my inclination is to get a big deal. we've come this far. alix: sparks fly before the trade meeting. the u.s. blacklists eight chinese tech companies for human rights violations. china says stay tuned for retaliation. china cuts the nba loose. the state broadcaster will stop showing games after a hong kong protest. in u.k. prime minister boris johnson tells angela merkel a brexit deal is impossible to make more contingency plans. welcome to "bloomberg daybreak" on this tuesday. the white house he said to focus on limiting china stocks in government funds. it's all part of the conversation of limiting any capital flows in support of chinese companies here in the u.s. the trump administration could be moving ahead with discussions around restricting capital flows into china, a real focus on investments made by u.s. government pension funds.

the idea behind it, why are you going to fund chinese companies that wind up competing with u.s. companies? that is potentially now on the table ahead of these trade talks. no doubt that is going to have an effect on the markets as we keep getting a lot of headlines creating difficulty with u.s. and china. 0.8%, rightnow down around the lows of the session. take a look at other asset classes. it is a move into safety. 106 on dollar-yen. yields in the u.s. down by four basis points. it is a risk off day. lots of tangential headlines are now setting the stage for contentious trade talks between the u.s. and china. let's get right to it here. it's time for global exchange. we bring you today's market moving news from all around the world. joining us from hong kong is enda curran, from london is emma chandra, from brussels is maria tadeo, and in denver, michael

mckee. let's kick it off over in asia. we begin with china, where the u.s. has blacklisted eight tech companies on accusations of being implicated in violating human rights against muslim minorities. enda curran joins us with the latest. enda: the timing of it is pretty sensitive. china giving a pretty robust response, saying the u.s. should push out of its internal affairs. they've said stay tuned retaliation of their own. we don't know what form the retaliation will take, but this is the first time in this trade war we had the human rights brought into it. even on the surface, these new trade aren't necessarily issues, but it is all part of the mix. alix: thanks so much. also, the headline that just

broke from bloomberg's at the u.s. is now considering restricting capital inflows into china through u.s. pension funds. joining me on the phone is shawn donnan, bloomberg's senior trade reporter. walk us through some of this news. shawn: we reported more than a week ago the u.s. is examining cracking down on financial flows to china. a lot of people focused then on one of the options that the white house was considering, and that was delisting chinese companies in the united states. we've been told the conversation has since moved on. delisting, as we've heard from a number of senior officials, is off the table, but what is very much on the table is finding a way to restrict the ability of government pension funds to invest in chinese companies. a lot of people in the white house concerned about msci's decision earlier this year to increase china's weighting on

emerging market indices and the imprecation that has for american capital. tuned for the conversation that is going on. alix: and this isn't just what is happening in the white house. we've heard senators come out again this, marco rubio front and center. shawn: absolutely. marco rubio is leading a push for a bill that would require chinese companies listed in the u.s. to abide by u.s. auditing standards. there's a funny quirk right now in the system whereby a lot of chinese companies don't ,ooperate with the pc aob overseas auditing that came up after the enron scandal. a lot of chinese companies in the u.s. don't abide by the same standards. marco rubio putting out that that is a risk for american investors, and the white house seems to be taking his line. alix: hang tight with us.

alibaba, tencent falling on this news. there's the chinese delegation that is going to meet on thursday. what are they thinking of doing now? shawn was just explaining, all indications is that the mood music is somewhat downbeat ahead of the stocks. there's some expectations among investors in policymakers -- there was some expectation among investors and policymakers that things would get back on track. this doesn't indicate that a near-term deal, or certainly a let'snear-term deal, but not forget china will have something of a response of its own going forward. let's see what kind of mood music does come out of those talks in washington, and how long those talks last. local paper reported that

those talks might even finish up early, with the delegation returning early if need be. taking it altogether, the mood music isn't especially optimistic right now. alix: we are looking at the market reaction, trying to digest that. michael mckee is in denver. you have jay powell speaking later on today at the conference in denver. how does jay powell address something like this? michael: well, he has talked about it in the past. it is a difficult problem for the u.s. economy because we've not had this situation before where trade is dragging down overall growth. it is hard for the fed to figure out how to fight it. here at the national association for business economics, there have been talks of the impacts of china trade talks. we've seen estimates that if they were to go ahead with the summer tariffs, a 2% reduction in u.s. growth over the next few

years. is it anything the fed can do some thing about> it will be interesting to hea? -- something about? it will be interesting to hear jay powell. alix: nonetheless going to make that fine line he has to walk a little trickier. how much of this do you think israel, and how much of it is posturing into the talks -- do you think is real, and how much do you think is posturing into the talks? against think the move chinese tech companies is very real. that is an existential threat to a key part of the chinese tech sector. the chinese are rightly concerned about that. there's also a step we haven't mentioned so far, which is secretary wilbur ross, when he announced this, use some very provocative language.

he said the u.s. government had a right to address human rights violations within china. that will be a real red flag to the chinese, who have for a long time argued against any meddling in internal politics. of course, we are seeing that with their response to the nba. this is an even bigger, or consequential -- and even bigger, more consequent to hit. i think we also need to give in mind that both sides do have an interest in settling things down and getting some kind of temporary truce. we saw yesterday president trump say something very interesting in the white house as he signed a trade deal with japan. that trade deal is very much a partial deal, mainly focused on u.s. agricultural purchases. the president said he wouldn't take a partial deal with china at the same time as he was signing a partial deal with

japan and calling it a game changer. you can see a similar scenario coming forward where he does something like that with china, although he continues to insist that he wouldn't. there's a lot of pressure on the economy on both sides, and i think a lot of people think that they could come up with some temporary truce, but certainly the broad relationship right now is just getting worse and worse. alix: just to reiterate that headline over the last few minutes, the trump administration is looking at possible restrictions on capital flows into china through u.s. government pension funds. to wrap in a lot of what shawn was talking about, in terms of the nba not airing two games, you have human rights violations leading to a tech company been. how does china deal with these kind of things when they are not directly trade related? enda: this goes to the heart of one of china's red lines. in the response, the commerce minister said the u.s. should not be meddling in its internal affairs.

