Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20171122

Anna a warm welcome, this is bloomberg daybreak europe. Another cracking show for you, the lineup looks like this. Interview at 6 30 u. K. Time. Toa and will also talk Valdis Dombrovskis in an exclusive interview. The u. S. Equity you jurors are running at the bottom of the screen. Should begin thanks to the junkbond market . Maybe the money goes back into highyield, but up she goes. 20 400, 20 500, 2600 is where we are. For aning get set evolution of the stock market rally. Is there anything that can stop this . I think janet yellen also added to this. There is a bit of risk maybe with raising rates. Fascinating comments from janet yellen. Investors who are long in the equity market might be singing in the asian market. The hang seng hitting the highest in a decade. Asia heading for it record close, new alltime highs in u. S. Stockmarket. Levels. The 2070 we need to talk about with tapping in emergingmarket currencies. The korean won and mexican peso, the korean won up at more than a twoyear high. For sevennal funds straight days. Manus they are monitoring the currency very closely. That could be the warning signs. Whether thes guess head of mexicos Business Chamber says negotiations are close to finishing work on telecom. Anna that sent the mexican peso up by more than 1 yesterday but today were hovering a little more. We wait to see if they managed to stick to the timetable of march. Lets get the bloomberg first word news with ad load low. Ed. With election, according to people familiar with the discussion in berlin. Her preferences to renew the partnership. Zimbabwes waking up this morning to a new post Robert Mugabe era. The president of 30 years resigned. The figurehead has been under increasing pressure to stand down after the military took control of the country last week. The mexican peso weakened against the dollar after u. S. Trade representative robert lighthouses said today there is no evidence canada and mexico will seriously engage on renegotiating nafta. They came after the fifth round of talks which were said to have failed to make any significant progress. A heavy workload lies ahead to resolve differences over hardline u. S. Proposal shot down by mexico and canada in talks scheduled through march. U. S. President donald trump has effectively backed alabama republican candidate roy moore who has been accused by multiple women of improper Sexual Conduct when they were teenagers. Reporters, i continue one thing for sure, we dont need a liberal person in there, a democrat. Alabamaident said the republican totally denies it, and you have to listen to him also. The lebanese Prime Minister has a right back in beirut after a near threeweek absence. He announced his resignation earlier this month, accusing iran and hezbollah of destabilizing his country. Raising questions about whether the 47yearold had been coerced into quitting. Saudi officials denied the accusation. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Find more stories on the bloomberg at top. Lets check in on the markets in asia. In the latter part of the trading session in japan, we are still up. Weve come off the highs of the day so far. Its still on track for a record close. It seems at the moment we are seeing a leveling off of the money coming through into markets like hong kong. The hang seng has given back a lot of these gains. Some of the things were watching, Airline Stocks very much in focus. We been asking a lot of people on the street, analysts, why were seeing these gains. A lot of people dont even know what is happening. Overall the Party Feeling were getting across a lot of these stocks. Andchina, substantial gains msci asiapacific, the energy space doing as well in todays session, up 1. 2 . You guys were talking about singing. Fromings to mind the song the 80s, nothings going to stop us now. Manus somebody is going to try to get me to sing on this show today. David, thank you very much. Janet yellen is the fed chair, she warned that raising Interest Rates to quickly risks stranding inflation below the u. S. Central banks 2 target. She preparesments, to step down from the fed in february. One reason it is dangerous is because Inflation Expectations are likely to also drift down. And indeed, there is some evidence, i dont really think they have drifted down very much, but there is some suggestion, some hint that after many years now of low inflation, they may be drifting down. That would be a very undesirable state of affairs. Manus an undesirable state of affairs. Twosided risk is what she talks about. Forgive me, but this woman literally has undone everything she was trying to message to the market. She is trying to get market to join her, now shes worrying about it dissipation of Inflation Expectations. Am i being cruel . Simon all use also confirmation [indiscernible] she has been by far the most bankh of all the central she starts to hike rates, three or four years . Say removing a policy accommodation to quickly moves inflation below target, but moving it to slowly also has risks in the labor market could tighten very quickly. Like a true economist on one hand. Where does that leave us for next year . To say anything recently changed the expectations that we get on three rate hikes next year, probably not. It tells us a little bit about the feds underlying mindset. The fed constantly heads toward a more dovish side. I think perhaps it tells