in this. but not quite yet. [closing bell] unprotected -- underperformer of the day. we are awaiting netflix to report results. don't think you got called netflix a tech company it is kind of its own company. it has so many of its idiosyncratic issues. >> there are still bid for havens particular coming from japan. headlines say japan treasuries rose in august. we had the results now from netflix. $524-quarter revenue billion in line with what analysts were looking for. the fourth quarter streaming

paid that change, these are the numbers everyone is watching for. plus 7.6 million. what analysts were looking for which was not .3 2 million. netflix is disappointing here with its change net subscribers. caroline: that's despite stranger things at the game of thrones. off by 2% now. i think we will have to read through the entire statement before we get a direction. >> were going to dive in momentarily but let's dive into the action with our reporters. i am looking at an interesting divergence on the day the s&p 500 basically flat down slightly as you all were talking. look at the energy sector down 1.4% underperforming. xle only 1% within the one is higher. not entirely clear what is

behind the divergence but it could present a buying opportunity in this year today chart where we have a reliable downgrade. every time we go above the 50 day moving average, the excellent has productively moved up. day,is goes above the 50 if that move does happen in the xle. >> chipmaker stocks took a hit today. one extended its year-to-date gains of more than 41%. the weakness is pretty broad-based. 27% of the 30 stocks in the semiconductor index are lower today. i far, the biggest decline or is a msl holdings. this is the dutch maker of chip manufacturing equipment area it

has clients like samsung. was 3.9 billion euros. that is above analyst estimates. citigroup analyst said even though it is robust, it might not be enough to keep the shares rallying. the -- stock traded in the u.s. was up about 72% year-to-date through yesterday. it's not the only one. for all the talk about the trade war hitting semiconductor stocks this year, all 30 stocks in the semiconductor index are up year-to-date. >> and taking a look at the british sterling. it is backing away from a five-month high as the eu and u.k. downplay the prospect of a brexit deal that would happen on wednesday night. the british sterling rose to the five-month high during trade versus the u.s. dollar. on reports that the democratic

unionist party had except the latest proposal. so far, there are signs that an agreement can be reached areas a sticking report remains, how to draw a customs border with ireland. the democratic unionist party denied reports that it may support some of the latest proposals. now time is running out to secure a brexit deal before next week's summit. keeping an ion netflix. it right now, the shares are higher. as much as 6% after putting the earnings. it is bouncing around quite a bit. or numbers you need to know the streaming numbers, the changes and for the third quarter, it was a miss you guys netflix reported an increase of subscribers. analysts were looking for more. for the fourth quarter, they are looking for seven 6 million and

analysts anticipate 9.3 2 million. curious as to what is driving the stock higher. >> eps did meet expectations. erae are moving into an where investors prize profits over growth at all costs and that is something we are seeing a lot in the market, where it's like don't really all costs show us you can make money, then maybe it's time to start looking at the eps line again on netflix and watch their ability to deliver cash to the bottom line. tomorrows this is a experiment because now they are saying the growth in the u.s. didn't live up to expectations because they have increased prices. for now, they haven't bounced back but perhaps they are going to push toward profitability. of free cash flow,

something everyone is looking at when you talk about these quality companies, netflix still sees cash flow at -$3.5 billion area it says cash flow will approve so pushing that ahead to the future. netflix are looking at shares moving higher in the after-hours trading. let's ring back our guest now. let's talk about earnings because the big banks have reported we have also heard from netflix and soon from ibm. what will be the theme here? thee keeping an eye on strength of the consumer but what will be the surprise this season? earningsanalysts have into the fourth quarter and they have missed in the first three quarters. we have a big ramp up expected for q4. i see no reason for that to fall through area will he want to see for the next three weeks is the guidance come down. we have a nice easy hurdle to be

in q4. aually the last two months of reelection year are strong for the market. let's get the earnings expectations more realistic so we can get the year-end rally. >> what is your take on the changing nature of what investors want to see? i think perhaps that is why netflix is up now. we are also seeing it in other areas of the market. software and other companies can't bounced back area is this a demand that investors have in any category where they want to see an ability to deliver real returns? typically athis is volatile stock. also in the fourth quarter that's when disney plus and apple tv are supposed to come online. maybe things aren't as bad as people think with the advent of these new streaming services coming online as competition. seen the market