it'snot responding -- responding to those technology companies listings. i think there will be a response from beijing over the coming days. there's no doubt about that. the question is whether all of this will be enough to derail these broader trade negotiations. as shawn mentioned, china's economy is under some degree of pressure. slowed, and it is feeling pain in the price front and on the activity front. certainly they are in the market for a truce. whether or not these coming talks will set things up for something avail extended truce i think is very much -- for something of an extended truce i think is very much up for debate. alix: in the markets, one of the starkest reaction we are seeing in the yuan, falling through the 7.15 per dollar. that's also setting up the stronger dollar conversation for

jay powell. president trump winds up tweeting a lot about how the dollar is too strong. how does he address something like this that could actually wind up being damaging for the economy at some point? michael: unless he specifically iss about it, powell -- he specifically asked about it, powell will probably avoid it. they know that by keeping interest rates higher and growing faster, the economy tends to push the dollar up. they are not going to cut rates just to weaken the dollar in order to help donald trump. the fed would like to avoid a conversation about that. in general, powell's problem is he doesn't really want to have to move until the last minute because he wants to see what happens with the trade talks, but wall street has kind of price did in. if he doesn't push back today, and it would be difficult to push back, then we are going to move forward with the markets basically saying a rate cut is a done deal for october 30. the fed won't have any kind of optionality. powell has a tough road to hoe

here here, a narrow lane to walk on, even if he doesn't talk about the dollar. alix: thanks very much, michael mckee, shawn donnan, and enda curran. just to recap what we've learned, we've heard yesterday that the commerce department put a ban on eight tech companies for human rights violations. china then vowed to retaliate overnight. you also had china pushing back against the nba, not showing two games, causing conflict because one of the managers of the houston rockets talking about supporting hong kong protests. this morning we get the news from bloomberg that perhaps the u.s. is considering trying to limit capital flows into china through u.s. pension funds. there were reports from other news outlets that perhaps china was going to cut trade conversations in the u.s. sort. all of that is what is playing out in the market today. let's get right to some of the trades. we are joined now for bloomberg first take with our in-house team of wall street veterans and aspects -- and experts.

romaine bostick, vincent cignarella, and damian sassower. lots of news flow. hard to digest. you come in and see the headlines. what do you do? vincent: this is really interesting. this has navarro painted all over it. for the u.s. to get this aggressive a couple of days before negotiations, i do not think markets are realistically pricing and a failure in these trade talks. alix: what that look like? vincent: maybe another 300 points in the dow, and dollar-yen crossing the what i six, and the 10 year -- the 106, and the tenure back to 1.40%. issuesuch an sensitive for china. china would love to dominate the ai world. they are relatively close. i think the u.s. sees that. i would not be surprised to see them pushing back against it. 40 out -- 48 hours before the

trade talks start, they are sending a signal that trump once this grain deal, and is not going to accept a little mini deal they've been talking about. i would be surprised if liu he doesn't even make the trip. alix: it stems back to what we heard over the weekend, which was taking an electoral property off the table. ?hat do you think, damian damian?do you think, damian: if he's using human rights, it is kind of uncharted territory for him to lean on that as opposed to national security or economic interest, which i think is an interesting twist to all of this. 110 million people are rumored to be in these reeducation camps. this means china has got to stimulate its economy more because trade is not going to be

any impact from trade talks. vincent: if he focuses on human rights, it could become a global situation where europe has to properly respond to that. they can't just ignore that. the europeans have to get involved. romaine: a lot of folks said that human rights should have been on the table a year ago, and the u.s. kind of dismissed it. we are heading into the 13th round of negotiations, but are we any closer than we are re-where -- then where we were at round 10 or around eight? you have people basically talking about 2500 on the s&p, the dow had to be priced out if

a trade deal fell apart, or else the prospects fell apart. vincent: i think going to this weekend, we saw a little sparring on both sides, trump backing off a little bit. but china coming in making the announcement that we are not bringing everything to the table , they are starting to throw some hay makers. they are punching at each other, and this is a proper fight. romaine: did you watch the press conference yesterday with the japan trade deal? this was a deal where japan largely gave into the trumpet minister should with regards to agricultural goods, but it was a fairly small concession. i think it was a way for japan to stop any potential greater sort of tariffs or blockage by the u.s. it was a pretty savvy move by japan, but there was a lot of discussion on whether they would do that. but what you seen transpire is the idea that the chinese, you wonder if even a limited trade

deal would be possible. vincent: i just don't see how trump could accept it, to be perfectly honest. damian: just to focus on the humanitarian crisis perspective, he's lambasting turkey for basically sending troops into northern syria, yet that is the biggest migrant crisis on the planet right now. there are 3.4 million syrians living in turkey, 4.4% of the turkish population. i don't want to say they are justified in sending troops in, but there is a real issue there. to have one humanitarian issue and then take the other side of the other, it is more flippant talk from washington. alix: where can you go for safety that is not too extensive? also, you probably want to leave the option open for weaker growth. therefore, you get a tweet about trade deals being a lazing -- being amazing. so how do you do that? jp morgan says the cheapest is still going to be dollar-yen. damian: i think they are setting

us up for the u.s. treasury auctions this week. the front of the u.s. treasury curve right now, that is the obvious place you go to hide out. alix: i said less expensive. the cheapest or not overpriced. [laughter] damian: well, cheapest is relative. romaine: the auction today i think is going to be the most interesting one. when you look at the difference you are seeing in terms of the , on they market two-year you are getting 1.44. obviously that number is going to have to come up on the three year option. you've got a market that is now on edge because of everything we are talking about this morning, and you've got yields in the secondary market that are matching the fear. vincent: this could create some appetite for those options. damian: the three month was taken down 60%. on the six months, only 20%. that's all due to the fact that that six-month auction doesn't

really compensate you. i think you have to see a 50 bit move at the next few meetings to get some sort of compensation from that, so things are priced very rich in the u.s. front end, but nevertheless, that is what people are traveling to. romaine: who's looking for duration at this point? alix: many, and the barbell approach, as a relative thing. i think you still have to own the ration, but it is a begrudging you still have to own it conversation. but if you are just a normal person in the real world, and you look at the long end, it's the disparity right now that is so stark with the backdrop we are seeing on the trade and economic front. i don't know how this continues. vincent: a couple of weeks ago, you get three months treasuries at a better yield. i don't see the point at all. romaine: the other day they were

at malec, 2.1, and i kind of laughed. then you see the small business. basically, the fact of the matter is you are not going to hide out in equities. what do you do? what it comes down to is you've just got to pick your spots. that barbell approach, long-duration, altar short is probably what most investors are doing. alix: you wind up having those saying it's a really good time for the economy, that it is going to expand. at winds up falling. that plays into the recession fears and leads to the bad news is now bad news. is that what this is? vincent: small businesses have a very limited capacity to hedge against these type of risk.

it's not like a large corporation come easy tariffs come in a few months from now. let's build up inventory in advance of that. businesses have limited supply, limited ability to do that. they do it as the product comes in. they can't hedge in advance. the tariff situations, all of aree uncertainties different than the large capital copies. alix: with these headlines, with a 0.6% slide in the markets, were you going to see? damian: we might very well see that. there's definitely room for the fed to smooth things over in the near term. romaine: he has the consensus

for that, but when you look at some of the comments out yesterday from fed speakers, it was almost the exact opposite. the hawks were out. alix: it's like, i don't really know -- [indiscernible] vincent: romaine makes a good point. i think he has the consensus perhaps to drop the fed funds rate down by 25 basis points, but we all know that's not going to be much. it won't even make the white house happy. they will be yelling for 50 or 100. alix: that's entirely true. just before we go, looking at dollar-yen, what is the level you're watching? we are trading at 106.88. vincent: what we talked about last week was 107. that was a key level. 107, thewe stay below more that becomes a ceiling. alix: really appreciate it. it's been a very busy new slow today. we didn't even talk about brexit.