a little more about what will happen beyond 2018. This is a fed that will be very, very cautious indeed, even under new leadership. I think the mindset is there. Its about as dovish as you can expect. A minithe dollar had renaissance. This is the dollar over the past three months. Youre looking at the dollar index on your screen. Weve had a renaissance in the dollar. This kind of twosided warning of risk and reward that she has outlined, what does that do to the dollar . One of the interesting bits over the course of this year that has impacted the dollar, its not been about what happened in the shortterm, its been about what has happened in fiveyear and 10 year yield spreads. Have any impact at all, its about what people thought about the longer deals. If you look at the dollars performance over the last month or so, its probably attract more to 10year gilts than anything else. Anna this is the top conversation along with bitcoin. We have this graphic that shows google searches for the phrase yield curve flattening. It has reached the highs level in at least five years. Wrong chart, lets have a look at this one. ,nna the flatness of the curve at decades let levels, what do you read into that, if anything . The first half of this year, theres no question that there was a great correlation between yield curve flattening and the dollars performance. What does that actually tell us . It told us that peoples interest was going further and further out on the curve and therefore when you would get in those moves, the dollar was on the back of that. Since the summer view of this year, it would not a done you much good except for about the last week and a half. I tend to think its been more coincidental. It says, we know the dollar is weak over the last two weeks. What part of the curve should we looking at, longer end . What does it really say . Areays that investors starting to become concerned about the future outlook for the u. S. Economy and maybe their word about what is happening with tax reform. Maybe they are worried about what happens with the republican. Anna its still an Early Warning signal. Now we can look at this , we are back on track. Ae team would say it is bullish indicator. It generally indicates an economy that is good for equities. During the last 30 years, takes about a year and have, 18 months before an initial inversion and then a recession. This is the late stage rally argument in terms of equity markets versus the bond market. Simon i think that is exactly right. Its precisely what you would expect to see. Its relatively rare to see a direct relationship between the dollar and the yield curve. I see a more common relationship with yield curve flattening which is normally been driven as it is right now by higher short year yield. Maybe its a measure of the fact that five or six years into the dollar bull market in the search for your search for yield becomes more extreme. Anna thank you very much, simon derek. He stays with us. The deputy mayor will talk to the team about how the city plans to capitalize on brexit. Thats the conversation in the radio studio next. Manus while Angela Merkel has publicly said she is open to fresh elections, which you really prefer a grand coalition . That is the discussion, next. K,a and budget day in the u chancellor Philip Hammond has the unenviable task of winning over voters and his own party alike. This is bloomberg. Manus a live shot of singapore. Up msci asiapacific index. 5 . The hang seng banging in out above 30,000, asian stocks passing the 2007 peak. Youre looking at the second record high this year on the asian equities. Can it continue . That is the question. Chancellor Philip Hammond due to announce his budget after Prime Ministers questions. I will be down on the green. Manus and Vladimir Putin hurts his counterparts. That will be in credibly interesting, given what janet yellen hinted at yesterday. Anna still very informative as to current thinking and perhaps a few clues as to whether their word about the record high were seeing in the u. S. Stock markets. Lets get the Bloomberg Business flash. Hackers stole the personal data of 57 million customers and drivers from bloomberg in a massive breach that the company can field for more than the year. This year they ousted there chief security officer. There was a 100,000 payment to the cyber attackers. It names, email addresses, and phone numbers of 2 million uber riders around the world. Hewlettpackard enterprises slumped after hours as Ceo Meg Whitman said she is leaving the role and its earnings forecast missed estimates. Whitman will step down on february 1. Earnings per share for the First Quarter at below the estimate. Atla has been burning money a rate of about 8,000 a minute over the past 12 months. Bloomberg data shows that if the trend continues, the company will exhaust his current cash pile on august 6 next year. The carmaker blanks blames hitches in cost for the allimportant model three. Investors do not seen to concerned. Shares rose 3 , taking the market cap to 53 billion. Ford by comparison is 48 million. Shares of nippon paint were suspended in tokyo after reports that it made a cash offer, citing in unidentified person familiar with the matter. Others said they were ending talks over a potential merger. A nippon paint spokeswoman declined comment. Without confirming any discussions with other suitors. That is your Bloomberg Business flash. Manus edward, thank you very much. Angela