francine: the prime minister prepares an ultimatum for the eu. negotiated brexit on his terms in the next nine days or face a no deal divorce. american manufacturing slumps to its weakest level in a decade. suggest it could mean no recession at this time. protesters march in hong kong after violent clashes. we are live on the ground. welcome to "bloomberg surveillance." i am in milan today.

we have an important interview coming up. but first, let's check in on the markets. the institute has cut its growth forecast. we did have worries about germany and the labor market and some of the things internally. that has a lot to do with trade. a lot are saying that if you look at the composition of the world, is probably the european union that takes the brunt of all of these concerns. ,uropean stocks are fluctuating but if you look at the stoxx 600 , investors are trying to figure out exactly what kind of clues they will get after these miserable manufacturing numbers. coming up, a great guest lineup here in italy. we speak to the former italian prime minister. we'll also talk to the chief executive of a general -- of

generale and the chief executive of campari. now let's get straight to first word news in your city. >> hong kong protesters were planning a fresh round of disruption after clashes sublease shoot a demonstrated for the first time in the demonstrations began. local media reported the shooting victim remains in critical condition that is expected to survive. the rallies coincided with celebrations in beijing, marking 70 years of communist rule. north korea fired what appears to be a submarine-based missile, and escalation coming just hours after resuming talks with the u.s.. donald trump downplayed the tests, saying north korean leader kim jong-il and has lived up to his pledge to stop nuclear testing. in the u.s., harvard university defeated and anti-affirmative action lawsuit aimed at stopping

the school from factoring race into its admissions. they say the oldest college does not discriminate, adding that considering race as part of the process is lawful. this ruling could be challenged all the way to the u.s. supreme court. you might not think a big block of cheese can protest tariffs might stay with me, but that is what greeted mike pompeo. a journalist from a satirical show handed him a wedge of parmesan. this as the u.s. plans to protest eu goods. pompeo kept smiling as content complaint -- conte complained. the reporter was whisked away. global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. the u.s. economy is losing speed

and economists are wondering how slow they can go before tipping into recession. past, growth below 2% would have guaranteed a contraction, but some economists believe they can continue around 1.5% without actually falling over. this would be a decline in the stall speed in aviation and refers to the slowest a plane can fly while maintaining a level flight. the economic equivalent is at a point where growth is no longer self-sustaining. our executive editor for economics joins us on surveillance. talk us through exactly what we are seeing. we are seeing a manufacturing getting worse and an economy that is slowing. it should still be able to avoid a recession. , if recent history is any guide. the economy is a bit like an airplane.

history iss often in that at a certain growth rate of around 2%, consumers and companies have been so worried about the performance or outlook in spendingst reign and hiring which tips economy down. the hope of some economists is whichhat level of growth the economy has choked is a lover. it means the economy is weak and data suggests reason to worry. it means the economy could sustain the expansion for longer. and in time, hopefully the federal government kicks in. talk to me about the potential growth rate. this is extremely interesting because it is the pace at which the economy can expand without inflation heating up.

simon: where it is is a big question for any economy. in the u.s., the view is that it has declined so we have a lower central growth rate. that also brings down that stall speed level. things, thaton of idea the economy can go a little lower for longer is certainly one that some economists draw hope from. francine: very quickly, what will it take to tip the economy over? and it's fiscal and monetary policy of enough to make sure it does not go into that? now isthe big question whether the pain in the manufacturing sector which has extended takes down the consumer. or the pain ines factors extends to services. whether it extends to hiring or

consumer spending it is now driving the u.s. economy. if the consumer buckles, the economy will as well. francine: thank you very much. simon kennedy, our executive editor for bloomberg economics. let's keep it on global growth and trade. brooklyne now is university president and former italian prime minister. also former eu commissioner. thank you for giving me a little bit of your time. we were just talking about the u.s. economy. where do you see things going? is, doe concerns stay as we tip towards a recession without realizing it? mario: if we look at the broader picture, i believe the growth we are seeing around the world is artificial and precarious.

artificial because it depends on a large extent on monetary conditions in the recent task. in most parts of the naturalized worlds that have been bringing interest rates to very low levels. sometimes, even the negative and nominal terms. is not a solid base on which the world economy growth can rest. time, more artificial growth is a curious. the reality and the deception is the threat of protection looming large. is almost used as a weapon

for indignation and negotiations. difficult for what is needed most. it will take place because of the starting conditions are, as i said in a very low interest rates and they cannot last forever. the future development of demand and of global economic integration is down as a protectionism. francine: why aren't we seeing more investments? even where interest rates are, it could be cheap to borrow. the chief executive borrow and invest. it is the specter of trade and geopolitics that is almost preventing them. mario: it is the very much that. it is the specter of protectionism. economies something

maintain, the fact that all considerations pertaining to real activity have become a bit less important, relative to the .mpulse of low interest rates there is, down there in the underlying structure of the economy, an unprecedented distortion. francine: how much do you worry about germany? german institutes have slashed growth forecasts because of the manufacturing slump. are we in a recession in europe? say, thismany, as you be widespread across europe. the hope is that germany go toes that it has to and has to spending

accept even some larger budgeting deficits, provided it is for investments. in the german economy gladly -- badly needs investments, particularly in the infrastructure. francine: thank you so much. monti stays with us for the next half hour. we are also looking at live pictures of hong kong. please are holding their daily briefing one day after a processor were shot with a live bullet. protesters are marching downtown after some of these marching -- after some of these marches led to a shooting for the first time. keeping a close eye on hong kong. .lso, boris's blueprint he told brussels to negotiate on his terms or face a no deal divorce. this is bloomberg.

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francine: economics, finance, politics, this is "bloomberg surveillance." let's get straight to the bloomberg business flash in new york city. >> tesco ceo dave lewis is stepping down. he will leave the business next year. kenneth murphy will replace him. murphy is currently vice president at walgreens. this comes as tesco reported profits for the first half that beat estimates. martin gilbert is retiring from standard life aberdeen. he lost his grip on power in march when the asset manager scrapped its structure.

he founded aberdeen asset management in the 1980's and merged with standard life in 2017, making him a cohead of the uk's largest active asset manager. he will step down in september of 2020. in an internal memo about tidjane thiam praised the investigation into the spine debacle, saying quote full accountability has been taken. he described recent events as deeply regrettable. butboard exonerated thiam the chief operating officer was ousted. that is your bloomberg business flash. francine: thank you. an ultimatum from boris johnson. the prime minister has told brussels to negotiate on his terms or face a no deal divorce. he will set up more details when he speaks in manchester data today with his office saying

that later today with his office -- later today with his office saying he will present a reasonable compromise. i understand the uncertainty around brexit can be challenging. but our step change in preparations has made a deal and a noore likely deal outcome more manageable. every department now has the resources available to prepare for no deal. francine: let's get the thoughts of the former italian prime minister, now the president of bocconi university. where are we now? and other italy european countries of you this? we say this almost every four months, but is this really it?

do you have the feeling that boris johnson is ready for a no deal. mario: it's interesting to hear from boris johnson a reasonable compromise that he has in mind. the burden of proof's is desperately on him. but for the compromise and perhaps even more because his not marry veryes well with these two terms. , most eu member states would be delighted to see the u.k. come back or decide not to leave. but it is very, very difficult even to understand what the british plan might be. it turns out to be an irish problem with all the indications

that beautiful island always carries with it. let's see. i believe the plan should take off to brussels on wednesday. francine: if there is a no deal brexit, and i don't know if it is 10% probability or higher, but what would it mean for a country like italy? new faces, new government, new correlation, they do starting to kick into year their economic plan. could italy survive a no deal? mario: the consequences of a no deal brexit would be very severe. but also for each of our member states. italy has a huge bilateral trade with the u.k.. we have about 700,000 italians living in the u.k..

be an ambivalent affect because the economic and financial implications for italy would be very negative. , the vagaries of u.k. politics on brexit over the last several years make italy appear particularly stable, reasonable, which is not exactly the image that is attributed to italy. and italy in milan general actually benefit from brexit? we are in a milan today. we often talk about the brain drain of smart italians living abroad. is it somehow an opportunity for the government to bring them back? mario: yes, provided the new government does a number of important things. otherwise, they might well frankfurt, new york, or

asia, rather than london. not necessarily milan. francine: thank you. mario monti, bocconi university president and former italian prime minister joining us today. coming up, we bring you the very latest live from hong kong. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua in milan. protesters in hong kong are marching for another day of unrest after the city was rocked on tuesday by the most serious clashes from widespread unrest. leading to a protester being shot by police with a live round. for more, are greater china government editor joins us. our people still shocked about what happened yesterday and what does it mean for the tone of the protests today? there is a bit of an edge hey over the city. it's hard to see the images we saw yesterday. we saw these cases between protesters and police. at the end of it, a protester being shot in the chest by live ammunition for the first time since unrest began. that is an escalation people had worried about but had not happened.

