francine: eu aircraft and french wine and cheese get slapped with new duties after the white house announces tariffs on eu products. slowdown fears had global equities. charles evans tells us he is next month'sbout meeting. and boris johnson tests his new brexit plan in parliament. does he have enough support to get a deal over the line? ♪ welcome to "bloomberg surveillance." i am francine lacqua in london.

we are getting data out of the euro area. services pmi is 51.6. anything above 50 means expansion, but it is a touch below estimates. at the stoxxok 600, for germany is close, so maybe a little less money out there to trade. brexitf folks will be on and boris johnson will tell parliament today. watch out for any reaction in the pound. , itou look at that paring has much to do with the dollar -- more to do with the dollar than economic data out of the eurozone. is big worry we've seen exactly what kind of economy we are looking at. coming up, more from the chicago fed president, but first, let's get straight to bloomberg news. donald trump is seizing on

revelations the u.s. house intelligence committee chairman adam schiff met with the whistleblower, the person of the heart of the impeachment investigation. this invalidates the complaint about his controversial behavior. he alleges the democrat health right original plaintiff but did not divide any evidence. >> he should resign from office in disgrace. frankly, they should look at him for treason does he is making up the word. not only words, but the meaning. and it's a disgrace, it should not be allowed to happen. u.k., boris johnson is testing his new brexit plans and parliament and optimistic he has got enough support from hardline eurosceptics. he had threatened to walk away from talks if the eu does not agree with plans in brussels. in hong kong, the government is

of ok emergency powers to van facemasks according to local news channels. it is the first time in half a century emergency rules have been. they were first introduced in 1922. a spokesman was not immediately able to comment. and indonesia's president is promising to introduce sweeping changes to labor. the move would deliver on some major reforms of esters have been asking work. president also said indonesia is not aligning itself with china or the u.s.. indonesia wants to take opportunities so that the trade war does not negatively impact our country we have good relations with the u.s. china, and our most important thing is that national interest comes first. >> 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? announcedthe u.s. has new tariffs on french wine and cheese amongst other european goods. that's after he got the go-ahead from the wto to impose duties on as much a $5 billion of exports from the eu. -- 15s a 50 year young year-long battle. to move onxpected its own to be about u.s. subsidies to boeing. they say the mutual imposition of countermeasures will only inflict damages on businesses and citizens on both sides of the atlantic. for more, our wto reporter joins us from geneva. who will be affected by these tariffs? >> european companies will be affected primarily at this moment. when you're talking about airbus planes and producers of french wine, scotch whiskey, spanish

olives them and a lot of cheeses. the u.s. has announced 10% tariffs on european aircraft and 25% tariffs on those goods and 150 of them from europe. are we entering a transatlantic trade war and where does this and? -- end? i would not say we are at this moment. this dispute has been working its way through the wto for 15 years. the u.s. has been fined by the book of the eu is pursuing another case you mentioned. they will have a ruling and 2020 with which they can retaliate. at this point, everyone is following the rules. were quite restrained and many were expecting 90% tariffs. of runway tot escalate this disputes if they feel the eu is not responding properly. the wto: we followed

quite a lot, but how unusual is it to give the go-ahead for tariffs? is it usually a done thing? is quite unusual. usually, cases are settled far before this point. dozen.ave been about two cases that made it to this level usually, they are settled quickly thereafter. i would say this is unusual. ,rancine: thank you very much bloomberg's wto reporter in geneva. joining us is the head of u.s. equities at columbia threadneedle. thank you for joining us on such a big day for trade. what does it mean for equities? we talked day in and day out about the trade war. who will lose most? of the tariffs, we are talking 75 billion, thinking of context of the u.s.-china side. billionready over 250

in the middle of october and talking about another 100 something billion at 15% the issue with the tariffs is that it is basically a tax on the consumer. ofn we look at the impact tariffs so far, the pricing of those goods relative to all pricing in the u.s., you can really see a divergence. tariffs have gone up to the tune of 3% when the rest of the basket has actually been flat. thatone is set to lose on that airbuseminder also sources a lot of its supplies from the u.s.. the supply chains in the u.s. supply chain includes a lot of people.

i think it is over 275,000. francine: consumers losing out, are these u.s. consumers? the goods tax from europe and what does that mean a further downturn in the u.s. economy? we already don't have a great picture. what does that mean for equities? economyrms of the u.s., first and then what it means for equities. the third are having a letdown in manufacturing that we have had since the beginning of the recovery in 2009. we had a mini manufacturing recession in 2012 when ip contracted. we had another one in 2015 and 2019 we had a contraction in industrial production. it looks as though we are having a third one now. francine: is that because of tariffs or is it cyclical? >> i think that has been a magnifying factor, but they are obviously cyclical.

there is a usual inventory cycle that goes but a lot of people have commented they're obviously, the economy is not just a manufacturing side and the u.s. economy has weathered the cycles because of the strength of the consumer. it is 70% of the economy. you can see the economy has been more muted, but the consumer is still in strong shape. a saving grace is high and the balance sheet is strong we still have rising wages and income. very low unemployment. i don't think we are entering into recession. as it pertains to u.s. equities, i don't think the backdrop is so negative the markets will make you think. up later thisng hour, attracting investments to indonesia. we bring you our exclusive interview with the president of indonesia. this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg surveillance." let's get straight to your business flash in new york city. allison cooper is stepping down as chief executive of imperial grants after the company warned sales of cigarettes alternatives were falling short of expectations. to keep uptruggled with bigger rivals like british american tobacco. shares have followed more than 20%. live up toiling to elon musk's hype in the third quarter. they hit a record 90,000 deliveries but shares sank.

that fell short of the chief executives much-hyped 100,000. they warn revenue may drop and say they are relying too much on the cheaper models to grow. yesterday's u.s. auto sales when as grim as the day before. ford sells a fell, coming in better than estimates. pickup trucks were a bright spot for fiat chrysler and general motors. that is your bloomberg business flash, francine. francine: let's focus on the fed. guy spoke to charles evans federal reserve bank president in chicago. fears of aof slowdown and what to expect as we head towards the october fed meeting. i am open-minded about the decision and we will learn more before the meeting at the end of this month. i would say the iso numbers was haveative number and we

received reports over the last many months about trade manufacturinghelp enterprises were a bit more reticent to expand capacity and capital expenditures which have been very weak. a moreas been confirmation of the reports we have seeing and it has been a very important. >> is it enough to tip of them towards a rate cut? manufacturing is not a huge part of the economy, but it is a significant part. >> in my district, we have more manufacturing than the average. i have heard reports of the weaknesses and comes from the trade uncertainties. policyg about monetary and positioning, i deftly think the fomc is moving until last year and headed for slightly modest and restrictive oppositions.

cut being the right decision, i think we will have to go into the meeting and see. >> data dependent? >> that is right. it sounds like we say that all the time, but we are always looking at the state of the economy. thereat is the job and are many fundamentals which are really quite good for the u.s.. consumer spending is good and the labor market is good. it has been moderated recently. it is definitely the case that business spending has been weaker. >> the consumer is important for the u.s. economy. nevertheless, if the fed waits until there are signs that the consumer is beginning to roll over, isn't that too late? >> that would be an important concern and that is one reason the committee is trying to get ahead of this. we have repositioned policy

towards one that is accommodative eric the question is how accommodative we need to be. accommodative. the question is how accommodative we need to be. it definitely increases concerns and i am looking at that data. at the moment, it looks like my outlook for this year is 2.25%, next year about 2%. trend growth is 1.75%, maybe 2%. this is a good growth outlook. the question is whether or not we will be able to navigate the uncertainties or shocks that come our way or whether or not there is something else that pushes us to decide. that is why we have moved to a more accommodative policy and we will have discussions as to whether or not more is needed at the end of the month. francine: that was the chicago fed presidents speaking to guy johnson imagery it. -- in madrid.

we are looking at monetary policy closely and what the fed does. overall, the impact on u.s. markets, the think the markets have been oversold? >> somewhat. overall, markets represent the manufacturing side as opposed to the economy. they over represent the cyclicality. when you look at the s&p 500, you have about 35-40% exposure to international spirit it's far less in the u.s. economy and they are very domestic am only 15%. they are very much exposed to exports and the government internationally. that's what i mean by that. perhaps the market is not as good a representation of the health of the economy.

francine: where do you see value in u.s. equities? >> there has been a massive value and between fears of recession in the market. stockms of how we look at , we like quality names heard -- names. companies that are more than just the top us -- and the cost of capital can have improved fundamentals. have seen value within the sector. we have really seen values across the spectrum. health care is one at that is becoming extremely cheap, because relative to its , you have a lot of dislocation there. and when we look at rates and utilities, it looks far less

attractive and there has been more growing. francine: when you look at technology, i don't know what your take on technology stocks is. whether the big overhang is regulation, will we see some of the stocks broken up? >> right, that is interesting. when we look at that first of all, it seems as though it is very difficult with the current available to make a very strong argument to break up and amazon or facebook, for example. e-commerce is still a tiny portion of commerce overall. you would need to have new lows -- laws in order to make a strong argument, in my opinion,

to break up amazon. and it would be fairly similar in the case of facebook. we do think there is more scrutiny the translates into more costs for them in terms of having to police their website. it changes the cost structure, perhaps, and changes the way some of the company organizes themselves. facebook had to create a new department as a result of the foc see to comply with the requirements they put upon them. but i do not think there is much of legal support to break them up. francine: think you so much. we talk the impeachment inquiry and what a prolonged investigation could mean for the markets. this is bloomberg.

