for help from theresa may. they say it is up to the prime minister. yellow vests drag on growth. france exacerbates slowdown, reinforcing mario draghi's's dovish press conference. pboc says monetary policy will be supportive. investors offer caution. welcome to "bloomberg daybreak," i'm alix steel, alongside carol massar. david westin hopefully still sleeping. what is interesting is we have the data, then we get the headline that china will be cutting tariffs to 15% on u.s. autos. carol: six of the top 10 vehicles that go from u.s. to china are from yemen automakers, bmw and daimer. we will see. alix: three months.

we will give this, soybeans et cetera risk off the in markets. low lows of the session, ugly risk off kind of day. s&p futures down 8/10 of 1%. over $27 billion leaving u.s. equities, second highest on record. talk about a flood out. euro-dollar down six tons of 1%. approaching key levels, as weaker euro data comes in. buying in the treasury market, safe haven, 2.88% on the 10 year. stable risk off the. , he ishe privilege literally called god in the commodity world. legendary investor and i asked him what his take is on oil prices. >> balance, if you want to place a bet on oil, you are better off

betting up. alix: catch that all weekend, replaying. it was great. he did not give a specific rise. carol: it was a great conversation. fascinating. for the bloomberg first take. let's start with exit drama. -- brexit drama. what a week. theresa may going to brussels. them saying, figure it out. what do you want from us, she says? they say, you tell us. worst breakup ever. alix: aint over yet. i am not a very close observer of u.k. politics. what ishs ago, acceptable to the tories? two the eu? there is no overlap. that backdrop has not changed.

-- to the eu? everything denominated in sterling, just u.k. denominated assets, that is the only upshot because the only asset class you can see it affecting is european banks already trading like dogs. there is not much left. carol: what else can happen? it is a good point. there is something interesting in businessweek. u.s. banks are coming into financial sector in u.k. and picking up slack. they are moving ahead. >> we have heard this refrain from so many analysts. the damages done with regards to these companies. they have to make contingency. they cannot wait until march. they had to make contingencies now before the end of the year. they have done that. no matter the outcome, a lot of companies have shifted significant business outside the u.k. borders. even if there is agreement or

amicable solution, it will not reverse. process for long u.k. alix: record outflows from u.k. equities this week. other story. potential growth slowdown in different areas. europe front and center. france pmi's contraction territory. germany also. manufacturing not holding up. auto story. outflows. luke: european assets, surprisingly, they are holding up better than u.s. and japan. carol: not dogs. luke: sorry to the dogs. you can cut all the tariffs you want but if there is no demand for autos -- a couple things stood out. france new orders index. it is your synchronized global growth waxing and waning chart.

contraction territory. new export orders across the continent, steepest drop in at least four years. it tells you about the external backup and the fiscal push european leaders are trying to put in might be needed. alix: that gives mario draghi the bizarre statement of yesterday. the balance of risk moving to downside owing to persistence of uncertainty. context it puts it in when you look at data today. the on france, look at germany, pmi. that is more concerning. they were the main pillar keeping things together. when you think about the transition with angela merkel moving away and other issues surrounding eurozone, it is the path to stay together, entering period of economic weakness, is not going to bode well. carol: you set us up for a nice

transition to china. slowing data in china as well. retail sales, industrial production weakening. we continue to see the story about concerns. most of us would want the growth rate around the world but it is slowing in comparison. 6%aine: 8% retail sales, 5%, industrial production, well below what the market was expecting, well below average growth rate for the past 2 years. the one silver lining? compared to europe, the government has much more flexibility for authority, i should say, to intervene. luke: most interesting and puzzling. the possibility of them trying to get consensus on august. no time in the markets where dominant theme has been china reflation stimulus. if there is something going on, this is the worst china stimulus

ever! carol: tough point. they want to keep stimulating the economy. they do not want asset bubbles or a financial bubble. luke: the nature of the stimulus is more geared toward trying to stimulate domestic demand on the tax side. carol: consumer. ,uke: potential still low spillover, more limited in scope. romaine: that reflects the downturn in regards to spending. it is more about sentiment rather than structural issues in the economy. carol: big meeting with chinese officials next week. look for headlines. alix: you have to wonder where the dollar-yuan line will be. good stuff. luke and romaine, we made it to friday. yay! ,heck out the charts atgtv save our charts at gtv .

more on theresa may lobbying in brussels. we are joined by paul richards. this is bloomberg. ♪

♪ >> this is "bloomberg daybreak," with your bloomberg business flash. agreedxury company has to by the operator of the famed 21 club. the owner will pay $26 billion in cash. expanding the animal health business.

a closelyagreed to by held company for $2.4 billion. they will assume $1.3 billion in debt. another harassment case involving cbs. according to the new york times, the network paid $9.5 million to settle harassment claims. an actress said that an actor said things that made her uncomfortable. when she complained, she was written out of the show. alix: european leaders met for a second day of talks in brussels. outcome not good. to brussels. where do things stand? what is on the agenda? reporter: good morning. it was a disappointing summit for theresa may. she walked in wounded by the challenge.

she wanted concessions from eu leaders around the irish backstop. theu.k. and the eu, backstop, the way it is now will mean the deal will not go through u.k. parliament. she wanted legally binding language around that to make it clear the backstop will not be something that stays forever. it would be limited. european leaders considered but decided to pull a statement that contained a softer language, saying they were disappointed by her presentation. they wanted a concise plan. they did not get it. european leaders thought theresa may, two years after the referendum vote, does not know what she wants. this will be a problem today. bad blood between theresa may and jean-claude juncker. we are not going to see a breakthrough on brexit.

