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00:00JONATHAN: FROM NEW YORK CITY FOR OUR AUDIENCE WORLDWIDE. I'M JONATHAN FERRO. "THE COUNTDOWN TO THE OPEN" STARTS RIGHT NOW. ♪ JONATHAN: COMING UP, EQUITY MARKETS RALLYING. THE U.S. AND CHINA SCHEDULING FACE-TO-FACE TALKS IN OCTOBER. WITH SENTIMENT IMPROVING, ECONOMIC DATA COMING NEXT. THE JOBS REPORT AROUND THE CORNER AS MORE SIGNS OF WEAKNESS EMERGE IN EUROPE, GERMAN FACTORY EARNINGS DROPPING. 30 MINUTES UNTIL THE OPENING BELL. HERE IS YOUR PRICE ACTION. BONDS DROP. STOCKS UP 1% ON S & P 500 FUTURES. BONDS DOWN, YIELDS HIGHER SIX BASIS POINTS. THE CURVE STEEPER. 1.52 IS THE YIELD ON THE 10 YEAR. EURO-DOLLAR UP TO 1.1059. LET'S BEGIN WITH THE BIG ISSUE -- SENTIMENT IMPROVES. SKEPTICISM REMAINS. > > EASING. > > FRESH OPTIMISM. > > THAT CLEARLY CREATES SOMETHING OF A TAILWIND FOR RISK ASSETS. > > MIGHT BE MORE HOPEFUL ABOUT TRADE. > > IF THAT WAS RESOLVED OR PARTLY RESOLVED, IT WOULD BE TOO LATE TO SAVE 2019, BUT IT MIGHT PREVENT A RECESSION IN 2020. > > WE DO NOT THINK TRADE TARIFFS WILL ESCALATE FURTHER, NORMAL THEY TEASE OFF ANY TIME SOON. > > WE ARE MORE LIKELY TO SEE A TRUCE OR A DELAY OF FURTHER TARIFFS AS TALKS KEEP GOING AND NOT ANY KIND OF GRAND DEAL BEFORE THE END OF THE YEAR. > > WHEN YOU LOOK AT THE IMPACT OF THE TARIFFS ALREADY ANNOUNCED, IN OUR VIEW THAT AS A SIGNIFICANT DOWNGRADE TO GLOBAL ECONOMIC GROWTH. JONATHAN: THE KEY QUESTION, MORE FOCUSED ON THE TONE OR THE SUBSTANCE? JOINING ME IS LALE TOPCUOGLU, CHRIS HARVEY, AND RJ GALLO OF FEDERATED INVESTMENT. THE TONE IMPROVES RELATIVE TO WHERE WE WERE WEEKS AGO. TALK TO ME ABOUT HOW IMPORTANT THE SUBSTANCE IS? LALE: SUBSTANCE MATTERS BUT THE MARKET SEEMS TO BE RESPONDING TO EVERYDAY TWEETS. THE REALITY IS IF YOU LOOK AT WHAT THE CONSENSUS VIEW IS, WHAT IS AMAZING IS PEOPLE HAVE GONE FROM TRADE LIKELY TO MAYBE THERE WILL NOT BE ANY TRADE. TRUMP IS UP FOR REELECTION , XI JINPING IS HERE FOR THE LONG-TERM, AND HE DOES NOT HAVE A RUSH, AND IT IS FEASIBLE WE WILL NOT HAVE A DEAL, AND IT IS -- AND WE KEEP GOING TWEED BY TRADE. JONATHAN: THE TOWNSHIPS ONE WAY, GOES ANOTHER. IN OCTOBER, TARIFFS ARE SET TO GO UP, IN DECEMBER, MORE TARIFFS. EVERY TIME THEY GO ON THEY DO NOT COME OFF. WE HAVE BEEN TALKING ABOUT THE PERCEPTION THAT RISK MIGHT MATERIALIZE. RISK HAS MATERIALIZED. THE DATA HAS GOT WORSE. SHOULD WE SAY WE WANT TO ADD CYCLICALITY. I WANT TO AT RISK TO MY PORTFOLIO BECAUSE THERE WILL BE A TALK IN OCTOBER? CHRIS: THAT IS RIGHT. LOW VOLATILITY OVER LAST YEAR HAS PERFORMED 14% OR 50%. -- OR 15%. THE EQUITY MARKET HAS ALREADY PRICED IN A RECESSION, ALREADY PRICED IN AN AGGRESSIVE SLOW DOWN. YOU WANT TO START PUTTING ON CYCLICALITY, EITHER IN FINANCIALS, IN THE CAP GOODS SPACE, IN SEMICONDUCTORS. THE TONE HAS CHANGED. THE TONE WAS HORRIFIC IN AUGUST. THE MARKET WAS EXCEPTIONALLY RESILIENT. RJ: NOT TO BE ARGUMENTATIVE, BUT I AM SURPRISED THE EQUITY MARKET HAS HELD UP AS WELL AS IT HAS. THE PE ON THE S & P 500 IS AROUND 19, MEANWHILE YOU HAVE BOUGHT YIELDS APPROACHING RECORD LOWS. IT SEEMS LIKE ONE OF THOSE TIMES WERE SOMEBODY HAS TO BE WRONG, THE EQUITY INVESTOR THE BOND INVESTOR. I WONDER IF THERE'S A THIRD WAY, THAT THE MUCH MORE ACCOMMODATIVE FED, WHICH IS CLEARLY SUPPORTING LOWER YIELDS, IS ALLOWING PEOPLE TO FEEL COMFORTABLE THIS IS NOT A RECESSION BUT IS A SOFT LANDING WITH A LOT OF CONCERN AROUND IT. LALE: THE EQUITY MARKETS ARE BIFURCATED. PEOPLE ARE CHASING GROWTH. LOOK AT ALL THE IPO'S COMING IN. WE HAVE COMPANIES LOSING BILLIONS OF DOLLARS GETTING OBSCENE VALUATIONS, AND THEN WE HAVE OLD-SCHOOL, WHAT PEOPLE DEEMED TO BE "DULL" BUSINESSES THAT ARE GETTING CRUSHED AT 3% PLUS DIVIDENDS, THAT IS MORE YOU CAN GET ON A TREASURY, THAT WILL PROBABLY KEEP UP WITH INFLATION AND PROTECT YOUR CAPITAL. TO ME IT COMES DOWN TO THIS IS WHAT HAPPENS WHEN THE COST OF CAPITAL GETS EFFECTIVELY CRUSHED. YOU CANNOT ELIMINATE BAD BUSINESSES THAT ARE JUST AN IDEA BECAUSE CAPITAL GETS THROWN AT THEM AND THEY THREATEN WHAT PEOPLE DEEM DULL BUSINESSES. THAT IS WHAT YOU SEE. JONATHAN: THERE IS SOME GOOD NEWS. THE SKEPTICISM I SEE IN PUBLIC MARKETS AROUND COMPANIES LIKE WEWORK FAR OUTWEIGH SKEPTICISM IN PRIVATE MARKETS. ISN'T THAT GOOD NEWS THAT THERE IS A HEALTHY DOSE OF SKEPTICISM IN PUBLIC MARKETS WHEN A COMPANY LIKE WEWORK IS TRYING TO COME TO MARKET? RJ: IT IS GOOD THAT CORRELATIONS CAN BREAK DOWN YOU GET DOWN TO IDIOSYNCRATIC RISK. WITH EVERYTHING BEING BID UP, YOU WONDER IF THIS IS AN UNSUSTAINABLE MONETARY POLICY. YOUR POINT ABOUT HOW DIVIDEND YIELD FEELS LIKE THE NEW BOND FOR INCOME ORIENTED INVESTOR HAS A LOT TO DO WITH WHY CERTAIN STOCKS ARE DOING WELL IN THIS ENVIRONMENT. YOU GET PUNISHED IF YOU HAVE AN EARNINGS