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>> this is a fraudulent crime on the american people but we will work together with shifty schiff , pelosi, and all of them. i had a great call with the president of the ukraine. believe it or not, i watch my words very carefully. there are those who think i am a very stable genius. ok? i watch my words very closely.

and facility to get up and totally fabricated a conversation i had with another leader and make it sound so bad, it was so evil. francine: that was president trump lashing out at democrats ,nd adam schiff, specifically saying he read out a fake version of his call. nokia from columbia threadneedle is still with us. -- nadia from columbia threadneedle is still with us. it's curious to say that the real winner of this could be elizabeth warren and a very different type of u.s. economy. at what point do you change or calls on equities depending on the race? is stillght now, it very early and we don't know who the winner of the democratic primary is. , biden versus warren, they would have very different set of policies to there would

be a different impact on the market. it still a bit early and the market has to move as i mentioned earlier, been grappling specifically on the health care sister -- sector. policy wouldren's mean for the sector, particularly as it pertains to health insurance. we had that overhang on the sector for some time. even though fundamentally, they don't believe the outcome for health insurance actually would be as bad as what the markets fear right now. francine: peggy for joining us -- thank you for joining us. coming up, we talk about attracting investment to indonesia and h&m. ♪

francine: new aircraft and french wine and cheese gets

slapped with new dutyies. tariffs on new products. under pressure. will the fed be forced to cut again? prime minister have enough support to finally get a deal? good morning, everyone. good afternoon if you're watching from asia. this is "bloomberg surveillance." i'm francine lacqua. anything below 50 means it is in contraction. the estimate was a 50.3 figure. a little lower than expected. the pound is waiting to see what happens with brexit and we're expecting boris johnson to answer questions on his new plan he will put before the e.u. and parliament today. let's get straight to the bloomberg first word news. >> we're going to put an

exclamation point on what you were talking about. otch, wine, dutyies on 7.5 billion of good will kick in. washington getting the go ahead from the w. nombings retaliation for e.u. government aid to airbus. the largest award in w.t.o. history. the e.u. will retaliate when they rule on their complaints over u.s. subsidies to boeing. charles evans told us weakness in manufacturing hasn't convince him of the need to cut rates again. he spoke to guy johnson. >> we have repositioned policy from being headed to slightly restrictive policy to one that is accommodative. how accommodative we need to be is the question. i would say the weakness in the i.s.m. and manufacturing is

something that definitely increases concerns. >> global news 24 hours a day, on air and on twitter powered by more than 2700 journalists and analysts. francine: thank you so much. shares surging this morning after the swedish retayler reported its first earnings rebound in two years. it is a rare bright spot after the bankruptcy of forever 21 earlier in the week. we will be joined with the financial officer who joins us from stockholm. thank you so much for joinings. give us a sense how you achieve this profit rebound. a lot of people say it is due to lower markdowns. how much have you sold full price and how much is unsale? > thank you for having me.

the customers appreciate what we're offering and the whole summer experience in physical stores and online. in all of the investments we have done, have seen a sustainability. i think that is taking off. as you mentioned, we have come down in our redetection reductions. also in the investments we have in our supply chain. that of course is helping us to deliver a good result in the third quarter despite the headwind that we have had, a very strong u.s. dollar which is affecting our purchasing prices negatively. all in all, i think it is always about the sorment. also to remember all of our colleagues worldwide who is working very hard and we are

and ann 72, 73 countries offering is getting stronger and also more local -- locally relevant. francine: can you give me a sense of how much more markdowns you'll have to do and what sales were like. have they been gaining and will that continue in the fourth quarter? >> it is far too early to give a guidance when a it comes to markdowns. we have still two months to go. we are convinced that over time we have the potential to come down further in the reduction levels. it is more connected to q 1, q 3, which are the reduction quarters for us in our industry. but over time, yes, but it could vary from quarter to quarter but all the investments we are doing in the supply chain, the

sorment, we think over time -- assortment, we think over time we will continue to improve that francine: what is your outlook for full-year sales deprothe? >> the online is a very strong channel for us and it is getting more and more strong when we are getting it more like connected to our physical stores. we believe in both physical stores and online. a strong performance. 25% up in local currencies. it is well received and we are still doing a lot of improvements ahead when it comes to different futures to connect the physical store with the dot.com. we see positive things ahead we see positive things ahead as well. francine: give me a sense of how worried you are about the trade war and whether that will affect

your supply chain and where you actually make some of your clothing. >> of course we are monitoring it. it is a lot of things happening. it is not only a tough industry when it comes to the transformation, the journey from physical stores to online but as you mentioned all the trade wars. we are on top of that, but of course it is a challenge for all players and we don't think it is a good thing for the world trade but we have to be realistic. it is what it is. but we are quite flexible when it comes to our sourcing so we have good plans. and e working in the group we try mitigate all of the threats. the a challenge. francine: how important are there for markdowns or reductions. how will reductions and discounts compare in the fourth quarter to the third quarter? >> as i have already said, i think fourth quarter for us is not the reduction quarter in itself.

it is more a full price quarter. it is too early to give any guidance. we still have two months to go. it is a very, very tough industry. the competitors are also like discounting a lot. so let's see. we will come back to that in connection with the q 4 report. francine: thank you so much. i look forward to speaking to you in the fourth quarter then. now let's get on to brexit with 28 days until brexit. boris johnson will test his new plan in the british parliament today. in his speech to the conservative conference see northern island stay in the market for good but leave the customs union. >> we have checks at or near the border in northern ireland. we will respect the peace

process and the good friday agreement and by a process of renewable democratic consent by the consecutive and the assembly of northern irlte we will go fult in protecting regulatory business on both sides of the border. francine: the compromise moves a step closer to a northern ireland only backstop. let's get the latest from london nd brussels. what's the mood in west minister. is this going to get passed? >> boris johnson is heading that way. this might be an ideal agreement or the hard core brexiteers.

with the clock ticking, i might say this is enough to swing them behind it. we are seeing some of the harder core brexiteers indicating as much today. againstette.rty is it goes to cabinet votes today. we'll get a better sense this morning once he has had the initial questions on the floor. francine: i'm trying to figure out whether this is a different game plan to what theresa may put forward. he is trying to make sure get ace prufle from parliament. do we care? >> there are negotiations that will go on with the e.u. from this weekend leeting up to the summit of course later this month. he seems to be on a double track here. one of the things the europeans said, you have to bring up the deal that is acceptable to the british people. don't bring us a deal that is not going to be sellable at

home. perhaps he is trying to go there to bruss unless a couple of weeks and say -- brussels and say i have the support behind me. the europeans are saying it is not workable. francine: does it get us closer to a deal with the e.u.? >> well, the initial reaction was we'll take a look at this and then we can continue to negotiate. i think politically the european union does not want to be seen as not willing to engage. they don't want to take the blame for a no-deal brexit. they still want to keith keep the united kingdom at the stable. the major stakeholder and the union wants to make sure they feel ok with the final version of this. we are expecting more details today and one of the things that has been made very clear here behind the scenes is that this is probably too little too late and there is two weeks until that summit. the europeans don't want to get

to the situation where on october 17 they have to continue to negotiate. there is speculation they will put forward an extension even if boris johnson doesn't ask for one. francine: thank you both for oining us. joining us now here in the studio is a senior strategist at i.n.g. when you look at brexit, there is like a million questions left unanswered. it looks like we're where are where we were at the beginning of april of last year. where do they go from here? >> i think the scenario we're looking at is that the article 50 will be extended and allow for snap elections to be rganized and the tories will have a majority. one of the key -- is talking

about a no-deal brexit. francine: the prime minister keeps saying a, he wants a deal. if he doesn't get a deal, he would rather a no-deal. how can we be sure he can force a no-deal through? >> we can't be sure 100%. the chances of a no-deal brexit is -- he is up to that, then it is much higher. francine: what happens in the scenario? kind of a haven in the past. are they losing that safety haven status? >> i don't think them. not for domestic envestors. long-term it is a different dynamic. i think a no-deal brexit would probably create more inflation. it would cause the treasury to spend more money to support the economy.