we will have to wait until january, january 21 is now seen as the real deadline. this is brussels. you need context, drama, fallout, fights to get a deal. both sides still want a deal, even though today there is a warning from the belgian prime minister that no deal is moving closer. alix: great reporting. theresa may holding a news conference at some point this morning. we will get a touch on that. in addition, political risk and brussels, economic risk rising in eurozone. france, output trunk this month with yellow vests protests weighing on outputs, exacerbating the slowdown. , paul,chards and david usually a big bummer. how much of the

slowdown we are seeing is a blip or longer-term? paul: ecb numbers yesterday had all of it. it is not going to upset what they will do. it is a mess. europe is feeling the effects of the china u.s. trade war. add to that, brexit. ongoing. it needed to get to this point. it needed a blowup to get outcome. they will get outcome. of that i am sure. probably in january. she will get nothing brussels. 20 people sitting around? forget it. she might as well start her christmas shopping now at home. in europe, it does not affect that emmanuel macron had to given. the italians are saying, great. ideal. this is europe. this is something that has been going on for 40 years. the euro is there to stay. we will get downturns in economic growth caused by the

turbulence that it is not one united europe. they're doing a good job at keeping it together. they are going through their own change. this is temporary. two things we need. brexit resolved. china and the u.s. result. solve them and watch europe take off next year. alix: $50 million lottery. carol: complicated. one word describes it best. euro sclerosis. pathetic. markets are down this year. economic competitiveness, they are not competitive. countries like belgium, italy, greece, france, do not crack the top 50. no wonder the u.k. wants out. they are competitive. they do not want to be dictated to by the rest of europe. carol: as you think about outlook globally, are there

opportunities in europe? david: generally i would stay away. i would find more compelling opportunities in em based on valuation, better debt, faster growth rate, very washed out companies at 11 times earnings. alix: i wonder what this means for policy. carol: central bank policy. it is interesting how in the u.s., it is starting to shift. i wonder if we see that in europe? paul: i think they are learning. this,b is carefully doing looking at the way the fed has started to withdraw qe. we are pretty much done. current rate hike end cycle with the fed. pcb, next thing -- ecb, next thing they will discuss is another ltro.

european banks will love that. you have that and if you can get brexit resolved, europe feels better. you still have to choose who will be draghi's replacement. that will be interesting in the summer. base case. before he goes, .1% rate hike in the fall. job done, see you later. we will see what yuan looks like. the market would struggle. we might need a compromise candidate. does emmanuel macron have the same bargaining power in brussels now after what he has done? that will be interesting. ecb will get out of this low. no accidents. alix: will you look at the global scale? emerging markets, you said. you still have volatility, nice dollar on safe haven. how do you make the case? david: buying on mistrust and valuation. em will be more vulnerable and

volatile. if i go back to the roots of valuation, em becomes more interesting. tough to forecast dollar but the next move is likely lower. that will be beneficial as well. growth rates are still there. post growth rates, real gdp, 5% or better. alix: back to the dollar, euro-dollar at 1.12. where do we go from here when the market is so pessimistic on rate hikes for 2019? mario draghi hedging dovish. paul: a little bit. alix: you don't agree? paul: fair comment but respectively, pmi, he knew what they would be. the problem with dollar, is if you sell it you have to buy something. 13% is the pound. you are buying brexit. you have to get that confidence level, which is why think

january, the dollar will struggle to sell off the way forecasters are expecting. carol: headline crossing on ecb governing council. unconventional monetary policy here to stay. thanks much for the guidance. paul: that means we will keep doing things to make you feel good. carol: supportive of the financial markets? paul: that is a good cue for another ltro. alix: to by the banks? paul: that has probably been the death trade for european banks. there will be a point where european banks are a buy. you need to be comfortable around politics. carol: and no the risk -- and you need to make sure you know the risk. paul: it is dangerous. david: too many european countries are putting too much burden on ecb to continue to stimulate.

we have got it right in this country by being more fiscally beneficial with tax cuts and deregulation. europe needs to borrow a page. paul: i am sure. carol: we will continue. lots more. the rest of the world. global advisors medley, staying with us. china's slowdown, the economy stalling in november with the weakest retail sales in 15 years. from europe to china we go. stick around. this is bloomberg. ♪

♪ the economy is still slowing. industrial output decelerating in november. retail sales, weakest performance since 2003, creating a challenging backdrop for policymakers ahead of the annual

summit in beijing next week. still with us, paul richards, david sowerby. let's talk about china. david. david: they need to stimulate more. in baseball terms, in the second inning, of re-stimulating the economy. that needs to happen. will take place because china gets better from a growth perspective as well as investing. carol: do they have to be worried about the balance? stimulate the economy but do not create the financial asset bubble. paul: they are focused on avoiding a bubble. the world needs to get used to 6.5% growth. it is not a percent. alix: did he say 3%? paul: 6.5%. david: do we believe the number? paul: we have to go with something.

we are seeing a carefully crafted slowdown. they know they have a problem. we do not know the trade effect. when you see november trade numbers you could argue, they would export more than they ever did to the u.s. with preorders, what is going on? too much uncertainty. the problem is, if you solve the trade issue, we will know what the state of the economy is. from a psychological perspective, solving that could do wonders for the consumer there. that is the problem with china. we just don't know. the big one for the world, not only china, remains trade. alix: are they limited in the amount of stimulus they can do? reflation, but if trade is not resolved quickly, there is not much to keep the yuan stable. david: he is right. they need to avoid bubbles. we are potentially creating a real estate a couple years ago. the push on the proverbial string to stimulate -- i think they are stimulating, growth

rates will improve. to what degree? it is a command economy. how much can you manage? that has never worked long-term. carol: going through research notes, you pointed out, what we have seen this quarter in terms of market selloff, it is not because of the fed or concerns about central bank policy or the yield curve, but you think it is what is going on between the united states and china? paul: i thought they could sell off for percent. -- 3%, 4%. i was not right. they went further. macro events globally, this was led by trade. it was not helped by the fed. powell made a mistake. we're getting used to a new fed chair. carol: he is still learning. paul: he has good partnership. it will be good to see him next week. he will define. no fed issue anymore.

then europe fed in. the market had forgot brexit deadline was coming. we did not expect what was going to happen in france and the italians started playing up. it does not help sentiment globally. david: i think powell is doing the right thing talking raising interest rates given nine years of intense monetary stimulus and. -- monetary stimulation. alix: stay with us. we will dive more into the s&p. bye bibles for now -- bye bulls for now. this is bloomberg. ♪

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below contraction level, also weakness in germany. risk off be a. the dax down by a 10th of 1%. -- risk off feel. stronger dollar to safety story. 1.12 euro print. we had an ok bond auction. lowest since 2008, 30 year yesterday, revival of budget deficits for november. $204 billion. big number. copper, china growth story. watch that market sentiment. crude off 7/10 of 1%. oil remains deep bear. concerns over supply and demand. yesterday i had the privilege of speaking to andy hall. bearish versus bullish? he is leaning more bullish on crude. god innown as the oil

the commodity world. andy: that is one element of the supply demand story. opec cut by 1.2 million barrels a day. you have other things going on as well. headwindsative side, regarding demand, worries with the threat of trade wars, how robust is emerging market country demand? stronger dollar is generally not constructive for oil demand commodity demand and general. on the other hand, not only have you had opec cut production, there is no question lower prices will have impact on production growth in u.s. when we look at 2018 -- the rapidt apprised has been growth in u.s. oil production. everyone knew it would grow.

