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. crude not even participating in the risk off bid.

it is time for the global exchange, where we bring you today's market moving news from around the world. joining us on the phone from hong kong is karen leigh, from plus guytuart wallace, johnson, and bloomberg's dani burger, and here in new york, bloomberg's michael mckee. and hong kong, thousands marched through the city's financial district after demonstrations turned violent lester day -- violent yesterday. karen leigh has the latest. they firedce saying more than 1400 rounds of tear gas at protesters yesterday, the 70th anniversary of communist party rule in china. people here came out to protest on that day. to give you an example of how big a number that is, that is more than half of the total number of tear gas rounds that have been fired over almost four

months of protests. so a pretty big usage by the lease. we saw a lot of violence here yesterday. we saw a definite escalation when a protester was shot by live ammunition for the first time, something people here have been worried about for a while as these protests get more and more severe. this is something that could fuel protesters' anger, concerned about aggressive police tactics. we will see whether this use of force is something that will keep people home or rile them up further. alix: thank you so much. now we want to turn to russia. russia is not complying with opec cuts. their average daily oil output still exceeds opec+ targets, even after producers made deeper cuts. speaking today, the russian energy minister blamed uncertainty over crude demand and price volatility that made it difficult to forecast how

crude will behave. stuart wallace has the latest. reporter: two weeks ago, the world was in an absolute panic about there being enough oil supply because of those missile and drone attacks on the saudi processing plant. just two weeks later, that is almost off the agenda. the only thing anyone wants to talk about is demand, the startling statistic is if you look at september production numbers for opec, they are the lowest in a decade because of that collapse in saudi production, but the reality is even if they kept producing at that level, that incredibly low level, through the first half of next year, there would probably still be a glut of oil. that is the conundrum confronting opec+ right now. just how much should they produce? what is the outlook for demand going into next year? as the russian energy minister said, it is very uncertain. they are particularly worried

about it now. as you highlighted at the beginning of this segment, russia is overproducing, so there's going to be pressure for everyone to fall into line and show the world that they can act in a unified fashion. but if you look at the oil price today and over the last few days, there's not a lot of worry in the market that there's not going to be enough oil next year. alix: thank you very much. now we go to london. u.k. prime minister boris johnson speaking to the conservative party in manchester with his outline of a new brexit plan, saying it just needs to get done. pm johnson: what people want, what leaveers want -- what leavers want, what remainers want, what the whole world wants is to be sensibly done. alix: what have we learned in the last 40 minutes? guy: boris johnson is still speaking, and he's kind of done with the brexit bit. let me recap what he has said. basically, the indications are that he doesn't want any checks

on the northern irish-southern irish border. that the u.k. were was even its -- will leave in its entirety the eu on october 31, and then some way down the road, potentially four years, the northern irish a sibley will have the option as to -- the northern irish assembly will have the option as to whether part of the irish island has the option to leave the customs union formed with the republic of ireland and rejoin the customs union of the u.k. but the indications are that the eu is not going to be happy with this. the indications are that dublin is not going to be happy with this. there have been accusations that the plan has already been leaked. it will be formerly given to jump lead juncker -- it will be formerly given to jean-claude

juncker later today. alix: thank you. charles schwab plans to get rid of commissions for options, stocks, and etf's. dani burger has more. tell us where we are. dani: this race to zero, this fee slashing, is nothing new. the asset management industry has been under pressure the past two years to reduce fees, so race to zero isn't new, but perhaps what is new is that schwab may have finally won. shareshing that, plunging. the strategy behind this is getting to economies of scale. they figure by having lower fees, they will attract more assets and more interest earned, but it is a really risky bet considering the current environment. with interest rates as low as they are, it is much more difficult to turn a profit that way. only 7% of schwab's net income

came from fees, so perhaps they can afford to take that risk. someone like td, on the other hand, more than 1/3 of their net income comes from fees. according to morningstar, schwab needs to get $20 billion worth of assets brought in from this move in order to make up for the loss of fees, so it certainly is a tall order. alix: thank you very much. finally, here in new york, u.s. manufacturing ism's hitting a 10 year low yesterday. michael is here with more. wacked tradersta upside the head yesterday. it was historically bad. take a look at the chart. the ism headline number shows manufacturing contracting the most since the end of the great recession. why is that? the president blames the fed, but manufacturers say it is trade war's. look at new export orders.

they are the worst since the depth of the great recession. whenever we are on recession watch, we look ahead to adp numbers today. those numbers might be influenced by the gm strike because they take a measure of the entire month. it is expected to show a slow down from last month. the gm strike may not affect overall payrolls because the survey data collected before the strike began, but in any case, you can see a little bit better news from the government, a little worse news from adp. we will all be watching over the next couple of days to see if we get the kind of surprise we got yesterday. alix: thanks a lot. coming up on this program, we will have more on your morning trade and analysis on the markets in today's first take. this is bloomberg. ♪

♪ alix: time now for bloomberg first take, where we give you the news and you get the trade and analysis of the markets. adams, us, gina martin bloomberg chief equity strategist, and vincent andarella, former trader -- macro macro sq mandel and also benjamin , jp morgan asset management global market strategist. pm johnson: the alternative is no deal. that is not the outcome we want. it is not an outcome we see get all, but let me tell you, my friends, it is an outcome for which we are ready. alix: 1.22 on the cable rate. does that say ready?

vincent: no. the traders i speak to come of the divergence in opinion, the real calm from some that say, there just has to be a deal. there can't be a no deal brexit. the other side saying we are still nowhere three years down the road, this is really going to happen. i think what is probably going to happen is we kick the can one more little kick, and we probably get a one-month extension. we will be back in this situation again, but from the standpoint of cable and where this is going to end, it really is going to end badly, i think. gina: i totally agree. i don't think there's any resolution coming. unfortunately, that is the worst case scenario for markets. what we need is to clear this risk. one of two things that is clearly dampening economic sentiment, dampening business investment, are brexit in trade. they are the ongoing drags on economic activity, creating a slow bleed in the economy that

we can't get past. we see it in the earnings stream. . we see it in sentiment. . we see it in every part of what is in markets. it is just ongoing uncertainty. brexit i don't think would be the worst thing in the world as long as we get it done. we can clear the risk and move on. we just can't seem to move on. ben: can we look on the bright side here? [laughter] from the perspective of u.k. equities, actually it could be a fine thing. from current levels, i think there's downside in the currency , and upside risk for equities. high dividend deals equity market, which, in a world where carrie is relatively scarce, is a benefit. some of the earnings revisions, notwithstanding the fact that i agree it is a structural issue for u.k. growth, but the near-term fluctuations have actually been ok in a world where good news is also relatively scarce. so you add those altogether, and u.k. ends up near the top of

your list of equities. gina: i think investors are telling you u.k. is not at the top of their list of equities. when we look at the global landscape, u.k. equities are the single cheapest market in the world. they are cheaper than japan now on a relative basis. at some point you have to have a catalyst. navy brexit is that catalyst for investors to say, ok, we've finally cleared this risk we can buy into this market. what you are not seeing now is any sustainable flow into the u.k. to create a valuation improvement, to create a better, longer term outlook for that market. until you get the clearance of this risk, you are not going to have it. vincent: the same feeling -- the same thing for the rates and currency traders, and for rights and currencies in general. it is going to get that knee-jerk reaction lower, but the structural long-term average is about 1.60, one .70.

