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Moving news from around the world, from hong kong to new york to d. C. We start off with the latest in trade. Larry kudlow im a white house Economic Advisor, signaled the u. S. And china are close to signing phase one. We are coming down to the short strokes. We are in communication with them every single day right now. Joining me on the phone from hong kong is enda curran. Does china agree with this assessment . Musiccertainly, the mood from both sides now is that they are on track to reach some kind of agreement. Mr. Kudlows comments came only a day after china agreed yesterday to lift a ban on poultry imports from the u. S. They started to buy u. S. Farm produce again last month. Clearly some things are coming together, but there are outstanding issues. We still dont know where either side are on tariff removal. That is something of a redline on the chinese side. There are still other areas, like ip protection and the like. Still dont know when any agreement will be signed. Separately, there are signs of pressure partly due to the trade war, but no signs of panic from policy makers yet. We saw another sign of how disciplined the stimulus was when there was an injection into the Financial System of about 30 billion u. S. Dollars, mostly to color a tax payment system, and said it wasnt a time of turning to stimulus, but much less will depend on when or if a trade agreement can be reached. Alix thank you very much. A fifth straight day of roadblocks. Roadblocks and vandalism in hong kong protests. Going me now on the phone is Bloomberg Markets asia anchor. What does that mean in terms of a crackdown . Rishaad nobody actually does because there was talk yesterday at the state run go global Times Newspaper the state newspaperl times that there was going to be a curfew. This trade war is of course taking its toll on the economy as well. The hong kong economy is excepted shrink by 1. 3 this year. To the rest ofn the city. The government also downgrading its forecast for gdp here expansion for the second time this year. They were rather optimistic 1 nking they would go up to growth. This is what weve had with the chief secretary outlining plans that hong kong may well see more decisive measures. We got scuffles taking place, quite today has not been as rough the far from previous days. New lastagain flare a week after the death of a student. We also saw the death of a 70yearold man earlier today. The police are investigating it as being a murder. We have citywide school cancellations, and also have carrie lam and her government denying reports of any further measures in terms of a curfew, as i mentioned before. The subway system remains partially under lockdown. Tunnel we have three tunnels in hong kong but the central tunnel across harbor tunnel has been ransacked, and the tollbooth set ablaze. This has made traveling through the city rather difficult. Alix thank you very much, bloombergs rishaad salamat. Fed chair jay powell telling the House Budget Committee on the hill that rates are in a good place, and there are no elevated risks to the economy. Chair powell theres nothing that is really booming that would look to bust. It is a pretty sustainable picture. I pointed out the risks, and those are in manufacturing. Manufacturing is declining, but not sharply. Manufacturing is more sensitive to cycles, so it does decline. Alix here in new york is michael mckee, setting the stage also for some data today. Michael yes indeed. Futures this morning suggest no bust inside, but are we really booming . We will find out when we get a report on consumer sales, retail sales for the month of september. Weve been seeing a deceleration in the one strong part of the economy. September data for retail sales was negative, at least the headline. The retail control numbers, the part that goes into gdp, that was flat on the month. The forecast is for a bit of a rebound, and the fed would certainly like to see that. As the fed chair said, manufacturing has been in something of a slump. We get data on that 9 15 this morning. Unlike retail sales, manufacturing has been in a recession on a quarterly basis. You can see the blue line there, mostly below zero, where retail sales has mostly been above. We are expecting another decline for october. The question now, does strong consumer demand or rebounding consumer demand pull up manufacturing, or does manufacturing hurt Consumer Confidence and drag down the economy . Thats for the fed to watch. Alix you will be joining me in the next hour, bloombergs michael mckee. Intelligencehouse committee continues its investigation into the impeachment inquiry. Joining us for more at the white house, kevin cirilli. What to expect today, kevin . The former ambassador set to testify before the committee as lawmakers in both parties indicated their side of the story. Democrats led by House Speaker nancy pelosi said that essentially, but the Trump Administration has orchestrated was bribery to ukraine officials, withholding aid until they investigated into the bidens. Republicans say the president , like other president s and previous administrations of both parties, had asked sibley for a Foreign Government to look into corruption. All of this comes during what is becoming an increasingly intense situation on capitol hill, and which both sides digging in. I can tell you here at the white house, they are working very closely, republican numbers of the house intelligence committee, and lockstep on messaging. As of this morning, they do not feel they are at risk of losing any republican support. Alix thank you very much. Something else i am watching. I dont believe that Elizabeth Warren can execute all of the plans shes talking about, but i think the fact that all of her plans dont make economic sen. Warren tax in america. [applause] for that is a new ad Elizabeth Warren. It calls for a wealth tax. Thatfein said on twitter vilifying the rich is bad for the u. S. Maybe tribalism is just in her dna, a possible reference to her one time claim that she was part native american. Cooperman says she rep is ins the worst in politicians, trying to demonize wealthy people. Esther day, as you were hearing, i talked to billionaire sam zell, who also turned his thumbs down on warren and her campaign. He said it doesnt make any economic sense. Coming up on this program, more on your news and your morning top trades on todays first take. This is bloomberg. Theres a trade war. Theres a technology war. Theres a geopolitical war. And there could be capital wars. That is the nature of the environment. How that is approached is going to determine what our futures are like. Alix that is bridgewater founder ray dalio speaking last night at the National Committee on u. S. China relations. Obviously, trade the big focused of todays first take. Joining me from our inhouse team of wall street veterans and insiders, damien sass our sassower, vincent cignarella, and yelena shulyatyeva. Im reading this from an article we wrote. Is this a chip shot to the green or a nerveracking final stroke of a painter . I love that analogy. Vincent they left out the part where we are probably still in a sand trap. Alix so like my fiveyearold drawing a dinosaur. Vincent i think we are closer than people think. ,hen people said the other day there are snags with the agricultural agreement, the snag is not a nag purchase, but rather not an ag purchase, but rather how much can china buy. We talked about this yesterday, if you look at china food and inflation prices, it is really steepening. They do need to import food to squash that inflationary scenario. Have to feed the people, essentially. It is just a matter of the amounts cant seem to be agreed on. That is going to be sorted out. It is not going to be something that is prolonged. It may lead into next year, but it will actually get done. Alix are you bullish into the weekend . Vincent i would be slightly risk on going into the year. Damian i am going to take the jack ma, ray dalio on that and think that the trade war is going to last forever. When you look at u. S. China yield differentials, if you look last year, it was at 35 basis points. Now it is 138 basis points. That is a massive move. You know what tracks that . Dollaryuan. I am probably a bit less optimistic than vince, and the little less pessimistic than you. To me, what it means is what really happens to the u. S. Economy Going Forward because of all of that. One,re, we can get phase but does it mean that uncertainty is removed and businesses start investing . Remember, we still have some tariff spending in december. That is a huge amount of money. Taken together, the delayed october tariffs and what is coming in december, more than what was imposed in terms of the share of economy back in 2018, so for the u. S. , its a lot at stake, and i am not that up to mystic. Vincent i think not that optimistic. Vincent i think, realistically speaking, you have to bet on the fact that the to summer tariffs do not happen, but the december tariffs do not happen, because if they do, all bets are off. The economy needs to stay improving, if not at least back to trend growth, 1. 