i don't think many people expected it to grow by as much as it has. right now, year-over-year growth in crude production in u.s., 2 million barrels a day. in january, the u.s. government, eia was forecasting growth of a half million barrels a day. staggering difference. $25, $30 perropped barrel. that will have an impact on production growth in u.s. alix: we will dig deep. before we go to set up, bullish or bearish now? over with prices hovering $50 a barrel, you have to have a negative outlook on global economy to believe prices will continue downward trajectory. i don't think we are on the verge of global recession or anything. to use the commodity adage,

price cures price, 30% correction or downdraft, not only is it going to impact supply-side, demand also will respond to that kind of price move. if you want to place a bet on oil, you are better off betting up. alix: nicest i had ever heard. investor, playing through the weekend, catch the interview, through the terminal or online. interesting half-hour. carol: he knows how to trade that market. he is finding it difficult. alix: how hard is it to be a traditional investor in oil now? the is a value guy. fundamental analyst at the end of the day. he said it is impossible. multiple reasons. shale, whichntity, confuses the cycle, and he said

it is hard. he does not do it that much anymore. now he is just an art collector. capital in germany. s&p core performance last week through investor sentiment, outflows, $27 billion worth of outflows in the market just this week. do you want to buy? paul and david. we are waiting for the bottom. do you buy the dip? david: more likely yes. sentiment unusually bearish. that is a better time to be a contrarian buyer. the economy is just fine. corporate profits just fine next year. corporate cash flow, free cash flow abundant in that type of backdrop. i want to buy when a market is down 10% and the stock is trading 20% of the 52 week high. carol: a chart looks at investor sentiment and how bearish it has

become. spike in december. can become david, it even more bearish. it can go down as much. the big spike here in the fourth quarter. david: specifically, when bearish sentiment crosses 45% threshold, if you use that as signal to be a net buyer, six month later the s&p has averaged 9% gain, 12 months later, 20% gain in this nine year bull market, we have been still taught to buy when the market is down 10% or more. carol: good indicator. volatility now. we caught up with dan and lisa. months havefew given us a sense of the types of risk out there. both the economy and markets

will face this in 2019. minimum, likely this year, expect, volatility ongoing. that is true across all segments of financial markets. carol: volatility. is that opportunity? paul: trump's currency is volatility. the best thing we ever wrote. carol: love that. paul: you can use it anytime. volatility is here to stay. look at the calendar in january to know you have another brexit showdown. trade ticking away. 75 days to go. the big one. no one is talking about it. i was having a drink with a friend. can you imagine if we looked at the screen and said tomorrow at 10:00, robert mueller's report is coming out? what with the market do? that is coming. q1, q2, it is coming. put this together and the other thing -- look at the fact of

what you have with the dems controlling the house. whether they will be kissing and cuddling and doing good things together? it is war. alix: in the white house? paul: this is volatility. to my point. if europe could sort themselves out, get brexit sorted, they may be a good place to park yourself as a hedge. the u.s. next year, although i am positive, there will be volatility around headlines. you can almost guarantee if we see a deal with china, by january, twitter will say, this does not look good. carol: david, you have politics and particular. historically when you get division between executive and legislative, that is traditionally good for the stock market. carol: we are rewriting history. david: here we go again.

we talk about government shutdown. 1995, government shutdown twice. the stock market was up 6% and 95 and continued on in the first half of 1996 with 10% rate of return. i have no problem with the government being shut down. companies will continue to generate cash flow. discounting a are worse growth outlook for 2019. if you buy that, what do you buy? david: beware of portfolio managers who talk the book. having said that -- alix: we always are. david: not a good year for small caps, down 6%. bloomberg spinoff index is down 13% year to date. over the last 10 years, spinoff stocks have compounded at 19%. great place to be buying. trinity, they of

make manufacturing materials for construction and transportation. wyndham hotels, spinning off the vacation unit, all companies, $5 billion market cap or less, five analysts or if follow the companies, there is opportunity next year there. alix: do you feel the equity market is reflecting and pricing inappropriate growth? does there need to be a re-rating? paul: equity market at present is respective. it is hard to say you can be bullish or bearish in december. i used to write it often banking. highly liquid. they are dominating markets. fundamentals tend to be pushed aside. when you throw fundamental backdrop like we have, it is ugly. to answer your question, equities overall, risk can do well if you can solve the macro events. the way the market is pricing now, they're pricing negativity

in macro events and they should. these are big events, and if they go wrong, people will lose more money. not money. more money. that will affect sentiment. carol: ceos hold off when there is uncertainty. david: that is more insider buying. that is a good thing. caesar's curate, i am seeing more small and mid-cap insider buying because they believe companies are on sale relative to future stream of cash flow. that will be a good signal for the markets. carol: good indicators. have a great weekend. thanks guys so much. coming up, before you buy the beachfront mansion, will builders let you stay on the property? that is coming up next in pursuit. we are waiting on a news conference from theresa may in brussels after calls for help from eu leaders. they were met with little sympathy. this is bloomberg.

♪

♪ >> this is "bloomberg daybreak," and coming up in the next hour, the goldman sachs chief u.s. equity strategist. alix: this is "bloomberg daybreak," and we have the bloomberg business flash. >> apple says the chinese ban on apple will force it to settle with qualcomm. that may harm the smartphone industry in the u.s. this underscores the importance of the chinese market and points out qualcomm's crucial role in china.

shares of costco lower in premarket trading. lower margins in an increasingly competitive market. sam's club has sped up sales growth by introducing fresh foods. bj's offering three months of free membership. in russia, central bank has raised interest rates for the second time this year. 7.7%. policymakers are concerned about a spike next quarter. that is your bloomberg business flash. alix: thank you. we turn to pursuits. all things luxury. mansions, test driving, try before you buy. luxury real estate jumping on the trend. the $5 million car you can actually drive. $6 million sale price. digital users can access it for free. deputy -- $350

billion fashion moment. carol: joining us now is james, the deputy editor for bloomberg pursuits. let's take a break from the news flow. i know about test driving a car. but test driving a mention? james: you would think it was a timeshare, but for the secondary home market, some of these real estate agents are pulling out all the stops and trying to get buyers. alix: can we do it? or do you actually have to be able to buy one? james: one of the funniest things, they have a term called, speeders. if you don't charge fees ahead of time, you get people who speed past the sales gallery. they can cost up to $7,000 a

night to stay in some of these. alix: we will not test drive that puppy. james: it goes toward the sales if you buy. [laughter] carol: this is to get buyers in. does it work? james: it does. it helps if you have jaguars, river tubing, spas. anywhere from 20% to 25% sales happen. alix: i will test drive a mention. a six can actually drive man dollar car. -- a $6 million car. carol: david would like one. alix: he doesn't need one. he has an amazing car. but i can try it on video? >> on your phone. 1500 horsepower. almost $6 million. it was released in august.