francine: thank you. our guest stays with us. allianz chief executive says the e.c.b. is making it easy for people to spend money they don't have. we'll talk negative rates next. this is bloomberg. ♪

francine: this is bloomberg surveillance."

allianz's chief executive said the e.c.b. is making it easy for people to spend money they don't have. meanwhile the chairman of banco santander has warned of an extended period of negative rates. she said the policy was the biggest disruptor of lenders. you focus on rates in europe but overall, how worried are you that negative rate also at some point create unintended consequences? >> i'm very worried. in fact those consequences i have seen in the banks in the threat of cuts to benefits. it is a threat that is real. the question is when does this outweigh the benefits of negative rates? we're probably not there yet. the reason why we have the comments you just mentioned. francine: are we creating a fictitious economy?

does it mean that actually people are getting much more into debt? >> it is probably creating some debt. the main issue is that the marginal benefit from easing further is hard to demonstrate. francine: what does it mean for a lot of the bonds that we're seeing in europe? the spret between a.t.p.'s and bonds hasn't widened as much as it has in the past. the whole of the economy including germany is slowing. >> the control rates alone will remain low. the e.c.b.'s function is to be able to expand its balance sheet. the reason why i'm a little bit more cautious in the short term is because we have a transition at the e.c.b.. she had a very big job on her hand to mend fenses within the governing council and to keep

verybody and build new confidences and measures. francine: with the tariffs coming from the u.n. on exports including cheese and wine. does that move a lot of bonds at the margins? >> i think it is fairly arginal. not exactly the engine of growth. francine: not the backbone. >> the sector is already hurting at the moment in europe. at least it is not adding pressure to the sector. francine: thank you so much for joining us. now coming up, managing expectations. a record number of electric cars -- elon musk's. those stories are up next. this is bloomberg. ♪ loomberg. ♪

>> here is your bloomberg business flash. today british retayler ted baker losing 1/3 of its value. it was off to a slow start. ted baker is suffering from a fierce competition. the new bosses telling clients not to worry after a few bumpy weeks. the co-c.e.o. said they are as committed to their clients as ever. they ousted co-founder adam newman from the top job. the c.e.o.s are now seeking new funding. next spring wework could rouvent cash. sults may help investigators find the outbreak that has killed 12 people. he injuries are not new.

and yesterday's u.s. auto sales were not as grim as the day before. ford sales falling 5% coming in better than estimates. g.m. had a strong quarter. fiat sales were basically flat. that was your bloomberg business flash. francine: thank you so much. said 's highest court has they will remove offenses and defamatory posts made by users in the european union. tesla has failed to live up to the hype. shares sank as it fell short of the chief executive's much hyped 100,000. first of all, alex. we have this court ruling. facebook may have to censor some

hateful posts globally. how big of a deal is it? >> it is a big deal. it depends how sfribt think this is enforced. -- how this was inforced. you see a post which is offensive or illegal, you flag it to facebook, they pledge to bring it down within 24 hours. now they have to be more pro active. frankly there is nothing better doing that now than two sets of yes. employeing tense of thousands of people could be very expensive. francine: is this just the first step of more regulation coming? >> there are a lot of things coming down the pike now. some including hate speech and some the nature of data flows and facebook's huge controls over the advertising,

technology, at least in mobile advertises. google is more dominant on the desktop. these are big threats. the stock hasn't really taken much of a pounding on this front. as the volume of complaints grow, that is something they should be watching carefully. francine: tesla, disappointing numbers or are the numbers good? >> best numbers soft but as with any company you try to exceed expectations and they didn't. elon musk kind of made a run pushing this idea sa they might be able to hit 100,000 cars a that they fell short of. 97,000. a 3% miss is quite big when you look at earnings numbers more broadly. there are fears of course that the delivery numbers are not so high and the mix of the cars they are selling will have an

impact on the average price that is beings paid and could mean that there is a revenue miss in the face cal quarter. francine: thank you so much for all of the update. tom keene joins me next out of new york. we'll be talking with the goldman sachs vice chairman. we'll talk about some of the things going on with trade. a reminder to our listener rs on bloomberg radio, the stock market in germany is closed today. the rest of the european markets are open. this is bloomberg. ♪

rancine: tariffs hit the skies

wine and cheese after the the white house announces tariffs. will the fed be forced to cut again? evans says he is open minded about week's meeting. does the prime minister have enough support to get a deal over the line? good morning everyone. good afternoon if your watching from asia. this is bloomberg "surveillance." i'm francine lacqua in london. with tom keene in new york. lot of focus on products. we'll be focused much more on what the u.s. economy is doing with markets taking a hit in america yesterday. tom: markets taking a huge hit. it is noncorrelated. what is fascinating is the japanese yen really didn't strengthen into the yield that late. it was really interesting what charles evans said about this. we're back to where we were in early september.

it will be the most interesting end of the week at the on the other hand that jobs report tomorrow. francine: we'll have a lot more on the jobs report. of course the fed's decision now. let's get straight to the bloomberg first word news. >> in hong kong the protests are prompting the government to invoke an emergency law for the first time in half a century. according to local media reports the government will ban facemasks at public gatherings that would make it easier for police to identify demonstrators. airbus jets will cost more in the u.s. so will scotch whiskey, french wine and atalian cheese. trump tariffs kick in october 18. the u.s. got the go ahead from the world trade organization. it is largest award in w. tombings history coming in retaliation for illegal government aid for airbus. in the u.k. today, boris

johnson's brexit plan faces a test in parliament. he is optimistic he finally got enough support to get a deal passed. he is presenting a compromise with enough concessions to keep the european union at the table. deal or no deal, he vows to leave the e.u. in 28 days. today the impeachment investigations will focus on the forblee special envoy to the ukraine. curt volcker will be the first to be interview. -- played a al ole. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thanks so much. i'm glad you led with hong kong this. it will be an extraordinary

watch thursday evening on to friday. on the a item out wouse weekend. a lot going on here. there is a lot of nuance within a still strong dollar yet euro picks up lake-effect. oil down. the vix showing 20.0. the two-year yield at 1.47 should be on the screen. a lower yield is up against the september lows. what is so important is we got there fast. 30-year bond from a 219 into 207. what has not happened the 106 yen. francine: tom, this is what i'm looking at. look at markets. they are drifting in europe. just a reminder for all of our global audience. good morning radio in london. german markets are actually

closed today. stocks drifting in europe. a lot of people trying to figure out data in the u.s. government bonds a little more up. boris johnson speaks to parliament on brexit. tom: let me go to the bloomberg -- it is a two-year yield. slope matters here. it shows the tendency here. 2019. one leg down in may. another massive leg down through that challenging august. up we go all clear and then not. what this really amounts to is a massive data dependency is as president evans said to guy jobs report tomorrow and the fed meeting. it is not a small day for the united kingdom. francine: a small day. nothing happening on that day. i don't know why you bring it up. it is on the back of guy

johnson's great interview with charles evans. it gives you a sense of what bond traders are betting. the u.s. has announced new tariffs on whisskist and french wine and cheese and other european good. imposing duties on as much as $7.5 billion in exports. joining us now from brussels, our bloomberg reporter maria. how much of a hit will the european economy take on this? if you look at the significance of this, it feels big but the numbers are quite small. >> that's right. the numbers are quite small. looking at tariffs from 10% to 25%. they are going to be effective october 18. this is not one of the crucial sectors. i don't think it is so much about the amount that is the political significance of this. i have to say this was not a surprise in europe. in fact, everyone here was expecting this.

the europeans knew full well this u.s. dd not want to settled this case and wanted to put in place tariffs. question now this is really the debate in brussels. what do you do next? retaliate immediately or take a step back. we know president trump is under big trouble back home. he is worried about other issues ave -- that don't have to do with trade. tom: brussels will be listening to every word boris johnson has to say today. does brussels have the leadership of the republic of ireland's back? are they in support of ireland or are they going to waive? >> brussels is saying they still want to speak to the united kingdom and keep them at the table. they do not want to be seen as not willing to engage because they don't want to take the blame for a no-deal brexit.

it is that simple. every country will have a right to veto this. every country will have to approve this. they are aware they have to get the irish to be happy and come to the table too. at this point there is no pressure publicly at the very least. the e.u. is aware there are long implications here. you do not want to throw a member state under the bus to help boris johnson. it is that same. francine: joining us now here in london with me, james, the adjustment management and chief investment officer. when you look at markets, they are basically freaked out about what's happening in the u.s. economy. we'll have jobs tomorrow. that will give us a good indication of the strength. are we overestimating or underestimating? >> i think we are overestimating the bad news. i don't expect the u.s. economy to enter recession. i expect the growth to be about

