Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20171003

Refuses to recognize the regions referendum. Welcome to bloomberg daybreak europe, our flagship morning show. I am manus cranny. Anna i am anna edwards. Hammond, philip yesterday, talking not about policy but the labour party. We will discuss that later in the program. We will talk about the leadership of the party. Theresa may is in the hot seat. Has ambitions towards that seat. About thelk more future of the leadership of the party. We need to talk about the markets. Despite what we hear from the white house about how there will be no talks with north korea, the markets are heading higher over the last 24 hours. Data, younufacturing have already been starting the conversations. We will hear a little from one of those. The chief secretary from the u. K. Treasury. Later in the day she will be joined by adam marshall. Data, thened the u. S. Dollar is on the march according to Goldman Sachs. The dollar is big. It is not necessarily in the positioning. Manufacturing is the strongest since 2004. The hedge funds are not joining the bid. The hedge funds positions are dropping. They the most bearish are the most bearish since 2014. Dollar itself is acceptable. He yen is on the march too Goldman Sachs wants to buy the dollar against the euro. That is reflected in the risk rate. Offered,e dollar is the euro dollar is offered in a sea of red. Why . Higher aussie dollar will weigh on the outlook. Will the market believe you . 1. 25 . Llar down by the target is 115 by year end. Down 0. 3 . Get update on bloomberg first word news. With juliette saly. Fromtte the death toll the Las Vegas Shooting has raised to 59 while 500 others were injured for stop police found 23 firearms in the shooters hotel room. President trump will visit the city tomorrow. The white house has ruled out talks with north korea. Now is the night not the time to talk. Rex tillerson said the u. S. Was talking directly to north korea through back channels. To turn theved screws on catalonia as the eu refuses to recognize the region. The country would use everything at its disposal including suspension of catalonias autonomy. Countries biggest crisis since the end of francos dictatorship. The Australian Dollar dipped after the Central Bank Left Interest Rates on hold. It is the 14th month in a row and is at a record low of 1. 5 . Boris johnson is behind every syllable of Theresa Mays Brexit plan. Criticismnslaught of at the annual conference the leadership contenders said he supported the contents of the Prime Ministers speech in florence. We all agree its around two years. It needs to be enough time for companies to be able to prepare for the government. It is important to say there will be a transition. The public knows we will the leaving the european union, which is what they voted for. Juliette global news powered by 2700 journalists and analysts across 120 countries. You can find more stories on the bloomberg at top. We have seen asian markets rally on the back of the record high coming from wall street. The nikkei is up. Australia is closing out the session lower. The rates were held on hold. The china and south korean markets are closed for holidays. Online market came back and were seeing solid strength there. Morgan stanley upgraded the target onhas a price that stock of 30. After winning a contract to supply 10,000 electric cars, were seeing the downsizing of the qbe. This is in response to what we saw in the u. S. With the hurricane. , thed see put options Contract Price rising. Manus we like the fast and furious stocks, juliette. Says he willmp travel to las vegas to meet the victims and emergency workers following the deadliest mass shooting in modern u. S. History. The nine people are dead and more than 500 are injured after a lone gunman fired into a crowd at a music festival. Pres. Trump it was an act of pure evil. The fbi and the department of Homeland Security are working closely with local authorities to assist with the investigation , and they will provide updates. As to the investigation and how it develops. Manus america comes to terms with what happened in las vegas. Across the nation, there are other facets at play. Markets are still operating. We have had strong data in the united states. The prospect of tax cuts are lifting the dollar to record highs. Guest, geoffin my rey yu. As america wakes up and deals with the horror in las vegas, with markets and facets we deal with looking at the world. The fear barometer in the world, thestocks trade markets are sanguine. The msci index travels higher. How bullish are you as you go into this Fourth Quarter . Off we are assessing where we are in the cycle. If you look at data it seems to be justified. How long can this last . The answer is, when did you start to worry about this . Lets look at the data. Surprise. Ntinues to when we are looking at what is driving u. S. Equities higher, you have talked in the past about policy being the biggest risk, yet we see comments from the white house saying, we wont talk to north korea, is that a Good Cop Bad Cop routine with Rex Tillerson . Markets seem