Highest close, though, since 1996. Good morning, everybody. This is daybreak europe. Matt good morning, anna. Guy good morning, matt. Nna good morning, matt lets talk about whats going on in spain. The chartier tracks the biggest etf that tracks spanish equities and the appetite weve got for that. The president of catalonia seeking talks with Central Government in madrid, not mentioning unilateral independence. That is sending more money into this etf that tracks spanish stocks. We have seen money coming out of. His particular etf we signed trading at volumes that were 700 of normal daily volumes, and we saw the euro gain a little bit. You will see that the euro is Still Holding on to some of those gains. Its funny, i was looking at the exact same etf here on my screen as well. Also, the euro, as you mentioned, holding on to some of the gains. Take a look at the risk radar this morning. I am going to kick it off with the euro. Spain front and center as far as what is going on. In dollarses at 1. 18 terms. There is the msci asiapacific index. The topics bang the topix holding it near record highs. Onlye seeing big gains not in u. S. Stocks, but also in asia stocks, and that could lead into european trade. Take a look at jgbs. We see investors selling off japanese debt, pushing up the yield. Even though the yield is red, it is actually gaining. Im not sure why we continually have gains and yields highlighted in red. There you see the u. S. 10 year yield, 2. 36. Right now we are kind of waiting for this two point four level that bill gross said when signaled the end of a market. Bondbowl of the reasons, perhaps, is what we see happening in the u. S. As far as a lack of progress on a tax reform bill. Anna we will talk more about what the failure to progress on tax means for u. S. Assets. Go to the bloomberg first word news update. Reporter north korea reportedly accused to the preparing to fire multiple skied missiles, citing unidentified person. South korea and u. S. Military authorities have detected that north korea is transferring skut 30 sketch missiles utt missiles. The incident is similar to one in march of 2014, where north korea fired about 70 rockets. The uks Prime Minister has stressed a President Trump the Iran Nuclear Deal is vitally security. For national the two leaders spoke on the phone, with theresa may reaffirming her strong commitment to the accord. This comes ahead of trumps expected announcement on whether he will certified to runs hransance certify teg compliance to the deal. She refused to say whether she would vote to leave the European Union and another referendum. Circumstances move on. When i did last turnaround was i looked at everything and came to the judgment that i would do exactly the same thing this time around. Meanwhile, her deputy told channel four news he Still Believes the country is better off inside the eu. Said thef ubs has worlds wealthiest individuals are staying on the sidelines when it comes to cryptocurrency. Peoplebloomberg that, are more curious than they are willing to invest. People are more curious than they are really willing to invest. I dont think there is any meaningful desire by high net to buy on thisls kind of phenomenon. Day. Obal news 24 hours a you can find more stories on the bloomberg. Back to you, anna. Matt anna thank you very much. Lets get on the asian equities session. Reporter we have asian stocks trading at decade highs. Is set for the. Trongest close since 1996 chinese equities are trading at 2015 highs. The housing bill lost ground as a hong kong chief executive delivered her policy address. Casualties, 7. 8 . I want to show you that stock on the board. We have seen in china on the back foot. There were no details to address plans for the housing markets in hong kong. Toshiba snapping a fourday rise , snapping after proxy advisers said investors should reject toshibas earnings at the upcoming shareholder meeting. Kobe steel is reeling from the today slump, on news that more data was falsified. Back to you. Matt Sophie Kamaruddin there with us. Now lets go to spain. Catalonias president said he will seek talks over the governor of madrid for the future of his region in spain. His announcement, rose back from an immediate declaration of independence to threaten to turn a constitutional crisis into an economic one. Go an economic one. [speaking foreign language] translator there is call for dialogue. Europe is afraid of the outcome if there is not dialogue. Those calls should be heated will be heated. Lets cross over to barcelona, where maria through deyo has the latest. Isdrid going to accept madrid going to accept the capitals offer . Reporter absolutely not. Madrid is not going to negotiate anything. That is a message from Central Government as soon as yesterday night. There is nothing to negotiate if they think this can get an agreed referendum on how to move forward. The administration is not getting the message. Thats what we are hearing from madrid. His cabinet at 9 00 a. M. And he will address parliament. The question is, how tough does he want to go . The question is, how tough didnt want to go in the Catalonian Administration . Did it wants to go in the Catalonian Administration . Trying to come up with a common front on how to deal with this, but we think there is going to be much room for dialogue. That is simply not the case. Anna they are trying to come up with a common front in madrid. What about what is happening in barcelona . What are the implications for which a month and his coalition . Maria thats a great question. I can tell you i was on the ground at the Catalan Parliament yesterday. We got this symbolic move which was very confusing. People were confused. For a minute, everyone went, what just happened . A lot of people within his