being more discriminatory lately. we have seen it with the ipo's and with software stocks also. you have seen it across the board. there was a great piece and someone called it the wework flow. growthare worried about going forward, you do still have some recession concerns. do you want to be putting money to work in a company that doesn't have profits? that has been a huge question hanging over some of these companies. >> your perspective on sectors you like and don't like? we are so close to 3000 on the s&p. unless you think the economy's going to pick up, why would you expect the cyclicals to generate the kind of earnings growth to want owning them? this is back to what it has been the last several years which has been growth stocks overvalued stocks.

the percentage of yields greater than the 10 year is high. if you are an asset allocator and you want income, where will you go? you have to go to the stock market. the few companies that can actually grow faster than the outperform as well. those are the sectors we like. >> what about international? >> going to interrupt you. we have breaking ibm news. third quarter earnings coming in at $2.68. net income at $1.67 billion. we will keep an eye on how ibm performs after-hours that they are up. the key story is how the integration of red hat is going. this deal that they closed during july. we want to know how that is operating. quartere felt the third would be at $2.67.

thenue is just shy of estimate. >> going back to your point earlier, what were you asking i can't even remember? stories has been u.s. outperformance. i am curious whether you think there is anything out there that would change that from a global perspective or are u.s. stocks in your view still the game in town? likes it is still u.s.. it does global slowdown or recession next up, that will over thernational u.s.. when people look at valuations in the u.s., it's not the case. it has more to do with the companies in the u.s.. there's more tech, more health care and growth in the u.s. and more energy, utilities and financials in europe. when you take that into account, europe is not any cheaper than the u.s..

a faster growth rate, it makes sense to be in the u.s.. it has been hard for them to gain traction. for a while it looked like people were ready to back into these be not stocks but that didn't last. x no and that's what happens when you're in a downtrend. small caps do best at the beginning of an economic expansion. if you have gone 10 years without the economic expansion, there's that window. they are not as domestically oriented as they used to be. profits from overseas have risen in the last five years. when people think u.s. economy doing better by small caps that's not really the story anymore. it may have been true 15 years ago but not today. thank you so much.

we have other breaking news because alcoa reported results and the number of find interesting is the outlook for global aluminum demand. alcoa sees demand down 4/10 of 1%. it is also cutting for your demand view overall. at that outlook is a reduction from its previous view. as for the third quarter, it had an adjusted loss per share of $.41. it's slightly wider than what analysts had been looking for. there's a lot more coverage to come here on bloomberg. that doesn't for the closing bell. romaine bostick is here next four what'd you miss. this is bloomberg. ♪

♪ caroline: live from bloomberg i'm caroline hyde. romaine: i'm remain bostick. -- romaine bostick. >> the question is would you miss? how is netflix pushing toward profitability? let's the pound clings onto gains. consumer contradictions, u.s. upswingdata reports an in the industry.

pushing for a brexit deal, europe leaders have gathered in brussels to nail down the brexit deal. despite signs that an agreement could be reached, key leaders are not playing the chances of something happening tonight. more on the progress or lack thereof is our guest. read the tea leaves for us. tofeels like it's impossible get through the deadlines that are necessary to have the u.k. leave the eu come october 31. ask it is difficult. leaders,from european from the brits that we could get close to an agreement. there is eagerness on both sides. we have two looming. one is october 19 where the u.k. compels the prime

minister to ask for extension. obviously the brexit deadline of the 31st. boris johnson has pledged many the euhat he will leave with or without a deal. the centerpiece of his message as a prime minister. you will see a lot of inpatients on the european side especially the ranch, the dutch bank that this is dragged on for too long. that it's time to move on and nobody wants a no deal situation. especially when it comes to the situation with ireland. there is also a desire on the european side to move on and focus on other priorities for the eu especially new european commission that will take office on december 1. >> what about the domestic politics in the u.k. within the government's own coalition? obviously, they will have some concerns.