to put that commentary to the side. Geoff it is possible. With north korea and specifically, the markets are not willing to pay a premium unless there is a Material Change in one direction or another. You cant dismiss the underlying data. People are not in the position for . I said that the dollar is on the move, manufacturing is marching higher. The hedges are not there. The hedge funds are the most bearish on the currencies. Who is behind who here . Way, you put it this mentioned a squeeze. If the market is in position on dollars manus i did write them down. There are three big variables. Geoffrey what about emergingmarket currencies . Well local currencies in the emergency markets. People talked about 25 at the beginning of the year. Now theyre wondering when we will go under 17. What has changed in the terms of fundamentals . That is where the upside to the dollar is. And where the profit taking in hedging is going to be. The fundamentals around the dollar, there is also talk about who is going to lead the fed next. It, if its janet yellen or something to be more hawkish, is that something you trade around . A more hawkish government . Basis,y on a strategic in the shortterm, changes from is helpingernment the sentiment in the u. S. These elements, what is coming out of the white house rather than wall Street Investors are wondering whether to take profit. Geoff, stay with us. Later, we will be joined by the ceo of blackrocks. We are going to talk about what is going on in spain. The eu refuses to recognize the rebel region. We are live in the trade. This is bloomberg. Manus here is a live shot of singapore. Up. Asiapacific there are a lot of countries on holiday. , their me not be in those markets this week. The conference continues today on brexit. Donald trump is scheduled to visit hurricane devastated puerto rico. Equifax. F echo fox facebook has outlined a plan to strengthen its advertising system. In response to rush efforts to influence the 2016 president ial election. People use of thousand to review ads that run on its platform. Almost every model produced in japan in the last three years, companylly costing the 22 million. Vehicles exported are not involved in the recall. In an emergency meeting to the meetingcompany, comes a day after overs manager declined tonager comment on the details of todays meeting. That is your new that is your Bloomberg Business flash. Juliette saly with the business flash. Spain has moved to turn the screws on catalonia as eu refused to recognize the rebel regions bid for independence. Spain we use all the tools at its disposal including the suspension of catalonias autonomy. Trade, from madrid, what is the latest . The latest happened yesterday evening. The Prime Minister had meetings with position leaders. Is main ally in parliament after the meeting he said, we have to apply the constitutional cause that allows us to intervene and take over control of catalonia. The other position leader from the Opposition Party said, there should be more dialogue. The promised or should be open to speaking to everybody. Finally, the other thing we see if the catalans seem to have a small rift between themselves. The more leftleaning group want to go ahead with independence. The government wants to slow can and find a mediator who hold talks between madrid and barcelona. Rodrigo, in terms of there isversations, the carrot and stick, the threat of invoking the article 155. Talks. O pushes for how realistic is that . Is that something the markets would see is a progressive step . Given that he is not taking control of catalonia, it would be out of style. Having talks would make more sense. It would mean stretching the situation further and avoiding and out front confrontation. We know they have failed to speak to each other and dont seem to have any weight any way to synch. They need a really good mediator in a situation. Manus thank you. Geoffrey yu is still with us. He is the head of u. K. Investment office, ubs. The approval the referendum and catalonias parliament, had nowhere near majority support in the polls. It has essentially been mishandled, pushing the independence agenda further because of their actions. Are we looking at idiosyncratic risks or something that could be systemically risky to europe . Geoffrey looking at systemically risk systemic is ano europe, catalonia important region for spain. That is when markets will price in. We have a lot of distance to travel before we get there. Given the results of the election and germany and what is going on in spain, after a investors. The risk is done for the year. I wouldnt say that is driving the euro down. The policy will determine how the euro will perform. This is a reminder why markets never discount risk. Discount the european event risk. If we see spikes in borrowing for spain, is that a buying opportunity . Ultimately that does seem to be the market reaction, shortterm adjustments. Unless we get to the systemic element, it seems like the markets will look past that. At this point, the greatest trigger will be the pace of policy on normalization, and if that will affect credit conditions. Reminder yous a can forget about Political Risk for the entire year, it does return so we need to be aware of that. Manus there is a great deal of debate in terms of europe and how strong it is. Confidence is at its highest level in 10 years. Europe be aggressive . Aggressive with the taper . You have a version which is aggressive in the best case scenario. Geoffrey the ecb will say our mandate is price stability. Can we think about normalization, tapering, but at look at thee inflation targets for 2018 and 2019, and we are barely above 1 . Then it will be time to take a breather. Thank you, geoffrey yu. When we come back with talk more about what is happening in manchester. About brexit in the future of the u. K. That is next. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Manus it is 6 30 a. M. In london. 2 30 in the afternoon in tokyo. You are looking at a live shot of the emperors palace. The dollar is on the move. We have been rising for three days. Three consecutive days. In terms of Business Leaders and politicians, they are gathering in moscow for the Russian Energy weak. President Vladimir Putin will be speaking to bloomberg tomorrow. 11 00 a. M. U. K. Time. Nejra cehic has your market watch. Asian equities have a left. China and korea markets on holiday. The topics is also topix is also heading for a twoyear gain. Treasury jb g spread approaching the widest sense to thousand 10. We have been seeing the 10 year meanwhile wed, know the bank of japan does not tolerate the tenured jb g yield. The level at which japanese buyers want 2. 35 now. Some say you have to look at the longer end. Jpg at this chart showing chart controlling stalling. That jbg line is curve. Showsoomberg dollar index the 100 moving day average in view. Anna after and onslaught of johnson seemsis to have stepped into line overnight. He says he fully supports theresa may. Asked about the discord. We all agree its about two years. It needs to be enough time for companies to prepare the government to be able to prepare. We need to give an end date. The public knows we will be leaving the europe the european union, which is what they voted for. Anna is it a maximum of two years . The Prime Minister laid out aroundforeign speeches two years. We have to go into a discussion with the european union. The british ever commerce said the issues, and the distraction is something that is weighing on confidence. Business representatives are saying this has an impact. Is this something you are hearing and looking to address . We are looking to a dressed making a deal as soon as we can. I have heard the message from business, they want to see as much progress as possible. Anna we had an interesting message from Philip Hammond today. Is this something the whole cabinet can get behind . Taking on the labour party and reselling to the British Party the message about free market economics. Is that a big message we will be asked to take away from this conference . Absolutely. Weve had 40 years of progress as a result of privatization. Weve got the lowest Unemployment Rate since 1975. Our messages, they take them for granted. That has come about from the policies. Economy wereave an people can be enterprising and come up with new ideas, then we will end up back where we were before we had all those reforms. That was the chief secretary to the treasury. She will be focusing on the budget as we go into the autumn months. For the moment, sticking with the party line around brexit, saying it will be two years for the transition. Manus we have a cracking story. The brexit transition might not be enough. Lets talk about the chancellor. Philip hammond will be focused on his speech today. Show, youtarted the said he spent less time talking about brexit and more time talking about the labour party. Taking the tories fight back to labor . Anna yes. We heard from Philip Hammond yesterday. He spent a lot of time talking about labor. He talked about the challenges around brexit, and said the brexit talks much must be accelerated. Much of the speech was taken up with talking about labor, the rival party. He talked about them as the Jurassic Park of politics. It is fascinating that the conservative party, somebody decades after margaret thatcher, has to go back and resell the benefits of the free market economy. It would be good if they find something to unite over. Talk to me about the choreography here. It was said the minister should keep his bloody mouth shut. That was yesterday morning. What happened . Anna he received a lot of feedback over the piece he did newspaper. N he set out his personal vision of brexit. He set out his full red lines around brexit. He got a lot of feedback from the party. Some people say this is best done behind closed doors. Others say this is boris being boris. Have come toto tell the party line. Toe the party line. Does that take away questions about leadership in the conservative party . Not really. Was credited for some successes for the party the past. Does she have pretensions towards leadership . Manus hold those thoughts. When you said feedback to me, i begin to worry. , headbring in