but a protester fatality is something people have been worried about. while it is unlikely that this man will die, he is reported to be in stable condition, it still marks an escalation in the violence. that is something that could fuel protester anger, especially as one of their key demands is a call for an independent investigation into what they say are aggressive police. tactics. -- police tactics. we have seenme, smaller scale protests and what appears to be a flash mob of march through parts of the financial area right near our office. there have been a plan to strike that has not had too much of an and planned disruptions of the transports that resulted in minor delays. butall, back to normal, still a bit of a cloud hanging over the city today. francine: all right.

karen, thanks so much. we will have plenty more from hong kong. professor, is this one of the biggest risks we are facing? mario: it is a very big risk. also for the impact it may have on the people's republic of china and the perception of china. it exposes some weaknesses of the chinese system which have been overshadowed by the effects of mr. trump, who made xi jinping a champion of good citizenship in the world and of trade liberalization. francine: thank you so much. generali's chief executive. ♪

boris's gamble. the prime minister prepares an ultimatum for the eu to

negotiate brexit on his terms in the next nine days or face a no deal divorce. >> the prime minister prepares an ultimatum for the e.u.. brexit on his terms in the next nine days or face -- manufacturing slumped. demonstrators-- shot for the first time yesterday in hong kong. good app -- good morning, everyone. this is bloomberg, surveillance. retail sales out of hong kong, with protestsy that started back in june. what they actually mean for the economy. so we have hong kong retail sales, we will get that number out for you. whatll have a look at currencies are doing. overall you can see hong kong retail sales a little bit lower than expected. -23% insteadt is

of the estimated -- the impact on stocks, we did have a lot of the luxury sector under pressure , opm age down 1.7%. the parent company of gucci down 2.2%. other big stock movers, here is danny. dominating the leaderboards peer the biggest online gamings an and gambling company. announcing an allshare merger with stars group. a continuation of consolidation in this industry. shares are up more than 15%, but we are seeing rivals gaining as investors speculate who is next to be bought and merged. , down aboutosing 4%. the founder is stepping down per there have been a lot of

concerns with metro bank about how small -- how strong they are. the founder is leaving. bloomberg intelligence is saying perhaps it paved the way for a sale or eventual delisting from metro bank. from --hape up moves the ceo is stepping down. replace next summer just about by ken murphy during those shares are up 2%. they have a whole summer to figure this out, and the current ceo who is on his way out, stepped in and 2014. hisysts are optimistic that turnaround plan has been completed. you soe: dani, thank much per let's get to first word news from new york city with viviana hurtado. viviana: we begin with more heat on president donald trump's closest allies over the ukraine call. u.s. house democrats warning

mike pompeo about possible charges after he blocks testimony from five state department officials. in a letter, lawmakers say pompeo appears to have a "obvious conflict of interest" because he listened into that phone call. the u.s. economy losing speed. manufacturing stumbling. president trump blames the fed. he says jerome powell and his colleagues have allowed the dollar to get too strong, hurting manufacturers. the bloomberg dollar index is up less than 2% on the year. another warning sign for the u.s. economy, u.s. auto sales peered in september nissan, toyota, and honda saw double-digit slumps. it suggests deliveries could come in worse than the estimated 12% drop. there is a worry that car sales collapse may be coming. johnson sent his new brexit plan to the e.u., with a

usual warning that he is ready to leave without a deal. his offer includes a special customs arrangement for the northern brethren -- for the northern irish border. ireland is saying a backstop is a nonstarter. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries, i am viviana hurtado. this is bloomberg. francine? francine: thank you so much per let's bring in another exclusive interview. germany's leading insurance cap in his peer does the future holds for the italian monthly national? i am pleased to be joined by the chief executive. thank you so much for joining us. if you are looking at the world economy, with the challenges out these lower for longer

interest rates and sank -- in central bank policy, how difficult is it to run it and insurance company in these challenging times? >> obviously these times are quite challenging for the whole financial industry. it is more challenging for the banking industry than for the insurance industry. on our side, we are very well prepared to this word. i spent a few years in japan. japanese -- i think we are now are really in the japanese scenario. we have a lot of things to do to prepare generali to cope with this environment for a long time . i can give you a couple of examples. existed of years ago we in belgium and we sold a

significant book of life insurance in germany. a couple of years ago, i was told that maybe we were sending the lowest point in terms of interest rate, and actually, we were right to do it. it was a great climate. when you look at the word, it is obviously, it could be of interest because low and negative interest rates, if it goes together with recession, the economy, it is becoming quite risky. when you are in charge of the business, you need to be at the same time cautious and optimistic. so i am convinced that at the end, we will manage the risk. it is important not to enter into recession. it means that the economy has to grow again in the states, in europe, and to do this, i think that you need to, especially earn theo lower tax to

look of entrepreneurs. francine: looking at regions where you want to grow, either through m&a -- where do you want to focus on? dna --e the we are strongest since the acquisition in western europe, but as you said, we also have a leadership position in eastern europe. for us, europe is a great opportunity. it is a very wealthy place in the world. people are getting older and older, and they have more and more needs to be addressed, to be covered. pension,term care, health care, and so on and so on. and through management as well. this is a great point for the asset business in europe. francine: low interest rates are

going to force a big consolidation phase in your industry. philippe: yes, it is both organic and m&a. it is important to have organic growth. if you have no organic growth, it means you are not successful. if you are not successful, you will not -- with m&a. n accelerator only if you have organic growth. talk to me a little bit about your finances. why green? philippe: it is another evidence of the strong commitment of the generali group to sustainability. we are one of the italian groups, part of the belgium index. we have a strong commitment to

sustainability, and it is important for us to issue this green bond, which is the first for an insurance group in europe. it was a great success. we use these green bonds to buy back subordinated bonds maturing in 2022. it was good in terms of risk management to better manage our maturities. it was also an opportunity to million,r debt by 250 another 250 million, and at the end, after -- we have completed debtlan in terms of reduction and cost of the debt reduction because the interest expenses after nine months have been reduced by 164 million. francine: what is your focus now? is it giving back to shareholders?

i know that m&a, because there is so much talk about consolidation, do you feel like you will be a target? do you feel like you need to send people off by proving good results? philippe: the priority for the use of financial resources, we are going to invest in growth, both organic and m&a. we are going to do it because this is what is good for our group. this is what our shareholders are looking for. we are waiting to find the growth opportunities. it is a great timing for us to go. i do not believe in big consolidation. for many reasons. risk management, regulation. on the other hand, i think that there will be some aggregation in the insurance and asset management market, especially europe. europe, you had 4000 insurance companies. some of them will not be able to -- will not be strong enough to

cope with the low interest rate, negative interest rate for so long. there will be some aggregation definitely. we will be proactive in this aggregation. francine: talking about brexit, i ask you every time -- 10 years, i have asked about brexit and you say it has no impact on your business. could there be potential u.k. companies that would be interested in buying? could they be part of consolidation? philippe: when you look at the insurance business, definitely u.k. is not part of our priority. we prefer continental europe because we are closer to the distribution model of continental europe, which is more a distribution model. so we are not looking at insurance opportunities in the u.k. obviously talking about asset management, it is different. it would be proper to look at asset management in u.k. because

it is a great place. francine: because of names, brand recognition? strategy,our acquisition of skills, competence. as you know, there , so wey smart people would look at opportunity to build our asset management capability. francine: thank you so much for joining us. the chief executive generali. coming up later this week, bloomberg tv and radio, guy , as the gmc central banking series in madrid. don't miss that conversation. this is bloomberg. ♪

francine: this is bloomberg surveillance. i am francine lacqua and malan. that's go to the bloomberg business flash with viviana hurtado. online brokerage bloodbath, that is what charles schwab triggered after options trades. -- tumbling as much as 26%, the move escalating a long price war as investors move to cheaper products. september was kind to value investors like david einhorn. gaining 8.4% across funds. that brings returns to a weighted average of 24% for the year. big gains coming amid a temporary shift from unfavored momentum stocks to inexpensive

equities paired norway's trillion dollar wealth fund getting the green light to sell nearly $6 billion of oil and gas stocks. at first it wanted to dump all its petroleum investments. the decision shielding some of the biggest oil companies while reducing norway's exposure to fossil fuel. that is the bloomberg business flash. francine? francine: thank you so much. let's get the latest on u.s. politics. president trump has ratcheted up attacks on those pursuing ricin whistleblower complaints. mike pompeo rejected the plan to take testimony from five state department officials. stephanie baker joins us. always great to get inside. where do things stand now with the impeachment inquiry and the whistleblower implication? are expectingt we today is the inspector general