i found out yesterday on this showed that apparently, they will be willing to sacrifice in exchanger belief for money. do you believe that there will ultimately be a way for boris johnson to win over his junior coalition partner? >> boris johnson is in an interesting situation politically because if you look at general election polls, if a new election was called, the tories are 10 points ahead. his voters appreciate the fact he is standing firm and have a clear message on brexit which is ensuring u.k. sovereignty and leaving the u.k. quicker rather than later. at the same time, he has a precarious majority and theresa may, it was very complicated. he's tried to push through an agreement with -- theresa may tried to push through an agreement three times and lost three times.

in his own party you have a lot of hardline exit tears who don't what to find a new deal that would be too detrimental to u.k.'s don't want a new the ups staying close to the u.k. it there's lots of different pieces to balance area and one of the things that we are close to an agreement on is the idea that the u.k. and northern ireland would stay out of the customs union but aligning its regulation and taxes and a lot of those components with the eu customs union and maybe as you said some financial support for northern ireland. there's a lot to be worked out with the eu and member states. then he has to convince his majority in parliament. we still have a lot of hurdles before the deadline.

>> even if we get to the deadline and a boris johnson gets across the line, at the end of the day he still has to go in and negotiate a trade agreement with the eu. i wonder how that is factored in to what is going on now. whether the eu might think they can press the u.k. harder once they get to that stage of the negotiation? >> bethanie an interesting question because people forget this. we are negotiating brexit right now but that only leaves us to a transitory phase where the rest and i would say the hardest part has to be agreed upon which is what is the trade relationship? a lot of other dimensions like security and defense. the u.k. is one of the two key events actors of europe. as europeans are pushing ahead with defense integration schemes, what more can the u.k. play into this? these will have to be decided afterwards.

e-sports johnson is trying to push for the u.k. to be very havetitive to be able to the ability to negotiate its own to lower fiscal regulatory standards to be more competitive, you can ask the question of what kind of leeway you will have to negotiate a new trade agreement with the europeans. these are also questions that loom large even after an agreement and after the october 31 deadline if it is expect -- respected with an agreement. >> thank you for being with us. coming up, shares of netflix moving higher after hours. international growth eases investors concerns. we will dive deeper into the numbers. that's coming up. is bloomberg. ♪

>> netflix shares are trading above $300 after their third-quarter numbers were released today. their earnings were in line with estimates for the fourth quarter. a lot of folks are paying closer to their cash flow and larger numbers. if break all this down, we want to bring in our guest from bloomberg intelligence. the shares are rallying. i assume this is not on the streaming numbers themselves. what do you think the four area is about? >> -- what do you think the euphoria is about? for 9 street was looking

million but it looks like -- ramp-up in spending even in the spending even in the face of these well-funded new arrivals. i think the other big thing was that they are going to give a much more detailed breakout in terms of international guidance. that gives investors a light of confidence area that starting in january, they are going to provide a region by region breakout of one the memberships are growing. that restores confidence. >> is this a turning point in netflix's history and a strategy to focus on earnings and free cash flow and now growth -- not growth at all costs? >> absolutely.

we have seen this has been a subscriber story until a few quarters ago when they try to change the narrative and shift the focus to what dashboard profitability. it looks like now that is going to bear fruit. over 160a company with million global subscribers area it is a game of scale. what we are going to hear management say is that as they keep gaining the subscribers they are going to be able to -- that is going to contribute to profitability and better operating margins. >> what do you want to hear regarding competition? it's going to be coming thick and fast in q4. they have great titles but none of them have the quality of original programming we have. do you agree? >> i do agree. what we have seen with these new

competitors is they are undercutting on price. if you look at the lineup of shows, it is fairly skimpy. apple only has nine originals in november. compare that to netflix and thousands of titles they have. the end of the day, it's going to be about value. consumers are going to look at netflix as the core of the streaming bundle and a compelling value proposition. >> great to get such swift analysis from you. interesting breaking news across the board. this one regarding brexit. a draft brexit deal including for northern ireland. the assembly can vote to end border protocols after four years. >> regarding tkey, congressional leaders met with president trump today. nancy pelosi says that meeting ended when democrats walked out over what she characterized as a

meltdown by the president area. this is bloomberg. ♪ from the couldn't be prouders