own coalition, especially the more times, they were visibly angry. On the streets, people had scattered to celebrate the new republic, and they were frustrated, disappointed. Puigdemont is under a lot of pressure jury at his coalition about to collapse . That is something that could happen. Anna maria, thank you. Joining us, a real friend of the daybreak show. After watching all of this on full in catalonia yesterday, and on the the conversations live blog seem to be, in a emont did not get anything out of this, had he did not make enough concessions to madrid. I think we are in an interim period at the moment, and it is clearly in madrids interest to play a very hard negotiating stance. The rationale behind that stance is that he is hopeful that the catalonian independent coalition is going to collapse. It was not obvious from the referendum. There could be a debate about the legality of the referendum. The Constitutional Court of spain said this is not legal. Voter turnout was disrupted, and it was not a satisfactory record random satisfactory referendum by any order of magnitude. If one breaks it down and looks at the economic impact, lets not forget that catalonia accounts for 16 , 70 of spanish gdp. If you did get independence, that would be quite a shock to the spanish economy. Not tove to be careful push the catalonians into almost a forced independence. It is also probably catastrophic for the catalonian economy. Like he has made the wrong move here at every step, and is there any room for optimism that he does the right thing . Reporter two it to address your comment, i think the answer is yes. But we have seen over the last week is a number of local companies in barcelona move their legal headquarters to madrid or elsewhere in spain. The catalonian corporate economy is voting with its feet already, and it is concerned it needs hedging against an independent move. I think that is reasonably clear. In terms of your question of, s negotiating stance, at this point i think he has no alternative. He has to follow this hard approach to the negotiations. At the end of the day, you are going to see probably a lot of tension, and it is not going to be positive for spinach markets for the next month or two, but by year end, i would assume some form of more autonomy for catalonia. Anna i doubt there is much about this that the ecb likes. One thing they might like is the fact that the euro has stopped tightening on the back of political tension. Where is the euro headed . Guest i think there was a clear message from the ecb in september. The dollar recovered. Did all currencies around the world, that we had a turning point in the dollar. As for the euro, the ecb did not like the pace of appreciation, and they did not want a euro. Reakout beyond 120 ideally, they would like to get it back to 114, 115. Anna 118 is where we are now. Thank you, bob. He stays with us on the program. Bloomberg radio is available to you live on your mobile device. Matt . Matt i also highly recommend bloomberg radio. I think anna and i both have been on that medium. Coming up with the minutes from the feds latest meeting do, we bring you our exclusive interview with Sergio Ermotti. Has things to say about his own company. We will take a look at the deepening scandal in japan affecting kobe steel. This is bloomberg. To daybreak in europe. It is 1 18 in the afternoon in singapore. Gorgeous day there. 6 18 in the morning in london, 7 18 in germany. Lets give you a look at what you should be watching today, your day ahead. The u. K. s theresa may faces the first Prime Ministers questions since her disasters Party Conference speech last wednesday, just a week ago. Canadas Justin Trudeau is due to me donald trump as nasa talks resume in north america. Is; 00 it is 7 00 a. M. U. K. Time. We will get the latest from the policy meeting. Surely you are waiting with bated breath for those. Reporter kobe still has plunged again after admitting it suspects data was falsified on another of its products, iron ore powder. The products have been used in cars, engines, and belligerence. Japans ash and bullet trains. Trains. Es, and bullet it may also play a role in japans snap election. The head of Elliott Management has built a stake in smith and nephew. It is not clear how much of the maker of artificial hips and knees the activist investor owns, or when it plans to push for. A representative for elliott declined to comment. A spokesperson for smith and nephew said it does not comment themor or speculation or identity of investors that are not publicly disclosed. The Worlds Largest retailer says it expects u. S. Read u. S. Ecommerce sales to surge 40 . The forecast added almost 4. 5 to walmart shares, and pushed the combined net worth of the owners to 140 billion. Sticking with business news, weve got a little bit of news coming out of the german ceramics sector. Symantec will be sold to a group led by bc partners. Last night, we were reporting that they were close to doing a deal to sell symantec saran tech ceramtec. The price would be substantially higher than they paid for it in 2013. An ipo, but ited seems they have gone for a sale. Notes from the meeting will reveal how toward the fed was. Yesterday, we spoke to ubs Ceo Sergio Ermotti on his view on the Central Banks next step. He sat down with bloomberg exclusively in new york. Sergio the market is already pricing the probability, the apectations that you may see three quarter of a point hike in the future. The equity markets are implying this kind of potential hike. I dont expect the fed to move aggressively. They have a nice path of being by the fact that a lot of the bonds they have will expire and they will be able to contrast the Balance Sheets smoothly. Wildcards is a u. S. President to his notch i