say. i thick it's going really well. alix: president trump sounds optimistic on day one of official trade talks with china as he prepares to meet with top negotiators. china loosens its rules. the consul he laying -- the country laying out a timetable years in the making. iran oil tanker hit by missiles. to checks of oil prices as iranian tankers hit in the red sea. confusion over whether saudi arabia is responsible. welcome to "bloomberg daybreak" on this friday, october 11. i'm alix steel. congratulations, you made it to friday. i feel like we've had three weeks and five days. optimism on potential trade talks. president trump saying the talks went pretty well. s&p futures are up by about 0.9%. will we see that kind of followthrough buying? euro-dollar building on gains from yesterday. cable rate also at a three week high. broadly weaker dollar story.

if we get a currency pact, maybe we see a weaker dollar. time now for global exchange. we bring you today's market moving news from all around the world. from hong kong to london to washington, this morning's top stories. we start off with china. after decades of waiting, china is setting out a timetable to remove its foreign ownership cap on financial firms. on the phone from hong kong is bloomberg's enda curran. what does this actually mean? to wind is a roadmap they can fully take over their operation in china. they've been pushing for this for years. it will begin next year. it's just the latest step on china's part to attract more foreign capital into its financial markets, to buy more stocks and bonds, and that is a good thing for their companies. the timing is hardly coming to dental, coming in the background -- is hardly coincidental, coming in the background of trade talks.

it remains to be seen whether and how quickly these approvals are granted to foreign firms. alix: now i want to turn to the tensions in the middle east. iranianiles struck an oil tanker off the red sea coast. they initially accused saudi arabia of the attack, but later withdrew that claim. walk us through the facts and what we know. reporter: what we know is very early in the morning, around dawn, this oil tanker which belongs to the national iranian tanker company, was struck by two missiles. it has a capacity of lifting around one million barrels of oil, and it is now slowly moving its way back towards the persian gulf. as you mentioned, iran initially suggested that it suspected saudi could be behind those missile attacks, but has since backtracked on those comments, and has denied it even made

those claims in the first place. alix: nevertheless, brent above $60 a barrel. now i want to turn to europe, where there are signs of optimism for a brexit deal following a positive meeting between prime minister boris johnson and irish prime minister leo varadkar. >> i am now convinced ireland and britain one third to be in and -- britain once there to be in agreement, and i do see a pathway to an agreement in the coming weeks. alix: joining us from brussels is maria tadeo. what was in that deal that no one knows about that made the irish prime ministers so positive? you canhe market, as see, is buying into that very positive music that came out of that meeting between the prime because and the irish that's the first time the two --eared to be only

appeared to be on the same page. eusaw michel barnier, the chief negotiator, leave the european commission jaime, looking very serious. he did not take any questions, and it was no comment from him. the mood here is much more cautious. it will all depend on those technical details. they will have a two hour meeting between the eu and u.k. delegations. they are looking at deadlines for the technical moves to be made before the political decision gets done next week at the european summit, but again, it is clear we don't have any details, and the mood here is very cautious. alix: thank you so much. , whereturn to the u.s. the unprecedented blackout in california has coming to an end, but the public anger continuing. newsomnia governor gavin called the blackouts appropriate, but had a dramatic he harsher tone at a press conference last night. >> this is not from my

perspective a climate change story is much as a story about greed and mismanagement over the course of decades. alix: on the phone with us now is bloomberg intelligence's senior utility analysts. what happens now? can you hear me? kit onks like we lost the phone. we will get back to him in a moment. we move now to the trade talks in the u.s. day one of u.s.-china trade talks apparently went very well according to president trump. the president is set to meet with key chinese officials today, including vice premier liu he at the white house. with us is jenny leonard, bloomberg trade reporter. what can actually get done? jenny: we are a couple hours away from a high-level meeting between president trump and the chinese vice premier in the oval office, which is usually a good sign, especially after the president said yesterday that

the first day went really well. what is on the table and can be packaged is the big question for today. we've reported there might be a currency deal that might see some chinese large egg cultural purchases coming. huawei can grab some licenses. i think that is what they are trying to figure out today. of course, the president has to sign off on anything that will be negotiated today and presented to him, and his advisors now, so there is cautious optimism going into today. we are a couple hours away from really knowing what is going on. alix: thank you very much. we want to update you on some earnings. a nice pop in premarket, sales coming up on most a percent year on year, beating estimates earnings. there's a little confusion as to what is comparable. we care about fastenal because it cans to be -- because it

tends to be a bellwether of the industrial space. they did invest more intact. they are hiring more people, investing more in the people, so that readthrough on the part of the economy also doing well. sales up by over 6%. coming up on the program, much more in your morning trade and analysis in today's first take. this is bloomberg. happy friday. ♪

alix: if you are a trader, you

get these headlines about an iranian oil tanker and missiles. do you trade it? vincent: no. alix: exactly. [laughter] vincent: it's a knee-jerk reaction. there's conflict in the middle east, potential reductions in supply. the algos take oil a couple of percent higher, and everyone waits to see what the next news is. iran blames the saudis, and says maybe it wasn't. we have absolutely no idea where this is coming from, so step back for now. reporter: look at what happened to one year brent crude the last time the saudi oil disruption happened. iea: you also have the lowering its demand forecast yet again. that was also part of it too. katie: i think we have to take a step back and look at the macro environment, which is just

really slow growth, slow demand growth in oil. ultimately that is going to set the price. think the political risk is always going to be bubbling up and down, but ultimately it is going to come down to fundamentals. vincent: i think it is the perfect take. these could be opportunities to sort oil if the global -- to global economye is slowing. alix: i feel like a tanker had a missile fired on it of saudi arabia. [laughter] alix: if that headline happened eight years ago -- i mean, a tanker was hit with a missile from saudi arabia. vincent: we don't know it was saudi arabia. alix: near saudi arabia, right off the coast. vincent: but we don't know yet. alix: but i think we learn something about this and potentially brexit. i feel like we learned yesterday from the cable rate that the good news is not priced into the market. if you get something good, what

is the upside risk you guys see? damian: that's a really good point. the markets are definitely reacting to good news. best treasury yields basically surged on good news with u.s.-china trade. bad news, they barely budge. we are in a bit of a consolidation phase with a lot of these assets at current levels. katie: this is going to have to be a show me market. i think we have volatility around the news, but growth and earnings are going to have to show up because i think investors are just fatigue at all of the noise in the news, and they just want something tangible to hold onto, and that is going to be fun the mentals. vincent: i'm exhausted. [laughter] vincent: when you say what's priced into sterling, i think you could see, if you get a -- you need to have parliament involved. do get a brexit deal, i

think you could see upside on sterling. a lot of people have pulled out of the u.k.. . this is the downtrodden economy. this is the place where it's been beaten up. it's got upside. that's where you want to hide. damian: my question is are you funding euro or dollar? the dollar is basically going from strength to strength, and now with the ecb minutes and people doubting whether they can reach any extensive ash any consensus -- whether they can reach any consensus alix: it feels like mario draghi was alone in extending qe. --ian: yields went from 70 from -70, sorry, 250. that's a pretty big move.

