no ifs or buts. >> u.k. government meltdown. johnson faces rebel in his own party as he strikes back with a fear of snap elections. the chinese currency sinking to record low as the trade war begins is next chapter. and back to school, back to risk off. it is a month of uncertainty from a trade war to politics and central bank. >> welcome to "bloomberg daybreak." i'm david westin here with alix steel. it's back to school and a busy fall. alix: a really busy eight weeks. we're seeing risk off permeate ny asset class here. eurodollar breaking below 110. we're continuing that downslide today. now at the lowest level since 2017. it's buy bonds but you're really buying over in germany, record low bund yields again and crude,

copper, all getting caught up in this risk off seer. time for global exchange where we bring you market moving news. from hong kong is reporter ian marlowe. from london is emma chandra. from new york and miami. over the weekend, you had protests continuing in hong kong. however, china is seeing some positive signs the hong kong and macau affairs said a consensus has emerged to put an end to violence and chaos. >> positive changes are emerging in hong kong, most importantly, putting an end to violence and chaos has well as restoring the order has become the strongest and broodest consensus of the hong kong society. alix: we welcome marlowe ian. is that true or is that violence a reality? >> yeah, i think it's a bit of both. the violence over the weekend is

certainly something that transfixed the city. you had a huge roadblock that was set on fire throwing molotov cocktails. and monday and tuesday, we had a little bit of comments coming from both the hong kong local government and today from beijing's hong kong macau affairs office and they were basically trying to draw difference between some of the more radical protesters and some f the peaceful protestors. they were trying to distinguish between some of these mass marches and more radical protestors who are tossing these trol bombs and clashing with police. david: members of parliament returned today from summer recess. they seek to seize control of the agenda and force boris

johnson to delay brexit if he can't get a deal. here what is the prime minister said about divorce negotiations. >> i want everybody to know there are no circumstances in which i will ask brussels to delay. we're leave ok the 31st of october, no ifs or buts. we will not accept any accept to go back on our promises or scrub that referendum. david: emma chandra joining us. what do we expect from parliament today? what are they going to do? >> the parliament returns from summer recess and business is due to get underway in the next couple of hours and the case this cross party group of opposition and peace, also including some rebel who is are going to seek to take control of parliamentry business. they oppose the process of a no deal exit the european union

when johnson talks about leaving no ifs and buts. if they manage to seize, they can hold a vote to try and seize control of parliamentry business, the parliamentry agenda. if they do that and boris johnson loses that vote, he has said he will call a general election and he will introduction a motion to do that tomorrow. he would need two thirds of m.p.'s to back that motion as well, david. alix: the reaction with the market was off the lowest session. now they're back down since 2016. can you walk us through some of the scenarios that shot analysts and economists are pointing to that could lead a no brexit or a no resolution? >> the currency don't like a no brexit deal. whenever we get headlines that look like a no deal is more

likely the process of a general election complicates matters and that's because of the potential outcome of that election. one could be a win for boris johnson, giving him a mandate for no deal. another outcome could be a win for the labor party and its leader jeremy corbin, a socialist. many people within the business community see his policies as extremely unfriendly to business and the other outcome could be a hung parliament. we will be no closer to a resolution but closer to a brexit deadline. alix: thank you, emma. over the weekend the u.s. rejected beijing's delay to get tariff. michael mckee joins us now. mike? >> it's the trade war basically taking an expected turn for the worse as the president did as you say, rejected chinese request to delay new tariffs pending talks that are supposed

to take place this month. insteadings he went wade with the new tariffs, a 15% tax cut and an additional $112 billion worth of chinese imports. both sides say that is complicating efforts to set up this next round of talks. a date for chinese officials to come to washington has not been set. the administration argues it needs to get tough on china in order to bring them to the table. the chinese don't want to be seen as giving in to those kinds of threats. as we keep an eye on equities this morning, one theme starting to percolate into markets that equities in particular have priced in an eventual resolution of to trade war but we may be approaching a tipping point where people believe a trade war isn't going to end and that could lead to big losses ahead. vid: the big -- one of the things the president is saying is we don't need to wow about that. is the president right? the yuan has not been

devalued but as gone where the markets wants to take it and the chinese are letting it. it's down about 8% since the president first imposed tariffs in march of 2018. the average tariff is over 2137. so no, they are not absorbing it in the devaluation. it's little odd because the president cites it as good that the u.n. has devalid because -- yawn because the americans don't have to pay it and it gives the chinese a leg up on u.s. competitors even though analysts say most chinese companies have not lowered prices. david: thank you, michael. in the meantime, the east coast of the united states from florida to the carolinas braces now for hurricane dorian. it's a category 3 storm weeks havoc on the bahamas. joining us is jonathan levin. what's the latest? >> good to be with you. this storm has just been sitting out there in the caribbeans,

pounding the bahamas. it's a terrible situation for the bahamian territory. it's now a category 3 storm as you say but we need to remember that when this started hit the bahamas, it was a really, really dangerous category 5 storm, still very dangerous. at this point, florida is cautiously optimistic that it's going to ultimately make that turn and head north. but it's still going to get close to a lot of important assets and where a lot of folks live here in the sunshine state on its way up to north carolina. alix: thank you very much for the update. and another story that we're following from over the weekend is the mass shooting in odessa, texas, that left seven dead and 22 injured. a 36-year-old gunman opened fire as he goes through two west texas towns with a assault rifle

culminating with a high speed chase. president trump thanks first responders in texas and says he is looking at different gun-related gun-related violence. president trump: i'd like to thank law enforcement yesterday in texas. they've been incredible. first responders, law enforcement, the police, the b.i., governor abbott, incredible, the job they did is tragic. but we're looking at a lot of different things. we're looking at a lot of different bills, ideas, concepts. it's been going on for a long time. background checks. david: united states says that most gun-related homicide with any developed country in this chart shows that americans own roughly 45% of all the world's firearms. second is yemen and third is montenegro. the gun debate may be a debate and the acting secretary of homeland security said mass shootings are a homeland security threat.

this is bloomberg.