1.5%. a 1% growth is a huge bet now. it will justify the wage increases. they are keeping consumer confidence high. if we can continue that, i think we could have a correction in the fourth quarter. certainly not the onset of a bear market. francine: what will it take for the consumer to be hit aside from wage growth? >> we need to see a number of people who don't have jobs opposed to the number of people who are getting jobs. tom: on these markets, we haven't really seen the correlations yet. we have seen some equity markets but mostly it has been expressed in the bond market and a little bit in the yen, etc. how do you own stocks now? how do you own what we all own as viewers and listeners given what the bond market is signaling? >> i think the market is sending a false signal. i would suggest what we are

observing is the response to negative yields right across -- in switzerland, for example. which has a positive return. i think in that environment, people will say you know what? i still would >> own with a dividend yield and a bond yield. over the long-term that will do me better. tom: do you buy the data dependency article that we're going to be totally data dependent to the fed meeting of october 30 and if that is the case, what do you do with cash now? are you opportunistic? >> i certainly believe that the fed will ease rates but to me, the big issue is how much money will the u.s. treasury need to raise the bond market to fund the deficit? we know they have a long way behind what is required to fund the deficit. i'm expecting substantial issuance.

i think that issuance is going to crowd out equity investments in fourth quarter. i'm expecting a difficult fourth quarter but i will consider that as a buying opportunity rather than bad news. francine: what happens after that. >> we should see progress. i'm anticipating we will see 5% of earnings growth to the sapp 500. actually there are a lot of scenarios. we have the street saying it is going to be a plus 10-year. where the number actually comes in i think will be very important as to the progress of the s&p 500. for me, i am optimistic the next year will be an up year. tom: what is the call? give me a dollar call and how it affects multinationals? i would suggest in the earnings report i have seen, yeah, the dollar affects, so what? is that how we go into 2020?

with a so what dollar worry? >> i think it will remain well placed it is a dollar currency. here i am sitting in the u.k. the principles determine what happened to the pound is the concerns over brexit. now it is very boring to yet again have to talk about brexit but the hard reality is that i still anticipate that we will see mr. johnson having to seek an extension. i do not believe that we will get a no-deal separation from the e.u. at the end of october. i do think that the pound will likely rally rather than fall against the dollar over the year ahead. francine: all right, james, thank you so much. coming up next, more from bloomberg's conversation with charles evans. the federal reserve bank president, we'll talk to him about rates and the strength of the u.s. economy. this is bloomberg. ♪

>> i'm open minded about the decision and we'll learn more before the meeting at the end of the month. i would say the i.s.m. number was a negative number for manufacturing. we received a number of reports over the last many months about trade uncertainties and how manufacturing enterprises were eceipt sent to expand. expenditures have been very weak. it is a little more confirmation in the reports that we have been seeing. > the fomc towards a rate cut.

manufacturing is not a huge part of the u.s. economy but it is a significant part of the u.s. economy. >> it certainly is. we have more manufacturing than average. i have heard more reports about this and the weaknesses and what comes from the trade uncertainties. the thing about monetary policy and what the right positioning is, i definitely think that the fomc has been moving to -- at one point looked like headed for slightly modest, modest restrictive position, now we have an accommodative position and whether one more rate cut at this point is the right decision or not, we will have to wait and see and have a discussion about that. tom: with us, james bevan of cco investment management in london. charles evans is watching the data and trends as well. is it pushing on a string when you take the architecture of our

modern monetary theory, is the ed pushing on the proverbial 1930's string? ittom, unfortunately we know is neither modern nor is it a theory. it is important to recognize that fiscal policy will have to be a key component getting the global economy moving again. i anticipate that central banks have to continue to be supportive . they cannot carry the burden alone in terms of getting the earnings growth up. tom: so what does it mean for corporations? c.f.o.'s are going to look at the persistence of low rates identified by president evans and the c.f.o.'s have to issue more debt into that, don't they? >> i'm very nervous of companies issuing more debt. because at some point the cycles will change and companies that are dependent on operational

financial leverage to driver returns are going to be caught deeply short. i also look at the global picture. for me the inventory bill that we saw earlier in the year flattened the growth numbers. it is now depressing the numbers which is why i believe reasonably we can see u.s. conomic growth bottom at 1%. i believe we'll see it finish the year at 1.875. i think it will be at that rate in 2020 as well. francine: what happens to the consumer in that scenario? >> we used to say anything less than two. now twho is the new normal for real growth. 1.5 to me is perfectly reasonable growth. i would be expecting next year to see inflation running 2%, 3%. real wages oning 3% to 4%. i'm expecting the consumer of the household to have real

income growth and i think that will remain the basis on which the u.s. economy can continue to measure. francine: how important is the financial growth? the fed sees it 1.9%. does that feel like it should be there? >> it certainly does. what we have to see now is more investment in the economy. this productivity shift that i referred to earlier where i'm expecting 1% in 2020 and 2021 predicated on the promise that we will see more investment in machinery. that resonates with the concept of the theory. it sees governments encouraging people to invest in the long-term this plays a bigger role in the economy. francine: thank you so much. coming up on bloomberg day break. conversation with the goldman

sachs international correspondent. this is bloomberg. ♪

>> you're watching bloomberg "surveillance." let's get the bloomberg business flash. good news-bad news for tesla when it released third quarter delivery depigs. they delivered a record 97,000 cars but elon musk hyped the idea of reaching 100,000 so

shares sank. the apparel chain said the second half was off to a slow start and a full-year result could fall. ted baker suffering from a shift to online shopping and also fierce competition. it has been reeling since the re-resignation of its founder. the latest quarter, pretax profit driving 25%. the credit going to h & m's well received summer collection and they have been making progress reducing high inventory levels. that is the bloomberg business flash. tom, francine? francine: thank you so much. the leader of europe's biggest insurance company, allianz's chief executive said the e.c.b. is making it easy for people to spend money they don't have. let's get back to james bevan.

james, we always heard from the banks pushing back and saying their business model doesn't really work with negative rates but it is now creating zombie companies and creating too much debt for consumers. what does that mean? bifurcation in europe who definitely use negative rates as an opportunity to gear up spending. in contrast, i look at the experience of germany. what we have is an increasing savings rates rather than spending in the face of negative interest rates. this is not a single story by any means. i worry that if the european central bank wants to cut rates further, it will cause more trouble. francine: is it to the point they should continue to it? if you outweigh the benefits and the negatives, who wins? >> there are two challenges that europe face. structural challenges within the

banking sector. a dependency on exports which are unsustainable in terms of the way the economy is configured. other issues within the eurozone, we have a noncome petstiveness at unit labor cost levels. italy against germany. since we have the formations, labor costs have risen in italy by 20%. there are four issues we have here. we can have germany accepting inflation to close the gap. it won't do that. italy could accept deflation. it won't do that. we can see a fiscal meeting this governments agree to spend more money to get the italian government to start moving. that would require a blind eye and the fourth, an option over the eurozone. it is a big issue. tom: appreciate that. scheduled in our next hour is an exceptionally important speech

by prime minister johnson. we have images of the house of commons preparing for this. the attorney general making comments here as well, preparing for prime minister johnson as he pleesd and asks and speaks to brussels. sterling with a slight lift. this is bloomberg. good morning. >> i think that does require a careful examination through some channel of the means by which we are to be governed after we leave the european union. i'm not enthusiastic about the scrutiny of judicial appointments. the government has no current plans to -- ♪ 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. francine: this is bloomberg surveillance. tom will have more on the markets, a lot going on with

pretty discouraging economic data out of the u.s. first, let's get straight to the "first word news in new york city with viviana hurtado. viviana: jerome powell is facing pressure to hike interest rates again. economic data and slumping markets increasing the chances of a rate cut. the full impact of u.s. tariffs. president donald trump taking steps -- from the 10% duty. airbus will be able to ship components from europe to alabama without paying the tariffs. in the u.s., airbus employs 4000 people. seven people are dead after the crash of a world war ii bomber in connecticut. hadng takeoff, the b-17 mechanical problems. 13 people in total were on

board. , the president is promising new rules on labor and foreign investment. that would deliver on some of the major reformers -- major reforms investors are demanding. the president says the new changes will apply to new workers only. that will attract businesses that want to set up shop in indonesia. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: in the winter of this january at davos, francine and i had a piercing conversation with the leader of the republic of ireland. we spoke of the border, of the tensions between dublin and london and the tensions with belfast. much has changed but nothing has changed.