thanks a lot. you can find all the charts we just used and more. go to gtv on your terminal. this is bloomberg. ♪

viviana: you're watching "bloomberg daybreak." deutsche bank will make about half of its planned 18,000 job cuts in germany. the lender wants to rely on savings in its retail unit to lower costs. london will also be hit hard because of brexit. deutsche has about 92,000 employees worldwide. hong kong exchanges is dropping its unsolicited takeover bid for london stock exchange group. the ceo wanted to make london the center of trading between east and west with the help of hong kong. now he says the company will build the rolet already plays in asia -- the role it already plays in asia. broadcaster cp tv and

china says it won't show nba preseason games. this all starting with a tweet from the houston rockets' general manager expressing support for hong kong protests. nba commissioner adam silver speaking with reporters. >> it's not something we expect it to happen. but if it's unfortunate, that's the consequent is of us adhering to our values, we still feel it is crucially important we adhere to those values. viviana: silver goes on to say the league won't tell players or team executives what they cannot can't say. that is your bloomberg business flash. you are watching bloomberg.

alix: this is "bloomberg daybreak." i'm alix steel. looks like we are headed for binary risk headed into the trade talks on thursday. s&p futures off by 0.7%.

tweet from the a houston rockets manager supporting protesters in hong kong. then china wound up banning some nba games. officials now say they are increasingly reluctant to get a broad deal agreement. they are taking things like reform of ip off the table. yesterday, president trump says there is still an inclination to get a big deal, but then the u.s. blacklisted eight chinese tech companies for human rights violations. china now vows retaliation, rumors say they may leave early from trade talks, and u.s. is considering limiting capital trade flows in into china when it comes from u.s. pension funds. that is the story. commodities getting hit. euro-dollar able to hold onto some gains. cable rate down 0.6%. there's a big move into the yen. dollar-yen now below 107, making some new lows over the last few weeks. there's a bid in the bond market.

how all of this is playing out in the nabe conference in denver, colorado, we want to go to michael mckee. some of this was happening yesterday when you were out there. what are people saying on the ground when it comes to trade? michael: because trade is such a big deal for the economy, we've had a number of things on china and the whole situation. the interesting thing is it is very ironic, much of what donald trump is complaining about gets widespread support from economists. one from the university of california san diego did a report on all of the things that china does wrong, how china cheats. they all say that if the president had gotten the world together to work on this, they might have achieved something. unfortunately, by imposing tariffs instead, he's hurting the u.s. economy and unlikely to make much progress with the chinese. that's what we are seeing playing out. u.s. economyp the

for even further pain coming in 2020, what the nabe economists are saying. they don't predict recession yet, but they don't know what is going to happen, like diving into a pool without knowing how deep it is. alix: that's totally why i don't go into the ocean. ocean. to capitalize on that, we are looking at a railroad recession, small business sentiment the lowest so far this year. how does all of this play into jay powell when he talks today? michael: the problem for jay powell is that the markets tend to say cut first and ask questions later, so with all of this news, they priced in a fed rate cut. powell and the rest of the fed would like to see some more data and would like to see what happens with the trade talks. he's going to have to make a decision today. does he push back, try to hold the markets off in a way that doesn't send markets tumbling? or does he just go ahead and say we would be what's appropriate to keep the expansion going, which the markets will take as a signal that a rate cut is bacon?

a tough -- is baked in? a tough line for him to walk today, whether he wants to ratify market thinking or give the fed additional optionality. alix: great point. thanks so much. joining me now is sebastien page , t. rowe price head of global multi-assets. a crazy newsday just within the last hour. basic question, do you buy the short end right now? it would be a safety move to buy the short end. i think the market is getting nervous with how quickly things are changing around trade. the key here is in our view, not to try to predict how things are moving day today. .- moving day to day we slightly de-risked our portfolio. we still believe in the role of stocks in these portfolios, but on the margin, we are going towards safety. things are changing so fast that

it helps to step back and look at the incentives. we seen over the last few days many changes, new directions for the trade war, which illustrates the incentive for the u.s. or the strategy for the u.s. to apply maximum pressure on china. , thee other hand strategy for china appears to be one of a test for endurance, a long-term strategy. if you step back and look at those incentives, it's hard to see what would trigger a meaningful trade deal. we can see many deals -- we can thingsi deals, but moving and the other direction the last few days, so overall it is worrisome. 0.7% s&p futures off by when it fuels like these trade talks could very well break down, which would mean that we are deftly come to see the tariff increases october 15 -- we are definitely going to see the tariff increases october 15

and in december. what do you make of that? sebastien: things are changing so quickly, and at the same time, there are other factors at play. you have to step back and look at the extent of the synchronized monetary stimulus that's coming on globally right now, with 21 central banks, pretty much the highest percentage of central banks, stimulating the economy since the crisis. if you step back and look at pmi's, of course, manufacturing pmi's are going down. they are falling like a rock. at the same time, those tend to revert. if you combine monetary policy with pmi's that look more like a bottom then i\/ -- more like a p, right nowa to sentiment is quite negative. you've seen investors pile onto

cash, to your earlier question on the short end. you have a combination of factors that may be cushion the markets a little here. pmi's looking more like a bottom than a top. sentiment negative, meeting room for positive surprises. massive synchronized monetary stimulus. you have to look at the overall picture here. alix: whether or not the stimulus is going to work or has the same juice it had will be the pushback. sebastien: and that's not clear. there's always a lagged effect. to a certain distant right now come up -- to a certain extent right now, we are seeing weakness. trade certainly has an impact. we hear from ceos, listen, i'm not investing until this is sorted out. it is clearly having an impact. but what we are also seeing right now is the lagged effect of monetary tightening, china deleveraging leading into 2018.

so with these lags, right now the question is will monetary stimulus have an impact. twokey question, too, with cuts priced in before the end of the year, are we using all our bullets? if things get worse, do we still have bullets in the chamber with u.s. real rates already hovering close to zero? alix: with that in mind, where do you still want to maintain some kind of risk? sebastien: what we are doing at the moment is at the top level, we are reducing risk on the margin. stocks are slightly expensive. bonds are much more expensive than stocks. as we are doing that, we are adding a little bit to cash. but under the hood, we are also playing offense and if you asset classes. with actually added -- playing offense in a few asset classes. we actually added a few. some companies are just being

dragged down with the asset class even though they are not cyclical or have nothing to do with trade. this presents opportunity to emerging an overweight markets. we are also adding high yield to carry. while we are de-risking at the top level, there are opportunities to play offense in certain parts of the portfolio. alix: does that mean you need to have a weaker dollar? how do you deal with the dollar with a net asset allocation? sebastien: the issue with the dollar right now is this provides another incentive for the fed to cut rates. the idea of an insurance cut matters. the idea we are not seeing a lot of inflation. but also, u.s. rates are quite high compared to the rest of the world. this puts upward pressure on the u.s. dollar, leaves room for the fed to cut rates. thick heavy out of those arguments is that unemployment is already very low -- the caveat of those arguments is