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>> i'm mark crumpton with bloomberg's first word news. president trump says things are very nicely under control in northern syria where turkish forces are fighting syrian kurds who were allied with the u.s. against islamic state. withg a press conference the italian president, mr. trump told reporters syrian kurdish fighters that turkey considers terrorists are more dangerous than islamic state. turkey believes the kurds who fought alongside the u.s. a link to the car to stand workers party which it considers terrorist. defending hisis decision to pull u.s. forces out

of the syrian border region where fighting continues. frankly, if russia is going to help in protecting the kurds that's a good thing not a bad thing. it would be led by syria and syria doesn't want turkey to take its land i can understand that. what does that have to do with the united states? , onenator lindsey graham of president trump's closest allies said the president's decision will allow isis to reemerge. agains the president will be held accountable. meanwhile, we have just learned that nancy pelosi says she and other democratic leaders left a meeting with the president at the white house after he appeared shaken up by an earlier houseboat that condemned his actions in syria. emmanuel macron and angela merkel today sought to show unity at a meeting in southern france. it came as the eu and britain appeared close to a tentative brexit deal.

after holding bilateral talks in a cabinet meeting, the two leaders say they were convinced that brexit talks are in the final stages and a deal can be adopted by eu leaders tomorrow. the house impeachment inquiry is exposing new details about president trump's actions toward ukraine and those of his personal lawyer, rudy giuliani. a former aide to mike pompeo is speaking to the house impeachment panel's today behind closed doors. michael mckinley who resigned last week is a career foreign service officer and was mike pompeo's defective chief of staff. he is expected to discuss the treatment of the former u.s. ambassador to ukraine. it global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg.

♪ data is out today reinforcing the idea that the recent upswing in the industry continues. with retail sales, the reports underscore how difficult it is to assess where the economy is or is headed. now, a family management corporate chief investment officer. where are we? it feels like it is an exceptionally difficult economy to read right now. there's an extraordinary amount of debate about whether or not we are going into a recession. >> i think i'm in the middle like everybody else. there's too caps. the people that see the manufacturing data and say this is going to drag down everything else and other people who say manufacturing isn't a big deal, this is all noise, services are strong, we have a healthy

corporate environment. we have housing which is pulling things up. i am not in any extreme at all. >> in the manufacturing thing side of theonsumer equation is relatively strong. we continue to get conflicting signals. we just heard from a bunch of banks. folks still spending on their credit cards. people refinancing their mortgages. then we had the retail sales number, it seems to show that there is a bit of a downward trend line in terms of growth. >> we could go from great too good. relatively, things have been great for a while. even if you go from great too good, that is still a little bit of a step down and disappointment. there's relative and absolute. in absolute terms, we are still strong. we could take a step back and still disappoint. elementre -- there's an

of where are the opportunities? going -- real estate is going to do well if we are seeing housing outperform. outperform -- our firm in particular has been looking at the s&p at almost 3000. ofre is a gm oh forecast asset returns out and you can agree or disagree with what they nevertheless, you see that seven-year future stock nevertheless, you see that seven-year future stock returns in the u.s. are projected to be -- we --ds you to say how do

three cities. >> what is it about this area that in your view has been underexploited or why there are still excess returns to be found there? why is this an opportunity? >> compared to everything else youthere, the factors when look at multifamily housing, even if we go into a recession, people will still need shelter. they still need to procreate they need a place to live. shelter is going to be sticky.