5 to 2 , going into the election so it is not yet another distraction. For that to happen, there needs to be not necessarily a grandiose trade deal, but simply an end to the trade war, or lets just say a truce to the trade war. This is going to go on for a very long time, and it will be fits and starts at different levels, but something needs to get started on both sides. You look at chinas economy, what they are doing, it is just not plan well for both sides. Alix to that point, overnight in w the cbrc stepping the pboc stepping in. You can make the case that it is for a slowing chinese economy. Damian it was perceived as kind of hawkish by the markets. Basically, it could be tax but whathich is why, it tells a lot of the practitioners is that they may which cutting from 3. 75 , is what people have been expecting. But they definitely need to stimulate their economy. One thing it may mean is that china is trying to focus on corporate longterm lending. If you look at the recent data, theyve had trouble spending corporate loans longerterm, infrastructure loans, more capital projects. But i think if you take a step back, youre going to need more stimulus from china. The three things i would mention, i think the most like the outcome is that china yields are too high. Alix which also leads us to the data in the u. S. Overnight you got that, and then you get u. S. Retail sales. We are going to make a big deal about the consumer today at 8 30, but how much are we really putting stock into it in reality . Yelena i think it really matters. You just mentioned the consumer is the key driver of Economic Growth. Any shock could really mean bad for the u. S. Economic growth. But it is so interesting to see todays numbers in terms of what to expect in the Holiday Season. Holiday season its a big deal for retailers. It is a big deal for Economic Growth because it is the time when we go out and spend all this money, and the momentum as of late has been quite weak, i would say, and it is not a good harbinger coming into the Holiday Season. Damian one thing that ive been focused on, i dont know if you have any thoughts on it, really defected if you look at retail sales, savings in the u. S. Household 55 years and older has risen, with unemployment at historical lows. This is the world of negative yields. We are stealing returns from the future to fund returns today. That means people have to save more for their future retirement. Yelena i would add to that, savings is one thing, and it has been creeping up. Income growth has been creeping down. On top of that, we need to watch consumer sentiment. Startse three things really flashing red, that is going to tell us that Consumer Spending is slowing down. Vincent savings aside, real spending, the real average earnings for the consumer has been holding up. It is not growing. It was on a decline. It is flatlining. The last reading was pretty much flat from the month before. At least the decline has stopped. We will see how that proceeds Going Forward. But as consumers have more disposable income, they will spend that income. They are not going to save it. That will hold the economy up Going Forward. With the tariff scenario and the delayed to december, we still growth from the First Quarter into the Fourth Quarter as people accelerated spending and inventory builds . We wont know that until march. I do think we will see a prosperous Fourth Quarter and see the consumer hold up into december. By concern is that in the First Quarter, we see a deflated bubble and drop back down to that 1. 5 growth rate, and see where we go from there. Alix i want to introduce Something Else from Bloomberg Opinion, the one chart that explains everything in the market that doesnt have to do with trade. It has to do with liquidity and developed markets, and liquidity in emerging markets. Innet, you have liquidity emerging markets going up, and in developed markets, going down. That is why you are seeing all the movement. Thats why you see tightening liquidity in em. Vincent the problem with that is that is the result of a strong dollar, and i dont think that will continue into 2020. Alix alix hes turning into a little but of a bear. Vincent ive been on this ride for two years. Youve got to get off eventually. It makes emerging markets very difficult. To throw shade on the chart, but that is some plea where the strength of dollar lies. That is not a matter of liquidity being drained out of em. If the trade war subsides, you will see emerging markets and evokes markets start to pick up aggressively and velti markets pickup and developed markets start to pick up aggressively. That notwithstanding, that is a major issue Going Forward. Damian it is going to cause different regions within em to integrate far more deeply than they otherwise would have. You are seeing that in asia right now with some of the Different Things coming through. You see thailand, and in asia, malaysia all moving closer together thailand, indonesia, malaysia all moving closer together. Can they do that without leaning on the dollar and the u. S. . We will see. Alix whenever going to know that answer . That is a really good point, where you are seeing more gross and all of that. If you get more integrated, that is going to be a game changer. Damian the reliance on the dollar is not going away. If you look at the number of transactions, the notional value of transactions, it is all dollarbased. Vincent that will always be the case come up at the dollar being transactional based doesnt have to do with the funding issue. Comes, the link that feeds the trade, investors are going to move away from the u. S. They will move away from europe. They will move into southeast asia, latin america to some extent. Things need to calm down there a little bit. But people will go toward nations where trade comes from, essentially. Alix em equity funds had the largest inflow in 41 weeks in the past week. 41 weeks. Vincent cignarella, damian sassower, and yelena shulyatyeva, thank you. Any charts we used throughout the two hours, go to gdp go goer terminal go to gtv < on your terminal. Kailey ritika this is bloomberg daybreak. Hedge funds increased their facebook holdings. The social media giant fell 8 during the three month stretch. Meanwhile, netflix was down 27 . Shares of the streaming service were snapped up by Maverick Capital and d1 capital partners. File ais going to lawsuit challenging the Defense Department decision to award a 10 billion Cloud Computing contract to microsoft. Amazon says the process was tainted by bias. Some lawmakers question whether President Trump unfairly intervened. Hes been at odds with the amazon ceo jeff bezos, who also owns the washington post. Qantas did it again. It flew a test flight for the worlds longest commercial service, this time from london to sydney on a boeing 787. 19 hours and nine minutes. Last month, its new york to sydney flight was three minutes shorter. Qantas turned both planes into flying laboratories. Scientists trying to figure out the impact of such long flights on the crew and passengers. That is your Bloomberg Business flash. Alix thank you so much. Im all for it. Another thing i am keeping my eye on my European Investment bank is taking a quantum leap in fossil fuel financing. It is a lending arm of the European Union that is going to increase support for clean energy projects. It is not going to consider new financing for fossil fuels, including natural gas, after 2021. The decision could deprive polluting products from financing, a broader shift with the new head of the European Union commission to make a push into green and make a crossborder carbon tax on the table as well. Coming up on this Program Comedy 10year yield wellington basis points this program, the 10 year yield falling 10 basis points. Gene tannuzzo, columbia threadneedle deputy global head of fixed income, will be joining us. This is bloomberg. Alix this is bloomberg daybreak. You made it to friday. It was a really interesting week. Equity futures going nowhere. It may bit of optimism by about 0. 25 . It is may be on trade. Larry kudlow seeing a short stroke to a deal. You have some whippy action over headlines. In other Asset Classes, we did see a big move into equities, and also bonds. At the same time last week, a big move into European Market stocks as well. You are seeing some buying in the market over in italy, which just got totally hammered this week. Spreads thend btpbund spread widened out as well. Jcp jcpenney coming out with earnings here. The thirdquarter loss was about . 29 a share, much better than what the street was expecting. Comp sales were still down by over 9 . The estimate was just for an 8 loss. Basis,look on adjusted their loss was just . 30. Looking into some of the details, we will get more as they cross, but now you are seeing jcpenney pare some of those gains, just up by about 2 . Comp sales not looking that great, coming in at 9 . Now back to markets. The u. S. 10 year yield falling by about 10 basis points. For the year, youve only seen a 10 basis point decline on a weekly basis five other times. So what do you do with that kind of move . 