DISAPPOINTMENT AND THE MARKET HAS BEEN TAKING ITS POUND OF FLESH OUT OF THOSE COMPANIES. JONATHAN: WE WANT TO BRING YOU UP TO SPEED ON THE TRADE STORY. KEVIN CIRILLI IS STANDING BY. WE HAVE HAD THE TALKS ABOUT THE TALKS. LET'S TALK ABOUT WHETHER THE TALKS WILL HAPPEN. KEVIN: AMBASSADOR LIGHTHIZER AND SECRETARY MNUCHIN SPOKE WITH THE VICE PREMIER OF CHINA ON WEDNESDAY NIGHT REGARDING U.S. CHINA TRADE TALKS AND AGREE TO HOLD MEETINGS AT THE MINISTERIAL LEVEL IN WASHINGTON IN THE COMING WEEKS IN ADVANCE OF THESE DISCUSSIONS. MEETINGS WILL TAKE PLACE IN MID-SEPTEMBER TO LAY THE GROUNDWORK FOR MEANINGFUL PROGRESS. I WANT TO PULL UP A TWEET FROM THE EDITOR-IN-CHIEF OF THE GLOBAL TIMES, WHO TWEETED OUT THAT CHINA AND THE U.S. ANNOUNCED NEW TRADE TALKS AND WILL WORK TO MAKE SUBSTANTIAL PROGRESS. I THINK THE U.S., WORN OUT BY THE TRADE WAR, MAY NO LONGER HOPE FOR CRUSHING CHINA'S WILL. THERE'S A POSSIBILITY OF A BREAKTHROUGH BETWEEN THE SIDES. YESTERDAY, PRESIDENT TRUMP SPEAKING WITH REPORTERS, SAYING HE BELIEVES CHINA WANTS TO GET TO SOME TYPE OF DEAL AND THEY ARE FEELING THE PRESSURE. THE ADMINISTRATION CONTINUING, ALONG WITH PRESIDENT TRUMP, A NEW WAY TO MARKET TARIFFS, SAYING IT IS A SOURCE OF REVENUE FOR FARMERS. I HAVE TO BE HONEST. I CANNOT FIND ANY FARMERS IN THE AGRICULTURAL SECTOR WHO SAY THEY LIKE THE TARIFFS AT ALL. JONATHAN: ALWAYS GREAT TO CATCH UP WITH YOU. CHRIS, I WANT TO REVIEW OF THAT TWEET OF THE EDITOR OF WHAT SEEMS TO BE THE MOUTHPIECE FOR THE CHINESE GOVERNMENT. ANYONE WHO THINKS THEY CAN GET IN THE HEAD OF THE PRESIDENT AND WHAT WILL HAPPEN IN OCTOBER AND HOW THE PRESIDENT WILL APPROACH OCTOBER TALKS, THAT IS NOT REPORTING, THAT IS BARELY ANALYSIS. CHRIS: HOW DO YOU PREDICT WHAT TRUMP IS GOING TO SAY? JONATHAN: NOBODY CAN. NOBODY HAS ANY CLUE HOW THE PRESIDENT WILL APPROACH THOSE TALKS. CHRIS: I AGREE. WHAT YOU DO KNOW IS THAT TALKS ARE GOING ON. ONE OF THE THINGS WE SPEAK ABOUT HIS IT LOOKS LIKE TRUMP HAS FINALLY REALIZED HE IS FIGHTING AGAINST HIMSELF. THE MORE THESE TARIFFS ARE HURTING US THAN THEM. HE HAS MADE HIS POINT. THE POINT IS WE ARE LOOKING AT CHINA, WE ARE TELLING THEY ARE A COUNTERPARTY RISK, THAT MESSAGE HAS GOTTEN THROUGH. WE LOOK AT DOLLAR AND DOLLAR GENERAL. 7% OF THEIR SOURCING HAS SHIFTED FROM CHINA TO OTHER COUNTRIES IN A SHORT TIME. THAT IS IMPRESSIVE. THAT IS WHERE YOU HAVE THE PAIN. I DO NOT THINK HE EXPECTED THAT, BUT THAT IS WHAT IS CATCHING THEIR ATTENTION. JONATHAN: LET'S TALK ABOUT WHAT IT MEANS FOR THE FED. WE HAVE HEARD A LOT OF FED SPEAK. JOHN WILLIAMS TOLD REPORTERS "THE CONSUMER IS NOW CALLING -- NOW CARRYING MUCH OF THE WEIGHT FOR GROWTH GOING FORWARD. ONE THING ABOUT CONSUMER SPENDING YOU HAVE TO BE CAREFUL ABOUT IS IT IS NOT A LEADING INDICATOR." MICHAEL MCKEE JOINING US NOW. HOW DOES THAT COMMENTATOR SET US UP FOR TWO WEEKS? MICHAEL: THE CONSUMER HAS BEEN THE STRENGTH OF THE ECONOMY, AND AS THAT CONTINUES EVEN MARK ROSENGREN SAYS THE ECONOMY WILL GROW AT 2%. WE DID HEAR A LOT OF FED SPEAK. IT GOT IS NOWHERE. IF YOU LOOK AT THE LINE ABOVE WHO SPOKE AND WHAT THEY SAID, IT IS EXACTLY HOW THEY VOTED ON JULY 31. THAT GROUP INCLUDES JIM BULLARD, JOHN WILLIAMS FROM NEW YORK, ROBERT KAPLAN. ERIC ROSENGREN HAS NOT CHANGED HIS VIEW. HE IS OPPOSED. THE BIG ONE TO, IS JAY POWELL ON FRIDAY. HE IS SPEAKING AT 12:30 WALL STREET TIMES, AFTER THE JOBS REPORT. WE HAD A BIG ADP NUMBER TODAY. 50,000 STRONGER THAN ECONOMISTS FORECASTED. THE COMPOSITION IS ALMOST ALL AND SERVICES, WHICH WOULD BE WHERE THE CONSUMER IS. MANUFACTURING HIRING RESTRAINED. MATCHES WHAT WE HAVE SEEN FROM THE ISM NUMBER. WE GET THE SERVICES INDEX AT 10:00 THIS MORNING. A LOT OF LOOK AT THAT. TOMORROW, THE JOBS REPORT. 110,000 JOBS AT THE LOW END AND OVER 200,000 AT THE HIGH END. ECONOMISTS NOT SURE ON CONSENSUS. IT IS NOT THE HEADLINE NUMBER THAT MATTERS. ECONOMISTS AND THE FED WILL BE LOOKING AT HOURS WORKED. IF YOU ARE A COMPANY AND YOU ARE STARTING TO SEE A SLOW DOWN, YOU WILL ASK WORKERS TO WORK FEWER HOURS RATHER THAN CUT THEM. HOURS WORKED HAS BEEN DROPPING. IF THAT CONTINUES, THAT MAY BE A SIGN OF TROUBLE AHEAD. WATCH THAT NUMBER TOMORROW. JONATHAN: REALLY APPRECIATE THAT. A REPORT -- AN IMPORTANT POINT GOING INTO PAYROLLS TOMORROW. LALE: I THINK THE EXPECTATION IS THEY WILL CUT 25 BASIS POINTS. IF THEY WANT THE CURVE TO FIX ITSELF, YOU HAVE TO LOOK FOR 75 TO 100 BASIS POINTS. I DO NOT THINK THEY WILL DO IT. WE SHALL SEE. 25 BASIS POINTS IT IS. JONATHAN: I THINK ONE OF THE MOST IMPORTANT DEVELOPMENTS OF THE LAST 24 HOURS IS THE MEETING WE HAVE HAD IN PRESIDENT CHINA PUSHING THE CENTRAL BANK TO CUT THE RESERVE REQUIREMENT RATE AND ENCOURAGING THE LOCAL GOVERNMENTS TO BOOST THEIR BOND ISSUANCE TO HELP BOOST