merkels party docs the risk of a snap return to the bout, according to people familiar with the discussion. Anna she has public they stated shes open to fresh elections, but they say her preferences to renew the grand coalition but she would need to overcome resistance from those social democrats. Simon derek is still with us. What this reporting tells us really is how little is certain in the german political sphere at the moment. We thought we would have the results of the next Coalition Negotiations by now. That kerry hasnt happened and we dont know if it will in up in a new election or not. Simon here is a month or two after the election and we are no further forward than we were on that morning. What is fascinating about this how it is taken so long to get here. And secondly, how little the market is worried about it, which is in complete contrast to his way the market was behaving the first half of the year with anything that was politically related for europe. Election, we word about the italian referendum at this time last year. All things we were laser focused on. Here we always germany with no actual government in place, it can break anyway. We could have a new election, Angela Merkels authority has seemingly been significantly undermined. I look at the euro and think we were writing it all over the past 18 months down to parity. Here we are, the Bloomberg Euro index, euro stoicism reserve currency status debate. More the flow of money into the euro and a haven times of geopolitical crisis . Is that the new latterday facet of the euro . Simon that is a really interesting point. Its something youve seen over the last six or seven years. The euro performing extremely well in times of stress. There were concerns about china and about whether or not they would devalue. In the middle of what was yet another eurozone crisis, euro is heading up to 118. The question, is it a safe haven story . What you see is people unwinding carry trade that had been funded by the euro in times of risk. In other words, stresses increase and people take risk off the table and the euro goes up. Manus you get the spirit of the move, but that is a whole big trend. If they are unwinding the euro as their carry trade, what are they using now as carry trade . Simon the point being that you unwind all your carry trade at one go. If you are risk averse, its with positive. Its a question about risk tolerance more than anything else. We had one fantastic trend in the euro. Once we had the president ial it, its lets face gone nowhere over the last three months and nothing we have thrown at it as managed to dented. There were existential questions around the euro at the start of this year. Around theocused dutch election, but there did seem to be a way that the parties that wanted to do away with the currency could have a big influence on power. Now we are in the throes of this chaos in germany, but its not looming with as quarter of the vote or something that looks more material. Major 13 is hardly that an issue. But uncertainty in the powerhouse of europe, you got to say that is a question mark, and it does raise questions about the approach toward the fiscal union, even raises questions about brexit and the negotiations around that. And more generally, the idea that populism has not gone away. We have italy coming up next year. Us. S simon is staying with if you are a bloomberg customer, we have it all, you have the charts and functions. You can join the conversation and even ask simon derek a question. Anna and you can rewind if you want to. Satisfy bothmmond voters and members of his own party when he delivers his tax and spending plan . The brexite are in conversation, thats coming up next. This is bloomberg. Manus a live shot of the interest palace in tokyo. Federal reserve chair janet yellen warned against raising u. S. Interest rates to quickly or you could strand inflation below the 2 target. So the dollar is the reactionary function this morning on those lines. Asian equities continuing gains. The msci pacific index, passing here,ak, as you can see its heading for a record close. Will it be the second time lucky hitting that record close after it felt that from it earlier this month . Or touching ar a to your eye is the korean won, asias best performance out of currency so far this year. According to one technical signal, it actually has more room to go. Something to watch for and the thai baht touching these Technical Levels also. We talked about the relentless , i put it against the german car and whats interesting here is the spread between the two has reached the highest, the most positive since 2006. Thats something to keep an eye on if youre investing in one market against the other. And we seem stronger oil this session, wti heading for a twoyear highs following signs that u. S. Inventories declined. It could be make or break for the british chancellor who presents his budget later today. Philip hammond under pressure to strike the right islands of trying to stick to financial targets. Criticized by some in peas for being too gloomy about brexit, hes expected to deliver an upbeat tone, promising to embrace change as he sets out his tax and spending plan. Our guests have invested interest in listening attentively today. You golfers implication you call for simplification. That is what you would like to see. Why has predictability been such an issue of late . One of the things we have seen over the years, budgets