Is the boeing breaking up the duopoly . Brexitress on the negotiations. U. K. Economy is not growing at a rip roaring rate. Carney speaks in less than two hours. Matt good morning. From the index opening, and castrating, we see Index Futures here. We had a mixed picture yesterday. Not a lot of action. Today we see the same thing. 0. 2 . Ex is down about little change on the dax. Blooms had been stuck in a range for so long. This is a onemonth look at the german tenyear trade. Investors have started to stock up on their safe haven bets. Buying them and pushing the yield down. It is up a little bit today. You can see from that red arrow pointing up, dont let that confuse you. Right now trading only at 38. That is a pretty low number for german bund it yields. Guy take a look at what is happening with the u. S. Shape of the curve. Yesterday the curve flattened, again, and big. It was a really big move. It is what we are seeing in europe as well. The markets should Pay Attention to it. Lets look at what is going on with the markets this morning. Copper into show you just a minute. That is pointing higher. The big metals producers, saudi arabia up. The oil story in focus as well. Lets show you whats going on with the commodity session. Here is copper. That is trading up. Yesterday we saw a big move. 2 on copper. Up, iron ore down 2 . That is worth paying attention to as well. But get a Bloomberg News update with juliette saly. Juliette north korea has warned that a nuclear war could break out at any moment. The comment from the nations deputy ambassador, as the u. S. And south korea again one of the off the westrills and east coast of the peninsula. The country has become a fullfledged Nuclear Power which possess the means, and warns uis mainland the u. S. Mainland is in range. U. K. Prime minister Theresa Mays Brexit mission to brussels has been a flop. She was hoping to unblock stalled negotiations. Following the meeting last night, both sides issued a statement that entrench their previous stances. Ministers are losing faith in the eus willingness to strike a deal. President trump and Senate Majority leader Mitch Mcconnell has presented a united front. The two appeared together in the rose garden, and insisted they are closer than ever before, despite having publicly attacked each other in recent months. Trump told reporters they are on the same page when it comes to taxes. Fighting forwere lower taxes. The biggest tax cuts in the history of our nation. We are fighting for tax reform. We are getting close to health care. It will come up in the early part of next year. We feel confident we have the votes. Catalonias Regional Government meets in barcelona to consider options that spanish me minister threatens to meanwhile spains court has ordered catalan fleet in ireland, three people have died as the country was hit with some of the worst weather conditions and 50 years. Banks closed branches and airlines canceled flights. Homes and50,000 businesses lost power while schools stayed closed today. Global news powered by 2700 journalists and analysts in more 120 countries. This is bloomberg. John taylor is said to have impressed President Trump in the search for the next chair. The stanford economist hawkish monetary role as risen to second to the betting market. How are fx markets reacting . How are markets in general reacting . We are seeing the dollar go big. We are seeing u. S. Yields rise. Yieldsseeing you will tick up globally. We are seeing a clear follow through on this. Taylor has jumped up and to being seconded investors thinking. Seen ask it was unlikely to happen. Now, yellen is still in there, and taylor is secondmost likely. It is important to emphasize that trump will meet with yellen later this week. Yellen is probably still the base case candidate. It makes sense that taylor is the second favorite. The market isnt surprised by anything right now. They are all trending lower and lower. The market simply does not anticipate that we will see any kind of tail risk events shaking things up. If we get a tale risk event, how aggressive could the move the given the setup we have on volatility gauges . In all cycles markets tend to go, that increases leverage and. Reeds complacency this cycle has gone a long time, but that makes sense. We have seen Extraordinary Bank action in terms of qe and liquidity pumped into the system. Overall, this declining volatility should continue longer. Willase case is it continue for another few months, another year, who knows . The longer it goes on, the more we have to prepare for tail risks that might be the catalyst to reset everything like we have seen in every other market cycle. North korea, which everyone is looking at, catalonia which is an underestimated risk, which is an ongoing situation that investors are overlooking, and near the end of the year we have the possibility of a Government Shutdown in the u. S. Matt i saw that in your macro view this morning. You talk about the reason the Government Shutdown is a main concern is that markets are so illiquid around the end of the year. What does the illiquidity come from, is it just the season . The Northern Hemisphere tends to take extended holidays. A lot of traders are out of the markets. Many