people could drive it then. simultaneously, it went to a 2.eogame called csr raising 73 million downloads around the world, one of the most popular racing games on your phone. the whole point is to collect cars and build a virtual garage. carol: they made 40 of them. they sold out within 24 hours. if you couldn't buy the real one, you could have a virtual one. they make these cars using computers. digitally you can have an exact replica in a digital world. james: they are upping the game. they used to not do the engine, the hinges, the hood, the rear spoils. they will check the torque, the rep limits -- [laughter] you canat is the way

have your car and eat it too. rebuilt the vintage cars as well. they can take up to 15,000 photographs to re-create. carol: you have to show david. alix: he would totally dig it. carol: nothing modest about it. that is what is going on in the fashion world. ines: the unlikeliest trend fashion since the fanny pack. carol: they are back. alix: i was going to say. and bodysuits. james: everything old is new again. carol: tell us about this. the body is covered. james: it is being driven by younger muslim women who do not feel that modesty has to be humble or plain.

dress with denim jeans and sneakers and the hijab. alix: last season, project runway had a woman exactly for this clientele. her point was that. you can be modern, fresh and modest. james: retailers are targeting this. it is strange to think sex does not sell. when you look at victoria's secret, what is sexy? campaign not doing well. on the flipside, you have other retailers. macy's introduced a modest line this year. puther retail giant has modest in the navigation between pants and a segment people we hundred $50n billion in two years. carol: whether is dolce &

gabbana, people are jumping in. james: one of the most interesting success stories is based around this. there is a section in every woman's closet that is modest. carol: good stuff. alix: hmm. carol: thank you so much. coming up, u.s. stocks dropped after a rocky week. all over the place this week. defensive stocks and outperformance, coming up next. we are waiting on a news conference from theresa may in brussels. she has had quite a week after her pleas for help were met with little sympathy. she faces a confidence vote. but a big part of her party not backing her. this is bloomberg. ♪

♪ >> here is what i am watching on friday. financial markets. another volatile week. defensive stocks gaining as the s&p fluctuates. we have seen this throughout the year. take a look at the ratio. utilities. dead.this is a stud and broader perspective. yours is comparing to history with the tech bubble. defensive gaining as the s&p struggles. carol: fascinating.

utilities, second-best major performing industry group in the s&p, up 7.3% while the overall market, still a lot of volatility overall. one of the outperformance. health care number one performing. alix: where do you go for defense? where do you want to hedge? many say utilities. everyone says health care. carol: it has been outperforming for a couple years. alix: tech versus utility in tech bubble from 1993 to 2003. white line is tech versus utility now. similar trajectory. how much more can tech be shaken out? how much more upside in utilities. if we see history repeat itself, a lot. what will lead the market? can utilities help find the bottom? and lead? carol: think about areas beaten up.

value guides come into the market and become the leaders. alix: value now? energy and banks? who will buy that now. you have the curve in birding. -- inverting. carol: it will depend on the economy and macro issues resolved. sachswe have the goldman equity strategist. they recently upgraded utilities overweight because of outperformance during accelerated gdp growth environment. theresa may, moments away from speaking in brussels, defending her brexit stance. this is bloomberg. ♪

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since 2003. pboc says there will be support. investors offer caution. $27 billion exited u.s. stocks this week. how much economic downside is priced in. we will get the latest call from goldman sachs. central banks tackle downside risk. markets expect the fed to downside, $80 billion on the sidelines waiting for distressed funds. welcome to "bloomberg daybreak," on friday, december 14. david westin is off today. we made it! carol: theresa may made it to it to what i can only imagine is one of the worst weeks in her political career. what a week. postponing brexit. then after dealing with a confidence vote. she won.

117 people in her own party voted against her. interesting feedback out of brussels. eu leaders toughening brexit language. diplomat saying the appeal was too vague. she is coming to them and not being specific about what she wanted. she is looking almost for the eu to say, here is what you should do. they are saying, you need to figure it out. it is and over. -- it is not over. alix: risk off developing. s&p futures down a 10th of 1% following the weaker sales in china. weaker manufacturing data out of europe, continuing in the u.s. euro-dollar down 6/10 of 1%. safe haven bid in the bond 2.88%.on the long end, crude stable even though we see

a stronger dollar, risk off feel. i had the pleasure of speaking to andy hall yesterday. legendary investor. here's what he had to say about oil. >> on balance, if you want to place a bet on oil, you are better off betting on it going up. alix: you can see that all weekend, 30 minutes of andy hall. carol: it was a smart interview. here is somebody who we care about and respect their opinion, because they have seen the cycles. alix: stay home and get a glass of wine and tune in. carol: headlines outside business. viviana is here. >> good morning. china ratcheting down trade tensions. dutyng over move the 25% on american-made cars for three months. the next move may come from the white house.

trump administration announcing today it is delaying tariffs due on new year's. the chinese will resume buying u.s. corn and they just agreed to restart purchases of american soybeans. the senate has issued a symbolic rebuke to the saudi conference and president trump, lawmakers voting to withdraw support for the war in yemen, and punishment for the killing of jamal khashoggi. the senate declared it believes the prince is responsible for the murder. bloomberg has learned mr. trump was present at a meeting with his personal lawyer, michael cohen and the publisher of the national enquirer. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

alix: thank you. million out of u.s. equity funds this week. second most on record. goldman sachs says global concerns could be overdone. the chief u.s. equity strategist wrote "it implies a more dramatic slowdown then baseline. we believe there is a short-term upside to the s&p 500." happy holidays. david: walk us through the essence of the call. monday wasarket last trading at 2800 s&p. 2650. is closer to we have seen higher indicators on manufacturing and nonmanufacturing side. print atlower new job