geoffrey yu of u. K. Investment office, ubs. Listening about the machinations of Boris Johnson, this comes down to money. Proffered the possibility of 20 billion euros until 2019. Who has the strength in this negotiation as it stands right now . Geoffrey you could argue if there is no deal, we should not underplay the u. K. Strengths. One way to be sure liabilities will be met, if there is a budgetary contribution, that is not going to be popular. Of what will light. E merkels Key Coalition when we talk about balance in terms of bargaining positions, anna is your case the conservative party put some deal together with europe backing the party and we avoid a cliffedge before march 2019 . Or will we have a Labour Party Leadership by then . There will be some transitional agreement that wont be a cliffedge. Jurassic park, didnt they have cutting edge scientists and were at the forefront of innovation . Im not sure thats the right analogy. They really want progress in the talks. At the least, given how sterling there is aed, reorientation back toward fundamentalist fundamentalism in the u. K. Brexit tears the tories apart, one deal may not be enough. Would you say that is a fairly reasonable position . The first one will be the status quo with no votes for the u. K. And two years will be long enough. Geoffrey there is a difference in terms of the political transition and the business transition. From the business point of view they need time to plan. Be will have to be made in advance to avoid the worst case scenario. We are in uncharted territory here. All possibilities are in place. The focus is deals, and no cliff edge. Base case,is your which is interesting. What is your strategy around u. K. Assets . You talk about diversified where you looking for that . Geoffrey just on the uks allocation perspective, investors did see around the time of the brexit vote a link to International Earnings that is very strong. Allocation point, we are underweight in the u. K. Clients are more cognizant and the Wealth Management space. Toward domestic companies, the right now state diversified on a global basis. Run. we had a fairly good boris, the bank of england, and the brexit risk. You said it has to do with the , if you want a look at the ftc positioning, do you buy that strength story given what you said to me . I hope you not hinting that the u. K. Will be triple b rating. It is about the bank of england right now. I dont see Much Movement in either direction at this point. From a euro Sterling Point of mentionedas we Political Risk that will be more important. Move placear through, you will have a weaker cable. Is that such a bad problem to have . Carney toh that force have to go in november . Thats what we expect a rate hike. It will be conditional on inflation. Manus its all about the data. Geoffrey yu is the head of u. K. Investment office, ubs. Radio. On bloomberg we arein on daybreak, live to the middle east. We are also at that u. K. Tory Party Conference. The political infighting has dominated the discussion. Stay tuned. This is bloomberg. Manus it is 7 48 in barcelona. You are looking at a live shot. It is catalonia that youre looking at. We have not the euro dropped to this level since july 27. You are seeing dollar strength. The markets really begin to assess what the next step is. Those are your euro dollar markets. Thing, thee another Business Leaders and politicians gathering in moscow for the Russian Energy weak. President Vladimir Putin will be speaking to bloomberg tomorrow. You dont want to miss that conversation. 11 00 a. M. Lets get you up to speed with the business flash and juliette saly. Juliette tesla has said it struggled to produce its cheapest model after the car debuted. Built 200 and 60 models. That was less than a that. The shares fell after the announcement. Goldman sachs is exploring how can help clients trade bitcoin and other digital currency. And talk with the currency experts, but have not formulated a timetable for implementation. Among the questions the bank is seeking to answer, how to address the risk of the volatile currency. Jeffreyelectrics immelt has cut his ties with the company. The new ceo has been elected chairman. The ceo transition has proceeded. That is your Bloomberg Business flash. Juliette, thank you. Could they be considered raising 10 billion to plug a hole in the budget deficit . What is the catalyst here with bond sales . The simple reason is abu dhabi is selling bonds because it can. We have seen demand for emergingmarket assets in recent months, but it has come off in the last couple weeks. We saw saudi arabia come to the market last week with a jumbo 12. 5 billion offering. This is the first time abu dhabi has issued new bonds since april 2016. It isnt to say we might not have supply concerns, if you look at the chart i prepared, this shows yields on existing 2021 and bonds due in 2026. The yield jumped once we had news that abu dhabi was coming to market again. There are supply concerns. You see that reflected in the price action. Abu dhabi is a strong credit, singlea rated, and has little external debt for the time he. This is a good time for investors. We have seen an astounding amount of emergingmarket bond issuance is this year. Incorporate alone we are running at what will be a record pace for 2017. When it comes to the abu dhabi issue, we are expecting pricing lunchtime. Around we will see if those concerns get reflected in the price guidance, whether there is a concession. Saudi arabia got 40 billion of for 12. 