>> this is bloomberg daybreak: europe. our top stories this morning. markets and are in a holding pattern as they await the fmo in c policy decision. all eyes will be on chairman jay powell when he speaks later tonight. boris johnson is getting his election and now he just has to win it. in a time of unprecedented political and cause additional upheaval, the outcome will be hard to predict. minister resigns after two weeks of antigovernment protests turn violent, but will that be enough to stop the demonstration?

as germany's spy chief says huawei cannot be fully trusted, we speak to the company's officer to the u.s. in this hour. ♪ >> it is 9:00 a.m. across the emirates, 1 p.m. in hong kong. i'm tracy alloway. this is bloomberg daybreak: middle east. manus: i'm manus cranny in riyaad. there is a new globally important date. december 11, their remco ipl will start to trade. the valuation anywhere between 1.5 to 1.7, depending on which analyst or moneyman or woman you speak to. 40% from the u.s.

the negative interest rates. billion, buthe $15 only one question that matters in riyadh. what is the valuation and who is going to buy their remco ipo? we have a guest later on. michael thompson in terms of flow of money. joins me after 30 minutes. we will get his brexit take, the flow of money and how important the region is. good morning. tracy: lots of interesting conversation coming up in just a few minutes. before that, let's check in on the markets this morning. the benchmark 10 year yield on china government debt still trying -- trading higher. lots people in the market expected the pboc to inject some liquidity, some relief for the market. that did not happen today. so, investors are left to parse the future for chinese fixed income. a different story when it comes to u.s. treasuries.

we are in wait and see mode ahead of the fomc meeting, but yields on the benchmark 10 year u.s. going down by one bip this morning. let's get more on how things are doing with sophie kamaruddin in hong kong and in mumbai. what is the latest? sophie: pretty much in a holding pattern for asian market stocks, trading mixed. regional benchmark heading for this first session lower. the hang seng extending tuesday's drop with gdp data, which is expected to confirm the economy slid into recession. carrie lam offering little on that front. instead extending gains in hong kong. rising as much as 3.2% on its. while most em holding steady before the fomc decision. the korean yuan, the recent rally may have been excessive given the overall economic future for south korea.

belowout the yen hovering 109. the boj meetings will be game changers. tracy: let's check in on india. we have a positive start to the holding. it's holding pretty strong actually at this point in time. contrary to the rest of asia, we have been holding onto stronger gain. it is off the back of the big move yesterday of 1.5%. 11,800 was the crucial resistance level to take that down. contributions coming in across the board not just from only the banks, but even the other smaller names within the index itself which has started to contributed. a more broad-based move into today's session. the mid-cap index has been contributing over the last sessions as well. whether or not this continues, we will have to wait and watch. this is the crucial monthly for

the markets as well. you will see that spiking as we move towards currencies. in today's session, the key highlight has been the bsu stocks which on the back of the government investment push has been seeing a lot of interest in the last trading session. it got the index on the back of numbers up 5.5%. pushback its quarter result announcements. it is giving a strong quarter. right, sophie kamaruddin and devina, thank you for the update. let's check in with the first word headlines. good morning. >> good morning. the u.k. is preparing for a general election on december 12. prime minister boris johnson managed to win backing in parliament to trigger the snap vote and get the election date he wanted an attempt to resolve the brexit crisis. it will be the third time the

u.k. has gone to the polls to choose a new government since 2015. lebanon's prime minister has resigned after two weeks of antigovernment protests turn violent, as demonstrators were attacked by supporters of the iranian backed hezbollah party. he said he reached a dead end and time for what he calls a major shock to confront the crisis. protesters are now calling on other top officials to step down. house democrats have released the impeachment inquiry resolution ahead of a full house vote on the future of the inquiry that would come as soon as thursday. it is a signal that the public will get a look at the witnesses and evidence to build a case against the president. republicans have complained the inquiry is illegitimate. germany's spy chief says huawei cannot be fully be trusted. it is a signal that security hardliners in angela merkel's government wants to keep the chinese tech giant out of the country's 5g network.

they say it is difficult to trust the company that has a high level dependence on the communist party. we will be speaking to huawei's chief security officer for the u.s. at 9:30 a.m. dubai time. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts. this is bloomberg. tracy: thanks. as mentioned, markets and a holding pattern this morning as they await the federal reserve policy decision later today. the fomc is widely expected to lower rates yet again, having already cut in july and september. the key will be the tone of chairman jerome powell's news conference later in the day with investors try to ascertain the trajectory of policy heading into next year. meanwhile, speaking at the future finance initiative in react, blackstone's stephen schwarzman voiced his concern about central banks not having enough ammunition left for

whatever the next downturn actually comes. >> we sort of run out of effectiveness from lowering interest rates. i think negative interest rates really make no sense. when we have a downturn, it is going to be challenging and needs a lot of physical stimulus. >> i think in the next 10 years, we have a risky situation, very risky because in that 10 year time period, we will probably have an economic downturn, almost certainly, while there is a large wealth gap. and, while there is not effective monetary policy. that's a scary situation. tracy: joining us now from abu dhabi is ryan lamont, ads senior executive officer. great to see you. i wanted to start out with the dynamic between equities and fixed income. you point out in your notes that

investors are basically buying overvalued debt with the hope that someone else will buy it at even higher price, but they are also buying overvalued equities. which of these two asset classes are more overvalued at this point in time? ryan: good morning. good to be back on the show and see you again. obviously, equities are much more overvalued than fixed income by a longshot. now, when the curve has inverse over suppertime, investors panicked and the tendency is to buyr your equities and just long and treasuries -- end treasuries rooted this person further into inheritance. as equity sustained their growth, people said let's move it back to equities, especially with the news we got on the trade war. the detante between the u.s. and china. people switched back again from fixed income to equities. this caused the treasury curve