a lot of the spreads are going the other way now. it's kind of interesting. markets saying loudly that rates are going to stay lower for a really long time. the market is dominating, i think, the central bankers right now. alix: so then why did we see this move in the cable rate? i'm going to bring it back is a microcosm. people are calling for parody, which we've talked about many times. it's going to be 1.60 again. , end ofit is a buy conversation. [laughter] alix: but all of the difficulties haven't changed. if boris johnson hasn't come up -- johnsonrder deal has come up with the border deal

for ireland, that could get through. that way imply he's brilliant, this is amazing, and an insult to the europeans, and cable is higher. vincent: remember, they are watching this in the u.k., and what they are saying -- what you are saying about orest johnson, they are all shaking their heads. [laughter] alix: the risk to the upside and where that may actually be. damian: just look at u.s. treasuries -- sorry, global treasuries. i think this is the second-worst week for global treasuries in the last 52. it's a really good point, and the worst week was mid-september. so we are getting to the point where yields are reaching a bit of a consolidation phase, and markets are reacting more positively to good news than the bad news right now. katie: we were all talking about a recession two weeks ago. the ism data comes out, we see some fraying around the edges of even the good u.s. data, so that's coming off the boil and you are starting to see that more priced into bonds.

alix: but we had the thirty-year auction yesterday, record low yields. at the same time, you had a selloff on the front end. that to me says that fear is not gone. vincent: there was a lot of concession going into that auction. i talked to fixed income guys. why are treasuries selling off so aggressively after a down printed cpi? novy wants to touch this into the auction. they need to make room for it so we can take the auction on. i think that was pure trading technicals. damian: look at the greek auction on wednesday. i mean, -0.02%. you're paying for the opportunity to own greek debt. can you believe it? vincent: if that doesn't tell you what's wrong with the world, i don't know what does. katie: that's the point. this negative interest rate environment is going to be with us for a while, and we could get even deeper into negative territory. that was the signal i took. i'm going to buy these because i

think they are going to go even more negative. alix: with italy, too. same kind of thing. so wrapped trade into this whole conversation. is trade just immaterial -- trade just immaterial to everything that is going to happen? vincent: i thing what is actually going to happen today if you are not going to get a trade deal. you're going to get the end of a trade war, at least temporarily. one name we haven't heard all week, peter navarro. the fact that he is under wraps and they have him in a box someplace tells me they don't want to hear what he has to say because it's always negative, and it's always the seven deadly sins of china. to make him of that means they are really trying to at least get a concession. it'surrency pact, garbage. we are going to give a lot to gives very little -- to get very little, but trump needs a win. the impeachment story is getting very hot. giuliani is in very hot water. you are not going to get

usmca. the democrats will not give him a win on that trade deal while they are holding his feet to the fire. katie: they are pretty busy. vincent: the one thing he can do is china. he can make that happen without them, and he's going to do that. katie: i think you are absolutely right. we will see some sort of truce or detente, so this part of the war might be over. we are looking for a small deal. ag, buying more soybeans, buying more pork. we will see perhaps some give up on our side. we will delay or avoid the increased tariffs, but we are far from an actual deal. but to your point about how the market will react, expectations are really low, and there's a lot of trade fatigue in the market where people have said this is not going to happen. beanything, it will probably viewed positively and we take just that bit of uncertainty off the table, which might be enough to push the market forward. again, that is a short-term view

because longer-term, that has to manifest in higher confidence and better activity, and in better earnings. we will see if that happens. damian: i agree. if you look at the price action after the set announced -- after the fed announced it is going to expand its balance sheet, it tried to rally, but couldn't. any time trump has been directly involved in negotiations with the chinese, something has gotten done. alix: that's a really good point. i mentioned a handshake or a hug . i was being glib, but i meant it. vincent: yesterday the president tweeted, "i'm going to meet with liu he." the optimism just shot through the roof. i agree with both of you. that's where the markets have a lot of fatigue. alix: to that point, you've got energy, financials, industrials, they led. is that the trade today?

see who'st twitter to hugging who, and then you get a trade into cyclicals? you left me. vincent: that's not my -- you laugh at me. vincent: that's not my wheelhouse. [laughter] alix: what do you need to see to make a more definitive rotation? katie: i think those have also been the most beleaguered in terms of the pressure from the trade war, so i think that's the short-term play, but again, to have a sustainable rally here, i think you really have to see some fundamental improvement. damian: i agree. we are sort of seeing people nibbling at value dislocation in lower quality debt. i'm a fixed income guy, but you're are right. we are not going to see real change in leadership from growth to value or defensive to cyclicals until manufacturing bottoms, and i think we are a long way away from that. katie: we've tried. we had a few fits and starts of seeing the transition from growth to value. we had a pretty good rally for a

while and gave back about half of that. i think the market is still waiting to see which side to place their bets on relative to how this is all going to shape up. alix: show me story. thanks a lot. cignarella and damian sassower, thank you. katie nexen of northern trust will be sticking with me. you can find any charts we are going to use on gtv under terminal. check it out -- on your terminal. check it out. california is governors has blackouts stem from greed and neglect. pg&e says we are sorry for the hardship. more on that next. this is bloomberg. ♪

viviana: you're watching "bloomberg daybreak." the talks surrounding wework have gone from ipo to bailout.

that's according to "the financial times." wework is set to run out of cash soon. bill mcdermott is stepping down as ceo of s.a.p. he will be replaced by co-ceo's. for about a decade, mcdermott led europe's largest software company. he embraced cloud computing and transitioned s.a.p. through acquisitions and revamped products. aregn renault and nissan working in sync to put the carlos ghosn era behind them. the french automaker naming their cfo as interim ceo after ghosn's number two. that is your bloomberg business flash. alix: thanks so much.

the unprecedented blackout in california is coming to an end, but public anchor continues. governor gavin newsom blamed the company for not hardening its grid. on the phone with more is kit konolige, bloomberg intelligence senior utilities analyst. how does this play out over the next few weeks? kit: i think the company hopes for no more high winds and dry conditions. they are really between a rock and a hard place. , if they have fires that occur because they didn't cut off -- alix: speaking about power, looks like we did lose connection there. kit konolige of bloomberg intelligence. stay with "bloomberg daybreak." we are going to speak to the citigroup analyst who says there's a 75% chance that pg&e's stock goes to zero.