20 me from london is gene tannuzzo, columbia threadneedle joining me from london is gene tannuzzo, columbia threadneedle global head of fixed income. Do you sell the rallies . Gene right now, it is also dependent upon a trade resolution. We seen stocks and bond yields rise over the last couple of weeks on the anticipation that we will get a resolution, and the biggest elephant in the room, which is trade. You have not seen improvement in the data, and it is very important that that is what powell is looking at what we should be looking at, because in lieu of that, it will be hard to sustain a move above 2 . Alix what is the effect elsewhere, like other really big moves . A big move into Corporate Bonds in europe with the ecb, a big move higher in yields in italy. What is the knock on trade effect . Gene even if yields go a little higher, there is to a scarcity of yield globally. It is still true that almost 80 of the yield in the world comes from u. S. Issuers. I really think investment grade, particularly in europe, but also in the u. S. , will be sort of the new safe haven. If yields go up a little bit, we are still talking about a pretty depressed yield environment that still pushes us towards highquality cash flows, and i think that is where we will continue to see demand. Alix where does that leave you in terms of your range for the 10 year treasury yield . Gene for the treasury, in the range of something just above 2 , if we can get a trade deal, and if we look at a Historical Context and look at those environments in the 1990s, when powell talks very frequently about those 75 basis point midcycle adjustments in 1995 and 1998, when they completed those, the 10 year yield moved up, but critically, we saw improvement in the ism go along with that. If it gets better in november and subsequently better, we could see that move closer to 2. 4 , but i think theres still a lot of work to do to get there. Alix can you walk that out for me in terms of corporate credit, for example . Is there more credit risk you want to be in . Gene i think you would rather be skewed a writ of skewed a little bit towards credit risk. We are seeing the fringes of the credit markets start to fray. High yield,t ccc that is really decoupled from the rest of the market. So broadly speaking, overall, the view is toward credit. Alix so you wouldnt like cccs even on an idiosyncratic basis . Gene we really dont. We are heavily underweight cccs across highyield bonds and leverage loans. It is a place we are being extremely picky, and we have even seen the market shut off access to really Risky Companies in that part of the capital structure. Bbs you are interested in or bbbs . Gene it is where you have the most cash flow stability come up particularly in areas that are more serviceoriented. On the highend side, it tends to be more single b. Bb is so crowded and compressed. Alix one number that caught my eye yesterday, and i really was totally shocked, was the amount of global debt we have in the world. The institute of International Finance said global debt rose by about 7 trillion in the first half of the year and is now at a record 206 2 trillion. A lot of that is actually coming from emerging markets, and a lot of that comes do in 2021. How do you look at that kind of number versus a search for yield in emerging markets . Gene yield is not necessarily safe everywhere. Weve seen that as recently as argentina in emerging markets, where when debt is coming due, they might not have the capacity to make good on that. It makes Credit Research and fundamental analytics ever more important, particularly because the growth environment is not robust. We want to look for that cash flow stability. If we are in emerging markets, we want to look at stability of institutions. There are opportunities in em, and there are countries looking better fundamental longterm truth is that are longterm choices that are more fiscally savvy. But i would probably skew away from em right now because we are a little worried in an asset class that could go hot to cold pretty quickly. Alix when you think investors will start to care about 206 2 abouton in global debt 260 trillion in global debt . Gene i think that is the reason we are seeing the indigestion in the repo market we are seeing. We are seeing those problems manifest themselves in different ways. In the emerging markets, it has to do with more fundamental solvency concerns. Alix we will get to repo in just a second. I also want to wrap that trillions of dollars of debt into mmcs. If you are a government, you basically want to fund yourself and go for stimulus. That is the idea. Jay powell yesterday weighing in on the idea of debt. Chair powell the idea that countries that borrow in their own currency cant get into trouble i think is just wrong, and the idea that debt doesnt matter is just wrong, if those are appropriately subscribed to that. Alix what is your scenario . Gene i think hes right that we certainly cant ignore these factors, but you are really but it really depends on the economy and how prudent policy can address them. If we look at the european area, it is going to be the mission of Christine Lagarde to help pace to fiscal s employ that. It will create more debt, but they have plenty of room to do it. Japan has already been coordinating fiscal and Monetary Policy in that way, but many countries dont have that flux ability and dont have the ability to do it. Frankly, and the u. S. We are pushing on that string a little bit because issuance and deficits are so high already, emily would already, even when we havent needed that stimulus. Alix fairpoint. Gene tannuzzo of columbia threadneedle, hang tight. We want to give you an update on headlines outside the business world. Theka the u. S. Is close to first phase of a trade agreement with china, but it is not a done deal yet. Thats according to white house Economic Advisor larry kudlow. He told reporters last night, we are coming down to the short strokes. The two sides have been holding working level videoconferences. Amongst of the issues, the chinese purchase of American Farm products and theft of intellectual property. Hong kong protests have taken their toll. The city is now forecasting its first annual recession since the Global Financial crisis a decade ago. The government says gdp will contract 1. 3 in 2019 from last year. The grim outlook is in line with what is visible in hong kong streets, shopping malls, stores, and restaurants, either shuttered or under shorter hours. The fed is taking steps to keep shortterm Interest Rates under control. The new york fed will conduct repurchase agreement operations that have a longerterms then those had done previously. The central bank has been injecting liquidity into the funding markets since september 17, when the overnight collateral repo rate jumped from 2 to 10 . Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Kuchta im ritika gupta. This is bloomberg. Alix do you feel like 80 billion is going to be enough . Has the fed done enough . Gene i think the Program Needs to be unlimited. We are finding the new level of where the Balance Sheet needs to be under a large Balance Sheet regime, which we are now in post crisis. It is very difficult to separate the fact that treasury issuance has also been very large, which creates funding issues as well at the front end of the curve. We need to separate what the fed is doing with shortterm repo operations, where they are substituting a cash like instrument for cash in the system with longterm asset purchases. It does not have the same stimulative effect, so it is not the same economic outcome that way, but it is functionally very important they do that. The dollar volume may have to be increased. Alix i totally understand the logistics of what you are saying, but in actuality, if they end up buying more on the short end, at some point youre going to see treasury being like, actually, i want to issue there because it is a lot cheaper for me to do that. It does wind up impacting overall Monetary Policy and funding from the treasury. Do you look at it like that at all . Gene youre right, you cant completely disentangle those things. The treasury should probably issue more there. The problem is they need to issue more everywhere, and also more at the long end. That is going to be the case i think, but so long as we has continued large net issuance, funded or created by continued large deficits, this is going to continue to be a challenge. It is not a big problem for the fed to provide this in what continues to be a low inflation environment. It becomes much more problematic if that environment evolves higher. Alix do you think they should be issuing a 20 year or 100 year . Would you buy it . Gene i think it is very likely the 20 year fits more cleanly into a traditional Asset Allocation framework. I think they would find demand for longer issues from pensions and others, but i dont ticket would be enough to move the needle