banks, many hedge funds, they have their end of year, if youre a traitor there is no incentive to escalate your risk in december. Most likely your bonus has been decided by november. Why take that risk to make a little extra money in december . Youre not going to get paid for it and all there is is downside. There is little incentive to take extra risk in december for many markets. So there is less liquidity. On top of that, around here and you have funding issues. Especially around a shortage of dollars. Overall, the funding their december 31 tends to be a low liquidity moment. If this situation extends into december, it could get quite messy even if he gets resolved in q1. Thank you very much. Plenty of analysis around bloomberg. You got the Morgan Stanley numbers. I want to show you this curve from yesterday. This yesterday as the taylor story begin to gain traction. Charted against the euro. On iraq upto focus next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. I want to get the Bloomberg Business flash. Airbus has agreed to. Cquire a majority stake and a potential effort to circumvent the tariffs, airbus will add another Assembly Line mobile,series in alabama. Netflix added another 5. 3 million subscribers beating estimates. It is expecting another 6. 3 million to sign up in the fourth quarter. Analyst estimates, while revenue beat forecasts. Steel has received a request from the u. S. Department of justice on its data scandal. Its own investigations will reveal the prices began more than 10 years ago. The Global Review of its Business Unit is also likely to show further instances of data falsification. Rio tinto is on track for shipment of iron ore from Western Australia will hit about 330 million metric tons. It will top the amount exported last year. That is your Bloomberg Business flash. Thank you. Lets stay with the commodity theme. Speaking exclusively to bloomberg, iaea inspector said conflict in the region wont have a major impact on markets. Say whattoo early to , what thee result implications on the markets. For the time being, we dont note a major impact on oil markets. Lets get another take on this. Is he right . The oil market looks the same. They are pretty much flat. They are slightly down. In terms of whats going on on 200,000nd, youve got barrels offline. Know, theres no action going on in the fields. You had some casualties, but you are also seeing negotiating between the kurds. It could be worse than we have seen. Matt couldnt to get much worse . Havent the peshmerga been really emboldened by their success in the fight against isis . Gain . They have a lot to they do. They have been emboldened by that. You have to remember to cook k has been a disputed area. It, but atontrol of the same time there is some dispute about who should have control. On the other hand, you are seeing a level of caution, and how the two sides are reacting. You have seen negotiated retreats to avoid bloodshed. That suggests we are not going for the allout war. Guy what happens next . How does this story evil . How does the story evil question how does this question evolve . How does the oil market deal with this . You have producers who will not be happy about this. On the other hand, it is affecting races and that is not good news. You have to consider iraq. They come from fields away from this area. You will not see a dramatic 400,000 barrels off of the market. In the context of a massive global oil market, that can be made up easily. The swiss activist investor has found a new target. According to person with the stake is around 100 million francs. Why is Credit Suisse targeted, and do we know yet what the plans are . I was asking myself the same question. Weeks ago he said he is not going to target the bank. His main rationale behind this move is the share Price Performance of Credit Suisse. That is something other investors would say as well. The big restructuring the bank was going through, and the Capital Raising shares have been up so far this year. This needs to be changed, and this is what he took a stake in Credit Suisse. The big plan is to break the bank of into three parts. I dont have concrete details at this stage. It seems to be the course of action. That is a huge plan. That is a big goal there. How do you think, how do you rate his chances of success . I was asking myself this question. Ofs is a guy with the fund 250 million. He is wellknown in switzerland and he has a track record. Success, ith some comes down to whether he gets enough support. He is speaking at a conference reportedly in new york on friday. It comes down to further investor support. I think the bank may talk to him and listen to his proposals. Given the restructuring theyre going through, it is hard to imagine this will lead to anything. Never say never, and many things are possible if he gets enough support. I dont think the bank will react to this at this stage. Thank you for joining us. You can follow Morgan Stanley and Goldman Sachs thirdquarter result. Check that out when they report earnings later today. Get to our stocks to watch next. This is bloomberg. Guy stocks you need to Pay Attention to. Airbus on the bombardier news. Credit suisse on the spec sale. Keep an eye on rio as well. This is bloomberg. Guy welcome, a minute until cash opens in europe. European equities, we have a spanish market that will probably drop more than most. Going to open up down another. 