we wait and see how the command and response. see how the bank of england responds. a no deal brexit is very dodgy. clear the board and get the uncertainty off the table. ben: just on that point, on positioning i would say that is a good thing. undergroundersally equity market from a positioning standpoint. it is a cleaner long. agreed that you probably do need a catalyst, but to both of your points, you could imagine a scenario where the good thing happens or the bad thing happens, and either way, it is either sentiment that is good or currency that is good. but: you mentioned trade, also how it is bleeding into the u.s. economy. brexit hasn't hit it in that way, but we had the horrible ism yesterday. the markets really fell out of bed.

there's a risk of talking ourselves into a recession. wonder metric some folks seem to think it is, but we have to acknowledge once again the risk of talking ourselves into a recession feels real." how did you guys understand that yesterday? are we psyching ourselves out, or is there real risk? gina: i think it is a domestic -- i think it is a mix. to 3% drop in equities, then we are falling out of bed. 1%, it is a little bit of a selloff after a really strong rally in the early part of september. i think you've got two conflicting stories in the main factoring sector. suddenly, we've miraculously forgotten that the marketing survey actually improved in september. the market limits, and we focus on that active story. it is all were presented of of the negative sentiment, which is

definitely predominant right now. what does that mean for your equity market investment when negative sentiment is the predominant driver of investing?? everyone is always persistently concern. stocks deny what everyone is expecting, and that is we are going to plummet into recession. this is the third time in 10 years that the ism has signaled manufacturing recession and the market manufacturing index has not. you need to be careful to reserve your opinion on what is economy.in the the manufacturing sector is a very small portion of not only index overall web and news and sales, as well as earnings, but a small portion of the economy. it is the swing factor, absolutely, but it is not the only thing going on. alix: you're making vincent laugh right now. vincent: because i am going to be optimistic for a change. the last on the index dropped below the contraction level, the fed was in a quantitative tightening phase. they didn't blink.

they kept going. this is kind about the same levels. you can go back and go, my god, 2008, but i think we are a andle closer to 2015, 2016, the fed not hitting the panic button. we will see what ism services do tomorrow, and what jobs do friday. one number, don't panic. alix: fair. do you have another view? ben: is there another view? [laughter] alix: we are all in agreement. ben: this idea of talking ourselves into a recession is difficult. i think we've heard for years and years now that this year is fine, but look out for next year. going into 2019, it was recession risk is normal for this stage of the cycle, but look out for 2020. that's when the recession hits. this self-fulfilling recession story is a myth. alix: but, if you take a look at earnings, last night stitch fix was really terrible. confidenceve cfos

lowering their forecast. you have debt downgrades for companies. ben: and all of that is symptomatically an economy that started the year growing at well above trend, and is coming down towards trend, and might did below in the latter half of the below innd might dip the latter half of the year. recession is a possibility, but it shouldn't be your base case at this point. from a market perspective, it might give you some reason to be cautious. markets are always going to grapple with that signal extraction problem. it looks equivalent when the economy is decelerating towards trend or breaking through it. i think that is a good reason why you should hold your cards close, maybe be a little underweight equities as a had for that, but it is all deceleration for the time being. vincent that point, and dovetailed onto that point, this time we have a steeper curve that has jumped quite a bit, like, six or seven basis points

in the last two days. we want a steeper curve, but we wanted in a good way, not a bad way. how do we do that? we do, but in the context of the trade situation is where you could say this time is different. if we do get a continuance of trade conflict, which easily could go either way, certainly one thing we could be sure of, we will probably have continued uncertainty with the trade situation going into 2020, possibly into 2021. that will probably bring growth levels back down towards the 1.5% level as opposed to 3%. if you want to suggest the recession jump off from there, you can have that argument come but you- that argument, can also have the argument that we will muddle along until the election in 2020 on how we will deal with china. if it is the navarro conversation, we probably will go into a recession. if it is the lighthizer

conversation, we will probably come out of it ok. alix: how do you model, then? you guys just came out with your earnings forecast. how do you model that? that's part of the reason why we are seeing cfos downgrading, because there's no way you can model a binary outcome what that. gina: i thing it is very difficult, but you follow the data. as much as i think that impeachment proceedings are somewhat important, i think that trade policy is somewhat important, i think that fiscal policies around the will or -- around the world are important, we have the tendency around the world to attribute far too much power to aussie makers. i think ash to policymakers. -- to policymakers. i think who has a lot of the power's central bankers. they need to maintain and easing bias, and the fed keeps backing away from that, saying we are easy, but we think the economy is going to steer its way through.

you continue to pound the table on, we are not sure we need to continue this easing bias, and the market is saying the economy is not going to be ok. we need you now. that's the friction i think is going on in the equity market. the rest of this, a lot of it is noise. i think we have to really be careful not to over attribute policymaking. alix: so 1% not falling out about, whatever. [laughter] alix: gina martin adams just released her earnings forecast for next year. check that out. vincent cignarella is on macro squawk. you can check that out all day. ben mandel of jp morgan is sticking with me. this is bloomberg. ♪

viviana: you're watching "bloomberg daybreak."

johnson & johnson avoided a risky trial accusing it of helping fueled the opioid crisis. j&j agreed to pay two ohio counties a total of $15 million. it will also donate $5 million to groups fighting the opioid crisis. it is the first time the company has settled in opioid-related lawsuit. tesco's ceo will step down, succeeded by ken murphy. in the wake of an accounting has boosted profits. that's your bloomberg business flash. alix: thanks so much. facebook ceo mark zuckerberg trying to rally the troops. published recordings show that zuckerberg has been speaking candidly about the social network's problems, and what of them is elizabeth warren's threat to break up facebook. >> it is not just breaking up

these companies. it is not going to solve the issues. it doesn't make her election less likely. it makes it more likely. alix: thunderbird says it would "suck to have to fight the government," and elizabeth warren tweeted, saying, "it would really suck if we don't fix a corrupt system that lets giant companies engage in illegal, anticompetitive practices." a fun exchange there. coming up, the u.s. joins the global factory activity slowdown. what does it mean for the jobs market and the equity market? this is bloomberg. ♪ everyone uses their phone differently.