155,000. we have had reasonable, solid economic fundamentals. that would support the economy and stock market moving higher. baseline forecast for 2019, would be u.s. stock market continues to climb toward 3000 on the s&p 500 at the end of the year. there are fat tails to the forecast, which makes the outlook different from what we had in previous years, where it is a high degree of conviction around baseline expectation. the reason is, there is a number of clients with whom we meet that anticipate recession in 2020. that is not goldman sachs' forecast. there is concern among investors that that is the outcome. on the other hand, there is a positive situation where markets continue to return higher level as a result of a believe in economic expanding.

that remains the topic of conversation with most managers. alix: near-term economic data versus macro risk. we talked to paul richards and i asked him, economy versus equity markets? well if can do quite you can solve the macro events. the way the market is pricing, negativity and macro events, and they should because these are big events, that if they go wrong, people will lose more money. not money. more money. that will affect sentiment. everybody is down. david: the strategy in this environment is to increase quality of portfolio. there are certain attributes about quality. slightly more defensive but we are looking for a stronger balance sheet. that is important to start with. given the likelihood of higher rates, uncertainty, stronger

balancing make sense at this time. sometimes, when rates are low, for most of qe, stocks outperformed dramatically. we want stronger balance sheets. low deviation in earnings. stability of those are valuable. low downside in revenue growth. we are looking for low downside drawn out in price and a strong return on equity. you start with portfolio prepared for uncertainty that you referenced. carol: we talked about health care and utilities. do you continue to allocate new money? david: utilities, yes. low beta center. we are focused on lack of sensitivity to the economy, specifically technology. less leveraged to decelerating trends in economic activity. if we think about recurring revenue, look at the analysis. software spending, real software

spending in the u.s. for 50 for 196s been positive of the 200 quarters. carol: strong. duringother than 2001, the collapse of the tech bubble, when spending declined, it has been positive. that level of stability is what we are looking at, which supports the line behind the subscription-based models which is about recurring revenue. microsoft used to have 40% of revenue recurring. now it is 60%. goldman expects close to 70% in the next several. that is an example of business models that have shifted toward more stable revenues. that is what we're looking for in uncertainty environments. the economy is decelerating. it is still growing. it is decelerating. the value of recurring revenue

is important. carol: great visibility. you can see with recurring revenues, this commitment. where do you not want to be? david: the concern about the decelerating economy, what is negative leverage? materials. some areas within consumer. we have slowing rate of job growth. we are still growing but there are fewer jobs. when you look at earnings revisions for this quarter and 2019, we see a steeper vision. we have not seen that revision activity in a while. how much more do we need to see? david: traditionally, close to 10% negative earnings revisions, from the times earnings are first introduced, until the final print from the 24. that is the magnitude of deceleration you're likely to see.

this year is unusual. we had the tax cuts. they came into effect officially december 22, almost the one year anniversary. the revisions dramatically positive through the beginning of 2018. as a result, we have had 15% pe multiple contraction this year. stealth market devaluation, derating. you used to be trading at 18 times forward earnings. , today u.s. stock market trading at 15 times lower earnings. you had a more appealing entry point at this juncture compared with where we were before. earnings growth is decelerating. the expectation is we have around 6% revenue growth, earnings growth into next year and no margin expansion. that is critical that not enough front managers recognize. carol: focusing on the margins.

david: that margins for the median companies have been flat for five years. what people focus on is aggregate margins rising steadily. we know the major companies that have lifted margins. in the last 10 years, we have been in a stock market and bull market for nine years, of all the margin expansions in nine years, 10 stocks are responsible for half. it is a few number of large companies that have lifted margins. in a flat environment, your revenue growth and earnings growth will be similar. revenue growth is driven by nominal gdp. work backwards. real gdp growth of 2.5% next year and inflation close to 2% means you're looking at 4.5% topline sales growth for most companies. that is the kind of earnings growth you're getting because of no leverage on the margin side and increasing purchases. that is a key aspect of how you

get to 6% earnings growth. alix: great stuff. love that stat. david, sticking with us. thanks have gotten beaten, -- banks getting beaten bad. that is next. we are still waiting for the news conference, theresa may in brussels. after an unsuccessful 24 hours for her in her meetings with eu leaders, they have little sympathy. this is bloomberg. ♪

♪ >> this is "bloomberg daybreak," with the bloomberg business flash.

lvmh has agreed to buy the famed 21 club. the owner will pay 2.5 billion in cash, premium over the london-based companies in new york. another harassment case involving cbs. the network paid an actress $9.6 million to settle harassment claims. she was guest starring on the cbs program, "bull." another actor said things that made her uncomfortable. when she complained, she was written out of the show. wells fargo and barclays keeping a leverage loan on the books. the reason? they could not sell it to investors. the bank plans to wait until january to offload the loan. selling the debt became difficult when oil prices crashed. that is your bloomberg business flash. alix: financials feeling

pressure. what is the headwind? there might be one that is overlooked. >> i am worried about the fed bank sheet. reserves are shrinking. some banks having to pay increasingly more everyday to get results. tnother issue for a net in erest margins can compress. there is an issue with a flat yield curve, ultimately a headwind for that sector. alix: how do you understand what is happening in bank stocks? david: well. alix: how long do you have? [laughter] david: relative performance between banks and financials with the 10 year treasury yield, but the more important driver valuation has been the yield curve.

when you look at performance of financial sector relative to market, much of valuation gap is explained by flattening of the yield curve. that has been the story for this year. steady flattening of the curve. the second is the deceleration of the u.s. economy, has also been more associated with financials, the most leveraged play to the economy. we are in an environment where economic growth is decelerating. that has been a challenge for the banking system. you have positives of bank repurchases of shares, allowed by the fed. that is positive. loan growth overall banking system running 4%. large banks growing 2%. loan growth smaller banks growing a percent. -- 8%. the key driver on valuation has been the flattening of the

curve. carol: does the story change in 2019? david: my colleagues are expecting the yield curve to continue to flatten. that makes it challenging going forward. alix: how do you maintain constructive view on equities? what leads? david: technology, in my opinion, is likely to do well, as well as communication services. areas of performing, hence the focus, recurring revenue is key attribute of both sectors. that is one of the attractions to those as a strategist, that is the area also, relative lack of sensitivity to whether the economy accelerates or decelerates. it is relatively immune to trajectory of growth. we talked about persistent man from software -- persistent demand from software spending, we can go through the different components of the technology

sector, which are likely to benefit from secular trends like cybersecurity. carol: we want to take you to brussels where theresa may is making some comments. >> my fellow leaders on the brexit deal and i was crystal clear about assurances needed on backstop. having heard the views of mp's in the house of commons, i reiterated it is in the interest of eu and u.k. to get this over the line. a disorderly brexit would be good for no one. eu has published a series of conclusions. the eu made clear it is their determination to work speedily on a future relationship or alternative arrangement which ensures no hard border by the 31st of december, 2020, so the backstop will not need to be triggered. if the backstop was triggered, it would only apply temporarily and eu would use best endeavors

