trade optimism. the country wants more talks before signing trump's phase one deal. and the queen's speech and brexit countdown. the queen lays out the government's legislative agenda while the brexit deal runs into problems and the e.u. says breaktrue is a long way off. the company is weighing bailout options from a takeover by softbank to a a $billion debt package from j.p. morgan. welcome to "bloomberg daybreak." you woke up, it's the hardest part of monday, congratulations. reality check is what i'm calling today within the markets. whether it come from a brexit deal or a trade deal. eality now setting in. alix: a nice bill big rally in the u.k. market. outperformer over in europe and crew getting wiped out -- crude getting wiped out. time now for the global exchange. we bring you today's

market-moving news from all around the world. from beijing to london to istanbul and washington. our bloomberg voices are on the ground with this morning's top stories. worry going to start now in the middle east. syria sending government troops to the north after u.s. withdrew forces in the area. mr. erdogan is down playing the threat of an escalation. what's happening in northern syria, what's the risk of a clash here? reporter: we're hearing that syrian forces are teaming up with the kurdish rebels after the u.s. allies abandoned them. and now they're moving towards the northern syria where turkish military operation is taking place. however, turkish president has down played the risk of syrian and turkish forces clashing. saying that the russians are mediating between the two nations. and we've just heard from the turkish defense minister. he says y.p.g. kurdish militants

have emptied a prison for isis suspects who then fleed. now of course this is a very troubling development because when u.s. troops were pulled from the region, u.s. president donald trump said that turkey was in charge and responsible for those isis prisoners. so we'll be following those developments very closely. of course turkey is facing international criticism for its syria operation. u.s. president donald trump has said that there could be further sanctions against turkey if it steps out of line. german chancellor angela merkel has called for an immediate end to the operation. and we're also learning that european officials are weighing up the idea of an arms embargo against turkey. some nations have already implemented this and there will be further discussion of this at an e.u. leader summit later this week. alix: thank you very much. and we turn to london now as

queen elizabeth just finishing addressing parliament to open its new session and outlined prime minister johnson's new legendive agent -- agenda. -- legislative agenda. what have we learned, if anything? reporter: yeah, hi. so we learned a lot about what a conservative party government would do if it had a majority. basically. you can view this queen's speech a little bit differently from others in the past. this is in normal times an opportunity for the queen to set out in the words of the government what the government plans to do with the next year in parliament. but that assumes they have a majority. this government does not have a majority. the been denied the ability to call a general election because opposition parties have been fearing a no-deal brexit. so because of that, the government went ahead with the queens speech -- queen's speech anyway and that means other people in this count, othe parties are seeing this as part of an election campaign. so this is -- we saw the queen setting out the brexit plan, and other domestic plans that the government would enact if it had a majority, which it doesn't

have. such is the confusing state of british politics right now. the action later on this week moves to brussels where we see, of course, e.u. leaders gathering to see if they can get that last-ditch attempt out of brexit deal by october 31. alix: thank you very much for joining us. want to turn now to the latest in the trade dispute. china wants further talks to hammer out the details of the partial trade deal that was agreed upon last friday. where's the current state of play? reporter: clearly it seems china is trying to manage expectations a bit more than the messaging that came out of washington on friday. for example, in both chinese state media and through the official commentary we have yet to hear them refer to the word deal. the commerce ministry spokesman in beijing today told reporters that china and the u.s. are working to meet each other halfway. now this latest news interest our colleagues in beijing suggest there's a bit more work to go before they get to signing off on a formal agreement. some sticking points could

includ whether or not the u.s. jacks up those plaining tariffs in december under the remaining $150-odd-billion of chinese goods. clearly by all accounts, chinese sending a message out that they're willing to do a deal but they're not quite there yet and they have a few more weeks of negotiations to go before anything is signed off. alix: how bad is the economy that in china, if you come inside bloomberg, you can see imports and exports for august and how they rolled over every which way. the problem of the data that we've learned overnight. reporter: yeah. no doubt about it. the export trade data overnight was reminded that the economy is under pressure. it's not all about the trade war, of course. china has its own domestic issues going on. they've been trying to get a grip on the level of debt and financial risk in the economy. so that's why credit has slowed over the last few years and they've been reluctant to push through stimulus. and of course it reflects the slowing global economy and slowing global demand as well. throw it all together, when you look at the -- especially the weak imports on china's trade data today suggests that china's

economy continues to slow and that in and of itself is something of a drag on the world economy too. alix: great point. thank you very much. then we go to d.c. where we focus on the latest on the p.m.i. investigation. we learned over -- impeachment investigation. where is the state of play now, what do we expect this week? reporter: former vice president joe biden saying that he did not consult with hunter biden regarding his decision to step down from that china-backed private equity firm. he says he wants to clear the field of any signs of potential conflict of interest while maintaining that there was no illegal wrongdoing on behalf of his son. on the flip side of that, president trump over the weekend speaking to fox news, standing by his personal attorney, rudy giuliani. just one day after here at the white house on friday he questioned whether or not giuliani was still in fact his attorney. the question surrounding rudy

giuliani, particularly over his relationship with ukraine officials, and lawmakers set to resume back in session this week, have plenty of questions for rudy giuliani and have issued subpoenas. the president over the weekend saying that this was a part of a quote-unquote deep state effort to continue to pressure rudy giuliani. now, the white house feels adamant that they will be cleared of all wrongdoing. they also feel adamant that there is not republican support for a conviction in the senate should it go there and articles of impeachment be brought in the democratic-controlled house. tomorrow, another debate for the democrats and it's unlikely that this will not come up. no doubt they will b pressing the administration and really pressing for impeachment. alix: thank you so much. coming up on this program, we're going to have much more of your morning trade and analysis on the markets in today's first take. happy monday, everybody. this is bloomberg. ♪ bloomberg. ♪

alix: time now for bloomberg first take. we'll give you the news and you get to trade in the analysis of the markets. chief asia economics correspondent is here. former trade and voice of the bloomberg audio squawk and global head of rate strategy. no doubt trade number one. you wake up, i mean, the question was, do you want to buy into the rally or fade it? that was my question. obviously that's now been answered. >> yes. obviously the rally's been faded somewhat. but i think overall it's a pretty optimistic take. alix: really? you are saying that? >> yeah, i feel good about this. alix: how is that possible? mr. pessimism over here. >> what happened friday, the markets went down. come on. [laughter]

alix: why are you optimistic? >> i think both sides need to get a deal done. we'veeached that stage where you can see from what came out of the trade talks what really was shocking for me was that the idea of intellectual property was brought up, the idea of the technology transfer was brought up. it still has to be put in writing. the fact that it was actually on the table shocked me. i thought we were going to get away with nothing but an ag-pork deal, something the markets wouldn't accept. got the plus side of this, the markets rallied hard on friday. i think a little bit too much. as we see a little bit of pullback today. but we're pulling back because it's not in writing. it can't be yet. there's still more of a conversation let let -- left. but in general, i think we got the first phase or at least the initial start of what we need to see down the road. will we get this final grandiose deal? probably not until after the elections. but instead to keep the markets at least calm going forward i think. alix: what do you think? >> i would say yes. the sort of worst case scenario

was avoided. t when the details are written, do they actual tulely address technology transfer and finer? i'm a little nervous that this might just be a currency deal, agriculture product, and then when i think about business uncertainty globally, does this put a floor on global growth? i'm not that sure. does it actually reduce uncertainty on the business investment front? because i think the critical issue in the u.s. is that business investment is weak because of uncertainty. and that might spill over into hiring which then effects the consumer. i'm not sure there's enough in this deal. it it stake -- it did take the steel risk out but i think china's going to want a rollback of tariffs. i don't know if the u.s. is going to allow that. so the uncertainty on the consumer, on the business sector, i'm not convinced that that's actually behind us. >> i think one point i would make as well, to agree with you, there's a disconnect in the language. the u.s. language was enthusiastic. we're on the road here to a phase one deal. but china hasn't used the word