♪ david: now for the bloomberg first take where we give you the news and you get -- of the market. brexit showdown. a british election could be around the corner as boris johnson will try to trigger a snap election. here to discuss is our reporter, marty schenker. and over in london, neil dwayne. so, marty, i'll start with you. another election? is he going to win it? >> well, that's the key question. he's banking on him winning it and it's a very important that that election take place before the october 31 deadline for hard

brexit. alix: my question was who is more dysfunctional? the u.k. government or the u.s.? david: hard to measure that. alix: and luke, i was struck by the whippy action in the cable rate. really? haven't we seen this play out before? >> because a lot of people have lightened traditions on cable. on news, you're going to get bigger reactions that are fewer people involved. it's very hard. he's had kind of taken large positions that are contingent on an exchange rate that could move fairly dramatically in a short period of time based on binary political outcomes. what i found interesting is that short sterling curve. so your expectations is moved as it has the month before. so people arto realize that he might have to ride to the rescue more than he wanted to in an attempt to salvage any negative ramifications. david: neil, how does it look in london? is there any relief that maybing

e will get resolved? >> there's a lot of people in the u.k. who are quite tired of brexit and would like one thing. where i would just say is because there are no rules from the house of parliament. we've been around for 500 years and never written anything down. the next 48 hours is going to be fascinating. i think it's right that sterling is taking a strain. i don't think it's necessarily up ect for investors to bid the stocks from a weaker sterling because the threat of a jeremy corbin government, i've been saying to our client is probably worse that a no deal brexit because of what he will do to the u.k. economy. i think it's fascinating to watch and unpredictable as we figure how the m.p.s are going

to watch the next couple of days. alix: we were joking about the dysfunction but it reminds me of the trade situation. who has the upper hand? you or the u.k.? u.s. or chyna? t leads to more uncertainty. >> you're probably not going to get real clarity in the u.k. there will be somehow another delay, i suspect. october 31, there won't be a hard brexit. and this is going to play out over, you know, months and maybe even longer. so get used to the uncertainty. >> and to marty's point, it's interesting if you're going to assume these two situations are similar in terms of u.s. trade and brexit. you have to beg that lends to a deadline. there's a calendar date that you can hedge around, protect yourself around where one is ongoing, uncertainty or you fear that things won't get worse but

inevitably, they seem to do. david: so neil, as we go to the-the-fall, are we better off with the uncertainty or getting an answer even if we don't like it? well, i would argue the latter very much. the direction of valve with the u.s. and china is very clear. china wants to be treated respectfully which is saying it is not being by the trump administration. so unfortunately, now that the president has decided to take on the u.s. cumer tariffs, and therefore, we will see china either hoping to wait out the storm of president trump and get somebody who they think they can do a better deal with. but i think the mood music for the second half of the year is now looking pretty dark whether it's the trade war between japan and south korea, the worsening between china and the u.s. and now we've got brexit coming to a head. i don't see anything good happening in the global economy for the rest of this year from

here on in. alix: to that point, i mean, you saw the global p.m.i.s, whether or not you were in china or japan or korea or we will get i.s.n. later. >> india. alix: that's right. a contraction there. here is the global growth? >> it's right here in the u.s., anywhere. and that is the whole issue in the context of whether trump can be re-elected president. we are in the middle of a slowdown as we approach november of next year, it's going to be very difficult for him and he knows it. >> even in some of these unindex of europe on the supplies -- on the services side, rather, you do see in the i.s.m.'s like a little bit of weakness starting to creep in there. maybe that's the catalyst. but if you look at the engine, china, which you weren't getting any risk there. we've been waiting that for a year to heat up so much everyone seals to know the -- seems to

know the solution. fiscal stimulus needs to come in and yet no one's really doing it. david: neal, there's a lot of soft data out there that's softening. what about the hard data? 2% growth if employment numbers are still pretty robust. >> i think when you take it just as we are today, the fed has got no reason to be cutting rates because unemployment is still at a healthy level. inflation is still doing ok. and the cumer spending is ok on the concern is is that sustainable? and just to pick on something that alix was saying earlier, we have record low interest rates in the u.s. and yet we do not have a strong housing market. we're seeing collapsing values in new york and some of the higher tax states as people start to move for the reasons that the changes. so i would question the

underlying health. and when we add in the uncertainty of trade and the politics in the u.k. and elsewhere, it's very clear that corporates are going to sit on their hands. they're not going to bin creasing employment or investing n capx until they get a better handle and they may not get it next year. david: a lot of uncertainty. we're going to have ans untry i 2020 and we have a president that does not want to lose that he does have some things he could do. back off on china or also some stimulus potentially. >> we're talking about infrastructure in the u.s. for even before donald trump got elected president. nothing has happened. they cannot agree on the -- even though they had a meeting where they came out and said we all agree on the numbers. it's going to be very difficult for the democrats to work with a republican administration to do stimulus. so it's going to have to come from someplace else. >> and the only place left, it's right there, it's trade. and if you look at the

president's goals right now, keeping the economy from collapsing and having the dollar kind of pair some of its strength. that all comes down to trade. that's very unilateral. that could be fixed with a tweet. [laughter] but this is a ball that the president seems to also like having in the air. politically to kind of paint the contrast with him and his opponents even in some cases on the democratic side, you could see a president warner sanders leading up if they're successful. >> i agree with that. alix: if you say that the u.s. cumer is going to be holding up the u.s. economy support the global economy, j.p. morgan had a very really interesting analysis they the cost for household with us $1,000 instead of $600. neil, how long do you feel like the strong cumer story stands? >> in theory, the market is a discounting mechanism.

the market is much more worried about the beginning of this year. those concerns will continue to come through. and of course what, we will have to wait and see is how quickly the targets and the wal-marts on the world start to put up prices and how quickly the supply chains around the u.s. and around the world start to impact. obviously as we run into thanksgiving and your shopping season, one would hope most on the product is already on the seats but anything that is going to make will be impacted it is too early to tell but the numbers as you again highlighting out of places like korea and tywin are telling you that the underlying trade world down 30% year in year in south korea is not telling you that you could be very bullish about the prospects of the 40% that is global trade in the economy. alix: and there's article -- maybe "the times" or something that said there's not going to be a price tag that says raise

prices because of chinese tariffs. they're not going to know why. it's not like a red dot special. david: they're not going to be happy. . ny thanks to bloomberg investors will be staying with us in london. you can find all the charts we just used and more by running the goal on your terminal. this is bloomberg. ♪ ♪

>> this is "bloomberg daybreak" with your bloomberg business flash. the huawei is lashing out at the u.s. today. china's technology company accuse washington of orchestrating a campaign to intimidate its employees. huawei says the u.s. launched cyber attacks to try to infiltrate its internal systems.

the trump administration has limited sale the american technology that huawei needs. and a documentary about a chinese-owned factory in ohio has become a hit in china. netflix can't be seen there legitimately. the film called "american factory" is being widely discussed on chinese networks. commentators are talking about cultural differences and workers rights. the commentary is backed by barack and michelle obama's new production company. alix: thank you. so i -- you watched it. i read the article and this is fascinating having that kind of access through chinese companies operating in the u.s. david: travel with the chairman. but they also get chinese people with subtitles saying very critical things with american workers which seemed justified in the film itself but giving rise to a national labor

dispute. alix: you think it would be just be about u.s. versus china but it's not it's automation and robot. david: they solve the problems they have by saying we just laid off a bunch of people. we don't need them. not is not chinese and american. alix: coming up, markets still niang the balance. back to school, back to risk off. this is bloomberg. ♪ this is bloomberg. ♪ here, it all starts with a simple...