from successive governments over time is change, additional complexity and cost in the system. The u. K. Has one of the most complex tax codes in the world and thats difficult for customers and companies. It makes it less likely and hard to get investment. Raise aone example, we tomium tax thats gone up 12 . Now it looks like it might increase further. Its that kind of additional predictability that we are trying to move away from. Anna you are calling for nothing to unpredictable and some stability because there is a lot of unpredictability that hangs over this jet. Asterms of the conversation a liaison, when is it too late for a transition deal . Miles the single most important isng that could be delivered predictability and stability around what is happening with brexit. View of whatt of companies are telling us and the conversations were having, is this out of christmas that we have a legally glower legally time. Transitional companies have to know that on march 29 2019 anna is still not too late to step those big u. S. Banks . We carried a story yesterday about global banks making plans to move some staff, its not too late to stop them doing that . Miles the issue is where the Critical Mass is. Its the risk they are willing to take on this. The better way of thinking about it is a number of gates the companys need to go through. They needed to start looking at the regulatory issues they need to deal with and they need to go through another gate of where to get office space. Now were getting to the final gate which is where you lose people in capital. That is where becomes difficult to move back from. Anus and the cost is around half billion dollars for getting through all those gates. What brexit might really mean for banking. Next the legal consequence is that the u. K. Financial Service Providers lose their it you passport. Manus that could not be clearer. Game theory,is negotiating position or whatever, they have already tossed the coin, the European Banking Commission is going, the drug regulator is going. His number 10 listening, or diluted in regard to banks and Financial Services . Barney is merely stating what the reality is. Its been clear in terms of where people expect us to be and where the negotiating positions and likely outcomes are, as we leave the single market, we lose the passport. Its tied up in a variety of different european regulations. , it doesntcenario necessarily mean this is where we get to, but worstcase scenario is about 75,000 jobs out of the ecosystem, which is a report done for us last year. The bank of england said the numbers sounded about right. 10 billion pounds worth of tax in the worstcase scenario. Thats about 300,000 health workers. The single most important thing we can do terms of national finance, its a good deal for brexit. Where we see the risk of another leg down, just to finish one guests topic, said a Free Trade Agreement is what you should be aimed for. From everything youve heard from brussels, do you still think that is possible . Market i have been to brussels and talked over these proposals. They are comprehensive and rigorous. We think they work for both sides and the demise economic damage. Manus how are they perceived . To the markets, everybody comes binary. Ays it is a deal with Financial Services and the banks included and a decent trade deal, we are off to the races. To lose momentum and everything drop away to march and beyond, youre looking at the dissipation of the pound. Would you concur . Bit think the fascinating as you look at the last couple if you look at it on the yield basis, it would be a lot lower. It really would be. Something else has to be going on. Given that domestically and politically its not a particularly great story, its the fact that people are starting to think there is a possibility that we could reach a deal on the divorce bill before the end of the year. Therefore, thats where the disappointment can come between now and year end. Concerns about the irish border it cannd the idea that increase to 40 billion. That can come along and derail the idea that weve made sufficient progress and can move on to trade negotiations. Indenly were talking about january, february march, that agreement. Then starts looking more negative. Anna what does it look like in the First Quarter if we dont have clear movement . Simon a lot weaker. Manus how much weaker . Simon i would have to say were right back to the rise of euro starting from earlier this year. Chart. Great longterm it has consistently been one way. Manus lets map it out for you. Simon that would suggest over time that you would get to revisit the parity act. Manus to round off the original , and its been a long time since i felt benevolent with any currency trader, what is the truth about brussels interpretation of the proposition that you put before them for Financial Services . Miles we go to the European Services in brussels, i will be in malta and luxembourg next week, paris, berlin, and so on. The reaction tends to be, if we were creating a system that was designed to do the things youre talking about, minimizing instability, thats exactly what we would design ourselves. The politics are going to be the tricky bit on this. Its the politics that will always be the economics of this, were here to talk about the priority for business and customers and investors. Youve been calling on the seen aent, weve not stable and predictable cabinet. There are various