you have the bankruptcy, which pg&e does not have exclusive rights over. then you also have utility companies having a deal with climate change and investing in their grid. at the same time, they have massive liabilities, $35 billion for this utility company. coming up on this program, day two of trade talks set to begin in washington, including a sit down between president trump and chinese like me are -- chinese vice premier liu he. we'll talk about that with henrietta treyz, veda partners managing director. 0.8%.w up by about this is bloomberg. ♪

alix: this is "bloomberg daybreak." i'm alix steel. it's the hope and optimism trade over the markets. s&p futures up a full 1%. the dax really outperforming.

that's going to be trade between the u.s. and china. the other part is we may actually get a brexit deal. whether or not you believe it, we are trading it. you can government bonds extending that drop. the 10 year yield rises 10 basis points. you have cable over 125. we are at a three month high. that continues the rally we saw from yesterday. you had the irish prime minister saying he is positive on a deal, that may be johnson has worked out an irish border problem. curve a little steeper in the u.s. brent up by 1% on geopolitical risk. going with the trade war issue, two days of talks. president trump says so far, so good. pres. trump: i think it's going really well, i will say. i think it's going really well. we had a very good negotiation with china. they'll be speaking a little bit

later, but they are basically wrapping it up, and we are going to see them tomorrow right here, and it's going very well. alix: joining me from new orleans is henrietta treyz, veda of economicector policy research. what does really well meaning your world? henrietta: i think it means really well right now, and i'm very concerned about the next steps. what we have so far, it looks like a commitment from china on agricultural purchases, a can the men to open up for foreign ownership in the financial services space -- a commitment to open up for foreign ownership in the financial services space, and bb some moves for market access. but you are looking at all of the low hanging fruit being thrown out right now. my concern is that after we get a pause, if that comes to pass -- we are only 40% on that occurs -- once this low hanging we have cleared, then

nothing on intellectual property , nothing on forced technology transfer. the chinese delegation wouldn't even discuss those topics this week. ahead, you want to build on the small things we can agree to. if we are every into all of that now, what hope is there for our next conversations when maybe president trump and president meet? there's no low hanging fruit to go forward, and that is definitely a concern. alix: what you make in terms of the tariffs that should be added in a couple of weeks and december? if that doesn't happen, how do you interpret that? how good is that? henrietta: i agree with your previous analyst on the line. i think a lot of the business community just wants to know what is going to happen and get it done with. i had the opportunity to speak with some manufacturers early in the year when we were thinking about a six month pause around the g20 in osaka. there was this idea we could hit

pause for six months. that was of no relief to the business community because they want this to end. keeping the uncertainty out there is a significant damper on spending. it -- on capex spending. that a smallful scale deal that staves off tariffs does not do anything for the $360 billion worth of tariffs in place today just from the u.s. side. this is not a constructive step forward. it seems to be geared towards getting a good optical moment for the president, who may be needs some good news these days, but in the long run, this is perhaps just prolonging this negative environment between the two sides that i think the chinese are frontrunning right now by announcing that they will be doing this opening of the access forarkets domestic u.s. banks and financial services companies. i think this is a short-term bump, but long-term bad news.

alix: i want to get to the manufacturing ceo sentiment. dallas fed president robert kaplan talked to bloomberg yesterday about just this topic. robert: most businesses i talked to right now want to stay nimble, and they realize there could be new policy pronouncements anytime, and with that amount of uncertainty, they are not cutting back their business, but they are putting new projects on hold. the other thing they are doing is watching very carefully if there is a broader slowing. alix: katie of northern trust also here -- katie nixon of northern trust also here. what does the fed do? katie: i think the fed is in a tough spot right now because talking about the trade uncertainty as being part of their calculus would suggest that if we get this mini deal, maybe they won't act. i agree with henrietta that this is a sort of pause and a much

longer battle. i'm interested in hearing about the conversations with some of the manufacturers because i don't think that manufacturers are going to think that this is just back to normal. i think this is a new normal. they are going to have to make different decisions regardless of what happens with the trade talks today. alix: that is a good point. also, we have to remember it is not just china-u.s. it is also europe and china. there were already tariffs imposed on certain autos from china. address the conversation, the question that katie was bringing up on manufacturers. i had ahenrietta: conversation a few months back where they said, i need to know with the tariffs are going to be on for three years at a 25% rate , because it is not worth it supply chain out of

it is.nless so they have done the cow collations. if you are a manufacturer trying to figure out where this is going to end, but i understand from my conversations with similar global manufacturers in the last few weeks is that they are not shifting their supply chains. they are shifting to their end-user. instead of selling your spandex pants to americans, you are selling them to indians. that is not getting you to cycle out of china because that is where your supply chain is. god help you if you have a pharmaceutical company and you need to go to the fda to get a five to seven year review process once you set up a new plan in thailand or malaysia or wherever you want to go. it is extreme nearly complicated. manufacturers are not happy about it, to say the least, but they are pricing this into their future, and the farmers are very concerned about auto tariffs, as you mentioned, especially against the eu come november 13, when a decision on that needs to be made.

they need those auto tariffs off the table because they're only trade beacon of light right now soy, andlentils, almonds going to the eu. so they need some certainty. alix: those soy croissants, always so good. so the fear of uncertainty you are addressing come of bloomberg economics had a really interesting chart that shows how much of a drag we seen just from uncertainty versus the actual tariffs. it really does wind up showing that it is the uncertainty that has a bigger impact. at what point does the actual tariffs have the bigger impact, henrietta? henrietta: there was really flashy news a few weeks back abandoningindustries its strategy to combat the tariffs because it was not resonating with voters. this is something they try to focus on for two years now

now,rted -- for two years predicting that they need to get in front of this and educate the u.s. consumer that this is going to mean taxes on things that they buy, specifically the walmart shopper, which is also tethered to the trump vote demographic. what they have tried to do is get out the message that these tariffs are inflationary, that they will add to the cost of your back-to-school shopping or your baseball gloves or your sneakers for your kids, and they have not been able to generate enthusiasm for that message, just like we haven't seen farmers en masse abandon president trump. i spoke with them recently, and they advised that in the first quarter of next year, the inflationary pressures and price increases are going to be essentially a given because what we seen so far is companies pull forward their inventories, they've gotten ahead of the tariffs, so they haven't had to pass costs onto the consumers, except in a couple of cases where christmas season is

involved, specifically with bicycles and scooters. you are starting to see it seep through. trade is slow-moving, and i can be first quarter is when we start to see price increases for everyday consumer goods. when president trump pushes out the tariffs further, that sets up for a timeframe around the first quarter. my expectation is this pause lasts one to two months, not another six months, as perhaps would be more beneficial for short-term traders. alix: wrap that into 20 turning -- into 2020 earnings. there was expectation he would have to see 2020 earnings related to the downside. how much? how do you deal with that? what sectors? katie: i couldn't agree more, and we are seeing companies not really able to pass price increases on, so we expect this to be a hit to margins, offset by continued share buybacks. we've never believed the street estimates that have double-digit

earnings growth for 2020. we are off of a very soft bottom this year, so it is all relative. we are building into some margin pressure. alix: what areas are going to get hit the most? katie: it really depends on what happens today, on whether the tariffs go into place. if we see a lot of pressure from the december tariffs in the first quarter, you're going to see that pressure on retail and some of the consumer areas. this would be areas that would be particularly vulnerable. there are a lot of crosswinds next year that are not tariff related that could impact sectors like technology. you've got the regulatory pressure on technology, this still challenging interest rate environment for financials. there's a lot of nontariff news that could still put a damper on earnings next year. alix: so where do you go? what do you like? katie: we still like u.s.