to steepen sharply as we have seen recently. equitiesing overvalued and hedging with slightly overcome fixed income instruments. it is a very troublesome situation. tracy: it is not your usual strategy. ok, so when it comes to risk appetite, we have seen a number of things rise to records. we have seen equities but we have seen a rally in emerging market currencies. where did you recommend investors actually pick up risk exposure at this point in time? ryan: to be honest, i have to go back. the barbell portfolio, to switch between the two. on the equities side, you have to be one of the best lock pickers in the world today because you have to pick the right lock -- stock. quite positive on consumer related stocks, especially in the u.s., it remains quite strong despite negative news, but consumers are still

spending. we look at the consumers. on emerging markets, this ipo coming in saudi arabia, we see it as a big trigger for momentum of the whole area. gcc equities markets are driven by momentum and we have had a lack of momentum recently in gcc stock markets. this ipo could break that freeze we have been seeing. tracy: let's turnover to the fed. we are awaiting the fomc meeting today, widely expected to get a rate cut from the u.s. something like a 94% chance at this juncture. what are you going to be looking out for as we get the fomc statement and the press conference? ryan: the key is whether the fed will continue on its automatic cutting back or not. i am hoping they will not continue with the automatic cutting because as has been o andoned by ray dali

other persons you interviewed, we are in a very dangerous situation today because cutting rates is not enough. if cutting rates were enough, germany and japan with negative rates should be having growth of 6% today. this policy has its limitations. not facing a cyclical chain yet but precautionary cuts are very dangerous the guns -- because once you hit recession, you don't have tools to fight it. it is key to know if this will go and an automatic cutting path or not. tracy: what happens if the fed and other central banks are presumably out of monetary policy firepower? so the likes we heard from ray dalio and schwarzman. is it fiscal stimulus? if it is fiscal policy, why haven't we seen that before? ryan: well, we have seen some of it with some tax cuts in the u.s., but they were not really enough. the world is facing some really

strong headwinds and has been facing it for the past two years. the trade war has a much heavier effect than what was observed. the geopolitical risks, all of these are big headwinds. i am not sure you can solve them with a simple monetary policy change or physical change treated these headwinds are being solved as we speak. we are hoping for some relief whereby the fed does not need to cut even further. could fix it. we will have a recession. it is impossible to avoid recession. tracy: is it a recession -- ryan: healthy. tracy: is it a recession or an economic slowdown because lots of people are talking about recession, but the market at the moment seems to be pricing in something of a slowdown. ryan: absolutely. given where we are today and how limited the tools the central

banks have under their belt for the economic slowdown, we expect the economic slowdown will come to transform into a recession. we think it is unavoidable. ites today been at 5%, yes, would tell you the economic slowdown could be caused by the central banks by cutting rates, some packages on the fiscal side. unfortunately, no, central banks do not have the firepower anymore. tracy: all right, that is ryan grimnd, painting a rather economic picture for us. thank you so much. still ahead, as germany's spy chief says huawei cannot be fully be trusted, we speak to the company's chief security officer for the u.s. that is at 9:30 a.m. dubai time. before that, we will be back to rehab in the future financial initiative where manus will be joined by schroders chairman michael dobson.

this is bloomberg. ♪

manus: it is futures investment. i am manus cranny. we are in riyahdh. i have the chairman of schroders, michael dobson, with me now. how are you? michael: pretty well, thank you. manus: valuations is what mohammad bin salman wants for aramco. i am hearing 1.5. how important is it to get this valuation to the upper edge along of $2 trillion? michael: i think it will. it is most important to get this important ipo done well and how the market responds. manus: do you think it will be difficult to get to $2 trillion? ,ichael: i am hearing 1.5 to 2

based on the dividend indicated. athat is the range and finding the right spot is important. manus: there is a bit of a gap. can we talk about inclusion? inclusion for saudi arabia was the defining moment. would you agree and is that reflected in your business? michael: i think it is part of the whole reform agenda here. to $20 billion of index related flows into the market which is a positive development. i think post aramco, there will be an increase in the weighting of the index. that will be positive. i see that more broadly in the context of the major reform agenda. it is a measure of it. diplomacy mades in this country and every time you come here, you see development. manus: what does it take to get the active money in?

this market -- michael: valuations are reasonably high. i think of opportunity is relatively narrow, but aramco is just one in a series. as that develops in the markets brought enough, investors will be interested. manus: elections in the u.k. we are going to the polls again. give me your assessment of the risks. donald tusk warned use the time wisely. michael: whatever that means. manus: the election in the u.k.? michael: like everywhere else, we are in uncharted territory. three elections are less than five years which is incredibly unusual. four major votes since 2015. people don't like that. i think johnson had no choice. his whole government was stymied by the situation in the house of

commons so he had to do this but there are risks and they are quite comfortable. manus: what is the biggest risk now as you go into this? michael: probably the biggest risk is he ends up where he was before in a hung parliament. there are 150 that are hard to predict. could be tactical voting. people don't like being forced into yet another election, particularly in december. it's unpredictable. the polls are saying it conservative majority. i think it is far too soon. manus: many people say hard brexit is off the table until the 31st of january but hard brexit is not dead if we are in election mode again. michael: i think it is highly unlikely. johnson has to get it approved by parliament. i think the deal will be in the end probably get through. manus: from an investment point