of a so they should stick within the one range. Alix really enjoyed talking to you. Thank you very much of columbia threadneedle. I want to recaps very much, gene tannuzzo of columbia threadneedle. I want to recap jcpenney earnings. Ebita over 45 million. They see comp sales within the 7 to 8 range, all of that enough to offset comp sales from the Third Quarter disappointed estimates and were marked down by about 9 . Coming up, it is the ultimate backup for doomsday. Her soft microsofts world leading code bank is working on ways to compile open source code for end of time survivors. The where and how is really interesting. That is next on our business week feature. If you have a terminal, check out tv. Look at the charts, interact with us directly, scroll through if you missed anything throughout the show. This is bloomberg. Ritika this is bloomberg daybreak. Hedge funds what shares of facebook and netflix during a volatile Third Quarter. Money managers increased facebook holdings. The social media giant fell 8 during the three month stretch. Down 27 . Netflix was shares of the streaming service were snapped up by Maverick Capital and d1 capital partners. New york, london, and vancouver are losing luster with luxury homebuyers. A study says Luxury Property prices in those three cities all fell in the Third Quarter from a year ago. In vancouver, the drop was 10 . Amongst the reasons cited, trade wars, brexit, and a populist backlash has led affluent cities to oppose new taxes on the rich to impose new taxes on the rich. Superstar taylor swift is begging Carlyle Group to help her in a dispute over her past hits. Shes accused her old record label of blocking her from performing her old songs at an award show. Carlyle group is involved it provided the money for her former partner to buy songs. Alix thank you so much. We turn now to our weekly Bloomberg Businessweek feature. First up, the ultimate backup drive. B is preparinghu for an opensource way to store code. And how President Trump from a grand bargain to a small deal from china. And then we look at vapor flying, nike latest technology that helps marathon runners break the two hour barrier. Should sports regulators rain in Athletics Goods companies . Businessweek editor silvia killingsworth. The first is this opensource code hub in the arctic. What . [laughter] off the an archipelago coast of norway is a global seed vault, where we put all of types in case there is a famine. This is for code. It is all open source, meaning anyone can contribute. It is based off of the early 1990s models of lennix, some of the of linux, some of the oldest operating systems. Google, facebook, amazon all use that code base as a source, so it has really migrated into some the very different. The irony here being that github, which was bought by microsoftlast year, is to call opensource code a cancer. They are obviously the classic cantilever Business Classic patent level business. Is the sort ofub protector of this realm, you could say. Hes the one who want to put in one of the first microfilms designed to last up to 750 years, maybe 2000 years if it is in a freezing cold cave. He is the sort of ambassador of this opensource movement at this point. Alix the reason why you do it they are, if i understand correctly, because if you storied in iowa, it could be to it could be too hot and wont last longer. It is the same concept as the seed vault, cold storage. Alix lets get to the second story, which is how trumps trade war went from an algo trying to understand how to do with china to just tweets and etc. Silvia it started as a methodical, algorithmic, computer design thing. Robert lighthizer brought it to us. It is exactly 34 billion, which we think is the right amount, and just enough places designed to twist, but not overall injure. One of the first things that happened was donald trump saw 34 and said no, it should be at least 50 books at least 50 billion, and it has devolved into this madness now where everything either happens via tweet or weve moved away from the algorithmic to the kind of chaos where we are now. Alix but it does show why we started it in the first place, a very practical, moderately of doing things. Silvia right. There was logic behind all of this, and the remains logic, but it is more creatively applied. Alix lets get to the third story, which has to do with these nike shoes, vapor fly. Im allete id hear i may im a luddite here. What is a preflight . Silvia it has carbon fiber that basically propels you at the end of your stride. The controversy over the speedo full body suits was basically, are the swimmers getting too fast . Here, it is the same thing. It is the technology helping them get faster . Nike said this instantly makes them get 4 faster. Weve seen many runners breaking barriers penny barriers. Many of the top runners have been wearing these vapor fly shoes, so it is not a coincidence. They are related. Alix but it is not like i am going to go all of a sudden and run a two hour marathon. Silvia well, if you ran in different shoes and wore the nike ones, supposedly you would be slightly faster. Basically, athletes train so hard at that level to shade a minute off your time, that if you can just put on a different pair of shoes and shave a they are making sure it is kosher. Alix do we know what the argument against it is . Can they elicit a maybe can they legitimately said you cant use these . Other side is that almost every brand has a version of this plate, but we will see. It is really interesting. Silvia can you imagine little toddlers alix can you imagine little toddlers with those . Silvia killingsworth of Bloomberg Businessweek, thank you very much. You can read these stories in the latest issue. Of women on wall street, coleman sex naming 400 625 Goldman Sachs naming 400 625 women to its wrecking naming 465 women to its ranking directors. Roughly half of goldmans junior bankers are women, but only 20 of its partners. Meanwhile, four point 3 of this class of managing directors is africanamerican. Coming up on this program, youre going to take a look at chinas food inflation next in todays traders take. If you are heading into your car, tune into Bloomberg Radio on sirius xm channel 119 and on the Bloomberg Business app. This is bloomberg. Alix time now for traders take. Joining me is nonsense a gorilla, voice of the bloomberg audio squawk is vincent cignarella, voice of the bloomberg audio squawk. You can listen to him every day under terminal if you type in squa. Vincent i does what to give people a little perspective of what this really looks like and how impactful this is on the economy. A few things few people know about china is that the economy is roughly 1 of the population. This isnt maos communist party, so feeding the population is incredibly important. This really plays into the trade less ande or more or less optimistic that some thing is going to get done on a trade deal before the end of the year. Both sides very much have a vested interest. Trump needs to do a deal because he has an election. Xis only president for life if the economy and the people are happy. Soy deal,n ag deal, a and a pork deal are essential to that. They need the product. Dont forget hong kong. I was talking to a friend there last night. It is getting really bad every day. China needs to do a trade deal. If they want to do anything in hong kong, if the military unfortunately has to go into hong kong because the protesters are getting out of control, they need to do a trade deal first or they will never get a trade deal done. Alix thats a good point. Thank you very much. Coming up on the program, chad morganlander, Washington Crossing advisors senior portfolio manager, joining us. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Alix welcome to bloomberg daybreak on this friday, november 15. Im alix steel. Heres everything you need to know at this hour. Lets take it right from the top. Mr. Kudlow the outlook for phase one is very positive right now. Alix the u. S. And china closing in on the first phase of a trade deal according to white house Economic Advisor larry kudlow. The news coming from both sides is that they are on track to reach some kind of agreement, and mr. Kudlows comments came only a day after china agreed to lift day an of poultry imports. Alix he says negotiators are in contact every day. A bright spot for struggling retailer jcpenney. The chang reporting a thirdquarter loss that was less than expected. Shares surging in the premarket. Hong kong headed for a recession. This is, of course, all down to the protests in the city. Retail hit very hard, with retail sales down in excess of 30 . Government forecasts the city will have its first annual contraction since the financial crisis. Pres. Trump impeachment to me as a dirty word. It has been very unfair, very hard on my family. Kevin former ambassador Marie Yovanovitch set to testify before the house intelligence committee. Yesterday, lawmakers in both indicated their side of the story. Alix she accuses them of bribery in the matter of withholding will at three aid for ukraine. Happy