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switch and save up to $400 a year on your wireless bill. plus, get $250 back when you buy an eligible phone. that's simple. easy. awesome. call, click, or visit a store today. ♪ alix: this is "bloomberg daybreak." happy wednesday, everybody. we had a 1% selloff in the s&p yesterday. the risk aversion is really only

felt within the equity market. european stocks getting hit the hardest. german institute coming out and lowering their german growth forecast for this year and next. in other asset classes, it doesn't really feel like. that much of a panic you do have a stronger dollar -- feel like that much of a panic. you do have a stronger dollar in the g10 space. buyingld see bond elsewhere, like italian bonds. the cable rate a touch lower. the curve in the u.s., twos-tens, almost 11 basis points. that would be a seven basis point increase just in the last two days. don't underestimate that. all of this on the heels of the latest print of the u.s. ism many factoring index, showing a 10 year low. fears that the economy is slowing to stall speed. michael mckee here with a closer look. michael: we like to talk about the fed being data dependent. wall street traders are data terrified these days, and the ism numbers scared the heck out

of everybody yesterday. you look at the ism number, does it signal recession? not really. take a look at the red lines, which are recessions. look at how may times we seen the ism headline number fall below 50, which is considered the contraction line, and the recession followed. that's where we are. it is not anywhere near as deep as it gets when we hit a recession. the ism number is going to have to fall a lot more for a lot longer before you really have to worry about it. we also get some backup this week from the ism nonmanufacturing survey. the manufacturers, we know, have been struggling, but what about service industries? you take a look at the blue line, and you can see they have been doing relatively well. in the last month, we saw a big rebound. that number comes out thursday. that should be underpinned by rising wages and salaries, and the gdp report we had last week's adjusted that is indeed

what we are seeing, very healthy wage and salary growth. the consumer sides look -- the consumer side looks to be watch for, but thursday. there are a lot of questions on wall street. take a look at the blue line, which is gdp. it has been trending down, last quarter just 2%. the atlanta fed came out with its gdp now number for the third quarter late yesterday, after taking into account all of the latest numbers, and they see it coming in at just 1.8%. even more important, look at the yellow line, the bloomberg consensus forecast for growth. in the third quarter of next year, what happens? election day. 1%we are going to predict a growth rate in the economy for the third quarter of next year, it is going to be an important number to watch. we will keep all of this in mind because, as always, it is the economy, stupid.

[laughter] alix: fair enough. still with me on set, ben mandel of jp morgan asset management. adding onto what mike was talking about, if you take a look at the bloomberg here, this was the ism. versus some of the regional data, they are diverging. when you look at that, what does that tell you? is this purely a trade/export story? ben: i wouldn't look at the ism is something that is totally benign here. firms might be slightly more prone to turning cautious in an environment where profit growth is not what used to be. profits have decelerated. that creates vulnerability. secondly, the foundation on which economic growth is sitting is a little bit less, a little narrower in a world where consumer spending growth is also decelerating. keep part of the -- a key part of the growth trajectory for the u.s. economy is that consumers are going to decelerate.

part of that is just very simple income. labor income is decelerating as job growth slows. wage growth is basically moving sideways. is arguablytiment passed its peaks from 2018 in early 2019. 2018 in early 2019. the story of the u.s. economy slowing is one of the consumer, which is getting less enthusiastic in terms of its spending. both of those, whether it is the narrowing foundation of the consumer, firms that are slightly more prone create a vulnerability and a slightly elevated recession risk, and argue. alix: we are going to be watching to see which side -- michael: we are going to be watching to see which side dominates. do consumers get pulled down because manufacturers are paying people?/or laying off that is going to be the real question in the months going forward. somebody is going to revert to

the mean, and then we will find out what level the mean is that. numbers,hin the ism you saw import and export numbers. obviously, the decline for export orders, that would indicate trade. but new orders is holding up. it's not really going anywhere too much, indicating the consumer is ok. michael: but manufacturers have been saying to this point is that we are continuing with our capital plans that we had in place. we haven't cut back significantly, but we are not going to add, we are not going to grow, we are not going to spend extra money. at some point, does that tip into we are going to cut back because orders are not good? that's where the export orders issue is going to be. for those who follow equities, you're going to be looking at the large-cap companies that do a lot of business overseas, and bb will see -- and maybe we will see a differentiation between the companies that are to mystically focused -- that are

domestically focused. ben: in terms of manufacturers, maybe it's not the economy, stupid. it's the trade war, stupid. we've learned something about youdynamic of factories as continue to shock the system. to shed a positive light on that, we seen that the many factoring sector has actually been resilient in the sense that you keep shocking it, growth declines, but then it stabilizes. you get another round of tariffs , it declines, and then it stabilizes. we are seeing a very intuitive followthrough from the fact that we just hiked the tariff rate again on a rafa chinese goods -- on a raft of chinese goods. michael: and then the next round michael: and then the next round of summer first. alix: what i found interesting -- next round december 1. alix: what i found interesting, what did you make of that? usually bad news is good news.

that's how we've been operating. is bad news finally bad news? news, atnews is bad least in this case. you're taking a broad spectrum of views on what investors care about. are you in a high-growth or low growth world? what is the recession risk? what is the adverse state of affairs for risky assets? risky rightably now. the fed is a shock absorber, as is all monetary policy globally. you add something like 15 rate cuts in the third quarter of this year across global central banks, that is pushing against, but not fully offsetting, the negative drags and the other direction. alix: i feel like we heard this with the boj and bond yields. is this something broader? we can't do anything else with super negative rates. the market is telling the fed that one more cut isn't going to

make a difference. michael: we've basically learned already that central banks -- alix: we thought, but now we know that they know. michael: the economy, particularly when you get to rates at the zero or lower bound , there isn't much more they can do to stimulate growth. one of the issues, are we going to talk ourselves into recession? we worry about what the central bank can or can't do. a lot of that is going to depend on what happens on wall street, and whether or not wall street rose over because that is a big consumer confidence driver. it's not the people are spending their stocks money, but it is just seen as a signal of the economy. we have to see if they hang in there. they are really dependent on the fed at the moment. ben: if i could broaden that point, if there's one thing that goes right in a global economy, it is the u.s. consumer. that's exactly what we sought the beginning of this year. the u.s. consumer is about 2/3 of u.s. gdp, but even if you add

up the gdp of all other developed market economies, europe, u.k., japan, australia, the u.s. consumer is 1/3 of that gdp. you have this cylinder that was firing very strongly, and that is decelerating. alix: so how much defense do you take on now? ben: you should be moderately cautious in your asset allocation. the obvious thing for us is to be slightly underweight equities globally. the difficult thing is what is the overweight. what do you offset against that? credit is not the best late cycle asset, so it is not clear that you want to be fully long there. duration is great, although there's been a lot of volatility in bond yields. cash is helpful because you are agile, but the real yield is obviously very low. so i think we are diversifying across those overweight's to find our weight in equities. alix: ben mandel of jp morgan asset management and bloomberg's michael mckee, thank you so

much. viviana hurtado is here with first word news. viviana: just hours after saying north korea would resume talks with the u.s., kim jong-un's regime apparently fired a simmering -- fired a submarine based missile. a coup is how donald trump described the immigrants' -- impeachment in cory. protests in hong kong are taking a toll on the economy. sales of luxury goods were down by almost half. much of that is due to a drop in the number of tourists. visits to mainland china are down 40%. 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'm viviana hurtado. this is bloomberg. alix: thank you very much.