we have the prime minister's speech in the next hour. the senate brexit committee chair joins us, a senator for the majority party. thrilled to have you with us today. is of this comes back to april 10 of 1998. of far is the prime minister the united kingdom asking ireland to stray from the good friday agreement? guest: the plan has been laid out in the past 24 hours, some thing that would move us far away from the good friday agreement and far away from the three pillars of the backstop in the existing withdrawal agreement that was agreed to after 18 torturous months. back in december 2017, the british government and the european commission committed there would be no border infrastructure or checks on the island of ireland. under this plan, we likely return to taking the u.k. and

component a different but the regulatory alignment aspect only details or agricultural products and industrial goods. it does not include services and there is a time limit and exit mechanism that can -- exit mechanism allowed. --is worth bearing in mind could block this without a simple majority. tom: i find fascinating the nuances of trust right now. is the distinction that dublin does not trust northern ireland voters on this once every four year choice they get to make or is it simply the lack of trust with the conservative party in london? guest: it is not a matter of trust. it is about response ability. the government has a clear responsibility with regard to

the good friday agreement. international peace treaty launched with the united nations. the aspect of customs that require a lot more work and a lot more focus over the coming days. look at the you proposal from the u.k., can they be the basis for further talks or is it just something that won't work? we haveertainly i think a responsibility to engage in further talks and look at this properly. we already had a conversation with prime minister johnson. he will speak with partners in the european union over the next few days. whether or not we take this further i am not too sure but certainly it merits further attention and discussion. we have that duty to keep talks going to avoid a no deal scenario but the proposal made

by british government as is certainly does not look like something that would be an agreement but it might be a starting point to evolve from. francine: do you think a deal can be reached by the end of october? guest: i certainly hope so. i think that is still a possibility. it might be important for all parties, not just ireland and the european union but equally the united kingdom that we do get a deal. the prospect of a no deal is extremely bad and negative for everyone included. we have responsibilities to work to the last minute to secure a deal. i will stress that a deal is on the table that has been ratified and approved by the european parliament and agreed by the british government. boris johnson himself did vote for it before. francine: in the case that we can't get a deal, what is more likely, an extension or a no deal brexit? guest: certainly within the

irish government, we are open to an extension. there must be a good reason for an extension. they request for an extension must come from the british government. agree, and we pay a tech -- we pay attention to , that is aitics domestic matter and i hope we can avoid a no deal and i look forward to the next few hours and days to see if we can flesh something out. movableme it is a border between belfast and dublin and you have a border proposed out somewhere in the irish sea. border with a successful conclusion? the successful conclusion sees no additional border on the island of ireland. the cannot be a return to infrastructure if you go back to 1998.

the border was hard, watch and checkpoints, it was extremely we have to period move away from an guarantee we don't return to. we are willing to work with the british government so that they can make their responsibilities to the good friday agreement but this proposal we received in the last 24 hours does propose a border on -- a custom borders -- a customs border on ireland. this should be a starting point for discussion. tom: clarify for us what a customs border looks like. help us with this. what is a good cut -- what does a good customs border look like? guest: this is the huge difficulty of the eu leaving the

customs -- of the u.k. leaving the customs border and earning ireland out with us. not detailed what they are. we don't know where they are in or where the responsibilities would be to check materials as they cross the border. that is not a good thing. the police service of northern ireland, if you put closer checks on the island, steadily they will need to reinforce and protect and go down a very dark path. we have to avoid that and we have to work to avoid that. francine: if the u.k. were to ask for an extension, how long should that extension be? i ami am have to -- guest: happy for them to have an extension for as long as they need. hoping that protects the good friday agreement and that the u.k. meets their final -- their

financial responsibility. have a discussion. francine: do you trust the prime minister, boris johnson be able to get through parliament the deal that he has put forward? we trust any british prime minister the presents something seriously that they will take responsibility to bring through parliament much like we took responsibility to bring their withdrawal agreement. it was unanimously backed by both parties of the irish parliament. francine: thank you so much, neil richmond with some great insight. up, a new addition to ' top women inrs finance. in the meantime, we are looking at parliament and boris johnson -- as boris johnson's brexit

plan faces doubters in brussels and westminster. this is bloomberg. ♪ >> he could have saved all that trouble. at least now we have a definitive judgment about the capital advice the government gives. gives.

tom: quick data. a bounce to the market. francine will get to brexit in a moment. futures are up. let's go right to the next screen with oil south. west texas intermediate, very carefully. also the yen. we still have strong yen. it is very important, that tensions in the market, strong yen are front and center. francine: let's get back to

brexit. we are having a great conversation with the gentleman from ireland as we await boris johnson speaking at westminster to lay out his plans that he has put forward to the european union. what is the probability of no deal? deal: i would say a no depends on what happens with mr. johnson and what happens in the eu. the eu can still decline even if johnson asks for an extension. extension, there is a general election and even then there is still a risk of a no deal. i still think that even if we get through an extension, that

does not mean no deal is still not on the table. if you were to say what happens ,f johnson secures a majority he could have a customs border in the irish sea and that is acceptable for the eu unacceptable to northern ireland but i expect johnson would save it is the price to get brexit done. i think the real challenge, the investment challenge in the u.k. is not whether you continue to buy global or domestic, because i have been a keen buyer of , of course the scenario where we get a deal that is -- one should instead

be buying the assets of the local players and that is going to be an interesting technical call to make as the fog clears. to shareou see any end buybacks? i am looking at the absolute confusion of well-run companies on what to do given money is free, particularly on emplacement -- inflation adjustment. do you see share buybacks forever as a real part of total return? guest: there are three aspects to the debate. it is certainly the case that some companies have bought back shares to magnify some haveer-share and issued debt to do it. that increases the depth of their equity while changing the constructs of the balance sheet and that just means they have , a lesserage and for me high-quality company. however another -- a number of companies have used buybacks in

order to address the challenge of having created excess shares as part of employee compensation and i go through the list of s&p 500 companies to have issued the script as part of compensation and their buyback programs, many of them are actually imbalanced. have an optimal level for sterling or eurosterling? isst: i think the pound structurally to cheap at the moment. value for sterling against the dollar is around $1.40 and that is where the currency were head if we were to get to the conclusion of brexit. francine: a satisfactory conclusion to brexit, is that priced in on european stocks? if we have a no deal brexit at the last minute, how much pain

will europe feel? guest: considerable pain because the euro zone has been dependent on the domestic economy which would be hit by a no deal brexit but also the export story. this isn't -- this is in other markdown to the european economy. tom: very good, thank you so much. we appreciate this perspective. markets really on the move, what i would note right now in the last hour is yields moving lower. i've got the three year, two year in front of me, the three day in front of me and it is moving as well. you can bring this up on yen-euro-sterling. we will dive into this after 7:00 on radio. i would direct your attention to has notline, that correlated with u.s. equities,

maybe we will get that today. this is bloomberg. ♪

viviana: this is bloomberg

surveillance. let's get to your bloomberg business flash. mergers among discount brokerages, e*trade joining a major rival in the race to the bottom. joiningr move by charles schwab at td ameritrade. shares were sent plummeting. a new study sheds light on the mysterious outbreak of vaping related lung injuries. pathologist say the problem is caused by exposure to toxic fumes. more than 800 people got sick. at least 12 have died. the new bosses telling clients not to worry. ceo saying they are as committed as ever. ipo scrapped the planned and ousted the top job holder.

that is the bloomberg business flash. tom: thank you so much. it is a chart that rarely gets discussed. the beleaguered europeans, the beleaguered americans. what is this? it is an auto company. tesla with that huge surge and the remarkable resiliency of the stock given all the news flow and all the gloom. alex webb is with bloomberg opinion. how gloomy is it? issue i think part of the has to do with the fact that it still has such a bullish valuation given all of the headwinds. that means there is still a lot of risk that if numbers do disappoint, that it will at

stuns -- at some stage translate into that share price. we have seen a huge amount of short interest. these guys are waiting for some sort of fall but the issue is we of -- thethe troubles troubles classic combustion crimes are sorting to have. that means they are sorting to accelerate into electric cars. they have huge financing abilities and they haven't yet really started to bite. tom: cut to the chase. porsche is the new cool tesla. it is what tesla used to be. going to be seen selling tesla? is he going to get out of the game while the going is good? guest: it is a question being asked for a long time. there will be plenty of people, companies in china not least, happy to get their paws on tesla .

they have the industry but they don't have any big brands. whether tesla has the same appeal or whether tesla without elon musk would have the same appeal is a big issue. there are good reasons why it might be a bit more tricky. francine: i want to talk about facebook. we have a court ruling on facebook saying they have to do a lot more editorial work to stop hate messages. how much of a burden is not going to be? guest: the proof is in the pudding, how strictly this is enforced and how widely and if it is really enforced strictly, it is a huge burden on facebook to hire more people to vet content. they have added tens of thousands of people to do that over the past 18 months. there was a slight hit to profitability as a consequence.