3. The rest of europe looks fairly flat, the dax a little stronger, the cac a little firmer. Keep an eye on rich more, richmore, airbus. Matt i have to show you a technical indicator. Cross, u. S. Oil nymex crude, the 50 Day Moving Average in pink, the 200Day Moving Average in gold. The 50day is about across the 200Day Moving Average. That is a positive sign for technical analysts if you buy into that, it means oil will go up. Guy psychology. , tradingopening flat around the 75 level. Keep an eye on the little line on the bottom, the ibex will be an interesting one. You could see weakness at the getgo. You may see a little more softness there, as well. Interesting to see where that trades on the nine handle as we worked our way to the thursday deadline in spain. Watchx yet to get going, inventories bouncing back strongly. Profits up on the back of that. Manus cranny has the details. Manus equity markets have moved of the asiane end session. The prospect of nuclear war at any time is the message from north korea. Other factors saying the north koreans may be in moscow for discussions trying to come off the fever pitch. Down for a 14th day in a row as the dollar is better bid on the story of john taylor going from wild card to one of the key contenders for the fed. By point 1 . P we are keeping an eye on the luxury in the form of rish mor richmore. The pound is under pressure. That dinner was served cold. In transitions, no breakthrough in terms of prospects of a discussion of trade. Sources saying europeans are less than bothered about back trying to get a deal done. This is the probability of a rate hike in the united kingdom. Inflation expected to come in on a fiveyear high. We are not getting paid as much as the inflation rises, the green line is the new target for the market. One rate hike in november and done, they say. The First Quarter of 2019, which would be the end of carneys ten ure. You get another rate hike. Will he go in front of the committee today and stick to the line, which is coming off . Wipro quote, sterling could be as long as u. K. Equities, so could the gilt market. This is your christmas gilts. These are the markets which are going to be in place. Your gilt yields 1. 35 . In saying look, you have to roll out your programs, think about no deal and what that might mean for you ks assets and for gam, that could mean the pound could drop as much as 10 . A moderately dovish call. I am off to Digital Radio with caroline. Manus, lets talk about the movers. Well,got daily mail doing airbus is a heavyweight on the back of the story with the cseries. Buying into that business. Is it a defensive move . Komen and about that concern around that. Danoneis on the up, rising on the back of better numbers. China a factor in that. Credit suisse at the bottom trading higher on this stake build a story, possible breakup. It aready talked about little bit. Quick look on the downside, Standard Life everything, airbus surely on the front foot. Is one we will talk about. Agreed to acquire a majority stake in a cseries jetliner program. For more,s Benedict Campbell joins us in berlin. Arbus walked away from similar deal years ago. What has changed now . Last put the question in night. They sprung this deal on us overnight. Tom wants to speak to you, and his response was, a couple of years ago, the cseries wasnt where it was now, wasnt certified, wasnt flying. , rampingr own issues up production on the 350, a couple of other programs so the timing then didnt seem right. Now it does. You also need to remember the bomber story is not a good one. They have had an issue on the train side. They were probably waiting long enough for the pain to build up so they could walk away with a steel. Much of this is about not letting the chinese get it . If they were to put this in their reduction, how would it change the duopoly story . That is always the big fear, lurking around the airshows. Benedikt that is absolutely right. They have just started flying its playing, it is a real plane, not a paper plane. There was the concern there is technology here owned by bombardier that would be interesting to them. Airbus is closing that flank now by essentially controlling the cseries. That is good news for them. It is great news for airbus in that they dont have to spend anything on this and they get a brandnew plane. They could probably use plug and play for their future technologies. The 320 is a nice plane, but it is from the 1980s. They will be looking at what can we take from the cseries that we like . How can we save on Development Cost on the next generation of three 20s. Of theght, i heard some aeronautics are the kinds of things on the cseries they like. You can probably see some of that technology transferred to airbus. Guy where does this fit in . If you are told you have to start selling cseries jets, as well, how do you make this work . Fit with the 319, at the bottom end of the narrow bodies, there is an interesting dynamic at work here. Benedikt there is a bit of revision for airbus. For the long time, we heard people