to conclude expeditiously a subsequent agreement to replace the backstop. the eu stands ready to embark on preparations so negotiations on future partnership can start as soon as possible. a formal conclusion, these commitments have legal status, and therefore should be welcomed. as i have said, the guaranteed way of avoiding the backstop is to have the future partnership and place by the time the period is over. the eu is committed to this course. mp's will require further assurances. i have discussed that this morning with my eu partners, including president juncker and others. there has been reporting that eu is not willing to consider further clarification. that eu is clear as i am that if we are going to leave with a deal, this is it. my discussions with colleagues

today have shown that further clarification and discussion following counsel conclusion is in fact possible. there is work still to do. we will be holding talks in coming days about how to obtain further assurances the u.k. parliament needs in order to be able to approve the deal. i say again, it is in the overwhelming interest of all our people, in the eu and u.k. to get this done and as quickly as possible. i will take a few questions. laura. thank you prime minister. you areed angry when speaking to jean-claude juncker earlier. what did you say to them? did he admit he called you nebulous? do conclusion suggest that eu is not willing to budge? can you tell us more about what they said to you about willingness to move?

if parliament won't budge and that eu won't budge, is it time for you to budge? >> i had a robust discussion with jean-claude juncker. that is the sort of discussion you can have when you have developed a working relationship and you work well together. what came out of that was his clarity that actually, he had been talking, with that phrase, of a general level of debate. i had current and further conversations with him through the morning. in relation to the question of assurances, and there is work to be done, it is clear clarification, we can look at this issue of further clarification. that has been something i have been discussing with a number of eu leaders and president juncker. it is a timetable for us. we will be bringing a vote back to parliament before january 21.

we will be working expeditiously over coming days to seek further assurances that i believe mp's will need. james. >> [indiscernible] -- your problem here, that your fellow leaders simply don't believe you can get this withdrawal agreement through parliament, so why should they move heaven and earth to help you? >> what was clear from fellow leaders is that they want to ensure the deal can get over the line. they want to work with the u.k. to ensure that is what happens. a very clear commitment to the deal, seeing this is the best way forward and working with us to achieve that. yes. the times. >> oliver. you got further reassurances today that the eu will look at a

form of document. why was that struck from conclusions last night? >> what i discussed -- first of all, let's be clear about the 27 conclusions. those take us forward. those are welcome. this is the clearest statement we have had yet from eu, that it is their intention for the backstop to never be necessary, to ensure that if it were necessary it was only temporary and it is their intention to work quickly with us once we have seen the deal being agreed, that we in parliamentary terms will work with us to ensure we start negotiations for future partnership. the key to this, the crucial thing in this relationship, is what our future partnership with you is going to be -- with the eu is going to be? that will be the sustainable relationship we have with the eu

when we are no longer a member. that is very clear from today and the conclusion last night. they want to get that partnership and place just as we do. do.n place as we no,rime minister, yes or would you be prepared to see britain trade wto for march next year? >> as you know, government is making no deal preparations. we have stepped up those preparations. we will be talking further about those preparations. my position has been clear. it is better to leave with a deal. i believe the deal we have is a good deal. a couple more. jason. >> thank you. the daily mail. you look like you have had a trying week. what has been worse -- [laughter] >> did something happen this week, jason?

>> i have read reports. >> you shouldn't believe everything you read in newspapers. >> what has been more difficult, the malcontent at home or the euro bullies over here? have you thought about throwing your phone in the been and moving to a remote island? -- in the bin and moving to a remote island? >> there is a job to be done. it is delivering on the vote of the british people in the referendum. that is absolutely important. it is our duty as a government and parliament to do that. i never said it was going to be easy. negotiations like this are always difficult. ityou get close to the end, can get even more difficult. sorting out the last details of something, absolutely. what drives me to carry on doing this, making sure we deliver, is

that this is what is right for the british people. this is what we will see out of this, not just outside eu. be able to take advantage of what this gives us and building the brighter future for britain. isabel. austria has the presidency currently. >> thank you. i want to rescue what was your of theion about the role chancellor during the talks about reaching an agreement between the united kingdom and the european union? >> chancellor kurtz has been helpful in the positive approach he has taken to negotiations of the deal and to wanting to make sure both sides come out of this with a good deal. the austrian president has managed it well.

a very good presidency. we have seen this in the way he has been able to move forward on the dossiers. he has been very positive and the support he has given to ensuring we get a good deal. a good presidency. thank you. tox: just been listening david coston, we have been listening to -- we were listening to theresa may in brussels. a dicey conversation. the press called her out. you look angry. she said, we had a robust conversation. we agreed this was the best deal we could get however there will be further discussion, countering reports that the eu is like, take a hike. carol: david, what are the discussions you're having when it comes to brexit? david: it is basically part of the global trade discussion,

whether specific to trade, issues involving france, china, tariffs, that is among the three big topics of discussion with fund managers. tariffs front and center. then labor inflation, pressuring on margins. third, interest-rate story. trajectory of fed tightening as well as longer rates. those are the three big discussion points about risk in the market, around broadly positive story of slowly decelerating economy, still growing but at a decelerating rate, which would animate higher level of profits and drive the stock market higher. carol: thank you so much. david: thank you. alix: retail sales come out in a few seconds. risk off feel. dow jones futures off triple digits over 200. weakness inhave weakness in asi.

weaker retail sales out of china. you have lumpy pmi coming out of france. the dollar, the long and of the story. long ende dollar, the of the story. october was revised higher actually. that is definitely a positive. the retail sale control group killed it. almost double estimates, and october revised up as well. that is an important input to gdp. these look to be solid numbers. exactly. we will take a look at what reaction we have. futures still down 24 points. nonetheless, still a negative trait. it will be interesting to see

how the markets read this. let's get a reaction to the market. dana peterson is with us from citigroup. these look like pretty strong numbers. >> absolutely. it is truly astounding and much better than what anybody was anticipating. we think this story is consistent with the fact that there is a lot of fiscal stimulus coming in from the tax cuts, and consumers are out there buying. they are still pretty optimistic. alix: how much of this is going to be a black friday retailers discounting to get people in the store's? how much of that is feeding into the strong retail numbers? >> arguably, the census bureau should be applying that bump in the seasonal factors. some of that should already be mitigated. it is not clear how much of this is an additional boost. i think a lot of that is due to the tax cuts. >> let's go back to the control group. i think it is an important number.