if they have to extend this further, there will be a further hit to profitability even as the top line continues to grow. it has applications beyond facebook, google and twitter and other companies of a similar nature where they have content on their platforms. it is going to increase the burden of what they have to do in terms of stopping defamatory content. francine: does it mean we are going to see more regulation or potentially see companies broken up? guest: i don't think this decision today means companies will be broken up but there are movements on the side of the world and increasing conversation about the way that they have such a lock on data and that plays into other parts of their business what of it is actually competitive and gives them a dominant position in online advertising which is where facebook gets 90% of its revenue. tom: thank you so much for your perspective on equity performance of tesla. it has not been all that bad.

coming up in the next hour, charles evans speaks to guy johnson, folding that into the market uproar the last few days. two year yields, a good time to -- will joinricky us to give a perspective. let me inform you in this hour, the prime minister of the united kingdom before his house of commons will lay out a plan for brexit. we thank the gentleman from ireland for speaking to us 20 minutes ago. i'm going to say what i said -- ♪

tom: this morning the growth

scare continues as markets led rely on.s. two-year jerome powell, data matters. giuliani caught up in the investigation. scheduled for this hour, the prime minister will speak to the house of commons. he will speak to the people of the net a kingdom. good morning everyone. this is bloomberg surveillance. this is not in normal speech i the prime minister is it? francine: not a normal speech but we are trying to figure out exactly what it is. boris johnson will answer questions about what he put forward to the eu. i don't know if there will be any possible blockage on the deal. that is what theresa may did and how she stumbled in the past was she gave guarantees to the eu

that the deal would go through and then parliament said no three times. it is an interesting dynamic between boris johnson and the houses of parliament. tom: let's go to a news briefing come our "first word news." viviana: in hong kong, the protests reportedly are prompting the government to invoke an emergency law for the first time in half a century. according to local media reports, the government will ban facemasks at public gatherings. that would make it easier for police to identify demonstrators. hong kong police are also calling for curfews. airbus will cost more in the u.s., as will whiskey and cheese. the trump administration approved tariffs, the u.s. getting the go-ahead from the wto, the largest awarded wto -- largest award in wto history in

retaliation for illegal government aid to airbus. boris johnson's brexit plan faces a test in parliament. he feels confident. he presented with enough comfort -- a compromise with enough to keep the european union at the table. today the impeachment inquiry will focus on the former special envoy to ukraine. -- with the first official to be interviewed by u.s. house democrats. he played a key role in connecting rudy giuliani with ukrainian officials. democrats collect text message evidence of highly illegal coordination -- call a text message evidence of highly illegal coordination. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: thanks so much. a lot going on. at organic looking

revenue growth coming out at 4% and that shows the juxtaposition here over better than good .arnings into october as well futures up 13 bouncing off the two day carnage. i am watching oil very carefully. the yen at the bottom is the big thing. down toy haven't moved stronger yen yet. francine: this is what i am looking at. i am looking at very similar data points. looking at european stocks. the dax is closed today. that was for a german holiday. i am looking mainly at the ftse and boris johnson's brexit plan, he has a new one he put forward to the eu. how his appearance

of the house of commons goes. evans is as different fed president. he is an academic from carnegie mellon. he has also been very opinionated and nuanced. he is not someone with one opinion. guy johnson caught up with president evans in madrid. we repositioned a policy from being restrictive policy to one that is accommodative and the question is how accommodative we need to be. at the moment it is still risk management. the weakness in the manufacturing is something that definitely increases concerns. trade uncertainty has been very important for the weakness in manufacturing. i have talked to so many business executives, manufacturing executives who have indicated that there is a good deal of uncertainty. everybody has been much more cautious and we have not seen an increase in business investment

that we expected on the heels of very aggressive strong tax cuts and corporate tax reform. we are well-positioned for modest adjustment and headwind to the economy. if something more severe happen we would have to make more adjustments. tom: charles evans with some important comments. right now, we can playoff that pepsi headline we saw. tersehts this shockingly that essay that links income to fixed economics. i want to get to fixed income that you always put on your analysis but i have to talk about the pepsi headline. 4% organic revenue growth. yeh, but ago that was n in the new world, chairman powell, president lagarde, that is not bad. guest: 4% sounds all right. tom: not 10 years ago but now it

is the new normal. guest: it is not going to be a growth stop but it is probably good in this era. tom: what is the second leg of the two year yield? down we go in september. now we go up. all clear, down we go again. 1.47%. what is the signal? guest: that we are doomed. i was looking at it on my way here, on my own bloomberg cap. that fed funds futures are more onless discounting a cut october 30. it is bouncing around a lot in market. we are pretty much prime for a third rate cut, just like chicago fed evans. one of three fed cuts.

one of those were good for risk management purposes. francine: is this an insurance cut like we have heard? guest: they keep saying insurance. francine: is it insurance cut or because the data is turning quickly so it is just needed? guest: i think it is still insurance. the purchasing managers for manufacturing, ifn, they see a recession coming all the time it seems like, where the index level goes down below the 50 and signals that manufacturing is contracting. they are hypersensitive, these purchasing managers. they don't always get it right. jobs are 8.5% of payroll jobs in the entire country. is that enough to bring down the broader economy?

now.sm is 47.8 it has to come down to 42.9. it has to fall five more points to signal a recession. if i was the fed, i would wait for the recession signs to appear. i think they are moving to early -- too early. francine: are they moving too early because of my chart? the markets are just expecting too much and are trying to keep up with market expectations? guest: they are being pulled along. a lot of people think the fed cannot deliver what the market wants. that is why i am surprised after ifn fell that fed funds futures are now saying a rate cut in october as opposed to december. that would be three meetings in a row. more than three, i don't think they're going to need to do more than three without a recession. tom: what is the impact of this? three is fine and if evans goes back to the 90's or whatever,

that was not near the zero bound. this is a michael mckee question. what is the efficacy of these rate cuts in the vicinity of the zero? guest: i don't like to forecast another fed rate cut because i think they're going to do what happened to europe and japan with rates going negative rates or zero rates. tom: they are impugning the thrust toward a japan or europe? guest: it seems like it. they seem to believe there is more they can do. they even say that once they hit zero, that there is more that they can do like give forward guidance. what's that? they are going to promise to keep rates low for eight years? they're going to put be out of a job here. tom: we don't want that because you use our mobile app. francine: we don't that.

-- we don't want that. with the, we speak goldman sachs international chief executive. yorkis at 8:30 a.m. in new and 1:30 p.m. in london. this is bloomberg. ♪

francine: you are watching -- viviana: you are watching bloomberg surveillance. it was good news, bad news for tesla when they released third-quarter delivery figures. founder elon musk had hyped the idea of reaching 100,000. after the announcement, instead of rising, tesla shares sank.

-- the apparel chain was off to a close start and results could fall. it doesn't -- it has also been reeling since the resignation of the founder. -- were to growth after a two-year slump. h&m'sedit is going to well received summer collection. the chain has been making progress in reducing its high inventory level. that is the bloomberg business flash. tom: very good. thank you so much. i am pausing because we are hearing what is going on at the house of commons and the timing of what we will see from prime minister johnson. now, --s right now we wish for a bilateral on

trade agreement. how lateral are we going to be in the future? guest: it is going to take time. they will probably have to be a change in management down in washington, both at the u.s. trade rep and the white house. out, ceos, freaked by the tariffs. it is concerning them. it is extremely worrisome for the outlook. let's get more on this wto decision, the fact that we now have tariffs coming in from france -- on wine and cheese coming in from france. our reporter joins us from france. we have never seen anything like this, extra tariffs coming in from the u.s. on europe? reporter: yes. this is a positive move for the trump administration and that

they have the wto's backing to retaliate against europe. this is a pretty big trade weapon that president donald trump now has to bring europe to the table, ideally at some point to reach a settlement. until then, tariffs are going to be the order of the day. more tradeow much disputes are we going to see? the u.s. is accusing airbus of subsidies. the u.k. is accusing the u.s. of subsidies to boeing. are we going to see tariffs the other way, from europe to the u.s.? reporter: that is correct. because of the timing of this dispute, it started 15 years ago, the u.s. pulled the trigger first. the eu did later. there is a six to nine month lag. that means in the first half of next year, the european union will have the ability to forliate against the u.s. america educate subsidies to boeing. tom: just so i can report to the

world, the trade tariffs are keenetic on cheese at the household. there is no tariff that cannot be paid. that said what is the power of french agriculture? for decades they have been the emotional stumbling block, the uniqueness of agricultural cross france. is that still there? reporter: you really know your stuff. the french lobbying power is still very strong. if there is an indicator of that, one of the key exemptions in the u.s. list of products to have tariffs on is french liquor . it dodged a big bullet and that is instant -- that is in no small part to lobbying in washington. tom: this is particularly key with theeep discussion chief executive officer of come

party yesterday -- of campari yesterday. francine: tom with the piercing questions. news you can use only on bloomberg surveillance. aboute are making jokes this but this is serious stuff. explain to us the fixation of u.s.-china and there is this transatlantic reality which is underplayed. am i right on that? guest: it seems like it. hear very distressed to the award by the wto. it is going to set off a trade war in a different theater. not for nothing, it was ironic to hear that airbus buys 40% of the planes coming from parts of the u.s. so this is going to hurt the u.s..