5 billion of available debt. Manus thank you, tracy. The rates were kept unchanged. The rba came out this morning. They went straight for the jugular, straight for the fx line. If the aussie dollar keep strengthening, we are going to have problems. They had gone to fx intervention. Geoffrey that has been the case. Yearba started off the awful. Doing better than and with australia maybes a china proxy, ectations i think the rba is going to make its mark as well. Anna one of our colleagues in australia wrote an industry piece about how the years of growth has hidden a need for fundamental reform and that economy. Is that something you would go along with . Need for reform it has been pushed aside because of the growth from china. , and the productivity car manufacturing sector, how things have changed their. Markets oroped and not letkets, immigration top that. That is imperative. That is how the sustainability of growth will be judged. It is more investment driven. The flexibility they are showing for the requirement, it will add liquidity. Move by the reserve requirements, what does it do to the china story . The china exposure you want to have . How do you do things in the tightest way possible . Its a market we really like. People have moved on, when we get questions about how to capture chinese tech that market seems to be head of the developed world. Overall, diversify your exposure to china with any of your investments before new technologies are offered. Being withk you for us and sharing your thoughts on the markets. From ubs. U is. He nikkei is up 1. 1 you are looking at the highest level in two years. That is charging ahead. The dollar is up. 25 . Anna lets talk about Global Markets when we come back. We talk about partying like its 1997. Sixal stocks have had straight quarters of gains. That is the first time that is happened in 20 years. This is bloomberg. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Trump, the u. S. President rules out north Korean Nuclear talks. He heads to puerto rico to assess hurricane damage before traveling to las vegas in the wake of the mass shooting. U. K. Foreign secretary falls into line on brexit on the after challenge challenging the bike Prime Ministers authority. Numbers of Parliament Take stock of brexit products progress with barnier. Itswo days after independence vote. Meanwhile, the eu refuses to wreck recognize the regions referendum. Good morning, this is bloomberg daybreak, europe. Im anna edwards at the conference in manchester. Manus i am manus cranny live at our bloomberg studios in london. Good to see you this morning. I know you are at manchester, harrying politicians. Set for a higher opening around the markets. Trump and the promises of taxes, but the real data talks about manufacturing being the strongest its 2004. Equities are higher. What will happen in catalonia . How will europe respond to rajoys handling of the spanish situation in catalonia . Supportedy independence at the end of the summer, now they have a serious constitutional crisis the likes of which we havent seen. Rising, dollar is offered, euro is offered, oil is offered. Risk on, oil is lower, euro is dropping, but the dollar is on the march. Higher aussie dollar, that is going to knock our open. Goteuro is down, spain has a constitutional issue crisis, whatever word you want to use, citigroup used the word crisis. , eurodollar down the ecb will be relatively dovish. Oil, a cant keep their oil compliance together. That is the bottom line for opec, produced another 20,000 gallons of oil. Butcher house and order, opec. Lets talk about the bond market because that is the prison of risk that shows you what is going on with catalonia. ,his is the bund spain 10year again you are seeing an escalation in risk in the spread between the two. Waiting for a print. That is yesterdays print. Spanish tenure government bond, checking that print. In the meantime, anna . Francine anna lets get an update on first word news. The u. S. , the death toll from the Las Vegas Shooting thanisen to 59 while more 500 others are injured. Police found 23 firearms in the gunmens room on the 32nd floor of the mandalay bay resort. President trump will meet emergency workers in the wake of the deadliest mass shooting in modern u. S. History. Ruled out talks with north korea over its nuclear arsenal. Adding that the u. S. Was interested in discussions freeing u. S. Citizens held by pyongyang. That comes days after Rex Tillerson said the u. S. Was talking direct lay with north korea through our own channels. On catalonia as the eu refuses to recognize the rebel regions bid for independence. Including the necessary suspension of catalonias autonomy to enforce the rule of law. It has sent the country into its just crisis since the dictatorship and threatens to unravel a democratic settlement. The us trillion dollar dipped after the countrys Central Bank Left Interest Rates on hold. The rba reiterated that growth and inflation may be slower than forecast if the currency keeps rising. It is the 14th month in a row that the benchmark rate has been set at the record low of 1. 