it announces its decision with expectations of a rate race. signals and noise. lows,es and oil traded temporary volatility or a troubling trend? a new consumer health care giant, glaxosmithkline and pfizer join to form the largest over-the-counter drug provider in the world. welcome to "bloomberg daybreak." i am david westin with lisa abramowicz. alix steel is off. italy has a deal. >> that is what they say. markets seem to be buying it. falling theds are followin most since october. this is not a big deal. 2.4% tot came down from

2.04%. is it real? coming up, the european commission vice president for brussels and former latvian prime minister will join us. lisa: do you think this is real? david: i don't know what is real. theresa may answering questions. they say they are getting ready for a hard brexit with no deal. lisa: it is getting more exciting to watch these. the person who screams loud, i love him. david: she is steadfast. theresa may did not blame. lisa: let's look at markets. tonew york, a softer today. equities, we are getting a pop in s&p futures. after in europe gaining

six days of declines. crude getting a bid after the run sincee-they 2016. italian yields declining on the possibility, just perhaps, possibly some sort of deal with the eu. david: we can hope. in the meantime, general mills coming in, beating in on their eps and gross margins, but fell short. they reaffirmed their full-year guidance. the stock is up nicely. we will see where the market sorts that out over time. lisa: it will be interesting to see the commentary on the rising wages for employees and what this says about them and, because -- about demand, because the consumer has been the driver of growth in the u.s. general mills has everything covered. david: you seem like a cocoa

puffs kind of person. lisa: do i? david: were joined by rachel evans and luke. we start with the fed decision at 2:00, then a news conference. . want to pull up a chart the blue is where the rate is. the white is the projected neutral rate. we are one hike away from neutral. they are getting darn close. said is what jay powell last month. he said we are just below that broad range of estimates of neutral. we expect to hear something similar today. one reason the fed does not think it has to go as fast as the economic data and tightening financial conditions. happen, andosed to intended, explicit consequence of tightening financial conditions. they never do it as slowly as

they like, but when you look at the growth estimates, you wonder how much that comes in, because growth estimates all over the world have been getting trimmed, but not as much in the u.s. lisa: rachel, i went to get your view on how investors are positioning. into cash? >> we are looking at massive flows into fixed income. intow an interesting bid longer dated treasuries. 20 plus year treasuries are finding a big bid. it is a real change in tone from previously in the year. >> cash was getting darn popular for a while in terms of volatility, but once jay powell tames things down, it takes the bid on the long end out, and

since the midterms, we've had a yieldlatten her and the curve, and that first of flows rachel is talking about. david: stay with bloomberg for special coverage of the rate decision at 2:00. anding us is alan greenspan the cio of guggenheim partners. lisa: i have worry about the volatility recently. how much is a growth issue, and how much is the fed raising to quickly? -- too quickly? the white line is expectations for rate hikes falling off the cliff in tandem with the s&p 500. volatilitynt is this a direct response to fed rate hikes that have come to fast, too soon, at a time we are projecting slowing growth next year? >> a lot of the weakness priced

in acutely to rate-sensitive sectors happened before it fell off the cliff come in it is like the stock market got the message last in terms of how the fed tightening was hitting the economy. lisa: or there was a lag time. >> that is being charitable to our friends in the stock market. i think that will be a big factor. financiales these conditions play directly into their models. i expect that to be a talking point, a nod to the traders, assigned the fed doesn't like what happens even if there is no explicit put. david: there is also the balance sheet thing going on. to what extent is that affecting liquidity in the market? >> it's having a significant effect. about this the last time the fed met.

president has been tweeting about this this week. that is something we don't always have when we have a fed meeting, a president weighing in. lisa: this is the new normal. david: now it's about the balance sheet. new slang in the street. the president weighing in, it puts the fed in a difficult decision. people can say that is the president weighing in. they have the risk of spooking the market further, so they are stuck between a rock and a hard place. david: a big announcement and pharmaceuticals, glaxosmithkline in a joint venture with pfizer. ultimately within three years they will spin that off into a separate company to break up glaxosmithkline into two companies.

you see this in various industries. there was a consolidation, getting bigger and bigger, a conglomerate as it were now breaking it up again. >> it will be interesting to see the market reaction. a financial engineering still thing that pleases investors? the market volatility and weakness and share price does helps birth the rationale. glaxosmithkline, the market multiple is not very high. if you would like to be rewarded as a former company and your boring businesses get a lower is one way to unlock shareholder value and realize some savings, but this does not talk about the savings with the robust growth backdrop, tweaking around the edges to get the optimal capital structure investors will reward. lisa: one bright spot in markets has been the consumer and people

buying things for their own personal health. i have to wonder how much that is a recognition this is a hotspot, let's dominate this industry and perhaps generate some more profits. >> if you look at the health care sector this year, it's one of the few bright spots. over the last month, things have been badly hit, so this is a good opportunity to get back in on health care. pharma has been hit harder. it has had a difficult year. health care has been rosy when you look at the longer-term picture. glaxosmithkline is acknowledging that, seeing the different outlooks for health care versus pharma and making that decision. , we willming up later talk with the ceo of glaxosmithkline about that big deal. thank you for being with us. italy now has a budget deal. the eu commissioner just spoken brussels and said a solution has

been reach for 2019 that avoids an excessive deficit procedure. he called the agreement far from ideal. maria joins us now with the commissioner. >> with the commissioner indeed. we just spoke to him and will speak to him for more detail. thank you for being with us. there is a deal, a lot of anticipation and height. -- hype. you have decided not to trigger sanctions that will keep a close eye on the budget. what is the biggest concern for you? >> indeed, during the last couple of weeks, we have been in intensive dialogue with the italian authorities and they made substantial adjustments to their budget plans and they effortstheir structural from 0.8% of gdp to know

deterioration -- no deterioration, and we decided that opening excessive deficit procedures at the current stage is not warranted, but it is subject to those changes being legislated and implemented. >> given the fact that some politicians in italy have said clearly they won't be dictated by brussels what to do. are you confident they will take us measures and apply them? beingse are amendments submitted to parliament, if i'm not mistaken, today, because italy needs to finalize its budgeting procedures, so we will the but it must be said rhetoric has changed substantially. a couple of weeks ago, we still heard confrontational rhetoric, but now we have been engaged in constructive dialogue and see a dialogue is bringing results. >> some would say getting

results given the market reaction and italian bonds in assets. during your press conference, you think the finance minister and the prime minister, but there was no mention of one other person. was there a political drive behind this? do you think some people wanted a political confrontation? >> first of all, our counterparts in those negotiations with the prime minister and another minister. we had been meeting several times during the last couple of .eeks we have been often in phone conversations. so, indeed, we thank our counterparts for this effort. >> you don't really have contact with the more you're a skeptic side?- euro skeptic