that unemployment is already very low. this could put upward pressure on the u.s. dollar as long as the fed, if the fed doesn't overdeliver on cuts. this in syria hurts emerging markets, but emerging markets as and as -- this in theory hurts emerging markets, but emerging markets as an asset class. we see this as an opportunity if you look across sectors and companies. alix: i started this segment talking about buying the short end, so i will end it talking about the long end. do you buy the long end? do you go long duration? sebastien: it is pretty much the only place you can get safety in portfolios at the moment. that explains in part to this unusual inversion of the yield curve. i say unusual because the yield curve has inverted before, but right now the thirst for duration, the need for protection in portfolios with global rates being so low is driving parts of that inversion. so the answer is that there

aren't many asset classes directly at a broad level that can provide safety and diversification in portfolios, so duration has to be part of the mix for diversified, long-term investors. alix: really great to get your perspective, with lots of headlines coming out. sebastian page of t. rowe price, thank you very much. we do have some breaking news for you. anthem sports will suspend contract renewal talks with the nba. this is a 26 billion dollar chinese company suspending renewal talks with the nba. this is following on china's cctv halting broadcasts of the nba preseason. this is actually quite material overall. 800 million people now watch the nba on various platforms every year, and tencent reportedly paid $1.5 billion this year for the nba's digital rights for the next five years. one rethink of these contracts could be material under the $26

billion suspending renewal of contracts with the nba. now for headlines outside the business world, viviana hurtado is here with first word news. viviana: deepening confusion over president trump's policy on turkey and the u.s.'s kurdish allies. the president has not endorsed the turkish invasion, that statement coming after republicans blasted the president after apparently giving turkey the green light to invade. turkey views the kurds as a security threat. british prime minister boris johnson sounding pessimistic about a box at deal, telling german chancellor -- about a brexit deal, telling german chancellor angela merkel that a deal is virtually impossible. breaking story, bloomberg has learned the trump administration is zeroing in on possible capital flow restrictions into china. a particular focus, investments

made by u.s. government pension funds. this is the latest escalation before u.s.-china trade talks this week. china vowing to retaliate overnight over yesterday's blacklist of eight chinese tech companies by the trumpet been astray should. the basis for that -- by the trump administration. abuse of for that, the rights of muslim minorities in china. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: coming up, brace for more cuts. deutsche bank planning to get rid of more jobs in germany and london. inod's wall str beat -- that's coming up in today's wall street beat. watch us online and interact with us directly. just go to tv on your terminal. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, bill rudin, rudin management cochair and ceo. now to your bloomberg business flash. nissan has picked a new ceo. picking their next leader. the board has been under pressure to select a leader at a critical time for the company. the automaker has reported decade low profits and announced 12,500 job cuts. the union for southwest airlines pilots suing boeing over the 737 max. the suit claims to stay competitive come of the company rushed to of the plane, also

accusing boeing of withholding key information about a feature links to two fatal crashes. southwest is the largest operator of the max that has been grounded since march. boeing is calling the suit merit less. protests in hong kong sending retail plummeting, but art auctions appear to have escaped unscathed. a recentccording to auction at sotheby's. two paintings have gone for roughly $25 million each. i'm viviana hurtado. that is your bloomberg business flash. alix: thank you so much. we turn now to wall street beat. first up, the hong kong exchange abandoning its lse bid. it unabashedly dropped the bid for the london stock exchange. jobsdeutsche bank axes again, cutting about half of its planned 18,000 jobs in its home market.

homebuyers pushing their best performance since 2013. running us is soon i'll he vasek -- is sonali basak. sonali: this deal took 26 days to unravel, 28 if you count when they surprised david schwimmer at the london stock exchange and offered that bit. it is something that was perceived as very difficult from day one. the thing is they knew that. exchangekong stock shareholder in our story today mentioned he thought the whole thing was a farce. alix: why? sonali: he was wondering, the stock exchange shareholder, was wondering whether they should have had more buy-in from shareholders and regulators before they even came in strong with the surprise bid. alix: does that mean it was just a deal gone bad, that they just made miscalculations and will have to recalibrate and come back? or are they just cutting and running?

sonali: it would be hard to come back. it was hard from the get go to come in. halfway through the process, only 26 days, hong kong stock exchange brought in ubs and hsbc in order to sway some of the shareholders of lse. now what you have is the head of hong kong stock exchange saying we couldn't really get the support, and it's not the best thing for our shareholders to potential he have gone hostile and hold out this long, ugly process. alix: let's get to our second story, which is deutsche bank. we are looking at part of the 18,000 job cuts coming from its home market. what did you learn in this news report? sonali: partly, it wasn't surprising, only because so many of deutsche bank's employees are in germany, where there's negative interest rates and a huge retail task force. right now, more than 45% of the jamaican employees are in germany, not to mention our own allison williams has pointed out since the beginning, they

haven't given us good clarity on where these job cuts are coming from. but there was some detail into profit ability plans for the retail business, so you could have deducted. but half is a lot, and they have union representation on the board. alix: in this conversation, do they have to go to the german government to get clearance? sonali: it would be surprising if they didn't talk to them about it already, but that doesn't mean there won't be pushback. he were talking about a merger with commerzbank earlier this year that also would have led to job cuts. so i think there is a bit of a recognition that there needs to also be drastic measures to make sure that this bank is profitable and continues to be germany's champion. alix: not to mention the fact there was another bank yesterday, a commercial bank that basically had to pass on negative rates to customers, and not the ultra-wealthy. that's how tight it is for these banks. sonali: notice a lot of these cuts are coming from europe proper. hsbc focusing on china, but really looking to cut out of the london area and whatnot.

not too different a situation from deutsche bank. alix: let's get to hedge funds. it's a lobar come up at the first three quarters of this year, they saw the best performance since 2013. sonali: i'm so glad you started on the low bar. the 4.9% rise this year is the best, according to hedge fund research, at least in a couple of years, since 2013. but remember, the s&p is still up more than 20% in that timeframe. hedge funds, you are not always benchmarking to the s&p. however, the momentum reversal was really significant in september. a lot of that was mitigated towards the month's end. you have chase coleman at tiger global, they lost 7.4% last year, but they were up 22% on the year. stake injust taken a uber come up big technology names.

forgive a tough september? i think what will be interesting is we hear from the banks next week for the earnings. we will hear from prime brokerage is whether people are ready to take on more leverage, whether people are liking this volatility, or whether the global tensions are really as horrible as they seem. but these numbers aren't that bad. alix: i don't gamble, but if i did, i would probably put money on the letter. thank you -- on the latter. thank you, bloomberg's cinelli vasek -- bloomberg's sonali basak. last week's episode of "south ink" has been erased china after it made fun of -- chinesesonrs censors.

of mickey mouse, poo bear stuff in there. the creators put out a mock apology that also poked fun at the nba, which is having its own problems in china. "like the nba, we welcome the chinese censors into our homes and into our hearts. we, too, love money more than freedom and democracy." coming up, the trump administration moving ahead on limiting capital flows into china. if you are jumping into your car, tune into bloomberg radio, heard across the u.s. on sirius xm chena 119 and on the bloomberg business app -- xm channel 119 and on the bloomberg business app. this is bloomberg. ♪

alix: time now for our traders take. joining me is vincent cignarella of bloomberg audio squawk.