issues over freelance Foreign Policy business and other matters, Sexual Harassment scandals. This is a government that does not look all that stable. If you start to think about what a labor government looks like, what brexit uncertainty looks like. Inevitably, any country prepares for political or economic change. We dont know if it will be a majority, who knows where things are. Any company that is well run and plans appropriately would stand out to you as requiring more expiration in the labor market . What policy raises your eyebrow . Any policy that has an impact on this industry and customers that we feel would be detrimental is properly set out in terms of cost and consequences. We have been clear on Financial Transactions tax and the limitations of that. There are a range of areas that we will continue to engage where it is our job to be clear of the sort of consequences. Anna thank you very much. Miles will continue the conversation on bloomberg radio. Stays with us a little bit longer on the program. Manus anna will be down on the green outside parliament. Hackers stole personal data from 57 million uber customers and drivers, a massive reach of the company. They concealed this for more than a year. In october 2016. The data included names, emailer dresses and phone numbers of uber drivers and riders around the world. Is thejoining Us Technology reporter. How did the breach happened, and just quantify 57 million for me. Howts hard to say exactly much of the uber base this is. We know that about a year ago about they they had about 4050 million registered users. It is quite substantial, 50 million users and 7 million drivers. The way it happened was some of ubers developers foolishly put their username and password into some things they had been uploaded to a thirdparty website. This was used by bad actors who then got the password, access the uber server in the amazon cloud and basically blackmailed uber with their full access to the data. Why is the Company Coming out with this information now . Cultural shift underway with new management in place. Is that the story . Potentially yes. You have to remember this is a company thats tried to shed his outgoing image before. It got into a lot of trouble about things like its program that were designed to avoid Police Scrutiny and things like that. It eventually wants to move toward an ipo and has to be seen as corporately responsible as bigger players like sony or yahoo or anyone like that. Then there are laws in place that say you must come out a reveal when you have been hacked. There are laws in place, its a question of whether you adhere to them. ,ell talk about them bob way celebrating his first day in 37 years without Robert Mugabe. Anna can Philip Hammond win over his critics . More on that later. This is bloomberg. Manus its new york, where the s p is just wanted to get through 2600. You know you can do it before the americans arrived. The turkeys are nervous, but the traders are not. Can we last under these heady levels . Time for the Bloomberg Business last. Hackers stole the personal million uber 67 drivers and customers. Included a 100,000 payment to the hackers. Compromise data from the october 2016 have included names, email addresses and phone numbers of 50 million uber riders around the world. Hewlettpackard enterprises saved after hours as Ceo Meg Whitman said shes leaving the role. She will step down in february and be replaced by the president. Adjusted earnings per share for the First Quarter at . 24 below the . 27 estimate. Tesla has been burning money at a rate of about 8,000 a minute over the past 12 months. Bloomberg data shows that the trend continues, the company will exhaust its current cash pile by august 6 next year. The carmaker blamed hitches and cost of wrapping up the output of the all important model three. Tesla shares rose almost 3 in your, taking the market cap to 53 billion. Ford by comparison is 48 billion. Shares in nippon paper suspended in tokyo after report that it later cash offer to buy another company. Other company said they were ending talks over a potential merger. A spokeswoman declined to comment. Without confirming any discussion with suitors otherwise. Jpmorgan is weighing whether to onlients that on the bitcoin. According to a person with knowledge of the situation, the , thebanking giant itcagobased cme group said will know by the end of the year. Pixarad of Walt Disney Studios is taking a leave of absence after Hollywood Reporter what hecusations of called missteps that made people feel uncomfortable. He directed early pixar films like toy story and is an executive producer of films that have been a cornerstone of the company strategy. Thats your Bloomberg Business flash. Anna lets get an update on what is going on in zimbabwe, waking up to a new post Robert Mugabe nation. Mugabe resigned as president yesterday, ending his 37 year rule. Manus and celebrations around the capital. Now, we have the president babwe vice as he is due to return on wednesday to replace mugabe. Is that a certainty . It is a certainty, he is said to be sworn in as interim leader, interim president of them bob way today. There were scenes of jubilation in the streets of zimbabwe that continue today. Some saying the hope that celebrations can continue for the next month and they would like yesterday and today to be declared a National Holiday to always remember the day. And the lead candidate for the ruling party next