about sharing his views on Monetary Policy, if that occurs to him. About sharingshy his views on Monetary Policy, if that occurs to him. Are you worried, Going Forward . Usually when you look at this kind of political intervention they may attract the contrary reaction of people trying to show that they are independent, and therefore i do not think it is a smart move for politicians to interfere in central bank and Monetary Policy. That when you think about policy specifically, is there anything that excites you, the prospect of a change excite you . How would it benefit your business . We are not outwardly focused on those kinds of leadership changes. I think the angle that is a matter for us is not necessarily Monetary Policy. It is more of there is any implication to the other side of prudential part of what the fed is doing to our industry. I think that is the path that seems to be the taken. That they seem to be taking. Parker is still with us on set in london. Taking on that conversation, it seems that he had some comments to make about the fed and where we go. We get minutes later today. What is the big concern at the fed right now . Is it a lack of inflation . His is valuations on the s p the fed has mentioned it a few times, they have talked about stock prices being high, increased risk tolerance among investors contributing to elevated asset prices. I think if you break it down into the various different components, my own view has always been no change in view that they will raise rates in december. I challenge whether the path of Interest Rate increases is going to be, as they have indicated, a further three interestrate increases in 2015. I think one could say with some clarity that they will raise Interest Rates further once in the first half of 2018. Thereafter, i think it is unclear. On the pace of tapering, they have said we are going to 10 billion a month starting out. That is very small indeed, because if you compare that 10 billion a month to the size of their balance sheet, which is 4. 4 trillion, i think that tapering will not have an impact on markets. To come back to your question, are they worried on the valuation . There are many different types of valuation. In one case, the schiller riggio, which you have. Ratio, which you have. Normal pe calculations what i would suggest the s p at about 18. That is not sending the correct picture. The fact of the matter is, the corporate Earnings Growth this quarter is going to be poor. The next quarter, it could rebound to 10 again. Matt ive got to a priceearnings ratio this is not forward, but if you use the ged screen, you can find ratios on the s p 500. I am looking at 21. 8 for trailing earnings. My question, bob, do central feel that Monetary Policy is the right way to control asset bubbles . Heavenly scene in the past that if they try that, they typically fail, the unintended consequences are too great, and it is not part of their mandate . Bob if you look at most centralbank mandates, there is a very clear objective, which is to control inflation. For the fed, it is plus or 2 . For the ecb, it is close to 2 or slightly under 2 . The first mandate is a very mandate. Lation in the case of the fed, they have this dual mandate worthy objective is to keep unemployment down in a very low level. That objective has been achieved. Thank you very much. Bob stays with us. Up next, an activist investor is building stakes in germanys g8. And britain smiths nephew, what is the after . This is bloomberg. Matt welcome back. Is 7 30 in berlin, 6 30 in london. In tokyo, to 30 in the afternoon. Lets check in on the markets. For that, we go back to london. Reporter weve got asian equities gaining for a fourth day. Looking at the msci asiapacific index, rallying to its highest since the two that since 2007. Asia,lly continuing in and it is actually tech stocks leading the rally in this session, up more than 1 if you look at the Industry Groups on the msci asiapacific index. We saw the euro rally yesterday. Eurodollar. 817 on it is also approaching and 55 Day Moving Average. Saying that 55 Day Moving Average might provide assistance at the upper end resistance at the upper end. If we go above it, it could change this outlook in the mediumterm. A key technical level to watch. Speaking of technical levels, ive got the dollar as well, pretty much unchanged. 1. 1243. , youve gotn technicals, youve got resistance and support levels. Check this chart out. Matt, anna . Anna lets talk activist investors. Paul singer is focusing on europe. Inger is that s smith andtake in nephew. Singer has increasingly targeted companies in europe. Bob parker, Investment Community member that core best management still with us. Lets talk about activist investors and what it is thereafter in europe. I remember hearing a commentators investing that in the u. S. , there had been a culture of activism for a long time. Andas quite new in europe, there were a lot of u. S. Activists waiting to get their hands on underperforming u. S. Underperforming european businesses. Thats probably true, and it goes back to priceearnings ratios. The price i can ratio of europe is cheaper than the u. S. Ratio ofice earnings europe is cheaper than the u. S. That driving activist activity towards focusing on European Countries away from u. S. Companies. Whats the objective for activist investors . Its either achieve a higher share price through management change, or through a change in Corporate Strategy to drive improvement in Corporate Strategy, or to achieve a high dividend payout. Main objective of activist investors. As you recommended certain cases, it is hugely successful, but there have in failures. Another objective is to package a business in a way that might attract a takeover. Bob it goes back to strategic