deal since it has responded. neither through the state media, which is an important proximatey, or through the official commentary and even today in beijing, the spokesperson was talking about meeting each other halfway. so there's obviously something on the table here, both that may come to the middle ground and sign off in some kind of at least a low-level agreement, but we clearly have work to go yet. >> to agree with both of you, seriously, it's not a deal. we're a trade truce. that's what i meant by positive going forward. it could last, it could be very temporary. the tail risk is off the table. that's what the markets want to see. is it going to generate cap-x? only to the extent that it needs to. what you have to do for 2020 to get things done. is it going to generate a substantial amount of investment? unlikely because you still don't know where to go yet. as to whether or not china would be the place for trade. you do what you're going to have to do. it's going to keep things growing probably very steadyy. nothing dramatic. but just to keep the feet under

the table and keep things moving forward. >> just on the global economy, not all about trade war. don't forget the slowing or the tired tech nothing cycle. that's a big issue in east asia. all the geopolitical hot spots, wher's bret or what's happening in the middle east. then just general slowing demand. we have a slowing global economy. if we get some kind of fix on the trade war, that may not necessarily solve all of these other issues either. >> i was going to say that the markets saw this trade deal as well as potentially brexit and took out a lot of fed cuts that was priced. i was surprised because the fed hasn't made this entire easing or rather the propensity to ease any further, all contingent on trade. they've been talking about global growth. i think the fed is trying to say that global growth is weak not just because of trade. so the fact that we took out almost an entire cut for next year out of the market in the last week, that was a little surprising. i think the market's almost saying that because we have this trade truce ordeal or phase one, that the fed's not going to ease.

i think that's a little optimistic. alix: to me there's two narratives. one is that any good news is not priced in. to your point of, ok, we're going to see snapback if it starts to get priced in, even look at the cable rate, right? and the other is that nothing's going to then. so unless you get some kind of rollback and then you get cap-x and c.f.o.'s feeling better, it's doom and gloom which ones -- which wins there? >> it's hard to call a win right now. what can the fed do? you roll back a cut, you add in a cut, at the end of the day, central banks are normal rlt the conversation. -- really the conversation. it's a pacifier to the market. if the fed cuts rate by 25 basis points we feel good about equities to a point. but that doesn't effect cap-x. to your point, that does nothing for investment decisions. 25 basis points helps no one. the fact of the matter is the trade war is the issue and it's not been resolved. it's just a minor little truce. how get from here, if you're an investment manager or a business -- alix: but then the cable

rate. over the last few days, volatility picking up and you see goldman sachs climb another 2.5% move because nothing good was priced and it has nothing to do with the actual underlying economy. that to me is baba in a s. >> political risk is hard to price. there are extraordinary binary outcomes. you can have a macro view. i have one of lower rates but you have to trade within the range. when we get too low, that's when you lytton up. i'm waiting for that 180 level to go back in and go long. i don't know if you get that. i figure within the next few weeks we'll realize that maybe we got too optimistic. we heard it within two days, china's not calling it a deal. so maybe this is a level to start linking in. you kind of have to trade these narrow ranges because political risk is essentially what we're trading which is impossible to -- [indiscernible] -- >> it does go beyond tariffs. this is something that the market seems to be wary of. even if we had a deal on the merchandise good side of things.

last week toss us u.s.-china relations are head -- taught us u.s.-china relations are heading into a rocky space. we went into the area of human rights concerns and of course we had the culture wars in terms of the nba and hong kong. even if we have this truce on tariff, the broader u.s.-china relationship is in a rocky space right now. alix: that's why you're here. you're going to go to the i.m.f. world bank meetings and we assume a downgrade of forecast again. to bring in your point about china data, the imports, that's not a trade story. the imports into china that are so weak, that's a domestic demand slowing story. >> domestic demand slowing story. alix: look at the car sales. that was really bad. >> in fact, imports of audio parts, that's a big part of the story as well. no doubt about it that there are domestic issues in china. they're trying to get a grip on debt. that's why they haven't gone to the races when it comes to stimulus. that's keeping the broader domestic economy somewhat in check. you can see import numbers today.

it's not all about trade wars. there are other issues too. china's economic engine isn't firing on all cylinders right now. >> the debt story is brilliant because we have the same situation here. and -- which is the reason fiscal policy is stymied. where -- what can you add with $23 trillion of debt? it needs to come from somewhere. it's not coming from germany. it can't come from the u.s. and china. and the central banks aren't really helping. so i think at some point someone has to look at the picture and ask if prices are a little elevated. >> that means basically, back to pria's point, you look at the asset clace, find out what the range is -- class, find out what the range is and trade it? >> somewhat. you have to pay attention to positioning as well. when you get too much in one side. but for the i.m.f. what i'm watching is, is there some acknowledgement here that we need structural reform, we need fiscal policy we need something globally. we're probably not going to get that in the u.s. but does germany put in any sort of fiscal stimulus here? because i think the e.c.b. and

d.o.j. are telling us they're trying to reduce the counterproductive effects for the easing. you really need something else to push aggregate demand higher. you're not going to get that help from the political side. that's where the conversation is moving, from more fed and central bank easing to something else. alix: let's talk about that. i thought it was fascinating the politics that are playing out within the e.c.b. with the ex-officials coming out and pushing draggy. then you have the financial times coming out and defending him. that to me is a whole different world. even if they had more ammunition, what could they do when it feels like a political debate happening within the central bank? >> exactly. i think it's all coming from the fact that people do realize a monetary policy is essentially pushing on the strings. so i think the hard part for a central banker, can they actually say that we're done, this is it? now you're on your own. alix: any more clearly than they already are. >> i can't wait until draghi gets out and he can tell the truth.

finally, let me tell you how bad things really are. like when lagarde left the finance minister of france. don't worry, the bank's capital asset ratios are horrible, the world's coming to an end. will draghi give us the real story? alix: real quick, one thing you're going to be watching this week. >> whether or not there is any kind of agreement for fiscal push at the i.m.f.? like we've just said, central banks are not maxed but close to it. they're no longer as effective as they used to be. will the politicians say we have to spend more? >> fixed income market. not today, they're closed. but those are the smart guys on the table. the not us f.x. guys or the equity markets. i think the rate traders are the guys who really tell the story and see what they think of this deal when they get back. alix: we have one right here. >> you're quite welcome. alix: you're seeing a big rally over in europe. so what's your position? >> we've had a 20 basis point

rise in 10-year treasury yields. i'll be watching for the retail sales number. i think what we've seen, before we get sort of too dark this morning, the global growth is weak, u.s. manufacturing is weak. the consumer's rock solid and it's all coming from the labor market. we have retail sales this week. is there -- we've had very strong retail sales numbers. i would say the labor market has start to somewhat soften. are we seeing signs of that spilling over into retail sales? outside of the headline number, if there's any softening there, then this view that the u.s. can remain this island of prosperity with global growth being weak, i think that starts getting challenged and then we should be looking at more federate cuts next year. this market pricing in one cut i think is pretty optimistic here. alix: so you want to sell? >> i guess in treasury market, i would feed the selloff, which means i'd be buying treasuries. alix: thank you very much. great to see you and pria will

be sticking with me. you can find all the charts we used at gtv-go. this is bloomberg. ♪

>> you're watching "bloomberg daybreak." we work is considering a bailout. it would hand over control to softbank group. bloomberg has learned that japanese investment giant is convinced it can turn around the once high-flying startup. a $5 billion in debt financing led by jp morning. the company is on the verge of running out of cash. private equity firm agreed to buy british cybersecurity company. the price -- $3.8 billion. that represents a 37% people willum to friday's close -- premium to friday's close. i.t. security to a range of clients as small as dentists and

neighborhood stores. shares of apple begin today at a record high. on friday, the stock rising almost 3%. that made apple the most valuable u.s. company, again, beating out microsoft. both have a market value of more than $1 trillion. that's your bloomberg business flash. alix: thank you so much. apple hit that record price hours after -- the company is optimistic about the upcoming launch of the company's video streaming service. plus now the firm's enthusiastic about the partial trade deal with china. >> this definitely does change the game. now that there looks like it could be not just a phase one deal but other deals that could come forward, this definitely puts it in a situation where right now i don't see anything changing for apple when it comes to china. alix: ives has concerns about u.s. tariffs and chy need-made goods have resulted in a 10% discount on u.s. tech stocks.