INFRASTRUCTURE SPENDING. IF YOU LOOK AT TWO CHART, LOOK AT COPPER AND LOOK AT THE 30 YEAR YIELD. THE STORY THROUGH 2019, AND MORGAN STANLEY HAS BEEN ON TOP OF THAT, IS IF YOU BELIEVE IN THE SECOND HALF RECOVERY, YOU SHOULD SEE LONGER DATED YIELDS PUSH HIGHER AND A RALLY IN THE COMMODITY COMPLEX. WE DID NOT SEE THAT ON THE 30 YEAR, WE DO NOT SEE THAT IN COPPER. IF YOU START TO BELIEVE THE POLICY RESPONSE WILL WORK, WE SHOULD SEE HIGHER LONG DATED YIELDS AND THE COMMODITY COMPLEX START TO PICK UP. CHRIS: I THINK THAT IS RIGHT. THE FED'S DUAL MANDATE IS MAXIMUM EMPLOYMENT AND PRICE STABILITY. IT IS NOT ANYTHING TO DO WITH THE CURVE. PEOPLE LOOK TO THE FED FOR INFLUENCE ON THE CURVE. ONE OF THE THINGS THEY DID YEARS AGO WAS OPERATION TWIST WHERE THEY FLATTEN THE CURVE AND PUT PEOPLE DOWN THE CAPITAL STRUCTURE. I THINK THEY NEED TO DO ANTI-TWIST. THEY NEED TO PUT PRESSURE ON THE FRONT END, THEY NEED STEVE -- THEY NEED STEVEN MNUCHIN TO TALK ABOUT THE 50 YEAR AND 100 YEARS. RJ: THE POINT ABOUT THE CURVE IS FASCINATING. IT HAS BEEN A STRONG INDICATOR OF RECESSION IN THE PAST, BUT THE NEGATIVE TERM PREMIUM AT THE NEGATIVE YIELDING DEBT ABROAD DO NOT EXIST IN OTHER PERIODS OF CURVE CONVERSION. IT IS POSSIBLE THE PURPOSE SENDING A FALSE SIGNAL. I AM NOT SURE THE FED SHOULD REACT JUST TO READ STEEPEN THE CURVE. THE IDEA OF AN ULTRA LONG MAKES A LOT OF SENSE. THE UNITED STATES TO DO WANT TO YEAR. IT MAKES A LOT OF SENSE TO ME AS A TAX PLAYER. JONATHAN: MY GUESTS STICKING WITH US. COMING UP, MORE SIGNS OF WEAKNESS IN EUROPE. GERMAN FACTORY ORDERS DROP AND THE ECB HAWKS ARE PUSHING BACK. WE WILL BRING YOU THE LATEST DATA OUT OF EUROPE, NEXT. TOMORROW, THE PAYROLLS REPORT ON A STACK TO SHOW ON THE OPEN. I THINK IT IS THE BEST LINEUP ANYWHERE IN MEDIA FOR PAYROLLS FRIDAY. I STAND BY THAT. RICK LEADER, MICHAEL COLLINS, MOHAMED EL-ERIAN, AND ANASTASIA AMOROSO AND WE WILL HEAR FROM THE WHITE HOUSE AS WELL. THAT IS YOUR NEXT 24 HOURS. THIS IS BLOOMBERG. ♪ > > ONE THING WE HAVE BEEN KEEPING AN EYE ON HIS GERMANY. IF DATA REMAINS AS POOR AS IT HAS BEEN, AND THE LATEST FIGURES WERE PRETTY DISAPPOINTING, THEN THE QUESTION OF FISCAL STIMULUS IN GERMANY TO BOOST GROWTH COULD BECOME A BIT MORE ESSENTIAL TO THE CONVERSATION. JONATHAN: ESTY DWEK WEIGHING IN. EUROPE'S LARGEST ECONOMY ON THE BRINK OF RECESSION. IT IS KIND TO CALL IT POOR. IT IS A LOT WORSE THAN THAT IN EUROPE AND GERMANY LOOKING AT THE ECONOMIC DATA. LALE: YOU WANT ME TO SAY IT BUT I WILL NOT SAY IT. JONATHAN: YOU CAN CALL IT WHATEVER YOU LIKE. LALE: IT IS CHALLENGING, AND TO ME AT SIGNALS MONETARY POLICY HAS REACHED ITS LIMIT AND IT IS TIME FOR FISCAL POLICY. THE OTHER THING I WILL HIGHLIGHT FOR ANYBODY WHO IS A VANTIV NEGATIVE RATES, IT DOES NOT WORK. CHRIS: I CANNOT AGREE MORE. IT IS NO LONGER A MONETARY POLICY ISSUE. YOU NEED TO BRING THE CURRENCY DOWN, WHICH YOU ARE DOING. THE OTHER THING IS WHAT IS CAUSING IT? AUTO AND TRADE TARIFFS. TRADE TARIFFS RESOLVED HELPS. THE AUTO SITUATION IS TOUCH AND GO BECAUSE OF THE TRENDS WE ARE SEEING. JONATHAN: TO THE POINT ON THE NEGATIVE RATE, THE IDEA THAT IN EUROPE WE HAVE GOTTEN TO THE POINT WHERE CUTTING RATES IS NOT ONLY INEFFECTIVE BUT COUNTERPRODUCTIVE THAT IT DAMAGES THE ECONOMY MORE THAN HELP SET. IS THAT HOW YOU THINK ABOUT THINGS RIGHT NOW? RJ: THAT IS CORRECT. I AM STRUCK BY THE CONTORTIONS EVIDENT FROM WHAT I WILL CALL ACADEMIC CIRCLES WHO STILL SUGGEST NEGATIVE RATES ARE EFFECTIVE. IT IS NOT CLEAR ANY COUNTRY THAT HAS PURSUED NEGATIVE RATES HAVE GOTTEN THE OUTCOME THEY HAVE PURSUED. AS THEY KEEP GOING DOWN THAT TRACK, I THINK THERE IS MORE DAMAGE BEING DONE. THERE'S NOT A LOT OF HUMILITY AROUND THE UNCERTAINTY OF NEGATIVE RATES. JONATHAN: HERE IS THE RISK ON THE SCREAM AT THE MOMENT -- ON THE SCREEN AT THE MOMENT. THE 30 YEAR YIELD IN ITALY. LOOK AT THE MOVE IN SPAIN AS WELL. THERE IS AN ARGUMENT AT THE MOMENT THAT ADDITIONAL QE WILL NOT HELP THINGS. THE COST OF CAPITAL IS ALREADY LOW. IF YOU START TO REMOVE THAT, IF YOU TAKE AWAY THAT PROMISE WE WILL DO MORE AND YOU START TO GET THE FIXED INCOME MARKET ADJUST. BATTALION YIELDS DO NOT MOVE 15 BASIS POINTS, THEY MOVED 20 AND WE START TO DRIFT HIGHER. IN THE SHORT-TERM, THAT SCARES POLICYMAKERS ON THE ECB. LALE: WHETHER IT IS THE ECB OR THE FED, WE ARE LEARNING THEY ARE MUGGLES AND NOT MAGICIANS. THEY ARE NOT EVEN HALF-BLOODS. THERE IS NOTHING WRONG WITH CYCLES. THERE WILL BE A RECESSION, AND AS PAINFUL AS IT WILL BE IT IS THE NATURAL COURSE OF ACTION. IT AVOIDS BUBBLES SO WE DO NOT FIND OURSELVES IN ANOTHER CATASTROPHE. JONATHAN: WHAT IF WE ALREADY HAVE BUBBLES? LALE: WE ALREADY DO, SO LET'S NOT MAKE THEM ANY BIGGER. JONATHAN: TO ALLOW THIS TRIP THROUGH EUROPE -- TO ALLOW THIS