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so come ask, shop, discover at your xfinity store today. ♪ alix: this is "bloomberg daybreak." i'm alix steel. it is riskoff day. we have potential new elections over in the u.k. we have another trade level of trade conflict heating up between the u.s. and china as new tariffs take effect. s&p 500 low by .7%. the daxon down by about .3 of

the bank stocks have not been performing no matter what european stocks have done. that does not bode well for future growth. and then in other asset classes, bund yields negative 72 basis points and also seeing a record low yield over in italy. and the euro continues to move lower down .3 of 1%. the cable rates the lowest levels since 2016. the superlative continue as the dollar just continues to gain in strength. david: u.s.-china trade continues to set the pace for markets with renewed talks in washington still up in the air. david wu of bank of america thinks relief may be in sight. >> i'm still reasonably optimistic that there could be a deal. i'm going to assume that they will have overwhelming incentive as time passes basically to do a deal with china as to minimize

the risk of a recession when he's seeking re-election next year. david: neil, we talked a.c.c. this before. does president trump have overwhelming incentives going into the election to try to cut a deal with china? >> i would say arguably the chinese president and president trump want to do a deal. the problem is both of anthem don't want to do a bad deal and increasingly as i talk to our client base, trump may fold and china will end up the longer term winner. so i think as one of your correspondents said in the previous section, trump has to make this look like he's a winner and be credibly so and it's not obvious to me where i would disagree with mr. woo is it do not think it is in the long-term interest of china do any deal. and therefore, they will not do any deal that will make trump look like a winner. david: the white is the chinese p.m.i.'s as you know, we got them over the weekend which were weaken below a. and blue is the financial

conditions over in china. how much pressure is there in resident to make the deal as well? >> he is trying to rebalance his economy, trying to get some of the bad banking and wealth management behavior out of the banking system. he's constrained on the capital accounts he's thrown the yawn -- yuan back into play. so i do think the chinese president is under a lot of trouble but the one thing that he isn't over is a lot of domestic political pressure. that just won't happen in china and so long as he can keep the message on track and we have a big presentation from him on october 1 to celebrate 70 years of the chinese communist party, i don't anticipate him folding to that pressure any time soon. alix: so what do you think happens to the exchange rate? like if you had told me a year ago that we would have a dollar

yuan near 720rks i would say we would see mazel volatility, we've seen some but not a lot. hy do you think that is? >> we have the offshore ray been b is a very short part of the monetary base. and so it's not a true reflection. when you talk to many ndependents, economists, given the chinese weakness is probably 760 or 770. so you could see another 10% weak for instance the yuan which would be another red flag to your. david: at the same time, neil what, power does the chinese president have to keep the capital flows? do they have unlimited capital flows? >> i think we know in most cases over the last two or three years with the corruption campaign

that president xi knows who has got the money out of the. he knows he's trying to get the money out of the system and piece by piece, you're seeing regulations changed by the company to make sure hong kong are no longer to be payable outside through the hong kong monetary system. so i think they're trying to keep the capital they have inside the system. that is clearly going to exacerbate the disinflationary prospects that we're seeing and while you and i can agree that china isn't growing at six, the thing we will have to face in the next maybe 12 months is china will say it's growing at six but it will feel like one or two with the rest on the world with all the implications and the luxury goods companies. alix: fair enough. basically, you're going to see china slow in the fourth quarter of this year. what i also find interesting is it's no just u.s.-china. it's what we are focused on u.s.-europe and even south korea

and japan when it comes to technology. this is not fix the china trade war and we're all good. >> no, unfortunately people are starting to take a bit of president trump's handbook and starting to apply it in their own way. it is very clear that they are now hurting very badly from their reliance on three key components on the technology industry. we're beginning to see from the u.k. as well as from germany clear damage from brexit in the uncertainty around it. so i think, you know, when things are about to drive for economic growth, you can't at the moment with politicians starting to do things that are good for their own electorate or their own basis, then clearly it's not good for the global economy in general. david: look at india. india has reported g.d.p. growth below that 6% level and there's concern about a quasi recession going on at india at this point. >> yes, it is very interesting.

now that we have the prime minister re-elected, maybe he can do a bit of stable clearing. merging a few of inefficient probably vast state banks. this is a bit of pain early on and then maybe we'll start to see some of the gains in 2020 or 2021. alix: so what's your favorite allocation right now, neil? > my favorite is u.s. high yields. u.s. trade is still a good place to be the dollar is fine. but as a hedge against aggressive monetary policy, i still think gold is worth having in evil's postals. -- portfolio -- people's portfolios. david: we turn to bloomberg's first word news. >> the u.s. east coast from florida to the carolinas is bracing for hurricane dorian. the storm has been downgraded to a category 3 but winds are still reaching 125 miles an hour and

it continues to pound the bahamas. the national hurricane center says dorian's path could bring it dangerously close to florida through tomorrow. the death toll is rising from the dive boat fire off the coast of southern california. at least 25 people were killed and nine others are missing. five of the six crew members on the ship escaped by jumping into an inflatable raft. the fire broke out while 34 people were sleeping below the top deck. and in argentina, the central bank is talking to the i.m.s. about revising its monetary policy target for september. that comes a day after the government reimposed some currency controls in an attempt to contain the financial crisis. argentina has borrowed a record $56 billion from the i.m.s. the loan include asset of targets to central bank first hit. global news 24 hours a day on twitter, powered by more than 2,700 journalists and analysts

in more than 120 countries. this is bloomberg. alix? alix: thank you. neil is still with us. two years ago, everyone thought it would be a great idea to buy central bonds. what do you do if you want to find growth but then you have these factors from merging market countries? >> i think you're not finding growth. you're finding income. that's what many bond investors have done and what we've learned in the last 12 months has been starting with argentina, then turkey, then south africa. they are increasing as you say risks. you have to be an investor. you have to follow things very carefully. if you look at oil at $60, that probably means that the oil sensitive emerging markets like russia are probably ok to invest in but you have to be very clear of where you think governments and policies is moving and to come back to something that david asked me earlier. that's where i would still back

the prime minister and the rupee and the indian bonds. they will get their way. it's clearly a risky place to be and if the dollar strengthens 5% or 10%, maybe more riskoff or whatever, that makes the headwinds and emerging markets that much tougher. david: neil, the yield on the argentina bonds are attractive only if they pay them. what are the chance are they in default? and is argentina the only credit risk? >> no. i think there are a lot of concerns around places like turkey and south africa where you can see the economy struggling and if commodity prices start to fall further, then the cash flows into that economy will collapse as well. clients have to understand they have happy too take that type of sk and with the dollar

strengthening, i think you have to go to some of the more structural stories and ironically maybe in china where there's a lot of good things happening and have got nothing to do with trade. david: stay with us, please. coming up, christian is putting his money where his mouth is. the deutsche bank c.e.o. plans to invest a part of his money on today's shares. alix: and if you have bloomberg terminal, you can watch us online and interact with us. go to tv go on your terminal. this is bloomberg. ♪