you have highlighted that. this is giving us a sense of underlying consumer demand. increase in a 0.7% the prior month. can all of this change very quickly if consumers start to get a little worried about the economic and growth outlook is and if they will have a job in 2019? >> certainly. i think the key things to watch are the sentiment measures. clean, consumers optimistic. -- lean optimistic. we will have tax season coming up. people will be receiving larger ipcunds, and with the e changes, a lot of people at the lower end of the income will be receiving additional dollars . this is the tax reform versus what people may be hearing in the news.

if the stock market continues to be weak, and that shows up in the census measures them people should be concerned. >> does this do anything to ship that policy? policy? fed >> no. we are looking for the fed to hike next week and two hikes next year. we are looking at march and june. that is somewhat fungible. >> thank you so much. son joining us from citigroup on this friday. let's get a look at what is making headlines outside the world of business. >> china is taking a number of steps to resolve that trade war with the u.s. the punitiveremove tariffs on cars. bmw.helped telsa and

the chinese will resume buying u.s. corn as soon as january. on capitol hill, house republican leaders sending their members home on a six-day break without revealing any plans to prevent a government shutdown. president trump said he will not approve a budget if congress does not include money for the wall on the mexican border. investors are getting nervous about riskier assets. outflowsion of net yesterday. 705 million. seven

global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. alix: thank you. staying with the debt market, wells fargo and barclays had to books becauseheir they could not offload it. we're going to explore that. thank you so much. general, where are we in the cycle? what to be the catalyst to make your life awesome? >> i think we are in the latter innings of the cycle. wet is a consistent theme have heard. the catalyst will be what it always is, a few different factors to conspired to bring the market two different place in credit. we have seen a shift to the concerns that the end of the cycle is upon us.

in credit, we have not seen it. -- that. i think that will push it to the point of inflection is the combination of rising rates, quidity in the market. and deteriorating fundamentals. >> we reported that your next fund structure will be a drawdown structure. we have seen that across the distressed base. the message is clear that he went to have cash on hand. powder, look at dry there is something like $80 billion waiting on the sidelines. how much opportunity do you think you will have? >> we have $80 billion of dry powder across the market. the market has doubled since 2007. we have $3.4 trillion of

noninvestment grade rated debt. another $2.5 trillion in bbb debt. the amount of that that falls into distress is roughly 30% depending on the asset class. you are talking well north of $1 trillion in total supply go through a regular recession. alix: i was talking to someone and goldman sachs who says there is the theory in the market that we will not tap the downturn we all expect because there's so much money in the market. i remember talking two years ago like, iebt people being am ready. the downturn never materialized. >> the difference then is you had one sector impacted by falling commodity prices.

but we did not see is a recession. that is the trigger. if we talk about the cycle, it has been a decade. people tend to forget what a recession is and how it feels and how that can affect market levels and liquidity in the market. until we see a recession, we are not going to see a marketwide opportunity set. >> there is also the other issue of the covenant light issue. >> roughly three quarters of the noninvestment grade loan market is covenant light. they don't have the same ability to cut the string of liquidity to the company off and force restructuring. it means the companies will last longer before restructuring occurs. for firms like ours that typically step in when something has gone wrong, it these the prices we will be willing to pay will be lower. alix: i feel like we have had some people coming out with

loans that have not been delivered. wells fargo and barclays not able to offload loans. >> buyers have had enough. we want to be a little more selective. that is a natural progression in the markets. i don't think what we are seeing today is the beginning of the next great cycle. i think it is the beginning of a normal correction in the market. we will need to begin to see the underlying fundamentals deteriorate. >> did you have an outlook for 2019? will be more active? >> i think it will be more active than the last couple of years. it is not until 2020 that we begin to see the impact of a slowing bubble economy. alix: what is on your shopping list? i have combat boots on my shopping list. i'm sure you have something more interesting. >> personally a lot more interesting. we are always interested in

buying good companies with bad bounce sheets, overleveraged, not set up to survive a downturn in the economy. when we can find us companies, we will invest in them. what we are trying to avoid is businesses faced with secular change. those are businesses facing changes in the economy that we are beginning to see the early signs of. in the automotive industry, they are shifting to more autonomy and electricity. if you are focused on old world technology, you are to have a difficult time. the goal is to find great businesses that will survive bad balance sheets. >> are there any sectors you are looking at? >> our favorites have been pretty diverse. we love buying food companies. we are pretty certain people will continue to eat. we also enjoy looking at the model the company's when you are at the bottom -- commodity companies when you are at the

bottom of the cycle that need to restructure their balance sheets. to sit here today and think what will i buy is difficult because we don't know what the next downturn will look like. we don't know what will cause that slowness. it could be something that comes as the result of a significant slowdown in the u.s. economy, the opportunities will be different. is your worst nightmare a resolution of the trade deal and brexit deal? >> not in the near term. i think what everyone is starting to fear is that we never see another recession. in my business, that is great because that means people are starting to become overly optimistic which means the excesses will build, and when we finally see that day of reckoning, it will be more significant. >> let's talk about something

you are ready have in your portfolio, puerto rican assets. what is your outlook for the economy there? what risks still remain? almost without question, when you see a significant amount of federal assistance coupled with proceeds from insurance policies being poured into an economy over multiple years, there is an opportunity to change the face of the economy and position that economy for significant growth on a persistent basis. the challenge will be to ensure those funds are spent wisely and that the economy is positioned to continue growing. you are seeing early signs of that. we all hope that is what transpires. i think if investors are concerned about the opportunity of investing in puerto rico, maybe place a phone call to your local congressman, will you continue to support our fellow americans in puerto rico? if you like the answer you get,

perhaps you feel a bit more comfortable. the amount of proceeds that will flow in will certainly help the economy enormously. alix: are you adding to those positions? >> we typically try to invest when things look really bleak. we were adding selectively when things looked bleak. our goal right now is to help complete the transaction we have. we have a single investment in the electric utility. we are working diligently to try to ensure that deal comes to fruition. >> if you were to weigh the important factors, what is more important, original sin -- reducing debt or improving the business outlook? cause the you can economy to grow, you will have a tremendous impact across

sectors, and it will really hit every component of the economy. the debt impacts the government balance sheet. that is part of what needs to be addressed. there are many more things that will have perhaps a greater impact on the lives of every day citizens. multifaceted challenge. i think the approach has been good so far. alix: what is your take on the overall world of leverage? give us some perspective of your years of dealing in this environment. >> i don't think it is alarmingly high today. the aggregate amount of debt, the total stock of debt in the marketplace is too large for the market to effectively trade. there is not enough liquidity in the market to effectively match buyers and sellers when the markets become disjointed.

