The main u. S. Indices. Then we got a tweet from the u. S. President basically indicating that he think say trade deal could be possible. Hes going to meet with the vice premier tomorrow. Who knows . Youre getting 0. 8 up on the s p 500. Similar moves on the nasdaq. Even your small caps higher on the day. We talked to Alan Knuckman in the previous hour. He talked about a market that was to go up. We are seeing that kneejerk reaction with regards to any situation improving on china. 1. 35 . 1. 3 5 now your 10 year yield. We are seeing a tick up. Whether that will continue, we will have to wait and see. Dollar weakness for another day. We havent seen too many backtoback days of dollar weakness, but getting it here, down about 0. 2 on the bloomberg spot dollar index. We will talk about that more. Keep an eye on crude. Not just a big read on supply issues, but really on demand and what is going on in the Global Economy, whether that slowdown is to be believed. 0. 24 . Rude wti up about guy in europe, stocks trading at session highs. The euro has been responding to that president ial tweet. The pound also higher, trading up on the Statement Issued by varadkar and johnson. Turkish assets are lower, but have firmed a little bit over the last halfhour. Trade absolutely dominating the agenda today. It is far and away the most important issue for investors. Lets get some insight on how markets should be playing what President Trump is doing right now. Hes indicating that he is going to meet tomorrow with chinese vice premier liu he. We are joined by david riley, Bluebay Asset Management chief strategist. How are you guys positioned into this . David i think we are positioned to be somewhat defensive. Theres quite a strong market consensus around a socalled skinny deal, so some kind of into their and deal some kind of interim deal, kind of a rehash of a deal they almost got close to earlier in the year, and then collapsed. I think there is not enough risk premium out there for what would be a negative outcome, which would be that talks dont progress and that we get additional tariffs or a tariff increase on october 15 next week. I think it is asymmetric. Weve got some hedges to protect some of the portfolio. Guy what does the downside look like . You get the sanctions going up on the 15th, more in december as well. Whats the downside on the s p . We are only a few points from record highs still. David its a difficult call, but i would say you are potentially looking at a 5 or potentially bigger move. In a situation where you get a breakdown in the talks, the tariffs scheduled to come into effect do indeed come into effect, and then you get another round of tariffs in middecember and a potential broadening to capital and investment controls as well. Thats really going to enforce these Global Growth concerns. I think risk assets are going to struggle in that environment. Romaine as we move towards the end of the year and into next year, even if we look past the microcosm of u. S. China trade and you broad made out to what is going on in europe, and you look at world trade overall, are we going to get any kind of snap in some of those trade flows, particularly on the manufacturing and agriculture side . David i dont think we are going to get a snapback. Wherebyt a interim deal there is no further escalation, but a substantial amount of tariffs remain in place, a lot of trade policy uncertainty continues, including potentially between the u. S. And europe, not only between the u. S. And china, then i think against that backdrop, it is hard to see how policy uncertainty disappears so quickly that you get a strong rebound in and investment, which would be required in capex and investment, which would be required to see a rebound in manufacturing and global trade. That kind of deal would clearly be positive, and i think markets will clearly respond to that, but i think we still have the backdrop where uncertainties are there, and some of that effect isnt going to dissipate anytime soon. We are still in a very weak Global Growth environment. Romaine when you look at the fundamentals of individual companies out there, in the u. S. And europe particularly as we head into this earnings season, and you have valuations on the market as a whole that are relatively elevated, at least above longterm averages, are your expectations for this arehngs season hig, or earnings season season high, or are you bringing them down a little bit . David we do see estimates coming down as we approach the reporting season, but we are probably going to be pretty close to having another quarter of negative earnings growth. I think what will be very key is when we get any substantial shift in the guidance for q4 and into 2020 because if you look at earnings estimates for 2020, youre still looking at quite a sharp rebound in earnings to high single digits, 10 type of growth rate during the course of 2020. I think theres potentially quite a lot of disappointment there. I do think the skew in that respect is for weaker and for disappointment rather than a big surprise to the upside. Guy just want to bring in a comment that our colleague maria tadeo got a little earlier on in a comment with the french finance minister bruno le maire. This is talking about trade tariffs. The agreement that we found yesterday is a major step in the right direction. The euro zone budget used to be supported by france and the french president. Be in know that it would force in 2021. Guy that was the one talking about the euro zone budget, but he also talks about the fact that the eu is watching very carefully what is happening with the trade story. If we get a trade deal done in the United States, does europe have to worry its next . David if you get a trade deal between the u. S. And china, that is good news for europe and good news for European Assets. Actually, i think