from the state department to appear before congress. he has an urgent request to present documents to the house. we do not know what documents they are, but it looks likely that this would not be favorable to the president. i think if it was favorable to the president, we would know what that is. i think all eyes will be on that. i think what we are seeing now is that mike pompeo is central to this whole inquiry. he is a witness, now that we know he was on the call between trump and president so linsky -- over testimony by state department officials. there is also a lot of withhere about mike pompeo his huge chunk of cheese by reporters because of the tariff

on cheese. six his concern about -- what is his concern about the impeachment process the echo stephanie: he is saying the house committee pursuing impeachment are not giving them enough i to time to prepare. pompeo wants any statement department official to testify in the house to have trump administration lawyers present. so this is shaping up to be a big fight over congressional oversight. meanwhile you have rudy juliano, who has also -- rudy giuliani, who has also been subjected to subpoena, lawyering up. he has brought in a friend of his to represent him with a subpoena request that he is expected to fight. this is a big fight between rudy giuliani, the president's personal lawyer, as well as mike pompeo resisting congressional

oversight. francine: what are we expecting today, stephanie? it is early hours. is there anything that will come out? we expect something to come out with the state department inspector general. he has made an urgent request to present documents. we don't know what those documents are. we will find out what those documents are, but i would expect that would come out later today. -- the formerll u.s. special representative to ukraine, kurt volker, who recently resigned, he will testify in a private briefing. next week we have the former u.s. ambassador to ukraine. she has agreed to testify. whether or not mike pompeo has sanctioned that or not remains unclear. she is still a state department employee. whether or not she will be

accompanied by trump administration lawyers, that remains unclear. francine: stephanie, thank you for the update. in the meantime, we are keeping a close eye on hong kong. we just heard the police briefing that happened 20 minutes ago, and they say that the officers shot that protester himself and protect his colleagues. this is still ongoing in hong kong. we are keeping a close eye on it and will bring you breaking news. coming up, the stock market rotation killed hedge, but one managed to make a percent. that is coming up next. this is bloomberg. ♪

francine: economics, finance, politics. this is bloomberg surveillance. last month's stock market rotation roiled hedman -- hedge

has returns, but one fund returned. it gained more than 8% in september. dani burger has the details. david einhorn's green light -- it does well when stocks are cheaper. we can look at the biggest holdings and get an idea of how much of a value fund this is. some of its biggest ones, gm has a price to equity ratio of just over 5. that compares to the s&p 500 with 18. now the ratio is just over 2. it turned over 15% in september. the short side paid off as well. momentum got hurt in the beginning of september. amazon, netflix, two very growthy names, both blocked out last month. it returned at about 8% last september. this strategy of value was really painful, einhorn losing

over 30%. but will this last? will it be another year where we see momentum? this is what helps green light. momentum, the shorts with netflix and amazon, they exist in this bucket. but when we look at a shorter period of time more recently, we see this change. we see momentum come back at 1% and we see value down more than half a percent. -- einhorn did well in september but that may be reversing. francine: thank you so much. dani burger there. bloomberg surveillance continues in the next hour. tom keene joins me in new york. much more here from milan, including the chief executive of pare -- of compare.

of focus on lot u.s. manufacturing. this is what heard a lot of markets yesterday. we are still seeing downward movement when it comes to european stocks, down 1.1%. i think it is something we need to keep an eye on, the latest news on brexit. borges johnson telling the e.u. it is my way or the highway. on wednesday, today, he will forward a plan, where they will decide on that or he says there will be a no deal brexit. this is bloomberg. ♪

francine: boris's gamble.

-- or face aister no deal brexit. -- economist suggests lower for longer could mean more recession this time. and protesters march in hong kong after violent clashes with police. police shoot a demonstrator for the first time yesterday. if you are watching from asia, this is "bloomberg surveillance." milan,ancine lacqua in tom keene is in new york. the scenes yesterday in rome -- anncredible with the italian reporter with a big cheese, parmigiana, given to mike pompeo, saying

please do not put tariffs on it. tom: manufacturing in the united states, the german economics, looking forward today. one of our lead stories in the next hour, john normand. from first word news come here is viviana. viviana: hours after say north korea would resume nuclear talks with the u.s., kim jong-un's regime fired a missile per that would be an escalation from the series of short range launches that north korea began in may. a coup is how donald trump describes what is taking place as democratic lawmakers plan an impeachment investigation. last night's tweet is the seventh time this year that he is the subject of a coup attempt. in hong kong is where thousands of people where thousands marched through the financial district in a flash mob style protest, coming a day after a protest turned violent for it more than 100 people were hospitalized. for the first time since

protests in june, police shot and wounded a demonstrator. in august, retail sales plunged by a record 23%. once again, boris johnson ready ultimatum to the european union, telling the e.u. it must negotiate brexit on his terms within the next nine days. if not, the u.k. will leave without a deal. a key e.u. player, ireland, already shooting down johnson's puzzles. -- proposals. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more i am vivianatries, hurtado. this is bloomberg. tom: thanks so much. let's get to equities, bonds, currencies, commodities. interesting market off the real challenges of yesterday. futures continue advance slow and negative, -12. negative 1.18. euro actually holding on pretty well after the different

qualities of last week. next screen, please. benchmark on a long-term average of the vix. 30 year bond we are watching very carefully, coming in dramatically yesterday from a 2.19 into 2.10. sterling has my interest as well. francine: european stocks are trying to figure out exactly what the slowdown in the u.s. means. we had the manufacturing gauge surprise yesterday, a disappointing and europe today. there was disappointing data out of germany. that is renewing concerns about slowing growth amid the u.s. china trade war. sparking another round of speculation over the amount of which the federal reserve makes up interest rates. european stocks are down 1.2%, and you look at the pound, because boris johnson basically issued a nine-day ultimatum. he will deliver a plan to the

e.u. and say this is what i want, otherwise i will go for a no deal brexit. tom: things turn so rapidly, you wonder about a global slowdown, and all of a sudden we consider a $49 per barrel handle on american oil. revisit back and american oil. the $100 barrel level running above $100 a barrel five years ago. we come down to some form of stasis below $50 a barrel. we have been up and then running down, with this recent tendency gets your attention, showing technical support on oil above $50 a barrel. francine? francine: the u.s. economy losing speed. economists wondering how slow it can go and avoid tipping into a recession. in the past, growth of 2% would have almost guaranteed retraction, but now some economists believe the u.s. can 1.5%nue at around 1% to

without falling. for more on the world economy, davide serra. thank you for coming on. you have to make day by day decisions on where to put your money and investments. given this possible manufacturing rescission that we are seeing worldwide and we talked about potential growth, thegrowth at pace that economy can grow without inflation heating up, does it change your view on where you want your money to be? davide: yes, it does. a have tried to create barbell investing in financials, the credit space, where as long as we have 0% to 1% growth globally, we are hanging in and aeating a 5% to 6% coupon, company extremely leveraged. today the price of those bonds are superhigh because of quantitative easing and negative

interest rates. francine: is there something the market is getting wrong? davide: what the market is getting wrong is the fact that some of the risky bonds are where the investor has no place to hide so they are buying too much risk. we are looking at them and actively buying. they can be a weak company, a triple see company, -- a triple c company. you have speculative investors that are bulked up by the market because of the surge in yield. francine: is it a bubble that could burst? davide: i think it is a bubble that can burst because if you look at the index in europe, for theple, i think eventually financial cycle, the next two or three years, bonds will be very painful. typicallyesting in

global financial institutions in the credit space, where we are getting 5% to 6% in dollars, which in today's world is contracted. at the same time we are -- in our view, it will not get refinanced. with a recession and manufacturing, they will be badly hit. tom: when you look at the two economic slowdown data over the past one to four hours, the u.s. data and the german forecast, what does it mean for the financial system? you're truly expertise there. doesn't mean that you we rush to scale in european banks -- does it mean that we rush to scale in european banks? davide: what i think with european banks, eventually it is oversupply in terms of many banks, too many employees, too many branches, and capacity will have to come out of the market. top 120at now the

institutions are probably adequately capitalized, i would imagine m&a stops domestically first. there is not such a thing as a single market yet. in banking. moreou will probably see domestic consolidation. i think this will accelerate with brexit because brexit is another draw to european growth. as a result, we will need to further consolidation domestically in europe. in the u.k., i would imagine some of the smaller institutions will have a tough time. i would not sleep at night if i was an incumbent. tom: we are trying to sleep at night with the slowdown in economic data. what is the actual two-do -- the you with the for economic slowdown in the market? first, itr example, is what you know and what you

can invest and what you don't know and what you need to prepare. fourhe last basically months, we have been adding in good risk credit. bmp,e talking hsbc, subordinated debt yielding anywhere between 5% and 7% in dollar. money over the last -- they never lost money over the last 20 or 30 years and they are getting a good deal. time, parity -- the irony of brexit is that the pound might actually join the one.one to so buying perfection on the pound, on oil, in the middle east it is over stable. to us there are too many players who have an incentive in making a mess out of it. that could be the final stroke in terms of to the global economy.