of view, mark carney was seen a couple of weeks ago at the imf. a constructed deal with due diligence. clients, are to they trying to reengage capital with the u.k.? michael: absolutely. i think what is really causing a problem is the either in or out situation has gone on too long and people want certainty. i think if we can get that for some thing like it, people can move forward, make plans, invest and take a longer term view. i think both in europe and the u.k., there is a sense of exhaustion and people want to see it done. manus: there are political risks coming to bear in the election cycle in the u.s. i'm selling assets. he's getting ready for something. ray dalio says -- are we getting

a sense that investors are becoming more defensive? michael: there is a lot of money on the sidelines. investors have been pulling money out. i think everyone can see. ray dalio looks at the five major risks. people can see that. marketsaid that, the are at an all-time high in the u.s. i think we are looking -- we are not looking at recession, we're looking at low growth, low in flation. within that, some companies will do is truly well. since you have zero yields on bonds, in some cases negative yields, i think investors will still look to equity markets to generate the returns they need. yes, there are risks, but our expectation is the low growth, low inflation, low interest rate environment. within that, some companies will continue to do very well. manus: we cannot cover

therything that happened in space of a minute but i want to get a sense from you, how defining a moment has it been for market regulation? what have you learned or taken away from the woodford saga in terms of regulation? woodfordi think that was an idiosyncratic event. very few daily trading in the u.k. which has very high proportions of situations. i think the read across from that to say active management is called into question, daily trading mutual funds is wrong. i think this was a very unfortunate event but idiosyncratic. i would not read across from that. i think unfortunately, this was

allowed to balloon. but it happened and one has to learn from that. i don't think there is a read across from the industry itself or active managers are challenged. i would not have that takeaway at all. manus: hindsight is a great /20 vision.20 thank you very much, michael dobson, chairman of schroders. tracy: thank you so much. don't forget, our interactive tv function tv . you can catch up on past interviews as well as dive into any of the securities or bloomberg functions we talk about. become part of the conversation by sending us instant messages. if you disagree on dobson's woodford agreement, you could let us know. this is for bloomberg subscribers only. check it out. this is bloomberg. ♪

tracy: let's check in i where the markets are trading this wednesday. as we have been discussing, we are awaiting the fomc meeting which means we have a lot of stasis in the market this morning. index,i asia-pacific trading down 1/5 of a percent but the concealed mixed picture for the regional indices. the bloomberg u.s. dollar index treading water, along with the yield on the benchmark u.s. 10 year treasury. investors in wait and see mode ahead of that fed meeting. almost a certainty we are going to get another rate cut. markets pricing in a 94% chance of a rate cut this but the guidance will be important. we know chair powell has struggled with guidance in the past. we have seen markets ratchet down expectations for further easing in december so the question for the u.s. economy and u.s. monetary policy is going to be what exactly comes next. s&p 500 active futures trading morning but wait

and see mode for the markets. up next, as germany spy chief says huawei cannot fully be trusted, we will speak to the company's chief security officer for the u.s.. this is bloomberg. ♪ when it comes to using data,

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tracy: it is half past 4:00 in the afternoon in sydney. you were looking at live pictures of the harbor bridge freedom let's check in on where the aussie dollar is trading. relatively flat. ever so slightly weaker. that is after we had the cpi data coming in as expected by economists, but basically hit the target of the rba. if you are watching central bank policy in australia, the big news from rba governor phil low delivered last night where he basically seemed to open the door to the possibility of qe down under. that is something to watch. let's check in on the first word headlines from around the world. >> thanks. the u.k. is preparing for a

general election on december 12. prime minister boris johnson won backing in parliament to trigger the vote and get the election date he wanted. this is an attempt to resolve the brexit crisis. it will be the first time the u.k. has gone to the polls for a new government since 2015. psa is exporting a potential merger according to people close to the move. be the ceoeo would of the combined company. the fiat chrysler chairman would be the overall chairman. ardrces tell us psa's bora is due to meet wednesday afternoon. signing off on aircraft design while admitting mistakes have been made. muilenberg testified before the senate finance committee and faced tough questions involving two crashes involving 737 max 8 jets. he says the company will review reformist posed by congress. >> the airplane will return to

service when it is safe. this is not going to be timeline driven. we are committed to answering every question that regulators have an airplane will fly when everyone is convinced it is safe. that is the most important thing. >> blackout set to continue in california as the wildfires there worsen. the state governor says more than 300 fires have been put out in the last 24 hours alone and around 130,000 people cannot return to their home. utility companies across the state may cut power to as many as 2.5 million people to prevent live power lines from sparking more fires. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts. this is bloomberg. now for a look at the markets, let's go to sophie kamaruddin. sophie: asian stocks are trading mixed and sent to halt a

four-day gain. the index does remain on course for the third-best month of 2019 thanks to the driven advance in the tech sector which will be put to this test when apple reports. providing a boost this wednesday. we have the outliers topping for the -- stocks are falling in shanghai and hong kong. the nikkei 225 off by half a percent. among the laggards in tokyo, dropping after the prophet missed while nomura is jumping on its rebound. the bond space is mostly higher, continuing to slip with the 10 year yield above 3.3%. the pboc held off on liquidity injection for a third day. with a rise in poor prices on the mainland, that is looking tougher for the central bank to ease aggressively. i want to end on some stock movers. hong kongfalling in as well as shanghai. cicc trimmed the price target

and earnings forecast. want to highlight china light which is rising in the back of its results. new business value. an expect apace for the insurer. the listed price target with new business value growth. that is the best amongst it's listed peers. tracy: thank you. we are in the midst of earnings season and have some breaking news coming across the bloomberg. earnings from the arrow's best heavyweight airbus coming in for the nine-month period. reporting third-quarter revenue billion, perhaps euros. the big news is going to be airbus cuts its 2019 aircraft delivery as well as its free cash flow forecast. lots of people were expecting the company potentially to benefit from the rivalry with boeing and the troubles we have seen with boeing but it looks like airbus is cutting its delivery guidance. in the statement, they say the