change, or management change. One of the outcomes could be a breakup of the business or a sale. The smith and nephew is up against businesses that could be interested in buying this, such as striker in the united states. Might that be the aim of this . Bob in terms of the outcome of activist investor, slowly forcing the failure of the business at a high valuation. You go in at a reasonably cheap level, and if you can achieve a , it has apremium satisfactory outcome. I notice we are talking a lot about companies that may hit. Striker, we were talking about the german hip and the maker, and smith and nephew does the same thing. Is this business going to keep growing . Is this a gimmick a democratic demographic issue . Bob as you know, i like the health care sector. That long structural position in Health Care Makes a lot of sense. The reality is we had an aging population. There is huge demand for product which an aging population needs. This is an example of that. A reasonably undervalued sector where the longterm demographic demand is strong. Share price that, perhaps, if you are paying in dollars, might be affordable more affordable than it was because of the brexit conversation. Make a very important point, which is that the sterling today is one of the most undervalued currencies in the world, and therefore i think m a activity will increase. Anna that takes us into a nice conversation about the u. K. Ive got a chart which is the performance. Risis output per hour in the white. It is what we could have had in terms of productivity for the u. K. One of my colleagues, jill ward, contrasting the hiking rates we might get in the u. K. With the hike in rates we might get in the u. S. The u. S. Is hiking talking about strengthening the economy. The u. K. Might hike, but they are not talking about a positive gain in the economy. Bob i think the bank of england has sent a very clear signal, which is that it will go up by 25 basis points in november, but we are starting from a much lower base. England,he bank of quite friendly, is concerned about the pace of Consumer Credit growth, and it wants to cool down Consumer Credit growth. In terms of whether the u. K. Economy is performing well or badly, i think we have painted a missed painted a mixed picture. You saw the imf data. It is forecasting 1. 5 to 1. 7 growth this year and next year. I think that is right. Youve got construction growing close consumption growing close to 2 , and that is in spite of the bank of england bringing in Consumer Credit. The thing that is disappointing about the u. K. Is the very low pace of investment spending at the moment, and that is partly driven by uncertainty of a brexit. Whereas export data is fine, computer Consumer Spending data is slowing a bit, but investment spending is very poor. Lets not forget that the u. K. Is dominated by the Service Sector, and measuring productivity in the Service Sector is very difficult, rather than measuring productivity in manufacturing. If i say to you, whats your productivity anna we are both very productive, thats all you need to know, but management is an issue. Lets take it to matt miller in berlin. I just wonder, because once again, bob, we touch on Central Banks trying to control asset bubbles or things that are outside their mandate. We talk about the boe trying to control Consumer Credit growth, and clearly it is a worried, but at the same time youve got an unemployment picture that does not look to be getting better. Got a chart here, unemployment is the blue line. The most important line is the white line, and that is wage growth. It is not picking up at the same rate of inflation. Doesnt the bank of england risk hurting rate hurting wage growth and further damaging the economy with an increase . Bob the increase is going to be very minor. We are going from 25 basis points to 50 basis points, and thereafter. I think we will probably stay at 50 basis points at a time when next year, the ecb is going to pull back on quantitative easing. The first in the short term, i think weve got a clear path of rate increases by the federal reserve. Relative to what the fed is doing, the bank of england will pursue a very moderate stance. Two comments, some longerterm comments on wage growth, clearly Central Banks are concerned about the lack of inflation and concerned about the lack of wage growth. I thinky are there are a number of reasons for that. In the u. K. , parttime employment is at a record high. Selfemployment is at a record high. Those factors are depressing the. Ate at which wages will grow in terms of inflation, there are a whole series of arguments saying that technological change is a structural factor, keeping inflation reasonably low. Its not just the cyclical factors, its the structural factors as well. Nna next, bob remember, if you are a bloomberg customer, you can watch this show using tv. You get all of the charts and functions that you can click on and follow along with and using your own work. You can influence the conversation also, by asking the by clicking the button that says ask at the bottom of the screen. Matt Sergio Ermotti signaled that the Worlds Largest wealth manager has resolved its capital and legacy cost issues, and shareholders focus is turning to returns. He spoke in an exclusive interview with bloomberg television. The capital location and business makes has changed. We still have a very important Investment Bank that is instrumental and important to fulfill our desires to be the leading wealth manager in the world. , howt the end of the day can we translate the cash flow that we generate today into capital returns . Investors are waiting for the timing in which the capital build up to fill regulatory requirements is over, and the cost associated with legacy matters is