>> this is "bloomberg daybreak." the hewlett parked greenroom. market with diamond offshore

drilling president and c.e.o. alix: we cover three things. first up, savings bet on shares. christian sewing invested 15% and rich profit from poor neighborhoods. helping poor communities pay be help the rich buying piece of your nba team. the league creating a investment vehicle as franchise soar. david: let's start, christian sewing, the c.e.o. of deutsche bank has figured out a way to get stock prices up. >> the investment is about 15% of his net salary. it's not paying off. alix: would that be enough? [laughter] >> you would think that at least it helps with morale quite a bit. he wanted to put his money where his mouth is and really show his

own employees that he's investing in a firm and he's putting his own money at stake to do it. alix: is that enough to help morale? is that really going to do it? >> it will help a little bit to his testament, they've lost a lot of people but things stabilized during the summer. david: we have seen this before. remember when jamie dimon did this when j.p. morgan stock went down and and the he bought a chunk, millions of dollars. >> and something else that's not even just the employees. the shareholders like it also. people have put lots of money behind this now. top five shareholders have lost a lot of money last year. alix: fair. second story. and that is president trump's plan to reinvent poor neighborhoods. it's basically a tax break for developers if you want to go into poor neighborhoods and create apartment building or retail stores but that is not

necessarily panning out. >> it doesn't always work out as planned. there's a lot of good that's planned out, but a lot of people were talking about because one of the things they highlighted is 200 of the almost 9,000 knowns were not quite low income areas but adjacent to it. so what they highlighted is all of these luxury hotels with rooftops and opulent restaurants being made in these areas. and you know, less than a year end, it's unclear how this is will clear out. david: even a luxury hotel, it does create jobs. people work in those hotels. >> does it create the jobs or gentrify the judiciary? -- area? >> the most important thing to watch in the next year or so, i think there's going to need to be more clarity about where the

money's going, how it's being used how people are benefiting or not benefiting from the plan. alix: it's also the issue of how the property gets revalued, right? it used to be that if your land value like tripled or whatever, that's a good thing but that no longer counts. >> how the valuation grows up and also the tax savings. i think all of this will need be measured, especially as banks, goldman-sachs, all of their clients are poring into this and funds are being raised. mark cuban was in the "times" story having told investors that he gets to pitch a day. alix: interesting. david: the third story is not a poor neighborhood. that's nba franchise which is has gone through the roof in their valuation and it's been difficult to get one of these minority limited partner. now the nba is thinking a different investment vehicle. >> my financial mind loves this story. it's like an nba fund to fund. alix: good call. >> and these things are so liquid.

a sports banker once told me that they had only a very few reasons that they saw people sell their stakes for mostly it's death and divorce. [laughter] david: there's been a lot of divorce, by the way. >> it's really hard to sell a team and find liquify for it. so maybe we'll see different types of investors the nba which is a different culture shift from the nba. alix: you really need to own a piece of the knicks? david: nobody needs to own a piece of the knicks, no offense. alix: but if they say i want to own a piece of the knicks. david: that's bragging. alix: i need returns and there's like nowhere else to go and let's securitize the nba. david: it is a illiquid asset. >> and this story was broken this morning and ego being one of them. alix: the first one. thank you very much. here's something off the beaten

streets. on sunday, ray tweeted this out. just back from burning man reminds me of woodstock and less good music. what a great vibe and amazing creative advertisement he had and david, just for you, i picked some choice response on twitter from some of his followers that basically were like i want a short burning man now. this basically called the end of burning man. this is supposed to be the cool place to go where you're listening to music and do some recreational drugs. ray dalio is totally killing it. david: let's be frank. people with a certain age of which i am reminiscing about woodstock. it's the closest thing to going to woodstock, i think. i've never even thought about it. alix: it's something about the davos lights now.

and weird coats. david: very weird. like joseph. [laughter] coming up, hurricane dorian batters the bahamas. the east coast braces for impact and we're going to talk about how the storm is affecting logistics and talk with craig fuller. alix: and if you're jumping in your car, go ahead and stay with us. you can go to bloomberg radio, heard across the u.s. and sirius xm channel 119 on the bloomberg app. this is bloomberg. ♪ bloomberg. ♪

david: hurricane dorian batters the bahamas with evacuation orders in effect for much of the southeast coast of the united states wreaking havoc with people's lives and with commerce and shipping. we welcome from tennessee, craig fuller. he's freightwaves' c.e.o.le freightwaves provides news, data and commentary on freight markets. craig, thanks so much for joining us. one of the chart is the reject rate on freight going into florida that indicates what

happened leading up up to the storm. people didn't want any freight coming in. craig: yeah the massive surge of companies rejecting inbound loads in the contract market. so they don't want to bring trucks in to harm's way and put drivers into harm's way as the hurricane potentially could hit the coast. so what we're seeing is consistent normal freight, freight that's normally ten derd is being rejected. so carriers are not putting capacity on their normal commitment to florida and that's a safety precaution. it's also an indication that shippers, you know, the distributors and retailers and manufacturers are not accepting loads because frankly, they're out of work. they're tending to protect their homes to evacuate. david: go ahead. coming the other way was quite a different story. outbound just spiked. craig: yeah. so we see a lot of out of bounds in preparation of storms so much shippers know that they need to get cargo off their docks. with the storm as big as it is,

there was a lot of questions last week about how long this storm -- how impactful it would be and potentially the kinds of disruptions. so you typically see shippers surge a lot of freight outbound in the traditional market and that's what we saw. we saw a lot of outbound surges, a lot of rejections which means carriers are not accepting loads in florida but we see a lot of activity from teema which is not electronically tendered. it's not normal freight and it's typically done to stock market over e-mails and load board postings. and so that freight is outside of these particular indexes. so carriers are allocating hundreds of thousands of trucks towards that market we're seeing. alix: craig, in your experience, how quickly do these things reverse once the storm has impact what, is the path afterwards? craig: yeah, you typically have a life cycle -- you have a couple of different psych

offense a storm. you have the preparation which includes things like apply plywood, duct tape, just the prep supplies to protect homes. you have the relief supplies which include things like m.r.e.'s and bottled water and ice that are shipped in to help people who don't have power, don't have freshwater. and then you have the rebuilding. and really the last cycle is entirely dependent upon how much damage is there. and we're in a situation where the storm does hit a major and dense population area, that could go on for months, not years. there have been hurricanes like hurricane katrina in houston where we saw the impact reverberate the economy for over a year. alix: yeah. craig: it could take many cycles. alix: do you have any sense based on how the storms perform so far how easy or not it is to get supplies in florida? craig: it's been actually easy this year compared to the houston storms that happened a

couple of years back. and a lot of it has to do with the fact -- first of all, this was over a holiday weekend. so there was just a lot of available drivers. and frankly the fema loads pay very well and the drivers know that. so they're willing to come out and to drive freight for fema or on behalf of relief supplies because at last lot of opportunities for them and they like doing good work. we saw a lot of available capacity and the freight market overall is pretty soft this year. so in terms of available capacity, there was actually a lot of opportunities to provide relief supplies and i talked to allen on behalf of nonprofits and governments and works with fema pretty closely as well with logistic companies and what they said is actually that they're asking the industry to slow down there's been an overwhelming response and they can't accommodate all the inbound request for services and

supplies in terms of helping until there's resolution as to what happens to the storm. we'll certainly need support there. but the trucking industry will -- this is what they do and do exceptionally well. alix: yeah. craig: it's a well-oiled machine. and they're prepare for this after multiple disasters. alix: yeah. craig, really great insight. thank you so much for your time. craig fuller, freightwaves c.e.o. good luck in everything in and out of florida. coming up, alicia lavine will be joining us. her call on trade. what do you do on september 3? this is bloomberg. ♪