year. Anna hes not someone whos very distant from the mugabe regime, hes been very much a part of it is there any hope for a better economy, as well as other criticisms of the human rights of the old regime. There have been many criticisms about what happens to the dreadful state of the currency and the economy. Any hopes there that things will change . s,after 37 years of mugabe anybodys entitled to some sort of happiness at the end of that. Output and production and Agricultural Production seemingly waning and drop in to almost zero at some point in time. Leadership almost the same as a dictator for the better part of 40 years. Hopefully he will lead a cooperative or social economy oft will allow ormer leaders the opposing party as well to come through and help in securing a Better Future for that economy. There is hope, but how big it is will only be seen in time. ,anus thank you very much chief currency strategist with melon has been with us for the past hour. Amazing scenes on the streets there. Lets see what that does to the currency and for the economy. In a wider context within emerging markets, they have to deal with the fed. Emerging markets are in a better position than they were when the fed started this tightening. In terms of fx reserves, the world has improved for emerging markets overall. Simon to agree two degree they have improved. Some nations like turkey are relatively speaking fairly modest. , tointeresting bit for me compare what happened in the second half of his sheer to what we have seen this year and last year is a real change in dynamic. We go back to 2016, for example. Wanted was to inform extraordinarily well 2016. The second half of this year something very different has happened, specifically since early september. Twoyear yields in the u. S. Have gone up. Currencies like the brazilian briel have suffered the brazilian riel have suffered. Despite the fact that the yield spreads have moved in favor of those currencies. The currencies you mentioned at the bottom their underperforming of the past three months. You would have expected them to do better. Simon absolutely. Its a very different story. For turkey, in may will be an issue. That simply the fact is where yields are going higher, they are going to find their dollar debt coming more and more of an issue. To simon foryou being with us for the hour and a half. Reducing the full growth forecast is one of the big issues. Anna how much money will he have to play with . More on that next. This is bloomberg. Anus running with the bulls asian stocks have for a record close after record american benchmarks rally to fourtime highs. Chairthe outgoing fed cautions that raising rates to quickly would risk stranding inflation below the Central Banks target. Manus the budget Philip Hammond hoped to win over voters today with the fiscal plan. Anna and uber uncovered. Data fromole customers and drivers, but the company concealed the attacks for more than a year. Manus welcome to bloomberg daybreak europe. Im manus cranny. Anna we want to tell you whats coming up this hour. Willuropean commission or join us for an exclusive interview in a few minutes time. How big of a boon are we seeing in the eurozone economy . We will talk about all of that. Getting a bit of breaking news this morning. Pain were in discussions to bid for exult or exaltar. It is true, they did make an but they cant guarantee there is going to be a deal reached. That is breaking news from their side. The question is, can they get it over the line. The collapse of the talks marking the latest twist in a wave of dealmaking. Pot er was part of to dupont previously. There is knows a prize when you look at what happened in the u. S. And asian session. There is no surprise when you look at what happened in the u. S. And asian session. That bullishness is contagious, those record highs you referred to clearly set the mood. They are filtering through. Youve got upgrades coming through from the likes of goldman sachs. There could be more to come. Politics looks like merkel. The hang seng, as you pointed above 30,000. A decade high level. More broadly,a through those peaks of 2007, turning our backs of what we saw during the financial crisis. Weve got a couple currencies we wanted to keep an eye on. More than a twoyear high on the korean won. Have boughtl funds korean stocks for seven straight days. Foreign exchange Authorities Say they are watching that closely. They see those moves are disproportionate compared to other currencies. The mexican peso also worth watching. We saw it to gain more than 1 yesterday. The overall headlines coming anyugh from nafta agreements in this round, which ended yesterday. We saw the pace at rally yesterday, a little more stable today. Manus lets look at the bond market. There are two different stories going on. Youve got flattening, youve got differentials between europe and the u. S. Widening. The market picking up ever so slightly. What happens next in germany is critically important. Takes nds up i5 by five ticks. Martin schulz states his political future on the fact that he was going into opposition and not preferred to compromise. Today both really want to go back to the polls where theyve got below was percentage . They are both losing support. Anna a lot of political pressure on these parties. Lets get a bloomberg first word news update. Reporter german chancellor Angela Merkels text year is betting on a reliance of the social democrat to