were upgrading. The 319 is all but dead. They havent had a new order since 2012. The 318, the super style version of that doesnt sell at all. A lot of people have upgraded into the 321. Probably the admission that airbus from airbuss people want to fly pointtopoint. It is a brandnew plane. They are probably thinking we will kill the 319, we get the Bombardier Cseries which has served a market of 140 people with a new plane, why not go with it, especially if it doesnt cost money. Matt i hope there is a decent amount of legroom. Benedikt that is what people like about the plane. Matt what about boeing . It has made some pretty strong accusations here in response. Benedikt boeing is the one with big on their face in this because they tried to keep on the deer out of the u. S. Market. We saw tariffs slapped onto the cseries and then we hear the idea, why dont you assemble a plane in mobile, alabama where we have a new Assembly Line. Matt ive been there. Benedikt good casinos. For airbus, it is a way of adding capacity to its line. For bombardier, you get a made in the u. S. Sticker. Interesting to see how trump response to this. This ebook it as a success and say, i put up a fight and we get u. S. Jobs, or does boeing call and say hang on, this doesnt seem like seems more like a trojan horse. What is going on . That is something we need to follow up on. Matt they say it is a questionable deal between two heavily subsidized contributors. Thank you for joining us, benedikt kammel, bloombergs global is this manager talking to us. Madrid finds evidence of Catalan Police force and a new deadline for barcelona to back down. The latest on the spanish crisis. This is bloomberg. Guy welcome back, lets look at the markets to see what is going on. Stoxx 600 is just up, but the main forces around europe are fairly flat. Doing well,one banks doing well, media doing well. And leisure where we are seeing weakness. The miners have come off. Basic resources turning around despite copper being up overnight. Iron ore softening up. Lets talk about one of the big stories roiling european markets. Has cut its projected growth over the catalan succession story. Tohas reduced its forecast 2. 3. Fory has given a deadline catalonia to back down. Overolice chief evidence of sedition. The pressure certainly being ramped up on a number of fronts, economic and legal when it comes to the catalan story. Maria thats right. Now we have the Spanish Government saying we are going to have to cut down our growth for next year to 2. 3 from 2. 6 . The Spanish Government now outputng this is a big and it is not going to have an impact going into next year. Pressure is on the catalan government. The head of police was asked to given up his passport. He will have to report intimate dread every two weeks and the heads of two Pro Independence are being sent to prison. In the Ongoing Investigation into sedition and the runoff to october for november 1. Pressre holding a conference later today. We might get a sense of where they want to go as they faced a thesday deadline to give up independence course oh go full ahead, which would trigger article 155 and madrid suspending the regions economy. Mariathank you very much, on the ground, covering this story out of barcelona. Simon french, the chief economics at economist at Panmure Gordon talking about what is going on in catalonia. This is one of three concerns that our own strategist from mliv, mark cudmore, listed as being a possible risk to the global bull market. How bad could this get, simon . Simon good morning, matt. What we worry about on thursday is one of escalation. It is quite clear that the have played it sensibly since the referendum in not declaring independence and looking to use that threat as leverage to do a twomonths negotiating process. Concessionsdraw with greater autonomy. Spain does not want to do that and has put in place this thursday deadline. If they trigger article 155, this escalates and it becomes a much broader event market event than just spanish banks, which felt most of the heat since the first october referendum. It is one of escalation where you start to question the european union, the European Commission being drawn into this m from aistracting the good growth story over the past three years. Matt they have had to reduce their fourth growth forecast in spain. Are you concerned about what we are seeing happen in the Eastern European countries, as well . This so socked socalled orb anization of austria. Germany, there are other parties where rightwing populists stand a good chance. Does that concern you . Simon it is a great question because you have got a lot of the same cloth issues transcend from the fact that consumers, businesses, look at the fact that they have very little local market power, local wage negotiating power. A lot of prices the Central Banks have been finding out the cost is made globally and what you are getting is a strong right offrom populist, Center Governments and left of center oppositions, saying we can take back control whereby your local governments can be returned to the level you feel more comfortable with. I fear that a lot of the progress we have made economically over the last 30 years would go into reverse if some