equities broadly. we are seeing positive earnings growth. though you wish and's are right around historical averages. they are not extremely expensive. our biggest confidence is that the fed is going to continue to lower rates, which would be very supportive to very relations. alix: ladies, thank you so much. and we had a trays of veda partners and katie nixon -- henrietta treyz of veda partners and katie nixon of northern trust. viviana hurtado is here with first word news. viviana: day two of trade talks between the u.s. and china in washington. negotiators are trying to end the 18 month long dispute that's rocked the main image -- that's rocked american manufacturing and hurt the global economy. president trump said they went very well. to dare -- today he meets with chinese vice premier liu he. the eu will discuss sanctions against turkey for their invasion of northern syria. turkish president erdogan

threatening to open the door to europe for the 3.6 million refugees ebbing in his country -- refugees living in his country. last night at a cnn town hall on lgbt issues, democratic candidate elizabeth warren was asked what she would say to a supporter who believes marriage is only between a man and a woman. well, i'm going to assume it's a guy who said that, and i'm going to say just marry one woman. [laughter] [cheers and applause] warren: assuming you can find one. [laughter] warren is facing concerns over how she will connect with voters in rural areas, as well as the midwest. 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: thanks so much. i love that story because if you

talk to comedians, their worst nightmare is a live this foreign -- is elizabeth warren, but we learn she's actually funny. -- morep, some people on the complicated ethics and grand ambitions in this week's "businessweek" feature. nowthree-tenure spread has turned -- the three-month-tenure spread has now turned positive -- the three-month-10 year spread has now turned positive. we've flipped into positive territory. you are also taking a look at the cable rate moving higher, a three-month high now. michel barnier is said to recommend brexit talks enter tunnels. we are trying to find out more on what that means. there's obviously optimism that there will be some kind of agreement on the irish border and customs checks.

if you have a bloomberg terminal, check out tv . watch us online, click on the charts and graphics. go to tv . this is bloomberg. ♪

feature. first up, staying with ev's, tesla's autopilot dilemma. the company hopes to dominate self-driving car. face e-cigarettes scrutiny. and champagne, for, and caviar.

the snow polo world cup. joining us is silvia killingsworth of "bloomberg businessweek." the tesla story is a fascinating take for the magazine. basically, people need to die in learn.r the computer to silvia: this is a classic ethics trolley problem. is it more ethical to say five people and kill one person? it is that kind of math that once you translate to the real world becomes really distasteful. we talk about these electric vehicles, people who are really into this autopilot feature, which is essentially a souped-up version of cruise control. it allows the car to keep driving on its own. it is software. right now, you can think of it as a sort of beta stage that gets updated every weeks. it is getting better the more it

practices. that is how machine learning works. these cars need to be on the roads to learn real-world obstacles, but there have been a handful of deaths and there probably will continue to be because that is the nature of driving, but then again, computers are probably more reliable than humans. they don't get tired, they don't get drunk. alix: longer-term is the point. most people are killed in car crashes then plane crashes by far. 's the end of the day, av will be safer. silvia: right. it is that sort of trade-off. are a few deaths more acceptable somehow? it is about 40,000 a year in the united six alone, over one million global. it's that difficult, uncomfortable math. alix: exactly. it was a really interesting read, and really made you think, maybe we need to take a hit if we want to get into the technology. talk about taking a hit, this is

focusing on juul. we thought big tobacco was bad, and now juul really taking the trophy. silvia: this company, when they started, kind of set out to be against big tobacco. like, we are going to beat them. we are going to switch people over from cigarettes. apparently, 70% of adult smokers who do smoke say they want to quit, so this was initially marketed as switch over to this, and this is a safer, they believed, because it doesn't have the tar and stuff, but there haven't been longitudinal studies on these things, so we don't know exactly how safe. as we know, there have been lots of vaping illnesses. i think we are heading up to three dozen deaths, and over 1000, 1300 people have come down with vaping illnesses. they aren't directly tied to juul products per se. they took the silicon valley of

mon -- silicon valley mantra of move fast and break things, but that doesn't come well to human bodies. alix: the third story is the snow polo world cup. how do you play polo in the snow? are you on the ice? silvia: yes. this happens the third weekend in january. you can go to over to saint moritz. there's lots of snow, the field is a little bit smaller. it is supposed to be one of the more accessible polo matches. [laughter] alix: because getting to davos is super easy. silvia: champagne, caviar, the whole nine. alix: what i love about this is it highlights what davos is hasosed to be to but davos become, a party of billionaires. silvia killingsworth of "bloomberg businessweek," really appreciate it. you can read these stories in the latest issue of "bloomberg businessweek." street, thebeaten

new book on immigration called "border wars" has some great stories from inside the white house. at one point, the author writes that president trump asked about a border moat filled with alligators and snakes. the president would only need about 700 miles of moat. the rest is actually water. the gators, 3500 of them would cost about 200,000 dollars, but construction would run into the billions. the water bills, astronomical. it would be about $450 billion. i wonder who he called? who do you call for one million alligators? i guess it's back to the drawing board. coming up, we are expert in -- we are expecting earnings. if you are heading to your car,

listen to bloomberg radio on sirius xm channel 119 and the bloomberg business app. this is bloomberg. ♪

alix: joining me now is vincent cignarella, voice of bloomberg audio squawk. you are watching cad. vincent: it's going to be a fun day for the canadian dollar. at least, it could be. cad.ould get a weaker my buddies at rbc when i was trading today study, and said because the jobs data last month blew out to the upside, traders think it is going to revert and go the other way. their study suggests there's real potential to get two really good job prince in a row. so the possibility today is to see the cad trade down, as opposed to pop back up to where

there was resistance. that level has significant resistance, so if this read is right and the canadian dollar does we can after the jobs data -- does weaken after the jobs data, it is a really good level to buy. today it will be canada, and is not the loonie. canadian dollar was back in the day that you could do same-day delivery. alix: back in the day, when vince had hair. vincent cignarella, things a lot. you can listen to him everyday. coming up, we are joined by mark connors, credit suisse global head of risk advisory, and lara rhame, fs investments chief economist. ♪ everyone uses their phone differently.