friday, everybody. We made it. Tgif. How much risk do you want to take on into a weekend where a we can move everything . We did get the pboc involved where a tweet can move everything . We did get the pboc involved. Eurodollar still going nowhere. You see a move in u. S. Treasuries, but not a lot happening. Only two basis points up on the 10 year. Joining the for the hour, michael mckee, Bloomberg Economics and policy correspondent. You dont play golf, right . Michael i have. I fish more than i play golf. Alix i joke, are we looking at a golf stroke in the short stroke, or a perfect painting line . Or is it my fiveyearold saying, heres my final line for my dinosaur . Michael not sure exactly what he means by short strokes. It probably doesnt mean anything. My first thought when i saw the headline about futures was pt barnum was right. You cant for all of wall street all of the time, except when you go inside you cant fool all of wall street all the time, except when you go inside the headlines, everything is either priced in, or people are getting skeptical about the spin that comes out of both sides until we get a deal both sides. Until we get a deal, theres no deal. Alix risk assets are rallying, but off the highs of the session. Kudlow said, like we were mentioning, we are down to the short strokes. We are in conversation with them every day now. With us is chad morganlander, Washington Crossing advisors senior portfolio manager, and Matthew Miskin, John Hancock Investment management co. Chief investment strategist. How do you invest when you have these headlines that no one knows how to interpret . Matthew we will run out of expansion at this current pace. How much more can the market rally off of the same news over and over again about headlines around a trade deal . Hopes of a trade deal is not a fundamental catalyst. We need to see actual things done to help improve earnings into next year. Expansion can probably do another 5 , and then we are times pe. After that, youve got to look for quality businesses that have good Free Cash Flow growth, and that is where we are leaning into today. Michael matt makes a good point that we look to this trade deal announcement as some great turning point, but is it really . Does it change the way you invest when there is a deal . Chad not at all. This trade deal, even if it does go through phase one, will have zero meaningful effect on Global Growth. Nor will it have a meaningful effect on global trade. When we are investing, we are looking at we are looking out three to five years and see where you can get a good riskadjusted return based on the different themes of the market. Michael why do we keep bouncing around on these headlines if you end chad dont think it is really going to make a difference . Matthew right now you have to go into the Behavioral Finance side of investing and look at canonic cycles and economic regimes. Later in an economic cycle, multiple expenses is actually pretty common. You see investors that have a lot of cash. Theres 400 billion net inflow into money markets this year. A ton of cash on the sidelines, and investors are using these headlines to get more comfortable, putting cash to work, but youve got to gravitate towards businesses that can actually deliver in the United States, and that is where we are looking to put that money to work now. Alix on the same side, european stock funds saw 100 billion of inflows this past week. The largest in 41 weeks. It feels like when there is a rotation to value, the rotation is not only within u. S. Equities, but also globally. Is that wrong . Matthew matthew no, i think it is right. If you look at the sector composition of value, the russell 3000 index, financials is the biggest segment. Financials is the secondbiggest component of the emergingmarket index. So yes, financials globally is the same play, whether that is value here or in the international indices. But you really need to see this reacceleration to Global Growth story get further and get better legs to it to us before navigating more so on the international front. Michael it hasnt accelerated, but we do seem to have had a turn in the market view of Global Growth prospects. Chad that could be the case because you saw at least a little bit of return in the pmis overall in the short run. Is we arey, though, expecting at Washington Crossing advisors a continuation of a deceleration of Global Growth in 2020. Overall, does not mean that we are increasing our session risk. We still have it in the United States at 30 or 25 , but overall, earnings are going to continue to moderate and decelerate. Growth expectations for s p earnings for 2020 is roughly about 10 , 9 . We still anticipate that to slow down. So like matt mentioned, a forwardlooking multiple right now at 18 times, it looks a little rich at this point. Alix into that point, ray dalio was speaking overnight, talking about chinau. S. Relations, echoing that same thing. If we get a trade deal, theres still a lot of stuff to work out. Heres what he had to say. Ray theres a trade war. Theres a technology war. Theres a geopolitical war. And there could be capital mores. Capital wars. That is the nature of the environment. How that is approached is going to determine what our futures are like. Alix i understand you were partying at that event, it apparently. [laughter] im not sure it was partying. A sickly, ray dalio was saying this is the new environment where the two sides are in conflict in a lot of areas. He wasnt saying we are going to war. He used that term the use of that term is kind of unfortunate. But there are conflicts in these areas that have to be managed well, or it could end badly. One thing that isnt dental that isnt getting a lot of press this morning, Henry Kissinger was there. He said we could have a catastrophic outcome if the two sides keep going in a contentious manner. We can coexist as rivals come about we dont want to really get into a faceoff with the chinese. When you look at it, youve got to ask, how worried should we be about all of this in terms of investing . China vs lee is going to be the biggest economy at some point in the near future. China is obviously going to be biggest economy at some point in the near future. Chad they are 50 pence it they are 50 of consumption for steel and aluminum the globe. There were roughly 150 million chinese that traveled out of the country to travel. Have a massive credit explosion over the last five to seven years. If they start to decelerate, their growth levels start to decelerate, even in a modest way, it has a meaningful feedback loop into inflation expectations, European Growth rates, and is well into s p earnings. Matthew absolutely. I think the other key factor is that the fed cutting Interest Rates three times is putting a bandaid on the situation. If you lift up that bandaid, and this is a scab that isnt healing because of these trade frictions, the fed is likely to have to continue to cut. If you want this to be a midcycle adjustment, free cuts is the base case. Any more than three, usually that is end of cycle type adjustment. If they have to do another cut, that is not a good sign to us. But they may have to because of these frictions. Alix chad morganlander of Washington Crossing advisors and Matthew Miskin of John Hancock Investment will be sticking with mike and i. Rolling your eyes, but we do want to patented to what Money Managers bought and sold in the Third Quarter. This is bloomberg. Alix the latest read on the u. S. Money managers positioning is out. Hedge funds filing there Third Quarter 13fs. Here with us is sonali basak. Sonali so what are the masters of the universe doing . We have facebook and netflix as some of the most popular trades. Harvard management making facebook their single biggest equity trade. Microsoft here, the Second Quarter in a row, unloved by the more than 40 gain in the period. With that said, that doesnt mean all Tech Companies are doing that well. And they, we had uber, Second Quarter, the most difficult trade for hedge fund firms. In the Third Quarter, many did decline. Travis kalanick himself has sold a lot. So why does this all matter this period . People are hoping it is a stock pickers market, and equity hedge funds have been doing better than anybody else in the class. People are hoping that the volatility can really perform a resurgence for some of these guys and posted significant gains through the end of the year. Alix kevin thank you very much. Alix thank you very much. Still with us on set is chad morganlander of washing present in of washington cross and Matthew Miskin of John Hancock Investment. Matthew we would stay with the steady Technology Names consistently growing, consistently profitable. One major concern is that many of these tech names do have exposure to china, as you saw with cisco earnings. If there isnt a trade deal, that could have significant impacts on Earnings Growth going out 2020 to 2020 one. Michael i want to spend the question a little bit to you. When you look at what sonali was just talking about, do you need to go and i dont