>> first of all, we speak with government. it's finance minister, who is responsible for the budget and the prime minister for budgetary policy overall, and they had been our counterparts. was italy's government itself. >> you wanted to make a clear message there is no double standard when it comes to european rules. ,ules must be applied to italy and to france, which said it will have to spend more for social measures. was it something you took into account when you took this decision, or was it separate, italy and france? mustrst of all, we measure fiscal performance with eu rules. that is what we are doing. today,rds france, later i will meet the finance minister and we will be discussing

france's budget, additional measures, conference of tory -- and other measures. >> the deficit could spiral if those measures macron announced are applied. is that something you are contemplating, a big concern for the eu commission? >> it is important that france's budget stays within eu fiscal rules. that will be the purpose of our discussions with french authorities, including the finance minister. >> i want to touch on brexit. today you put out no deal papers. many times the eu has said they don't think the u.k. is prepared for no deal and everybody should think carefully about the vote, because it could plunge the country into recession. why are you putting out no-deal

papers if you say this is not an option? >> indeed, there is a deal, and negotiations are finalized, and we clearly see that an orderly brexit with the deal is much better than no deal. firmly of the position we should be of avoiding no-deal brexit, but we follow the discussion in the u.k. and we see the risk is there. certaincase, doing amount of contingency planning to limit damage, but it is still much more disruptive scenario in an orderly brexit. that was the european commissioner on a date when the european commission has decided italy.trigger on we saw bond yields fall most in three months and italian stocks

are rallying to date on what many see as a good decision for the market. david: thank you very much. equitiese the global strategist for hsbc and ceo and cio. they seem to have averted another near catastrophe. >> i will take it. it is a step in the right direction. we are cautious europe. strikee a capex affecting earnings. i think there are better places to invest globally. lisa: is that what you feel? >> i would agree. their structural growth rate is below where these lower yields are, so a problem longer-term. europe has not been an engine for economic growth worldwide for a long time. i think they have internal

problems, but i don't think it will impact the rest of the world dramatically. david: we have prime minister question our in parliament. theresa may defending her position once again. lisa: she has been dealing with a lot of heated back-and-forth. david: we will continue to monitor that weird you see jeremy corbyn debating -- that there. you see jeremy corbyn debating theresa may. stocks are down this year, with the s&p losing the most in any years since the great financial crisis. says hedruckenmiller does not expect anything to turn dramatically for equities anytime soon. the air can be let out of this polling without causing another financial crisis. i think it is possible.

believe, atrd to least markets will not have struggling returns the next three to five years. reaction?t is your struggling returns? five, buty three to there is still money on the table. late-cycle at equities performance, it is a double-digit return. know we didn'tu see the double-digit return in the first six months of the year? how come that was not the end of the cycle? >> if you look at the economic data them a we were still accelerating at that point. i would say that is midcycle. there areould be decent returns on the table. look where we are now.

you have an outlook of double digit earnings, but low average market has and the just given itself a huge growth scare. david: we have zero to three. the next three years, he thinks we will be ok. do you agree? iswe think this bull market alive and well and will supply significantly to the high side of expect haitians next year as expectationss -- next year as china resolves, as people realize there is good deflation taking place. it is called technologically-enabled deflation associated with the innovation platforms we see in evolving. if you go back to the late 1800s, early 1900s, electricity, telephone, internal combustion saw the yield curve inverted more than half the time back then, and it was

associated with strong growth and low inflation. lisa: when you look at the real world numbers we are getting out, micron results overnight, fedex after the belt yesterday, disappointing results. they lowered their forecast due to the rest of the world, not necessarily the u.s., but shows how the u.s. is not immune to the slowdown, so at what point do you look at this and say maybe i am wrong? >> there is a slowdown happening. it is lorit argue ling over from a strong level. roilings still -- over from a strong level. valuations are below long-term levels. i would make the case multiples could rise from here. david: do you agree with that

when we look at eps going forward? what drives it? there are only two ways to get to profit. >> europe is in a structural slowdown. if you look at china right now, internally, cutting income tax rates, cutting import duties, and have been since may, and i believe a big surprise next year is going to be china, especially because i believe we will have the trade war under control, and the big surprise could be a global tax cut in the form of lower tariffs around the world. i think that's what we are working towards. that will be the big surprise. big tax cuts, big surprising growth. lisa: the other surprise could be a fed rate hike. how has been vocal about yields will go lower. the idea of the fed staying put

and remaining low, if not cutting come how much is baked into your assumption? that is decent upside. it is more than we've had in a long time. we will see if a couple of hikes survives at the end of the day. we get a dovish hike and don't get a policy mistake, we rebuild some confidence. some get decent earnings, continued chinese stimulus, pmi's stabilize, then we are back on track, and that is how we generate double-digit returns next year. david: costs for companies are going up the wages were the cost of capital. this chart contrasts a rate hikes with the financial conditions. conditions are tightening without a doubt. to do as well as you hope it will come at does the fed have

to stop altogether in 2019? >> if we are right, the fed will continue to raise rates, maybe not as frequently, but in response to growth. if you look at the difference between the three-month treasury bill rate and the fed funds rate , when the fed funds rate is above the t-bill, the fed is too tight. a record highar relative to the fed funds rate. we don't think the fed is cutting the economy off of the past. to somewant to dig in of the drivers of the rally and .he fall recently, tech i was compelled by some of your holdings, in particular tesla, which is basically a religion for some people. i have to wonder what makes you think that tech is poised to to rally further from here given the slowdown we have seen? >> one answer has to do with the

question that david asked. costs are going up. how do companies offset that? they increase productivity? with new technologies, better, cheaper, faster, new products and services. we think this is a stimulus for tech spending. david: is it playing out in practice? after the tax cuts, we saw an uptick, but it has come back down again. >> it has come down a bit. in thel have 16% capex u.s. this year. expectations next year are 2%. that is far too low for an economy growing above trend. we are bullish on tech as well. a much bigger proportion of that than it used to be. it is more ubiquitous.