nine-month results are mostly driven by performance in commercial aircraft which areudes the a-320, but they reattached rationalizing the delivery schedule. we will be bringing you those numbers as we get them. but at the moment, it is a cut in the 2019 aircraft delivery guidance as well as the free cash flow forecast. let's turn closer to this region and the technology situation in asia. germany's spy chief says huawei cannot fully be trusted. it is a signal that security hardliners and chancellor angela merkel's government wants to keep the chinese tech giant out of the country's 5g network. the president of germany's federal service says it is difficult to trust the company that has "a very high level dependence on the communist party." we are joined by huawei's chief security officer for the u.s., andy purdy. thank you for being with us this morning. i want to start out with the situation in the u.s. because

there is a very important vote coming up from the federal communications commission. a vote that could ban u.s. government subsidies on huawei, but also potentially bar u.s. carriers from purchasing huawei telecom equipment at all. how significant whether that be for your business in the u.s. and the foothold you have in the u.s. generally? andy: traditionally, we have not generated a significant amount of revenue from the united states. it is uncertain how much of an impact it will be. the fact american companies are not allowed to sell to huawei. while the impact on us is in certain, the impact on the u.s. is quite certain. 130 companies that would like to sell to huawei amount for probably over 40,000 u.s. jobs. we would hate to see that impact. huawei is going to do fine. the first three quarters year-over-year were up 30%. we will do fine even if we can

do substantial business in the u.s. tracy: one of the things we have been tracking and investors are focused on is the trade tensions between the u.s. and china, and some mood becomes more optimistic. do you see huawei potentially be a part of a trade agreement between the u.s. and china? unclearankly, it is because we are not sure the nature of the private talks between the u.s. and china. it does appear that because of the geopolitical situation between china and the u.s., the u.s. government has not been willing and is not willing to talk with us about the traditional kinds of risk mitigation measures that for example allowing nokia and ericsson to do business in the united states despite their deep ties to china. they can do business in the united states because their subject to government monitored risk mitigation agreements. we would like to talk to the u.s. government about lessons learned from that in our experience in germany and brussels. we can come up with the risk

mitigation that allows us to serve our customers. tracy: on that note, used to work for the u.s. government. i believe it was in the u.s. administration for bush as a cybersecurity expert. do you think the trump administration overstated the security threat huawei poses to the u.s.? andy: i think some of the government officials have said quite forthrightly it is not about the company, it is about the country, china. the fact is the u.s. government has concern. as the former head of public safety and homeland security for the fcc that will take that vote, the u.s. should not be distracted by all this discussion of huawei and chinese companies. the fact is sophisticated malicious actors could hack into everybody's equipment. it is necessary to make sure we have objective and transparent measures so there is a basis for trusting all equipment. that is one of the reasons we are so impressed with the work of the qatar government with a conference where they're

emphasizing internationally recognized standards to independent valuation. i am going to ask you about your involvement in qatar in the middle east region, but before i do, on the u.s. strategy, it does feel like the u.s. is trying to turn multiple countries against huawei. how effective is that strategy and what do you think it is that actually encourages companies to side with the u.s. -- countries decide with the u.s., i should say? andy: i think it is remarkable given the pressure the u.s. government has mounted for the entire year of 2019, how few countries have gone along with the u.s. pressure to simply block huawei because we are based in china. in fact, what you see from the european union 5g risk assessment, the recent announcement from germany two weeks ago. the idea of coming up with comprehensive risk mitigation provides an objective basis for knowing which products are worthy of trust, that is the way

you address security risk and make us safer. tracy: let's talk about what you are doing in the middle east, specifically in qatar. what are your business plans for the region and do you feel there is some tension given that a lot of these middle eastern countries are u.s. military allies? andy: well, i think what we have seen in these sessions we have attended so far and the meetings today and tomorrow, the government is rightly concerned about, given the growing dependence of qatar in the region on information and communication technologies, to make sure risk is promoted, to make sure telecom operators, the equipment vendors understand what the requirements are and there is a basis to holding them accountable. we are excited to see the commitment by the government and private companies to pursue the potential economic benefits that can flow from 5g and 5g can be managed in a way that addresses

the real security risks so we get the benefits of huge job growth hopefully. tracy: we have seen a number of cybersecurity attacks in the region and this is a region that has some very serious infrastructure, particularly in the energy space. how big is the cybersecurity threat for the middle east? andy: i think the cybersecurity threat throughout the world is great and great in the middle east. you may recall the attacks against saudi aramco some years ago which were kind of a legendary example of using sovereign attacks to cause physical consequences. i talked to people connected to the munich security conference who were involved in energy and energy security. it is a major commitment of the government and the private companies here to address the real cybersecurity risks to protect the flow of energy, to protect the data. the energy gathering and transmission depend. i think the standards are in place and the experts recognize

what they need to do. i think we have a large degree of confidence that moving forward, the risk can be addressed and the citizens have the ability to depend on the flow of energy resources. tracy: one more regarding the u.s. situation before you go. we know the u.s. has granted some temporary licenses for some companies to do business with huawei, but there's a lot of confusion over exactly what that allows and does not allow for. what is your understanding of exactly what u.s. companies and entities can do with huawei at the moment? andy: there's almost nothing we can purchase from companies with a couple of minor exceptions. the fact is that these companies are forcing huawei, the fact they cannot sell to us, and forcing huawei to find alternatives. while we want to continue to buy from american companies, our 5g equipment, we are shipping with no u.s. components. we would like to come back to u.s. components, but right now,