addressed. I believe we are in a good path and are almost there, and actually we are there. Now people will start to see the catch. We are coming back through dividends or share buyback, and i am confident in the for siebel will future that we will be able to sustain our desire to be reclassified. Are u you or six years into the Strategic Wealth overhaul, which doubled down on wealth management. These years have been defined by regulation. What do you see in the next 16 years . Regulation will continue to play a role, but not as significant as technology. I dont know now, if something will sit here and look back at the last 10 years and say, look at the amount of changes we went through because of technology, and all of them are, in my point of view, net positive. I think we will have an industry that will be much more efficient and effective in the way we use our cost and financial resources. We will have a Better Service to our clients. The industry really needs to find this balance between cost advantage between creating cost of image in order to rebuild decent returns as an industry, past some of those savings to clients, and ultimately the benefits to shareholders. Anna you talked about it in the article, but you expect to see further consolidation. When we are talking about consolidation and the technology , what that creates, it will mean job losses. How much are we talking . Sergio job losses are people changing their job. General, we are going to go through a huge amount of demographic contraptions. We are going to have more people retiring. How do we replace those people . Ofgeneral, there is a lack demographypositive trends. Therefore, we need technology to step in and seal the gap of the demographic trends. He is also featured in the new cover story of Bloomberg Markets magazine. Oming up, kobe steels scandal shares plunged for the second day as the company says it may have falsified data around another one of its products. Calling a timeout. Castellini and president the catalonian president says he will seek talks with madrid. 1 48 in the morning in new york. S p futures unchanged. We saw a new record on the dow. Lets go to Bloomberg Business flash. Steel has plunged again after admitting and suspects data was falsified on a number of its products, iron ore power. It has been used in cars, rockets, aircraft engines, and bullet trains. Than one third of the companys value has been wiped away. This may play a role in the countrys snap election. Management has built a stake in smith and nephew. It is not clear how much the maker of artificial hips and knees the activist investor owns. A representative for elliott declined to comment. A spokesman for smith and nephew said it does not comment on speculation, or the identity of investors. The five ayers to the walmart fortune became 5 billion richer yesterday, after the Worlds Largest retailer says it expects u. S. Ecommerce sales to surge 14 in the next fiscal year. The forecast pushed the combined net worth of the waltons to 140 billion. That is your Bloomberg Business flash. Matt thanks for that. Lets get back to the scandal engulfing codebase steel. Engulfing kobe steel. We want to bring in the deputy tokyo bureau chief for bloomberg news. Latest developments today concerning what was first a problem, i thought, with just aluminum and copper, but now seems to involve iron . Thats what typically happens with these kinds of scandals. We are starting to see more information breadth out of the company, reports emerging that the company may have falsified data on iron ore powder, which is typically used in automobile on. S, brakes and so there have been other reports out today that units of the company may have also find data related to Semi Conductor material. We are starting to see more information, out of the company, and obviously the Market Reaction has continued. Shares plummeted yesterday with most of the shareowners unfulfilled. They were down another 19 today. We can continue to expect to see this dominate the headlines for the next few days to come. Do you have a sense of how the business is going to cope with this crisis . As you pointed out, the price action has been pretty ruthless. I think it wiped off the third of the market cap over the past two days. As far as how it is going to cope with the crisis, there was a report today that has been denied by the company that it would to sell its real estate assets. I think a lot of it will depend on the investigation into the exact details of the extent of the falsified data, what it extended to, how many products that affected, and what customers were affected, whether. Here will be recalls its a little early to tell what that will extend to. On the flipside, one of my colleagues spoke to an analyst at jefferies today that says this is not the end of the world of them, and at the end day, most customers, including automakers, dont have much choice but to continue using this product. Anna fascinating story area thanks for joining us. That fascinating story. Hanks for joining us ruthless price action you have seen around the stock as a result of the scandal, bob. Here it is once again on this chart. Whenever you have a scandal, whether it is here with kobe steel, with questions about , whetherf the product it is the Auto Industry, whether it is the highspeed latrines in japan, youve got serious questions about the quality of the product highspeed bullet trains in japan, youve got serious questions about the quality of the product. 