there is more disruption. driversone of the big of tech. i think there are a lot of misconceptions on tech. i don't think it bears up to too much observation. david: you own tech. how do you differentiate within tech? scott druckenmiller believes in the cloud. >> he is right. i think we are further ahead with nat. within tech -- ahead with that. there is old tech and new tech. oracle said we are not interested in old tech. the cloud, the companies that were going to make the cloud happen, the seeds were sown in the tech telecom bubble, those companies, oracle, cisco, those of you not the ones delivering. hatave salesforce.com, red purchase by ibm, a whole new

wave of companies. lisa: i'm looking at some of your holdings come a tesla, square, companies facing competition from the old behemoths. what makes you so confident the upstarts have an upper hand? >> i've been focused on disruptive innovation my entire career. it is very rare for the old dna to be able to transform into the new dna. , theylarge car companies have to transform from the internal combustion engine to electric irma then they have to transform from human driven to autonomous. tesla is way ahead, more than three years ahead of the game. lisa: do you agree? >> i do. these sectors have been disrupted by technology and it is difficult for these companies to capture. lisa: thank you to both of you

for sharing your bullishness today. reminder, we will have the latest market reaction to the fed decision on rates. tune in to our special coverage at 2:00 p.m. in new york. glaxosmithkline announced a major restructuring of its business today, forming a joint venture with pfizer to provide over-the-counter medications, the largest in the world. they will spend the new jv off into a separate company. 7%, havingline up the best day in a decade on this news. joining us now is the ceo of glaxosmithkline. thank you for joining us. >> delighted for being here. david: congratulations. these deals are not easy. you got it done. give us a sense of what led to this, what the strategy is?

some companies are being put together to have flexibility. you are now essentially taking companies apart. you for of all, thank having me today on what is a landmark day for gsk. we are able to announce this deal, strengthening two businesses and creating significant shareholder value. the first part of the announcement is the formation of this new world-leading joint venture with pfizer, a partner we already work with, but the second point we have is that it allows us to strengthen our pharma and fax scenes business. vaccinesar term -- business. we are generating cash flow to fund our number one priority, the strengthening of our pharma pipeline, and we give visibility to the eventual separation post-integration, and as we've

made further progress in our pharma pipeline, and that will allow us to reset the balance sheets of two companies, one pharma and vaccines based on the science of immunology, genetics, and new technology, and one new world leader in consumer health care. historically, you are right. we like the balance of the broader company, but we have always been pragmatic about that and said it was conditional on the access to capital for these businesses and the board would regularly review it. truly create a business of such scale. opportunityte an for a new delivered company. lisa: in this current environment, is it possible to be a big, successful

conglomerate with a lot of different tentacles? you are not the only one. >> well, i wouldn't, i wouldn't say that we looked at this from that big picture philosophical point of view. this was triggered by the unique catalyst of the opportunity of creating a new world leader in world health care of such scale that it should have this focus with a new vaccines business and an accelerating pipeline at the point of separation and, as i said, the opportunity to reset the balance sheet. the consumer business will be so much larger and stronger at the point of separation that we have announced half of the billion synergies in the target operating markets, mid to high 20's. , withw consumer business

strong and stable cash flows, will be able to take the leverage at four times the point of separation, meaning that the pharma and vaccines business will allow it to invest considerably in its further investment organically and an organically, as well as returning shareholder returns at the same time. i would see it less as a more as acal view, catalyst. >> let's talk about how you plan you sayy that cash organically and in organically, are you looking to purchase more in the areas of vaccines? first of all, we are

absolutely delighted with the announcement and i'm looking , butrd to that closing more importantly from ecology. not onlyng move for us from the r&d pipeline point of view, but it already has a strong commercial team as a part of gs k. workve been doing a lot of to re-shape the portfolio through acquisitions or noncall , a divestment for unilever. the number one priority in terms of capital allocation organically and in organically,

with excellence around the deals of the next few weeks, but we will supplement that with in and out licensing in the years ahead. >> i wonder if the amazon foray into this is more part of the calculus when it comes to consumer health. emma: it's a good point and there are no questions that in termsn every sense of market brands or distribution, or indeed the way that we operate the company for all of us in all industry, is incredibly important factor. the consumer health care business, which i used to run before taking over, has been in e-commerce and consumer health is a much

smaller percentage than today. today it is a much smaller percentage. we do have this strong growth in markets like the u.s. and china of course. one of the exciting things is the strength of the business in vitamins, in china and e-commerce. themthe way that we market very directly with the big tech media. how it willdent keep accelerating leadership there.

>> brexit, right now, theresa may, how does that affect your business as a practical matter? >> listen, i'm british, i run a global but british company. these are quite difficult times and we are all very much looking forward to more clarity and certainty. in terms of gs k my number one priority with brexit is making sure that u.k. patients and consumers have secured supply, we have been planning that for a long time, looking at it in all scenarios. we will be able to manage through that.

beyond brexit, if i can coin a , thee, these businesses new consumer company and the focused farmer factory company will be very much global and we expect that in a few years, once we have settled through this uncertainty. remember i'm a the u.k. is a great location in terms of life sciences and innovation and of the creative industries like technology and it is quite convenient for time zone. i am looking forward with optimism to getting through this immediate uncertainty. shares certainly show optimism today. emma walmsley, thank you so much. david? emma: thank you. david: president trump has not sayingy and what the -- what the fed should do, saying

they should not make another mistake and that continued right increases would be wrong. welcome from capitol hill, republican senator pat toomey. thank you for joining us. let's start here, the fed is on the minds of all of our viewers right now, coming up this afternoon. what do you make of the presidents repeated statements? one, is he right on the merits? and is he right to address those merits? sen. toomey: first of all, let me say this, the path to normalization of interest rates should have come in 2010. it's wildly overdue and it's a dangerous and extraordinary monetary policy. so i am grateful that chairman powell and his colleagues have

been pursuing normalization after the fed funds rate. we are certainly a lot closer to normal now there we were a couple of years ago and i think that's a very good thing. the president has his views on this and as we know he's not shy about sharing them. i think that the important thing for chairman powell and the fomc is to ignore the politics in the -- the noise. i think of the close call as to whether they should go up a quarter-point or have a pause. probably the argument for pausing is stronger to me but they have a great deal of expertise that i don't have. i think that either way we can get through this, the rates today as they look more likely than not, that suggests maybe a little bit less next year or vice versa, but either way we are much closer to the initial rate and that is where we should be heading. david: turmoil in the markets,

things like high-frequency trading and the volcker rule, what do you make of being in the center of this economic policy? what do you make of the stock market and oil as well? we have to alook, knowledge that the stated purpose of the extraordinary monetary policy of interest rates and a massive balance inflate asset prices. you have to expect that would contribute to taking some wind out of some sales. i think that this normalization process inevitably meant that ime assets would reprice, think that secretary mnuchin is right, the volcker rule clearly issued liquidity to the financial markets, taking big trading players out of the market. we should expect more volatile swings.