TO RIP THROUGH EUROPE? WITH THE POLITICS IN EUROPE? LALE: I AM NOT SURE I UNDERSTAND THE POLITICS IN EUROPE WITH WHAT IS HAPPENING. THERE'S NOTHING WRONG WITH LETTING THE AIR OUT OF THE BALLOON. IF WE DO ENOUGH, WE MAY BE ABLE TO GET OUT OF THIS WITHOUT A HUGE DISASTER. THERE ARE CORPORATE CREDITS THERE ARE CORPORATE CREDITS YIELDING NEGATIVE. THAT IS CRAZY. I CANNOT PUT WORDS ON IT THAT WOULD BE ACCEPTABLE ON TV. JONATHAN: I IMAGINE THERE PEOPLE AROUND THE TABLE WHO AGREE WITH YOU AND PEOPLE WATCHING WHO WOULD AGREE WITH YOU. I WANT TO BRING IN OUR REPORTER JOINS US FROM FRANKFURT. HE COVERS THE ECB. WE HAVE A LONG LIST AND IT IS GROWING UP OFFICIALS PUSHING BACK AGAINST THE PROSPECT OF QE NEXT WEEK. HOW IMPORTANT IS THAT? > > IT IS SUPER IMPORTANT. WHAT IS HAPPENING IS THAT WE ARE HAVING A GROWING LIST OF POLICYMAKERS WHO OPPOSE THE QE, WHICH IS QUITE THE CHALLENGE FOR MARIO DRAGHI BECAUSE HE PRIMED MARKETS FOR A STIMULUS PACKAGE. THAT WOULD PROBABLY INCLUDE QE. OVER THE LAST WEEK, WE HAVE SEEN A NUMBER OF POLICYMAKERS SAYING WE ARE NOT COMFORTABLE WITH RESTARTING QE, AT LEAST NOT NOW. A LOT OF THEM HAVE BEEN HAWKISH MEMBERS WHO IN THE PAST WHEN QE WERE FIRST LAUNCHED WERE AGAINST THE PROGRAM. NOW THE GAME CHANGER HAPPENED EARLIER THIS WEEK WHEN FRENCH CENTRAL BANK GOVERNOR CAME OUT AND SAID QE IS SOMETHING FOR DISCUSSION FOR THE MEETING NEXT WEEK. THEN HE WENT ON TO LIST ALL OF THE REASONS WHY HE WOULD NOT BACK THEM. DEFINITELY WHAT MARIO DRAGHI IS SEEING IS THERE IS A GROUP OF GOVERNORS ON THE GOVERNING COUNCIL WHO REPRESENT COUNTRIES WITH ROUGHLY HALF OF THE POPULATION OF THE EURO ZONE OR EVEN MORE IN TERMS OF GDP AND THEY ARE SAYING WE DO NOT WANT TO GO ALONG WITH YOU WE AT THIS POINT. THAT IS A PROBLEM FOR MARIO DRAGHI BECAUSE WHILE HE DOES NOT HAVE A VOTING RIGHT, HE MAINTAINED SWAY. HE REPRESENTS THE SECOND-BIGGEST EURO ZONE MEMBER. HE COULD SAY THIS MATTERS IN THE DEBATE. WE HAVE HEARD ALSO FROM A NUMBER OF OTHER POLICYMAKERS , WHO BASICALLY SAID IF WE WANT TO COME UP WITH A PACKAGE THAT IS SUPPOSED TO STIMULATE THE ECONOMY, THEN WE NEED TO HAVE THE BROADEST POSSIBLE CONSENSUS, SO THAT WHEN PEOPLE COME OUT AND HAVE TO DEFEND WHAT WE HAVE DONE , IT HAS TO SOUND CREDIBLE. IT IS A BIG CHALLENGE FOR MARIO DRAGHI. HE HAS NOT SEEN ANYTHING LIKE THAT BEFORE IN TERMS OF OPPOSITION. QE WAS OPPOSED PREVIOUSLY, BUT THIS POSITION IS MUCH STRONGER. JONATHAN: NICE TO MEET WITH YOU AHEAD OF THE ECB MEETING. FOR THE LAST YEARS THE HOCKS OF THE ECB HAVE COMPROMISED THE POLICY RESPONSE AND OBVIOUSLY -- AND ARGUABLY MADE THE DOWNTURN WORSE. I WONDER IF THE HAWKS AT THE ECB ARE DOING THE DUBS A FAVOR BY PUSHING BACK? RJ: BY RESTRAINING THE DUBS FROM GOING FURTHER? IT IS QUITE POSSIBLE. THE GENERAL THOUGHT AROUND NEGATIVE RATES, AT LEAST IN THE MARKETS, IS HIGHLY SKEPTICAL. MANY OF THE ACADEMIC ECONOMISTS, MANY OF WHOM ARE EMPOWERED WITHIN CENTRAL BANKS WANT TO KEEP GOING DOWN THAT PATH. IT IS NOT CLEAR THAT IS THE WAY TO GO. ON THE KIWI FRONT, HOW MUCH LOWER TO YIELDS NEED TO BE TO STIMULATE THE ECONOMY? IT IS AMAZING THE EUROPEAN SITUATION HAS NOT BEEN MET WITH FISCAL EASING FROM CORE EUROPE. THEY ARE ADDICTED TO BALANCE BUDGET TO A DEGREE THE TEA PARTY WOULD FIND SHOPPING. JONATHAN: ARGUABLY, IT WILL NOT FADE OTHER. RJ GALLO STICKING WITH US ALONGSIDE CHRIS HARVEY AND LALE TOPCUOGLU. IN THE MARKETS RIGHT NOW, SEVEN MINUTES AWAY FROM THE EQUITY CASH OPEN. FUTURES LOOKING SOLID. UP 1% ON THE S & P 500. ALIX: -- JONATHAN: FIVE-MINUTE'S AWAY FROM THE OPENING BOW. FUTURES LOOKING GOOD. POSITIVE A LITTLE MORE THAN .9%. LET'S GET YOU MORNING CALLS. A LOOK AT ANALYST RECOMMENDATIONS OUT OF WALL STREET. GOLDMAN UPGRADING A COMPANY TO NEUTRAL WITH A $152 PRICE TARGET. THE ANALYST SITE INCREASED CONFIDENCE IN THEIR LONG-TERM PRODUCT ROADMAP. OPPENHEIMER UPGRADING COMCAST OUTPERFORM WITH A $54 PRICE TARGET. SOLID OUTLOOK FOR 2020 THANKS IN PART TO THE COMPANY STRENGTHEN BROADBAND. THE STOCK UP 1.9%. JEFFREY REITERATING IT'S OVERWEIGHT RATING. ALREADY STRONG INTEREST FOR APPLE'S 5G VERSION OF THE IPHONE WHICH IS NOT EXPECTED TO LAUNCH UNTIL LATE 2020. THAT STOCK UP MORE THAN 1%. THREE OF THE CALLS FROM THE JONATHAN: 23 SECONDS AWAY FROM THE OPENING BELL IN NEW YORK CITY. GOOD MORNING TO YOU WORLDWIDE. FUTURES LOOKING GOOD. UP AROUND .9%. THE BOUNCE BACK CONTINUES. NASDAQ FUTURES UP MORE THAN 1%. THERE IS YOUR OPENING BELL. THE CASH TRADING. SWITCH UP THE BOARD AND THE BOND MARKET. YIELDS UP SEVEN BASIS POINTS NOW. CALL IT SIX. 1.53. YIELDS BLEEDING HIGHER ON THE BOONES -- ON BUNDS. YOU WONDER HOW THIS FEEDS A CONCERN ABOUT HOW QUICKLY YIELDS ARE RISING. IT IS FOREIGN-EXCHANGE RIGHT NOW. THE DOLLAR WEAKER, EURO STRONGER, 1.1072. UP .33% AND