china tempers optimism as officials walked back the idea of a deal. they want more talks beforehand. and all of that is a reality check within the markets. you look at futures up. volume probably is going to be a little bit light because you have the bond markets closed here in the u.s. overseas you are seeing a pretty solid bond rally. yields down by about eight basis points over in the u.k., the outperformer. but also in germany, yields down by four basis points as well. the dollar starting to outperform on safety trade and you have commodities, copper and crude really rolling over by that 2%. the reality check in full bloom. this is bloomberg. ♪

alix: this is "bloomberg daybreak." happy monday, everybody. futures still down by .3%. wanted to highlight the nonmovement in european audio stocks, at the spite the fact

that chinese car sales tanked in the last month. not really affecting that sector as of yet. in the other asset classes you have a dollar that's getting steam here. cable rate down a full percentage point. talk about pricing out in a reality check. last week it was all about we maget a brexit deal. now that's being drained out of the market. you are seeing a rally under way in the bond market in europe. yields down in germany by three basis points and crude really part of the trade optimism being rung out of the markets. to that point, there are reports that china wants more talks before signing on to president trump's phase one deal. here with clears look at what is and is not in the deal is bloomberg's michael, international economics and policy correspondent. reporter: this deal's being screwed -- described a lot of different ways. my favorite is one analyst who calls it all foam, no beer. we have two different versions it seems of what's been put into this deal. the chinese version and the u.s. version. china's going to buy agricultural goods.

the president says $40 billion to $50 billion but china hasn't put a dollar value on it at all. intellectual property, china has a new law protecting some intellectual property areas. maybe that's what they're referring to. but nobody really knows. nothing's been written down. same thing with market openings. on friday china announced it was going to open its financial sector to 100% ownership by foreign firms. that may be what they are agreeing to here. something that they've already done. the october 15 tariff increase has been suspended. that's the one thing that appears to be certain about this whole thing. china also apparently agreeing to some sort of currency stipulation that allows them to say they did what they have already done, which is agree not to manipulate their currency. if we do get the agriculture purchases, you can see it would be a big deal if the president were correct. the high in 2014, $24 billion. if we got to $40 billion or $50 billion, that would be pretty amazing. the problem here is we don't

know exactly how they would do that. part of the problem that you have is that agricultural prices have slumped so badly, it would be hard to get, even with a tremendous increase in volume, that kind of dollar value. agriculture experts waiting to see what happens. even if we get that, here's the problem with this deal. it suspended the october 15 tariff increases but it leaves all the others in place. so it locks the trade war in where it is. and the president hasn't agreed whether he would suspend the december tariffs on the rest of those consumer goods coming. so the economy still faces ongoing tariffs, ongoing trade war, nothing has changed there. maybe the farmers get something, but the rest of the industrial united states, manufactures and exporters get nothing. the rest of the world gets nothing. the trade war continues. alix: thank you so much. to pivot off something you talked about earlier, this is the probability of no change

versus the probability of a cut through the january meeting. this is kind of what you were talking about. probably the no change moved up on this deal, it doesn't give us that much. >> right. the fed has really been saying this this is essentially a midcycle adjustment. even though they used the word -- the entire narrative from the fed is that -- [indiscernible] -- 75 basis points of insurance cuts. if they cut once more which the market has priced in, the fed narrative is we put the insurance in. it's going to be all about economic data which is where i think mike's point, if this trade deal or phase one or all phases, if that was going to floor u.s. growth, the u.s. growth is going to pick up from here, the fed doesn't need to ease. the worst case scenario has been taken off the table that the tariffs didn't go in, but the december 2015 tariffs are massive. there's no lollback. in terms of business uncertainty, tail risk is off but i don't think business

uncertainty is better today versus where it was thursday night. so i'm not sure that the u.s. growth dynamics have changed all that of much -- much. i was surprised that the market took this one cut out of 2020. i think it's a little bit of optimism, maybe brexit, because we do know that -- [indiscernible] -- that had some impact. but the market's looking at growth and kind of doesn't know what to make of it. because you mile -- -- [indiscernible] -- is still solid but a lot of the consumer data is backward looking. as we see early read on hiring and if that's slowing down, the consumer slows down, the fed will have to come back in terms of easing what's priced in. >> the fed's problem is they don't know what's happening here. you talk about insurance cuts, they can't come out and say, we see a recession on the horizon or wall street would fall over dead. at this point they're watching and the data, as you say, are backward looking. does the manufacturing slowdown lead it slower hiring or layoffs, which then hits

consumer confidence and consumer spending falls apart? or is it that we're just slowing down, partly because we can't find enough workers, and that's anecdol report you get from a lot of companies. and we're also in the 10th year of an expansion and you can only hire so many people. do we at this point see a change ? the fed can't tell. alix: what the fed really wants to us know is whatever adjustments they made on friday is not q-e -- q.e. that's what we definitely know. >> did you see neil's interview? you should be talking about this. he gave an interview over the weekend in which he said, wall street should drop dead. because they complained about the repo thing but it's their business to supply their own liquidity and they didn't do it. and he said, you know, we have a way to get liquidity. you you can -- you can go to the discount window. you just don't want to. so why are you blaming us? very, very strong interview. >> i would push back against that argument because the regular latory environment has

changed so much -- regulatory environment has changed so much. the fed didn't appreciate that the bank reserves is much higher. i think the fed probably thought that that number was much lower so excess reserves from a lot of the fed strangs is arguing it's about $1 trillion. were at $1.3 trillion when this whole repo things happened. i've been thinking minimum reserves in the system has to be about $1.5 trillion. the other issue is i think the fed was hoping that if there's this problem of halves versus halve-nots, that they trade with each other. if one has access reserves, they can trade with one that doesn't. if i'm -- but it doesn't allow that trading. the fed has pull all these regulations in place. they don't necessarily, i think, interact as much with the monetary policy side, which is why this whole repo thing happened. i was hoping that in trying to address the repo issue, they would ease financial conditions across the conserve. but the fed is so worried this will be viewed as q.e., they're only buying bills. i think they're going to resolve

the reserve scarsity issue but with the buying that they've announced, and they announced it on friday, not on a fed meeting day, i think, again, to reinforce, this is not q.e., but now that's going to create scarcity in the front end. we don't have enough bills. alix: so the fed blames the banks and the banks blame regulation and the requirements that they have to -- so this is like a round table of blame? >> yes. it kind of is. the fed knew they would have a problem at some point. there was a dispute at the fed do. we just automatically leave reserves at a huge level? or do we try to find the level at which reserves are scarce and build from there? they went with the latter and they found that level. they're not particularly worried about the fact that a few banks had a tough day for a day twor and then we go back up and they do the repo facility. because that's part of price discovery, essentially. their view now we build -- their view is now we will build up our assets and it's not that big of

a deal. alix: on the flip side, commerce bank had an interesting note on it. they were saying that i consider it worrying that the liquidity policy is never going to go back to what it was pre-2018. if liquidity never again becomes a limiting factor for banks, but constitutesity base limitation, monetary policy will remain as impotent as it is now. alix: what do you make of that? >> there's some merit to it. if you increase regulation to the point where banks are holding reserves and do not lend, but i would still say, if there is enough aggregate demand for loans, i think banks will lend. because your return on equity or return on assets of lending for productive use is still much higher than it should be keeping it at the fed. i think the problem is we have an aggregate demand issue.