of those policies were implemented. Guy would you buy Spanish Government bonds in advance of thursday . Think there is enough uncertainty regarding what will happen on thursday. Behavioreen erratic from federal government for me to want to stay out of that market looking for greater clarity. Guy the ecb is buying Spanish Government bonds. Simon we spoke about this 10 days ago. Bond Market Reaction has been very benign. Spreads between spanish debt on the 10 year and bones about 120 basis points. Barely a [bleep] if you look at the chart. A blip if you look at the chart. The reaction function is expected to be very limited, but there is an escalation risk, particularly on thursday, which i would want to be on that side of the trade. Guy which peripheral bond markets are you when . If you are you in, in the u. S. And you see spain deteriorating, i am not going to buy spain anymore, i am going to buy italy. Or it has been a great run in europe, see you later . Simon you have to look at what happens on thursday, rather than what is going on in spain or italy. If you are buying into the ongoing growth story in the eurozone, i think selection out of spain and i wouldnt go into italy, because i think it is the next caps off the rank. Prices are high, but it keeps you out of the market at a time when every single Political Risk over the last 18 months has either been wrong or somewhat wide of the mark. You cannot have confidence on how this will evolve in the next 48 hours. Matt i was talking with one of the bookers about budget day coming up in the u k and saying, pretty soon, no one else in the world will know what that is. I know in london it seems important. How much importance is the new kit you cave losing as far as investors are concerned due to brexit . Simon so far, the numbers have been rather erratic. We had some opportunistic buyers coming in with the sterling devaluation in 2016. Investment sentiment is mixed across a lot of surveys. But looking ahead to the budget you mentioned the 22nd of november the focus will be on degree to which government brushes off austerity in terms of the opposition and increase the amount of spending and delay even further the dates with which the government is looking to balance the fiscal balance in the u. K. Matt remember, remember, the 22nd of november. Simon french, chief economist at Panmure Gordon is staying with us. , trump talks up taylor. The president gushed about the fed chair candidate. We will take a look at the front runners for that chair as interviews for the top job continue. This is bloomberg. Guy 23 minutes into the market open. Lets look at what is going on with the greenback. Extending gains after we were hearing john taylor said to make an impression on President Trump during an interview for the position of fed chair. The yellow circle indicates when the news came out. Simon french, chief economist of Panmure Gordon is still with us. Im trying to get my head around the markets. People are making market decisions based on speculation and scuffle but and rumor, and reporting on meetings that are taking place in the white house behind closed doors. They are repositioning around this. Is this a rational market right now . Commentst regarding around the relationship between john taylor and donald trump. Reactiont a rational because we dont have a public statement. What is interesting about john taylor is that he has something that will appeal hugely to the president , and that is a rulesbased system that provides less discretion in his approach to monetary policy. There are people on capitol hill and the white house who like that approach. Of course, you plug in the central taylor rule here and you have Interest Rates somewhat higher. Is is why the greenback reacted the way it did on that positive talk. Will donald trump like the implications of a rulesbased system that generates higher Interest Rates and the u. S. And puts more pressure on trade for the you collect bluecollar workers . That is why markets are being so erratic regarding these views because you can base your argument on why the dollar will go higher in a john taylor fed. But you check back against that you instinctively think the Trump White House will not lower for longer. Guy there is a whole series of contradictions here. Taylor has published some papers, which may mean we have a more dovish taylor rule going forward, but we believe that. This is the u. S. Curve over the last month. It continues to flatten and flatten. Is that the logical response to the data we are seeing and the speculation around where we go next with the fed . Simon i think it is more a tax story myself, rather than the fed. I dont think we get any great clarity on the fed until we get an appointment, not just the chair, but the other vacancies on the fmo say. Oc,t dynamic is up and fm that is up in the air. Any bipartisan support for a tax seeminglyas gotten caught in the wings. There wont be meaningful tax reform to push up to sustainable growth. Matt where do you want to buy, to invest in the curve . Beon look, i still like to at the long end of the curve because i still by the structural stagnation thesis in economies, not least the u. S. The long been still looks attractive to me. I know it is not popular at the current point in the cycle, but we still havent addressed any of the big structural problems in the global economy. Therefore, i think that story comes back once the stimulus starts to be removed. Matt all right, simon french will stick with us. More ground to cover with the chief economist at Panmure Gordon. Up next, the u. K. And theresa may. 