we are seeing that on a fairly persistent basis. that is alarming if you are holding that debt. the volatility will be more significant going forward. part of the reason we are pursuing a drawdown structure is it opens the door to a new set of investors and allows us a longer time horizon to pursue investing. distressed investing is not something where you trade. alix: thanks very much. this is a great interview. thank you. thank you very much. we want to check in with a series we have been bringing you all week, our look at climate change and its relation to extreme weather. on tuesday, we covered hurricanes, wednesday the california wildfires, and today water scarcity. >> by 2050, at least one in four people will live in a country where the lack of fresh water

will be a chronic occurrence. alix: one reason, climate change. more drought, that crops, damaged water supplies. [indiscernible] alix: global temperatures are up 1.4 degrees fahrenheit is the 1800s. droughts are the second most costly natural disaster in the u.s. >> it is time to change how we value and manage water. my plan has four objectives, to approach tor silo better tackle water stress, combat water change. alix: freshwater dangers are global. population growth outpaces water withdrawal. >> right now, there are over 800 million people who lack access

to water. that is their struggle every day. alix: the crisis can cause opportunities for companies. water providers to clean water. >> we are clean, but every other place in the world is dirty, that is not good. i want clean air, clean water. and: joining us is jonathan after. -- patrick. let's talk with tests start with patrick -- let's start with patrick. what do you see the opportunities in the next five to 10 years? >> thank you for having me. clearly, the policy challenges, the funding challenges are very real. the impact everyone globally. what we are optimistic about is that technologies exist through smart analytics, artificial

intelligence, full reuse of water. these challenges are able to be tackled. one of the issues is affordability. the affordability at the utility, community, and individual level. these technologies are disrupting that to make it much more affordable to address these issues. about when, tell us you look at climate change, the impact it has had in terms of access to water. what are you seeing? >> sure. the last day of the climate talks at the u.n. today. the main issue is global water supplies. communities where water aid works around the world, suffering severe shortages and damaged water supplies due to

increased flooding and diseases and droughts. what we are calling for is for these technological solutions with better management and understanding of the problems, and we need finance. we need that finance to come from the international community to get through to some of the poorest people in the world who are seeing real crisis now. >> when we think about water around the world, we think of it as an emerging market problem. athave been taking a look what is happening in florida and their water table impacted by climate change. tell me what you're doing to address those cities on the coast. >> you think about extreme weather events. they are the immediate aftermath of recovery efforts. there is a vast array of things we do, deployment of emergency pumps to displace the water.

going through the retreatment of that water. it is a shame to lose that in the oceans to only go through desalination. we retreat that water after it has been removed. there is proactive work to work with the city's and utility departments to help them understand. a lot of times they don't have a digital map of what their water infrastructure is. when you think of the impact of stormwater overflow, epa consent decrees are a rising issue. it comes to affordability. with theg to work utility or city to go through the classically engineered large infrastructure projects. >> which is what florida is facing right now. they don't have the technology to make sure their aquifer is secured. >> we are using better technology to utilize the

infrastructure they are the have. -- they already have. it helps them extend the life of their current infrastructure, avoid large capital outlay, and address the affordable issue. marketsabout emerging that are just trying to make sure they have water for their people? i think about developing versus developed markets. what are they doing in terms of handling their water crisis? , it wouldging markets be great if we had access to technology that could solve problems easily, but the situation on the ground is pretty bleak. 800 million people don't have access to basic water. they have to travel more than

half an hour to get to the nearest water source. ,hat is disrupting lives usually young women and girls. they are taking time to secure those resources, and so they cannot do other things. that has effects on the economy. a lot of solutions are often related to improved management, understanding the weather. when we are working on the ground, that is what we are trying to address as much as anything. alix: how has your business change in the last few years to deal with the increasing weather events? >> it certainly has informed the acquisitions we have done. the portfolio we have today is different from what it was a few years ago. to jonathan's point, i would add

that these are very affordable a greatgies, and it is economic way for markets to get at these issues. we are doing a lot of work on how we handle distributed treatments. you think about large treatment 250 toanywhere between 500 million liters per day. developing markets can't afford that. they don't need that. we are doing work to develop distributed prepackaged treatment opportunities to get to 1.5 million per day. that helps the prime minister get his citizens connected to water. there is a wide variety of things that need to be done. i am very optimistic. the policy issues are real. the funding issues are real. they are a challenge. the technology exists to be able to address this. thank you so much.

>> thank you. alix: what i am watching is going to be futures. we are looking at a lower opening this session. retail control group was up nine percent -- 0.9%. alanng us from chicago is messman. what are you doing with today's price action? >> there is always opportunity. maybe we will have less liquidity in the coming weeks. there will still be movers in any market environment. i am looking big picture. if we can factor out what is happening geopolitically and here in america you can see the s&p trading for nine out of the last 12 months. we are at the lower end of the range now. we had a reversal on monday and then built on it tuesday through thursday. >> what areas are attractive.

that is definitely not happening at banks. they have given up their gain from the trump bump. they have come back to key support levels. the etf to attract the financial sector. you can see we are still significantly above that breakout. that particular sector, that etf. i am looking at this as value. i use the option position, and i usually buy three to six months at a time. i am looking at these banks as possibly longer-term value. morgan stanley holding around this 40 level. some of these banks have made new lows but not new highs. that can be a positive. thank you.

you were looking at the market. we have not seen a lot of protection hedges for the downside even though the equity market was selling off. wondering if there is more optimism further out. >> what is fascinating about what happened this week is we and still have china brexit fed volatility next week. alix: thank you for joining us. that does it for this morning's program. coming up, bloomberg markets with jonathan ferro. this is bloomberg. ♪ ♪

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coming up, global equities ending the week lower. the latest data showing china flowing in the euro zone economy ending 2018 on a gloomy note, looking up at looking at problems abroad and a solid economy at home ahead of next week's decision. the dollar stronger. euro down. negative 0.75%. morning this friday with the big issue, what does the federal reserve do when the global economy is slowing and the economy at home is still resilient? >> the fed is going to pause for the time being. >> pricing in one hike next year. >> debates on to next year. >> whether this is one more hike or