inrd, we are buying upside rates, inflation, valuable bonds. but eventually three or four years from now they might be worth more than they are today. --the same time i'm just saying at the same time, making sure that we have enough optionality on a very weak balance sheet because then if something were to go wrong, you will have losses in the high-yield companies. , thank you so much. with algebris, this morning. coming up, john normand and luigi's friend . ♪

viviana: you are watching bloomberg surveillance let's get the bloomberg business flash. u.k.'s biggesthe retailer. tesco ceo david lewis will step down, succeeded by the officer ken murphy. he has leverage the company position as grocery market leaders have boosted profits. martin gilbert is stepping down from the company he helped found. in march he lost his grip on power at one of the u.k.'s largest asset managers. the company scrapped its co-ceo structure. clients withdrew more than $19 billion. --nson & johnson avoiding j&j agreed to pay two ohio counties a total of $15 million. they will also donate more than

$5 million to groups fighting the opioid epidemic. j&j was accused of mishandling the painkillers. it is the first time the company has settled an opioid lawsuit. that is the bloomberg business flash. francine: thank you so much. an ultimatum from boris johnson to the u.k. prime minister is set to tell brussels to negotiate brexit on his terms or face a no deal divorced and he will set out more details when he speaks at the conservative party conference in manchester today. his office is saying he will present a fair and reasonable number mies to the e.u.. -- compromise to the e.u. davide se in midland, rra with algebris. do we know what the u.k. is proposing to the e.u.? i think there has already been pushed back from ireland saying it is not going to work for them? does the e.u. have an appetite to strike a deal? >> we have certainly seen

outreach from the e.u., this idea of how to present a hard border in ireland. but they are willing to have a time limit on that. that is a jester from europe, something they have not said before. boris johnson is saying he has his own blueprint he will is to keepd that northern island in a -- northern ireland in a customs union with the u.k. that would require checks on goods and regulations on goods coming in and out. in effect, it is a border of sorts, and he is proposing it would last for four years. it is an effort for the europeans to give him something, his response, that this is my plan. if you do not like it, we are crashing out. francine: rosalind, give me a sense of how ireland has responded so far. we did hear from the irish minister saying they will not go for it. theseleave ireland behind

plans to go through? rosalind: yes, we do. the irish are describing the bulk of the plan as we know it so far as concerning. you can hear similar -- you can expect to hear similar rhetoric from the europeans. it is not just how the irish react. -- there could be concerns if what you're talking about essentially is a wall between goods coming in and out that is a redline for the irish and to the europeans. that is something they cannot overcome. concerned.re the europeans are likely to be concerned as well. we hear more about that today and by the time he gets to brussels later this month to try to seal the deal. what is priced in the markets? davide: i don't think a hard is

priced in the market. the deep meaning of the currency market, you can see the downside. i think the irish border cannot be resolved. lose-lose, personal win-win. will let ireland decide on the border. it is their decision ultimately. thing a deadline of nine days is not something that is typically allowed for a deal. serra: all right, davide rosalind from and bloomberg. oris johnson will present his new plan. -- boris johnson will present his new plan. stay with bloomberg as we will bring you live coverage of his speech and his updates that is at 7:00 a.m. in new york, 12:00 p.m. in london, and this is bloomberg. ♪

the secretary of state in the united states of america receiving cheese. security breached, i guess i would say, to say the least, but a fun moment here.

es francine lacqua and david know, a parmigiano cheese. mr. pompeo, not distracted. i was trying to avoid the pronunciations of elmilio romagna. parmigiano,is is tom, and it cures everything. parmi have a cough, giano. tom: negative interest rates on the effect of all global banking. francine: before we get to negative rates, tom, let's talk

about the impact that europe and the role that europe plays in the europe-china trade war. it was a fun moment with mike pompeo. but europe is going to negative rates largely because they cannot grow. growth is sinking because they ae in the middle of u.s.-china trade war. is there anyway that europe can fight back? davide: europe come on the will of germany, has an export-led model. isa time where global trade strengthening because of the u.s.-china trade war, europe is suffering. draghi has asked, basically said monetary politics has de facto ended its capacity. we are at the limit of what we can do, and the result is up to the government, and the

government can only really use fiscal. at the time where everybody else is using fiscal, the deficit right now is 6%, 7%, in china it has been high for a very long time. europe has no choice because basically fiscal will create a massive recession inside the euro zone. francine: how can banks survive? low growth? davide: it is very simple. one, eventually negative rates will have to be passed on to customers. that is when i think you will see people on the streets say you have got to do something. stop -- fiscal can deliver because ultimately the banks need some sort of nominal growth. they need inflation. inflation can be created by fiscal, which i think eventually is the only chance you have. if you don't have fiscal, what is going to happen, the risk is you will see anti-europe rhetoric pumping up.

many people will say why do we need to be in europe if we only have recession? tom: it is important what you say. we will talk about this with professor luigi zingales in the next hour. what are the ramifications of fiscal eventually for the banking system? what does it mean for the banks of europe? for banks of europe, it means we will have high nominal growth. you will be able to basically lend money on projects, whether capex investments in infrastructure. there are lots of investments today, where you are borrowing on negative rates, the return on investments, which is higher. border think about security across the union, you can think about having european military for migrants, you can think about an education plan,

you can think about a marshall plan in order to cope with the dramatic situation in northern isica, which ultimately governed by security in europe. brexit,think about security affected by it negatively. and europeans are in it altogether. you will not have typically the five -- the winners and losers. the fact that germany is the weakest, what happens? tom: thank you so much, davides serra with francine lacqua. coming up, it is an interesting and deeply troubled verizon. this is bloomberg. ♪

interview twoant days ago is now made more urgent.

thes the president of federal reserve bank of chicago. charles evans is very opinionated, very smart, and always on point. look for that tomorrow in the 7:00 new york hour. francine? tom, let's focus on the banking sector in europe with more consolidation expected at their the european central bank extended a fire length of negative rates. investors beld positioned around financials? let's get to a man who knows a thing or two about investing in banks. davide is still with us. we will go to the negative rates and a second, but we have been talking about credit suisse the last four days given the scandal and everything that has pursued with the chief operating officer yesterday. what do you do with the bank right now? are you investing in credit

suisse? davide: we are investing in credit suisse. i think it is a key theme that we have been playing a while and i'm glad there has been an independent investigation by the board, there has been a clear decision taken, and whatever has happened, clearly, now is in the hands of the board. and anything that happens post is in the hands of the prosecution. check andstor, every balance means to be played, respected, so we move on. francine: if you look at asset managers, is it too crowded? say they could be interested in buying something in the u.k. and asset space. do people come out on top if every bank wants to go in that industry? davide: wealth management is a

long term circular play. what is happening is basically another barbell. basically, it is model driven, and other time is the one that has basics for the machines cannot get to. that is bifurcation. company, the insurance they need to generate some of the capability because anything goes later.id now the balance sheet needs to be put to work. they need to get their hands dirty, which is go boutique by boutique, and they cannot rely on equities or bond treasures. francine: what happens from now on? do we need consolidation? davide: if you look at the banking sector today, the main

index, today, the implied cost of equity is 16%. withving a banking sector 16% cost of equity is wrong. technically, there are some basket cases. for 20 years, they have been under delivering. time will tell whether 20 years of doing something that was wrong will be able to be fixed or not. happen,ly, what could is theyse scenario, will pay. tom: this is wonderful. i take your point on deutsche bank. i had that chart up moments ago in new york. i guess they are in control. are you curious where their german or united kingdom regulators are on deutsche bank? urgency tooviding an

saving? has overhe bcb already steps taken in the right direction. ultimately, the ecb in europe, if the capital level were to be depleted at a certain point, would force the large bank to submit a capital plan. i think from the point of your large bank, time, in a way, is what will tell if they can execute or not. what is good for the right time is in the right direction, and strategically, we are supporting a saving plan because before, it was building an empire, serving clients, who were not the core clients, and right now they are focusing on core clients. they are facing a challenging environment, which is negative rates, but that is beyond his control. that is why i think this is a

positive change in deutsche bank over the last 20 years. tom: what is the future for milan? what is the opportunity for milan given all the upset and continental finance? davide: well, first of all, milan is a truly european city. that, i think, you could not have said 10 years ago. offers any, attractive location for anything wealth or asset management, and basically not capitalist banking. eee country, so you can have your talent here, your brain here, simply because the level of education is high, they have a university, they have a good infrastructure, and you are basically two hours away anywhere you want from europe. think it can play in the bankingly