CRUDE UP .9% TO 56.70 FIVE CENTS -- $56.75. ABIGIAL: LOTS OF EARNINGS MOVERS. MOST OF THEM MOVING IN THE OPPOSITE DIRECTION OF THE MARKETS. MOST OF THEM DOWN. SLACK, THE RECENTLY IPOED WORKFORCE COLLABORATION SOFTWARE COMPANY. THOSE SHARES ARE DOWN SHARPLY. THEY DISAPPOINTED, NOT SO MUCH IN TERMS OF THE REPORT, BUT THE SECOND HALF OUTLOOK COMING IN SLOWER. ONE ANALYST CALLING IT ANEMIC. THE PRICE TO WATCH IS $26. AT HOME DOWN DUE TO WEAKER SALES AND MARGIN EROSION. THE COMPANY ACKNOWLEDGING THIS HAS TO DO WITH THE TRADE WAR AND TARIFFS. ONE COMPANY THAT HAD BEEN HIGHER EARLIER BUT NOW LOWER, CIENA, THE NETWORKING COMPANY. THEY PUT UP A THIRD QUARTER BEAT BUT THE OUTLOOK MAY BE DISAPPOINTING. THE 2019 AT 15%. IN 2020, SLOWING TO 6%. PALO ALTO NETWORKS, THE INTERNET SECURITY COMPANY POPPING AFTER THEY BEAT. THEY ANNOUNCED THEY ARE BUYING ZINGBOX. THE STOCK IS SIDEWAYS IN 2019 BUT IN THIS REPORT MAYBE THEY WILL GO INTO A BULLISH UPTREND. JONATHAN: THANK YOU. NOTHING SIDEWAYS ABOUT THIS EQUITY MARKET. UP 9% ON THE S & P 500. INTERESTING LOOKING AT THE BOND MARKET PRICE ACTION. TREASURY YIELDS DRIFTING HIGHER. THE 30 YEAR IN GERMANY UP 10 BASIS POINTS. STILL NEGATIVE ON THE 30 YEAR YIELD IN GERMANY, BUT UP 10 BASIS POINTS SO FAR. IT IS A BIG NEW FOR A GERMAN 30 YEAR YIELD. KEEP AN EYE ON THAT. ELSEWHERE, A BIG DEBATE. THE DIFFERENCES BETWEEN DEFENSIVE'S AND CYCLICAL EQUITIES. I WANT TO BRING IN BLOOMBERGS TAYLOR RIGGS. TAYLOR: WITHIN THE EQUITY MARKETS, STARTING TO GET MORE DEFENSIVE AND SEEING THAT PLAY OUT THROUGH THE BOND MARKET. THREE STRATEGISTS COME OUT WITH LOWERING THEIR 10 YEAR FORECAST. JP MORGAN LOOKING AT A 150 BY YEAR-END, AND OTHERS LOOKING AT A 1% ON THE LOW END OF THEIR RANGE. A LITTLE BIT OF DEFENSIVENESS. WE SEE THAT WHEN WE LOOK AT VALUATIONS ON A FORWARD PE BASIS. STOCKS THAT ARE HIGHLY CORRELATED WITH BONDS RELATIVE TO STOPS NEGATIVELY CORRELATED WITH BONDS. BIG OUTPERFORMANCE, AND MOST IMPORTANTLY THE SPREAD BETWEEN THE TWO IS WIDENING AS INVESTORS WANT TO GET DEFENSIVE BUT THEY'RE NOT SURE THEY WANT TO GO COMPLETELY INTO BONDS. HOLDING ON TO SOME OF THOSE BOND LIKE EQUITY PRICES. FINALLY, IF YOU COMING TO MY TERMINAL AT GTV < GO > , YOU ARE STARTING TO SEE THIS PLAY OUT IN THE PRICE ACTION BETWEEN THE RATES AND THE MOMENTUM TOTAL RETURNS. TAKING A LOOK AT A 20 YEAR ETF THAT IS ALMOST POSITIVELY CORRELATED WITH A MOMENTUM TOTAL RETURN INDEX. WE HAVE STARTED TO DIVERGE A LITTLE BIT IN THE LAST FEW DAYS, BUT STILL A PLUS ONE POSITIVELY CORRELATED NUMBER IS SOMETHING THAT CATCHES MY ATTENTION. JONATHAN: THANK YOU VERY MUCH. DO YOU WANT TO STAY DEFENSIVE? TONY RODRIGUEZ WEIGHING ON THAT DEBATE. TAKE A LISTEN TO WHAT HE HAD TO SAY. TONY: IT MAKES SENSE. I WOULD NOT CARRY THE FLAG FOR FIXED INCOME BEING ABLE TO GENERATE DOUBLE-DIGIT RETURNS THIS YEAR. IF YOU ABDICATE FIXED INCOME COMPLETELY IN YOUR PORTFOLIO, YOU ARE SAYING I DO NOT NEED ANY PROTECTION AGAINST A GEOPOLITICAL BLOWUP OR A REAL DOWNTURN IN THE ECONOMY. EVERY EQUITY MARKET WILL GET HURT IN THAT ENVIRONMENT. THAT IS THE ONLY PLACE FOR FIXED INCOME. JONATHAN: WITH ME IS LALE TOPCUOGLU, CHRIS HARVEY, AND RJ GALLO. THERE ARE A LOT OF PEOPLE THAT HAVE GOT VERY DEFENSIVE. HOW MUCH CONVICTION DO YOU HAVE NOW IS THE RIGHT TIME TO ADD CYCLICALITY BACK TO THE PORTFOLIO? > > I WOULD SUGGEST IF YOU LOOK AT OUR MULTI SECTOR BOND STRATEGY, WE HAVE PULLED BACK ON HIGHER BETA OR CYCLICAL EXPOSURES. WE TILTS BACK TO NEUTRAL ON INVESTMENT-GRADE CREDIT. STILL HAVE A SMALL OVERWEIGHT IN YIELD, AND WE HAVE BEEN NEUTRAL TO LONG IN THE MOST RECENT DURATION. IF YOU LOOK AT OUR POSITIONING, WE ARE POSITIONED FOR A SOFT LANDING BUT WE DO NOT HAVE A LOT OF CONVICTION. THE MARKETS HAVE BEEN FLASHING YELLOW MORE THAN THE ECONOMIC DATA. IF YOU LOOK AT RECESSION INDICATORS, THE YIELD CURVE SPARES EVERYONE. THE OTHER ONES ARE NOT THERE. WE ARE CAUTIOUSLY OPTIMISTIC WE CAN ACHIEVE THAT AT WE WILL NOT ROLL OVER. IN THAT CASE, SOME CYCLICALITY MAKE SENSE. LALE: WE LIKE SOME OF THE CYCLICALS. WHERE WE FOUND VALUE IS THESE AIR POCKETS WHERE AN ACUTE EVENT HAPPENS AND COMPANIES THAT HAVE GOTTEN HURT BECAUSE OF TRADE NEGOTIATIONS OR, LIKE IN HONG KONG, WITH THE RIOTS, YOU SEE SIGNIFICANT VALUATION DIVERGENCE AMONG DIFFERENT COMPANIES AND DIFFERENT SECTORS. WE SELECTIVELY PICK THOSE. ON THE FIXED INCOME SIDE, I NEED -- I SEE NO VALUE IN FIXED INCOME OR CREDIT. JONATHAN: THE DEBATE SEEMS TO BE INVESTMENT-GRADE EVER HIGH-YIELD, BB'S OVER CCC'S. DOES THAT MAKE SENSE TO YOU? LALE: THAT IS HOW WE HAVE BEEN POSITION FOR A LONG TIME. THE VALUE IN THE BB'S IS VERY SKINNY. A MAJORITY ARE ALREADY TRADING TO A CALL. WHERE WE FOUND OPPORTUNITIES IS WHERE WE ARE GETTING EXTRA BONUS POINTS IS