15 to 20 years ago, investors probably would have said, because i am can serve about kobe steel, i will take it down to 40 . Is thathappening now investors head for the exit, so rather than just reducing the position slightly, they are exiting companies which are scandalprone. Over thet was with bp gulf of mexico, whether it was the german Auto Industry over the emissions problems, and the same here. You see very heavyselling pressure. The clients of investment toagers want good reasons as why they want to hold kobe steel. Matt what about any Japanese Company . I feel a lot saying this from germany, so close to slack wagon, so close to volkswagen , but does it not Say Something bad about the Japanese Corporate culture at large . They have had issues with takata and other companies that have and nobody problems, says anything because it is frowned upon in japan. Japanese authorities, if you talk to people at the ministry of finance or bank of japan, they are since it of about this, and there they are sensitive about this, and there has been a campaign to improve Corporate Governance in japan. You have seen authorities adopt a number of corporate government standards. Governance standards. Agoe were problems 20 years. There has been a steady improvement. Is it perfect today . Obviously it is not, but by an order of magnitude, it is much better than it was in times past. I was going to ask you about china and whether you see any bubble in stocks or the housing market, but during the break we had an interesting conversation where you said you dont the many bubbles anywhere. Explain more. Bob first, how do you define a bubble . Typically when you have a market bubble this refers to the graph you showed earlier on. Bybles are characterized high levels of investor leverage, bank leverage, corporate leverage. We saw that in 1999 and again in 2007. We see it in very stretched valuations. I cant say that markets are fairly valued, but obviously the s p is expensive today, but less expensive than 1999, 2007. The other characteristic bubbles apart from leverage and valuation is, do you see concentrated investor volitions . Int was clearly the case 1999, when there was investor concentration in the internet sector. That is not the case today. We see a high degree of caution. Anna bob parker. Up next, stepping back from the brink, we look at the latest developments in catalonian independence. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. He will seek talks with the Central Government. We are live in barcelona. Back on track. Signals into capital and legacy issues. He spoke exclusively to bloomberg. I believe we are on a good almost there,e actually we are there. People can see the cash flow coming back through dividends or share buyback. Europeaniott sheikh campaign. Setting his sights on the content building stakes. Plunges again. A second day even out the nikkei is set for its highest close since 1996. Welcome to bloomberg daybreak more europe. I am matt miller in berlin. Anna i am anna edwards in london. Lets talk about the start of the european trading day. Picking up on the headline news, about the nikkei, confirmed closed at its highest level since december 1996. It has risen by zero point 3 . How does that role into the European Equity equity trading day . The your stoxx 50 is up. 4 of 1 . Looking punchy compared to where the u. S. Session is expected to open later on. The u. S. Futures look flat to mixed. Story,e of the spanish we factor that into the equity trading day. When we get more on the ibex we will talk about that as well. Take a look, i have the msci asia, always index on the risk radar. Or asia pacific. Also showing gains as you would imagine. Often times when we see gains at of the u. S. , feeding through into asia, they come through into europe as well. Take a look at the euro. You can see little change but holding onto the gains we got yesterday after that catalonians down a little bit. Back to down a little bit. We will hear more about what is going on in the catalan ale catalonia independent situation. Owner to take a look at jgb. No longer seeking the safety of Government Debt in japan. Even though the arrow is green there. The 10 year yield coming down with the green arrow. Beh a 2. 36 yield, it should 2. 4 to get to the level that l gross has cited which is in his opinion and end to the 30 year bull market in bonds. We have not reached a yet as tax reform seems to stumble. Anna lets look at the bond market. This is what we are seeing in the bund futures. Keeping an eye on the spanish market same reason we are keeping an eye on the ibex. We have seen pressure as a result of the tension between barcelona. U. S. President donald trump has said he plans to make changes to the tax by within the next few weeks without giving any details. That thesed concerns quarrel with bob corker scuttle an overhaul. Been criticized for adding to the ajit deficit. Analysts suggest it would raise taxes for 30 of people taking and 100,00000 year. North korea appears to be appearing to fire multiple scud missiles. Citing an identified unidentified person. Transferring 30 scud missiles to a Maintenance Facility on the west coast. The movement is in response to an incident in which north korea fired 70 rockets. The uks Prime Minister has stressed to President Trump that vitally nuclear deal is important for regional security. The leaders spoke on the phone with theresa may reaffirming britains strong commitment to the accord. This comes a few days ahead of trumps expected announcement on certify durants compliance to the deal. Theresa may has risked angering brexit supporters. Toan interview she refused say she would vote to leave the European Union in another votedndum saying, i remain for good reasons at the time but circumstances move on. Is ii did last time around looked at everything and came to the judgment and i would do exactly the same thing this time around. Channel fourld news he Still Believes the country is better off inside the eu. The ceo of ubs has said the wealthiest individuals are staying on the sidelines when it comes to cryptocurrency. He told the mark that people are more curious than really willing to invest. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Anna thank you very much. Let see how all that is playing out in the market in asia. Sophie kamaruddin is standing by. Sophie the nikkei to 25 hitting a new milestone closing at the highest level since december 1996. 21,000 may not be too far behind. This is despite the dreck we are steel. From kobe falling 18 , the worst today slump for kobe steel given the scandal engulfing that company. China is sliding. The chief executive did not quite spell out plans to address the housing crisis. At toshiba that is snapping a fourday rise. Investors should reject toshibas earnings at the Shareholders Meeting on october 24, an official said. Matt thank you. A look at your markets. Lets get over to catalonia. The president of the region has stopped short of a declaration rode backndence or after signing when saying he will see talks over the future of his region in spain. Call for dialogue because europe is afraid of the outcome if there is not dialogue. The calls should be heated so we need to open up a time to have a dialogue with the state of spain. Matt lets cross over to barcelona where bloomberg reporter has the latest. Wilma tread will the dread thept the madrid accept offer . Maria absolutely not. It is not going to happen. The comments we got from spanish Central Government yesterday night are anything to go by. A spokesperson saying this is completely irresponsible. The way that major it interpreted what happened, they it was about and the language. He thinks he has a mandate to create this republic but suspended the process by which this republic can be created. Enough,id, that is there is a step too much. The question is if this is enough to trigger article 155. Cabinet is meeting at 9 00 a. M. And he will address the Spanish Congress later tonight. The question is how far will they go . What would happen to petrol markets, what happened yesterday was unacceptable. The he is dependent on cooperation of others. Politics ofn catalonia. How much is that part of the answer to what happens next here . Maria that is the key. Is overseeing a coalition of and it is weak fragile. They reported this four week. There was divisions yesterday. I was at the Catalan Parliament and it can see how faces dropped when he said it is going to be suspended. Catalonia was an independent nation for 10 seconds and then it was suspended. A lot of people, the Left Parliament visibly angry. People on the ground, the voters, the people who went out on sunday and voted, they said this is not what we were promised. A lot of people faces dropped. This is not fixed backed result they expected. His own people are asking him to step aside. Anna thank you very much. Journey us now from amsterdam, the chief Investment Officer. Conversation. The you think that markets are overestimating Political Risk at the moment. Youre not concerned about the separatist movement we are seeing in catalonia might inspire other movements to carry out similar activity elsewhere because this is not the only separatist movement in europe, is it . Guest yes, so good morning. There is a severe crisis going on in catalonia. It is mainly an institutional crisis, a question of legitimacy of the region. Region to recognize the being highly favored at the European Union especially after the broadening of the markets in 1986. The reality of the crisis is institutional. It is not touching the fundamentals of the catalonia economy or the spanish economy. It is more from pure political are in the market, they reacting immediately. Over the medium term it is a rather long process and number two we still have even if the attention is very high these days, the capacity for the European Union to play the mediation and we have to recognize that for the year that we are seeing the Political Risk has been overestimated on the moment and the fundamental, they are stronger than politics. We see, major banks moving their headquarters, hasnt some damage already been done to the catalonian economy . Guest it may be but we have to recognize also the way to of the catalonian economy into spain. Also the trade with the french part of catalonia is stronger than the links with spain. I think this is, we are talking about an integrated region into the european market. We should not overestimate the risk as we should not overestimate the risk when it comes to brexit. Anna in terms of what you would buy or sell, we have seen a lot of tension focused on selling a certain stock in the ibex and we have seen the bonds coming under pressure, yields going higher. Are you going out to buy spanish stocks in the nearterm, we expect them to go higher at the start of trade today according to features. Marketshe spanish stock present represent a portion of the european index. Most investors are looking at europe as a whole. The Global Recovery is also benefiting to spain. Whatever tension we have. I think they are still a good value to be found in the Banking Sector in europe. Also spain is part of it and especially in the industry industrial sector. The industrial sector has been lagging because no one believes of therecovery industrial sector. Now we see extremely strong signals coming from the world trade, we see a lot of multipliers coming from the industry industrial recovery and for that reason we think the the one sector to focus at this moment. Much, thek you very chief Investment Officer at avn, he will stay with us and we have a lot more to talk about beside that story out of spain. The likelihood of a rate hike is one of those things in the u. S. With the minutes of the september fed meeting do, we get the view of ubs Ceo Sergio Ermotti in the interview we will show you. This is bloomberg. At this is number daybreak europe. Strongerdollar trading at 118. 