want to start this off as a fund versus hedge fund debate but do you need to take more risk to get more return these days . That was a question that was sort of put to jay powell yesterday. Do you need to go the hedge fund route, where you can take more risk, but get more return . Or do you think equities are going to provide enough over the coming years . Matthew we think equities can offer the return potential that investors are looking for. If you think about some of the places that investors have gravitated towards come out the low volatility part of the market, that has kept a pretty well, and probably a little too well given the Interest Rate sensitivity and like a fundament of support to that part of the market. But the quality factor to us is actually the most important thing to follow. High return on equity, high return on invested capital, stable earnings, and low debt to equity are the factors we are most gravitating towards across the u. S. Equity market. For the hedge fund survey, it would bring us into facebook come up away from netflix. It is that kind of differentiation we are seeing that has been fruitful for us in navigating this market. Michael interestingly enough, facebook not in china. They cant get in there. Do you have to look at companies that dont have china exposure . How worried should you be about companies with chinese exposure . Chad what you have to do is, if it does have a meaningful impact or meaningful size to the revenue line, you have to moderate their future growth expectations in year three and five. When you do that, you can come up with a proper evaluation, or at least assumption. Our longterm forecast for return to equities is about 5 to 6 over the next seven to 10 years. We are recommending investors look for companies that are steady eddies at this point. We would stay with consumer this point. T we would stay with Consumer Staples, which can offer upside postelection. Alix to me, the bigger stand out is what is going to happen with regulation. An article overnight talking about how the ftc is looking again at technology companies, looking to face guard the democratic process looking to safeguard the democratic process. How do you model for some thing like that . I know it is the high flyers, the facebook and google, but nonetheless, how do you look at it . Chad you cant. That is the problem. Alix dont you have to . Chad what you try to do, based off of what type of strategy youre running, is maybe stay away from those type of companies. You could have a microsoftesque issue that happened 10 to 20 years ago, as we all know, where you have to put a higher discount rate on that company when valuing it because of that uncertainty factor. Michael a couple of strands to bring together, matt, you mentioned volatility, and chad is talking about essentially what is happening with the fed. When you look Going Forward, are we going to be maintaining this low volatility environment . And is that because the fed has put so much money into the markets . If the fed is going to step aside, do we have to worry bout headline risk involved . Matthew i think you do have to worry more about headline risk and vol. Qe has been amazing, how well that has put liquidity into the market. The fed funds rate is actually between 1. 50s percent and 1. 75 . That is because of the injection of liquidity on the repo market. That is helping right now. You are seeing stocks not even see two down days in a row. But you have to be ready for volatility. It will come back. It is just a matter of time. At John Hancock Investment management, we are dipping a bit into the investment side as well. Infrastructure equities is the way we are dealing with that. Having duration in fixed income, to us, makes sense here. That is hourlong volatility part of the portfolio. Michael what are you doing on the fixed income side . At this point, jay powell has cap danced offstage. Matthew unless we reduce our highyield exposure chad unless we reduce our highyield when it comesall, to duration, weve brought our duration in a bit to a benchmark. Our duration is roughly about four years out. We are just moving out the credit quality spectrum. We want to be very careful because, as matt mentioned, the Federal Reserve has brought down volatility. Spreads are really tight. Youre not getting paid well for taking excessive risk, especially if you are anticipating a continuation of a decelerating global environment. Michael what you like about gold . Its been a lousy month for gold. Matthew we are looking chad we are looking at gold as an allocator going out three to five years. It is a good diversifier when you look at it sidebyside with treasuries on that side. Again, it is not going to get you a 30 40 return come about overalls, if you start to see additional Financial Stress a 30 to 40 return, but overall, if you start to see additional Financial Stress. Alix doesnt it need to not get better . Matthew it just needs to continue to grow, where Global Growth moves. We think our strategy can do very well by just being in a steady eddie u. S. Domestic, u. S. Dollar denominated assets, and to continue to be moving up in high quality assets. Thats how you can do well this year. Alix matt, really the same question to you because i feel like you could make the other argument that if we slowly grind higher, there is a bottom. That is going to be a huge risk on. Never short aw boring market is an adage that i think resonates. This market does seem incredibly boring, but you do want to have a good bulk of your portfolio in equities. We start with a 6040 portfolio. We have 60 in equities. We havent been underweight. I think the underweight to equities is a tough thing to be late in the cycle. You havent seen any euphoria yet im a at least we havent, in talking to investors. That still may be to come. Equities are going to be the best channel to get that done. Alix we will leave that here. Chad morganlander of Washington Crossing advisors and you must get of John Hancock Investment will stay with us and Matthew Miskin of John Hancock Investment will stay with us. This is bloomberg. Ritika this is bloomberg daybreak. Shares of jcpenney are surging in the premarket. The struggling retail chain posted a thirdquarter loss that was smaller than expected. Samestore sales missed estimates, but investors were cheered by penneys report that it is my can progress in improving operations. Amazon is going to legal war pentagon. It will file a lawsuit challenging the Defense Department decision to award a 10 billion Cloud Computing contract to microsoft. Amazon says the process was tainted by bias. Some lawmakers question whether President Trump in fairly intervened. Hes been at odds with amazon ceo jeff bezos, who also owns the washington post. Qantas did it again. They flew a test flight 40 look test flight for the worlds longest commercial test flight, this time from london to sydney. It lasted 19 hours and 17 minutes. Its new york to sydney flight was three minutes shorter. Qantas has turned both planes and defying laboratories, trying to figure out the impact of such long flights on the crew and passengers. That is your Bloomberg Business flash. Alix thank you so much. Im on board, except that they tell me when to work out on the plane. University of notre dame i said it right, right . We say thats the way it in the United States, not paris. Aix they might sell out 77,000 seat football stadium tomorrow for the First Time Since 1973, the end of a streak of 273 games. The last time it played to a less than capacity crowd was thanks giving day was thanksgiving day 30 years ago. Have you been to notre dame . Have you been to the stadium . Michael yeah, its a bit of stadium. You have touchdown jesus in the background. The problem with notre dame come up ticket prices have gotten so high, and you can watch it on tv. The weather is supposed to be cold. It has already snowed in south bend this year. This is a trend. There has been speculation that sports will become a tv that stadiums will become a tv set. No one will have to go to the games. Alix but then you say, why deal with tv you can go to on demand instead . Dont be fooled, mike knows just as little about sports as i do. He sounded like he knows a lot. [laughter] michael youre just jealous. Alix i am jealous. Coming up, we get the latest on retail sales. Tim boyle, Columbia Sportswear president and ceo, will join us. This is bloomberg. Alix this is bloomberg daybreak. I am alix steel. Retail sales just a few seconds away. First lets get a quick check on the markets. S p futures up eight points, adding to a risk on rally. Larry kudlow saying we are inching closer to a deal. In other Asset Classes youre taking a look at the bond market. Youve seen yields move lower lower by 10 basis points for the whole week. To a littleg yield bit higher in the u. S. Retail sales out right now. If you backout autos and gas you are looking at it increase of just. 1 on a month on month basis. Group, whichntrol is the input into gdp, coming in a bit stronger, up. 3 . Revised lower for september. In terms of import prices and export prices on a year on year basis, lower both ways. Import prices down 3 , export prices down. No feedthrough in terms of tariffs and rising inflation. Empire manufacturing coming in light at 2. 