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october 11. i'm alix steel. here's everything you need to know. it's day two of trade talks between u.s. and china in washington. negotiators are trying to end the 18 month long dispute it's rocked manufacturers and hurt the global economy. pres. trump: i think it's going very well. we had a negotiation with china. they are basically wrapping it up, and we are going to see them tomorrow right here, and it's going very well. alix: an iranian oil tanker hit by missiles in the red sea, the latest in a series of attacks in the region that have rattled the energy industry. iran's tanker company first blame saudi arabia, and has now backed off that claim. hopes of a brexit deal rising after what was described as a constructive meeting between u.k. prime minister boris johnson and his irish counterpart. varadkar: i am convinced that

both ireland and the u.k. want there to be an agreement, and i do see a pathway toward an agreement in the coming weeks. alix: varadkar says he believes an agreement as possible hope for --an agreement as possible before the october 31 deadline. this will be the first time line by line negotiations have taken place since boris johnson became u.k.'s prime minister. the nobel peace prize has been awarded to the prime minister of ethiopia. he was recognized for his work to end almost two decades of conflict with neighboring eritrea. and it is all going to be a show me kind of story. s&p teachers up a full percentage point on trade optimism. we've got to see the delivery for a sustainable rally. euro-dollar higher on the news. a selloff in treasuries as risk on really takes hold.

let's delve deeper. isning us on the phone stratford's vice president and global and list. that an get a headline iranian tanker was hit with a missile, what is your take on that? guest: there is still a lot of confusion, and there has been back and forth from iran on what exactly happened. first it was more clearly blaming saudi arabia. now the line is that this was coming from the eastern red sea. so when we look at the destination of this iranian tanker, it looks like it was headed through the suez canal toward the mediterranean. there's a possibility that this tanker was destined for syria. as iran has been continuing supplies to syria despite sanctions, that creates this deterrence dilemma for everyone

post saudi attacks. iran has two not been held acountable, so there is possibility that someone like saudi arabia or israel targeted this tanker, but there is still this big issue looming out there for the oil markets, which is there has been no effective deterrence against iran following significant attacks. alix: to that point, doesn't iran have to retaliate iesco -- retaliate? and if so, what does that look like? reva: and atelier should -- a retaliation is minor compared to what we would see in response to the saudi attack. we still haven't really seen what that response will be. it could be another cyber attack. we could be getting word of what's been happening on that front any day now.

iran could respond through the cyber domain. it could also respond in a military domain. this is where you have to go back to iranian strategy, which is that they want to escalate with the united states in order to push the white house to the brink, knowing that they don't want war, in order to greatly sanction stalemate. still bornork is under iranian escalation. alix: can you help me draw a line into what we are seeing with turkey and syria and president erdogan? can you connect dots? ina: tangentially related the sense that this is another area where iran has tremendous influence in syria, where the syrian government is extremely dependent on tehran, but it exposes how desperately the united states wants to extricate itself from its military commitment in the middle east to

focus on these other big policy priorities, but that is so much easier said than done. turkey, of course, once the u.s. to get out of the way. it's been looking at its immediate periphery, saying i don't like what you've done with the place. we need to take matters into our own hands. but of course, there's the threat of islamic, that the u.s. still has a major interest in. once they are abandoned, they have to make a deal with the devil. they may team up with the syrian government and try to resist the turks, so this is kind of classic italy string politics, and it is messy and complicated, but this is why it is so hard for the united states to remove itself from these conflicts. alix: great point. thank you so much. here on set with me as mark connors, credit suisse global head of risk advisory. your title is risk advisory, so when you hear these headlines and then see oil up 1.5%, what do you think? mark: we look at volumes, and

.ou had cignarella on earlier you always look at where liquidity is. at credit suisse, we are looking at how we finance people in commodities. over the past three or four months, we've seen oil positions reduce in footprint and the tilts go down. so they are taking off longs and shorts, and taking off longs at a faster rate. so there wasn't a lot of stuff on the books to be impacted. that's why you are not seeing it higher. alix: i love that explanation. it's not a fundamental thing. it's a technical liquidity thing, but why? mark: because of fundamentals. if people are looking at the growth trajectory, they are looking at demand, and speaking to clients, we get a little bit of a window into their thought process. they are not that constructive. then let's look at rates. where's the trajectory of rates? lower. there's no inflation really out there.

that's a broad statement, but when you have the chairman of the st. louis fed redefining is, that's when we see inflation. alix: when we take oil as a microcosm, you have the macro factors that are more supply related, what changes it for a trader? what brings in more liquidity? mark: that -- alix: does it have to be inflation? mark: last september we were looking at the rotation into value and cyclical's. if that was a real reflation trade, you saw the transports and cyclicals really get a bid, you will see people buy oil in anticipation of investment. had someone on earlier talking about investment appetite, and you're not seeing that. if you don't see people investing, you're not going to see oil go up. would have to see that demand. alix: when it does happen, how can it come?

mark: 2007, i think we had to $60.from you have to look at that as a marker, i think. alix: civic and come back. mark: absent -- so it can come back. mark: absolutely. alix: what are the chances of that happening? mark: i believe very low. but tread carefully because that is consensus. alix: exactly, which ties into what we are seeing with the cable rate as well. we are going to dig more into that in just a second. mark connors of credit suisse will be sticking with me. coming up, day two of trade talks. president trump says so far, so good. we break that down lara rhame, fs investments chief u.s. economist. where is the consensus? this is bloomberg. ♪

pres. trump: i think it's going really well, i will say. i think it's going really well. we had a very good negotiation with china. they will be speaking a little bit later, but they are basically wrapping it up and we are going to see them tomorrow right here, and it's going very well. alix: that was president trump speaking at the white house yesterday. going me now, lara rhame, fs investments chief u.s. economist. , is connors, credit suisse still here -- mark connors of credit suisse is still here. they's case for you, lara? lara: i think there may be some effort to talk about a smaller deal, but i'm still a little more pessimistic that we are going to get really a lasting fundamental trade deal.