♪ david: welcome to "bloomberg daybreak" on this tuesday, september 3. i'm david westin along with alix

steel. alix: here's everything you need to know today. alix: the u.s. east coast from florida to the carolinas is bracing for hurricane dorian. the storm has been downgrade to category 3 but winds are still reaching 125 miles an hour as it continues as it pounds the bahamas. david: and prime minister boris johnson says he will try to trigger a snap election on october 14 if he loses a crucial vote on brexit in parliament this evening. opponents want to delay brexit if there's no new deal with the e.u. >> i want everybody to know there are no circumstances in which i will ask brussels to delay. we're leaving on the 31st of october, no ifs or buts. alix: embattled chief executive carrie lam is on the defensive denying she ever asked china permission to quit over the protest. >> i have never, i have never

tended a resignation to the people's government. i have not even contemplated to discuss a resignation. david: and the trump administration wants to speed up the death penalty for those convicted of mass shootings. an aide said the proposal will included in a white house package designed to address gun violence such as the video shooting over the weekend in texas. alix: whether or not you're dealing with trades or domestic issues here in the u.s., here's what we stack up. s.v.p. down a full .7 of 1%. it's back to school, back to safety. the euro down .3 of 1% and holding there. not getting a bid as dollar strength dominates the g-10 world and bonds here or over in europe. your bund record at a record low. n the u.s., 148. david: let's focus on china and the united states.

united states on sunday imposed those tariffs on additional $110 billion worth of chinese imports. hitting cumer and capital goods, particularly hard. we welcome now on the telephone, damian ma, from macropolo. so damian, thank you so much for being with us. i'll put a chart up here that shows what's going on with chinese p.m.i.'s as well as export orders and manufacturing versus non-manufacturing. give us a picture of where the chinese economy sits right now. >> well, chinese economy is down and slowing down and they've been preparing and hoping to weather the trade war. they are not going to be stimulating like they've done in the past. they have just announced last week by the premier that they're going to opt for more cumer subsidies, you know, tax cuts. they're doing those types of stimulus. but on the cumer side to hopefully weather the trade war.

but the notion of another kind of robust stimulus, that's not really in the cards at this time. david: president xi trying to send a message that he has the resources to withstand any consequences of a trade war. is he right? >> that's why they held off the stimulus, a la the post-financial crisis period. they're not going to do that anymore precisely because president xi still wants the balance, the deleveraging campaign without, you know, totally undermining it. so they're approaching it much more targeted and much more careful and they've made some progress in deleveraging over the last two or three years where you see the debt of g.d.p. ratio actually has -- it hasn't stopped growing but it has certainly plateaued a little bit. alix: damien, dollar you know

offshore 7 .18 is where we're at. what is the risk tolerance? >> in terms of the currency, we to get -- we have to get useed to the fact that there is going to be more two-way movement and the seven to one magical threshold was a bit of a illusion, i would say. that was just a fictitious number that everyone had in their head. and i think the chinese are not going to dramatically devalue like they did in the 2015 period. that would completely spook markets. and so far they've done pretty well in managing a gradual depreciation or appreciation that's gone up a little bit as well since they moved to that system. so i would just expect much more to move up in the r&b. david: is it more a matter of how fast they value? is there any trouble even if they do it gradually? >> well, that's extremely hard to predict. i really don't foresee that the

chinese are really going to depreciate because of capital outflows, capital flight, things that really disrupt the economy the 2015 to 2016 period. so i think they will -- if it becomes -- if they're concerned about competitive value regionally, that could prevent them from decreasing so far. so far, they've been manage it pretty well without spook the markets. alix: can you tie it all in for us since october 1, the 70th anniversary of the chinese republic and what pressure that may put on xi to deliver something or not? >> in terms on the stimulus, they are going to make sure that the economy stabilizes. you know, they certainly want to frontload the stimulus, so to speak and paper it off -- taper it off by the end on the fourth quarter. so that's how i'm looking at it that they will pump some money

in, again, minimal targeted, not the same kind of stimulus but certainly, they want a decent stabilized economy going into october 1. alix: damien ma, thank you very much. david woo says it may actually -- you may need to start betting on a deal. david: i'm still reasonably optimistic that there could be a deal. i'm going to assume that funds are going to have overwhelming incentive as basically -- as time passes, basically to do a deal with china as to minimize the risk of a recession when he's seeking re-election next year. alix: joining us now is alicia levine, chief strategist at b.n.y. mellon. do you agree with that? >> i'm sympathetic to that view. it is going to get worse before it gets better. but the administration has an incentive do a deal here and we think it's going to be a skinny deal but the incentives are really there.

having said that, it is going to be very noisey and very uncomfortable for investors which is when the really bad tariffs come on. david: president trump -- do the chinese want to give president trump a way out? alicia: it's a great question because we think the chinese are actually looking agent the polls on the democratic side. and to the extent that biden seems to be weakening in mparison to lizzi o'leary -- eashes warren. -- elizabeth warren. they may deal to decide to deal the delve they know. alix: so how do you play that? alicia: so that's thank you call. alix: how do you look at the market? alicia: though tariffs and the

market is fascinating to me. we've had tariffs for the last 18 months and it seemed like the world is going to come apart the market was dead and actually, we're 3% off the high. and we just keep on moving along. the cumer keeps on moving along and the frog is still alive and the boiling water, even though it feels as if with those august 6 announcements we were getting to the worst case scenario. so, what do we think? we think there's going to be more volatility moving forward. september and october are a lot of deadlines. we have brexit. we've got the teches in japan. we've got talks with china that don't appear to actually be happening. i mean, there was actually nothing on record that the two sides are talking so much we think it gets worse before it gets better. david: could the worst news be that it may not be the tariffs if we blame it on the tariffs but we're seeing p.m.i.'s we've been talking around the world,

india releasing. south korea softening. maybe there's a bigger problem ere. alicia: whether the manufacturing slowdown and the manufacturing globally and the slowdown of manufacturing here, whether that blows back to the u.s. cumer. that is the big question. does there's a blowback and so far, it hasn't. but we're putting so much stress on that side of the equation here. because the tariffs are going to affect the consumers here. so once you start weakening the cumer, then you're wide open to a recession here. alix: what's the pain threshold? j.p. morgan said the new tariffs will hit us household by $1,000 a year. what's the pain threshold that you say ok. this is going to be a whole big game changer for the u.s.? alicia: for us, december 15 is really the problem. the market has been able to absorb it. don't hit the cumer. if it's noisy, it's ok.