2. A little bit of confidence in the single currency as a result of what we saw in barcelona. The catalonians stepping back from that declaration of independence. Up atex 35 expected to be 1. 7 . A mixed picture coming through on the german bonds versus the spanish. At oneield at the german 1. 4. The yield is coming down. Movement across europe into the periphery. We have the by market moving higher. Soldew benchmark that was 7 , 2020, zero point eight bond. Looks to have replaced the one that was previously the benchmark. Substantial movement showing up on the bloomberg for the french currency. Kobe steel has plunged again. Beenlawed products have used in cars, rocket engines, and bullet trains. The scandal has seen more than one third of the value wiped away. Shake and customers have attracted the wrath of regulators. It may play a role in the countrys snap election. Tech the terms of the deal were not disclosed the deal is valuing it around 2. 6 billion euros. Beat out pitcher mother firms including cbc Capital Partners and partners group. Billionaire paul singers hedge fund Elliott Management has built a mistake. It is not clear how much of the maker of artificial hips and knees, the investor owns or what his plans are to push for at the company. A representative inclined to comment. They say they did not comment on rumor or speculation or the identity of investors other than those publicly disclosed your the walmartrs of fortune became 5 billion richer. It expects u. S. Ecommerce sales to surge 40 in the next fiscal year. The forecast added a 4. 5 share 4. 5 to combine shared. That is your Bloomberg Business flash. Anna thank you. Minutes from the federal open Market Committee meeting. We will feet it will reveal how torn they would were in raising rates. We spoke to the ubs ceo about his view. He sat down with bloomberg exclusively in new york. Guest the market is pricing the probability, expectations that evenay see at a point, three quarters of a point in the future. I would say that the equity markets are inclined to this kind of potential likes. I do not expect the fed to move aggressively. They have a nice path of being [inaudible] and they can contract the Balance Sheets is late. The new president is not shy about sharing his views on economic policy. Are you worried about the independence of this said Going Forward . You look atly when this kind of political intervention not only in this country but generally in the world, they may attract the country contrary reaction of people trying to show they are independent and therefore i do not think it is a smart move for politicians to interfere in central banking Monetary Policy. When you think about that policy specifically, is there anything, does the prospect of a change excite you, how would it benefit your business . It guest we are not overly focused on those kinds of leadership changes. The and goal that matters is not necessarily Monetary Policy. It is more if theres any implication to the oversight of the prudential part of what the fed or Central Banks is doing to our industry. Pathnk that is the there seems to be taken and i do not expect immediate changes. Ermotti. T was sergio to bring you up to date with what is happening at kobe steel. More products under suspicion. We have seen the stock moving lower once again. We talked to bob parker and he said this is heart of a broader trend, a decadesold trade of investor intolerance. Se Days Companies investors are heading for the exit before the get asked. They get asked. Matt it is an interesting story , also concerning if you are flying in a plane or writing a bullet train or driving a car that uses those products, not as strong as the company said they would be. It is interesting that we see the nikkei to 25 closing at a record high or the highest level it has since 1996 and it is being led by some industrial companies. Pacific metals, Fuji Electric leading gains. Companies that would be considered in a similar sector as kobe steel, not the concerns about the Japanese Corporate culture that you may be worried about when you hear of a story like this and think about also stories like takata when it seems to be part of the Corporate Culture to not say anything about these errors, not report them to the higherups and move along as if nothing has changed. Odd saying that from germany the seat of volkswagen where they had a similar issue. A new record high on the nikkei to 25. Anna absolutely. Despite the weakness the japanese markets in general are doing well. Another thing we pulled out is the role of activist investors. It seems there were not as many in europe as in the u. S. But that is changing. Issinger paul Singer Building another network with his nephew. It is less than 2 because the company has not had to reveal that singer has the stake at this time and he would have had to do that. He has been building a stake in a german engineering business. A lot to talk about in terms of what it is investors want to get out of europe, are they trying to do deals and put companies together or are they driving more out . Ceramtech, it of does some of the similar , also being sold, we are reporting now for about 3 billion. A lot of m a and that sector and watch to see banks move after the comments about how he has gotten as far as he needs to go with capital and with concerns about legal issues to start paying shareholders back. The shares rose in the u. S. Yesterday, could rise year to date as well. Will be speaking to the World Bank President tomorrow at four 2 45 p. M. Christine lagarde joins us at 3 15 p. M. London time. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com