we're not seeing wage inflation. the counter to -- are we hitting this capacity on the economy, where wage inflation should be much higher? if we were and we were seeing wage inflation of 5%, 6%, then then corporates would start investing in cap-x. we're not getting that. there is this issue of loan demand being low, i'm not sure easing regulations helps. the yield curve is also part of it. when you have a flat yield curve, banks are not insented to take on a whole lot of risk. which is why i think the fed should pay attention, trying to deepen out the curve. i don't think this buy something going to help a lot. fiscal easing, structural -- [indiscernible] -- you steepen out the curve, you can get more credit creation through that channel. >> although that brings us back to what you were saying about the circular situation. if we have an aggregate demand shortage, the fed isn't going to that. to -- alix: fix >> because people don't want to borrow at this point. companies have enough money and

they're holding back because of trade wars. the fed's kinds of pushing on a string here. they get some affect at the margin, they're the only game in town. so they do something. the same story in europe, it's the same story in japan at this point. central banks are tapped out. alix: we're going to give you all the cheer this morning. thanks a lot. >> fortunately the bond market's closing. alix: they're just leaving. thank you so much, mike, priya. breaking headlines. when it comes to turk. e.u. nations have agreed to restrict arms sales over syria. also president trump was tweeting earlier in the morning that their big sanctions on turkey coming. so both of those playing into it. you're looking at the dollar-lira up by .8%. that's the highest level since the end of august. now more on turkey and other stories making headlines outside of the business world. reporter: that's where we begin, with turkey.

president trump saying the u.s. is ready to go with more sanctions on turkey over its military operation into syria. the administration warning that could include shutting down all u.s. dollar transactions with the turkish government. the u.s. pulling off of its troops out of northern syria to keep them from harm's way. kurdish forces, who was once u.s. allies, might now cut a deal with syria and russia. problems for boris johnson and his brexit proposal. the european union warning talks are a long way from a breakthrough. plus johnson's political allies are distancing themselves from his plans. the e.u. says the u.k. proposal for breaking the deadlock over the irish border doesn't have enough details. queen elizabeth opening the new session of parliament. >> my government's priority has always been to secure the united nations' departure from the european union on the 31st of october. my government intends to work towards a new partnership with the european union based on free

rade and friendly cooperation. reporter: negotiators are trying to sketch out an agreement that e.u. leaders can endorse at the summit. hong kong, more violence there over the weekend. a police officer was slashed in the neck by a protester. police say they also found an improvised explosive device. another demonstration is planned for today. protesters will show their support for a bill in the u.s. congress that could potentially sanction some chinese officials. global news 24 hours a day on air and attic tock on twitter. this is bloomberg. ♪ alix: thanks so much. coming up, it may soon run out f cash and so a boilout that could -- [indiscernible] -- if you have a bloomberg terminal, check out tv-go. you can interact with us directly.

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>> this is "bloomberg daybreak." the hewlett-packard coming up in the next hour. the founder and c.e.o. now to your bloomberg business flash. boeing c.e.o. stripped of the hairman's title. directors expressing their support for him but also engaging in active oversight. volkswagening a way season considering a sale for its

lamborghini supercar unit. that would be another step in the c.e.o.'s long-term plans for the world's largest automaker. he's channeling resources to the audi and portiona units. and malaysia expanding its hunt for stolen funds in the scandal. it's now targeting hundreds of recipients who received roughly $119,000 or less from the troubled state fund. more than $4.5 billion have been taken from one m.d.b. malaysia has already charged unit it's of gold mcsax and the country's finance minister says if the bank wants to make restitution, it must take action. >> if you're serious about making the necessary restitution , please back up your words with action. >> that's your bloomberg business flash. alix: thanks so much. we turn now to wall street beat. we're going to cover three

things wall streets a buzzing about this morning. first up, stock bank bailout. the fast-growing money-losing startup. the chairman says an i.p.o. is closer than you can imagine. and a 97.5% tax rate for billionaires. a bernie sanders presidency would mean billionaires would slashed with sky-high taxes. let's start here with so many different things here. what's on the table to wework? >> softbank making another infusion of equity. we knew this would happen. remember, debt holders can't get comfortable with adding more debt if there's not another equity cushion underneath. if they were to do this, they could take a very big hit and do it at a valuation that's even lower than $10 billion. according to the "wall street journal." which just a couple weeks ago we were talking about $15 billion. alix: also softbank shouldn't be

running a company like that. they're taking v.c.'s and startups. they're not supposed to do that. >> that's the whole thing about it. if they're taking a stake now, is it to shore up the existing position so really they're going to run out of cash quickly? or is it about a lom long-term vision about the company and that's usually the terms in which you want to make an investment in something like that. alix: what are the other options? >> jp morgue season trying to shore up a $5 billion financing package. so we'll see where that happens. we work on -- wework on the record has been in talks with different options. it won't come cheap. alix: they were supposed to i.p.o. and then all of a sudden they're going to run out of cash. months before that was supposed to happen in december when they were going to get more debt because they i.p.o. add. >> one person involved said know, we should have seen the writing on the wall a couple of months ago. alix: a little bit. >> it all happened so fast. now you have banks, jp morgue

season leading this. other banks around the initial financing have gotten skittish. alix: investment banks really need to win when it comes to i.p.o.'s. you had a representative of the company saying it's coming. then you think what? what is coming soon? >> it would be 1% to 2% listing which is $40 billion raised. that is by far one of the biggest we've ever seen. alibaba was only $25 billion. so it's a huge listing. i think what the big question here is is what kind of valuation will it come out as? the journal reporting that it could be closer to $1.5 trillion. advisors have said that that might be the case. but of course the crowned prince and the company itself wants to push it above $2 trillion. alix: this ising still going to -- this is still going to list local. >> exactly. the first listing would be local before our thanksgiving, so november. then they'll do another international listing. alix: interesting. last story here. big tax rate that that bernie

sanders wants to unveil. a 97.5% tax rate on the highest billionaires. what would it mean in terms of raising money for the country? >> these taxes are hard to pull off. the 97.5%, the professors involved in this study found that's compared to 62% under elizabeth warren. so that's quite a staggering difference. and 0.6% under joe biden which is seven percentage points above trump. it's still quite clower than the other two. timely. we have the big democratic debates tomorrow night. i'm sure this will come up. and then also the professors that did do this study were advising warren as well. so you know that they're very big components of a wealth tax rather than just income tax that we're accustomed to. >> it raises the broader question. alix: what corporate america and what sectors and the wealthy will be attacked in terms of dealing with an equality in poverty. nobel prize winners dealt with

poverty on a global scale. >> also it depends on -- and private equity too. they're for sure in the spotlight too. big banks maybe on over here. if you look at the chart on where warren is targeting, it's really every sector. but there is a belief on wall street that maybe she won't be as bad as people think she will be. depends how you think. if you're a wealthy person, 62% effective tax. alix: compared to bernie sanders, you'll take it. >> exactly. alix: thank you very much. in today's off the beaten street, billionaire ken fisher is still feeling the backlash from offensive remarks he made at a conference last week. he's apologized for the sexist and off-colored comments but that hasn't stopped the outrage. the state of michigan's retirement fund has pulled $600 million from fisher investments. michigan's chief investment officer said in a letter that fisher's comments weren't acceptable. his returns were still good but they were pulling that anyway. coming up on this program, the pound weakening against the dollar. uncertainty lingering all over the u.k. we're going to discuss that.

and if you're heading out and jumping into your car, tune into bloomberg radio heard across the u.s. and sirius xm. this is bloomberg. ♪ mberg. ♪

alix: time now for traders take. you're watching the cable rate. what do you see in >> the pound about as heavy as the queen's crown this morning. that's pretty heavy. you can see really big jump up in the last couple of days on the exuberance of johnson saying there's a pathway to a deal. there is a pathway to a deal. there's always been a pathway to a deal. still a lot of things in the way . it so the likelihood of what's going to happen to this eventually is we'll get enough positive news to give johnson a way out, to ask for an extension. this time i think the extension's going to be negative. because we've alreadyinned up the excitement that something was going to come.