SOME OF THE INVESTMENT-GRADE REDUCTIONS TO REFINANCE THE DEBT. AS YOU KNOW, HIGH-YIELD VOLATILITIES -- IN INVESTMENT-GRADE THEY ARE NOT. EVEN IF YOU ARE AT IN THE SHORTER END OF THE CURVE, 1% HERE OR THERE. JONATHAN: WE HAVE HAD A LOT OF ISSUANCE IN INVESTMENT GRADE AND A LOAD OF MONEY, ALMOST $30 BILLION IN A SINGLE DAY. THAT IS A LOT TO COME THROUGH INVESTMENT-GRADE. MAKE THE ARGUMENT WE STILL HAVE TECHNICAL SUPPORT DESPITE THE FACT WE HAVE JUST HAD A TON OF ISSUANCE IN THE LAST DAY. LALE: NOT EVERYBODY IS IN THE WEEDS AS WE ARE. PEOPLE LOOK AT IT AS A TOP-DOWN THEME OF UPGRADING THE QUALITY. WHEN YOU THINK OF UPGRADING THE QUALITY YOU MOVE AWAY FROM HIGH-YIELD OR YOU MOVE TO THESE INDICES -- LOOK AT THE ETF FLOWS. THE FLOWS COME IN, YOU HAVE TWO O BUY, IT IS AS SIMPLE AS THAT. SOMETIMES THERE IS NOT A LOT OF CREDIT ANALYSIS. JONATHAN: IT SEEMS TO BE THE CONVERSATION, STICK WITH QUALITY AND FIXED INCOME. IN EQUITIES, A HARDER QUESTION TO ANSWER IS WHETHER YOU STAY WITH THE DEFENSIVE. UTILITIES LOOK EXPENSIVE. THE DEFENSIVE SECTORS LOOK EXPENSIVE. THE ONE ARGUMENT I KEEP HEARING IS STAY WITH THEM FOR INCOME. STAY THERE. THAT IS WHERE YOU GET YOUR INCOME. DO YOU MAKE THAT ARGUMENT? CHRIS: IF YOU'RE AN PLAYER, YES. AS FAR AS GENERALIST, NO. WHAT YOU SEE FROM VOLATILITY IS OUTPERFORMANCE. LAST YEAR WE SAID LOW VOLATILITY WAS THE MOST UNDERAPPRECIATED STYLE OUT THERE. YOU ASK THE QUESTION SHOULD YOU BE SHIFTING? TACTICALLY YOU SHOULD BE SHIFTING. IT IS THE PERFECT TIME TO SHIFT. YOU START TO -- YOU NEED TO START ADDING CYCLICALITY IN FORMS OF SEMI'S AND FINANCIALS. YOU CAN STILL GET REASONABLY VALUATION IN CRUDE BEVERAGE OR TOBACCO. YOU NEED TO MOVE AWAY FROM BOND PROXIES AND THEY ARE PRICING IN AN AGGRESSIVE SLOW DOWN WHICH NEEDS TO MATERIALIZE RIGHT HERE AND NOW. IF IT DOES NOT COME IT WILL BE HARD TO MAKE MONEY IN THE SHORT TERM. R.J.: I WOULD AGREE WITH THE REALITY THAT YIELDS HAVE GOTTEN SO LOW AND IT HAS DRIVEN INCOME ORIENTED ASSETS THAT WE START TO QUESTION AND YOU MIGHT REGRET IF YOU DO NOT GET THAT RECESSION. IT SEEMS TO ME THAT THE MARKET VARIABLES ARE FLASHING YELLOW. THEY ARE NEGATIVE, THEY ROLLED OVER, BUT IT IS QUITE POSSIBLE THE FEAR IS OUT OF PROPORTION TO WHAT WE ARE ABOUT TO HAVE HAPPEN. THE VET IS ON THE CASE, THAT HELPS. JONATHAN: LET'S GET TO OTHER CALLS FROM THE STREET. ROMAINE: A NUMBER OF STRATEGISTS ARE TURNING POSITIVE ON EQUITIES. YOU'RE TALKING ABOUT MONETARY POLICY SUPPORT AND THE POTENTIAL FOR FISCAL SUPPORT AND THE IDEA OF THE DOWNSIDE IS PRICED IN. THAT UNDERPINS THE THESIS OF A LOT OF THESE STRATEGIST AND THEN YOU LOOK AT THE YIELD. THE DIVIDEND YIELD ON EQUITIES VERSUS GOVERNMENT YIELD HAS WIDENED TO A LEVEL THAT IS PROVIDING A SILVER LINING IN THE MINDS OF SOME STRATEGISTS. IN EUROPE THE DIFFERENCE BETWEEN THE STOXX 600 AND THE 10 YEAR BOND YIELD, 450 BASIS POINTS. BACK NEAR AN ALL-TIME HIGH. IN THE U.S. IT WERE AROUND 100 BASIS POINTS, TRADING TO THE LEVELS WE SAW IN 2016. THAT IS -- THAT IS THE DIFFERENTIAL BETWEEN THE S & P 500 DIVIDEND YIELD AT THE 10 YEAR TREASURY. A STRATEGISTS SAYING WHEN YOU LOOK AT THE RISK PREMIUM, IT IS PROVIDING ADEQUATELY SUPPORTIVE MEASURES, AND RIGHT NOW IS NOT A GOOD IDEA TO BE UNDERWEIGHT EQUITIES IN THIS MARKET, SAYING THE MACRO CONCERNS ARE OVERDONE. WE ALSO HEARD FROM BANK OF AMERICA AND THEIR BULL-BEAR INDICATOR SAYING THERE IS A CONTRARIAN SIGNAL FOLKS MAY START BUYING INTO EQUITIES. JP MORGAN CITING POSITIVE TECHNICAL SIGNALS AS TO WHY SOME INVESTORS SHOULD GO OVERWEIGHT ON INVESTORS AS WELL. I SHOULD POINT OUT NOT EVERYONE IS AS BULLISH ON THIS. WE HAVE SEEN SOME OF THE BUY SIDE INVESTORS ACTUALLY GOING UNDERWEIGHT FOR THE FIRST TIME WE HAVE SEEN IN QUITE SOME TIME. WE SHOULD ALSO POINT OUT WHEN YOU MENTION THAT TREASURY RALLY, WE ARE GETTING A REPRIEVE. SEEING THOSE YIELD RISE BUT COMING OFF A RELENTLESS RALLY. THE RALLY CULMINATED IN AUGUST WITH THE BEST CONCERNS WE HAVE SEEN ON THE U.S. SIDE GOING BACK TO THE 2008 FINANCIAL CRISIS, RIGHT NOW 1.53 ON THE 10 YEAR. 0.2 ON THE 30 YEAR. HIGHER THAN WHERE WE WERE A COUPLE DAYS AGO, BUT -- WHERE WE WORK NINE OR 10 MONTHS AGO. JONATHAN: ONE TO EXPLORE THAT FINAL POINT. IT IS THE PRICE ACTION IN FRONT OF OUR FACE. IT HAS NOT BEEN A TREND THROUGH THE YEAR. THE NEW TREND AS WE PROGRESS IS WORTH GOING THROUGH AND WARGAMING THIS OUT. LOOKING AT THE BOND MARKET, IF YIELDS CONTINUE TO DRIFT HIGHER, CAN EQUITY MARKETS ABSORB THAT KIND OF MOVE IN THE BOND MARKET GIVEN THE FACT THAT THROUGH 2019 WE HAVE HAD EQUITY MARKETS HEAD NORTH OR SIDEWAYS, WHATEVER YOUR STARTING POINT IS. AND THE BOND MARKET YIELDS GRIND LOWER. A LOT OF PEOPLE COME ON THIS PROGRAM AND MAKE THE ARGUMENT THE EQUITY MARKET IS WELL SUPPORTED