that thread, it's really hard to put it back together again, so i think that's what we've done. you're seeing the tentacles of this spread to cybersecurity, currencies, and a variety of different fronts. it is going to be hard to really change the big shift lower in trade volumes, investment lows, all of that. alix: anyone who comes on says exactly that, but we still have a huge rally in the s&p over the last few days, a move into cyclicals based on the headline that they are going to meet today. ink: if you have rates negative territory, you have to put your money somewhere. we have unfunded pensions, we have liabilities we've got to feed. there aren't many places you can go beside credit structure and credit equities. they have to be bought. that's just a demand. lara: i think that's exactly it. we hear so much -- i don't even

say pessimism, a lack of conviction any of this. we have sterling flying higher today because there is hope there could be a brexit deal. but does anyone really think a magic wand is going to be waived and brexit is going to be solved? alix: so how do you trade that? lara: it's tough. [laughter] alix: i get it. lara: volatility. alix: so what do you do? mark: our business is to finance active managers. when you look at who's winning, the quantitative managers who were the poster children for the future have had a terrible 2019 because of chop. because of the rotation that happened in september. because of a number of reasons. --cretionary chapter discretionary captures the trends. who's making money?

macro discretionary. some of those tactical trades that are going on. but the trade-in from the metals and the quantitative managers that are very levered to manufacturers, not doing that well. alix: so when does it change? i'm looking at the three month-10 year now in positive territory. that is a big step from where we were. what signal does that send? lara: the bond market is so pessimistic, sending singles for the economy, the u.s. economy in particular. i think they were too negative on growth prospects. we've remained positive on cyclical sectors like high-yield. that's also been a terrific performer over the year, and i think it's a place where there's still a lot of room for gains. if you get the economy slowing, it is going to keep the volatility in the system. it is going to keep that chop going. but it is also a place where these higher-yielding assets can do really well. mark: agreed. alix: how is that not consensus,

though? mark: it is consensus. i love what you said about the slowdown in volatility. it is all most like when a tsunami comes into shore. when you hit a lower volatility regime, any bump is going to go higher because there's really no place to go. people don't feel comfortable in inflation. sub 1% alix: from an economic standpoint, we spoke exclusively to robert kaplan yesterday, della said president. here's what he said -- dallas fed president. his what he said. businesses i talk to want to stay nimble, and realize there could be new policy pronouncements anytime. with that amount of uncertainty, they are not cutting back their business, but today are putting new projects on hold. the other thing they are doing is watching very carefully if there is a broader slowing. alix: so that's real.

that's not just trade talk. when do we feel it? lara: we are already feeling it in sectors. the impact is just uneven. i think we have the services sector, a much larger sector of our economy, feeling more in the uncertain, nimble, not extremely pessimistic sector. ,hen we have the household still relatively insulated from a lot of this. really we get german any factoring data just doesn't -- german manufacturing data just doesn't impact the u.s. household directly. they are looking at a jobs picture that is relatively constructive. they are looking at good household leverage, a high savings rate taylor: that is where -- savings rate. that is where i'm hanging my expectation. mark: i was singing about where is the impact to different companies. hadchief strategist

something i haven't heard many places. they are taking up more cash. they generate twice the month of free cash flow than they did 10 years ago. they are become faster, better. they are achieving scale. they understand that expense line is tough, because growth isn't there, that's not good for wages. they are leaning into technology and efficiency. so eventually, i think this is going to continue to have that divide, the economic divide that the fed is so conscious of. it will only get wider because companies are doing it for themselves. they have to. if people are along for the ride, great, but there will probably be less of them. lara: people haven't really been pushing into wages this entire expansion. to the extent that they can squeeze more productivity out, i think that could be good. productivity has been dismal as well. alix: how does it end up lasting? peak margins have been a thing

forever. now 2020 earnings, we have to slow down our estimates. what do you think? lara: globally, margins are getting squeezed. the fundamental for the large multi-cap equities are eroding. crushing small and mid-cap companies. lara: yes, and not goes back to the massive amounts of passive investment, the fact that there feels like there's nowhere else to go, the dividend yields are higher than a lot of your traditional fixed income return. so you either have to go into equities, where you have less conviction, or you have to reach deeper into the credit taylor: you have to go -- credit. mark: you have to go down the food chain. that's why structured credit, anything that generates cash flow, is being structured and sold back out. alix: but all i hear is the leveraged loan market is falling out of bed but as we have less time to view those documents. lara: that's crazy.

deals are still getting done. alix: where is the biggest risk? where is the biggest mispriced right now in the markets? misprice inggest the markets is probably in sovereign credit. [laughter] mark: let's just drop it right there. the amount of debt that's out there that's being financed now, the reason i say that is look at what happened in september with the repo market. we got jammed because of the supply. 800 billion dollars coming down. had one of our treasury inearchers speak of that august. we haven't had $800 billion come down in the front end, and the fed is cutting rates. that spiked everything up. that is a sign that our system got jammed because cash is being husbanded. cheekily about

sovereign credit. the system got jammed. alix: i'm glad you didn't say plumbing. mark connors of credit suisse and lara rhame of fs investments will be sticking with me. coming up, eu chief negotiator michel barnier recommends going to detail divorce talks. more on that. this is bloomberg. ♪

alix: -- on brexit optimism as eu chief negotiator michel barnier is recommending tunnel talks, the process were both sides to access legal text in

secret -- sides discuss legal text in secret. maria tadeo is joining us for more from brussels. walk us through what we think we know at this point. it is at this point, and very significant, michel barnier has been talking of entering the tunnel. usedin brussels, is a term to essentially have time and space to explore a new legal alternative to the current brexit plan. of course, the has always been the big obstacle. we know former prime minister theresa may tried to get this done, and it was rejected three times. barnier has said it is ok to look at alternative to the existing plan. the hope is that if they do get to an agreement, this will be ready to be sealed at the european summit, which is seen as the all crucial make or break moment next thursday. having said that, you need to be very careful because we are talking about technical details. ultimately this is a political

discussion, and of course, the biggest unknown is what is the u.k. parliament going to do with the text. at this point, they have always been rejecting every proposal that's been put to a vote. alix: thank you so much. i do want to point out we are getting a couple more headlines here. first off, the european union comments on barnier and the meeting in brussels, the new u.k. brexit czar from the u.k. saying that the eu has decided to intensify brexit talks. mark connors of credit suisse and lara rhame of fs investments still with me. mark: our clients were buying u.k. assets. today you would fade it. if past is prologue, you would fade it. will we get every one to say yes? probably not. we have people who were long,

and that supply is going to be hitting the market. alix: good point, but doesn't it show that we are not price for anything good? lara: yes, it does show that, but look at the news. we don't have any details. that's hardly a reason speaks to the fact that all my day by day basis, we may have been over positioned. there may be some squeeze there. but this is a long, difficult negotiation that we know is really bogged down in so many places. alix: what if it's not? mark: well, back to your point about the secrets, it feels like high school note passing. what's really in it? it more has an impact for being dramatic then any substance. alix: you know what i'm getting at. that consensus is so far one way it is easy to write off good news. mark: it definitely could break. the question is, can you afford the other side of the trade? what is your floor here?