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. Will taylor rule . The dollar climbs after the Stanford University economist said toas said is impress trump. Airbus acquires a majority stake in bombardiers cseries. Prevent theempt to chinese from buying and preventing the duality duopoly . A fiveyearto hit high with little progress on brexit. Speaks < she two hours later. Welcome to Bloomberg Markets the european open. Im matt miller in berlin, alongside guy johnson in london. Guy lets focus on what is happening in the u. K. Right now. To atays attempt brexit talks. Both sides issuing statements entrenching previous positions, leaving agreements looking a little challenging. Call sunday sent it around monday. Boe governor mark carney is expected to be pressed on his missed inflation target in parliament today. We will get cpi numbers in an hour. How will the two events, cpi fall justpected to below the letter requirement, and the testimony later interact . How will lawmakers deal with the fact the consumer is being as squeezed as hard as they are right now . I think inflation will be a huge topic right now. We had the shock election called in april. Usually inflation is after every quarter, and they havent. The had to elect a new Committee Chair and this is the chance they have had to talk about inflation since march this year where we were in a fairly different set of circumstances. It will be a huge topic of conversation. They have two hearings before so actually, they will be talking by the time the data comes out. I dont think we can assume they are going to ignore it. A the data seems like bit difficult to ignore. I am looking at my screen, click into the u. K. And see the yearoveryear cpi, the survey is for 3 . The core numbers survey is 2. 7 . How is carney going to react to these kind of numbers . Lucy so, it is interesting. They have started to shift their message. For a while, they were talking poundhow it was from the after brexit and they could look through that temporary spike in inflation. Now they are starting to say less they will be tolerant. Maybe it is time to step in and they have signaled that next month is a live meeting. He hasnt done anything to damp down speculation that we get a rate increase next month. We see markets looking at 87 probability. Over three quarters of economists saying we will get it. To, if his one chance they are not going to do it, this is his chance to pull it back and i will be surprised if he doesnt. Guy we will watch with anticipation. Plenty of coverage around that event. On your bloomberg, a number of functions you can use to access that. Lucy makin, joining us ahead of the testimony and the data. Where lucys pick up left off. A policy mistake or not to raise rates . Simon i think they will be one in done in november. Ing signaled to markets mark carney has promised higher rates and not delivered. At this point, it is about the credibility. For will sit tight negotiations regarding the brexit deal and more data on the u. K. Economy. It is tomorrows data on the jobs numbers which will actually provide a full or picture on the degree to which higher inflation 2. 9 , willt run, start to feed through two wages, which are stuck at 2. 1 year on year and going nowhere despite a 46year low in the unemployment rank. Keeps spitting out data that is hard to get your head around. Simon you are alluding to revisions in the balance of payment numbers, which 490 billion pounds did numbers. Has hidden wage data in there. To wages,isions constructions, balance of payments. Bank of england have long complained about the had a look to try and increase the quality, but one thing i would say is the wages meaning that the models that have traditionally in this market generated significant wage inflation. Just broken. The ecb are having the same problems, but it is tough to have confidence in your forecast of your models have a poor predictive record. Matt what do you think of the forward forecast . I have a chart here, 9421 is the btvon the bloomberg, g 9421. The green line is what our survey of economists now show. This one hike and then holding until a couple of hikes in 2019. Does this make sense to you . Do you buy or sell gilts on this . Simon that green line is a little too bullish. I think in 2019, you potentially in march 2019dge in terms of article 50 and in that environment, it seems unlikely the bank of england would want to tighten monetary conditions and u. K. My own view is they will be one and done through 2019. 2018, 20 19 flat while we await the brexit settlement and in absence of any court inflationary pressure. What is interesting about 2. 9 , there are lots of goods inflation driven by sterling, very Little Services inflation. In that case, the bank can sit on their hands. Matt what do you think about gilts at 134 right now, 135 . Does it make sense after this next rate raise . Simon we have a target to return to 1 . I would be a buyer at 1. 