white i just stay invested in equities? are you seeing a risk there that folks are not equity should stay away from question mark box i think it is more of an additive. maybe the merits of fixed income are not going to be helping and equity portfolio and vice versa. taking a sliver of stocks and bonds and adding it to high-grade real estate, cash flow producing real estate that has tax advantages and they can reprice in a rising market or a falling market is not a bad

place to be. we are talking mid to high single-digit returns. this is not a sexy investment it is a middle-of-the-road shooting for singles and doubles but there is merits going forward. you.ank coming up, awaiting the return of boeing 737 max 8. we're going to get an outlook on the aircraft from the chairman of india's spice jet. this is bloomberg. ♪

welcome. a few weeks back, i believe you said that the boeing 737 max 8 at least for spicejet would return to service by january. are you still sticking by the forecast? >> we are hoping that we can stick to the forecast. we are constantly in a dialogue with boeing. they have been telling us they expect the aircraft will return to service by the month of december. we are hoping that the indian regulators can then work on all of the documents that have been submitted and hopefully we can return to service in january. >> what is boeing doing to help , we knowit comes to the regulators are going to want simulators. >> we are certainly talking to boeing on trying to put a

simulator into india. there aren't many macs simulators around in the world at this time area. if pilots are going to be required to be retrained and we have a big problem around the world because there aren't very many simulators area where hoping that a simulator can be put into india and that the training that will be required will be more computer-based training instead of simulator-based exercise. >> is boeing doing anything for you on the financial side of things given the cost to you and if it was too long before the plane were able to get up in the air what it come to canceling future orders? boeingre hoping that will return the plane to service as soon as possible. we have a very large order of close to 200 planes with them. we have 38 aircraft on the ground.

it's not so easy to switch from one aircraft to the other. are pretty confident that boeing will be able to resolve this problem. boeing is a company with a rich history and they have done this for so many years, we are very hopeful they will resolve the problem soon. it's a great airplane. we have flown it for a long time and we were happy with his performance areas our first option will be to try to fly the aircraft. beyond a point, we will have to look at options. >> let's talk about the broader business environment area and we have seen some of the high fair terriers in india struggle. i wonder specifically for spicejet at your price point, what is the demand outlook right now? demand ismand >> the extremely strong. we have 1.3 billion people in india. only 3% of those people fly

today. the potential is very large. remains the fastest-growing aviation market anywhere in the world. at our price point, we see a lot of passengers shifting from trains to airplanes. flying in india is aspirational and with the size of our country and the long distances, it takes longer to24 hours or get from one end of the country to the other. by train. by airplane, it takes two hours or less. it makes sense for people to fly area as the economy is growing and people are becoming richer and there is more disposable income, we expect the aviation market will continue to grow for several years to come. >> talk to us about your international ambitions. there are a lot of budget carriers across asia. how do you intend to distinguish

spicejet from the competition? especially if you're going to the same destinations? we are already flying to 13 countries. we are flying typically in our neighborhood. to the middle east, dubai, saudi and thailand and hong kong. lanka and afghanistan. we are flying into several countries and we are hoping to expand that is the aircraft comes back to service area that aircraft has a range that is one hour more than the traditional aircraft. we are hoping that as soon as into37 max 8 comes back surface, we can fly to several destinations that we are not yet servicing. we look at the longer haul destinations as well. we now have more washington

related breaking news. it seems as though trump and resident erdogan had a call that led to a lengthy pushback to avoid -- yesterday we got news of a state run bank being investigated by the doj. it would seem that president trump assigned his attorney general and treasury secretary to deal directly with the turkish president. erdogan is repeatedly playing to avoid a trial for that bank. though that changed and undated indictment which was in failed -- unveiled on tuesday. an interesting story. we will dig in more in the

future. >> it is time now for smart charts with abigail doolittle where we look at timely topics. this week, you are looking at one of the broad u.s. stocks. >> we are taking a look at the russell 3000. everyone we have on our various charting shows and our guest are talking about what's happening to the end of the year. let's look at your russell 3000 chart. >> i decided to use the russell because it encompasses 98% of all stocks out there. it's a very broad-based index. here we are at 1748. this is roughly the same level that we have been at since last september. if anything, the market has gone nowhere since last year. the trend is still optimistic. my concerns are that momentum is gradually starting to wane. the second is seasonality in a

pre-election year tends to be down from september through november before a year-end rally. also you are starting to see waning in parts of software. growth stocks are starting to dip. longterm one wants to stay up through october expiration. as we get toward the end of the month, there are a lot of cycles that suggest downward pressure. >> what about this on the bottom? the russell 3000 relative to the s&p 500? this is interesting because the s&p 500 eating 500 and the russell a broader base, it shows how much differentiation you see. cap andit is a small may cap deterioration. the large caps tend to be the place to be.