we have no choice. tracy: that is andy purdy, huawei's chief security officer for the u.s. thank you so much for being with us today. up next, we speak to the ceo of the uae based shopping and entertainment company. riyadh next.s in this is bloomberg. ♪

tracy: let's check in on the indian markets now. >> the indian equities have been bucking the trend when you look at asia. we have had a steady rally. some news reports

taxes which the equity investors and that includes long-term capital gains in india last year. these are the reports on back of which we have seen renewed by an industry -- interest coming. gaining 3/10 of 1%. of course, it is trading just 5.5% away from its all-time high level and reclaims the mark of 15,000. we have been taking cues from earnings as well and a couple of auto companies reporting numbers in the last five to six days. estimatedter than numbers. across the board, a couple of these stocks as well from the likes of shipping corporations on news of government investment we have seen the oil company on the back of that buzzing in today's trading session. also seeing somebody interest. also the monthly contract expire ahead of the traders taking huge bets.

price ended the day with a lot of long positions. we can expect a bit of volatility as well when it comes to trade. manus: thank you very much. the futureyadh, investment initiative 2019. my next guest, alain, good to see you. alain: good morning. manus: one of the most watched videos on bloomberg in the past 48 hours. that wed for -- he said have a disaster in overbuilding in dubai. we are going to face a disaster. is there a disaster waiting to happen in the commercial property market? government is the taking a very important step to regulating the market and making sure that supply and demand are

locked in steps. you have seen that in order to look at this. in the very early days, we will see how it is going to be implement it. manus: you have been in those conversations? alain: this is a conversation ongoing within government owned entities. that is something that came to us as good news because there is obviously a clear strategy to make sure dubai does not over do it from that standpoint. manus: saying we need a one to two-year halt? is that on the commercial side where your expertise is? stop building for a short amount of time in dubai? alain: it is a commercial business. anyone building that does not stack up should reconsider what they are doing. manus: two years ago. alain: in our case, it is faring

very well. we are very happy with the markets overall in the region. saudi arabia is a very important market with more opportunities. uae, marketsd today in a slowdown, but actually when you think of some of it coming in, the available currency. there is also some good news. would be in favor of whatever new regulations come to bear from the committee. alain: absolutely. manus: i didn't get my invitation for this. neither did you. let's get a few numbers. what money are you putting to work in the kingdom of saudi arabia? alain: we have a $4 billion investment strategy for the kingdom of saudi arabia. these are investments we are doing in our sinema business, shopping mall business, retail

business. entertainment businesses and energy management businesses. in theknow, we have been kingdom for the past 10 years. huge opportunity ahead of us. we are seeing that in reality in the cinema business. we are number one in the kingdom in the business. we started about 18 months ago and we are doing more and more better and better. most of poorly, the saudi customers -- importantly, the saudi customers. manus: what is the momentum behind that? upward slope? the saudie insight to customers you are interacting with. alain: the saudi customers actually overspend the regional average by two to three times. this is something extremely encouraging. you have to remember, it is a new sector coming in and it is something that will not be

sustainable on the long-term. there is the supply ramping up but much more demand. this is something we are dealing with. opening more and more theaters. manus: in terms of balancing, if versus andubai acceleration in saudi arabia, are you taking cost out of the business and hold in dubai to balance? alain: two things. about 70 markets in the region. region.ross the whole yesterday, opening on 2020. before. hearing than been on a general has flat to declining trend. saudi arabia, huge opportunities are coming. we have always been very

financially disciplined. we look at our margins. we make sure we are always competitive. manus: we get together every now and that and talk about the differential. the very high end to be haps more mass-market. what is the next you see? is there a balance portfolio or a change? alain: the next four years is about doubling down on customer experience. today, we are present across the spectrum. there is more to be done in each and every one of these categories. the one thing that us and others will have to focus on is customer experience and more performing. manus: thank you so much. the ceo of majid al futtaim. tracy? tracy: more earnings coming across the bloomberg. another heavy hitter on the banking front. banko sent in their reporting

fourth-quarter net income of 501 million euros versus an estimate for 457.4 million euros. that is a beat on third quarter income. management confident they can reach the midterm target. the ratio coming in at 11.3%. a beat on the net income front fullyuity chair one ratio loaded at 11.3%. let's turn to africa. time for the weekly segment, africa in focus. we hone in on some of the biggest market stories from across the continent. joining us from johannesburg is the south africa bureau chief. let's start out with south africa. the finance minister is set to deliver midterm budget -- the midterm budget later. what exactly are we expecting? >> well, that is the big event of the day. the finance minister expected to deliver that midterm statement

in parliament later this afternoon. analysts are expecting the bailout in south africa that had to make to the embattled state owned countries may widen the budget deficit to the biggest since the financial crisis. economists in the bloomberg survey expect a fiscal gap of 6.1% of gross domestic product for this year. this is compared to treasuries earlier forecast of 4.5% in february. one of the major risks going into the budget as the credit rating risk. we know analysts are speculating moody's may cut the stable outlook on the country's rating to negative. this of course due to rising debt and lower economic growth projections. a downgrade by moody's when it makes the review later this week on november may leave south africa without an investment credit rating for the first time in 25 years. of course, prompting capital outflows. manus: you're also -- tracy: tracy: you're also closely

monitoring the plan for scom. the plan to save it has been revealed. what are the details there? amo: the long anticipated turnaround strategy was revealed on tuesday by public enterprises minister. what a significant is the market reaction shortly after it was unveiled. sovereign bond yields rose. this showing that investors are not convinced about the power utilities financial stability. the turnaround strategy also introduced various interventions, including exposing to more competition, lowering fuel cost and spending non-core assets. we know they will be battling the transition unit of the utility. the private players will be watching that very closely. tracy: finally, amo, sudan has reported to be delaying the auction of 14 oil exploration blocs.