industry. if you are leaving u.k., a balance sheet needs to be france, germany, netherlands, maybe ireland, but your people and talent can be spread out across europe, as it was 25 years ago. like in the u.s., you will have talent and los angeles, miami, and it does not all have to be in new york. fromine: davide serra alger breese, joining us from millennium, thank you. let's get to first word news. trumps week, president outlines his vision for the vision of medicare. he is scheduled to travel to florida tomorrow, where he will promise to strengthen the program for the elderly and disabled. he will issue an executive order regarding medicare advantage, involving private insurers. he once the contract is klein with those being offered

by democratic candidates. a federal district court says the nation's oldest college does not discriminate against asian americans. it rolled it is lawful for harvard to use grace for one of the criteria for admissions. the suit was brought by an anti-affirmative action group and they plan to appeal. global news, 24 hours a day on-air on tictoc and twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: thank you. greatly appreciated this morning, as well. it is time to move beyond october first. yesterday we saw the pageantry in beijing, and not only the violence in hong kong, but i knew violence with one protester shot. stephen engle gave us reports from the street. today is more peaceful, where

our greater china editor joins us in the evening of october 2 in hong kong. what change today, karen? a prettym, it has been busy couple of days here. today, there was a cloud hanging after some of the images we saw yesterday. police really underscoring what a violent day it was. they held a press conference and said they fired more than 1400 teargas rounds yesterday alone. that is roughly 50% of the teargas they fired over months of protests, so it was a really big day. it really functioned almost as a split screen. ing had xi jinping oversee one part of the parade, and then you had protesters in hong kong, including the first shooting of a protester with live ammunition by a police officer. so really, contrast, and it has

left the city on edge, wondering if this violence will get more people onto the street or if it will taper off? tom: let's move forward to this weekend. would it be a weekend where reporting would guess it would be protesters alone, or will the entire city be engaged in protest? karen: the size of these has tapered off. we used to see hundreds of thousands of people, and tens and thousands, or hundreds at recent events, including a smaller one today. one of protester's key demands is for an independent inquiry into what they say are aggressive police tactics used to disperse them. what we saw yesterday was a significant increase in the level of aggression, and that could bring more people out. at the same time, it could frighten some to stay home. we will watch closely saturday and sunday to see the situation. tom: karen, thank you for the

report and for our team in hong kong for challenging reporting over the last number of days. karen leigh in china. coming up, francine lacqua in italy, which means you can only have a discussion on what to do maybe, and we, speak with our chief executive officer. this is bloomberg. good morning. ♪

viviana: this is bloomberg surveillance. month, greenlight capital hedge fund surging, getting more than 8% in september. that brought returns for the year to an average of 24%.

einhorn remains committed to buying beaten-down stocks and shortening growth companies. the world's largest self earn -- sovereign wealth fund got the green light to sell $6 billion of oil stocks. that produced a proposal to dump all $40 billion or so of its petroleum-based investment. they are arguing selling the stocks would reduce the overall risk for norway. retail prices for manhattan apartments falling the most in more than 80 years. buyers are demanding discounts and markets swamped with choices. previously owned condos and co-ops fell for a median of 915,000 in the third quarter, down 8% from a year ago. that is the bloomberg business flash. tom? tom: thank you. francine lacqua in italy, and i'm tom keene in new york. joining us from london, an expert on the administration response to crisis, stephanie

baker, or bloomberg senior writer. let me begin with an open question. esther pompeo is distracted in europe, -- mr. pompeo is distracted in europe trying to make it business as usual. is there any way anyone in the administration can do business as usual? stephanie: i think it is hard right now. today, we are likely to see a huge fight between the state department and congress. we have state department inspector general who has made an urgent request to present documents to the house. we don't know what those documents are. i think there will be intense interest in what those pertaining to against the backdrop of a fight on whether or not pompeo will let state department officials testify before the house and the impeachment inquiry. tom: does he have the right to block them from testifying? stephanie: well, this is going to be the fight. i mean, the terms are very

contentious. pompeo wants to have trump administration lawyers. there have been accusations flying on either side about pompeo saying state department officials have been intimidated by the house, and then you have the house committees accusing pompeo of intimidating those state department officials who want to testify. this will be a big fight. it seems hard to imagine that the state department would succeed in their efforts to block state apartment officials from testifying, but there could be a tough over the terms and who sits besides them. tom: i get the term of who sits beside them, but what do you believe to be the certitude that the house will move this forward quickly? there is talk about getting it through october and wrapped up in the house by the end of the year. that does not seem a natural

washington process. stephanie: yes, it seems like that would be too quick given the fight and the subpoenas that are being resisted by both pompeo, as well as trump's personal lawyer, rudy giuliani. we do not know if you will comply with that subpoena and request for documents and communications. hashey resist, the house said that that will be part of an obstruction of justice charge , that will be part of the impeachment inquiry, and they would press ahead even if they were not allowed to testify and did not honor the subpoenas. i do not think the house has any choice but to press ahead if they refuse to testify. subpoena fight, legally, could drag on for months. ,om: stephanie baker, thank you with a london briefing on the impeachment inquiry of the house of representatives. coming up in our next hour, the former prime minister of italy

and the 6:00 hour with francine lacqua. this is bloomberg. ♪

this is bloomberg

surveillance. tom and francine from milan and new york. let's turn to the beverage industry. geopolitical and trade risk continues to be avoided. they are benefiting from a cocktail renaissance. investors are continuing to view investment opportunities and italy. the question is whether one of italy's biggest threats is becoming an unexpected safe haven. we will have a lot to say about that. let's get to our exclusive interview with robert kunze-concewitz. thank you for joining us on bloomberg surveillance. it is a nice change from talking about the trade war, to talk about beverages and the drink of your choice. do you feel like you could be right in the middle? andhave to deal with brexit a lot of your spirits could be taxed. robert: we have stockpiled quite a bit in the u.k., so we should be able to weather three months to six months, depending on the

brand. the big question is what will happen with the trade wars in the u.s. we are waiting any day now to understand how high the tariffs are going to be. clearly, these trade's are slowing economic growth and investment decisions are being postponed. consumption, i think, is going down. in our case, we are still growing thanks to the strength of our brand. we will see how it goes. if the tariffs are really high, we will have to look at outgoing production elsewhere. if they are acceptable, we will pass down the pricing to consumers. francine: how difficult is it to delocalized production? i don't know the percentage made in europe, but if you had to move part of it to the u.s., how long does that take? robert: depending on where we go, three months to six months. francine: that is quite fast. are you modeling now what that would look like? robert: yes. francine: you're prepared for any eventuality. robert: yes. francine: how's is the market

going? robert: it is growing. we have seen investment categories really strong. bourbon is still strong. while turkey growing high single digits -- wild turkey growing high single digits. tequila is growing month on month. and then you have aged rums coming back. there is quite a bit of excitement from a category standpoint. plus, we have our own specialties, so campari is going for strength to strength, and the u.s. is responding really well. francine: is that all marketing? do you have grand marnier, what do you do with that brand? as a cocktails? robert: it is all about cocktails on the grand classics. francine: is it word of mouth? how do you transform a brand like come party -- like compari that was dusty 10 years ago? robert: it was very dusty 10

years ago. we have influencers. get them behind one exciting cocktail, and everything takes care of itself. francine: how are people consuming differently? do they drink more cocktails at home or still go to bars? robert: depending on the country, and the u.s., it is mostly in bars. you have two trends. on the one hand, you have classic cocktails, which are haveabv, and then you newcomers which are low or no abv. i think down the road, the brand could do nicely. francine: for our international audience, a lot are nonalcoholic. is that the new trend that beverages may taste like alcohol or be nonalcoholic? robert: depending on the moment and what the consumer is after. francine: how is asia doing? if you asia, actually,

look, business is growing very nicely. double digits. overall, it is market dominated aged brandands and spirits, but we are excited by the rise. i was in asia last weekend and had fantastic cocktails in china. and i lookedbaba, down and see five bottles and they are producing a perfect spritz. it is encouraging. francine: do you see more consolidation in the industry? you have bought a lot of brands. this is an industry that has consolidated significantly. what will it be like in 2020? robert: i don't know. that is around the corner. in 20 years time, it will look different, that is for sure. it is still a fragmented industry. there are a lot of businesses and brands in the hands of families or small, independent

companies, medium-sized. you have your national champions in each market, so there was quite a bit to be done. francine: when you consolidate, is that a way of hedging against currency slopes? robert: sure. we have a natural hedge, from production and consumption standpoints. francine: if you were to buy anything right now, what would it be? robert: i will keep that for myself. if you don't mind. francine: it is like the secret sauce. we will never guess the secret recipe. we can do the cocktail but not the actual alcohol. thank you. tom: we now need to test the campari. i would say venice would be a good place to start. thank you from milan. interesting headline. this is a battle. germany comingof out with a pretty grim economic minister comes out with direct and abrupt headlines.