5 . Secretary Boris Johnson has insisted he is behind every syllable of Theresa Mays Brexit plan, folding in line after challenge is to her authority. The perennial leadership contenders said he fully supports the contents of the minute Prime Ministers speech in florence. We all agree it is around two years. It needs to be enough time for companies to prepare for the government to be able to prepare. But we need to give an end date. It is important to say there will be a transition plus in and deal so the public knows we will be leaving the european union, which is what they voted for. Juliette european mps in strasburg will assess progress in the brexit talks with Jeanclaude Juncker and eu chief negotiation michel barnier. Vote on athen nonbinding resolution setting out the recommendations to the eu 27 summit in brussels on october 20. Parliaments chief negotiator will also hold a press conference. Hasesbank board member warned that banks should prepare for a hard brexit in ks talks between the u. K. And eu fail to reach a deal. His comments came during an exclusive interview with bloomberg in singapore. The banks need to plan for a hard brexit. Nobody knows whether we will have one or not, but this is an assumption which is the most likely assumption right now. Juliette global news 24 hours a day, powered by more than 2600 journalists and analysts in more. Han 120 countries you can find more stories on the bloomberg at top. We are seeing Japanese Equities close out the session with the nikkei at a twoyear high up by 1 . Hong kong coming back online after yesterdays holiday. It will have another holiday thursday but strong buying today, the hang seng up by 2 . 51 a closed down. 5 . We are seeing china and south korea markets close. India coming back on and quite a good by coming through. Looking at stocks we have been watching. Tartar motors, the front runner by over 4 . Contract tot won a supply 10,000 electric cars in india. Inna Merchants Bank rallying the financial space in hong kong. Particularly in the h hshare index. After the pboc said it would cut their requirement for some loans. Have the manufacturing gauge hit high, the first time stocks in hong kong have reacted that. Qbehe downside, qb a fell after catastrophe flames of claims of 5 billion. Manus juliette, thank you. The markets themselves, lets check our government wants between spain and germany. That is what we will focus on. Spain versus germany, the spread. You are seeing yields rise a little bit. This spread is going to be one we focus on. To talk Stephen Smith about these markets and put them into con context. Welcome to the show. Good morning. Yesterday, we had this slight , widening ofpread the spread, but there was no radical mark market reaction. Theeuro is a little lower, bond market is not screaming high risk to me, but the risks are there in how to deal with the catalonia risk. Stephen clearly there will have to be steps to contain the situation. This is something of a constitutional issue for spain so we will see where we go. But the settlement will need to be political. Some point, the two sides will have to come together and negotiate. Anna good morning to you. Is your sense that we are not withstanding what we are notwithstanding what we are seeing in catalonia, the political headwinds in europe from a Global Investors perspective the rise of the afc in germany, italian let elections looming. But with the ecb in the mix, have we got through the worst of the potential speed bumps on politics . Stephen we still have the italian election, which will come at some time in the next 12 months. What is interesting about that is if you look listen to the rhetoric coming out of fivestar , it has backed away to a certain it deck extend from a pro euro brexit stance, and i would interpret that as a signal that they dont see that as a vote within italy. We will see where the italian election goes. I was talking earlier on the radio about the fact if you think about where populist votes have defeated, many would describe president trumps europe as being has failed to follow that script over the past 12 months. To your question, has Political Risk receded, no. In europe, generally, it is never as bad as you fear, never quite as good as you hope. At the moment, the situation is more settled. Manus lets talk about fear and loathing from stocks. There is no alternative is what a variety of people have said to me. Lets talk about what has happened. Global stocks, 2016, the sixth quarter of gains on global stocks. We havent seen that since 1997. From a markets perspective, volatility is low, fear levels are low. You share that a listeners bullishness . Stephen i just look at the fundamentals. With othermpete investment classes. If you think