so that's it. a trader would say what is my trade here. good. i've got 5-1 upside. i like that. buy the rumor, sell the fact. investment is down, lowest growth in the g7 except for japan. it's not a pretty picture. alix: good point. mark connors of credit suisse and lara rhame of fs book bothing with me -- of fs sticking with me. cohen,k to rodgin sullivan & cromwell senior chairman. this is bloomberg. ♪ ♪

alix: this is "bloomberg daybreak." i am alix steel. data, butit of ego really it is about the trait optimism in the market and brexit optimism also reflected in the market. s&p futures up 1%.

the dax outperforming in europe. cable rates popping. bonds selloff all over the place . yields up seven basis points. four. u.s., yields up went into steepening territory and were no longer flat for a second. economic data coming out. import prices on a month on month basis coming in, up .2% overall body year on year basis, still down 1.6%. that is less down than we thought it was going to be. export prices are also lower. still with me are mark connors and lara rhame. deflationary conversation? -- lara: its not at does not add to that conversation. we do not have the tariffs

impacting the broadest swath of consumer goods. we are still seeing this regular input prices. alix: when with that start taking effect and what with the impact wind up being? any reflationary signs? lara: tariffs are attacks so it does not give us the inflationary wage push that the fed gets concerned about. it would just be attacks on households. one of the things we need to see out of the straight deal to get any genuine good news is a delay ofthis giant tranches tariffs affecting households. alix: lack of inflation never coming back also seems to be consensus. what you do with that? mark: with the lack of inflation you by cash flows. remember that game we used to play called 60 days of kevin bacon? -- six degrees of kevin bacon. alix: i thought you meant bacon like you eat. mark: everything goes back to

rates. going to continue to grow down. everything that has growth in scale, you have to buy it. let's get the robert kaplan -- alix: let's get to robert kaplan . here's what he had to say. he is not opposed to rate cut. here's what he said about how the path should go. now gives usestly the best chance to avoid a more severe slowing. that is why want to use the ammunition now, even though it means we will have less ammunition later. you: what does that tell when you hear that? lara: we are probably in for one more rate cut, but he is trying to change the conversation. are we cutting rates because of the data or because of the risk and because of what is clearly a lot of broad-based hedging from outside the u.s. that fed rate cuts do not help or address.

they are trying to chase the conversation away from cutting rates for risk. they feel like they have a trust that. they want to focus is back on the data. alix: i basically said that. robert kaplan was like we do not follow the markets. when yields are so much lower, he said we have to take that into consideration. mark: on our team, there is a fedum, the fred -- the governs the front end and the market governs the long end. when you have a spread between bunds and the 10 year, the fed has to trade that. there is going to be a pull down and their hand may be forced. the structural difference between the u.s. and europe impacts the fed and may force their hand. alix: agreed. wrap this up for us in a nice neat bow. if we get a handshake between donald trump and the vice premier today at trade talks, what happens to yields and

equities short-term? mark: equities go up, yields go up, and that goes into year end oril we have economic data the financial market like in september or something more on a geopolitical scale. lara: we tread carefully when trying to buy into good news on the china-u.s. trade front. i think we could see in norma's volatility down the road if this deal is not enough. alix: such a pleasure. enjoy talking to you. mark connors and lara rhame. i want to show you what is happening with gm. this comes from a letter from a executive in general motors. there has been a four week workers strike. apparently there has been an offer made to the uaw to increase wages in a lump sum payment. it also preserves health care benefits and preserves profit sharing with limited upside.

they offered to create a clear path for temporary workers to become permanent. that seems to be what gm is offering as this strike hits a one month mark that could be having a material impact on gm's bottom line and its employees and factories in mexico. now let's get an update on what is making headlines outside of the business world. viviana hurtado is here with first word news. viviana: day two of trade talks between the u.s. and china in washington. negotiators trying to end the 18 month dispute that has robbed american manufacturing and hurt the global economy. president trump day one met well. today he meets with the head of the delegation, the chinese vice premier. next week, eu leaders will discuss actions against turkey for the invasion of northern syria. the eu has joined those criticizing the operation. nowish president

threatening to open the door to 3.6 million migrants to europe. -- one of the changes, key regional banks will have to hold assets that could be sold off a crisis. the changes could free up tens of billions of dollars. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. alix: thanks so much. time for follow the lead, a deep dive into stories making headlines and moving markets with insights from industry veterans and insiders. today we will take a look at the banking rule changes viviana just told us about. joining us as someone known as the dean of bank regulations. raj cohen. do? did the fed the fed it was not at

all to relax the rules for the largest banks in the country. modestlyid do was relaxed the liquidity and capital rules for the large banks that are of a regional nature and scope that do not have major international or nonbanking presence. follow what did was congress told them to do in dodd-frank and in legislation enacted earlier this year, which was to tailor their rules, not to have a one-size-fits-all thegation, but to look at actual risk posed by the institution and then adapt the capital and liquidity standards based on risk. alix: is it enough? rodgin: certainly for now. that hundreds, or tens of billions of dollars at

least, will now not need to be held in high liquid assets. that is one side. the other side is those tens of billions of dollars can now be used to make loans. this frees money to go into the loan market. that is a potential positive for the economy, as well as for the banks. like there a feel lot of loans regional banks weren't making? rodgin: absolutely. if banks have the opportunity to make loans, they will put their assets somewhere. alix: the less creditworthy borrowers? rodgin: i don't think so. i think there is plenty of good credit out there. what has to happen next? what would make a more material change? rodgin: i do not think we will see a more material change for some time. the bank commentators ask for greater change than the fed

gave. the fed did not report with any of those requests except for the foreign banks, and for the foreign banks, there was even greater change in the sense of making it more equal on an international basis. alix: what do banks do now? they make more loans, and then what? rodgin: loans are important because of the interest rate situation. rates are very low. -- this puts pressure on net interest margin. the ability to shift from lowest yielding assets to better yielding assets will be important for that margin. alix: regional banks will get hurt much more by the yield curve than a big bank. are they able to make up that lost revenue by the amount of loans? now they can go out and be like, great, i will make a bazillion

dollars worth of loans. rodgin: no. rateegative impact of the environment on them will outweigh the truly incremental additional capacity to make loans. if you look at the whole scenario, it is still relatively negative. alix: does that mean we will see more consolidation in the space, constant underperforming for the regional, what do you think? rodgin: i think we will see more consolidation. scale continues to be a major issue. see the very largest retail banks, bank of america, j.p. morgan chase, wells fargo, citibank being able to increase their market presence by the advantage which scale brings. asle used to be thought of back-office, today it is front office. it is how you can market when you have the scale to use

technology to market multiple different channels. the: does that mean you see large banks coming into beat the consolidators? rodgin: there are statutory barriers which prohibit the largest banks from ever again acquiring depository institutions. alix: where's the rest of the volcker rule? where are the rest of the rollbacks we need to see? rodgin: i do not think we will see much more in the way of true rollback. whether it is volker for the changes made yesterday, these are changes at the margin. these are not radical changes by any means. for example, on volker, you are not going to see the large banks go back into trading. they will have less regulatory burden and it will be easier for them to comply. it is not going to be a seachange. the federal reserve has pressed on issues of transparency, but

not major change. alix: if you wrap this into a bow for me, what are you hearing in terms of how banks think about the 2020 election in terms of senator warren -- not to senator warren but also bernie sanders? how are they processing that kind of political shift? they are still waiting for more information. we are so far away from that election. the banks are as concerned that the chairman of the federal reserve and the vice chairman willin place, because that be critical to them as well. that is irrespective of the election. reelected,ident were there would be a question as to whether chairman powell and the vice chairman stay. alix: always great to have you on set. rodgin cohen of sullivan & cromwell.