>> do you expect further efforts to renew things like the volcker rule? we have not only massively increased regulation but also capitalization. ever been as heavily capitalized as today or as prescriptive and its regulatory regime. both of those don't make a lot of sense to me. the purpose of capital is to weather the storm and it diminishes the need for the incredibly prescriptive regulatory environment we have been in. having said all of that, it takes 60 votes in the senate and a change in the regulatory regime and our democratic colleagues have not agreed on the notion that we might want to allow a little bit more flexibility on the parts of our financial institutions, so i

have a list of things i would like to do. modifying the volcker rule is among them. but the prospects with democratic control of the house are not great. that the think declines and underperformance in financial equities are part of the hamstringing that comes from taking risk? sen. toomey: i think it is hard to say and i will leave it to others to parse through fly a particular sector has underperformed the rest of the market. factorse a number of there. but i think it is unambiguously true, that we have dramatically increased capital requirements and curved their ability to innovate flexibility. that would suggest, all else being equal, pressure on equities. david: what zynga we talk about with you before senator, the successor to nafta, you hoped that that would get through in the lame-duck. congress didn't make it in the agenda. how concerned should viewers be about getting this deal

ratified? let me be clear, i was advocating for modifications in the legislation, not in aning it, but moving freer trade direction as i think it's a modified nafta the curb trading and diminishes it throughout the continent. that's a negative. the administration chose not to pursue that path, the president decided not to negotiate with those of us who are strong believers in free trade. he is instead now at the mercy of nancy. speaker pelosi has been in this position before. we have seen this before, where a republican president passes free trade agreements on and each time she refused to act on it. optimisticextremely that we will see any movement anytime soon and if we do i'm afraid that the demand is going

to be to take it in the further protectionist direction. >> senator, we are awaiting a further fed decision today. do you think that if the fed continues to hike the rates, senators will band together to provide more fiscal stimulus? sen. toomey: i hope not, i don't think that's necessary. i think you can make a reasonable case for why another border point is not a bad call. inflation is at about 2%. we have some tightening from the former reduce the balance sheet that is a bit of headwind. but still, our real overnight rate is close to zero, so it's not extraordinarily tight. short-term treasury yields are above the fed bond rate. i don't think that if the fed were to take one more modest step towards normalizing and reaching a neutral rate we should respond with some kind of spending blowout.

senator, thank you so much for your time today, we really appreciate it. >> all right, joining us now is our bloomberg intelligence chief interest rate strategist. today obviously we will be getting the fed decision and we are expecting them to raise rates. how can they most effectively make these dovish hikes? >> donald trump really wants that. >> as do other investors. >> that's true, but when the federal reserve talks about financial stability they are talking about market function, not the high price. those are two different things. paragraph it says that the committee expects further gradual increases to help the expansion. i six that -- suspect that the were gradual may come out. that's the biggest signaling

factor and i think we are basically saying hey, we are going to be very data dependent. we will just go more data dependent. going more to those 2019 numbers. david: hate to ask this question, but have to. ioer, are they going to change? >> yeah, that was a tool to try to keep the fed funds rate within the range of the crisis and what has happened is that liquidity in the fed funds market has changed so much that it has been rising a little bit and is now trading with interest on reserves. i do think that they will tweak that within 20 basis points and reallynical, doesn't matter. they are still raising rates but are doing this instead of other things they could do, like repo operations in the open market. >> i love it, the magic word, magical. atlow our fed coverage today

2 p.m. in new york when we hear and scottgreenspan minard. let's get a quick check on the markets. upore optimistic a here, 7/10 of 1%, the nasdaq future yesterday, ending a lot flatter, the dow jones up 9/10 of 1%. getting in touch of with what's happening, getting a balance after the worst three-day selloff in 2016, gaining a touch against the dollar. it's interesting to me that the't more given resolutions between the italian representatives and european commission. the 10 year yields are climbing a basis point with the japanese yield managing to rise after a very bumpy session. david: going back to italy, the premier just spoke at the senate there, there's a live shot, saying that they are not going

back on promises and they will likely sell some real estate there. they think that their growth is actually going to be 1% of 19, which is not what i have seen on the positive in terms of going into the negative, but the deficit target is 1.8% in 2020, and that's the deal for 2019, with 1.5 and 2021. things are really looking great reporting to him. don't know what the issue is in italy. >> tax online sales and everyone will be happy. david: growth, the. in the meantime, theresa may continues with prime minister's questions in parliament, and selling the questions -- answering the questions there, saying that the net migration in the u.k. will because the tens of thousands. remember, this was one of the primary drivers of the referendum from the beginning, and the people for coming across

the channel and that they have lost control of immigration. she said this would really cut down the immigration. >> i wonder what she does the site herself up before going into these sessions. whenever she does, it is working, she seems very of laughable to me. now, three things that wall street is a zynga about this morning. the steve mnuchin blame game .ith a high frequency trading we just talked to pat to me. and then deutsche bank takes a look at low morale. citigroup's 100 $89 million loss, facing as much as $180 million in losses in a hedge fund. brooksing us now is sutherland of "bloomberg ."inions is this the fault of

high-frequency traders that have been a whipping post? is it the volcker rule? what are people saying, do they buy this argument? 5 your point -- brooks: your point is a really good one, we haven't necessarily had high volatility for the last five years. it was not long ago that people were complaining about low volatility. convenientis a very fall guy, a few categories that people love to hate. but in the market they tend to doubt that. of whatve you a sense steve mnuchin said, he said that in his opinion it had led to a market crisis of high-frequency traders and he actually recommended that they investigate. david: well it wasn't about trade problems with china, we know, he would have none of

that. a fair numberut of investment bankers in asia are losing out? >> whenever you see these companies go through so many scandals in hard times, your high performers are not really going to want to stay around. deutsche bank has said that it will be an ongoing area a focus, but it is sort of hard to keep people in the situation like they are in. i think about those parallels and how hard it is to keep people. if you talk to headhunters, they have had to pay up to get some of the people who have the confidence to come to them. it's interesting downward spiral . as you become less attractive on a corporate level, it's more and more difficult to retain talent.