the extension will probably weigh on sterling little bit. we have big data coming out this week, jobs tomorrow. then c.p.i.ment then retail sales. all of those numbers are expected to look good and be positive for the pound. so when you wrap it all up, it seems like there's just way too many good things built into sterling this week. and i don't -- i like the sort of symmetry of it and the risk to the down side perhaps. alix: it's ravg, right, that measures what kind of down side we could then see? >> what this measures is what the standard deviations are around the average close. for the last month sterling average close around that blue line. then what we've seen it pop through the first deviation, really hold the third one, which is a pretty big move in the short-term. it's now back below the second level. 125.08 is a pivot point for sterling. i feel like we might trade back toward 125. but certainfully we test 127-ish, likely to be a ceiling

in the short term. alix: interesting. good stuff. thank you so much. you can listen to him all day every day if you type in squago on the terminal. you start at 9:30? coming up on this program, principle global investors will be joining us. plus the u.s.-china phase one partial deal. we have all your angles covered from the market. what do you do on a day like today, what does it mean for china and what do you do with bank earnings that kick off this week? this is bloomberg. ♪ this is bloomberg. ♪ everyone uses their phone differently.

that's why xfinity mobile lets you design your own data. you can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. all with millions of secure wifi hotspots and the best lte everywhere else. it's a different kind of wireless network, designed to save you money.

switch and save up to $400 a year on your wireless bill. plus, get $250 back when you buy an eligible phone. that's simple. easy. awesome. call, click, or visit a store today. alix: welcome to "bloomberg

daybreak." happy monday. here's everything you need to know. let's take it right from the top. e.u. nations agree to restrict arms sales to turkey over its operations in syria. earlier president trump said the e.u. is alsoed will to go more with sanctions on turkey. that could include shutting down all u.s. dollar transactions with the turkish government. the u.s. is pulling off the its troops out of northern syria to keep them from harm. china wants more talks before signing a trade deal. beijing may send a delegation to finalize a written deal. that could be signed by the two countries next month. and problems for british prime minister johnson and his brexit proposal. the european union warns that talks are still a long way from a breakthrough. queen elizabeth opened the new session of parliament. >> my government's priority has always been to secure the united kingdom's departure from the european union on the 31st of october. my government intends to work towards a newartnership with

the europe union based on free trade and friendly cooperation. alix: negotiators are trying to sketch out an agreement that e.u. leaders can endorse at their summit that starts on thursday. and the son of joe beside season moving to quell the controversy over his business activities. he's step down from the board of a chinese-backed private equity firm. he'll also give up foreign work is if his dad is elected president. in the markets, what i'm call something your reality check. runup we saw on friday and now cold water from china and just some draining out of the market. you have .2% lower there on the s&p. you have a big move into bond market in the u.s. u.s. treasury markets are closed today. yields over in the u.k. down by about eight basis points. the dollar getting a little bit of steam and crude really rolling over with that weaker optimism for china and u.s. trade deal. ining me for the hour is romaine. you picked apples over the weekend. i would love some ams. i like to bake but i'm too lazy

to go pick apples. what do you like today? >> i was taking a look at the reaction that we saw in the yuan both in terms of onshore, offshore move, and really that daily fix that we get out of china. you want some sort of confirmation that the chinese are onboard with this trade deal. you kind of mentioned it already. clearly pushing back a little bit on this. but when you look at what happens in the fix every day, we didn't really get that strengthening that a lot of folks are looking for. you did see some of that strengthening in the secondary market. particularly in the offshore market. so when you come in later tonight u.s.-time, you're going to have to look to see whether china is willing to bridge that gap between what the market's looking for and maybe what the pboc wants. right now it doesn't look like this is a complete go from china. alix: i wonder what a new word for deal is. let's get more into that. phase one of the trade deal with two different sides of that story. president trump heralding progress from last week's talks. tweeting the relationship with china is very good. we will finish out the large

phase one part of the deal, then head directly into phase two. the phase one deal can be finalized and signed soon. then over the weekend china says, not so fast. we have officials asking for further talks. the china ministry of commerce said they made progress in talks. there's no need to be overly optimistic. joining romainee and i from london is -- romaine and i from london, george george. so great to see -- george george. so great to see you -- george magnus. so great to see you. what's your word for a deal? >> i think the chinese for quite some time, actually may, when the infamous presidential tweet basically caused the trade discussions to basically kind of rupture, ever since then, if not before, the chinese have an interest in spinning these negotiations fourth quite a long time. i think their view is that the longer it's spun out, the

greater the likelihood is that president trump will make concessions, will almost do anything really for a deal before the presidential election. i think this is basically the last chance for any such -- any kind of agreement. it's going to be small, if it is an agreement that can be signed, it's going to be small, limited and there won't be any phase two or phase three. this is basically it, i think. i think the chinese know it. >> then why don't you think the chinese would accept this because at this stage, they're basically getting almost everything they want. basically an increase in relatively minor agriculture purchases, no real concessions on some of the bigger issues that the u.s. had been pushing for earlier this spring, and at the end of the day, they get to walk away and potentially wait out this president for whatever phase two, phase three might bring with the u.s. >> yeah. so i think this is -- this could be really about what kind of leverage beijing thinks it can actually extract from this

current stage of negotiations. beuse rember that the african swine flu that's affected china really badly, i mean, perhaps after half of their hog -- stock of hogs have been -- had to be slaughtered, they want pork. and they want soybean intellectual ports and i think -- imports and i think they're quite keen to get -- to source additional supplies quite quickly. because it's politically quite sensitive in china. my hunch is they still are kind of angling to get this to work. but i think you're right in your description and i think the chinese in this particular case, they've got everything they want really, this is a deal that could have been done two years ago. and if it gets done now, i think they'll be ok with that. romaine: with regards to working out the details of things like huawei, technology transfers, and some of the i.p. issues that don't appear to be part of this

current preliminary deal, do you the trump administration will have enough sort of mojo to get those aspects done before we get to november, 2020? >> not going to happen. i mean, these are really -- you know, this is fundamentally what this so-called trade war is all about. of course it's about trade. but it's also underneath, as i think everybody understands nowadays, not least in washington and beijing, this is really about industrial policy, procurement, technology transfer, intellectual property, and ultimately about standards and beliefs and values. which is why i think this dispute is bacally dug really, really deep roots. it's just not going to go away. and i think the chinese will be very reluctant to make any concessions or even really to have serious discussions about these things. except to the extent that it

benefits them to some degree. and remember, they also have a point that they can actually hold back in washington which is, you accuse us of not doing these things or not playing by the rules, but what you're doing within the w.t.o. context in terms of tariffs and other kinds of policies related to that, is also illegal. so there will be a lot of debate about this and i'm sure there will be a lot of noise between the two sides about it. but i'd be really surprised if between now and the end of 2020, let's look no further than that, but between the end of 2020, whether there's any coming together or engage bottom these really, really sensitive issues. alix: so as we hear in media and investors, we paris every word, we look at every moment to see if we can figure out in game theory to make money, what are the tea leaves that you are looking at? what are the tea leaves that

tell you this will fall apart this will get done, the next phase isn't going to happen? what are the buzz words and key things you look at? >> i think if you look at u.s. trade policy really since, well, really since president trump came into office really, gone are the days when we talk about -- used to talk about multilateral deals and big comprehensive trade deals. if you look at the u.s.-mexico-canada agreement, if you look at the japan agreement that was recently signed with the united states, if you look at other kinds of arrangements that the united states has done, these are small-scale, limited, bilateral -- they don't really kind of go very far. and so my sense is that -- i know that the white house would like to kind of champion a deal as being something that they can sell politically to american farmers and to other people in the country as a kind of proof of the pudding of american

negotiating prowess, but actually the truth is that these -- this is really very small beer. the big issues on which this conflict has really erupted and continues, i don't think they're going to be really addressed satisfyly, not this side of a presidential election anyway. >> always -- alix: -- alix: always great to get your perspective. talking about pork and soybeans. did you see the story that north korea might have the swine flu but they're keeping it under raps and they have no pork left or something. romaine: i saw. that there was so much speculation about how widespread the swine flu was in china. and there were some lynx to north korea. but north korea being the black box that it is, no one knew what was going on. but it does make you wonder what the relationship now is between china and north korea. alix: also they need the pigs. romaine: they have those giant pigs. alix: one giant pig. romaine: is it only one?