vincent: watching dollar-yen as well as the treasury market and obviously the equity market, there are three basic deals that can come out this week with the trade talks with the chinese premier, mnuchin and lighthizer. the grand deal, which we know is not going to happen because china has already said they are bringing a limited things they want to talk about. wouldis a mini deal which pretty much revolve around ag and soybeans, it is still a possibility, but what i'm concerned about over the last way for hours or so is a no deal , possibly that talks don't even take place. when you look at that, i don't think the markets have priced in a significant amount of risk for that third alpha. alix: if you take a look at dollar-yen, what does this chart wind up telling you? what do you watch if that third scenario is going to be playing out? vincent: this is a function on the terminal, i think we brought this up last week, ravg.

a range average chart. i chose five years to get a longer-term fuel for this. that's with the blue line is, the average close. then it will snap deviation lines below and above it. we've eliminated the ones above it because it is not likely where we are going to be right now. the first standard deviation line below is about 107, and below that 101.5. if the trade talks break down, 107 looks like the ceiling, not the floor, and 101 is where we could go. alix: oh boy. this is bloomberg. ♪

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

october 8. here's everything you need to know at this hour. the trump administration is firing the latest shot in the trade war. bloomberg has learned the u.s. is moving ahead with talks of restricting capital inflows into china. china's outrage against the nba getting worse. says-run broadcaster cctv it won't show nba preseason games. this all started with a tweet from the houston rockets general manager expressing support for hong kong protests. nba commissioner adam silver spoke to reporters. >> it is not something we expected to happen. i think it is unfortunate, but if those are the consequences of us adhering to our values, we still feel it is critically important we adhere to those values. alix: prime minister boris johnson sounding pessimistic about a brexit deal. johnson told german chancellor

angela merkel that an agreement is essentially impossible. he wants the eu to drop demands for northern ireland to stay in the customs union. in russia, president died of mayor breeden celebrated his sixth -- resident vladimir putin celebrated his 67th birthday. apparently there was no congratulatory message from president trump. about markets, it's all trade tumbled over the last few days. prospect of some kind of trade deal or even good trade conversation thursday seems to be breaking down. that's what's playing out in the markets. s&p futures off by 0.6%. the yen breaking below the 100 day moving average. down four basis points. we get a three year later today. my guess is it will be pretty well subscribed. crude getting hit by risk off as well. joining us from washington is bloomberg trade reporter shawn donnan. walk us through how we got to

today in the conversation between the u.s. and china on trade. shawn: the hope is that this week, we could set trade relations. we could have the high-level talks that will take place later this week, and somehow you could negotiate at least a temporary truce or an agreement not to escalate any further, and that that would calm down financial markets and limit some of the economic damage on both sides. but as we've learned with these trade wars throughout, there's always a surprise at the last minute. we got that from the commerce department yesterday, which eight chinese tech companies for their alleged involvement in the human rights inckdown in should zhang -- the far western region of china, where muslim minorities have been targeted by chinese authorities. that clearly has sent a bad message to beijing going into these talks later this week. but really, what we are looking

at this week is a hope that you can stop this escalation that we got over the summer and that has continued to come. we went into the summer with $250fs in place on roughly billion in chinese imports. we are now at $360 billion. there's a big trench that could 15 thatect december would affect things like smartphones. a lot of people worried about the potential economic damage of those tariffs going ahead. the goal this week going in was to stop the escalation. the current state of play is much messier than that. alix: it is, which is my question. is putting on these blacklisted tech companies because of human rights, obviously the government knows this would have tempered trade talks and sent a bad message to beijing. is that what they wanted to do? is this brinkmanship or a

threat? bringing in human rights is very different than talking about ip reform. shawn: absolutely. i think what we hear from folks in the administration is that they believe that these are separate actions from the trade talks. these are national security actions. they say this is a process that was underway long before this week. it just happened to gel this week. but what you get out of that is evidence of the continuing battles inside the administration over how to handle china. there's a big contingent of people who see china as an existential threat. there's another side that wants to do a deal. the second thing is lack of policy coordination. the timing of this couldn't be any worse. alix: wonderful reporting out of bloomberg shawn donnan. thank you very much. joining me on set, sarah hunt, alpine woods portfolio manager. it didn't feel like the talks were binary. now it feels like a barren area outcome -- like a binary

outcome. how do you view it as a market to spent? sarah: if you look at how may times we've had this, something is going to happen and then there's a wrench thrown in the works, the timing of this is not fortuitous if you are going to have talks. i believe one of the headlines this morning was that they may leave a day early, and i think the market was poised to look for something positive on the trade front. i feel like the fed has their back on the interest rate front, and if trade can get done, you have a better outcome for the equity markets. for the last several months, it's been very similar to what we started with when all of the trade stuff started. i don't think we see an easy solution here. alix: if success now seems to be -- i mean, it seems inevitable that we will get escalation now in terms of october 15. is your base case for the december tariffs to also be increased? if the rollback now totally off your cards and your modeling? sarah: i think a rollback would

be very difficult, but some kind of cease-fire is something that both sides would want to see happen. whether or not we can get through that with all of these noisy escalations and things going on outside of the trade talks, which includes this issue with blacklisting and what is going on in hong kong and all of these different pieces, for both sides it would be nice to see some cessation of further tariffs. whether or not we get that is really hard to say right now. alix: what do you do with earnings estimates? we are still looking at 3% earnings growth for the third quarter. how do you start to think about your estimates? sarah: i think the near term already going to be fairly baked in. i think it is the further out that is going to be the question. i think the earnings calls this quarter are going to be very key to what the market sees going forward. if companies are exceedingly cautious, saying we are doing x, thend z because of environment, that will put earnings under pressure to the degree that people are not

picking decisions because they want to see what the outcomes are. i think you see some of the trading-related stuff, like ups and fedex slowing down. i think that is going to be a very important component. alix: you come inside the bloomberg, this may be my favorite heart of earnings season. it's looking at the russell, the s&p mid-cap, and the s&p 500 in terms of forward earnings estimates. s&p has held up completely well. the small and mid-caps have rolled over. what do you thing about that? sarah: i think that goes to the point of who can handle those the most. on the s&p, you've got a lot of tech companies where right now, that is not so much of an issue for them. it may become an issue for them, but it is not an issue right now for google or amazon or some of those bigger tech companies. but the small companies, especially those using components from outside the u.s., you are having trouble getting them right now, or paying more for them.