i do want to highlight some headlines coming out of russia. the russia energy conference, vladimir putin is commenting. "russia is doing everything to balance oil supply and demand." the facts might dispute that a little bit, considering russia is producing more than its month. cuts as of last he also talked about the iran issue, saying he is regretting that trump and rouhani talks didn't happen when they were both in new york city for the u.n. general a simile. -- general assembly. he does not think there is enough proof to blame iran for the saudi oil attack. on tvrd from mr. rouhani and iran, saying that he would perhaps be somewhat open to the plan that europe has laid out, including a $15 billion credit line backed by oil at french president emmanuel macron has been leading. he doesn't like the language, necessarily, but is supportive of the idea. some conciliatory talk coming from both ends. coming up on this program, online trading price war.

charles schwab plans to eliminate fees. more on that in today's wall street beat. if you have a bloomberg terminal, check out tv . you can check out our charts and graphics, interact with us directly. just go to tv under terminal. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, julia coronado, macropolicy perspectives founder and president.

now to your bloomberg business flash. the financial decoupling between the u.s. and china is growing. according to "the financial times," chinese venture capital investment in the u.s. fell to a billion in, just $4 u.s. companies. those firms are turning their attention to india and south east asia. norway ends a two-year process t was a proposal to -- resale prices for manhattan apartments fell the most in more than eight years. buyers are demanding discounts in a market swamped with choices. owned third q, previously co-ops and condos sound for a memo of $19,000, down 8%.

i'm viviana hurtado. that is your bloomberg business flash. alix: thanks so much. we turn now to wall street beat to cover three things wall street is buzzing about this morning. first up, charles schwab triggers online broker bloodbath. schwab plans to eliminate online commissions for stocks and etf's. says theyger berman are poised to do better than the public markets. tellse credit suisse ceo police accountability has been taken in the recent spying scandal. joining us is bloomberg's sonali basak. i went to start with the derivative effect of this charles schwab thing that happened yesterday. td ameritrade said the same thing at the bell. what are the repercussions? who wins? sonali: the consumer that doesn't have to pay for the trade. also interesting is charles schwab's statement. it said "eliminating commissions ensures that the ultimate vision for alized," this

millions of his net worth wiped out yesterday. alix: when fidelity started doing this, the whole point with you do it for one, but then you bring them in and upsell, or they will pay for other stuff. is that the point? sonali: the diversification is a big part of it. the other thing is this is going to lead to more mergers in the business, but if they don't diversify, do mergers even make sense? if you put in two businesses that are not making much money, you get a bigger business with more flow? the retirement advice is another big place where they can start to charge more fees. alix: that's a good point. interesting. so they do have pricing power somewhere. newberger berman managing director spoke to lisa abramowicz yesterday on "money undercover." here's what he had to say about

private equities. >> you cannot make transformational changes in a public company today. there's too much short-term pressure. alix: what was your take away from that interview? sonali: interestingly, he did say returns in public -- in private markets will be bigger than public markets, but also said they will be lower moving forward, which is really important. we are at the end of the cycle now. lu asian's are superhigh. you got to wonder how these -- valuations are superhigh. you've got to wonder how these are going to perform. alix: are some of the big private equity shops private equity shops anymore. -- shops anymore? sonali: private equity doesn't look the same anymore. the last time we talked to him, one of the big strategies moving forward that would be more successful is private equity going quant. like the hedge funds, you have private equity firms levered to big data to try to get some edge, but if you're looking for

edge that much, there's a problem. alix: we have to wonder if the industry has woken up to realized that lower returns are not -- i don't have a good read on that yet. sonali: you also have record amounts of dry powder sitting out there that needs to be put to work. or competition, more firms. on top of that, you have debate among many people on whether private equity is even aces and seer model. warren buffett has accused the industry of having inflated returns. you have to measure these differently, and do they not look so good when you adjust them? alix: our third story, credit suisse's ceo said in a memo to workers that we are really regrettable about what happened with the spying scandal, and moving forward, everything is going to be fine. but the beautiful part of this story from reporting it, how the relationship between thiame and khan started.

sonali: you mean how he built a house next to the ceo and started to criticize his garden? alix: basically insulted tidjane thiam's partner, saying his garden didn't look good. who does that? sonali: there were arguments people have spoken about before on strategy and whatnot, but now you have khan stepping forward -- and by the way, ubs is lagging credit suisse at the moment -- basically saying, you guys can talk to me. there's a lot of unrealized potential at ubs. it is really heating up, the competition between the two firms here. alix: that is really interesting. i also wonder what kind of scrutiny he's going to be under. light, are you actually worth all of this that happened?

was the issue just with thiam? what are we paying for? sonali: there's a great story that points to the cleanup credit suisse has to do after this. thiam lost his cielo that had to step down after the scandal -- his coo that had to step down after this scandal. one of my colleagues told me thiam ateak two all, you had to go through his coo. alix: and just don't criticize your boss's stuff. thankerg's sonali bostic, you very much -- sonali ba sak, thank you very much. -- doesn't have a high opinion of the women's soccer pay suit.

they are also better than the men. i'm just going to put that out there. coming up, we take a look at the market reaction to the latest ism manufacturing numbers in today's traders take. if you are heading out to your car, tune into bloomberg radio across the u.s. on sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪

alix: time now for traders take. i'm joined once again by vincent cignarella, the voice of bloomberg macro squawk. you're taking a look at ism and the trade data. the ism as we discussed dipping below contraction, it did the same thing in 2015-2016, when the fed was in quantitative tightening mode. traders i am talking to, looking across the asset classes, we see an opportunity in three different sections. number one, stocks. the futures, perhaps treasuries.

and most certainly dollar-yen. in the dollar space, everything seems to have come back a bit after that trade. one day ago, we would be a figure higher. in the next two days, we get the ism services data and jobs data, both potentially beating to the upside, which gives the dollar some upside. an easy way to play it is in a call spread we -- is in a call spread. to 100omething like a 20 risk-reward, which i will take any day. if you want to price these, you can use the bloomberg terminal with the options you like. certainly, one day, probably shouldn't be a panic. i also have to wonder what ranges we are looking for. something like a 1% move in the s&p, it feels big, but the ranges are pretty tight. vincent: if you watched the trade, it just seemed like it

kept going and going. there really wasn't a stop to it, which gives you that feel that the trade is overextended. you look at things like the dollar, u.s. treasuries, where do you go? in the world of the blind, the one eyed man is still king, and that is the united states economy, the u.s. dollar, and treasuries. this is still a big opportunity. it could keep going. i am not going to tell you what the perfect timing of this is, but all in all, back to the trend is where you should go. alix: so it is definitely a trade to look at. take a look at the function. vincent cignarella, always good to get the trade with you. coming up, julia coronado, perspectives founder and president will be joining us with her perspective on jobs. ♪

♪ alix: welcome to "bloomberg daybreak" on this wednesday,

october 2. here's everything you need to know what this hour. north korea is testing president trump's limits for weapons tests. has tested's regime a missile appeared to be designed for submarines after agreeing to continued nuclear talks with the u.s. secretary of state mike pompeo has confirmed he was on the phone call between president trump and the ukrainian president. >> the phone call was in the context of being sick. state coming on a year and a half. i know precisely what the american policy is with respect to ukraine. it has been were markedly consistent, and we will continue to try to drive those set of outcomes. alix: that's the call that is at the center of the impeachment inquiry. final offer.o's u.k. prime minister boris johnson unveils his exit plan.