and then you have these pitfalls. david: also, not specific to deutsche bank in general, if you are not sure if they're going to change their strategy a few more times, it's hard to say were to sign up. and inevitably your conversations will be in stocks, so you're making a bet on the vision of that ceo. todeutsche bank was trying expand in china, taking us to our third story about the losses the bank has incurred. citibank saying it had a potential $180 million loss on alone in hong kong. i found this really interesting, this range of questions about the risk control operations at citigroup. brooks: some of that payment we have seen in hedge funds, which are on track for their worst performance since 2011 with the

beginning of the ramifications here of that. one thing i would say is potentially $180 million, so you do get those big swings in revenue and citigroup in the past has come up with big benchmarks and later water them back down significantly. it is a sort of yellow sign, if you will. theyy can evict -- david: can be very important clients for the big banks. sen. toomey: -- brooks: something that the cfo has talked about a lot, part of taking this potential 180 million dollar loss, they are reorganizing for parts of the brokerage and moving around the brokerage where the loss occurred into making that a part of the severed agency, making you wonder what those strategies might be like going forward. david: it's an absolute land

rush into china. very much thanks to brooks sutherland. coming up, fedex under pressure after the cuts that was deeper than out look was expected. this is bloomberg. ♪

david: they say that it's come down fast. >> with europe and international pressures. you what oned to analyst said, that they were surprised by the magnitude of the headwind that might be seen

in a severe recession. david: and to reinforce that, it was the ceo as well, the ceo, fred smith, said that when you have a change that comes on as fast as this did, it's hard to react. international businesses in europe reacted significantly. >> this is tremendous. david: it makes you wonder if there is more coming down the pike. coming up, bank of america the research, with strategy chief investment liveegist here with us from new york. this is bloomberg. ♪

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cold, the fed tries to get it just right as they announce their decision. maybe less than what was in coming in 2019. signals and noise, equities clawed back a bit of both trading at lows for the year if it's temporary volatility. toys "r" us. we will talk to the ceo of about how retailers plan to boost sales this holiday season. i'm david westin right here with lisa abramowicz. alix steel is with her well-deserved time off. lisa: although this was supposed to be a quiet week. david: didn't work out that way. lisa: between the fed, with theresa may? the big announcements? lisa: trading has been increasing, go figure. stockssitive tone breaking the losing streak, with

s&p futures indicating a fourth things happening rapidly late in the day. a three-day loss with the worst being the three-day tally in ten-day yield with 18 basis points and people believing what they are being told by the european commission and the italian leaders. time now for your morning brief at 10:00 this morning, with existing home sales. 1:00 this afternoon, paul ryan will deliver his farewell address from the great hall of the library of congress on capitol hill and at 2:00 we will get the fed rate decision with jerome powell. right now we will take a look at capitol hill, immediately behind that is where paul ryan gives his farewell address. debatehis as they whether or not to come from this budget.

ahead of that budget, the get is next yearssion in his tenure has been an interesting one. david: you one of the tax cuts, but not the deficit. -- he wanted the tax cuts, but love is fairly the deficit. >> senate republicans are trying to avert government shutdown and delay the fight against the border wall until february. they are considering a spending bill that would finance veterans through 2008. asking that the president back off a confrontation over the wall. meanwhile it's a victory in capitol hill for trump, overhauling criminal sentencing guidelines. consider thel now proposal to avoid jail sentences and helping ex-convicts readjust to life. facebook reportedly gave access user data than

previously disclosed. than 150 companies to obtain personal data, including names and contact information. that it found no evidence of abuse by any partners. onbal news 24 hours per day tictoc in twitter, powered by 2400 journalists and analysts in 120 countries. david? .avid: thank you so much we get the fed rate decision later this afternoon with expectations of another hike baked in, but some economic signals are being sent that things may get trickier in the new year. joining us now is the bank of america merrill lynch strategy and in harnett, welcome to both of you. the white line basically indicates where the so-called neutral rate is in the blue line

is where the rates are so far. that whateverest the market is doing, the fed should think about taking aim? >> there getting close to neutral. the fed doesn't know, they have models and estimates. and as they get there they will have to be more cautious and data dependent. they will really need to take their cues as to hard-fought -- how far interest rates need to go and how the economy responds to a different level of interest rates. one thing that it's not is the s&p 500 plunging. i would love to get your sense here, you can see that the white line is rate hike expectations

and the blue line is s&p 500, plunging in tandem. would it be safe for the federal reserve to hike today? much chance ofe saying that it's a mistake, but what we are saying is that raising interest rates in an environment where banks around particularly the risk for asset managers, raising rates clearly justified from the domestic economic outlook and global financial outlook is challenging. lisa: wait, you are saying financial firms are in crisis right now? can you elaborate? how does this play out?

>> i think that what we are looking at, as i say, is the systemically important financial institutions that have been devised by international bodies. 30, a group of eurozone banks were down 40%. even companies like state street, goldman sachs having been hit hard, we've got nine of these large u.s. financial institutions, maybe the fed is just saying look, you told us that you could pass the stress test and we are going to focus on that the mastech economy and we will wait until main street comes under pressure, we can be seen to bailout wall street yet again. so, there are very clear bits of i think, lisa, the we are seeing a lot of stress in these institutions in our view is that that is coming out of and quantitative

thriving. at the moment there's no sign that the fed will reverse that. david: they look at things like stress on financial institutions and i have another chart here, if i may, these are financial conditions that have really tightened substantially since october. is that something the fed will be looking at yesterday and today and this afternoon? >> absolutely, it's an important it affects the economic conditions, confidence, and a keyng, and is transmission mechanism for the fed in the real economy. the fact that financial conditions have tightened is not to the fed.rising they have been raising interest rates in our expecting conditions to tighten. if anything the fed might have argued that they would have seen more tightening earlier in the than they have, but they

are clearly worried about the speed at which these financial conditions have tightened, equities falling as rapidly as they have over the last couple of has to be concerning, sending signals about future growth, the fed needs to take that into account. after today the fed says that they are near neutral, taking things easier, informed by incoming economic data without a preset path for interest rate hikes. no longer will they be on autopilot. they will be taking in a wide variety of information. lisa: what about libor rates rising to their highest level? >> financials in particular are taking a fair brunt of that. i don't necessarily see it as systemic at this point. i think it has more to do with future profitability for financials, the flattening of the yield curve, and how it --

lisa: interest margins. carry on. >> you are right, we have seen rates and proxy for bank credit increase in the year end and we think that that is somewhat attributable to technical factors at the end of the year with bank dollar sheet management. i don't think i'm quite ready to a systemicis is issue for the banking community, but banks are facing profitability challenges going or word and are certainly aware of that in with the flattening yield curve that has a lot to do with it. are you suggesting that financial institutions that are under stress are the canary in the: mine? >> looking at financials in u.s. financials in particular over the last few weeks, you get the sense of why in the global

economy. the trouble with the narrative that mark was just giving about this being about profitability is so far the earnings forecast for u.s. banks have been rock solid and we are still talking about 10.9% for earnings growth. there's no real evidence for what we have seen and i'm afraid it is systemic. you have got 34 out of 37 globally systemic important financial institutions in bear market territory compared to where we were in january and we have also seen this big rise in u.s. credit spreads. so credit has gone up, high yields have gone up 70 basis points in the last six weeks. treasury yields have come down a bit more. you normally only get that kind of environment when we move towards recession. that is what equity markets don't like. the earnings market expectations, running around