it is crazy. tom: thank you so much. with all that chat, when you are in new york, go to the bar at the saint regis hotel, brie cheese. up, listening to the united kingdom. we will speak about the importance of prime minister johnson speech. this is bloomberg. ♪

>> clearly within his department and again this morning. francine: that is the house of commons shortly before boris johnson will give his brexit proposal. the prime minister pretty confident he can get his proposal past the house of commons. talking about brexit throughout the day. --ning us now is the thank you both for joining us. when you look at the concerns that we have about this new u.k. proposal, is it the basis for further talks? what are the chances we get a deal by october 31? >> they are not looking good at the moment but what we are looking at today is to

demonstrate a deal that could actually pass. theresa may's problem was a failed three times in parliament and what went down in the biggest defeat in parliamentary history. johnson is in a much stronger position if he says this is a deal that i can pass. francine: this deal means the eu would have to give up some of their redlines. how difficult is that? >> very difficult. -- it certainly does not means a customs border in the from januaryland 2021. it gives them a possibility of a regulatory border. we have this consent arrangement proposed where it is up to the northern ireland institutions whether to go with the

regulatory border or not. from this watertight guarantee that the eu has been looking for. tom: wonderful to speak to somebody who actually has government service in moving stuff around. you were in -- having to do with agriculture as well. how do you gauge the panic, the hysteria or the grim reality of no deal agricultural and product upset from europe? is it tangible? >> it is quite tangible because that is the area in which the eu has most favored nation tariffs. they would apply to the u.k. the moment there is no deal if we leave on that basis. you are looking at pretty grim lambfor these -- beef, producers. among the farming community,

they voted to leave back in that referendum where a lot of farmers said this was getting out of the nightmare of the common big or cultural pot -- agricultural common policy. tom: in your recent essay you speak of extra time and using it wisely. time line totra october 31. >> the timeline right now is the prime minister is ready to send people over to brussels and talk to them about the deal. the critical stage in europe on the wrong up to the -- run-up to the european council, scheduled october or 17, 18 october. the deadline is a different date . what9th of october because the piece of legislation parliament passed against the government desires back in december said if the prime minister has not got a deal by

the 19th of october that is passed parliament and parliament has not said we were lax about leaving with no deal, the prime minister has to do what he was dead set against which is go to the eu and say the u.k. needs another extension and the even drafted that letter for him so they are trying to cut out all of the wiggle room by saying these are the words you have to use, you have to go ask for an 30, 2020.to january tom: thank you so much. leader of the house of commons taking questions right now. 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. tom: bloomberg surveillance, good morning. francine lacqua in london. the united kingdom awaiting the

most important speech by prime minister boris johnson. the market upset, not about brexit but may be linked into it. it really has to do with the slowdown in global growth, perceived or in reality, it is here. this is the most important board from the bloomberg terminal. spanning from italy to the united kingdom, to the negative rates of germany and switzerland. the german rates have really not moved it down in the last 24 hours like the u.s. yield. we are watching the u.s. to year, very carefully. right now at 1.46. a breakdown of that toward lows of early september. hereour "first word news," is viviana hurtado. viviana: jerome powell is facing pressure to cut interest rates again. economic data and slumping placing a 75% chance of a quarter-point reduction.

airbus has been spared the full impact of new u.s. tariffs. president donald trump taking steps to keep planes built in mobile, alabama from the 10% duty. airbus will be able to ship components from europe to alabama without paying this tariff. in the u.s., airbus employs 4000 people. at least seven are dead after the crash of a world war ii bomber in connecticut. during takeoff, the b-17 had mechanical problems and slammed into a maintenance building after coming back to land. 13 people in total were on board. president is the promising new rules on labor and foreign investment. that would deliver on major reforms investors are demanding. the president saying labor law changes will only apply to new workers. that would help attract businesses who want to set up shop in indonesia. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries.

i am viviana hurtado. this is bloomberg. francine: thank you so much. we are expecting boris johnson to take the floor in the house of commons shortly. this is the first time he will talk about his proposal to the house of commons. from our newe now brexit editor. what kind of greeting will the prime minister get at the house of commons? are they going to work towards a deal or will they just try and cut him off? guest: his supporters are going to be thrilled and his detractors quite the opposite. the numbers look as though they're are beginning to fall in place. the euro skeptics are falling in line behind him, as all right -- as are a number of labor mps. is that enough to get a deal through the comments? certainly possible. the chance we is

actually get a deal? eu side, its, the is unlikely they will give up some of their redlines. >> as london gets close to a deal, russell's is as far as ever. the best the could be set for how the deal landed last night in brussels was it wasn't rejected out of hand but the key sticking points are still there. and on thement consent issue, the idea that it would be subject to a veto out of belfast. the backstop has been replaced with a question mark. this andy reading on speaking with the gentleman from dublin 40 minutes ago, mr. richardson, where is the irish border? is it between belfast and dublin or is the proposed up -- is the proposed border out in the irish sea? he is taking northern ireland

out. there will be a border between north and south in ireland. custom checks will be needed but they will be done well away from the border. northern ireland will stay in the single market. there will be a border in the i received. -- in the irish sea. borders for one country for a period of time. it is a very elastic situation. expectingas we are from the prime minister to actually show up, i think we just saw him walk into the house of commons. who is the one person you are looking out for? >> we have that the prime minister seems to be getting the euro skeptics on board.

you see steve baker as a cheerleader for the euro skeptics but there are all those people we call the sort of whopendents, the people prime minister -- who the prime minister remove the whip from. a lot of them are rebelling because you are heading -- because they say he is heading for no deal. will philip hammond, david gorka, -- you left the party earlier and said with a heavy heart he would probably back this deal. they will be looking to see whether indeed he is getting some of those labor mps on board. caroline flinch. got her, he is not doing very well. we are going to see some other people who were quite keen on backing the may deal. leader --ormer labor

the basis for talking or does he just say no, this isn't good enough? believe we begin with the prime minister of the united kingdom. >> and deliver brexit on the 31st of october in an orderly way with a deal. this government's objective has always been to leave with the deal and these constructive and reasonable proposals show our seriousness of purpose. they do not deliver everything we would have wished. they do represent a compromise, but to remain a prisoner has become a cause of deadlock rather than breaking -- breakthrough. we made a genuine attempt to bridge the chasm and reconciled the apparently irreconcilable and go the extra mile as time when shorts -- as time runs short.

more people voted to leave then voted for any party in our history. this referendum must be respected. promised thaties they would risk -- respect the referendum and that there would be no second referendum. this house voted to trigger article 15 and voted repeatedly to leave. it has also voted three times against previous withdrawal and so as i emphasized time and again, there can be no path to a deal except by reopening the withdrawal and replacing the so-called backstop. while as i stand here today we are some way from a resolution, it is to the credit of our european friends that they have accepted the need to address these issues and i welcome the

constructive calls i have had the last 24 hours including with chancellor merkel and a statement from -- the europe commission will now examine the legal text objectively. the essence of our new proposal is a new protocol on ireland and northern ireland consistency of debt consisting of -- in the first place, all of our actions are based on our shared determination to sustain the good friday agreement, the fundamental basis of government northern ireland, the protection of which is the highest priority of all. from this follows a second principle, namely that we shall uphold all the long-standing areas of cooperation between the u.k. and our friends in ireland including the rights of all those living in northern ireland and the common travel area which predates the good friday

agreement and the european union itself. third, we propose the potential creation of a regulatory zone on the island of ireland covering all goods including accra food -- agrifood. this zone would eliminate all literary checks for trade influence between ireland and northern ireland. backstop, so-called such a revelatory zone would be sustained with the consent of the people of northern ireland and expressed through the assembly and executive. they will give their consent during the transition as a condition for these arrangements entering into force. thereafter the assembly will vote again every four years and if consent were withheld, these arrangements would lapse after one year. it has always been a point of principle for this government that at the end of the

transition, the u.k. should ande the customs union hold intact, restoring sovereign control over our trade policy but opening the way for free trade deals with our friends around the world and that is a fundamental point for us. report of theosal u.k. customs territory, not the eu customs union. but there will be no need for checks or any infrastructure at or near the border between ireland and northern ireland. indeed, i have given a guarantee that the u.k. government will never conduct checks at the border and we believe that the eu should do the same so there is absolute clarity on that point. instead, under this new protocol, all customs checks between northern ireland and ireland would take place either electronically or in the small