pm johnson: what people want, what levers want, what remainers want, what the whole world wants is to be calmly and sensibly done. alix: months of protests in hong kong are taking its toll on the economy. retail sales fell by a record 23%, luxury sales down by almost half. from a drop drop is in tourism. in the markets, we are seeing followthrough selling in the s&p from yesterday's 1% drop. we did not get a 1% move at all in september. we change that up on the first day of october. the dollar is still the safe haven currency of choice, but in the bond market, we are not seeing a move into treasuries and into the european bonds as you might have thought, considering the slide in markets here, as well as in europe the curve. -- in europe. the curve is steeper from where

they we were three days ago. the u.k. prime ministers spoke to the conservative party in manchester earlier with his outline of a new brexit plan. he gave a warning of what could happen if it doesn't go through. be in non: let us doubt of what the alternative is. the alternative is no deal, and that is not the outcome we want. it is not an outcome we see got all. but let me tell you, it is outcome for which we are ready. alix: joining me was more from london is bloomberg editor rosalie matheson. what did we learn that was materially different in terms of brexit negotiations? reporter: what we saw today was vintage boris johnson. the brinkmanship of giving you nine days to come up with a deal or we are going to go out at the end of october without a deal, that is one week before european leaders set to meet in brussels to go through this proposed deal. setting up a timeline for a

collision course with the eu. bit of saw a conciliatory language from boris johnson. he says, we are not against europe. i love europe. we just want a different relationship with europe then we had before. we are not trying to cause this collision with europe. we just want to negotiate on a more even keel. slightly more conciliatory, but the new proposal is on much of to be anything european leaders, including the irish, could possibly agree to. alix: what happens now? what is the state of play? reporter: he's do to speak with the european commission chief this evening. he's been speaking with european leaders beforehand and after his speech today. he will be doing that in the coming days through to his self-imposed deadline of october 11. basically, he's trying to peel the european leaders off one by one and convince them his deal is the best option to get something to avoid his threat of a no deal brexit. the key in all of this really is the irish.

they are saying they are not convinced by what has gone on the table. they find it concerning because essentially he is building a border between ireland and europe, and that is something they are fundamentally opposed to. it's a lot of working the phones from boris johnson, possibly a trip to brussels, possibly a trip to see the irish again. it all comes down to that meeting, which we are going to have in brussels on october 17. alix: thank you very much. all of this attribute into global uncertainty, and we saw some of that play out yesterday in the u.s. manufacturing ism hitting a 10 year low, stoking fears of a global slowdown as the economy looks nearing stall speed. the other side, writing, "it is not the metric other folks seem to think it is. having said that, we have to knowledge the risks of talking ourselves into a recession feels real. " joining me are stuart kaiser,

ubs macro equity and derivatives strategist, and julia carr and otto, macropolicy perspectives founder and president -- and julia coronado, macropolicy perspectives founder and president. could we talk ourselves into a recession? stuart: yesterday was obviously a mist to the downside come but to the coming -- a miss downside, but that is coming off of a rally. on the global basis, you have seen soft data, really showing a data, really showing a ton of weakness over the course of the last month. i don't know that this is talking ourselves into every session. i think the data is slowing, and we can decide whether this is real economic activity slowing or whether it is an exogenous shock from the trade negotiations, but there is a real legitimate slowdown at yesterday's start of the trade. alix: julia, i'm going to describe the chart i'm going to show you, looking at the ism

versus the kansas city manufacturing sentiment and the u.s. many factoring survey. they are just showing different things. it's not as bad as the ism. is that speak to just a trade issue? julia: i think you are making the point that the manufacturing actor is not as important sector in the u.s. economy that used to be, and there are mixed messages from different indicators. it is weak. all indicators suggest it is flat to slightly contracting, so it is definitely an area of weakness. the broader economy is more dependent on the service sector, but i don't think this is purely a psychological phenomenon. it is related to uncertainty tied to the trade war. we are seeing not just manufacturing, but all segment's of business investment declining now. we saw that another numbers yesterday. the construction, the commercial investment in construction, has

been declining precipitously this year. that certainly isn't because interest rates are too high, so it has something to do with we are late cycle, businesses are confronting a terminus amount of uncertainty, so while markets tend to move up and down with every wiggle of the trade negotiations, the reality that businesses on the ground are confronting is that they can't really plan for the future in this environment, so investing has ground to a halt. that is the biggest risk here. alix: fair point. we have seen ceos start to cut their guidance, downgrades in companies and their credit debt. how does that translate into an equity trade? i want to highlight the s&p 10 day and 90 day vol. some of this is going to revolve around trade, that october 10, october 11 state. how do you trade it? stuart: over the short-term, you probably need to belong a little volatility. some of these tariffs will

officially kick in. neither of these parties has tended to be quiet ahead of these type of events, so we would expect a fair amount of headline risk to pop up over the next couple of weeks. our view is generally long volatility about three months out, so long december volatility come along the december vix future. the reason for that is partly the shape of the curve. the curve is very steep, so rolling down that curve is very painful. normally the curve is pretty flat, so you don't suffer that role down. you have the opportunity hopefully to keep all agility well supported in that part of the curve, and if you get real macro risk, the curve should shift higher. it was parallel shifted up post ism, and then flattened because the front of the curve moved higher. that is typical to how the market would react in these cases. future own that december as a portfolio hedge and just hang out there a little bit.

alix: i like that you brought in the fed and encompassing the volatility around there. yesterday we saw a move up in rate cut expectations for the fed, yet the market moved lower. is that the conversation that the market is acknowledging, that they are out of gas? bad news is bad news? julia: i think there is some of that, and i think that is definitely a real concern. it is not that monetary policy has no impact. we've seen, for example, the housing market turnaround. housing is poised to make its first positive contribution to gdp in six quarters. so it is having an effect. it is just not that powerful. it can't fix all of the things that ailed the economy. i do think the fed will probably cut rates again at the october meeting because we seen enough weakness in the data, even if it isn't recessionary. you want to get ahead of these risks. but it's not enough to fix the trade war or a deglobalization

trend, which is what businesses are confronting. alix: which is interesting that we had five german institutes coming out, lowering growth forecasts for this year and next year, but still trying to some more constructive. they said, "the reason for cooling and growth are premier league to be found in manufacturing, capacity utilization -- are primarily to be found in manufacturing, capacitively utilization pointing towards economic crisis." when it comes to who got hit the most in terms of a trade war, when do we start to hear from these institutes that no things are really bad -- that know things are really bad? julia: i think it is not a foregone conclusion that we are going into a recession. one of the more positive elements is that data out of china is still mixed. it still looks pretty weak, but it is somewhat stabilizing. if we get some stabilization in china, i think that set the tone

for the whole global manufacturing sector. they have been the leader there, so i think we may see a move down to a much lower growth range and we've been used to in recent years, and that's something that is challenging for businesses and for margins and for managing expectations of investors, but it isn't necessarily a foregone conclusion. alix: julia coronado of macropolicy perspectives and stuart kaiser of ubs securities will be staying with me. we get employment numbers in just a few minutes ahead of the jobs report. it will be a key to whether the many factoring slowdown is spreading. more coming up next. this is bloomberg. ♪