fall 20?, could pg&e we talk to the alice that made that call in today's bottom line. remember, bloomberg users can interact with the charts shown on gtv . this is bloomberg. ♪

viviana: this is "bloomberg daybreak." i'm viviana hurtado in the hewlett-packard enterprise greenroom. oning up later today "bloomberg markets," chun neil, lloyd's of london -- john neil, lloyd's of london ceo. now you're bloomberg business flash. aroundcutive who turned walmart's u.s. stores is leaving the company just before the crucial holiday season. he is returning to his native new zealand to run the country's

flagship airline. for five years he has been walmart's u.s. ceo and club ceo. a panel of international experts said u.s. regulators dropped the ball on the boeing 737 max. the faa sometimes did not follow its own rules and used out of date procedures. faa lackedaid the the resources to pull the designs located in two crashes. alix: time for bottom line. it will look at three companies worth watching. ,e are joined by emma chandra sonali basak, and brooke sutherland. first we are taking a look at renault. what have we learned in the last 12 hours? emma: a lot going on at renaud. we are seeing the carmaker have its best day since june, the stock up 4% and reading and a day high after a big management shakeup. ceo is out after the board

voted unanimously to remove him. the cfo will take over on an interim basis while they search for a new ceo. this comes just days after we saw a similar shakeup in the leadership team at nissan. member renault and nissan part of the world's largest auto alliance. thee moves being seen by market as those companies repairing the relationship. they have been under strain since carlos ghosn was arrested last year. analyst saying this could be a catalyst to reopen mergers with fiat chrysler, certainly with ci ti. --rcore more circumstance evercore more circumspect. alix: thanks so much. sonali joins us looking at we work. sonali: bankers are working out a new financing passage -- package as soon as next week. position ofe in a

real distress if they do not figure out the financing package by november, which is a lot sooner than we thought. we estimated they would run out of money by spring. now you have j.p. morgan leading the finance discussions. according to the financial times, goldman sachs has set out this round, concerned about the is remaining to be seen how much they will put in by the end of the day. alix: the third copy we look at his pg&e. maybe the blackouts are done but still a lot of problems for the company. brooke: a lot of problems. shares falling 29% yesterday. shareholders panicking at the prospect they may be wiped out in the bankruptcy plan. the bankruptcy judge yesterday stripping pg&e of exclusivity in miniaturizing its organization and allowing creditors to go forward with preparing their own

up 25.5 billions -- in damages. a lot of uncertainty about what the ultimate structure of appeal may look like. investors have been expecting pg need to follow the history. in their past bankruptcies they did expect something from shareholders and analysts thought they might have more than her 2% equity structure. a lot of concern. the blackouts still lingering over some 300,000 customers in california. we want to dig a little deeper into pg&e. a bleak view from wall street. the weakest view comes from citibank, who says the stock to go to zero. an analyst cut his target. he joins us now. a horrible chart. walk me through your call. 75% probability stock goes to zero. praful: you have two competing

issues, the bondholder plan which will wipe out the equity to zero. the other plan is pg&e's plan. pg&e's plan says we want to play 18.9 billion dollars to all of the insurance claims. have apg&e plan you can $25 stock price. two competing plans. hasuse the judge exclusivity, the probability you end up with the bondholder plan is higher in our view. that is a 75% from polio zero -- a 25% of probability which you will get for $25. alix: how to political concerns

plan to this? how does that impact how the money gets distributed? praful: it has been a challenge in this process for some time. they try to get the recovery bonds earlier in the process but were not able to get them because of political uncertainty. even now, you have one of these processes where you might end up with the pleat estimation process, which means you get a bankruptcy court or a jury to get a trial. own to the&g victims. because you are going to a san francisco jury a time when there is blackouts. it will make it more challenging for pg need to make the case that these are the facts. the politics and all of the other issues around less than i had yielded to be. say we fast-forward and

they wind up getting out of bankruptcy. how much money will have to wind up spending to change their grid or make investments on equipment? praful: in the end it is a utility. if they get out of bankruptcy, .ho ends up controlling it in the end, the companies pave the investment. you'll be able to invest in the grid. the california public utilities commission will authorize it because they need to invest in infrastructure. everybody knows the future concern is quite good. the fight right now is who can get control between now and the exit of bankruptcy. of theu get control, you officers for investor growth. because of going into bankruptcy, you have opened up yourself to competing plans, which would not of had the

opportunity if you did not go into bankruptcy in the first place. thanks -- alix: thanks. brooke sutherland, thank you for being with us as well. next, technically speaking. this is bloomberg. ♪

alix: time for technically speaking. phil maloney joints me now. what do you see? bill: an important technical day. futures up on the trade optimism and the prospect of a brexit deal. when i left my desk futures were up around 30. yesterday we closed above the 50 and 100 day and closed at the top of this range, 2940. we will break out of the range on the open. it will gap open on the open. around 2986 is a

pretty good resistance level. good short-term support todayday, high 2948 and 2954. a fun day. you can listen to him all day on bloomberg. that doesn't here for bloomberg daybreak. coming up on "the open" with jonathan ferro, mike wilson. all of the optimism is on trade and we are getting the chinese delegation arriving -- waiting for them to arrive in d.c. to continue trade talks against president trump. many fundamental investors say it is a show me story but the charts look positive. this is bloomberg. happy friday. ♪ from the couldn't be prouders

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jonathan: coming up, global equities rally. the president says trade talks are going well. crude jumping up after iran's has a missile struck one of its tankers off the saudi arabia coast. sterling surging. a pathway to a deal. here is your friday morning price action. what a 24 hours. upadd weight to the s&p 500, 27 points. positive .9%. the dollar weakened the euro firmer. treasuries on offer. we reclaim 1.70 on the u.s. 10 year. let's begin with the big issue and a little bit of optimism. >> it seems they are converging towards a deal. >> things are going well. >> mood music is turning more positive. >>