dodge the risk of a snap election, according to people familiar with discussions. Merkel has publicly stated she is open to another vote. Her preferences to renew a partnership that underpins to upper three terms in charge. To the new waking up post Robert Mcgahn bay are Robert Mugabe era. Undergurehead has been increasing pressure to stand down after the military took control of the country last week. President who was dismissed will take over as interim leader. The mexican peso weakened a u. S. The dollar after trade rep said there is no evidence canada and mexico will. Ngage on renegotiating nafta that came after the fifth round of talks which were said to have failed to make any significant progres. S. The outgoing chair of the Federal Reserve has cautioned that raising Interest Rates too quickly risks stranding inflation below the 2 target. Janet yellen also said there had been some hand that expectations for future price increases may be moving lower. Is dangerous is because Inflation Expectations are likely to also drift down, and indeed there is some evidence i dont think they have drifted down much but there is some hand that after many years with lower inflation, it may be drifting down. That would be an undesirable state of affairs. Reporter donald trump has effectively backed Alabama Senate candidate roy moore, who has been accused by multiple women of improper Sexual Conduct when they were teenagers. Trump told reporters, we dont need a liberal person. After being asked if he believed the accusers, he said that the alabama republican denies it and you have to listen to him also. He announced his shock earlier this month, accusing iran and hezbollah of destabilizing his country. Coincided with the arrests of senior royals and businessmen in saudi arabia, raising questions about whether the 47yearold had been coerced into quitting. News 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Lets check in on the markets in asia. Here is david inglis in hong kong. David goldman upgrading their assessment of where asia goes next year, but i am talking with msci asia x japan, up 33 this year with goldman up 18 in 2018. You put japan into the mix, japan is already closed, half of 1 . China rallying into the close a little bit below water earlier, a quarter of 1 . Hang seng above 30,000. As banks stand as things track asian stocks are on for a record close. 172. 61moment, we are at on the msci asia pacific, but in japan into that mixture. A brief look at some of the movers in the asiapacific region. The airlines have gone bonkers. Intoy interesting move cyclicals, like energy, 1. 4 , bestperforming groups in the equity space in this wednesday session in the asiapacific. Guys. Anna thank you. It could be make or break for the british chancellor who presents his honesty who presents his budget later today. Philip hammond is trying to strike the right balance of appeasing voters of his own party while trying to stick to financial targets. Joining me, bloombergs chief economist. Good morning to you. Thanks for joining us on this day where there seems to be a lot of expectation. Now that expectation is tinted, given the many ways philip. Ammonds hands are tied what is the main change to the economic and fiscal outlook since the budget that weve got to look out for . Has alreadychange been signaled by the independent office of budget responsibility who produced the forecast for the u. K. Cigna theyg to said they are going to significantly downgrade their expectations of gdp, and the reason is they think britain is not going to be growing its productivity as fast as they did in the past. Anna they have been optimistic in the past, havent they . They have. A have done dozens of forecasts over the past seven years, and they expect productivity to pick up to what it used to be, and it has not happened. ,hey have responded to this they think, for the last time, and they have nudged it all down. We are not getting more output for our work, and this means the economy is not growing as fast, and tax receipts wont rise as fast either. This means hammond will have his hands time because there will be less revenue going around. The question is, how much wiggle room does he have, because there in termsjigar recovery of the borrowing they had, and that went on the governments boots. What had room does he really have in this . Say, the targets are always changing, and the last of gdp borrowing, no more than that. That meant they had wiggle room of 26 Million Pounds to spend over the next 26 billion pounds to spend over the next few years. We think he will be about 13 billion, which is a bit less. I dont want to be aggressive manus i dont want to be aggressive, but 26 to 13 is a draw. This is about half a penny for every pound spent in the british economy. It is around the margins, but still, hes got less room. Those kinds of spending pressures hes got on the nhs, education, everything else, there is not much for him to give if he wants to meet those targets. Will be the usual mix of the well trailed releases and the sprinkles of surprised. There is a lot of pressure building on something as big as housing. Intergenerational fairness is a big theme in recent months. Is that going to be the focus in terms of what he delivers . Hei would be surprised if had the room to announced Something Big on housing. If you look at what the treasury has done, it is always been offbalancesheet, or it is going to be loans im not expecting