BECAUSE GILTS ARE SO LOW. IF THEY GO THE OTHER WAY, IS IT A NEW STORY? R.J.: IS A SELF-LIMITING DYNAMIC. LOOK AT WHAT HAPPENED LOW THE LAST YEAR. THE FED TIGHTENED. THEY OVER TIGHTENED. IT IS CONSISTENT WITH THE LOWER NEUTRAL RATE WORLD, THE R-STAR DYNAMIC WE KEEP HEARING FROM THE FEDERAL RESERVE. MARKET OUTCOMES KEEP SUGGESTING SOVEREIGN YIELDS CANNOT GO TOO HIGH BEFORE RISK ASSETS CANNOT TAKE IT ANYMORE. I DO NOT THINK 20 OR 30 BASIS POINTS WILL BRING BACK THAT DYNAMIC, BUT EVERY MORE AND PEOPLE START TO WONDER. PEOPLE GET ADDICTED TO THOSE YIELDS. JONATHAN: R.J. GALLO, J TO HAVE -- GREAT TO HAVE YOU WITH US ALONGSIDE CHRIS HARVEY AND LALE TOPCUOGLU. STERLING RALLYING TO ITS HIGHEST LEVEL IN A MONTH AS BORIS JOHNSON BREXIT STRATEGY CONTINUES TO CRUMBLE. WE WILL BE CATCHING UP WITH JANE FOLEY FOR HER OUTLOOK. 12 MINUTES INTO THE SESSION, EQUITY MARKETS PUSHING UP MORE THAN 1% ON THE S & P 500 AND TREASURIES HEADING SOUTH. YIELDS HIGHER. THIS IS BLOOMBERG. ♪ RITIKA: RITIKA: THIS IS "BLOOMBERG -- THE OPEN." COMING UP ON "BLOOMBERG MARKETS" KEVIN JOHNSON, STARBUCKS CEO. JONATHAN: 15 MINUTES INTO THE SESSION. EQUITIES AT A SESSION HIGH. THE SCORES LOOK LIKE THIS IN THE UNITED STATES. IN NEW YORK, EQUITIES POSITIVE MORE THAN 1% ON THE S & P 500. THE NASDAQ UP BY MORE THAN 1.53%. LOOKING AT THE SECTOR ACTION, ABIGAIL DOOLITTLE. ABIGIAL: IT IS RISK ON SECTOR COMPOSITION. WE USE THE IMAP FOR THE S & P 500 BY GOING INTO THE BLOOMBERG. MOST SECTORS ARE HIGHER. FINANCIALS UP TO PERCENT DRIVEN BY THE FACT THAT RATES ARE HIGHER. INVESTORS THINKING THAT WILL HELP THE LENDING ACTIVITY. ON THE BOTTOM, UTILITIES AND REAL ESTATE. WHEN RATES ARE HIGHER, THOSE DIVIDENDS LOOK LESS ATTRACTIVE. RISK ON PICTURE WITH FINANCIALS AND TECH AND INDUSTRIALS, CONSUMER DISCRETIONARY ON TOP. RATES ARE AMAZING, THEY HAVE BEEN FALLING SO MUCH. OVER THE LAST TWO DAYS, THE 10 YEAR YIELD UPDATE BASIS POINTS. THAT IS THE BIGGEST BACKUP FOR THE 10 YEAR YIELD GOING ALL THE WAY BACK TO JANUARY AND HELPING OUT THAT FINANCIAL SECTOR, WEIGHING ON DEFENSE, REAL ESTATE AND UTILITIES. JONATHAN: THANK YOU VERY MUCH. BIG MOVES IN THE BOND MARKET. BOND YIELDS MUCH HIGHER. NO BIG MOVES IN THE U.K.. THE HOUSE OF COMMONS DENYING BORIS JOHNSON'S CALL FOR FRESH ELECTIONS UNTIL THE OPPOSITION CAN DELAY THE POSSIBILITY OF NO DEAL BREXIT PASSED OCTOBER 31. LABOR SHADOW CHANCELLOR JOHN MCDONNELL EXPLAINING HIS PARTY STRATEGY -- > > WE WANT THE GENERAL ELECTION JUST AS MUCH AS THEY DO. I WANT TO GET RID OF THE BORIS JOHNSON GOVERNMENT AS RAPIDLY AS I CAN. THE DATE IS D. THE CONVERSATION IS THE DATE. CAN WE GET A DATE THAT ASSURES OUR OVERALL POLICY AND THEN HAVE A GENERAL ELECTION. JONATHAN: BLOOMBERGS EMMA CHANDRA JOINING US FROM LONDON. WHAT NEXT? EMMA: A VERY GOOD QUESTION. THE QUESTION IS WHETHER OR NOT WE WILL SEE AN EARLY GENERAL ELECTION. BORIS JOHNSON'S GOVERNMENT WOULD DENY THAT. IT STILL DOES LOOK LIKE WE WILL GET ONE. YOU HEARD THE LABOUR PARTY G STRATEGY. THEY WANT THIS BILL WORKING ITS WAY THROUGH THE HOUSES OF PARLIAMENT TO PREVENT A NO DEAL BREXIT TO BE SIGNED INTO LAW. IT IS CURRENTLY IN THE HOUSE OF LORDS, WHERE IT WILL BE DEBATED. IT WILL BE RETURNED TO THE COMMENTS ON MONDAY AND IS EXPECTED TO HAVE ROYAL ASSENT BY MONDAY, WHICH WE -- WHICH IS WHY WE ARE HEARING THE GOVERNMENT PLANS TO ASK MP'S AS SOON AS MONDAY TO APPROVE A GENERAL ELECTION. THE PRIME MINISTER DO TO MAKE A BIG SPEECH FOR GOING BACK TO THE PEOPLE. HE WILL BE SPEAKING IN YORKSHIRE IN THE NORTH OF ENGLAND, AN AREA OF THE COUNTRY THAT VOTED TO LEAVE THE EU. THE PRIME MINISTER SUFFERING ANOTHER HUMILIATING BLOW THIS MORNING WHEN HIS OWN BROTHER, JOE JOHNSON, CONSERVATIVE MP AND MINISTER RESIGNED AND SAID HE WOULD NOT STAND AS AN MP AGAIN, CITING THE TENSION BETWEEN FAMILY LOYALTY AND THE NATIONAL INTEREST. JONATHAN: AS MY GOOD FRIEND AND COLLEAGUE PUT IT, QUITTING TO SPEND LESS TIME WITH MY FAMILY. EMMA CHANDRA, GREAT TO CATCH UP WITH YOU. LOTS OF OUTCOMES FOR BREXIT. > > THE POUND TRADES OFF IN TERMS OF EUROSTERLING. ABOVE 95 ON EUROSTERLING IS RIGHT THINK WE WILL GET ON NO DEAL. 85 IF WE GET A DEAL, 80 IF WE CANCEL BREXIT. WE ARE HALFWAY BETWEEN NO DEAL AND IT DEAL IN TERMS OF PRICING. JONATHAN: JANE FOLEY JOINING US NOW FROM LONDON. GREAT TO HAVE YOU WITH US. DO YOU HAVE A BASE CASE FOR THE NEXT SIX MONTH IN ANY WAY SHAPE OR FORM? JANE: OUR BASE CASE IS DIFFICULT. POLITICS HAVE BEEN CHANGING DAILY. OUR CASE IS THERE WILL BE A DELAY NOW THAT THE LAW HAS NOT BEEN SIGNED INTO PLACE JUST YET, BUT IT LOOKS LIKE IT WILL BE SOON, CERTAINLY BY MONDAY. THAT WILL DELAY BREXIT BEYOND OCTOBER 31. WE ALSO THINK THERE WILL BE A GENERAL ELECTION IN THE COMING MONTHS, PROBABLY NOT BEFORE OCTOBER 31. IT WILL