if it feels stable, it's escalation and a direct hit to the cumer. so that's where we would really look for an inflection point and there's some noise around thatf dies in the boiling water or does he jump out? alicia: i think the frog dies on december 15. alix: ok. alicia levine, chief strategist at b.n.y. mellon, will be sticking with us. coming up, the pound is touching its lowest as ahead of a slowdown at parliament. what to expect how to play. this is bloomberg. ♪ ♪

david: the u.k. braces for another snap election as prime minister boris johnson says he would rather risk losing his office than back down. >> i want everybody to know there are no circumstances in which i will ask brussels to delay. we're leaving on the 31st of october, no ifs or buts. david: here with more is emma chandra live at westminster. emma, parliament's reconvening today, considering the legislation. what are the chance that that legislation will be enacted? coming after their summer recess. parliament recess gets back in an hour's time. and then we're going to see this cross party coalition of m.p.'s from opposition parties and some within the conservative parties

try to take control of the parliamentary sexreand push forward this piece of legislation that will try and tie boris johnson's hands in aiming to prevent a no deal brexit. those people within that coalition said they have the numbers to be able to pass that motion and to pass that legislation. should that happen, prime minister boris johnson said he would call for a new general election in order to prevent that from happening and then he would bring a motion to have a new general election to parliament tomorrow and m.p.'s would have to vote again 2/3 of the m.p.'s in the house of commons would have to approve that. it is log like sources telling us that the coalition of opposition m.p.'s and rebel tori m.p.s have the numbers to get this, to take control of the agenda but we won't know until we see the votes. david: they could have this vote on this legislation today which

would be confident but it would not trigger an election because they need two thirds. if they do have an election, how fast do they have to have it? there's also i think october 17 e.u. smut -- summit being held. >> that's exactly right. what we heard from the prime minister is that if he calls for a new election, he would want that election to be on october 14. parliament would be suspended and we will be on a general election sitting for a election on the 14th. there is some concern among labor party m.p.'s and some of those rebel conservative m.p.'s, the ones that the prime minister has a mandate for the general election. he might try and change the date of that election. his advisors are saying that isn't the case. it would happen on the 14th. so hope for the prime minister, for boris johnson is if he wins that general election, he gets a man date from the people to go to this european meet on the

17th and to begin the negotiations again. so of course they are getting very close to the current brexit deadline which is october 31 by that point. alix: thank you so much, emma. we appreciate that. they label themselves rebel alliance. do they have theme music? david: they didn't see the movie. alix: it's amazing. i have a chart that i feel like incumbent to all of this. it's a two-month implied volatility. we're sitting at the highest since 2016. are you playing this? do you hedge it? what do you do? alicia: so the thing about brexit is that it's not priced into markets at all. and if you look at the pound -- alix: it's not. alicia: if brexit were priced in, you would expect the pound to be at 115 or lower. the markets are expecting at worst, a 50% chance of a hard brexit.

the thing about prime minister johnson's strategy is that he's definitely letting the e.u. know that he means business and that his negotiating style is very, very different from prime minister may's. and the chances of this go up is the only solution that you can get with the frackous parliament that you have. so i think that the chances of a hard brexit are higher than 15% because it feels that is the only outcome you'll you could actually get here. david: they've got problems of the economy. are they worried about this at all? alicia: great yes. two years ago, i don't think the e.u. cared about the economy of the e.u. right? we were all worried about what the effect of brexit was going to be on the u.k. and we didn't ask the question of what will brexit mean to the economy as the e.u.? if you're germany and if you lead germany, i suspect you're very concerned right now because

the u.k. is a solid economy with a great labor force and a very dynamic economy and to lose the and u.k. the e.u. and have germany essentially carry the rest of the members of the e.u. cannot be a comfortable thing when you have a manufacturing slowdown there. alix: say we do get a hard brexit. does that increase and raise the possibility of fiscal stimulus the europe? alicia: so there's been some suggestions even just this morning that germany is looking at some kind of fiscal stimulus nd doing a little fending. they're waiting for gadot and with wathe rates so low, it's not a bad idea to precipitate the debt here you increase the lie and you wouldn't have this deep vacuuming suction sound of the negative yielding debt. so stimulus could do this. but i think for germany to wait until it's clearly in recession

by the next quarter t a technical recession, it seems amazing they haven't put anything into place just yet -- just yet. the expectation is that the e.c.b. is going to cut 10 and 20 basis points and to restart quantitative easing and asset purchases and the talk is perhaps they would buy equities as well. and that suggests a bit of urgency on the part of the e.c.b. to one, stay relevant and also to make sure that the european project can remain. david: ok. alicia levine will stay with us. coming up, after a violent weekend of protests, more next on what this means for asia's financial hub and this is bloomberg. ♪ loomberg. ♪

>> this is "bloomberg daybreak." the huawei is lashing out at the u.s. today. china's largest technology company accuse washington of orchestrating a campaign to intimidate its employees. huawei says the u.s. launched cyber attacks to try to infiltrate its internal systems. the trump administration has limited sell to the american technology that huawei needs. another sign of the growing south korean backlash against japanese products. south korea imported 97% less there in japan in august from year earlier. that's according to a korean business newspaper. the boycott japanese goods has pread since tokyo imported taxes. holding sale of the $3 billion stake in hong kong retailer watson has been put on hold. that's because the pressures of brexit and the anti-government

rotest in hong kong. temasek could not reach agreement with potential buyers. that's your bloomberg business flash. david: for more on hong kong, still with us is alicia levine, chief strategist at b.n.y. mellon. this story across this morning early, it raises larger questions about the extent in which and when these demonstrators in hong kong will have effect on commerce in hong kong. alicia: the thing that we're learning is really interesting because it spans the globe is that uncertainty kills business ctivity. it just kills business activity. you can't get anything done if you can't project forward. alix: when you look at the logistics of the trade war, have you hear about things like this

and how it may weaken china or when you say huawei is accusing u.s. companies of unfair pracks for the -- practices of the employees, how do you understand it in a broader picture? alicia: we think that the trade war and the trade skirmish deepens before either side has an incentive to do something about it. so china has to get to october. it's got to get through its important meetings and then there's a decision to make. it cannot show hong kong that it's backing down to the u.s. just now. it can't. hong kong is critical to the chinese stint as one nation and it cannot let hong kong go just that. david: at the same time, if china asserts its will as it that might there, does affect western banks? saying we may move to singapore or to other places? alicia: i would assume that

china's acutely sensitive to how international business is willing at this. i mean, obviously, they do not want to is skate this any further but yet the demonstrators are not backing down. they have a problem. they have a real problem. alix: this has been going for 13, 14 weeks. it just hit mainstream media a month ago. what is the other unforeseen risk out there? alicia: the unforeseen risk is clearly t violence. the real risk is you have the p.l.a. and mow people down. that is throughout as a real threat because people think there's a possibility thinking about tiananmen square but the real risk is whatever slowdown you have because of the manufacturing recession and kind of the ripples out throughout asia reacting to the slowdown in china, you just make it much worse. you wine up taking down economic activity instead of in a slow trickle. that's the real risk. alix: alicia levine, chief