viviana: you're watching "bloomberg daybreak." blackrock reportedly is taking steps to strengthen its foothold in china. the money manager has preliminary discussions with chinese internet giant tencent. blackrock wants to make its debts wants to make its tools for modeling is this -- wants to make its tools for modeling business portfolios more available. johnson & johnson agreeing to -- ohioohio came please counties a total of $15 million, and will donate $5 million to groups fighting the opioid epidemic. it is the first time a company has settled -- the company has settled an opioid lawsuit. green light gaining more than 8% in september. that brought returns for the year to an average of 24%. they remain committed to the strategy of buying beat down

scott's -- beaten-down stocks. alix: thank you so much. we are waiting for the adp number to come out. the estimate is for 100 40,000 jobs to have been added. one thing you need to pay attention to is the census, which might change the data. the gm strike also. bid number coming in now, little light. it is going to be interesting to see what this has in store. 60,000 a bigger drop, a percent drop from how much jobs we added. i should point out -- a 60,000 person drop from how much jobs we added. what that winds up for jobs report, we are going to dig into that. still with us, stuart kaiser of ubs investment bank, and julia coronado of macro policy perspectives. yulia, your read on the numbers.

-- julia, your read on the numbers. julia? we are going to get julia back on the phone right now. stuart, if you were put on a trade friday for this numbers, what do you think? stuart: adp has not always been the best predictor of the jobs numbers. alix: very true. stuart: i think our view on the jobs data and retail sales later smallerth, the ism is a part of the economy. for the market to really start trading a recession, we are really negative growth outcome, you're really going to need to see weakness in retail sales. we don't have that in our current forecast for this week, but given what we saw out of the ism's, i think people are definitely going to be on edge going into those events. it wouldn't surprise me if the market has trouble recovering from yesterday selloff until we get confirmation that the jobs data is remaining pretty solid. alix: does that mean we are looking at a cat in rates where we are in the s&p?

stuart: it is subject to headline risk. i think after the selloff we got yesterday, you will probably see the market struggle to get to previous highs until that data comes out later in the week. the odds of a fed cut at the end of october jumped from about 40% to 80%. our economists' base case is that you will not get a cut in october, but the ism certainly increased to those odds, and they are specifically looking to that payroll number to see how that is going to play out. you take that altogether, i think the payrolls numbers are going to be very important this month, probably get a pretty strong view on the direction the fed is going to take in october. until that happens, the market may be in a bit of a holding pattern. alix: usually we focus on wages, but now the implement rate is taking up. ,o recap the numbers for you adp coming in for september 135,000 jobs, little light. august was revised down by 30,000 plus.

what is your take on the numbers? julia: those are consistent with what people are expecting for payrolls friday, which is that we are seeing job growth in a lower range. it has slowed quite a bit this year, and part of that is the manufacturing weakness we spoke about earlier. omet of that is s segments of the service sector slowing, so that is in line with what we were expecting. alix: how do you look at census hiring and the gm worker strike? how do you deal with that going into friday? julia: the census workers is a wildcard. it has certainly defied patterns of hiring for a number of reasons, including the lawsuit that is now settled. we may see a pop in census hiring. it doesn't really matter for interpreting the number as far as the market is concerned. what we are looking through is the private payroll number, and there i think what we are seeing

in adp, what we saw last month is that we are seeing a slower hiring trend. the gm strike won't be an issue for payrolls on friday because it happened right after the survey was conducted, so that is going to be an issue for next month. that will be an element of weakness that we will have to look through because it will likely be transitory, and what we are really looking for is to read the tea leaves on how quickly is hiring slowing in the private sector. alix: nevertheless, you're still looking in the market. the twos-tens spread right around 11 basis points. that is a really big jump in two days. we would have thought that was good a couple of weeks ago. what do you do with that? stuart: the good versus bad in terms of rates versus equities is always kind of a riddle. our view is generally if rates are falling, this is that for equities. probably what you're seeing a little bit is as the odds of a fed cut being brought forward to october got priced up and had an

impact on the curve, from an equity perspective, i consider bad growth data to be bad news for equities. policy can kind of support that a little bit in the medium-term, but the issues facing the economy are really hard to deal with from the fomc perspective. i think you are in a situation here where the way rates have reacted is sort of a negative read through to equities, which is we got really disappointing growth data, and that is holding rates down, and that is not necessarily what equities were hoping for. of macroia coronado policy perspectives, thank you. stuart kaiser of ubs investment bank will be sticking with me. tomorrow, guy johnson will be speaking with chicago fed president charlie evans. don't miss that. that conversation coming just after 7:30 am in london, to: 30 7:30 a.m. inork --

london, to: 30 a.m. in new york. this is bloomberg. ♪ on some veryare important questions, but our agreement rate is always higher than our disagreement rate. ♪ . ♪

alix: justice ruth bader ginsburg is an iconic figure in the u.s. justice system and an inspiration for many. she sat down with david rubenstein on "peer to peer conversations." david: many people think the court is very political, that those appointed by president tend to follow the political desires of the republican or democratic party. do you think that is a fair assessment? why do you think people have that view?

havece ginsburg: people that view because agreement is an interesting. disagreement is, so the press tends to play up 5-4 decisions. but if we take the last term as a typical example, we had 68 full briefingr and argument. 5-4 or 5-30 were divisions, but 29 were unanimous. alix: that was justice ruth bader ginsburg and david rubenstein. you can watch the first of a two-part special of that conversation on david rubenstein's show "peer to peer." joining me on set as my previous coanchor, but now the anchor of "balance of power," david westin. you clerked for the supreme court, so you kind of understand

the inner workings. is it the media's fault? david: no, justice ginsburg is right, but there is a sleight-of-hand there. many of the case that come both could -- that come before the statutory legal things. the other thing is people tend to break down, regionalism, for example, as right of center. they are not saying i have may republican. originalist -- saying i am a republican. i am an originalist, therefore i am skeptical of roe v. wade. they have to take up a case from the fifth circuit to decide whether they are going to take it. it basically curtailed access to an abortion. that will be a big test for chief justice roberts, whether to take that. that will be seen as a political case, even know the justices will never talk about

republicans or democrats or left or right. they will talk about a --ionalism and a more about original is him and a more expensive -- originalism or a more expansive view of the constitution. is for case discrimination in employment for lgbtq, and that will be seen as very political. a so-called conservative justice could decide we do not want to go too far. alix: what i miss when you are gone is the politics part. check him out on "balance of power" later today. crude holding. we will give you the data from the russian energy conference. this is bloomberg. ♪ sometimes your small screen is your big screen.

and with the xfinity stream app, which is free with your service, you can take a spin through on demand shows, or stream live tv. download your dvr'd shows and movies on the fly. even record from right where you are. keep what you watch with you. download the xfinity stream app today and get ready for xfinity stream tv week.