it is hard to push those prices out. the question is how badly does the problems we are experiencing on the trade front impact the margins? i think estimates are showing you that for the small and mid-cap companies, it is harder for them to absorb that, and they can't make the changes of the last year or so as a look at this coming. alix: do you feel like, looking at the s&p closing yesterday 2938, is that accurately reflecting the risk that you are talking about? sarah: i think the market has made some assumptions about what's going to happen in the future that are somewhat optimistic. alix: trade or fed related? sarah: probably a little bit of both. necessarily make the trade-off that it is going to happen, but to the degree the market is already assuming some fed cuts are coming in here, if the trade escalation situation gets worse, it's possible the market will start banking on more. clearly, last week when you had that rally on friday, that was

the expectation of the perfect employment number. it gives the fed room, but it wasn't a disaster. to the extent that bad news is not bad news, it can't be terrible news. alix: that a fair point. a traders note says for us, "if this had happened any other time, it would have gotten ugly really fast. it appears traders are looking for something positive to come out of negotiation." what is your top trade right now? sarah: it's a terrible thing to say, but you end up going back to those stocks that have a dividend yield and that have some component of consistency in earnings. right now, you are in such an unusual time period where you have very high valuations, but some uncertain macro backdrop. i think people are still searching for yield. that's not going to change because it doesn't look like global interest rates are going to do anything. that becomes something where you look at these valuations and say historically, these are very convincing. but if you look at some of these

dividend stocks, that trade is being made. that's why the multiples are expanded. alix: sarah hunt of alpine woods bill be sticking with me. coming up, we speak to tom petrie partners founder. that's coming up. this is bloomberg. ♪

alix: in the markets, one asset class getting hit by trade issues between the u.s. and china is oil, rolling back by over 1%, right around the lows of the session. still with me is sarah hunt of alpine woods, and joining us is tom petrie, petri partners chairman. oil is still so exposed to these headlines on trade. does that say something about

sentiment or underlying fundamentals of demand? tom: it's hard to say for sure, but i think there's both the fear that the demand is not going to be there because there's a lot of buy-in into the notion that the chinese are just playing the president into the election. if that proves to be the case, it is hard to not see that affecting demand. also, the strength of the dollar is really working against oil right now. alix: where are the weakest parts? sarah: of that argument --tom: of that argument? there's a powerful self-correcting force if wti drops below 50. it gets below 50, pretty soon the rig counts go down even further and supply is also going to be constrained. that's the weak part of the argument. $50 and bounced around, have some volatility, what kind of strain does that put on saudi arabia when they

are confronted with the u.s., but more importantly, with demand that no one seems to have good this ability on? -- good visibility on? tom: it is going to be a problem. they've also been so bent on an ipo that they've really given us signals on how fast it come back. i suspect they haven't come back as fast as they talk about. they did a very creative deal with the rock to buy oil from iraq and put more of theirs on the market. they are really leading us to be more complacent than we should be. too, was a little skeptical that a week and a half later, everything is perfect. you have the journalists coming into look at perfection. you bring up the geopolitical risk, which is that they are not going to be the oil supplier of

last resort. you have a rock, which has been having -- you have iraq, which has been having some protests and other issues. you have turkey coming into syria, so there's that issue. how do you view all of that? tom: the geopolitical mist is a real -- the geopolitical risk is a real challenge. we've got a whole bunch of counteracting forces. we officially are backing tripoli, along with europe. the saudis and egypt and others who've allied with them are libya. general haftar in it's a real war, problem, and is going to continue to be. alix: as a market participant, when you see something that has a big dislocation, these big geopolitical factors in the macro backdrop, what is your take on that?

sarah: the energy sector is a much smaller part of the s&p that used to be, and that sector has become, to my way of thinking, somewhat under invested. i think conocophillips raising its dividend, the energy companies are looking for ways to make themselves into more investable comedies. the ones that have the clash -- more investable companies. the ones that have the cash flow to do it will start to look more like utilities. for the rest of them, because of the dislocation in terms of demand and pricing, it is difficult to see how investable they are because you are a little worried that the timing isn't going to be good. if i buy it now, do i have to wait for that low prices to cure low prices problem, or do i have to wait for dislocations? right now i think there are some attractive places in it come about unless you have a longer-term horizon, people are too afraid to get into that sector right now. alix: do we want energy companies to be like utility companies? is that a good or bad thing? tom: the demand of the

institutional marketplace is show us you are doing a more disciplined job of allocating capital. that is setting up for a consolidation. competitors that are needed, and we may well see some form of catalytic effect as consolidation advances. alix: what does that mean? tom: i think fewer players, some takeouts. right now, mergers of equals are the choice du jour, but i think some premiums and liquidations. alix: just to echo what you both were talking about, this is the utilities yield versus the energy yield. over 400y yield is basis points. the utilities yield is only 300 basis points. how high does this have to go to say, i'm just going to buy it? sarah: the tricky thing about that is that at lower oil

prices, people wonder about whether they can pay those dividends. in the end, if you are worried the cash flow isn't going to be there, it's not as much of a sure thing as it looks relative to utilities. the cash flow of utilities isn't as vulnerable to price shocks as energy. have cutthat could their dividends and didn't are ones that people will say, this is something we really count on. we know investors count on it. i think those dividends are institutionally safer because the companies understand that is why people are investing in them. but as a group, there are some that are going to end up being more vulnerable than others. that's where picking and choosing is going to end up being more important. alix: if you would like for big oil, the rhetoric is they are going to keep buying u.s. shale and get out of longer-term cycle. is that what you think? tom: ironically, one of the biggest new place going is off na, off of exxon and

hess. it's a compelling play. it's got gross margins and so on. i think we are entering -- it's got growth margins and so on. i think we are entering a phase, the u.s. still has a lot of optionality dealing with geopolitical challenges, but i do think it's going to be a challenging period while we recognize this reality of a rolling over, maybe even some decline. there's been a tendency recently to extrapolate the recent builds. when we went from nine to 10 to -- to 12,in 13, predicting 13, i began getting skeptical. the idea that they are

going to keep it going, it's going to be fine, what's wrong with that argument? tom: well, to some degree, there will be some options like that. but will it be broadly across the industry remains to be seen. the other part of what we are seeing in this industry is taking the points -- is, taking the points that sarah's talking price the vulnerable points will be there for averaged companies. there are a number of companies that have been very disciplined with their balance sheets. they won't be affected the way that overleveraged ones will. alix: before i let you go, the range you see for oil, what is it? tom: i think we are likely to be in the mid-50's to mid 60's. am optimistic that touch below $50 will be

short-lived, and the correcting forces will kick in at they have the last couple of times. then i think, in the coming 12 months from here, i think we've got a good shot at mid 50's to mid 60's. higher than that, self-correcting the other way. alix: always great to catch up with you. so good to have you on set. tom petrie, petrie partners chairman. sarah hunt will be sticking with me. we will take a look at the chips industry next as the tech industry is once again brought into the trade conversation with china. this is bloomberg ♪ -- this is bloomberg. ♪

viviana: you're watching "bloomberg daybreak." there's a new ceo at nissan. the head of the japanese automaker's china joint venture will become its third chief executive in as many years. he faces a number of challenges. among them, problems

restructuring and issues with partner renault. deutsche bank has announced it will make about half of its 18,000 job cuts in germany. london will also be hit hard because of brexit. deutsche has about 92,000 employees worldwide. samsung electronics posting quarterly earnings that easily beat estimates. there was strong demand for the south korean company's new note 10 smartphone. they've also been helped by the debut of the iphone 11 pro, which uses the samsung digital display screen. alix: thank you so much. still with me on set, sarah hunt, alpine woods portfolio manager. tech, do you like it or not? sarah: i think there are places in tech that are attractive. the story the beginning of the year was you are going to have

an inventory correction, and everyone was waiting to see when that was over. stocks report better when they feel like the worst of it is over. where are we in terms of supply and demand and everything else. i think that has gotten drawn out a bit longer than people thought was going to be, at least in june, and some of those stocks got weaker i can. on the semiconductor side, i think you see some of the stocks recover. on the other tech side, like amazon and the larger u.s. tech stocks, i don't see a whole lot that's wrong with that going on right now. i think that's an area where people are continuing to look and be invested in those areas. software stuff is very expensive. it is a little tricky in terms of valuation, but there's a lot of growth. that's what people have been paying for. the question is if there is a slow down, what are you doing with those? alix: do you go with the faangs or the microsofts of the world?