small and mid-caps out-of-favor right now. whether we get a bounce or not, it's tough to say. it is certainly want to keep an eye on. >> right now would you recommend buying, selling -- >> i have a tactical short-term bullish position for the next three to five days then i suggest taking profits after october. i think we are going to get some kind of hold back into november. it depends on how extreme it is. anything under october or august lows would be a concern. right now it's a little bit more of near-term damaging going between now and november than a rally into next spring. >> let's connect this with the vix. i don't agree on the pattern attempt to us about what you are seeing. >> you are starting to see this pattern where many people

recognize this shoulder, and head then hire right shoulder. oftentimes, this does not mean we plummet straight down to new lows as the market rallies to all-time highs area if anything, this suggests is more likely to see some several blow in a decent bounce in applied volatility in the weeks ahead. i don't know that i would be too complacent yet and thinking the china deal is going to be imminent and we're going to rally. i like to buy implied volatility in the next week to 10 days. more ofund like you are a buyer of volatility. >> i think you have to be tactical in this market. it's hard to buy and hold forever anymore. if stocks have gone sideways for about a year, autumn line you want to buy volatility when it cheap and it is certainly getting cheap in the last few weeks. >> thank you for joining us for smart charts.

up, the latest on the impact of the protests in hong kong. this is bloomberg. ♪

>> china is condemning the u.s. congress. the house has approved a package of measures backing the pro-democracy movement. us what this house proposal is all about and whether it will garner any effective support. >> the one we are talking about right now and i think that's the one that beijing is most concerned about is the human rights and democracy act which was passed by the u.s. house area still not being passed by the senate. it has to be signed by president trump. there are a few measures that were erected toward hong kong. this democracy act is about

reviewing the special trading stashes of -- status of hong kong every year. once you have that approval, then you are new the status. there were other measures including reaffirming the relationship between hong kong and the united states. the -- the u.s. doesn't want manufacturers to sell this crowd control gear to hong kong. that was also included area beijing is now saying that they will implement strong countermeasures if this act is passed into law. >> so we heard from carrie lam eventually last night. she laid out her policy of economic and political for hong kong. next she tried a couple of times. >> she went to the legislative council and started talking then the pro-democracy lawmakers forced her out.

she was not able to lay out her plans there. she had to do it through videoconferencing. one of her pro-democracy lawmakers saying this about her. her if she urge can't govern hong kong and she has no determination to govern hong kong and she has no ability and is even incapable and administrating hong kong, please step down. >> the pro-democracy block makes up one third of the legislative council >> she was being heckled by lawmakers? ask yes you can see they can force debates to be stopped which is a huge deal. hong kong developers having a big night. is there some shift in sentiment? that but support measures she announced last night.

what she announced were these 200 initiatives to help ease the discontent. one of them was suppressing the home prices that you can see and over they have been doubled. she wants to me these homes more affordable. there have been others saying if you make it easier for first-time buyers to get mortgages, you will have to boost home prices even more. onion for us area. tomorrow, eu leaders will gather in brussels again. there is a russell's -- brexit deadline looming again. >> and i will look at housing numbers all out tomorrow. >> morgan stanley and honeywell are reporting tomorrow area.

>> bloomberg technology is coming up next in the u.s. area this is bloomberg. ♪

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experience the leesa hybrid mattress. right now, it's on sale. order today. go to leesa.com. this is bloomberg technology. coming up, netflix rejections for the third quarter. ms. obstructions falter. we have more on the streaming giants latest earnings report. talks, a $5 billion rescue plan for