what exactly is going on there? amo: quite right. 14uth sudan will delay exploration blocs for the fourth quarter of 2020. it was anticipated later this year. the delays are not surprising because the country is grappling with a new piece deal and unity government. what is significant is opening the bidding process, international investors, is a good site and development. several companies from the u.s., russia and china have showed interest which will be central to reviving the economy that was undermined by internal conflict for some years. an interesting fact is south sudan is highly preferred in some of the japan's powerplant and chinese oil refineries. those will certainly be countries and players that will be keeping a close eye and have a vested interest when it kicks off in 2020.

tracy: that is our south african bureau chief amo mbataha, thank you for that. we are in the middle of earnings season and we got a flurry of results out, critically from europe. santander beating average analyst estimates. 501 million euros versus an original estimate of 475.4 million. the company also talking about its ratio fully loaded at 11.3%. management making some positive noises, saying the company is confident in reaching its midterm targets. is having santander its best underlying performance in almost a decade. we also had reporting from airbus. airbus cutting its delivery goal for aircraft as it struggled to cash in on those woes over at boeing. it cut its forecast by 880 to 8 90 planes to 860 jets.

that is it for bloomberg daybreak: middle east. daybreak: europe is up next. this is bloomberg. ♪

>> welcome to daybreak europe. live from london. third quarter daily use is what we are getting today. you today for corporate results across europe. we will hear from the ceo of credit suisse in the next hour. third times a charm. the fed poised to cut rates again amid an expected slow down and third-quarter gdp. we will see of the u.s. consumer is still saving the day. four and a half years, the u.k. goes to the polls and again in december over a vote that could finally break the deadlock on brexit.

we will talk to the ceo of credit suisse from the company's headquarters in zurich. don't miss that interview just after 7 a.m. london time. ♪ nejra: welcome to daybreak europe. let's get to the bank earnings. credit suisse. looking down of these numbers, third quarter net income comes in that 881 million swiss francs. that was a clear beat for credit suisse on third quarter net income. third quarter net revenue, 5.3 3 billion swiss francs. better than what was expected. the third quarter ratio at 12.4%. estimate that 12.5%. little weaker than estimate, but pretty much in line with the third quarter cte one ratio.

we also looking at third quarter pretax. for4 billion swiss francs credit suisse. the third quarter, iwm pretax comes in at 539 million swiss francs. 517.4 million swiss francs. a better number than expected there. what we are looking at in terms of the third quarter ibcm pretax loss, the number is 15 million swiss francs. stronger numbers than expected pretty much across the board that we are looking at for credit suisse. the global markets number coming through. third quarter global markets pretax at 269 million swiss francs. those are the numbers coming through from credit suisse. you can follow all the developments. coming up, we will speak to the ceo a little later in the show. do not miss that interview.

getting to numbers from deutsche bank as well. i will get to the two red headlines. third quarter fic trading revenue at 2.3 billion euros, versus the estimate of 1.41. that comes in worse than estimated on the third quarter fixed fic trading revenue. looking at third quarter core revenue, that comes in at 5.4 9 billion euros. again, a softer number than expected there. -- so, i'muarter looking through these numbers. 5.26 quarter net revenue, billion euros. coming in worse than expected. the third-quarter loss is 942 million euros, versus a profit of 130 million year on year. these numbers not coming in as good as expected from deutsche bank.

it is reaffirming its full-year 21.5 billion at euros. the third quarter adjusted cost coming in at 5.40 3 billion euros. we are going to be speaking to the deutsche bank cfo later in the program. again, that is another interview not to be missed because the execution of the plan and the cost-cutting is going to be very much in focus. the key numbers we are looking at coming in a little worse than expected. getting to santander. the numbers came before we went to air. third quarter net income, 501 million euros, better than the millionions of 457.4 euros. stronger third quarter net income number for santander. 11.3%. santander saying she is confident in reaching midterm targets. santander, this is a quote from

the bank itself, had the best underlying performance in almost a decade. commenting on the bank performance there. again, another interview not to be missed. we will be speaking to the cfo of santander just after 7 a.m. london time. lots of bank earnings to get through. joining us is jim mccormick. jim, great to have you with us. welcome to the show. a lot of numbers coming through and a little bit of a mixed bag so far in terms of what we heard from credit suisse, deutsche bank and santander. in your macro view, what is the earnings season telling you so far about the state of global growth? jim: i think there is obviously a lot of noise. you have to pick your spots. i think of two things that stand out to me are firstly, those companies with a lot of global industry exposure are struggling.