number of cases where physical checks will be necessary, they would happen at other points in the supply chain. we have put forward a method for achieving this based on improving and simplifying existing rules, trusting certain traders and strengthening our cooperation with ireland in pursuit of friendship and sensitivity to the particular circumstances. while these proposals will need changes from the situations that prevail today in ireland and northern ireland, it is their driving purpose to minimize and -- any disruption. in order to support the transition further, we propose a new deal for northern ireland that would boost economic growth and competitiveness and set in ,rade new infrastructure

particularly with a cross-border focus. the previous withdrawal agreement and political declaration would have permanently anchored the u.k. within the orbit of eu regulation and customs arrangements and an indefinite so-called backstop provided a bridge to that vision of the future. this government has a different vision, basing our future relationship with our european neighbors on a free-trade u.k.ment and allowing the to take back control of our trade and our regulations. theropose to amend political declaration to reflect this ambition. our proposal should not -- should now provide a basis for rapid solutions in the short time that remains. -- the fact that

we have shown great flexibility in the interest of reaching an accommodation with our european friends and achieving the resolution which we all yearn. if our european neighbors choose not to share a corresponding willingness to reach it, that we will have to leave on october 31 and we areagreement ready to do so. that outcome would be a failure of statecraft which all parties would be held responsible for. conflicts inof the europe and the immense challenges we have together surmounted in the 74 years of peace and prosperity that we have together achieved, i believe that surely we can summon the collective will to reach a new agreement. government has moved, our

proposals do have compromise and we can come together in the national interest behind this new deal to open a new chapter of friendship with our european to ourrs and move on domestic priorities including education, infrastructure and nhs. moment toze this honor our promise to the british people, respect brexit, get brexit done and i commend this statement to the house. corbyn.y >> thank you mr. speaker. i would like to thank the prime minister for an advance copy of the statement. what we have before us is a rehashed version of previously rejected proposals. it puts the good friday agreement at risk and would trigger a race to the bottom on

rights for protections for workers, consumers and our precious environment. given the seriousness of this issue and the vagueness of the proposal so far, can the prime minister tell this house if and when he plans to publish the full legal text that he must submit to the eu? these proposals would lead to a worse deal than that agreed by the former prime minister. the prime minister signed up to the backstop in cabinet and he voted for the withdrawal agreement as a backbencher. his letter to the commission yesterday claims both are now unacceptable. perhaps he can tell us what has changed. why did he support it then but oppose it now? the letter makes its intentions clear. it rejects any form of customs union, something demanded by every business and industry body in britain and every trade union.

they want to ditch eu standards on workers rights, environmental regulations and consumer standards, and engage in a race to the bottom, deal or no deal. this government's agenda is clear, they want a trump deal brexit. a trump deal brexit would crash our economy and rip away the standards that protect our environment and protect our consumers. no labour mp could support such a reckless deal to be used as a rights and to attack standards in this country. the truth is that after three years, this government still hasn't found an answer to solving the issue of the irish border and the good friday agreement. where once the government was committed to having no border in

ireland, they now propose two borders in ireland. u.k.-eu jointthe report from december 2017. can the prime minister confirmed the government has never abandoned their commitment to the people of northern ireland, that they would ensure there is no physical infrastructure or related checks and controls on the island of ireland? i am only quoting what the government said. leadersker, while eu have been lukewarm, the response from businesses in northern ireland has been very stark. the head of retail northern ireland said the proposal would quote, hugeffs with negative impact on farmers and the agrifood sector. he went on to say it would also mean two borders requiring renewal after four years, surveillance and border

communities without consent and checks north, -- checks north-south and west-east. the chairman of the federation of small businesses of northern ireland was clear. she said all the promises of unfettered access have been abandoned. northern ireland is a small business economy and this is the death knell for some of those businesses. mr. speaker, these plans are simply unworkable. us isat we have before not a serious proposal to break the deadlock. instead these proposals are nothing more than a cynical attempt by the prime minister to shift the blame for his failure to deliver. conclude his political advisor was telling the truth when he called the negotiations with the eu a sham. can the prime minister give a clear answer to one question?

deal atesn't get the the october council summit, will he abide by the law of this country, the eu withdrawal number two act and requested extension to avoid a disastrous no deal? mr. speaker. leader of labor speaking with the hout -- speaking in the house of commons. we heard from the prime minister. you can follow along on this discussion on your bloomberg terminal. much more happening around the world. -- our guestsank in new york city. far more engaged with us from the united kingdom and a changing europe. tangible government and domestic government policy. what struck me and i know

francine has some strong ideas on this as well, when mr. corbin said there is a number of irish borders. how is that going to work? >> that is indeed the proposition. would leave the eu customs union with the rest of the u.k. that means there is a customs border between northern ireland and the republic of ireland. the second idea is that if northern ireland forms part of what boris johnson called this ireland,y zone with that the people of northern ireland agreed to that through their institutions, then there is a different border which says northern ireland will stay aligning with eu rules and regulations so goods coming from the rest of the u.k., so england, scotland and wales, would have to be checked going into northern ireland. that is the east-west checks to make sure they meet eu

standards. that is a different border. from no border to two borders. tom: francine this is brilliant. it reminds me of when we were kids sneaking fireworks across the border at niagara falls. bym absolutely fascinated the complexity of this. francine: it has been complex for quite some time. we have to give a shout out to to our news team because a couple months before there was a brexit vote, they had -- of the backstop that nobody knew about at the time. the border was a big concern in these negotiations. if you look at the tone of the prime minister, his tone seems to have changed. will he be able to convince the house that this is a good deal? >> he looks as though he is going to get a good reception from his own back benches.

i think that is a win for him. also he is sounding much more prime ministerial . last week we had this awful shouting match that was much more antagonistic. his tone is much more experienced. boris johnson has not done much of this. the interesting thing i think was jeremy corbyn is really laying down the line, talking about some of those labor mps. he is clear, no labour mp should vote for this. before we thought jeremy corbyn, a bit of an instinctive euro skeptic, might actually like to see the u.k. leave without it having to be his decision, turning a blind eye to people who voted against the official labor line in previous votes we had back in march about what the

way forward might be but jeremy corbyn here is basically saying if you are a labour mp you cannot vote for this deal and i think that is a very interesting happening. tom: we watched from our new york studios. my guest khaki letting what governor cardi card -- governor cardi will do or not do. what is the state of business confidence beginning in the united states and moving across the atlantic to the united kingdom and europe? >> i was trying to think here. remember what brexit vent for us back in 2016, economists not gdp down by 0.5 percentage points due to brexit. that fear has gone away but the risk of a hard brexit is that both europe the continent and and u.s.tain, exporters to the european union,

they see less demand for their good and that helps slow our economy. tom: this is the hard brexit model. what if we get some form of boris ground theresa may johnson compromise to get that done? why do we know that will assure growth in britain? >> it will certainly assure fed officials. one of the reasons they cut rates a couple times was the global slowing that they saw and one of the problems was brexit out there. if brexit gets resolved, that removes one of the pillars of uncertainty around the world. that would be a good thing if there is a good resolution. our team i'm sure that is looking at this. what would their reaction to this be? >> i think the interesting reaction is, do they think it is worth even trying to engage the u.k. to mark they did not

formally reject it but they did not give the green light to negotiate. do they think this is a bit of a position by the u.k. where as jeremy corbyn was saying, this is the u.k. going back on those commitments in the joint report they agreed to in december 2017, the commitment to avoid a hard relatedut also those checks and controls. the prime minister said let's go into this mystery thing called a tunnel, a really intense secret negotiation between both sides and we come out the other side in the run-up to the european council. we will see if they give the green light to those talks. francine: could this be a ruse from the prime minister who actually showed he has done everything he can to get a deal but secretly wants a no deal brexit? >> he clearly wants a deal on his terms. saying actually i

don't want the sort of deal theresa may wanted. what matters is the long-term relationship. his government is not interested in the sort of deal she thought the backstop was bridging to. saying we are going in a different direction, just a free-trade agreement. eu has toere -- the think, will he still be there after the election? tom: we will have to leave it there. the prime minister continues to speak. stay with us. this is bloomberg. ♪

♪ >> now we have a, did edition --

now we have an accommodative position. i think we will just have to go into the meeting and see. alix: chicago fed president charlie evans isn't sold on another rate cut. all hinges on services. read leavesacturing eyes glued to services this week. an trade war, this time it's europe. the u.s. imposes tariffs on european goods with room for escalation. welcome to "bloomberg daybreak" on this thursday, october 3. i'm alix steel. the markets finding their footing again after the worst start to any fourth quarter in years since 2009. question, has it been able to find a bottom? s&p futures up by 0.2%. a mixed dollar story in the g10 space. you are seeing global bond