alix: i just saw the one picture. romaine: i hope there's more of them. alix: the trade deal eventually gets signed, what does that mean for the markets? there's still a peace dividend to be earned after this week's move. geopolitics created a growth slump. so less uncertainty should drive growth revival. joining us now from london with her take is seema shah. are you on that camp or on the other camp? >> i think there's some truth to what they're saying. ultimately the uncertainty, if it is listed, -- lifted, it should lead to stronger corporate spending and global growth recery. what we're seeing at this stage, the unlikely we're going to see a comprehensive deal. one thing i think could really move the mark is if you see the december 15 tariffs lifted. we haven't got that yet but that i that's what the markets are

going to be waiting for. if you do see that, that means the consumer outlook is a lot stronger and given that most of the concerns really are on the consumer side, can they continue to prop up the economy, that would be considered the very strong positive signal. romaine: i'm interested in that aspect of it. because when you look at the selloffs that we had sort of late on friday or i guess the pullback and some of the gabes we had in equity markets on friday, it seemed to be tied to that idea that you don't have any concession at all on the october tariffs or the december tariffs. we talk about october 15. we talk about december 15. these are dates that the administration seems to be somewhat cagey on. and i'm wondering, how can we talk about certainty if we have no idea whether those tariffs are going to be around or not? >> exactly. i think that's really what's going to be weighing down the markets. at least between now and whether or not we get some kind of idea on where that's going. i think one of the interesting things today, though, is why does china feel they have almost

like a stronger bargaining position, that they're saying that they need more talks before they can find any deal? and to me that says that they're not so worried about the economic data that's coming out of china. but what they can see is that for the u.s., a lot of the weakness was not priced in. so the u.s. is more vulnerable to a further down turn. so they feel they can push president trump a bit further. romaine: part of the pricing we're seeing in the market with regards to the trade deal also ties into directly with expectations for what the fed is supposed to do. at least in the market's eyes. i'm wondering with this sort of handshake agreement that we have on trade, does that change the calculus for the fed just yet heading into the october 30 meeting? reporter: no. i think given that we've seen such weak data in the last few weeks, they have very little choice almost but to cut rates from in october. what we're going to see is if the fed doesn't deliver, the market will be very disappointedment further up than, that i have to wonder fort fed can do anything further. they have to be thinking, what

more help are they able to provide? rates are already so low. a further 25-basis point move isn't going to help consumers when rates are already so low. i wonder if the market is priced too much for next year and for the rest of this year too. alix: seema shah. romaine bostick will be sticking with me. maybe inflation break evens are off. maybe we can get off of that level. coming up, earning season under way with big banks' results on defpblgt tomorrow we'll break down expectations with the quarter. leigh drogen coming up next. this is bloomberg. ♪ rg. ♪

alix: earning season moves into full swing this week. we'll start with reports from the biggest u.s. banks tomorrow. then netflix, i.b.m., coca-cola

also among those on deck. for more, we're joined by leigh drogen, founder and c.e.o. still with me is seema shah and romaine bostick of bloomberg news joining me for the hour. so my favorite chart is what are we going to do for 2020 earnings estimates. where is the worst downgrade going to be? >> so it looks like consumer discretionary is going to be down about 2.2% year over year. the problem is that that is one of the largest declines coming in. the third largest decline after energy and materials. but we think that it's just starting to tip over, which is the problem. and given 80% of our economy is consumer. we really haven't seen in the last two quarters, which have both been negative year over year the consumer issue really be there in the numbers. if that starts to show up, that's what you're going to see the market get hit. because we're pricing in energy, we're pricing in materials. semiconductors and hardware have

been bad. because of the trade war. but if the consumer really gets hit here, that's when the market's going to have a problem. >> we had some encouraging signs last quarter. romaine: at least with regard to consumer staples and companies being able to raise prices which suggests consumers were willing to spend more or they they had no choice. when you look at that, can you extrapolate anything from that into the more discretionary side of the equation? >> nike's report was incredibly strong. both top and bottom line. huge beats. it got rewarded. the problem is we think that we're going to see kind of a very idiosyncratic outcomes across consumer discretionary. consumer staples have been very good at pushing that stuff anden to put up decent bottom line numbers. it's really the more, you know, discretionary purchases that we think consumers may start pulling back on here. alix: i want to highlight what's happening here. mr. mnuchin, treasury secretary, is speaking outside the white house in a gaggle. he's saying we will do what needs to be done to complete

phase one. but mnuchin over the weekend not sounding as positive of a transformative trade deal for u.s. farmers that they reached on friday and he's saying they'll do what needs to be done to complete phase one. do you agree with what leigh's saying on consumer discretionary? how do you take on appropriate risk in the market while also taking into account forecasting maybe needing to come down? >> i think when we look at this, we have this idea that liq assets, you still need to be in risk assets but you should be focusing yourself more on the defensive perspective. consumer staples, utilities, real estate, those kind of things. i agree. if we see that consumer side start to weaken, that tells you that last barrier between the u.s. economy and recession is starting to fall. >> when we head into this earnings season, there's a lot of focus on margins. romaine: you look at the gains we've had this year -- alix: are you saying peak

marges? he's doing it. romaine:, no but i hear things. think about it. when you look over the last 12 to 18 months, most of the gains we've had in equities have been because of that multiple expansion and we really haven't seen it sort of break down at the margin level, at the earnings level for these companies. i know expectations are pretty low. but do you think that there's any sort of possibility we could see a floor, not a peak, but a floor in some of the margin issues we've been dealing with? >> i think q-3 is going to be a weak one. i think q-4 will be worse. but then i feel that you can look at q-1 and q-2 and could you see there is a brightening ahead. i think there's going to be global growth prospects should start to improve as you move into q-1. the profit margins issue is a concern, we are watching the unemployment rate very, very closely. to see if there's anything creeping in through that. that's where you're going to sea the weakness coming from the profit margins through to hiring.

but we do feel -- this is almost e darkest before dawn and then these things start to improve a little bit. romaine: darkest before dawn. alix: you can say that. romaine: that's pretty dramatic. what's the trade war -- with the trade war, going back to the margin issue, we know margins have been compressed partly because of the trade and supply chain issues. there are a couple notes out saying how tech could be one of the biggest beneficiaries of a trade deal, assuming we get something on paper. do you think that's going to be reflected now in this 3-q earning season or are we going to have to wait a couple more quarters? >> i agree with se, ma that q-1 is where you really want to look for. if this thing is going to get going. because year over year camps are going to get easy there. for tech, we still really like software. hasn't really been impacted. you're not going to see the spending stop there until main street businesses really stard to get hit. and pull back on noncap-x

spending. romaine: what are we talking? >> all the productivity applications, adobe, work day. all of these companies. the issue here, and this is the biggest trade that we're looking at, which is basically if you look at momentum versus value, what's actually in the momentum category right now? well, it was those software names but they're out now because they took a pretty big deep over -- dip. it's really your staples, your real estate, your utilities. and on the other side, you've got financials, energy, materials, industrial, stuff like that. it's a rate-sensitive environment. that tree is specifically rate-sensitive. the bet here is if you believe that the economy's going to get a little bit better, we might get a trade deal, stuff like that, you buy that value trade all day. our belief, my belief specifically, is that the momentum trade associated with the tech names and those safer names is not over.

because we're not entering that flip in the rate environment yet. alix: leigh drogen, thank you very much. seema shah. both will be sticking with me. we're going to look at how elizabeth warren is proving a point by running an ad with a false claim on facebook. she can actually be funny. it's a thing. steve mnuchin finishing up a gaggle outside the white house. he said the national security team will be meeting this morning on turkey. he also talks about the fact that they will do anything they need to get a trade deal done when it comes to china. he's called a plan but no trip yet planned. they're taking it very seriously and they want to do anything they can to get it done. bloomberg blrg -- this is bloomberg. ♪ ♪

>> you're watching "bloomberg daybreak." wework is considering a bailout. it would hand over control to softbank group.