3, 1. 4. I have been. I dont see an environment where the bank of england is going to stake out a path for a sustained rate hike in an environment where its nearest trading partner, the ecb, the bank of japan, the bank of china, highly stimulative. That is the International Backdrop that means yields will remain very compressed. Guy i listen to all of this why even bother with 25 basis points . Simon it is credibility. Guy they have backed themselves into a corner and have to deliver 25 basis points. The data isnt necessarily supporting them the august inflation reports set out that they want to see net exports to pick up in order to justify some removal of the stimulus in august 2016. When the data didnt come through, we had surprise speeches from the governor saying we see a rate hike in despite the fact that hasnt come through. Having promised that to the markets and retracted a lot of criticism to the rate cut in 2016, it is about saying you can believe us when we give you forward guidance. Guy even if we are doing the wrong thing . Think 25 basis points is the wrong thing. It would be wrong if they staked out Treasury Selection Committee or a march rate hike given the economy over the next 18 months. Around,on will stick chief economist at panmure us on daybreakn radio. The story drops at 9 30. Go to live go on your bloomberg and you will be about the find that event. Start with nine starts at 9 15 u. K. Time. This is bloomberg. Guy welcome, lets talk about the markets. We will try not to repeat ourselves too much. This is how the market picture is shaping up. A fairly quiet picture. Keep an eye on the stocks ne jra will talk about. We are watching richemont, danone. Lets get a first word update. North korea has warned that a Nuclear War May break out at many any moment. The comment to the u. N. Came as the u. S. And south korea began one of the largest joint naval drills off the east and west coast of the peninsula. Added that the country has become a fullfledged Nuclear Power which possesses the delivery means of nook various ranges. He also called north korea a responsible nuclear state. Bribes frexit mission to brussels appears to have been a flop. Following their meeting last night, both sides issued a statement that entrenched their previous stances according to a person familiar. Faith re losing the faith in the u. K. To strike a deal. Mitch mcconnell and President Trump have presented a united front, saying they are fighting for lower taxes and tax reform. The two appeared at the rose garden and insisted they are closer than ever before despite having publicly attacked each other in recent months. Trump said they are on the same page when it comes to tax. We are fighting for big tax cuts, the biggest in the history of of our nation. We are fighting for tax reform as part of that. We are getting close to health care. It will come up in the early to mid part of next year. We are going to have a vote. We feel confident we have the votes. Catalonias Regional Government meets in barcelona to consider options. Rajoy threatened to seize direct control unless the president for independent. Spains National Court has ordered the police chief to do surrender his passport after spying on his rival in madrid. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Thanks very much. Lets get to our top stock stories. A little under the look under the hood. Nejra cehic is there for us. Nejra the indexes might be little changed but we are seeing sizable moves in individual stocks. Pearson jumping the most in five months. Boostedigital revenue earnings at the worlds biggest education company. Pearson predicting fouryear profit fullyear profit in the upper range and the stock will come as some relief for the ceo. The company has stumbled somewhat this year on a gloomy outlook in the u. S. College market. An update for up day for pearson, and also airbus. Agreed to acquire a majority stake in bombardiers cseries and will start assembling the jetliner in the u. S. This packed opening a new front in the battle for global aircraft sales. Airbus will contribute no cash when the deal closes. By almost 3 . Her the worst performer on the europe equity benchmark, merlin entertainment, extending a drop of more than 20 right now. The biggest drop since brexit. We have to go back to june 2016 to see a drop this big. It sees 2017 ebit at the lower end of analyst forecast. That is largely what is moving the stock today. Matt thanks very much. Up next, what now for germany as Coalition Talks get underway. We will focus on the future of europes biggest economy. This is bloomberg. Matt welcome back to Bloomberg Markets the european open. Im matt miller in berlin. Preparing foris lengthy negotiations, exploring and theth the fdp German Green Party begin tomorrow. There have been suggestions that the cdus defeat in lower saxony have weakened the chancellors hand. She argues that is not the case. Us, marcel fratzscher, president of diw berlin. I cant understand why a defeat in lower saxony will defeat her in coalition negotiations, especially since the other parties didnt do great, either. What Angela Merkel is trying is a new experiment. There