about where real yields are in equities, you are getting an acceptable real yield. Not really out of cash, not really out of soldering, may be taking more credit risk. If we think about fundamentals for European Companies to invest in, they seem to be improving all the time. We have evidence with the pmis just released. The picture continues to look pretty strong in europe. That is despite the recent move in the euro. My sense is that although earnings have come under pressure, because of the currency translation affect, we are still expecting decent earnings as and as long as nominal growth holds up, i think that is what we will get. Anna what is your view on the dollar at the moment . Goldman sachs saying the dollar is on the move . Inhave seen a real change sentiment towards the dollar in september. Stephen i think there has been a shift, but the last time i was on here with you, i talked about positioning. I think positioning is important when you look at price formation. When you get to an extreme in the market, anytime of marginal type of marginal changes going to exaggerate. We did get to an extreme in the backend of last year. People were underweight euro and long dollar, looking at the evidence in the Chicago Court of exchange. That decision reversed because the dollar weakened considerably and we are at a point where positioning is very short the dollar. Interestingly to me, i think there was a story on bloomberg the shortterm rally in the dollar, people have increased dollar shorts. The dollar andrt there has been a change on the u. S. Side in the sense that it now looks as if there is a tax deal on the table. People expect that to be good for your us u. S. Growth. Is goodlooks good, that for growth. In the background, a fed that is committed to tightening Interest Rates. Hisnt necessarily think recent move in the dollar is over by any means. Manus i will jump in here, why not. You talk about the pound, we talked about the dollar. But the pound positioning, we are seeing traders perhaps switch on their power pound. Most bullish on the pound since 2016. We have over arched so far to the outside, this is not the pound at all. That is the dollar. When we want these charts, we cannot get them up there. Well, lets just do the folks a service. There you go, that is the dollar positioning. That strength. Lets turn around and talk about sterling, because sterling is a different story. Jeffrey was here a few minutes ago and said, the u. K. Has some Bargaining Power in the brexit negotiation. It is all about the money. Back ofd is bid on the england more so than brexit negotiations. Does that sustain . Would you agree with jeffrey that there is some strength the negotiating hand of the brexit negotiations and the u. K. Position over the money . Stephen leaving aside the question of whether the specific a larger yes, we are economy, yes, we do have positions of leverage we can take to the negotiation with the european union. It is not in anyones interest that a product deal is not found. Sterling has taken the strain over the past 18 months now since the referendum. Purchasing power parity basis, sterling is undervalued in the medium term far as we can tell. A lot does depend on the outcome of the negotiations. Thank you very much, Stephen Smith, great to have you on the program. Head of european at could equity strategy at jp morgan stanley. Air timeave no dead when we return. We will talk about the brexit. What does business want from brexit . We will act asked the director general of the british conference. Plus, in the next hour we will speak with the conservative mp, mickey morgan. To discusssion in manchester. Gone 8 20 a. M. Across in central europe. A couple of things to keep you up to speed with and make sure you are focused on them. This is a conversation you dont want to miss. Vladimir putin will speak to bloomberg at a Panel Discussion in moscow. The Russian Energy week of 2017. 11 00 a. M. U. K. Time. Seven 19 in london, 8 19 in barcelona. Focusing on spanish bonds. What is next . Somerime minister faces stark choices. The opposition wants talks, the lawmaker warns that catalonia independence may be 72 hours away. You are seeing a little move and it is not knocking the european stock story. Stocks are more interested in manufacturingry, in the united states. Dubai has closed for the day and we are seeing that market down by 18 the 1 . German bunds opened down in price in yield at 4. 