watch shows like south park and the walking dead october 7th through 13th.

alix: jobs only increasing 8000. services still crushing at 127,000. -- thateeing hiring will not feel good when you have data rolling over. in other news, we are talking about oil. the moscow energy forum is kicking off today. it lasted a few day and vladimir putin has been talking early. he said russia will do its part to balance the oil market on supply demand.

joining me from london is stuart wallace. what did you learn from vladimir putin this morning? the right is making noises in terms of trying to maintain the illusion of cooperation and friendship within the opec plus group. the reality is they have been overproducing for a long time. there is no sense they will try to bring it down. the weight remains on saudi arabia to try to do something. as i mentioned earlier, the most extraordinary thing about this event is what they are not talking about, which is the attacks we saw in saudi arabia which crippled the biggest producer for a couple of weeks. it is a testament to the saudi's they have managed to get it back up fast enough and every assured the market it is in hand, but the focus is on the demand side and their things are not looking optimistic. alix: we did hear some news out of iran. the president was on television there and talked about how the

deal europe is putting out, that emmanuel macron is putting out, the loan backed by oil is something he could get behind if the language changed. are these concessions real? is the market expecting something positive to come out of iran? stuart: the short answer is no. i do not think there are any expectations the europeans will be able to come up with a deal that allows iran to get oil out in return for cash or goods in a way that would go against the u.s. actions. the oil market is not convinced. that does not mean it cannot happen or will not happen, but no one is believing it. remember the french in particular and the europeans more generally have set themselves in aggressive deadline. iran has started setting deadlines for things to happen. none of it came through. i do not think there is any point when the oil market was pricing in a deal with iran. where they got more excited was

some sense of detente in the region. you have a cease-fire of sorts between yemen and saudi arabia. that had a much weaker impact than any arabian issues. -- that had a much bigger impact than any arabian issues. alix: still with me as stuart kaiser. oil volatility. where is it. it is amazing you've had these headlines, even the ones that seem more conciliatory. it is amazing. >> we liked using oil as a downside hedge a week ahead of the saudi attacks. the concept still applies. given the downside risk to oil, using that as an alternative growth hedge makes sense. there are a couple things and play from an equity perspective. one is that the u.s. economy is a lot let's sensitive to the price of oil that it used to be because we produce a lot domestically. there is probably less of an impact on the economy that was.

energy is probably 5% of the s&p. it is less impactful on the performance of the market. not beenreason, it has as market moving as it might have been in the past. the third is we have these three competing narratives. one is the global oversupply of oil. the second is event risk. the third is if growth is weak, does that mean we also have a demand shock? againste demand shock an oversupply market, that can be negative for the price of oil. the markets are trying to sort this out. it looks like a big issue, but it is not a big part of my portfolio. stuart: therapy -- alix: fairpoint. it seems like where it can be a deal is in junk bonds. a large part of that has to wind up being energy. are there derivative derivative trades you can look at when you're looking at the oil market? stuart: we tend to focus on oil

markets directly as opposed to indirectly. for people focused on credit markets, there is a price of oil below which credit risk starts to ramp up. there was probably some concern, given the slower growth data at we could get to those levels. the attack on saudi took away those risks for a short time. that move higher in oil was not sustainable. you look at a sector neutral oil basket of u.s. equities, they are down. that is a bigd tactical risk but it does not change oversupply or the issues with global growth slowing, which are much more powerful over the medium-term. alix: when it comes to earnings, because if you will look at big oil earnings or any oil earnings, comparatively, they will probably look good from last year, particularly if you get into 2020. do you feel there will be a market reaction or will it be ignored?

stuart: i do not think it will be ignored by people investing directly. as i said, it is 5% of the portfolio. that is also an area of the market that is hugely underweight and hugely shorted. to the extent you had a positive earnings surprise that put pressure on the short, it could be locally painful or locally important. you saw that when the saudi started happening. you had a huge event over the course of a couple days. once that played through, people reengaged shorts or stepped away. if you were to have a positive earnings surprise, i think it could be locally important, but its affect on the overall market is not what it was in 2007. alix: let's round it out and talk about earnings for a second. we have seen cfos start to lower their outlook. do you feel like it will be a beat and raise thing? or do you legitimately feel they

are lowering their forecast because they are lowering their forecast? about $172 of s&p earnings, we are at one 60's right now. our strategist think we will have -- you are around 0% year on year growth, which they continue a key level of interest for the margin. our view is this is real, earnings are coming down for a reason. have slower economic activity. when you have these political events and headlines, companies use those. could you seal open of that? yes. -- could you see a little of that? yes. the first quarter had negative revisions from the tariffs in 2018. some of that is probably happening. our view is these are real negative earnings revisions and companies are lowering the bar because they are concerned. alix: what you do with defensive's? some say they are overcrowded.

they actually could see earnings growth. stuart: active managers are in safety positions. we think that will continue. our view on that momentum dislocation in september was it will be short-lived because we think people boring in defensive's and safe stops for a reason -- that reason is they are concerned about the growth outlook for the next six to 12 months. unless you're going to do something that resolves the concern, it is hard to see an active manager say i'm worried about growth but now i will get cyclical. we need something to release valuation, and in our view that has to be an improvement in the growth outlook where you will not see that rotation. alix: stuart kaiser of ubs will be sticking with me. we want to get an update on what is making headlines outside the business world. viviana hurtado is here. viviana: just hours after saying the u.s. would resume nuclear talks with the u.s., kim jong-un's regime reportedly fired a submarine-based missile.

u.s. secretary of state mike -- confirmedmed it that he was on the july phone call between donald trump and the leader of ukraine. that call is the focus of the houses impeachment inquiry. mike pompeo did not comment on a white house summary of the paul that says the president -- of the call that says the president asked the ukrainian president for help investigating joe biden. the president will issue an executive order regarding medicare advantage that involves private insurers. he wants to contrast his plan with those being offered by democratic presidential candidates. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. alix: thanks so much. stuart is still with me. geopolitical risk, political

risk. do you hedge? what you do with the impeachment conversation? how do you hedge it? stuart: it is a tricky subject for us to comment on. that type of risk is index level risk and you will probably hedge that at the index level. you are working out for some combination of russell 2000, s&p, and nasdaq. we view nasdaq as the best value from a hedging perspective. we think it can get put up in the trade headlines. it has been the leadership in the market. if we were to get a broad-based structural selloff, that could come under a lot of pressure. we see it is the most attractive volatility. alix: i'm glad you brought up tech. it leads me to elizabeth warren. part of the narrative it up and impeachment issue is biden does not look good. elizabeth warren gaining would be a negative in terms of technology and health care and even the banks. when you start up on these bets for the election?