9. That was lower than estimated. Not so great. Is that fair to say . Michael that may be a good way to put it. The headline numbers are not bad and control came in as expected. The prior month was revised down through a contraction. 2, less than expected. Much of the strength in Motor Vehicles and car sales were strongerthanexpected. Onstore retailers everybody else struggling. Food up. 5 . Gasoline 1. 1 . That is price related. General merchandise stores, Department Stores, the eating and drinking establishments, which is a discretionary thing, down. 3 . Building materials down, electronics. Not a lot of strength. Month. S off a week or well have to wait and see if this is a trend or people may be saving up for those black friday onward deals. Alix seven of the 13 major categories dropping. The consumer is running a little bit out of steam. In the market, s p futures still up seven points or eight points. Not a lot of impact. Chad morganlander and matt michigan are still with us. How do you interpret this data . Matt this week has been filled with relatively weak data. Initial jobless claims is the one we are watching the most. That jumped 225 thousand and broke out of a five month range. Youre adding on top of this the consumer is looking like. This early to call negative feedback loop as it relates to the overall economy, but you are seeing growth slowing. Whether it is the jobs market, whether it is the consumption part of the equation, it is a slowing global backdrop. One of the big things we are looking at is whether or not china brought forward a lot of their goods and services before the tariffs were put in place. That provided impulse that Global Growth was improving. This data today was suggesting the impulse might be over extrapolated and yields are topping out at these levels and that is what we are watching right now. We saw jcpenney report, big decline in samestore sales. Department stores up. 1 . Clothing stores down. Are you buying anything in retail, even defensive Consumer Staples . Chad look no further than walmart. Walmart numbers were pretty good. We have belonged to walmart for five years. As long as consumption and credit growth, more importantly credit growth in the United States on the household side grows 3 to 4 , that should support consumption in the United States. The savings rate is going higher, hence the reason why this report looks lackluster. Michael doesnt have to be someone involved in the internet . Walmarts online sales got a lot of criticism. Got a lot of credit. Chad there is a teutonic shifted retail, and you have to have that other channel which is the internet. Jcpenney is obviously struggling. You will see these other marginal players fall by the wayside. Overall, on the retail front, we got a lot of we would be looking at bigbox retailers like the walmarts and the cross code. Alix chad morganlander and matt miskin, always a pleasure to have both of you. We have a headline on bonuses. Credit suisse is said to cut Investment Banking bonuses and shift capital and cut Investment Banking pay, even if the Fourth Quarter revenue rebounds. They will be shifting capital from the Investment Banking Capital Markets to Wealth Management. Part of that is a general strategy shift for Credit Suisse , highlighting Wealth Management, but it also echoes what we have heard about wall street bonuses being caught. We have a consultant for compensation saying bonuses across wall street could drop in 2019. Equity traders would fare the worst. They could fall as much as 15 . Maybe a 10 decline. That is broader wall street and Credit Suisse seeing a shift into Wealth Management and seeing that reflected in bonuses. Back to retail. Joining us from portland, oregon is tim boyle, Columbia Sportswear ceo. Columbia sportswear is one of the biggest outdoor lifestyle and Footwear Companies in the u. S. So nice for you to get up so early for us. From where you stand, how is the Holiday Season looking . How are sales . How is revenue . Tim as a Public Company we cannot talk about our numbers into quarter, but our business is highly reactive to the weather. We have had great weather and the last few days in the bulk of the United States. We cannot discount the impact of the trade war on the dampening of the consumer in the United States. These tariffs are a tax on consumers. It may be we are seeing some of the impact of the taxes, the tariffs, and the fight with china. Michael when you look at the trade war at this point, have you had to pay more for any of the materials you sell . And if you have, are you raising prices to consumers . A broad and diverse sourcing base as a relates to merchandise we import into the United States. Call it mid double digits, teens or low teens. The amount of merchandise that we import to the United States from china, and on some of those products we have various prices. It has been impactful but we are not the only ones having this kind of issue. If you are a soybean farmer or you are making a john deere tractor, there been much more severe impacts on the trade war. Alix to stay on the immediate thee of the economy, freight shipping index fell almost 6 in october. They are reaffirming we are looking into an economic contraction, that gdp could go negative. We love looking at that. It is an indicator of a realtime shift into what products are being moved around the country. Do you feel more or less optimistic than you might have three months ago . Reliant on tois being able to predict the future. When we have issues such as we have with trade wars going on, it is very difficult to predict what is going to happen and to make longterm investments. Our business is strong, we have a strong Balance Sheet, we have a great business in the u. S. And globally. We get concerned when we are not able to predict where we should invest and what the returns are likely to be. It raises the question what are you doing . Holding back until you get some sort of clarity . What are your plans for the coming years . Can you even make them . Tim in some areas of the world we feel comfortable. We make investments in europe, where we have been doing business for a long time. And in other markets. Not to say we are not investing, but we would be more buoyant about future investments in the business if we had some reasonable predictability of what will happen to our government and whether or not the rule of law will continue to be established here. Michael that raises the question of what is it you need to see to have more confidence . The trade war go away . The phase one deal . What would it take to turn your caution into confidence . Tim our products are among the most heavily tariffed in the United States. The tariffs on our products have been in the mid teens up to 37. 5 percent from time to time. When we are making predictions and purchases for future seasons , where we make those purchases in the world is important. The pricing will be critical. Some countries where we have sourced product have no duties, others have significant duties. If we are buying from a country, we place an order for delivery in the future, and for some capricious region the tariff changes because somebody wakes up on the wrong side of the bed in washington, it is difficult for us to with any kind of certainty actually by merchandise that is going to be sold in a future season. Michael let me put that into a macro perspective. Are you still hiring . Where you see wages going . As an employer, how do you react . Tim we have employees all over the world. We happen to be headquartered in portland, which has a very robust employment number. It is more expensive here in the u. S. To hire employees and we are hiring in some areas. As you mentioned earlier in the segment, we have a robust Internet Business and folks who are experts in that category of expertise are much more in demand than others. The particular category of employee we are looking for. Alix do you feel like youve been able to pass on the price increase as well . Has your Consumer Base absorbed it . Tim consumers never want to pay more for something than they have in the past. As i said, we are used to working with tariffs. Tariffs are included in the prices we charge for merchandise. If the tariffs go up, the prices go up. We would expect there would be some elasticity and some impact from the higher prices. We have not seen anything yet. It is our expectation the higher prices will have an impact. Alix i know you might not have exposure, but i want to get your take on it. Have you noticed within asia and a trickle down from the protests in hong kong . Business in a big hong kong and in china. Our business in hong kong is with a long time partner. Retail throughout hong kong has been impacted. Impact hasr us, the been much more severe in china on the basis of the trade war and in the u. S. On the importation of products from china. Alix so great to catch up with you. Tim boyle of Columbia Sportswear. Thank you very much. We want to give you update on what is making headlines outside the business world. Riddick a group debt is here with first word news. Ritika the u. S. Is close to the first phase of a trade agreement with china but it is not a done deal yet. That is according to white house Economic Advisor larry kudlow. He told reporters we are coming down to the short strokes. Holdings have been videoconferences. Amongst the issues, the chinese purchase of American Farm products and theft of intellectual property. The months of protests have taken their toll on hong kong. The city is now forecasting its first annual recession since the Global Financial crisis a decade ago. The government says gdp will contract 1. 