6 . Anna thank you. That is the markets looked at and dealt with. The politics in manchester at the conservative Party Conference. A lot of talk is around Boris Johnson. Other members, whether they have other leadership intentions. Views ofk about the adam marshall, the director general at the British Chamber of commerce. Of unity in cabinet. You have talked about this and even been in the same room discussing with members what this lack of unity is doing for the Business Environment . Is it putting businesses off investing or are they putting off to the same side . Adam there is uncertainty around the brexit process, but uncertainty at the heart of government doubles the worries businesses tell us they have. What they want his competence and coherence on the part of government and worry that division could undercut that and that we dont have the right policies to get us through the brexit transition. Transition period, you say three years, the government message is about two years. Phrase used by theresa may in florence, Philip Hammond yesterday. They wont elaborate on if that means it can be longer than three years because they say we have to go into negotiation with the eu. Why three . , businessesurvey said they would like three years or more for the transition period. We are going on evidence from business communities around the u. K. The fact that it is a transition period is on the table at all is hugely important and a step forward from where we were six months ago. All of us in business appreciate we now have some sort of transition to manage our exit from the european union. To the was listening chancellor speak yesterday and he was talking about things may be the cabinet is not united on. For example, some aspect of brexit. Talking at length about the need to resell the advantage of free market economy. I find that fascinating that the conservative party is trying to resell the advantages of that model. How does that fit with the Business Community . Adam i think we have been through a period of time where the contract between business and society has been tested. What we are seeing as a result in our politics is the result of that strain. It is not just for politicians to make the case for the free market, but all of us in business to make the case for free market. I have sigrid civic businesses up and down the u. K. , searching for profits day after contributors great to the community. We have to demonstrate more as business communities that we are doing things the right way and not let a few bad apples actually ruled the headlines. Anna would rage wage increases from businesses be a better sales pitch for the free market economy and globalization in general . Adam most Chamber Member businesses pay much higher than the going rate, so a lot of them say wage pressures arent the biggest things theyre facing. But there are a lot of jobs where wages are lower. I think you have to get productivity up in order to get wages up. What we are trying to do is say to the government, do whatever you can to incentivize business investment. That drives product unity, and productivity will drive wage rises. For all of us, business and politics, we want to see a prosperous country. Anna you are going to have a sit down with Philip Hammond later. What are you trying to elicit from him that you didnt hear from him yesterday . Adam i think we have heard enough from the chancellor on brexit and the certainty he is trying to get businesses. Easier transition period, and the cost of adjustment coming at the end of transition rather than at the beginning or twice. What i need to hear more on is the domestic economy. We could get the best exit brexit deal in the world, but it will not make a difference if we have dont have the right policies in place in the u. K. Budget inllor has a november, we want to hear the Building Blocks he will put into place in the budget to make sure the u. K. Can fire on also wonder. Anna you called on him to be bolder than yesterday. Was he short on news . Adam i have to have sympathy for the man. This is a Party Conference speech, not a budget speech. We do want him to be bolder, incentivize investment, bring projects forward. Why cant we do projects before brexit to give that Construction Confidence . We can do more on the upgrade upfront costs facing businesses. To run a you pay a lot business, let alone what you pay in tax at the end. They mind all of these upfront costs. Anna we will hear a lot from Boris Johnson and others speaking on brexit today. Are you any closer to knowing what that looks like . Get the forum of what we from discussions is less than the practicalities. Good lie higher and for how long . Will they get stopped at the border for some kind of checks . Do i have to pay terrorists . Tariffs . There is plenty of talk about what is needed, but we need to talk about specifics. Anna adam marshall, joining us in manchester at the conservative Party Conference. He is the director general of the chamber of Commerce Business chamber of commerce. Manus great work up there, anna. We look forward to more throughout the day. That is it for daybreak europe. The market open is up next and they will be speaking to nicky Morgan Azevedo clock a. M. 8 00 a. M. They have an interesting piece on what the sterling looks like. Currently very much an emerging market currency. Beautiful day. Guy good morning, you are watching bloomberg markets. This is the european open. Cash equities will be opening in half an hour. Bunds are already open. We will talk about the fixed income market throughout the program. I am guy johnson in london. Matt miller is off this week. We are talking about the dollar dilemma this morning. The greenback danes on economic hope, tax reform expect tatian, the fed chair speculation. To fundamentals tell a different story