bloomberg has learned the japanese investment giant is convinced it can turn around the once high-flying startup. wework is also weighing $5 billion in debt financing led by jpmorgan. the company's on the verge of running out of cash. democratic presidential candidate elizabeth warren poking fun at facebook with a deliberately false ad. here's the deal. the ad claims the social network and c.e.o. mark zuckerberg are supporting president donald trump's re-election. neither by the way has endorsed a candidate. warren is trying to get facebook to remove misinformation in political ads. and that's your bloomberg business flash. alix: thanks so much. can we take a moment and talk about how funny that is? romaine: is this the state of u.s. politics now? everyone's just trolling everybody. trump took it to one level and i guess warren's playing this. alix: pretty much. but the thing is, you think she can't be funny, she is. she has a sense of humor. she's serious about it. romaine: she has a sense of humor. one thing i thought was interesting was facebook's response.

andy stone, who is the spokesman for facebook, basically said if she wants to say things that are untrue, it's not our job to police it, which i guess is honest. alix: it's the point they make. but it does bring up front and center, the regulation for big tech and whether or not her or whether or not it's over in europe. you ask people in europe, they're like, that's one of my biggest risks. the down side is you get regulation on tech. romaine: of course you had sort of, remember over the last week, when you had that audio leaked out with zuckerberg talking about stop warren and the potential for regulation. alix: good point. coming up, big bank earnings kicking off tomorrow. morgan stanley's betsy graseck is with us and she'll give us the names that will cut through all that noise. this is bloomberg. ♪ . g. ♪ . from the couldn't be prouders

to the wait did we just win-ners. everyone uses their phone differently. that's why xfinity mobile let's you design your own data. now you can share it between lines. mix with unlimited, and switch it up at anytime so you only pay for what you need. it's a different kind of wireless network

designed to save you money. save up to $400 a year on your wireless bill. plus get $250 back when you buy an eligible phone. call, click, or visit a store today. alix: this is "bloomberg daybreak." i am alix steel. here is my quote of the morning. not theld is probably

happier place it was supposed to be at the end of last week, but that does not mean the asset prices have lost all their friends." futures down by .2%. in other asset classes it does not feel like that at all. you are seeing the dollar gain in the g10 space as the safety trade moves in. you are seeing a move to the bond market in the u.k. crude getting wrapped up in the risk of feel. cable, too. talk about your volatility. look at the cable rate. big banks will kick off their earnings this week with jp morgan, goldman sachs, citigroup, and wells fargo all reporting tomorrow. then you have bank of america on wednesday and morgan stanley on thursday. it would look at what to watch is sonali basak. sonali: the banks have had a tough year. all of the six major banks expected have lower revenue, led

by the bait major global investment bank goldman sachs and morgan stanley. jp morgan doing the best out of all of them. that does not mean jp morgan is immune. interest rates are lower and we are hoping the yield curve pickup will have relief. jp morgan is above banks that have revised their net interest income expectations. we will see whether there will be greater impact through the end of the year. the last thing investors will look at is trading revenue and it looks to be a bit of a mixed bag. three of the big local banks are expected to have higher trading revenues, but citigroup and morgan stanley faring lower. we will see if they are able to surprise on the upside. the major take away is we are seeing a mixed quarter and we will want to see people borrowing more money, trading mart in spite of the global tensions we've been seeing throughout the corner -- the quarter. alix: that was the best intro. low more money, spend more

money. joining us now is betsy graseck. romaine bostick is here on set. that was a good set up. spend more money, do more stuff. will we see that? betsy: reporting will be a reflection is what have happened over the last few months. loan growth is good. we have loan growth coming in better than what we are forecasting for the commercial loan portfolio, and then over the past month or two, consumer borrowing, especially in auto but nonmortgage has accelerated. romaine: when you look at the consumer borrowing side, we saw there were issues with regards to banks having to boost some of the reserves for bad debt. boosting the consumer loan side but at the same time protecting against some of the losses. betsy: great question. romaine: thank you. [laughter] betsy: today the consumer is

doing well on credit quality and we saw this on friday, discover financial released its data after the close and you see all -- esau net charge-offs coming in below what is typically the case for the season. when will it change? when will the lending start to turn into more issues like what you are alluding to? the answer they are is all around the jobs numbers. the number of jobs, wages paid, hours worked. romaine: how much of the earnings season this euro be driven by the specific issues -- will be driven by the specific issues with the bank and how much will be jobs and the economy? betsy: it is definitely half-and-half. there are some names that might be much more idiosyncratic. macro is always important and we have to look on the last three

months, and the lookahead. with the yield curve having come down 100 basis plus year on year over the past several months, that is going to be a question for everybody on the call -- what is 2020 going to look like? currently, our the volume of loans enough to offset the fact they are making less from the loans? betsy: it depends on your book? alix: which books will do better? betsy: the ones where you are going faster and your costs are last. alix: who is that? betsy: it depends. we have a view that folks that are liability sensitive are in a better set up into next year, and our topic -- our top pick there is american express. romaine: when you look at the rate environment, we have gone back and forth as to whether we are going up in rates or down in rates, nowt seems like october 30 and beyond is anyone's guess.

we have had suppression on the banks because of the drop in yield. do you think that is over? are we just looking at what the fed will do, or can we get more clarity from other signals? betsy: as it relates to interest rates, i cannot tell you i've the crystal ball to predict with perfection. that will be a level of uncertainty the stocks will have to reflect. it will weigh on multiples. where is the upside? the upside is and how you are managing the expenses. as a management team, that is what you have to work with. romaine: of all of the -- alix: of all of the job cuts in all of the industries, it seems like it has been banks every year. how many more banks have low hanging fruits to trim their expense ratios? betsy: our view is the retail banks with the branches where you are moving people to the phone, there is opportunity there.

if you have a large retail branch presence, we would expect you are still going to be making that large investment more and more efficient. that is the group that has the most opportunity for continuing to get more efficient. romaine: with the bigger diversified banks, a lot of the job cuts have been on the ading side. we do not even talk about trading revenue the way we used to. alix: totally right. romaine: have we given up on any hope we will see in a rebound and that? have the banks moved on from that as a main profit center? betsy: trading is critical to the money center banks. your question is are we going to re-accelerate here? what i would highlight is there is some seasonality around trading. typically you start with a bang in the first quarter because you have money put aside by investors that going to the

market. first quarter is typically your strongest quarter for trading. that fades over the course of the year, with q4 being one of the lowest. that progression will still hold true. importantly, on a year on year basis, we do think q4 will be better. remember last q4? we are anticipating that fourth quarter this year will be much better on a year on year basis. alix: you mentioned american banks,, the regional walk us through the top big bank and why you like american express. betsy: we are going into the quarter most positive on citigroup. they are less sensitive to interest rates. focused than u.s. the other institutions. what is happening with the dollar and interest rates here is less of an issue. romaine: you think they will hit that target they had in time for

2020? betsy: this is my second point. i think you will have some improvement in the efficiency. we all know the headlines around citigroup. i would not be surprised if they have numbers around what their expectations are for better efficiency as we going to q4 and next year. i am looking for an improvement in the efficiency rate relative to what is in the stop. and american express and discover, is that your consumer play? betsy: yes. and on the regional banks, we like the set up for pnc. it is well reflected in the stuff and they are one of the biggest beneficiaries of the fed tailoring proposal, the fed tailoring rule that got finalized last thursday. romaine: you are not at all concerned about some of the rate exposure with those regionals? a lot of people seem to be gambling on the fact that the bottom is in for these.