has never been this coalition. The conservatives, the green party and the liberals. She has defined a common position on a lot of important issues from europe to tax cuts, to refugee policy. The perception is she has lost about 8 in the federal election. Strong as she used to be an her challenge will be to bring all of these positions under one coalition government. It is a big feat. Pull especially with the to the right that is coming from the east. You have what is going on in hungary, the czech republic, really bavaria, as well. A very important german state, her partners at the csu pulling her to the right. How do the greens deal with that . Difficulty. Is the the perception in the conservative party is they need to move further to the right to get more of the votes of the afdt wing extremist party. Has a election coming up next year. She is torn from different directions. Green party want to put a priority on climate change, switching off Nuclear Power in powery, leaving coal plants. On the other hand, you have a strong conservative wing of the party which is trying to move to the right. Together ise forces difficult, but at the same time, if she is smart and i think she is very clever, she can utilize the different advantages and competencies in the distant parties different parties to make a coalition that can succeed. Guy good morning, it is guy in london. How will germany change economically as a result of this . Marcel germany has an incredibly Strong Economy at the moment and the new coalition betterent have never a starting position carried very high competitiveness of its export firms, a huge Public Surplus of more than 1 gdp. The question isnt if the government has enough money. There will be three major challenges to increase public and private investment in germany, which has been low. The second challenge is how to reform europe. Since president macron has approached germany and said we need a European Finance minister, we need to reform europe. These are the two major challenges. The short outlook for germany looks good, but will they use this these golden years to invest in the future. Guy what you think the answer is . Marcel the answer is tough reforms are made never in good times, but it difficult times. Germany knows this. My expectation is the new German Government has to engage with france and french president macron in reforming europe. Completing a banking union, union,g Capital Market having stronger financial integration in europe. There hasnt been much progress in recent years. Legacy problem, a lot of high debt in europe, a lot of nonperforming loans in many countries, including germany. It has over banking in its banking industry. My hope is that germany has to engage more in europe and that is a good thing. The Coalition Talks kick off tomorrow in berlin. At the same time, there is an eu summit kicking off in brexit is brussels. This chancellor merkel have time to be on the phone with theresa may and help her out a little bit in that situation . Marcel im afraid brexit doesnt rank very high on the list of priority in german at the more germany at the moment. It is low on the priority list. It is domestic politics, policy, the forming of coalitions. It is france reforming europe and even trump and the protectionist threat is higher on the priority list. Many people frankly dont understand what is going on on brexit. This combination of other priorities and not understanding what the fuss is about at the moment, that is hindering that being very important. Matt one of the things most people agree on is that germany needs more investment. You pointed out germany needs more skilled workers. Is the economy going to get this infrastructure investment, the fdp haszation that the made and the skilled workers it needs to power this economic engine . Marcel the big issue of labor market is a difficult one, because it can only be solved by more immigration and germany has been come alike the u. K. , one of the big beneficiaries of european immigration. Work. Come every year to young people, very skilled, but germany needs a lot more of that to fill that gap. Matt you are not talking about the refugee immigration, but skilled immigration from italy, france, within the freedom of movement, they are coming. People dont recognize they are coming because they integrate well. European immigration is a lot more important than refugees, in terms of numbers that is the question. Will germany remain an attractive place for people to come and work . That will be the key to the issue of if they can find skilled labor. Matt thank you for spending time with us. Marcel fratzscher president of diw berlin. Up next is surveillance. They will be focusing on the european Political Risk story. What is going on in catalonia and spain, very important as well. Join guy and myself on daybreak europe live on london dab digital. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Have impressed President Trump, but will his hawkish stance fit well with markets . Jet program is challenging chinas ambitions. Cpi is expected to spike to a fiveyear high as mark carney testifies this morning. This is bloomberg surveillance and im Francine Lacqua in london. We have a very packed show. Mark