he is really quite strident about how things are in control in germany and also, at the same time, we see a fiscal reticence out of germany, and he reaffirms this. to october 17, an important date, where the government of germany will re-gauge their economic growth and their slow down, as well. in our next hour, we will touch on europe and what we have seen in the markets the last number of days with john normand of jp ofgan and professor zingales university of chicago booth school. this is bloomberg. ♪ from the couldn't be prouders

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designed to save you money. save up to $400 a year on your wireless bill. plus get $250 back when you buy an eligible phone. call, click, or visit a store today. tom: this morning, the shock of u.s. and now german economic

data. the global slowdown is decisively here. john normand of jp morgan and of the boothes school in chicago both here. right now, the executive branch will not cooperate in the impeachment. and it is the 70th anniversary and protesters say october 1 will mark an anniversary of violence in hong kong. good morning, everyone. this is bloomberg surveillance from new york and milan. francine lacqua at a timely seminar in milan on the state of italy and the state of european finance. francine, what is the message serra?vide there was a lot of concern on negative rates. there is quite a lot of concern, which i was surprised about, brexit. they said they are

not pricing in for a no deal, we heard from other executives who said they are stockpiling to have enough for three months to six months to see if we will have a no deal. we have spent a lot of time on negative rates. later, i will have a conversation with the chair of santander. tom: very good. we will continue here. a new york city with first word news is viviana hurtado. viviana: just hours after say north korea would resume nuclear talks with the u.s., kim jong-un's regime apparently firing a submarine based muscle, and that would be an escalation from the launch as they began in may. a coup, how president donald trump describes what is taking place as democratic lawmakers plan and impeachment investigation. the seventh time he tweeted he is the subject of a coup attempt. district was leading a flash mob style

protest, a day after demonstrations turned violent. more than 100 were hospitalized. and for the first time since june, police in shot and injured protesters. once again, british prime minister boris johnson is ready to issue an ultimatum to the european union. people tell the eu they must negotiate brexit on his terms and within the next nine days. if not, the u.k. will leave without a deal. ireland already shooting down johnson's proposal. global news, 24 hours a day on-air on tictoc and twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: thank you. let's do a data check. commodities right now difficult day yesterday after a nice start. we rollover again today. futures negative. dow futures, -155. a little bit of a pullback from

that u.s. and version, just for a brief shining moment. euro stronger over the last days. watching oil, as well. onto the next screen with the vix out near 20. to 30 year bond, 2.19 down 2.0 nine and 10 basis points. and sterling having trouble finding a bid. francine? francine: stocks are slumping in europe. of course, the missable manufacturing data from the u.s. continued to reverberate around markets. the dollar is up a touch. i would also point to the fact that we see stocks underperforming in the u.k. and the pound weakening after ireland seemingly rejected the prime minister's plan to issue a brexit ultimatum before he officially disclosed what his deal would be. tom: very good. cheap surveillance has been on fire in terms of getting two smart people in the same spot at the same time.

it is harder to do then you would imagine. we got lucky today, traveling ales.chicago, luigi zingl change the dialogue on free markets in america, and john normand is with those with jp morgan. markets, john, let me start with you. i'm still not used to it, i saw a german auction come out with negative interest rates. our negative interest rates coming to a theoretical rational a believed end, or are we had point where a lot of institutional global wall street is saying, wait, this is not working? john: i think we are at the end of the rope and thinking negative rates have the capacity to stimulate the economy. that does not mean we are at the end of the move into negative rate territory. negative rates hardly reflect the scarcity of tv programs because i think qe programs are the norm the next couple of years.

he will not get growth out of it you could still see rates go down. is: the distinction here authorities, people who have to confidence. i did not hear that from you. it is some amalgamation or mutation of qes is something new. what is the new qe from where you stand? john: i don't think the european approaches a new. it's standard increases in the balance sheet and banquo serves to purchase bonds. what the fed is doing is distinct. there is the possibility they will increase the balance sheet and purchasing assets. i would not call it qe because the size will be so much lower than what the fed did in 2009 through 2012, and also because they will be buying securities across the curve as opposed to targeting a specific point to lower interest rates. the fed is where qe does not apply but i think with the ecb

is doing is very standard. thisine: john, we had great story on the bloomberg getting a lot of traction, saying that because of the manufacturing data, we could see a slow down, but the u.s. could avoid recession. is that your base case? john: our base case is the u.s. will avoid recession. one reason is because of the policy dynamic, where the fed has the possibility to ease the tariffs. and the other is that the private sector balance sheets in the u.s. look at her than they typically do before recession starts, so household balance sheets have delivered. corporate balance sheets have levered up. you take those two, and it seems you have a firmer starting point around a downturn. this is why i don't think you will get a recession out of this. zingales, if you look at the manufacturing

recession over the world, mobley, what will that do? prof. zingales: i think what is weticularly problematic is have seen a significant slowdown in germany. is the that german gdp real gdp growth of china because we do not know exactly the number in china, but we know the germans connect with china. i think this is a sign of a sign of significant slowdown in china. europe. been throughout the italian economy is linked to the european economy. as john said, the united states has more space for monetary reaction. europe does not. i think the situation can only get worse, and the news from brexit are not very positive. i think we are in for a rough year. tom: this is incredibly

important, in 1974, 45 years ago, a laureate speech, the pretense of knowledge. guys like john normand are in the trenches every single day, trying not to lose money. maybe you will make a little. normand does that, but the goal is not to lose money. do we have a pretense of knowledge now? are there theoretical underpinnings of negative interest rates, and our inability to clear markets, to move debt out of the way in europe, is there a pretense and knowledge? prof. zingales: i think there is knowledgeretensive around, but this is a time where good knowledge makes a difference, in where negative interest rates are nothing extraordinary from an intellectual point of view. they are ordinary from a historical point of view. if you have a good rain more, you can deal with negative interest rates. tom: can you re-hedge comfortably now?

general today, is it derivative per strategy? can you go out with confidence and re-hedge what your belief is? john: to some extent you can. you still have some standard relationships, which still seem to hold, which is when risking markets selloff the rally markets. tom: the correlations are still there. john: and that is what i think makes hedging still useful. wonderfulberg had a story today. do you know where the risk-free rate is? i'm not going to ask him because he will throw stock at me. alk at me. john: i know where it is in the u.s. outside, you have to do a lot of hand waiting to arrive at answer. tom: we will continue our handwaving with john normand and luigi zingales. francine lacqua is in milan.

eene in new york. look for this important discussion with another gentleman from chicago, president evans. this is bloomberg. ♪

you are watching bloomberg surveillance. let's get your bloomberg business flash. retailer' ceos will step down. he will be preceded by another ceo. , sincewake of a scandal then, they have leverage the to moves position

profits. gilbert lost his grip on power at one of the uk's largest asset managers. that is when the company scrapped the co-ceo structure. in the first few months of the year, standard life clients with through more than $19 billion. johnson & johnson avoided a risky trial, accusing it of helping it fueled the opioid crisis. they have paid two ohio counties a total of $15 million. it will also donate more than $5 million to groups fighting the epidemic. johnson & johnson was accused of mishandling the painkillers. that is the bloomberg business flash. thank you. hong kong protesters are marching down town for another day of unrest after the city was rocked on tuesday by the most serious clashes since widespread unrest began in june.

leading -- leading protester was shot by police with a live round for the first time. joining us for an update in hong kong is sophie. was the tone different today because of that shooting yesterday? the aftermath in of the october 1 protest, which emmons traders are calling a day of grief, -- which demonstrators are calling a day of grief, there has been backlash given the intensifying clashes between hardline protesters and police. today we had flash mobs downtown with thousands marching through the financial sector. mobs to the flash other parts of the city. the civil human rights front organization hide some of the asked marches throughout the summer are planning another large-scale mobilization. they are calling october 1 now i day of suppression given

the action of the authorities. give me a sense of how many more days and months we are expecting protests, and if this continues escalating, what is the endpoint? sophie: it is very hard to say how much further this has to go. protesters deemed october 1 a milestone, given they are attempting to undermine china's national day celebrations, which are seen with much pageantry, and you can anticipate more weekends of unrest. we have other milestones to consider. example, november 24, district council elections, where you have registered voters who could use that avenue to express their frustration. between now and then, we have yet to learn if there will be more community dialogue

scheduled with the chief executive, the first of which was held last thursday. the chief executive was facing tough witticism, even after withdrawing the extradition bill. they want all five demands to be met, including universal suffrage and an inquiry into police conduct, chill be underscored given the activity on tuesday. much,ne: thank you so sophie joining us from hong kong. we will have 20 more through the day. coming up later today, an theusive conversation with aries executive chief. this is bloomberg. ♪

bloomberg surveillance, milan, italy.and francine lacqua in milan, an important day for her in northern italy. i day with interesting political economics -- a day with interesting political economics. john normand of jp morgan and booths:ngales of the chicago, i thought to have you two here, it would be good to have a broader conversation of the dollar. let me start with you, professor zingales. the we will move on to what

new dollar will be. what is the sovereign strength of the dollar right now as the global currency? is that unwavering in your mind? prof. zingales: no, it is not unwavering. i do think it remains the choice of most countries. weaknesses that the u.s. leadership has shown recently, i think the united states are still the leader of the world. i think it is here to stay. however, challenges do exist. there are plenty of people who would like to replace the dollar. in particular, i think the use of extra territoriality of the united states has done to pursue everything to use dollars is starting to undermine the dollar in the world. tom: i have like eight questions for you and no time coming off of what the professor says. what is the normand call on the dollar? everybody said weak dollar, no, it did not happen.