angs are nota as strong, so i think you want to look for places where you are seeing some corrections. look throughave to carefully at what devaluations are in sort of see when you get those moments where the market gets really unsteady, and then you go there. alix: sarah hunt of alpine woods, you will be sticking with me. coming up, the latest read on inflation. we break down the consumer prices for september, all ahead of jay powell speaking at nabe later today. this is bloomberg. ♪ everyone uses their phone differently.

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alix: this is "bloomberg daybreak." i am alix steel. a few seconds away from the latest eco-data. we are definitely risk off, but it could be worse. with all of the headlines going back and forth, it could go nowhere. classes, the same kind of story. you're seeing money coming into bonds, yes you are seeing a bid for the dollar but also for the yen. nothing as extreme as you might've thought with those negative headlines you see investors wanting to see the positive. if you back out food and energy on a month-to-month basis, it falls about .3%. if you take a look at your on your basis, you have energy coming in at 2%. final demand also lighter, coming at 1.4%. that is a miss and sequentially down as well.

that data not going to help any optimism on the eco-front. collins, she megan leads bloombergs economic coverage. still with me is sarah hunt. this does not set up jay powell to feel good as he goes to talk when you have producer prices down .3%. fed has been grappling with the inflation numbers. coming in lower-than-expected. this morning is not good news. on friday jay powell set on a speech in washington dc that he is still looking for inflation to get back up to that 2% target. the fed was seeing some indication that inflation was moving a bit closer to that target over the last several months. these figures show there is still question about whether or not inflation is muted. specifically at the time when we are seeing tariffs flow through and potentially consumer prices.

-- we have seen a number of people say the rise of technology and automation throughout businesses is changing the dynamic of pricing and how inflation may be flowing through to the consumer. that is something that is also flying out, as well as an aging population throughout the world is another factor that is weighing on economies. we are seeing these big demographic shifts. we are seeing technological shifts, and that is playing into pricing. alix: this is the biggest sincey drop in core ppi 2015. the implication is if you have weaker demand, companies cannot pass on their prices. that could wind up hurting their margins. what you think? sarah: this goes back to the problem we've been discussing the last several years, which is how do you get final demand to be better.

how do i create inflation? part of the problem is everyone is looking for some sort of inflation target and chasing that is a goal without looking at the reasons you have deflation in the first place. part of that is a macro problem and part of that is the way goods move around the world. it is a tough thing for them to be targeting something in that it keeps slipping away because then you keep arguing you have to keep targeting this, and the question is is that the goal we should be looking for? collins of bloomberg news, thank you for helping us break down that data. sarah hunt will be sticking with me. global finance leaders gather in london. bloomberg editor john micklethwait is sitting down with pimco ceo. we want to listen to what they are talking about. headwinds. at some point in time they will be seeing fiscal stimulus. >> you expect lagarde to make much of a difference or do you

see her carrying on in the same way as mario draghi? manny: we think the right way to think of the ecb is a board of directors where decisions are spread among people and so she will do a good job at that and we think the ecb will go on in the same direction. 17 join dollars of debt with negative yield is quite something. not something any of us had expected five years ago. you run perhaps the biggest bond house of all. how do you make money with negative interest rates. by beating a benchmark. $17 trillion on negative yield is a challenge, but it can change dramatically. we have a trough of interest rates in this country since the 18th century where you see incredibly low rates at that

incredibly high rates. the way we think about the world is there's not a lot we can do about the world we live in. we can do is mind our business and to perform over the long run would be fine. you think there are particular bits of the yield curve where it is easier to make money or ones you want to avoid? manny: our greatest concern right now is not so much the yield curve. obviously there is credit in the u.s., which is priced incredibly tight. there may be a few high yields in the loan market but the market would have to deal with. if there is a sector we like less, we like less corporate credit in the u.s.. >> you talk about that in may. you warned about that. credit is still

incredibly tight. the reason is there is a hunt for yield. people in the euro zone facing negative yield look at the u.s. and say we want to buy something with a positive carry. leverage does matter. people will look at specific credit and they worry. are there any particular areas that were you? they takeovers? particular sectors? manny: you can look at retail, you can look at oil and gas. sectors can change quite dramatically and go from six or seven times leverage to 20 very quickly. that is something i would look at. something we all have to do is to try to progress business which can turn. >> people from pimco talked about an illiquidity premium. can you explain that? manny: the way to think about

i have a u.s. pension plan and i need to deliver 7.5. this is the magic number. , i don't think there are any liquid assets which deliver a return near 7.5%. look at private equity and private credit as a way to achieve this. you basically raise funds and by debt you intend to hold for the maturity of the fund. you may restructure the company. you may trade out of it, you may back it with estates, you may have a situation in retail. there is opportunity, the more

the economy is distressed, the .ore opportunity you have there is capital waiting on the sidelines for the next cycle. yorkie on that area but you're also worried about corporate credit at the same time. surely there is an overlap. we hope we have an opportunity to buy more at a much better price. the bond market that i told you i do not like, at $.80 a dollar on my like the more come at $.60 a dollar i may like them a lot more. i wait for the opportunity. that is what investors trust us to do. that mean you run the risk of underperformance? manny: definitely in the short term. we tell clients we focus on long-term performance. we have done incredibly well in 2008 and 2009 and right now we have less corporate credit risk

with other people. we have replaced some of it for agency and nonagency. this day ofthink reckoning is coming from the corporate credit market? manny: in a recession. maybe next year. is aeconomist think there 30% to 35% probability of recession next year. >> sounds like you are higher than that? manny: no. 35% is high. >> in the euro area easy the same problem? manny: there is not as many bonds. everyone knows the euro high-yield market is tight given the hunt for yield. same accesse of the but the market is much smaller. >> we heard that flutter in the repo market which caused these problems. many people would say if this happened in some esoteric corner

of the corporate bond market, that would be ok. this was supposedly the most .iquid market in the world you've now had a few weeks to think about it. what is your lesson? the lesson is is that a technical problem but it retraces the fact that banks care a lot about liquidity and start to offer less liquidity bright now. we have to all think about this and understand the repo line one make yet make it affected by how banks think about the capital at the end of the year. .2 is the question of does it tell us something about the economy. the answer to that is no. it reflects the fact that you had a technical issue in the repo market and the fed basically not looking at it very carefully at the time. a very technical situation with a tax bill and all of these things happening.

we think the market will be tight for funding for the next few months. nothing that cannot be dealt with, but that is part of what we do. do you think there are possible long-term worries about this? you might have people who want to really regulate finance coming in. when i first met you you had escaped from socialism in france. you now have jeremy corbyn here and elizabeth warren. manny: i will head right back. is of the interesting thing that we market does not price jeremy corbyn or elizabeth warren. if you look at the programs on paper, they are very negative for risky assets. higher,end rates much but for equities is quite negative. >> let's deal with elizabeth

warren first. have you looked at the effect of what she has to say would have on credit? manny: from the program she has on her website, one can guess. what we have learned the hard way is trying to make addictions is not ay in the cycle very wise thing to do. but the rest of her program, if it was applied and if you are able to get it through the house and senate, would transform the way the u.s. system works. we are seeing that even if she is to run, the chances for hurts --ple to implement anything it is unlikely she would win and win the house on the senate at the same time. quite unlikely. >> are you more scared of brexit or jeremy corbyn? manny: thank you for this question.