3 in 2019 from last year. The outlook is in line with what is visible in hong kong streets, shopping malls, stores, and restaurants, are shuttered on shorter hours. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Gupta. Itika this is bloomberg. Alix thanks so much. Just to recap some of the data. Retail sales disappointing. The control Group Standing at estimates, up. 3 . A month by month basis, anemic, up. 1 , backing up gas and autos. Michael our first read on manufacturing for the month is not good. 3. 9 , falls from 4 . Another decline shows manufacturing seems to be in the doldrums. We will get Industrial Production at 9 15 this morning. Alix coming up, is jcpenney fashioning a turnaround . Shares soaring in the premarket. The retail reported betterthanexpected results and outlooks. More on todays bottom line. This is bloomberg. Ritika this is bloomberg daybreak. Hedge funds bought shares of facebook and netflix during a volatile First Quarter. Money managers increase their facebook holdings. The social media giant fell 8 during the three month stretch. Netflix is down 27 . Shares of the streaming service were snatched up by Maverick Capital and d1 capital partners. Credit suisse expects to cut bonuses at its Investment Banking and Capital Markets division. Sources say the swiss bank to reallocate capital to high growth areas after a slow down in dealmaking. Reductions are likely to happen even if fourthquarter revenues rebound. I am ritika gupta, that is your Bloomberg Business flash. Alix thank you so much. Time for bottom line. We will look at Companies Worth watching this morning. Jcpenneys shares surging in the premarket. Boyle, us is tim Bloomberg Intelligence senior retail analyst. Beat on the gross margin line, which is encouraging, and also the adjusted ebit of forecast higher than 70 million was encouraging for the street. Keep in mind that jcpenney has a high Short Interest ratio. We could be seeing some recovery. Michael i wonder, they are talking about their turnaround plan and there is some excitement about the fact the results were betterthanexpected, even though still a big loss in terms of samestore sales. Does this Company Really have a future . You look at the market cap and in 2007 it was 20 billion and today it is 350 million. They are cutting stores, they have closed about 200 stores. Can we say this is a longterm play . At the if you look results even from today, samestore sales were down 9 and if you take that appliances, 6. 6 . Sales are bad in the quarter and when you think about their longterm plan where they are trying to build experiences back into the stores and so forth, the issue i have is that traffic is the biggest culprit for Department Store sales weakness. Over 800 with still stores, theyre not 800 malls that are great malls to be in. About 300 of them are a or b malls, i still see is he to be a reduction needed for their store cap. Alix thank you so much. The other company we are watching is airbus. Bloomberg spoke to the airbus ceo exclusively about growth and demand. I think the cycle suggests a trend down. We continue to see up and up. I am not sure cycle is the right word for what is happening to us. We have growth. The growth has been strong and keeps growing. The demand keeps growing faster than the supply. Alix Brooke Sutherland joins us now. What was your biggest take away from that interview . Brooke it was interesting to hear him talk about growth continuing to go up and up. There has been a growing concern about investors and analyst that we are going to start to see a slowdown in this aerospace cycle. You see that with the passenger traffic numbers from the international and our transport association. Those are coming down. You also see some customers, mostly bowing, but also lived while the and iag pushing out orders for the planes saying we need to reevaluate our capacity goals. There is growth but it does matter what the rate of growth is. If it is not as high as you expect, you do not need to make as many planes, which then leads to production cutbacks and filters down to the supply chain in impacts jobs and Companies Like ge, honeywell, united technologies, they can have a wideranging impact. Michael dont need to think about them differently . I cannot walk into boeing or airbus or by a plane today. It will take years to get it. How do you look at a company like that when you say there could be a slow down but it could mean they are cutting back on production six years from now . Brooke they are coming back on production now. Michael they cannot fly. Max, theot the 737 787, because you are not seeing the demand materializing china. Some of the demand is shifting to airbus. Airbus seeing boeing and slipping. They have been so strong because of they have had more orders than the planes they are delivering. That dynamic is shifting. That does raise the question to me about what is the longevity. Of course this is growing faster than a lot of the other industrial markets. Are we getting long in the tooth . I have some doubts. Alix your point about the longevity, we wind up having things like climate change. If you not take planes or you do not have to and blaming Business Class seats for extra fuel, that is a shift in the conversation of the market. Brooke it is a material shift and you do have airplane manufacturers and engine makers moving to all electric engines. My colleague had a great column about are we actually ready for that . If you look the engines we have now, we are pushing them to their technical limits, to be more fuel efficient and costeffective. It is not clear the technology is ready to take that a step further, at least in the near term, which will continue to fuel the backlash towards travel on airplanes. Alix Brooke Sutherland of Bloomberg Opinion and michael mckee, so great to sit next to you. We used to sit next to each other all the time. Michael i feel badly because im taking the plane. Maybe i should hitchhike. Alix take a scooter. Coming up, Warren Buffett is betting on our age. The scott hitting this docketing resistance. The stock hitting resistance. One into Bloomberg Radio sirius xm or channel 119 on the bloombergs ms. App. This is bloomberg. Alix time for technically speaking. We will give you trades and set you up for this morning. Bill maloney, voice of bloombergs equity squad joins me now. Listen to bill all day on your bloomberg, type in sq ua. Bill Applied Materials is up 6 in the premarket. We had an uptrend since september. The alltime high of 62. If we get above that, we are off to the races. Alix speaking of reporting last night, nvidia did the same thing. Chart. K at the two your bill nvidia did report. Not much premarket action. The stock has been stalling. 50 retracement of this move today. That will be a resistance around 209, 210. Above that, look at 212. If we can push it, 222 or so. Alix it has been going nowhere. Bill going sideways. Warren warned alix buffett adding to the stock. The stocks tend to take on a life of their own. Brooke up about 8 in the premarket bill up about 8 in the premarket. The stock has been moving higher since june. It has been holding the 50 day moving average. Look for resistance around the alltime highs. 191 and 192. Above there, off to the races. Alix bill maloney setting you up for your technical chart of the day. Bloomberg daybreak america is coming up with jonathan ferro. Lale topcuoglu. This is bloomberg. Jonathan from new york city for our audience worldwide. Im jonathan ferro. The countdown to the open starts right now. Jonathan coming up, equity markets making fresh record highs. The white house talking up trade talks. Chaos continues in hong kong. The u. S. Senate moving to expedite legislation supporting protesters. The American Consumer remaining resilient. U. S. Retail sales continue to support confidence. 30 minutes until the opening bell. Good morning. Friday morning price actions. Equity futures up another. 30 3 on s p 500. We grind towards a sixth straight week of gains. Treasury yields higher by a single basis points. The dollar weaker against the bulk of g10, eurodollar firmer 1. 1042. Lets begin with the big issue. Still waiting on a phase one trade deal. We have come to a substantial phase one deal. We have come to a deal

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