strategist at b.n.y. mellon, you will be sticking with us. coming up, you got september risk. the key events to watch that could weigh on the markets. that's coming up next. and speaking of the markets, s&p futures off by .7 of 1%. it's riskoff throughout all equity classes. i'm still paying attention to the dollar around high levels here. highest level since 2017. the cable rates since 2016 as yields move lower all across the world. this is bloomberg. ♪ isis bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. back.e back to work, back to school, back to risk off in the markets. s&p futures down .6%. saying chinaaper

firmly opposes trade war, words are great, action has to follow. , theher asset classes continued story has been dollar dominance as well as global low yields. the german ten-year bund yield, record low, italy record low, the per continues to be negative territory, continues to invert in the u.s.. crude is rolling over. part of that may be a storm related thing but i think it is a global trade issue thing. if you want a barometer of trade fear, that is where you need to be looking. david: exactly. this is the first trading day of september so we want to take a look at what is on deck this month. bloomberg's michael mckee takes us through the september watchlist. michael: september supposed to be the worst month for equities. take a look at the risk factors. these are just some of them. exit, we do not -- brexit, we do

not know what happens. we may know who will run italy soon, but maybe not. they will have to submit a new budget to the european commission. a lot could happen with italy. you were just talking about the trade war. trade war negotiate -- trade war negotiations will dominate this month. september 12, the ecb meets. september 18, the fed meets. how far will they go to stimulate the economy? on september 30, maybe this won't happen -- that is when the government funding runs out. the president and congress have negotiated a deal, but would it get passed in time? will we get another government shutdown? question -- what can they do. can they go farther negative? qe.white line is huey -- is

do they raise that? do they restart qe? the mechanics of how they do it -- the yellow line is long-term refinancing options, tltro's, will they be generous and does that help stimulate the european economy? we get to the big fat question at head. what does the fed do? the white line is market expectations for september move. more than 116% priced in. thisctober meeting, at point just over 50%. once they do it in september, does that change, do we think we need more, or does the market say the fed can sit back and wait? alix: alicia levine is still with us. what you do when defensive stocks are expensive?

where global bonds are overvalued? where'd you go? alicia: where you start is the global bond market. the global bond market is driving all of the price action in the equity market for now. to the extent we have $16 trillion of negative yielding debt, and central banks appear to be unable to change the trajectory on the long end just yet. thanks are in a cutting cycle. we think rates stay lower for your dividendore paying stocks work and more than 60% of the s&p has dividends higher than the 10 year yields on bonds. it makes sense to be in equities with 10-year this low. thed: we talked about different messages being sent by the bond market and equity bond market. are we still getting conflicting signals? if the bond market is right, i am not sure equities will do that well. alicia: the bond market is

clearly being driven by all of the assets coming into the u.s. bond market. the inversion is caused by the effects of the flight to any kind of yield. we have a one handle on our 10 year, nowhere else can you get that. that is what is driving the inversion. it is hard to see that as a signal. the question is once the curve has inverted, does the fed need to cut on the short end? -- not just asion signal of recession, but is it causal? most people who work in markets believe the fed needs to cut another 50 basis points to diss invert curve g. alix: there was also a conversation last year where you had italian 10 year btp's. it highlighted the u.s. had the highest interest rates in the

developed world. would 50 basis points do it? of 75 this year looks like it would do is invert the curve and we think that it would be a good idea, the fed should do that. it is not simply about what is going on with inflation, it is not about what is going on in the u.s. economy, which is growing at 2%. the markets are sending a signal and the markets can get twisted. the markets can cause a problem in the real economy and the fed has to do with that. david: low yields are not because of weakness in the u.s. economy. alicia: not fully. david: everyone else in the world wants to crowd into u.s. bonds. is that a good signal that the u.s. economy is trying to support the world? alicia: the u.s. economy tends to support the entire world. recession -- global recessions are birthed here in the u.s.

the question is whether this global weakness comes back to the u.s. and we give birth to a great global recession. we do not see it yet. we are still growing at 2%. the consumer is remarkably strong. the data last week showed that. the issue is some of the more forward-looking data. intention and sentiment and future expectations look like they are starting to roll over, which is why the tariffs are difficult. alix: what is your top call? alicia: top call is you should have some exposure to cyclicals. eyebrows are raised. the defensive trade is so crowded. what i know is when everybody is in the same trade, you wake up and you are wrong. you nafta hedge on the others. -- you now have to hedge on the others. when the market was rolling, you had to hedge by being defensive. here you hedge by having some

exposure to cyclicals. we always think credit is a great idea. investment-grade and sovereign debt, we think yields stay lower for longer. david: alicia levine of bny mellon be staying with us. now let's get update with what is making headlines outside the business world. let's turn to rick the group got -- let's turn to riddick a group to -- let's turn to richter group to -- >> dorian has been downgraded to a category 3. it continues to pound the bahamas. the international hurricane center as dorian's path could bring it dangerously close to florida tomorrow. the death toll is rising from the fire off the coast of southern california. the coast guard says at least 25 people were killed and nine others are missing. five of the six crewmembers on the ship escaped by jumping into an inflatable raft. the fire broke out while 34 people were sleeping.

in argentina, the central bank is talking to the imf about revising its monetary policy target in september. that comes a day after the government reimposed currency controls in an attempt to contain the financial crisis. argentina had borrowed $56 billion from the imf. global -- 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. gupta, this is bloomberg. jonathan: thanks you -- alix: thank you so much. alicia levine is still with us. how do you look at something like argentina? alicia: argentina feels like a place it is not a bad idea to avoid. alix: not that cyclical. alicia: our main call is to going to defensive sectors, but

you should have some exposure to the extent the trade goes against you. in terms of emerging markets, there are pockets of strength and yield. we think mexico is interesting, brazil is interesting. india still feels like an engine of growth. these are places to go. vietnam, the exports coming out of vietnam have been strong. you have to be selective, and you have to not just by in etf for emerging markets. you have to think about which economies are benefiting and which are not. david: how much is president trump helping vietnam? as they redo their supply chains a lot seems to be going to vietnam or southeast asia. alicia: this trade war has been going on for 18 months. decisions about moving supply chains and the consideration of that started 18 months ago. you are starting to see the fruition of that now. even if you signed a trade deal today, you cannot go back to

holding hands. you will not run back into china. the truth of the matter is that relationship has been broken. something new will be in its place. right now, manufacturers, if they can leave china leave china. vietnam as a beneficiary and mexico is a beneficiary. alix: part of the usmca thing. alicia levine, always a pleasure. again,up, oil sliding down over 2%. we will speak to mark edwards, who is positioning his company in the face of low oil prices and companies prioritizing free cash flow. that is coming up next on today's bottom line. bloomberg users, correct with charts at gtv -- interact with charts at gtv . this is bloomberg. ♪