i am wondering where is the risk as you see it with those regionals? betsy: what i want to highlight -- i do not want to say i am not concerned. your words, not mine. what i would highlight is what is in the stock versus what is and expectations. as it stands today, with pnc having underperformed super regional banks we cover, the rate expectations are embedded in the shares. alix: what will be the biggest disappointment? betsy: in earnings? the biggest disappointment might be it ends too soon. alix: you wanted to go on forever. which bank has not priced in the bad news? betsy: where we are underweight is the trust banks. that is mainly because while they are rate sensitive, they do not have large branch networks. there is less opportunity for them to effectively cut costs as

much as some of the other banks. alix: got it. betsy graseck of morgan stanley, thanks so much. now we want to get an update on what is making headlines outside the business world. isiana: the european union showing its unhappiness with turkey's military operation into syria. it has agreed to restrict arms sales to the turks. president trump says the u.s. is ready to go with more sanctions on turkey. the administration warning that can include shutting down all u.s. dollar transactions with the turkish government. in hong kong, violence over the weekend. a police officer was slashed in the neck by a protester. police saying they found in improvised explosive device. another demonstration plan today. protesters will show their support for a bill in the u.s. congress that could sanction chinese officials. over to spain, where there is an unprecedented port rolling. was given ander

unprecedented port for trying to break away from spain. the leader was handed the stiffest sentence. eight other activists received between nine and 10 years. the referendum triggered a month of unrest. the convictions could have an impact on spain's general election next month. 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: some more cold water thrown on any optimism for a trade deal. here's what the chinese premier is saying. they will trade domestic and foreign companies equally, but they will strictly protect ip rights. a big one. they welcome continued investment by high-tech companies. romaine: he talks about how the economic issues, the economy there is still persistent.

he does reiterate the idea china will offer that support. you are talking about an economic situation that has not improved. alix: he is also talking at the samsung offices, so that is a part of it, saying we will protect our ip rights. program, we this will get back to that 737 max -- the boeing board strips the chairman of his title so they can focus on getting the jet back in the air. more on today's bottom line coming up next. bloomberg users, interact with the charts using gtv on the terminal. ts shownchar throughout the show. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." i'm viviana hurtado in the hewlett-packard enterprise greenroom. up later today on "balance of power," national foreign trade council president. now you're bloomberg business flash. bloomberg has learned volkswagen is considering a sale or stock listing for its lamborghini supercar unit. that will be another step in the ceos long-term plans for the world's largest automaker. he wants to more than double vw market value. he is channeling sources to the main vw, audi, and porsche units. a private equity firm agreeing to buy british cybersecurity office group for $3.8 billion. that represents a 37% premium. office provides i.t. security to a range of clients as small as dentist and neighborhood stores. shares of apple begin the day on a record high.

on friday, the stock rising almost 3%. that made apple the most valuable u.s. company again, beating out microsoft. both have a market value of more than $1 trillion. i'm viviana hurtado and that is your bloomberg business flash. alix: i still have not bought my new iphone. i have a five, it is an ongoing joke. i am watching wework, maybe we will see softbank take over the company, maybe we will see jp morgan, but the most interesting part was when we had bloomberg opinions say it is unusual for venture capital company to become the parent company. that is the realm of private equity. what are you doing, guys? romaine: i do not understand. at some point you know when to cut your losses. we have an investment that did poorly. now you will double down?

alix: it is a small portion of your portfolio. it is not like you live and die by your investment in wework. romaine: this seems to be more of a financial issue. they need the money and this is the only way they can do it. alix: looking at facebook. romaine: remember libra, the big rollout in june? up toouted they would be 100 companies. there was a meeting with all of the companies supposed to sign on to libra. five of those companies have already backed out. we have gone from 27 to 100 down to 25. alix: these are big companies. romaine: mastercard, visa. the only companies still in the mix are vodafone and uber and lyft. the rest of the companies are relatively smaller players. you want to see the

heavyweights. regulation around this is too much. alix: the third company want to focus on is going. sutherland joins us now. finally we have a different ceo. it only took how long? brooke: seven months since the 737 being grounded. this was a late announcement, they put it out friday. they are taking away dennis muilenburg chairman title. why did it take this long? the language in the press release talks about enabling dennis muilenburg to get the 737 max 8 back in service. i would've thought that would be the focus. romaine: calhoun will be breathing down his neck. i thought calhoun was a ceo candidate. does this increase those rumors? brooke: potentially.

there has been criticism over dennis muilenburg and the way boeing has handled this crisis. their communication has not been great. they have been overly optimistic about when the plane will return to service. the real test will be the latest deadline. they say this plane will be back in the air by the fourth quarter. there are a lot of indications this might not be true. you have the airline saying we will not fly this until january, and you have criticism from the european regulators saying we are not convinced boeing has been done everything it needs to do to fight -- to fix the flight control at the heart of these problems. david calhoun is a busy man. he is on the board of caterpillar and still employed at blackstone. we will see. alix: does this push the timeline back forgetting the 737 max back in the air. switching up the ceo role came focus on getting the plane back in the air. they are saying that will not happen. brooke: there are a lot of

questions. you still have looming in the background dennis muilenburg testimony to congress and making it look like they are not kowtowing to any pressure from lawmakers. potentially increased scrutiny from the faa, the report that came out of the review of the faa's process, showing they did properly evaluate the plane and boeing put undue pressure on its own employees. romaine: is it more because of how he has been communicating with regulators and pilots and the airlines? brooke: at this point it is a regulatory issue. to have these workhorse planes fall out of the sky and the way they did, the regulators want to make sure they get this right before they put it back in the sky. your point, there is a separate issue about how you convince the flying public to get on these planes. that is something boeing is ill-equipped to handle. a producer in the

control room, i do not think you could pay her enough to get on the 737 max 8. that is all the background. it has nothing to do with the 737. brooke: there is a question of china. boeing needs china to order planes to make its production goals for those wide-body jets that are falling out of favor in other markets. alix: thanks to brooke sutherland. in romaine, it was a pleasure. i appreciate it. future slipping as china throws cold water on trade deal excitement. if you're heading out and jumping in your car, tune into bloomberg radio heard across the u.s. on sirius xm channel 119 and the bloomberg business app. someone is in there. it is lisa. i can see her in the corner. this is bloomberg. ♪

alix: time for "technically speaking bill maloney, voice of bloomberg's equity squad joins me now.

s&p will be choppy. set it up. bill: it will be choppy. looking at friday's action, we gapped out of the 2940 trading range. had a close, classic buying remorse. first support level, 2960, the october 7 hi, in then 2954. resistance starts at friday's close at 2970. alix: did we learn anything today? if we are just hanging around this level, we are down .2%. what does that tell you? 2972 296070 -- bill: is your yields today. treasuries will be closed. we had a steepener for a hot minute. what do you see? bill: looking long-term, key support level 140 to 150. friday they closed at 173.

the real level is around 185. this is a retracement level. 185 he resistance on the 10 year treasury yield. alix: in terms of support, will it .5? bill: 1.40 to 1.50, big support level. all the way back to 2016. alix: gold has broken out in the past but now we seem to be range bound on the breakout. what you wind up seeing? bill: gold had a break out of this huge trading range back to 2013. but for resistance around 1500, 1507. the big resistance levels are around 1560 and goes back to 2011 and we felt there in august. 1560 is your big level in gold. alix: what happens after that? bill: not a lot. about 1800. alix: i remember those days. bill maloney, appreciate it.

you can listen to bill on the a.m.berg starting at 6:00 that wraps it up here. coming up, diana a moa, jp morgan asset manager will be joining. a reality check for the market as china puts coldwater on a potential phase 1 deal. futures off .3%. european automakers in the green despite chinese automakers tank in august. money moving in the bond market in bunds but also gilts. happy monday, happy reality check market day. this is bloomberg. ♪ everyone uses their phone differently.

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switch and save up to $400 a year on your wireless bill. plus, get $250 back when you buy an eligible phone. that's simple. easy. awesome. call, click, or visit a store today. jonathan: from new york city for our audience worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. ♪

jonathan: comin up, china looking for more talks before degrees design president trump steel. a reality check for brexit optimism. the eu warning discuss turns a long way from a break through. we work considering a bailout deal that will hand control the stop -- to softbank. odorning. here is your monday morning price action. futures negative eight points on the s&p 500, down3%. the bond market closed for columbus day, but what a move on treasuries. treasury yields up 20 basis points. foreign-exchange euro-dollar negative iran .1%. euro-dollar down to 1.1025. let's begin with the big issue. beginning the week with a healthy dose of skepticism. >> have we change the tone in these negotiations? >>