BE QUITE INTERESTING WITHIN THE NEXT HOUR TO HEAR WHAT BORIS JOHNSON HAS TO SAY ABOUT AN ELECTION. CERTAINLY THE LABOUR PARTY DOES WANT AN ELECTION, BUT THEY WANT TO MAKE SURE BORIS JOHNSON DOES NOT COME BACK WITH A MAJORITY, WHICH IS VERY QUESTIONABLE, BUT OBVIOUSLY SOMETHING JOHNSON WOULD LIKE AND THAT HE WOULD POTENTIALLY CHANGE THE LAW THAT HAS BEEN FOUGHT ABOUT THIS WEEK. JONATHAN: AS WE DRIFT TOWARD AN ELECTION, SEEMINGLY THAT IS WHERE THIS IS HEADING, HOW DOES STERLING BEHAVE IN THAT ENVIRONMENT? JANE: THAT IS VERY INTERESTING. GENERALLY SPEAKING, INVESTORS LIKE GOVERNMENTS ASSOCIATED WITH GOVERNMENT PRUDENCE AND HAVE A DISDAIN FOR LEFT-WING GOVERNMENTS BECAUSE THE OPPOSITE IS TRUE. THAT IS THE CASE. JEREMY CORBYN HAS RILED UP SUSPICION AMONG STERLING INVESTORS. HE IS VERY LEFT-WING. HE WANTS TO RE-NATIONALIZE CERTAIN INDUSTRIES. INVESTORS ARE WARY ABOUT THAT. HE IS IN THE REMAIN CAMP, AND THE REMAIN CAMP IS SOMETHING WHICH INVESTORS DO LIKE. THERE IS A MIX OF WHAT MIGHT HAPPEN. THE WAY THE OPINION POLLS ARE GOING NOW SUGGESTS PERHAPS NO PARTY WILL GET A MAJORITY, AND JEREMY CORBYN MIGHT BE BETTER POSITIONED TO FORM A COALITION WITH OTHER REMAIN PARTIES SUCH AS THE LIBERAL DEMOCRATS, THE SCOTTISH, THE WELSH MAY BE DISAGREEING. IF THAT WERE THE CASE, INVESTORS MIGHT THINK CORBYN MIGHT BE LEADING THIS GOVERNMENT, BUT HIS LEFT-WING LEANINGS COULD BE DILUTED BY THESE LEFT BUT MORE CENTRIST PARTIES. JONATHAN: THIS IS CRYSTAL BALL TYPE THINKING, BUT WHERE IS THE MOST DOWNSIDE FOR TABLE? IS IT A JEREMY CORBYN GOVERNMENT OR A HARD BREXIT WITH BORIS JOHNSON? JANE: FOR NOW IT WOULD BE THE HARD BREXIT. THE LIKELIHOOD OF A PURE JEREMY CORBYN GOVERNMENT IS DISTANT. A HARD NO DEAL BREXIT IS CERTAINLY A BIG RISK RIGHT NOW FOR INVESTORS. JONATHAN: JANE FOLEY JOINING US FROM LONDON. GREAT TO CATCH UP WITH YOU. COMING UP, THE MARKET MOVING EVENTS YOU NEED TO BE WATCHING. THAT IS NEXT IN OUR TRADING DIARY. THE EQUITY BULLS IN A HAPPIER PLACE. EQUITY MUCH HIGHER. THE S & P 500 POSITIVE 1.2%. THIS IS BLOOMBERG. JONATHAN: IT IS TIME FOR THE TRADING DIARY. WHAT YOU NEED TO BE WATCHING THROUGH THE REMAINDER OF THIS WEEK. AT THE TOP OF THE HOUR, U.S. FACTORY ORDERS AND -- A BUSY DAY GOING INTO TOMORROW. GERMAN INDUSTRIAL PRODUCTION IN THE MORNING FOLLOWED BY A RATE DECISION FROM RUSSIA AT 6:30 EASTERN. THEN PAYROLLS FRIDAY IN THE UNITED STATES. THIS MIGHT BE DIFFERENT. THAT MIGHT NOT BE THE MAIN EVENT THIS FRIDAY BECAUSE WE ALSO HEAR FROM JAY POWELL SPEAKING IN ZURICH AT 12:30 EASTERN. FOR FINAL THOUGHTS, I WANT TO BRING IN MICHAEL MCKEE. LET'S GET TO THE DATA AT THE TOP OF THE HOUR AND THEN MOVED TO TOMORROW. WHAT ARE YOU LOOKING FOR? MICHAEL: THE NONMANUFACTURING ISM NUMBER WILL BE THE MOST IMPORTANT. WE WILL LOOK AT THE EMPLOYMENT NUMBERS POINTED OUT IN THE ADP REPORT THAT SERVICES JOBS WERE GROWING FASTER THAN MANUFACTURING JOBS. WE SAW THE MANUFACTURING ISM THAT JOB NUMBERS WERE NEGATIVE AS THE SERVICE INDUSTRY CONTINUES TO HOLD THINGS UP. FACTORY ORDERS A REPEAT OF WHAT WE ALREADY KNOW. JONATHAN: YOU'VE MADE THE POINT GOING INTO PAYROLLS FRIDAY THAT THE ANALYSIS WILL GET MORE NUANCED. IT WILL NOT BE LOOK AT THE HEADLINE NUMBER, LOOK AT WAGES, WE WILL START TO LOOK AT HOURS. WHERE ARE COMPANIES PULLING BACK? MICHAEL: AND TEMPORARY HELP STAFFING, AREAS THAT ARE THE FIRST CUTBACKS WHEN COMPANIES DO NOT SEE THE BUSINESS. WE MAY SEE THAT IN THE FACTORY SECTOR, NOT JUST HOURS WORKED BUT MANUFACTURING HOURS AND OVERTIME WORK. JONATHAN: YOU GET THE DATA, YOU START TO THINK ABOUT THE POLICY RESPONSE. WE WILL HEAR FROM CHAIRMAN POWELL TOMORROW. WHAT ARE YOU LOOKING FOR FOR THE CHAIRMAN OUT OF EUROPE? MICHAEL: ANY NUANCED SUGGESTING HE IS WAVING ONE WAY OR THE OTHER, 50 ZERO, BUT HE WILL PROBABLY TELL US WHAT WE HEARD ALREADY AND CONFIRM -- AND CONFIRM THE MARKET VIEW OF 25 BASIS POINT. JONATHAN: DOWN IN D.C. TOMORROW? MICHAEL: IN D.C. TOMORROW. JONATHAN: LOOK FORWARD TO THAT. A BETTER SESSION ONCE AGAIN. EQUITIES MARCHING HIGHER 1.25%. FROM NEW YORK, THIS WAS "THE COUNTDOWN TO THE OPEN PETER:

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'Bloomberg The Open' Full Show (09/05/2019)

Jonathan Ferro highlights the market moving news you need to know heading into the opening bell on Wall Street. Stocks climbed as the U.S. and China agreed to a further round of trade talks, and U.S. factory orders for July beat expectations. JOHCM's Lale Topcuoglu, Chris Harvey of Wells Fargo Securities and Federated Investors' R.J. Gallo discuss the outlook for trade talks and the market's response. Jane Foley of Rabobank joins to look at the pound in light of Brexit uncertainty. (Source: Bloomberg)

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