7.5%, we think that number is going to be closer to zero when we get to the 12 months forward. senator toomey blames regulation, mark lames what's going on with profitability for interest margins, talking about how is the fed and a host of other issues as well. , youcabana and ian harnett are both sticking with us. follow the fed decision with us at 2 p.m. in new york today. this is bloomberg. david? coming up, may mock's corban. parliament at a stalemate right now. this is bloomberg. >> oh, yes he is. oh, no he isn't.

>> this is "number daybreak." a british drugmaker and pfizer have agreed to combine their consumer health care businesses and the unit will be listed on the stock ark it in the next three years. will be mixing with things like avril and central. shipper, fedex, planning to offer employee buyouts to cut employee capacity , saying that international business has weakened significantly since september and shares of stock-based domestic telecom businesses having one of the first data climbs ever in japan, falling more than 14%. softbank and underwriters stuck to their plan for a crisis offering rather than a range. that is your bloomberg business

flash. david? kayleethank you so much, . uncertainty around brexit is greater than it has ever been. plans for messy brexit without a deal have been stepped up and theresa may questions before parliament goes on christmas holiday recess. >> they said a vote of no-confidence, then they said they wouldn't. then they would. pantomime. he's going for the confidence vote. oh, yes he is. oh, no he isn't. lisa: i love that. [laughter] david: so hard to follow. , you are over there, kind of responsible for this. what is going on with this messy trading forum? [laughter] >> don't blame me for that.

our narrative throughout the process has been that it's difficult to avoid chaotic brexit and i think we are very much in the heart of that. we are just, as you say, seeing this theater playing out when there are really tough decisions to be made. today five business organizations came out warning about the lack of preparation in the u.k. economy about a hard brexit. we are now hearing warnings from the european commission and u.k. government about a hard brexit. clearly project fear is what's coming through and theresa may is hoping that as the fear starts to set in people will recognize that the only deal on the table, better than no deal, is her deal. lisa: we are going to be getting a bank of england decision tomorrow and i have to wonder how this plays into rates. it will be more difficult for central bankers to move away from unconventional monetary policies, right?

>> at entirely right. brexit is one of the big points of uncertainty that policymakers have to be cautious about when thinking about whether or not they should try to reduce the extraordinary measures they have put in place since the crisis. they cannot be particularly confident right now. david: so to go to a happier place right now, let's go to italy. [laughter] >> looks better, doesn't it? the germanspread of bond has come down and people are now purchasing italian bonds . it's better than it was, it's better than it was. up 300 basis points. ian, has it gotten past the storm, do you think? >> i think it's dangerous to say that. clearly some of the politics is weighing out more favorably relative to the u.k., but my concern remains that we get this focus on italian debt when you

have worries about debt sustainability that comes about when economic growth slows and what we still see, globally, from those warnings earlier today, global growth is slowing. european growth looks like it's slowing aggressively and when you have had that in 2015, 16, 2011 and 12, it sets the scene for debt problems in the eurozone. we thought it was down over the for in terms of the selloff italian debt, we had a nice rally and personally i thought it had gone far enough. remember that italy is the only country in the eurozone with a debt problem. france is actually the key one. they have done the bulk of the largest amounts of leverage loan lending. we really need to worry about eurozone debt when it gets french rather than italian. lisa: market, is this temporary

truce enough to make you more >> the ecb has reflected real skepticism and looking at overall economic data it appears that global growth is facing a number of challenges right now and we think that global growth for 2019 will be smaller than what we saw 2018 because of brexit, challenges in the euro area and the slowing u.s. economy. en, mark, thank you so much. mark, you aren't going anywhere, i apologize. glaxosmithkline and pfizer will be teaming up and we have got more on that story at the bottom of the line. from new york, this is bloomberg. ♪

david: time now for the bottom

line. glaxosmithkline announced a "pfizer combining consumer health care pricing. and we talked to the ceo of smithkline earlier today who explained the driving force was about getting the capital they needed to invest in prescription drug businesses. >> it also allowed us to strengthen the pharma and vaccine businesses because in the midterm we have seen significantly larger cash flows from this big joint venture to continue to fund our number one priority, strength in the pipeline. david: the slower growing business is the consumer business, but the bigger risk is what they are grouping the capital into. lisa: we will definitely be watching that. i'm looking at ipo's, we saw raised $23.6 billion in initial public offerings and it

didn't go so hot in its first down atrading, riding lot of other japanese companies. blue apron, though, putting it out of its league. blue apron ipo has launched more than 90%, the third worst ipo ever. which is like, what's the first? bet it's like pets.com. lisa: i'm in my goodness. have you use them? david: i haven't, but remember they said they wouldn't have this range business? how did that work out? ok, the third story today is an important one involving company buyback, specifically johnson & johnson and boeing. for more we turn to our bloomberg opinion columnist. >> a report from s&p indices saying that third-quarter buybacks are passed 200 billion 500the first time among s&p

companies. year to date, nine months of the year, we are 1% shy of the record that was set in 2007, so this is big money being spent primarily coming from the top, it's very top-heavy. you are not necessarily seeing the companies doing the big buybacks but the ones that are are spending a lot of big money. their programzed with a $5 billion buyback authorization. it's pretty heavy spending. is it working to push up the share price? and what happens when they stop dying? >> that's the big question, will they be a to counteract these downward pressures? a lot of it is trade related over concerns that we are headed towards an economic slowdown. you wonder, they are sort of buying it at maybe not so bad a time if you think the stock will skyrocket from here, but you wonder if it's the best use of their money and it's certainly