[laughter] >> not saying you can't get both. [laughter] that awe think obviously labour government with the program they have would be bad for risky assets. me of what i grew up with in 1981. the socialists started to nationalize everything in sight, and within one year they had to do a 180. the core belief is that the government is not good at planning things -- never very good at running things. >> you see jeremy corbyn would come in and run into trouble. manny: if you look at his program, it is quite extreme. >> you think that is worse than brexit? you buy a lot of government

bonds. manny: we do and we like the u.k. and we own a lot of u.k. bank. even in a brexit scenario, they are fine. what you need is resolution. i think we are in limbo and being in limbo is not a good thing. situation where between the politics, the government, the house, the voters, it is so fragmented and so fragmented and implanted. i do not tell you this is a way to get to an outcome. an outcome, you if it is a hard brexit come is better than two more years where nothing gets decided. i understand this has drastic impact on local issues such as the good friday agreement, and these things, which we care about.

i grew up in a place where security was a big issue that i understand that. hopefully get to a situation where it is about and people can elect the government they want. alix: you've been listening to bloomberg editor-in-chief and pimco ceo at the bloomberg best london. you can follow the conference on >.ve

is that conversation in a real estate market? ill: it is coming into real estate because the yields are basis, betterive than putting your money in germany or european banks. we are seeing flows come in and the new york city market very vibrant and strong in terms of releases and that drives people and that drives people wanting to invest in new york. it is almost like a safe haven. alix: where has the money changed? either in the buyers or flows? we have seen less chinese money coming in. there is still private equity money floating out looking to buy real estate. of themebody steps out market, somebody else steps in and there is still tremendous amounts of money flowing into real estate because of the relative yield.

something that struck me was bloomberg reported we may see in them -- i think how can china retaliate? i think maybe they stop investing in real estate. does that happen? william: chinese were typically the buyers of a lot of condos and lending. that has slowed down. i'm not sure if it can get worse. probably it could, but who knows. world, the, and your search for yield, where is your favorite search for yield place. sarah: i was just looking at the yields on a bunch of different things, including the energy stocks we were looking at earlier. there was a concern a few years ago there had to be a refinancing and rates would go higher and it was going to be a problem. now that we are back to lower this makes them even more

investable. those are the places people are going good william: as the rates been ame down -- have good place for people to find yield and invest if they want to get into the real estate space. that is a very good way to invest. as i said before, the fundamentals are very strong. we have 35 million square feet of leases signed year-to-date in the third quarter, up from 29 million last year. it is a broad range. it is the fangs, it is uber, it is amazon, it is google. small companies. in terms of new york, we are seeing a vibrant market. young people want to come here. we have great educational institutions. columbia, andech, the engineers are here. that is where the companies are

following them because they want the best and brightest. alix: how much of that is we work? william: everybody has been talking about we work. it is 1% of the market. total co-work influx bases about 15 million, or 3%. it is a very small part of the marketplace, but an important part. to coows small companies me into lease space with less brain damage. but even large companies are taking space. you have to put all of this in perspective. the co-working is here to stay. other companies will fill in the ork slowing down their growth.

it is important. our customers want that type of flexibility. we are hoping in building and brooklyn with we work as a major .enant they have taken about 30% of the building. spacere filling up that and that is what companies are .ooking for open spaces, food halls, conference centers. that is the trend of where companies want to take space, and the owners are providing the type of alternative. alix: no doubt that idea of a flexible workspaces taking halt, particularly with wework. you are an early investor. on this chart, the bond trading $.83 on the dollar. the conversation is will they pull back on their leases, will you offer them the same terms?

william: the ceos are very smart young man that will right size the company and create a plan and come forward. they have to rebuild confidence in their customers, landlords like ourselves, they are investors. they have the ability to do that. alix: what is the number one way they can do that for you? william: come up with a plan, implement that plan, and regain the confidence they had. the business works. they are 95% occupancy with 30% of that versus with rental .ompanies they have to build that confidence back. state of their core mission of providing flexible workspaces, and i think they will regain the confidence in the marketplace that things will change. their leases will change.

back to the fundamentals. space --demand flex there is demand for flex space. alix: thanks so much. bill rudin. sarah hunt, always great to have you with us. brexit,alix: coming up, a bond auction coming up, a search for safety. if you have a bloomberg terminal, check out tv . you can interact with us directly. if you jump in your car, do not lose touch with bloomberg radio. this is bloomberg. ♪

alix: time for technically speaking. voice ofney, bloombergs equities quad joints me now. how important is today technically? bill: very important. we have boris johnson telling angela merkel a brexit deal is

impossible. u.s. blacklisting eight chinese tech firms, and allowed -- and tound 7:00 the u.s. was said be limited chinese spots from its pension funds. now we are back in this churn, this trading range we talked about last week. 2919, the october 4 low, and then 2911, the october 3 hi. below that, 2900. alix: that is a tight range between the 100 day and the 50 day. when we break one, what is the follow-through? bill: if it is churning up and down one day, it does not mean as much. today we will probably open below the 100 day, but above the 50 day, and we close below but not a significant. microsoft has been upgraded yesterday.

you wind up seeing when it comes to microsoft? bill: microsoft has had a huge run but you can see the 50 day starting to flatten out. the stock is losing momentum. your persistence around this 141 level. you want to see a big breakout above that before you get excited about the stock. morning.barely up this bill maloney, thank you so much. you can listen to bill all day on the terminal. open," with "the jonathan ferro, mandy xu. this is bloomberg. ♪ from the couldn't be prouders

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jonathan: coming up, global equity markets held hostage by headline risk ahead of this week's trade talks. president trump pushing back against a partial deal before china's delegation arrives. the administration moves to blacklist eight chinese tech firms. with 30 minutes into the opening bell, here is your tuesday morning price action. equity futures down 18. in the fx market, a stronger japanese yen and a weaker dollar against the euro, with euro-dollar pushing 1.10. in the treasury market, yields head south. 1.52 on the u.s. 10 year. let's begin with the big issue. the mood music turning shower. -- turning sour. >> i'm struggling to find the good news against all of this. >> the chinese have been clear about not wa