stuart: it feels early because we do not know who the nominees will be. i think it is late march or april you will have 70% of democratic delegates having voted so by that point you will have a clear picture of who the nominee will be. you just went through the laundry list. financials, tech, health care. those are big sectors of the market. it is hard to imagine the market performing well if those sectors are all under sharp lyrical pressure. with the shift in the polls, warren looking more even with biden, we have seen more questions in those line. not something you would transact as a hedge until you got closer and had a clearer idea. ahead,en starts to get that other people will shift their policies in her direction. it happened to hillary and the last cycle. as bernie started to do well, she got pulled further left. not only is the nominee important, it is also important

how the nominating process goes. alix: great point. thank you very much. stuart kaiser of ubs investment bank. coming up, gm losses pile on. it is week three of worker strike at the automaker. jp morgan says it has already cost gm over $1 billion. remember, bloomberg users can interact with the charts shown on gtv . this is bloomberg. ♪

viviana: this is

"bloomberg daybreak." i'm viviana hurtado in the hewlett-packard enterprise greenroom. , anng up later today exclusive interview with ares capital management ceo. now dear bloomberg business flash. the financial decoupling between the u.s. and china is growing. according to the financial times, chinese venture capital in the u.s. fell to a four year low. in the first nine months of 2019, chinese funds invested just $4 billion in u.s. companies. those firms are turning their attention to india and southeast asia. the world's largest sovereign wealth fund got the green light to sell almost $6 billion of oil and gas stocks. this ends the two your process that reduced a proposal to dump all $40 billion in petroleum-based investment. doing it willare reduce norway's overall risk.

prices for manhattan apartments sell for the most in eight years. buyers are to many discounts in a market swamped with choices. previously owned condos and props sold for a median of $915,000. from adair:, that is down 8%. -- from a year ago that is down 8%. alix: thanks. we look at three companies worth watching this morning with emma chandra and sonali basak and brooke sutherland. you're looking at lennar. emma: it seems lower mortgage rates breathing new life into the housing market and of course that helps the homebuilders. lennar the biggest u.s. homebuilder rising in the premarket. increase in 9% orders during the third quarter.

that far exceeded estimates with the bump of 3.5%. if you look at 30 year mortgage rates in the u.s., they are more than 1% lower than they were a year ago. analyst saying that is driving demand along with low unemployment, higher wages and also lower inventory in the sector. also what is interesting is it is pumping orders, allowing lennar to pull back on its promotions and incentives. that is helping growth margins more than 1% higher of the third quarter of 2018. alix: thank you so much. sonali, you're taking a look at shutterfly. what is the latest? sonali: the banks have struggled for months to offload some of this debt. it is assigned investors are looking at the leveraged loan market is a lot more risky and they're unwilling to take on the riskiest portions. now we have barclays and citigroup leading a group of banks and they're unwilling to salvage that as a group below $.95 a dollar.

they are looking to hold on to some of those loans themselves. bloomberg is reporting about $280 million worth of loans. they are looking to offload more than $1 billion worth of the debt as the deal gets done. alix: great point. it dovetails with the jump bond sales. -- with the junk bond sales. the third company is gm ended strike. the rhetoric when it first to adopt was they can handle it. -- the rhetoric when it first kicked off was they can handle it. that is not the rhetoric anymore. robert: -- brooke: it is not. the longer this goes on the harder it is to make up losses. you are now seeing the pain points for gm. you're also seeing a little bit on the union side as this continues to go on. you have employees who have not gotten paid their normal salaries since this started, only getting paid $250 a week.

it will be interesting to see how far both sides are willing to push this. alix: i thought the derivative results were interesting. there was a factory shut down in mexico with 6000 workers because those workers have supply the stuff to make the cars do not need to supply the stuff to make the cars. brooke: and you have seen layoffs in canada as well because you do not have the different parts coming in. that affects the parts makers that's applied to gm. if gm is not producing the cars, they do not need the parts. i think about it in terms of manufacturing numbers. also seeing the pain in the auto sector which has already been hit quite hard this year. alix: jp morgan is not the only one. adam jonas at morgan stanley doing something similar, lowering earnings estimates. $.81 -- atok at five $5.81. that is a material shift. sales from some of

the foreign manufacturers and i would gm in a few minutes. brooke: this gets to the heart of some of the demand. they want protections for their temporary workers. want them translated into long-term employees to have jobs 30. gm would like to retain more temporary workers. they want to have more flexibility to lay people off and to shutter plants and do what they need to do to protect their profitability. you do have that lingering in the background as a concern. alix: you do have jd power and lmc automotive saying the cars that were sold had to be discounted, some more than $4000 per car in the third quarter. even if sales people, that is another margin hit. brooke: and you couple that with potentially higher labor costs if the union continues to dig in on their demands on health care. gm has already made concessions on that point where they're willing to protect these very generous demands.

there is concern companies like ford will have to match that or maintain the levels they have been providing that creates a broader industrywide margin hit. alix: we will definitely look at that when auto sales come out. brooke sutherland, always great to deep dive in with you on that. coming up, we will tackle the technicals and look at stitch crushedt stop getting -- that stock getting crushed. this is bloomberg. ♪

alix: time to tackle the market technicals. joining me is bill maloney, voice of bloomberg's equity squad. i will kick it off with stitch fix getting crushed. walk me through. bill: the stock is getting hammered in the premarket. what is interesting about this

stock -- this chart is the stock is fading since 2019 highs. nothing more than a trade range. let me get the charts out and draw your lines. the trading range starts up there and comes down. the 16 to 2018 level, this brings you down to december lows. probably in the 16 to 18 range. alix: more downside potential? bill: probably more downside. alix: also taking a look at monster. guggenheim downgrading the stock to neutral. they are looking at competitive risk from the upcoming launch of coca-cola energy and they are looking for the stock to be range bound for the next six to nine months. what are you noticing on your chart? bill: what is interesting about this chart, you say guggenheim worried about competition, every time the stock started bumping

against the 200 day, selling the stock. as far support levels, you might have support around the bottom of this range, which brings you down to 53.81. if i go back five years below that, 52 or so. 52 to 54 maybe good support of this cross. alix: aren't you getting a death cross? >> a death cross is a lagging indicator. the cross has already been down. the death cross is good but i do not know how significant it is. alix: let's go to lennar. it beat expectations. it is the biggest homebuilder when it comes to revenue. it had a surge in orders and a lower borrowing cost. are we overextended? uptrend from an the july lows and a bigger uptrend from the december lows.

where we think it goes from here? i will slap on a retracement level and i will take the 2018 peak to the 2018 lows. ort brings me to about 58 $59. there may not be sellers until there. alix: thank you. .loombergs bill maloney you can catch him on macro squad on the terminal. that wraps it up for me. purves.p, michael as we are seeing some fall through selling in the equity market. softer adp data. what is it mind up meeting for jobs data ahead of the friday release? this is bloomberg. ♪

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growth anxiety gripping investors taking a bite out of equity markets. the manufacturing recession makes an appearance in america. the latest figures parking concern, leaving economists waiting for the next data point. the payrolls report is just around the corner. here is your wednesday morning price action. futures down once again. off 17 points on the s&p 500, -.6%. euro-dollar stable. the outperformance coming on the front end of the curve on a 10 year maturity. yields down to 1.62 on the u.s. 10 year. let's begin with the big issue. the manufacturing recession aching an appearance in america. >> does global growth feedthrough and u.s. growth? >> does manufacturing feedthrough? >> halpenny manufacturing recession bleed into an economic