call lastgreat missed year, isn't it? john: over the short term, the rest of the year, the dollar will go up versus asia and europe and go down versus the yen. this is the reaction to an economy slowing. in the long term for the dollar as it was in currency, i think at the potential challengers are europe and china because the status of the reserve currency is dependent on the size of financial markets, and only europe and china could potentially compete with u.s. but on the multi-decade basis. this is not on an adjustment that will occur over the next one year or even five years. francine: john normand, are havens changing, or should they change from markets? john: they are changing somewhat even the amount of stress that is being transmitted through financial markets right now. one should have expected a stronger yen, and the yen is

quite stable. there are concerns about negative interest rates in japan, and that is retarding its usual safe haven value. i think the euro would normally benefit in an environment where u.s. interest rates are going down, right now, the european economy ask worse than the u.s. economy and whatever the fed is doing on policy rates could be exceeded by what the ecb would be doing on qe. there are small changes in how the g3 are behaving, but i think the basic rule of the dollar is it is a safe haven asset versus em and commodity. look at: luigi, if you europe, is there anything the small open economies, exporting economies, do to protect themselves in this kind of environment? unfortunately, not very much. this is a situation where internal demand will be the natural thing to do. italy does not have the fiscal space to do it. germany, who does have the

fiscal space to do it, does not want to do it. particularly is exposed to the cycle. tom: what is space? we are on a journey. journey.veillance all of a sudden, space is everything. we go to john normand of jp morgan to translate the new buzzword. what is space? john: it is an imf term. call it capacity. if you don't have a lot of debt, you have more capacity to borrow. if you have more interest rates, you have more capacity to cut them. i think it is obvious who has it and who does not. the big question is, would you use that preemptively? there was a lot of focus on this idea that may be there will be some sort of regime shift in europe, where, for once in europe's history, it will use fiscal policy before the recession. therefore, you should be buying european assets ahead of that

big policy mechanism. i think that is a bit heroic as a claim. there seems to be nothing coming out of germany to suggest they want to use this tool. i think they will use it, but once they have had a proper recession. trade, you look at broad whatever the dollar blended index you have, what is the space president has strong dollar? not as rhetoric, but what is the actual space we have where we get up to a dollar retention? john: it is always possible the president could order unilateral intervention against the dollar. tom: that is not going happen. john: there are many things i would consider impossible under this administration, and they become reality. even though it would be unprecedented for the u.s. to engage in unilateral intervention, it cannot be ruled out under this administration. i think it is a question of his personal whims. tom: what is the dollar mean for

capitalism? your request transcendence on people's capitalism. what does the dollar mean for america? is it a litmus paper or a symbol of what we have? prof. zingales: it is a bit of both. i think it is very important for the dollar not to appreciate too much in order to keep the economy going. i think the president pays a lot of attention to that. also, as we were saying earlier, it is the symbol of u.s. dominance over the world and the mind of symbol and holding the possibility of remaining there as a problem. tom: we will come back. john normand, luigi zingales, this is wonderful. this is bloomberg. ♪ erg. ♪

this is bloomberg surveillance. tom and francine from milan and new york. tom, we are trying to figure out

in this global trade war, especially between the u.s. and china, the place of europe. we heard an executive say he predicts europe was becoming a lot more like japan. in the meantime, something happened in rome. a lot of the press is talking about it. a days secretary of state mike pompeo of the u.s. being presented by parmigiano cheese -- a reporter walked up at the end of a press conference ain't she is worried about tariffs on this famous italian cheese and mike pompeo, rather and very seemly, holding that big chunk of cheese, and she was escorted off stage. it does go to another angle i've been trying to figure out that at the moment, europe is at the center of this trade concern because they are left out, but extra tariffs could really hurt europe, especially for touches german carmakers. tom: i can only imagine the president being confronted on one of his roadshows with a stick of the leader cheese --

velveeta cheese. that would be the american approach. francine: i feel like i need to send you a chunk of parmigiano. tom: we had that all the time. of jp is not john normand morgan but it is luigi zingales, an expert of parmesan cheese, as well. it is religion, isn't it? when you have spaghetti, whether fresh or dried, you have got to have the right parmesan -- parmigiano. prof. zingales: absolutely. tom: what do you prefer in this area? prof. zingales: it depends on the dish. generally, i prefer parmigiano. every dish has its own cheese. tom: we are just amateurs. they do it best. we have got a number of things coming up right now. francine: tom? tom: yes, francine. francine: i'm sure there is a

cheese index. this is one of the big exports of italy. i know we are having fun about it, but it is something to keep a close eye on because it could be a turning point for the italian economy. tom: we will see. we see images before mr. pompeo making comments and italy. you really have to wonder when they will turn to the debates of washington between the executive and legislative branches. kevin cirilli reports this is truly front and center right now. front and center this morning, our first word news with viviana hurtado. viviana: protests in hong kong are taking a toll on the city's economy with retail sales falling 23%. sale of luxury goods were down by almost half, much of that due to a drop in the number of tourists from mainland china down 42 percent. this week, president donald trump outlining his vision for the future of medicare. he is expected to travel to

florida tomorrow, where he promises to strengthen the program for elderly and the disabled. he will issue an executive order regarding medicare advantage, involving private insurers. he wants to contract his plans with those offered by democratic presidential candidates. a legal battle over harvard admission policies may be headed to the u.s. supreme court's. a federal district court saying the nation's oldest college does not discriminate against asian americans. it rolled it is lawful for them to use race as one of the criteria for admissions. the suit was brought by an anti-affirmative action group. they plan to appeal. ireland bracing for the largest storm ever in the eastern atlantic. hurricane lorenzo is forecasted to strike the heart of ireland's west coast days. it was once a category five storm with 160 mile-per-hour winds. they have now died down. the azores or hit by gales generated by lorenzo. global news, 24 hours a day on-air on tictoc and twitter, powered by more than 2700

journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: thank you. there has been a stream of morning must-read's of essays in our beds. i have been turning to true authorities on the law. steen, yes,on serving democrats, but more than impartial at harvard law. i cannot say enough on this strange word. one essay we have seen from him, under the constitution, the house should not consider any actions, however terrible, that the president took four he became president. this principle has white. the impeachment provision was designed for egregious abuses of presidential authority, abuse or misuse of powers that the president has by virtue of being president. an expert on this is kevin cirilli, surviving day by day in washington, our chief washington

correspondent, and he joins us now. kevin, it is extraordinary. beneath the headlines, how is the ranking republican from fresno of the intelligence community going back and forth through the white house? will he be their voice on the committee? kevin: absolutely. i think as we head into this, what you are really noticing from the polls that have come out is republicans are still behind president trump and his favor and impeachment. an nbc news poll found 23% of republicans are backing the impeachment inquiry, but that said, what is going to be interesting to watch is to see how many republicans, like congressman adam kinzinger, a war veteran, a conservative, and has been critical of the president's rhetoric on this, despite being in lockstep with him and other policy areas, how many of those republicans continue to raise concerns about how the president was -- about

the president's actions. not saying they are impeachable but calling for him to change course and how he behaves. tom: i want to stay in this wall right now. mr. cummings and maxine waters have rate respect. meaer neil has his -- mr. his own issues. what i find interesting is the tension between adam schiff, congressman from hollywood, and the gentleman from the upper west side, mr. nagler, how upset is judiciary that intelligence seems to be taking the lead? kevin: they would say upset is the wrong word but it is a massive turf for. there is no other way -- turf war. there is no other way to look at it.committee is without questio, with the focus of all these investigations, in the sense he is driving the car, and on the senate side of things, the

senate intel, controls the corresponding republicans. they are working in tandem with each other. in manchesternson here. this will be an important speech, an update. a calendar in the united kingdom on brexit is absolutely extraordinary. let's leave it there because we have our wonderful guests today, and also, so much on brexit. francine lacqua watching her prime minister from elon. francine? -- from milan. francine? francine: it will be interesting to see how the prime minister of the u.k. tries to finesse this. there were a number of leaks in the media of his plan. i don't know if we can listen now to the prime minister to see whether he has any more news on that backstop. prime minister johnson: good. i am delighted. even if you were, even if you were, i don't think any of us

are abashed by that kind of thing. we are conservatives. we get on with serving the people of this country, and speaking of it, i should begin by paying tribute to my predecessor. teresa may. [applause] i know the whole conference remains full of gratitude to you, and to philip may come up your patience, and, yes, we will continue with their work of tackling domestic violence and modern slavery and building on your legacy. prime minister for only 70 days, but i have seen so many things that give me cause for hope.