not to use that was intended when we passed the tax that not long ago. exactly, they have more cash. but you have to wonder when you see this, is the ceo saying that they think the stock is undervalued or saying that earnings-per-share has an enumerator and the evaluator and things will go up as it distributes the earnings over fewer shares. >> the third one i would ask is maybe don't necessarily feel that confident investing in developing some of these projects right now just given the degree of economic uncertainty that we have right now. how do you make this decision is the ceo? how do you set up your supply chain? it's all most in easier decision to buy that stock right now for those ceos, getting the earnings benefits that you talk about, and whether it boosts prices we will have to see. lisa: one point they have made is that the low credit spread has given the money to buy back seeingand now you are

tightening of financial conditions shifting and companies will be able to do that and you do have to wonder, heading into perhaps a rock year 2019, what it means for the ability to support the share price. david: a little bit of skepticism, the world is a tough place out there. thank you for being with us today. coming up, the housing market got a brief reprieve from tightening financial conditions, but how will the rising rates weigh on the market? we will talk about that, next. this is bloomberg. ♪

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upward,utures indicated but lower than this morning. the dow jones as well, coming off earlier highs, david. david: we are waiting for the current countdowns that are due out right now. it is 124.8 right now. month, it, -- last was revised down. healthynue to run a account. lisa: we got data on mortgage applications, and it fell 5.8%. this was the first time mortgage sixications have fallen halves -- applications have fallen since november 16. in nelae want to bring richardson from st. louis from

edward jones. really follow housing closely with you. we have to look at the housing start numbers that beat to the upside nicely as well as building permits. where are we right now in the housing industry? nela: what i think you see is the disparity between supply and demand and going back to basics, right? the fed is being captured by mortgage applications -- it is being captured by mortgage applications. it is good for multi-family apartments. when we are talking about housing, we are talking single-family, which drives the economy forward. single-family disappointed in november. the projection was 900,000. we are around 840,000 starts in single-family. it is disappointing for first-time buyers trying to make inroads into the market. lisa: mark, i would love to get

your perception. others say that the fed is in purchasing as many mortgage-backed security. how significantly has that effect it the weakening we have seen and housing? mark: i think the housing story is an interest rate story in the u.s. housing is one of the most interest rate sensitive parts of the economy. it is no surprise you are seeing housing starts fall and affordability measures dwindling. fed is allowing to have a maximum of 20 billion roll off of the balance sheet. that is a headwind in terms of mortgage rates. that will continue to be a headwind that will decrease to affordability. david: we have a red headline

involving allergan. , and i'mnded sales assuming these are breast implants, issuing a recall order, saying they are cooperate -- saly are cooperating with authorities -- saying they are cooperating with authorities. they are suspending sales and withdrawing implants over in europe and they will continue to work through the situation. lisa: they are suspending sales of their breast implants in europe and their shares are continuing to decline on announcement of this news. allergan is also known for its botox. david: we will follow-up with allergan. coming back, you say it is supply and demand. to what extent is there interest rate sensitivity? interest rates have come up a

bit. is there that much elasticity in demand? nela: right now, there is. it is the pace of the increase, and the pace has been very slow. prices are pretty high. it is important to remember that people have bought homes at all kinds of interest rate environments, even as high as 18%. it should not be that dirt cheap great other requirement for a booming housing market. there is more going on in housing than just a little bit higher interest rates. it is about structural interest rates and supply, the cost of regulation, land zoning at the local level -- these are structural issues that have yet to be addressed. that is why we are still saying the supply constrained and that will carry forward even though demand is relatively strong, and

rates are pretty low when you look at the history. lisa: nela, you make an interesting point. mark, this is a problem with the structure of the housing market. do you buy that? mark: there is no doubt a component. it is interest-rate sensitive and interest rates are lower, but higher than they have been. housing prices have fallen off to some extent. when you look at some sentiment indicators from homebuilders, that is reflecting those less confident in the building outlook and less competent and the buyer base as well. david: so, is relief on the way? this chart compares the blue russell s&png the 500. the white line is -- you see the yellow line that turned down back in march, but is coming around and are bucking

the trend. are homebuilders turning around? nela: yes. if you want to look at the future of the housing market, look at this. there is demand. wages are rising and that means a healthy consumer. the first time buyer is the lifeblood of the housing market. what we are seeing it -- what we are seeing with homebuilders is the pivot to more affordable homes. that is where the demand started. nela, everyone loves baseball analogies. where are we in the baseball analogies housing market? market is noting a baseball game, it is a marathon, and it is an during. homebuyers cannot sell because it is not a liquid asset.

we think the economy is still growing. the labor market is still tied in we will see wage growth. most importantly, you will see millennials form household, so that means the future demand is there. david: mark, i want to become back to you. you have been inside the fed. you say, it should be data-dependent. how do they look with the homebuilding? what is the emphasis on? mark: what they are concerned with is what the labor market is doing. housing is a very important piece to the u.s. economy. it is slowing a touch. we do think that households in aggregate will shift to a head when recognizing some of the slowing and growth and the year-over-year pace of gdp growth will slow probably back

closer to the trend by the end of next year and that will no doubt weigh on the housing market to some extent. the fed care most about labor market inflation. there are key inputs to that across the economy, whether that is or consumer confidence -- capex orhat iscape consumer confidence overall. sensitiveest rate parts of the economy are slowing, and they need to be careful to not rock the boat and spoke markets more than they had been. lisa: can i ask you about the feeling at the fed? when some come out saying they made a mistake to raise rates, do they listen? mark: the fed takes in a wide variety of information. they certainly see former fed officials and prominent

meaningful market participants, but that is one factor in terms of their overall stance of policy. what they are hearing is that the market is on edge right now and the fed would very much like to see that calm and see focus return to data. they believe data should be strong the first half of next year. if that is the case, they will have confidence with the interest rates. i don't think they will overweight anyone investor in thinking about what the best policy is. david: nela, if the fed comes out today and signals that there will not be three rate hikes next year or less than two, what will that mean for the housing industry? nela: they will take that is good news. homebuyers make decisions based on monthly payments and lifestyle choice, and that the man will be there regardless of rates go up 25 basis point or 50 basis points.

when you are looking at the long-term future of housing, it is more than just about interest rates. next year, you will see that play out as homebuyers are more concerned about their monthly paychecks than the actual rapier paid each month. there is a push and pull about longer-term issues. at the end of the day, housing is so fundamental to the consumer profile, you will see that play out next year with a growing, but slowing economy. lisa: and that is especially if millennials start creating families. thank you both so much. david: let's turn to kailey leinz here with first word news. kailey: the u.s. is making a potential overture to restart tech stocks in north korea. a representative say washington well look at policies -- will look at policies regarding kim jong-un's regime, discussing

nuclear discussions back on track. the trump administration told congress it plans to sell its defense plans to turkey. that is a breakthrough. he was is hoping turkey may help its purchase of a russian missile system, but turkey still has plans to buy it. authorities have made the first arrest a bankers in what may be europe's biggest money laundering case. tied to the arrests are $340 million in suspicious transactions. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. lisa: thank you. coming up, the toy market up for grabs. we are going to look at how retailers are jocelyn for market ing for market

share. this is bloomberg. share. this is bloomberg.