you could even get a bit of strength in the euro on the back of that. Whats been the biggest single drag on European Growth through this year has been external weakening. s been a lot of that has been manufacturing in trade related, in china, the weakness within the u. K. As well. I think if you get a trade deal between u. S. And china, i think European Assets do quite well out of that, and the outlook for europe improves. Does it mean that the white house turns its attention to does it turn its attention to europe and ill of that . Guy theoretically, you could argue that the dax could be the biggest fishery. A trade togh being being done between washington and beijing. But i have to question that because you didnt look at what could come next out of the white house, and that could be an attack when it comes to europe and trade tariffs. Where do you trade on a deal getting done . David i think on a deal being done, rather than play that through europe, because the other thing supporting european credit and fixed income is clearly the ecb policy they are going to start doing 20 billion euros of purchases november is potentially some space within emerging markets. Emerging markets have had quite a tough time. Part of that is Risk Reduction within multiasset credit strategies, just take down e. M. Local debt exposure. Thats really because em currencies have struggled against an environment where youve got potential weakness in euro, pressure on the cnh, and a stronger dollar. If you get a trade deal between u. S. And china, other things being equal, i think a stronger euro, stable cnh, so for me, looking at some e. M. Local markets would be a better trade in reduced Global Growth fears. Guy we will see whether it happens. Stick around. Its going to be a busy day. David riley, Bluebay Asset Management chief investment strategist, will stay with us. Brexit negotiations apparently moving on a little bit today. Romaine before we get to that, lets get a quick check on global markets. Heres abigail doolittle. Abigail we had a bit of a risk off tone for markets on the day. Take a look at the s p 500 in the u. S. , up 0. 9 after pretty solid gains yesterday. Investors and traders hopeful around the trade talks between u. S. And china, that it may result in some sort of positive outcome for trade tensions to resolve or at least lessen. 1. 2 . C 40 in paris up emerging markets also up 0. 5 , helped by the shanghai composite and stocks in asia, which did rise again on perhaps trade talks, hopes about those rising. Yield seeing the 10 year in the u. S. Up 0. 6 . This chart goes back about a decade. What we are looking at is the put to call ratio. Are bearish options, calls are bullish options. For quite a period of time here, it was relatively low. Ino that corrective period 2016, we see it when higher. The same before 2018. Right now, we are looking at basically a decade hi for the ratio, so investors are taking on protection, at least relative to the uncertainty factor. However, returning to the day and what does make it risk on, in addition to stocks being higher, take a look at both copper and oil. Commodities overall arent all that much higher, but copper is up 1. 8 . Oil is up 1. 3 . Both of those not only risk assets, but seen as tells on the Global Economic picture. Copper could be one factor helping freeport mike marin. Elping Freeport Mcmoran albemarle also higher, up 3. 3 . Apple and microsoft are the biggest point used for the s p 500 on the day. Overall right now, we are looking at another risk on day, but within the choppy picture of volatility we are starting to get used to over the last couple of months. Romaine thanks, abigail. You can follow the risk on day and all of the functions on gtv on the bloomberg. It allows you to browse all the charts that we feature here on bloomberg tv. You can catch up on all the key analysis and save your for future reference. From new york and london, this is bloomberg. Guy from london, im guy johnson. Romaine from new york, im romaine bostick. This is the european close on bloomberg markets. Lets get a checkup first word news with courtney donohoe. Two associates of Rudy Giuliani have been arrested in funding, accused of illegal contributions to political candidates last year. The two have come under scrutiny in their role of giulianis uncover dirt on democrats. The white house is considering a partial deal that would include suspending plans tariffs. President trump tweeted that he will meet the head of the chinese delegation tomorrow. The u. K. And ireland see a pathway to a possible deal on brexit. British Prime MinisterBoris Johnson and his irish counterpart leo varadkar met in northwestern england. The u. K. And the eu are trying to end their impasse, but time is running out to reach a deal. In california, bankrupt utility pg e has expanded the biggest blackout ever aimed at preventing wildfires. 3 Million People may eventually lose power, most in northern california. Blackout could last six days. Pg e is trying to prevent equipment from igniting fires. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im courtney donohoe. This is bloomberg. Guy thanks very much indeed. Still with us, david riley, Bluebay Asset Management chief investment strategist. Theres a stunt of stuff theres a ton of stuff going on, and a lot of it difficult to understand. Trade, brexit, what is happening in syria, what is happening in happening what is with the situation with the u. S. Elections. Picking it very hard to manage a portfolio. How are you doing it, or how are you not doing it . David well, we are managing our portfolio. [laughter] guy no, but basically, there must be a temptation to go, you know what . Its been an incredible year for most assets. We are going to try and protect that. David yeah, you take some profit, scale down some of the risk you have in portfolios, and you have a bias towards, and our case, some of the noncyclicals and also in terms of getting close to ecb liquidity and more defensive credit, whether that be Investment Grade in europe or Investment Grade across, the emerging markets. So it is not taking all the chips off the table, but its been a very strong year so far for many investors and many of the strategies that we run. Given just how much political noise out there there is, as you fact that, and the normally id kind of ignore some of that, but it just is a lot going on right now, combined with we still arent really seeing any meaningful turnaround in terms of global data, if you look at asian trade data, Industrial Production data. Theres no real sign of bottoming there. So it actually makes sense to be and defensively positioned, i just think against this backdrop, if you miss out on some of the upside, but youre focused on some capital preservation, i think it is the right way to be, and thats how we are. Guy when you look at some of the scenarios and how they are going to unfold, lets dig into some of them. Brexit. Do you see any indication that would get something other than another delay to article 50 . David i would be very surprised if theres anything other than an extension to article 50. I think it is still very hard to see what actually is the pathway that was referenced by a leo varadkar and u. K. Prime minister johnson, which would square that circle, which no one has yet been able to square between having a frictionless border between the u. K. And ireland and the u. K. Having a wholly independent customs and trade policy. That a dealkeptical is going to be done, certainly in time before the u. K. Is forced to ask for an extension to article 50. I still think the most likely outcome is the u. K. Goes into a general election. Brexit is also one of those sources of uncertainty not only for u. K. Assets, but also for europe. Fairly you cant completely take off a clearly you cant take off the table a no deal brexit the beginning of next year. That would be a meaningful negative shock for the european economy, which is in a pretty fragile state right now. Romaine even though if we do end up there, and up with some no deal fallout one way or another, do you think the Market Impact is going to be severe given the long run way up to this point . David well, youre absolutely right that its been a very long runway, which i think is going to get extended, but i dont think the market is pricing at this stage any meaningful probability now of a no deal. I think the expectation is that ande will be an extension, then a general election. Its almost a 5050 coin toss, frankly, as to what the outcome of the u. K. General election would be. Depending on that outcome, then you will get either potentially a hard, no deal brexit, or if it coalition,led potentially a second referendum. I dont think the market right now is fully it has been pushed out, so i dont think it is fully pricing that in, but if we do get a no deal brexit, i think sterling has got a long way to fall. I think there will be a big negative shock to the u. K. , and that will have consequent is for europe and European Assets. Guy great to see you. Thanks for stopping by to see us, david riley, Bluebay Asset Management chief investment strategist. This is bloomberg. Romaine time now for Bloomberg Business flash, a look at some of the biggest business stories in the news right now. Aramco expected to give the green light for the worlds biggest ipo next week. The saudi oil giants board will meet with advisors around october 17. The ipo expected to raise 40 billion. The Company Hopes to list shares on the saudi market as soon as next month. Delta airlines warning that earnings will probably fall below expectations. Earnings are falling and Pricing Power is getting weaker. Wendy boeing 737 max 8 turns, that will probably boost the seat supply. Some say changing software for a single product would be too cumbersome. They have concerns over how juul will use that transaction data. That is your business flash update. Lets get a check on what is going on in the u. S. Markets. The s p 500, the Dow Jones Industrial average, and the ns at the highs of the day nasdaq holding the gains at the highs of the day. Negotiators in washington right now. We can see volatility taking a little bit of a dip right now. Yields in the treasury market taking up market ticking up. Guy European Markets trading at session highs on the equity front. This is the story for the ftse, dax, and the cac 40. The cac 40 outperforming today. Us hurtecting that, not by the hong kong story. Ofsion high, 221 the ratio Equity Stocks two to one the ratio of Equity Stocks up to down. This is bloomberg. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. You can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. All with millions of secure wifi hotspots and the best lte everywhere else. Its a different kind of wireless network, designed to save you money. Switch and save up to 400 a year on your wireless bill. Plus, get 250 back when you buy an eligible phone. Thats simple. Easy. Awesome. Call, click, or visit a store today. Guy 30 seconds until the end of regular trading for european stocks this thursday afternoon. A positive picture, but in the last hour we have seen markets turning to the upside. You will see that on the session chart with the stoxx 600. The overnight session out of asia very bumpy. Europe, an incredibly tight range. It is at this point the president of the United States will tweet with the chinese vice premier, potentially at the white house. The market takes that is a positive sign. The stoxx 600 goes up, up. 8 . It is risk assets doing well. One is the ratio of winners to losers. We see a lot of stocks exposed to the trade narrative. The ftse 100 only up. 4 . It is underperforming because the pound is trading