we saw that obviously in the caterpillar numbers last week. what you would expect. i think the story particularly in the u.s. is one of declining margins. we have not seen margin decline in quite some time. a world war i ages are increasing at inflation isn't, it has to get somewhere. nejra: margins is what is in focus for you. the guidance is what a lot of people are looking for in 2020 in terms of whether of the optimism we have seen over the past month or so will bear out into 2020. that brings me onto negative yields. we were looking at august. we had a record pile, $17 trillion of negative yielding debt. falling below $13 trillion now. this is something that is pertinent if you are a bank ceo in european if you are a bank ceo, should you be feeling better about the state of affairs? jim: i think so. in a world of low yields, flat

curves, volatile markets, it is difficult to be a bank. i think in europe in particular, for me, the big change at the macro level in recent months is a recognition that monetary policy is running out of ammunition. that fiscal policy is becoming more forceful in the next year. i think that is good news for european bond yields for the shape of the curve. nejra: the shape of the curve in europe could be steepening? jim: i don't think it is a significant steepening but if you had 10 years where you relied almost exclusively on monetary policy, you end up in an environment where you are today which is mostly negative yields in europe, very flat curves. f monetary policy is finished, if fiscal policy will be employed and we have close to 1% gdp fiscal stimulus and germany next year, big number, that should be higher bond yields and a slightly steeper curve. nejra: which brings me on the 10

year treasury yields closer to percent at 1.5% which is where we got to not too long ago. i was reading quite recently if we get to 2%, that is where you want to step back in. is that a position you still hold out in terms of the backup we had recently? jim: i think so because the key macro theme globally that we have is that risks are receding a little bit in europe. fiscal policy is becoming more important. but in the u.s., the fed has a long way to go. with that, i don't see a big rise in u.s. bond yields. i think the fixed income market i want to belong in the two year is the u.s. nejra: it is a question of time horizons. is now perhaps the time to sort of be sure treasuries and then you put back longs going into 2020? jim: i don't know because i look at the market pricing in only two more rate cuts for the fed. we think it is going to be four by the middle of next year.

it looks to me like 2% is a good place to start getting long u.s. fixed income again. jim: that is something you would be wanted to do again. nejra: your preference isn't emf? i spoke to summit yesterday who was resident about getting into emerging market equities. what looks good for you? big story onthe the business cycle globally is that emerging markets have been quietly outperforming. the emerging-market pmi, the manufacturing pmi is going to be above 50 for the fourth straight month. it is above the develop market equivalent for the first time in seven years. for some reason, everybody seems to be worried about emerging markets. emerging markets seem to be stabilizing at a point where emerging markets are under pressure. i thing the emerging markets over very good story. nejra: is credit a good story at moment?

we have seen both high-yield and investment grades tightening we seen a backup and other government bond yields. the credit story pertinent. we were asking barclays a few days ago about whether he was worried about the credit cycle turning. should bank ceos be worried? jim: i think credit is a difficult asset class. it had the perfect year of a relatively good environment for risk assets driven by much lower bond yields. as we go into next year, i think bond yields are going higher, particularly in europe. at the same time, the risk asset picture going into a cycle that was pretty weak does not look particularly obvious. credit looks a little bit tricky heading into next year. nejra: jim mccormick stays with us. much more to discuss but for now, let's get the first word news. >> hi. the u.k. is set for its first december elections in nearly a century. it's widely seen as a proxy referendum on brexit. voters were but the last chance

to choose between different versions of written's divorce to the eu or vote for canada -- wanting to cancel it altogether. boris johnson finally got the motion through the house of commons. it now heads to the lords. when it comes to where cars are made, president trump wants to be in the driving seat. we learned the white house wants to dictate how and where global auto companies make vehicles and parts. that is part of a new nafta agreement, the most direct intervention yet into manufacturing. some are worried the process could be used for political gain. fed which is certain to cut rates for the third time in a row today. the key question is what will chairman jerome powell signal is coming next? he may be getting ready to pause this year's monetary easing campaign. bloomberg economics is predicting a meeting by meeting approach.

in the middle of another round of blackouts. some of the season's strongest wildfires across the state. 70 million people facing critical weather conditions. utility companies make a power to as many as 2.5 million people. pg&e says it will issue a one-time rebate to customers for the shut off. fiat chrysler and psa are next lower a more tick -- exploring a merger. the combined entity could have a market value of $47 billion, around the same size of honda. these discussions follow the merger talks which were known earlier this year. both companies declining to comment. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts. this is bloomberg. nejra: thank you so much.

as revenue and wealth management, we talk to's credit suisse ceo. don't miss the interview just after 7 a.m. london time. coming up, we will be speaking to the deutsche bank ceo after the german lender reported earnings for the third quarter. you can catch that interview just after 7 a.m. london time. trading revenue falling 13%. core revenue down. we also have an update on higher transformation costs at one billion euros in 2019. coming up, fed decision day after almost a guaranteed rate cut today. what the central banks hit the pause button? what guidance will we get from jerome powell? tune into bloomberg radio live on your mobile device or digital radio in the london area. this is bloomberg. ♪

nejra: this is bloomberg daybreak: europe. let's turn to the fed and it is decision debuted the u.s. central bank is widely expected to lower interest rates by 25 basis points for a third consecutive time this year. investors crossing that 90% likelihood of a cut. while this cut would be insurance against local risk, the fed is inspected to signal it has done enough for now and won't continue to ease. joining us now is jim mccormick. that is still a big question in the air, what jerome powell is going to signal and how is he going to do it. you actually expect three cuts after today, all by the first half of next year. that seems pretty aggressive. jim: that is. i think the point we make is this fed has made three messages clear about its policy framework. one, it has done a very bad job on its inflation targeting. then, within the zero bound, the

two points they have made is when you see weakness, you cut quickly. what you get to your terminal rate, you leave it there for a long period of time. our forecast for gdp first half of next year is somewhere around 1% which will feel very weak that is a fed moving quickly. nejra: if jerome powell comes out and signals that after this week's cut, which is highly anticipated, they will be much more data dependent. anymore signals going hawkish, would you go with that call? jim: i think our view on the cycle is it is going to weaken. it is data dependent. it will give the fed room to move. there is this constant debate about insurance cycle before real cycle. every cycle starts out as an insurance cycle. this will be a third fed cut in three meetings. the fed funds rate very close to zero already in long-term relative terms. this idea that you are still an