♪ >> this is "bloomberg daybreak." i'm kailey leinz in the hewlett-packard in a price greenroom. coming up, a bloomberg opinion columnist. now to your bloomberg business flash. general electric is moving ahead with plans to spin off its most property of -- it's most profitable business line signing off on an ipo of its business unit. the new entity could have an enterprise value about to $70 billion. japan has agreed to take a minority stake in aflac, the

american insurer whose biggest market is in japan. in awill take a 7% stake $2.4 billion in increased voting rights to aflac to 40% over the next several years. is trumping the landlords real estate brokers. they are getting a greater portion of its business from the large companies that property owners usually report. blackstone group are venturing into -- is venturing the flexible office workspace of their own. that is your bloomberg business flash. lisa: that is an interesting story. they were one of the biggest commercial properties out there. how difficult is it for other property owners to stick a little putting course in there.

david: they say, it looks like a good business. why shouldn't i do that? lisa: you put in a couple of pain upon tables in there and you are good. david: it is christmas time and we are going to talk about toys. with the demise of toys "r" us, new playmakers have had to find new ways to reach their customers this holiday season. one company not missing a step is a pop-culture company that has had their stock go up this year. welcome, brian. good to have you here. for people who know -- who may not know about you, explain what the toy is you produce? >> in business terms, we are like an index of pop-culture and do things affordable and fun the goldenows like "

," to," to "game of thrones sports and music. we are everything pop-culture the proliferation of new pop-culture content and the consumption of that content, we make things that high amazing products to the fan base -- we make things that tie amazing products to their fan base. david: you guys did the dolls with the large headset people by. -- buy. what is the median age of your customer? 50%0% -- the ages 35 and are female and they are buying for themselves and speaks to the whimsical nature of the products we connect fans to? . lisa: when we were talking about her company, are there more adults looking to buy toys and collectibles? brian: yeah, i think there are.

it is a fun way to connect people to what they love. if you are a hugo quote game of thrones" fans, and you want to represent -- if you are a huge " game of thrones" fans become and you want to represent that it were, it is a huge conversation starter representing what you love. ,hether it is video, theatrical having ways to express that affinity of those equities and fandom is what we love to do. david: how are you distributing the product? since you don't have toys "r" us, how has that disturbed how toys distributed during christmas? brian: we always think our toys are channel agnostic. 20% year-over-year and having an absolutely phenomenal fourth quarter. we can put our products almost anywhere. we have strong products in andon, target, king stop

internationally -- and game stop and internationally up year-over-year. our fans will find our products. lisa: one thing i am struck by can especially as we hear about the trade tensions, where you producing your toys and have you shifted your supply chains in response to some of the trade tensions? brian: that is a great question. we produce 50% outside of china and we will be near 75% outside of china next year. but those are not fear decisions. we are looking at the best factories with the quickest leadtimes and the most able cost of goods. we found most of those factories reside outside of china. lisa: brian, where the -- where do they reside? brian: in vietnam currently. david: we saw the fedex numbers that came out yesterday and they said international shipments would be down, particularly in

europe. are you seeing a showing -- are you seeing a slowing in shipment? brian: for us, no. we are on fire. there is such a demand for our products that the idea that they we affordable and fun, and basically capture all of pop culture, so we are not seeing a slowdown. lisa: brian, what about the increase in the cost. we have seen the inflation entries. how is that affecting you? has been soricing stable. we had the name of to address that through volume and we are beginning to regain operational leverage as a company, so we are safe stability across the board. david: how on earth do you get all of these licensing deals done? a lot of people say, this is my likeness and i will be really protective how i license this out. how many license deals do you have? brian: we have probably more

than anyone. we are all pop-culture consumption junkies. 700 strong that we live, breathe, and i all these different wonderful medias that are adopting a producing amazing content. we are so tied to what is going on in pop culture. we do believe that we look at ourselves as a fast-fashion approach to pop-culture so being tied to everything that is moving the needle of pop-culture is our first thought. lisa: real quick, brian, how well do you work with netflix? they are real driver a pop culture. brian: they are. they are a phenomenal partner for us. we are consuming their content and they are investing $10 billion in original content this year. we have had phenomenal success with "stranger things." lisa: brian, thank you so much.

coming up, the italian finance minister says it's a dead to gdp to gdp willdebt sulfonic year. that is what i am watching. this is bloomberg. ♪ s is bloomberg. ♪

♪ lisa: everything is great again in italy. the italian finance minister says their debt to gdp will fall next year and they will just tax people more when it comes to online shopping and will selloff real estate, so it is all fine. david: they have had a great track record collecting from those taxes. lisa: and balancing the budget, but the ecb is curtailing its bond purchases. the italian banks are a concern for a lot of people because they own acute portion of italian debt. you make it -- you may have a problem in the banking sector. we will see. david: muddling through. next up, france. lisa: how about brexit?

going absolutely smoothly. we will see how the budget works out for italy in practice. lisa: but the markets are buying it and you are seeing a bid for italian debt. you may see something a little more positive. up 300 basispreads points. coming up on the open with jonathan ferro, the bloomberg opinion columnist will be there discussing. ive from bloomberg, ♪

jonathan: from new york city, i am jonathan ferro. the countdown to the open starts now.

coming up, the federal reserve expected to shakeup presidential pressure and raise rates by 25 basis points. economists looking for a hike. looking for 2019 rate guidance. andy volatile equity market waiting for confirmation what the rate market has priced in. the equities not waiting around. we are up 16 point. six tens of 1%. euro-dollar,, -- 114. investors worldwide coming into the big decision, looking for the answer, there is one question. >> can the fed execute a dovish hike? i think it can. >> the dovish hike. >> to be even more dovish, sure. >> the dovish twist to the market. >> the markets rooting for a dovish outcome. >> that is