hospitals that are finally getting the investment to match the devotions of the staff. schools, where standards of reading are rising through the use of phonics. colleges were young men and women are enrolling in large numbers to fight crime. shipyards in scotland that are bridges superb modern for sale around the world, and every one of those high wage, high skilled jobs in shipbuilding is a testament to the benefits of belonging to the united kingdom. [applause] the most successful political partnership in history, which we will protect and defend against those who would one keenly destroy it, and i say -- you destroy it, and

i say to ruth, thank you for everything you did. [applause] conservativesof in scotland and we will honor your legacy, too. i am proud of the role that this government is playing and everyone of those investments. of course, they are only possible because it was this conservative government that tackled the debt and deficit left hind by the last labour government. it was because we cleared up the wreckage they left behind that we now have record employment, wages rising their fastest in 10 years, and we have record foreign direct investment of 1.3 trillion pounds, more than any other country in the eu. [applause] we have so many reasons to be

confident about our country and its direction. like a world-class athlete with a pebble in our shoe. there is one part of the british system that seems to be on the blink, if parliament were a laptop, this green would be showing the wheel of doom -- the screen would be showing the wheel of doom. [laughter] [applause] school, went were a would be shutting it down. if parliament or a reality tv a reality tv show, the whole lot of us would have been voted out of the jungle by now. [applause] read have had the consolation of watching the speaker being forced to eat a kangaroo testicle. [laughter]

the sad truth is they just have more to say. voters have more say over i am the celebrity then they do over the house of commons. deliver brexit, -- which refuses to deliver brexit or have an election, just at the moment where voters are desperate on us for us to focus on their priorities. we continue to chew the super masticated subject of brexit, where what voters ones, with the whole world wants, needs to be calmly and sensibly done with the subject and to move on. [applause] and that is why, that is why we

are coming out of the eu on october 31, come what may. [applause] [cheering] let's get brexit done. we will.e must, and even though things will not be made easier by the surrender bill, we will work for a deal with our eu friends, but whatever happens, we must, by the end of october. let's get this thing done, and let's get ready to make our case to the country against the patricide who were in brighton last week. [applause] corbyn had aremy number of damaging and retrograde ideas in his speech. he wants a full day week, which

would slash the wages of people on their incomes. he wants to ban private schools, even though it would cost the taxpayer 7 billion pounds to educate the kids he wants to stamp out excellence in schools by banning the inspectors to ensure schools are safe for our children. but he had one good idea. he had a whole paragraph of repeating what he has said for the last three years. he wants an election now! that is what he was going to say. poor fellow. theonly trouble is that paragraph was censored by john mcdonald, so we have the astonishing spectacle of the leader of the opposition gagged and prevented by his colleagues from engaging in his constitutional function, which is to try to remove me from office, and i'm surprised no one

has yet sued him for breach of contract. [laughter] [applause] though, it now appears they may try to bundle him toward the throne, like some constantine charlemagne figure. look it up. crew, so for a kremlin they could get on with their program of total national discord, turning the whole of 2020. which should be a great year for this country. chaos with two more referendums, a second referendum on scottish independence, even though the people of scotland were promised the vote would be a once in a generation decision. and a second referendum on the

eu. can you imagine another three years of this? but that is the corbyn agenda. tom: behind the prime minister of the united kingdom, get brexit done. he receives a good amount of applause on the idea that all of the united kingdom would like to move on. we will see how that doesn't october and through november -- how that does in october and november and 2020. right now, final thoughts with john normand of jp morgan and luigi zingales from the booth school in chicago, you have studied with five or six academics this strange thing called populism. you see populism playing out in britain. rio back to the states of the midwest, where your school is located. pool populism back to wisconsin, michigan, ohio. how does it shape up in the next 18 months? prof. zingales: i think the

problems we observed in the 2016 elections have not been resolved. tom: they have not went away. prof. zingales: and to be honest, it does not look like the democrats are trying to do anything about that because all of their conversation is about impeachment and doing other things rather than addressing those problems. unless you address those problems, you don't change the picture. tom: you are such a wonderful outsider. let me cut to the chase. there was an academic from chicago named paul douglas who did pretty well. a boat tied one years ago. i don't see any paul douglas's out on the democratic party. are they out there and waiting? prof. zingales: you can argue elizabeth warren is trying to do that. i don't know what extent she will succeed, but i think that is the only thing i see in the democratic party going that direction. , thankuigi zingales you for being with us. we will continue to monitor the

comments of the prime minister of united kingdom. we will come back with guy johnson with some thoughts forward on brexit. this is bloomberg. ♪

prime minister johnson: first and foremost, kratz. -- democrats. [applause] and -- francine: that was boris johnson, prime minister of the u.k., speaking at the conservative party conference in manchester, romans ago, talking about the backstop. we also expect boris johnson to speak a little later today. yinge minister johnson sa there will be no check at the irish border and u.k. will respect a peace process in ireland. guy johnson, not related, is one of our anchors in new york. john normand with jp morgan's with tom. guy johnson, what do you make

about what the prime minister is saying? he is trying to find a solution to the backstop, but given what we know so far, is it likely ireland will agree to it? guy: early indications are that ireland will not agree to it. plan has beenk.'s linked. when it comes to that leaking, the response from ireland is not positive thus far. we have seen the pound trading lower this morning on the back of that. basically, the plan is we are going to have four years of borders. and what we are therefore going to have his northern ireland remaining effectively within a customs union with southern ireland, and that will last for years. after those four years, we will end up in a situation where the northern irish assembly can determine whether or not they want to leave it. the early indications are that this is not a plan that will be workable. brussels and dublin are already pouring cold water on it.

guy, we were just hearing from the prime minister, saying the u.k. is prepared for a no deal brexit. what insight do we have on whether he actually once a no-deal brexit? guy: that is what i mean by maybe that is where boris johnson once to be. there were many reports last night from some fairly senior x government officials suggesting that this is a plan -- ex -government officials suggesting that forrest johnson knows this will not fly. the u.k. is to a certain extent prepared for a no-deal brexit. johnson has insisted he wants their deal, but if this is the deal and he knows it will not work, that could have question marks around it. the u.k.? we will find out. indications are this will be a6 shock -- a tariff shock.

many believe it will cause a short-term recession. is the u.k. ready? probably not. is ireland ready? probably not. is the eu ready? probably not, but boris johnson is setting a short-term timeframe for the eu to come back on this. if it doesn't, then he says the u.k. will withdraw from negotiations. at that point, point the finger at brussels and say, you are to blame for this. tom: that may be the game plan. let's look at the litmus paper. pound-sterling, a brexit chart showing a good five year-six year trend of sterling off of brexit. in the 145 range, down to where we go at 1.22. john, this is not only a brexit trend but a long-term trend for pound and sterling. click into be true obstruction? when does it move over to devaluation? john: if you had a hard brexit,

the transition from markets would be a recession, followed by cutting interest rates to zero, then you could have a much more stabilizing depreciation, even if it is already cheap. even though it has been depreciating for a long time, it is very weak in terms. i think there is a drop if you have a recession and that gets to zero interest rates in the u.k. tom: do these headlines instill and effort towards reunification of the island of ireland? suggest that.d if it were to be the case, it would be a long way down the road. the conservative party is also the unionist party. by definition, it should therefore propose northern ireland remains part of the u.k., but the movements in the it. from ireland scotland,

is certainly gathering a little pace. given where we have been in the politics of northern ireland, i think it will be a very, very difficult road to journey down. tom: very good. guy johnson with us as he prepares to speak with charles evans, an exceptionally important interview. in italy, the secretary of state of the united states of america, -- pompeo, with mr. conti excuse me, mr. dimaio of italy, the headlines beginning to come out. you wonder if it will be the beginning of the discussions of the distractions in washington. thank you. this is bloomberg. stay with us. ♪

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u.k. prime minister boris johnson unveiled his brexit plan, and says he will walk away if this one is rejected. pouring cold water on the belief the u.s. would be immune from a global slowdown. and bad news is bad news. risk aversion hits the equity market as the odds of more fed cuts rise. has the central bank put lost its power? welcome to "bloomberg daybreak" on this wednesday, october 2. a drop for the s&p yesterday, which is impressive because we did not see a 1% move for the index in all of september. now we are down 0.6%. that is pretty much it. you're not seeing a lot of safe haven buying anywhere else. you are seeing a broadly stronger dollar. euro-dollar down 0.1%, but not much to write home about. modest buying in the treasury market. ud