ritika: this is bloomberg daybreak. coming up, mitch daniels, former governor of indiana. this is "bloomberg daybreak." the world's first -- the world's third-largest maker of gym equipment is posed to be a winner of trade tensions. company johnson health believes a new factory in vietnam will allow to escape tariffs good johnson still makes plans to make equipment and china for export to non-us markets. floyd rupe is buying petco's mortgage portfolio. the uk's largest mortgage lender

is betting the economy will hold up despite the possibility of a disorderly brexit. tesco announced it was ending lending. the national basketball association may create investment vehicle that would by individuals shares of teams. forbrooklyn nets just sold $2.3 billion. nba owners will discuss the proposal later this month. that is your bloomberg business flash. david: thanks so much. time for the bottom line, where we look at three companies worth watching. i am joined by taylor riggs and brooke sutherland of bloomberg opinion. shares of tesla are lower as electric car sales fall in china. taylor has all of the details. taylor: take a look at shares of tesla, off .5% after sales of -- fell.vehicles valve

this is according to analysts at bernstein. this is hurting teslas. china government scaling back funding for individuals as they encourage carmakers to focus on other types of products and innovation. if there is any good news, it is on friday, tesla says they won exception from a 10% purchase tax reserve for domestic vehicles. chinas going up 25% in due to those tariffs december 15. there is a win and a little bit of loss for tesla. our: howard -- david: second story is about going. has storiesrland about the max 737. brooke: shares are falling more than 2% premarket after a report from the wall street journal center report with regulators was called off after regulators were frustrated after going failed to provide -- after

bowing failed to provide technical details. this is just the latest setback ar boeing and it comes at time optimism had been building the plane maker might meet its deadline. we are also getting reports over the weekend from airlines suggesting their schedule, american airlines and united saying they do not expect the plane to return until december. a research analyst advising investors he does not expect the plane to return until early 2020 at the earliest. david: not good news. thank you so much. alix: the third company we will watch is diamond offshore, and oilfield services company. the sector getting hit on multiple fronts. low oil prices and lower activity as producers prioritize cash flow and shareholder return. handful of drilling ships and 12 more rigs used for mitt water depth.

the ceo marc edwards joints me now. thanks for joining us. places, levels of oil what is activity like, what are your clients telling you? marc: we saw activity starting to increase, but i think it it is leveling off as clients look at the macro situation for oil and the oil price specifically. there are four factors influencing oil price today. people are looking at the yield curve inversion and what that means for oil prices. they are looking at the trade issues between united states and china, and the third issue on everybody's mind is non-opec production growth. that has accelerated in the last few years. where is that going? and in the melting part you have the mix of opec's efforts to try to balance the market. people are looking at that and trying to figure out where it is going. alix: have you felt that in terms of client activity or do

you feel it more in day rates? marc: day rates have been moving up over the last 12 months. when i was on your show earlier in the year we saw a big increase in what we had in terms of day rates. ofgot close to a doubling what the market was on a long-term contract. there is another asset category diamond offshore is focused on. we are seeing day rates in that space significantly up from where they were before. day rates are coming off the bottom. there is no question. the question is where we go from here. we had day rates for drillship's, ultradeep water, they doubled. what about now? are there too many rapes to have any pricing -- are there note -- are there too many rigs? marc: it is not just what is

happening in the macro market, there are a lot of drillship's on the market. is there enough capacity and demand going forward to demand all of that supply. have thehers, you mobile offshore drilling units. some of those are more, some of those are dynamically positioned. in that space, we have seen a lot of scrapping of the fleet. of the 126 assets we have seen scrapped since the beginning of the downturn, about 90% of them are in the second asset category, which is semi-submersibles. with that scrapping, we have seen a tightening in that space. on the back of that, as the market has picked up, we see those day rates have started to substantially move up. alix: can you give me clarity on numbers for both?

marc: let's go back to the ultradeep water space, which is primarily drillship. ,here is about 134 of them today maybe 65 are contracted and 45 to 50 are actually drilling. because of the oversupply in that asset category, the day rates are struggling. they are off the bottom. what we were pleased about in our second quarter call, we announced today rates close to around $300,000 a day, which was almost a doubling of the market. we were fortunate. we caught a specific window of opportunity whereby as there was little bit of the tide that was ratesng in terms of day and utilization and that asset class, we are able to grab that. since we have seen a softening in the oil markets themselves, that door is closed. i think day rates are somewhat

limited in terms of further growth. we are pleased to capture that. on the second asset category, the semi submersibles, as i spoke about the scrapping has fixed that space. day rates for those are outstripping the day rates for the ultra deep water assets. what is good for diamond offshore is we are a leader in that space, especially with more asset category. semisubmersibles, more out there, maybe -- we have six in the top 12. those don't -- those day rates are recovering. alix: why don't investors feel good about your stock? is it not believing you will sustain those day rates? what gives? , the investoral community has been looking at us

in terms of net asset value, and i think over the past six to 12 months, sentiment has shifted towards forward earnings and earnings multiples. those are challenged. for all of us in the space, they are challenged. we need day rates to move higher. as i just explained, we are starting to see that today. the elephant in the room is shale production. if you look at what is happening in shale, specifically and the last couple of months, sentiment is somewhat changing and that the question is is it the gift that will keep on giving? when you use that terminology, it ends at some stage. if you look at geology and drilling efficiency and you look at the number of uncompleted wells, you put that into a multiply. i think there is a suggestion

that the incremental production out of shale we have seen, which has been strong, is beginning to ramp down. when you step back and look at of the oil mix, it represents less than 10% of total oil supply. our headlines might tell you different. good analysis, i appreciate you stopping by. you are heading to our conference. marc edwards, diamond offshore drilling ceo. did into my special on friday. it is called oil's next big boom. september 6, 9:00 p.m. new york time. coming up, the pound paring losses ahead of the show down over brexit. this is bloomberg. ♪

alix: here is what i am watching -- brexit. take a look the cable rate in

the two month volatility is the highest rate we have seen since the referendum in 2016. bloomberg intelligence says that bloomberg intelligence says that 10% fall in the odds of a no deal brexit lives the pound by a 2%. if you unwound the no brexit scenario -- david: it is great but it looks the otr way. alix: maybe not so much this time? we will see and 24 hours. coming up, a chief investment strategist joining on this risk off day. you come back to school and worked and you're confronted with trade wars and risk off. this is bloomberg. ♪ devices are like doorways

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chinese and u.s. official struggling to agree on a date for the next round of talks. in the u.k., the brexit prices deepening. orest johnson threatening a snap election as tensions with his new deal opponent climax. in argentina, opposing capital controls as the economy faces a deepening crisis. 30 minutes before the opening bell. a softer tone to market, although they are off their earlier lows. we are seeing the euro falling out of bed at this point, reaching the lowest level since 2017 as we face deteriorating pmi data out of the region. 10 year yields up a touch. it has been a rocky day. with deepening trade tensions. new tariffs taking effect as the u.s. and china