insurance cycle starts to become a little tenuous. i think the data flow in the u.s. will continue to weaken and give the fed the reason to cut pretty aggressively into next year. nejra: what is it in the data flow that is telling you that? there has been passed insurance cycles with three cuts. that could be what happens this time sweat what and the data is telling you no? jim: two differences. one is the policy framework that should be a fed that tends to work faster than has been the case of the past. also, if you look at what is happening in the u.s., started out with export sector weakness. the corporate sector is starting to feel some pressure. i think it is quite telling that ceo confidence in the u.s. is close to recessionary levels at a time where the economy is doing so well. it will start the corporate sector weakness. we have seen the beginning of that. it should eventually filter into

the employment market and consumer spending. nejra: that is the big question about whether it is actually feeding into employment. when we have the bank earnings of the u.s., it shows a robust consumer and that is for people who take the other side of your trade. is that something you think will start to falter? jim: it is already in the data. we have private sector payrolls averaging 2.5 a month and now down to 130. i think from an employment point of view, you need private sector payrolls going at 100,000 a month to see unemployment rise but we are getting there. the weakness has been in the data, it is just not very significant weakness. nejra: you are saying earlier that you want to be going long treasuries. how would you trade the curve? would it be curve steepening or would you still like the back end because your view on global growth is quite pessimistic? jim: i think it is a curve steepen or. it is a more aggressive fed into

an economy that is weak but not recessionary week. you got a lot of supply coming in the market. the other meeting we should be talking about is boj. steepening itsn curve and we continue it will continue to do so. curve steepening could help stephen other curves globally. it makes sense. nejra: with the action you expect the fed to take, if that is aggressive, does that push the horizon -- recession far into the horizon? jim: insurance cut terminology, it provides insurance. i think we should be able to avoid a recession next year but the fed needs to move pretty quickly. nejra: jim mccormick staying with us for the hour. also what we need to talk about is the u.k.'s first winter election in 45 years. to the right, 438.

the no's to the left, 20. boris johnson won the backing of parliament yesterday for a general election to be held on december 12. voters will head to the polls for the third time in less than five years. the prime minister's conservative party leads falls but no one is claiming the result is predicament. jim mccormick is still with us to discuss this. the pound is headed for the best month against the dollar. does it need more than an election date to stay in the rally? jim: obviously, needs an election outcome. i would not be surprised if u.k. markets go very quiet between now and december 12 the point we have been making in recent weeks is we are reaching a moment of clarity. publicent, the voting have watched a very weak economy for a long time and people want

to move forward. this election will provide that moment of clarity. we do think u.k. assets are probably a buy over the next three to six months but we need to see the election outcome. nejra: in terms of the outcome, what would be the best outcome for the pound and the worst outcome? jim: the best is a difficult one to call because there is different outcomes with different time constraints. probably, the worst outcome simply because we start to fear no deal brexit again which continues to be the big risk. which small tory majority fold that 40's towards the brexit party. our message is that risks of a no deal are moving toward zero. they are not zero yet but they are getting there. that is good news for markets. nejra: you are seeing that reflected in the options market in terms of volatility recently. i understand with the spot

price, you are targeting that to move higher. would you be trading the volatility as well? jim: i think we will see some volatility buying around the day. my guess is that volatility over the near-term is going to fall quite significantly. we're going to have a quiet period of campaigning if it is going to be a tough outcome to predict. no one is going to believe it because the pulse have not been particularly good in recent years so we have to wait until december 12. nejra: what does this mean for the bank of england? jim: i think the bank of england is not going to do anything between now and the election. the bank of england has been predisposed to tightening. if we do get a good outcome that helps turn the economy quickly, which i think is quite doubtful, you may well see the bank of england tried to deliver on their hawkish message. right now, the bank of england will be quiet for the next few meetings. nejra: do you think inflation

expectations will continue to fall? is that a trade you want to get on board with? jim: interestingly, through the brexit process, inflation markets and the pound have been interchangeable. what we see in terms of relative value is buying the pound makes sense the next three to six month. selling short term inflation looks even better. nejra: and then that guilt curve, given the bank of england will probably be on hold and maybe with a hawkish bias. does that mean we see flattening of a yield curve? jim: i don't know you see flattening is i don't think the bank of england delivers on a tightening. i actually prefer steepening. what we see in the yield curve is about a 50 basis point brexit premium still built in. if you can start to see a decline in uncertainty, that should be higher yield going server -- going forward. nejra: a european strategy and

your view of the euro for example given where we have seen the move from the pound. jim: i think what people have underestimated is the importance of brexit for the region as a whole. because of the weakness of the u.k. economy, it is mattered for u.k. markets. brexit uncertainty is going to fall. german fiscal policy is going to provide a floor for growth in europe. that should be higher european bond yields generally. and felt going into a year where you get a lot of fed rate cuts, i would think it is higher, not lower. nejra: jim mccormick stays with us. he is our guest host for the hour. also, a huge day in terms of bank earnings. recap of what we heard in terms of deutsche bank and credit suisse. deutsche bank seeing higher transformation costs of one billion euros in 2019. third quarter trading revenue came in significantly below estimates.

for credit suisse, third-quarter net income came at a strong beat, beating the estimate of 830.5 million. we will speak from executives from both of those banks later in the show. this is bloomberg. ♪

♪ >> this is bloomberg day break europe. i'm nejra cehic in london. let's get to w.v. volkswagen cutting its full-year delivery target to this line with the prior year. that is the key guideants with the redheadline on the bloomberg at the moment. it is basically lowering its sales as the demand decline is accelerating. it is concerned its revenue and .6 ance, rising to 18 billion euros. nine months