him to do anything enormous. It would cost an enormous amount of money to be able to build the sort of housing that would be required just to tread water in the u. K. Irk thehat could bankers in england . We want to know what kind of war chest he has for brexit. What do you think the bank of england is perhaps most worried about in this budget . Anna if we are all surprised today, and the chancellor spends money over the next year or two maybe he spends more now and promises to spend less later that could bring the first rate rise forward. The bank of england is looking to how much spending is going to occur in the economy over the next couple of years. More spending means more inflationary pressure, and rates will go up more than otherwise. Other things they can look out for, if there is a big measure , they need to watch out on the Financial Stability front. Anna they will be getting their toolbox out. Jamie, thank you. Manus u. K. Viewers can watch Philip Hammonds autumn budget statement at 12 30 u. K. Time. Next, we will speak to the European Commissioner. Just how strong is the great story in europe right now . This is bloomberg. Manus good morning. The eu publishes its european semester update today. Commissioner Valdis Dombrovskis joins us now exclusively from brussels. Good to see you this morning. I suppose it is one of those health check moments that we look to people like you to tell us just how strong europe is. From ofsome of the data the European Economic commission sentiment indicator has been since the eve of the crisis. How strong is the recovery, in your view, in europe . Mr. Dombrovskis economic recovery in europe is continuing, so we are expecting over 2 growth for this year and next. Unemployment is going down. Employment is at the highest level ever, both budget deficit and public debt levels are gradually going down. Now,we need to focus on today we are reconfirming our Economic Policy priorities of boosting investment, supporting Structural Reforms to strengthen competitiveness, and responsible fiscal policies. Emphasistting bigger to be sure that economic recovery, Economic Growth is inclusive, so the benefits of Economic Growth that all citizens. Benefits all citizens. Which countries are you concerned about . Italian media is reporting that they you will call on italy for a budget adjustment in 2018. Is that the case . Mr. Dombrovskis well, first of noting when weh are discussing the economic performance, all 28 eu member are having Economic Growth. When we discuss fiscal performance, we do an assessment , and today we are publishing opinions on Member States draft budgetary plans, and in the case of italy, it is one of those isntries where we see there in compliance noncompliance and instability. Manus just how offbeat might they be, and who else is at risk on the at risk list, Vice President . Well, there are several countries i cannot reannounce there are several countries. I cannot announce the european package right now. But i can say that there are several countries at risk of noncompliance, and therefore call on those countries to do their necessary fiscal measures to bring their budgets in line with stability. Anna we wont ask you about all of them, but i have noticed reporting in spain that suggests the will war in spain that it may need to do cutbacks. Is spain a country you are concerned about . Mr. Dombrovskis in regards to spain, it is worth noting that spain is one of the countries still in excessive deficit procedure. What is expected in spain in that we do a timely correction of excessive deficit, and this is for seen for next year. Countries inre two excessive deficit situations, france and u. K. Arehe case of u. K. , we seeing the deficit being corrected, so this will leave us with only two countries having about 3 of gdp, spain and france, and in the case of france, they failed to correct already this year. Manus lets pick up on the french team. French theme. Mr. Macron is new to his political chair and has a big agenda. Do you think his economic r do youare enough, o expect them to have to do more . Expect him to have to do more . Mr. Dombrovskis well, indeed we see the new french government has been very ambitious in terms of its reform agenda, and we right way to go, that you start doing reforms in a frontloaded way. We see that is the approach that macron is currently taking. We have announced a number of reform packages on labor market, on improving the business environment, and we welcome those reforms. Also president macron has called for economic convergence with eastern members of the eu. Is that a priority . Indeed,rovskis well, it is a priority. , the European Mission will come forward with proposals in regards to deepening our Economic Monetary Union and restarting the process of convergence amongst Member States. It is going to be one of the priority directions of this deepening of the package. I would say our views are broadly aligned. I ask Vice President , can you, obviously germany is not in a political vacuum, there could be more elections or the expediency of a former alliance with chancellor merkel. Either way, one is likely to include a reduced chancellor, a reduced strength in germany. Could that hold back reform within europe . Is that a risk you are considering . Case,mbrovskis in any from a European Commission perspective, we are moving forward with the preparation of ourproposals in regards to economic governance. It is worth noting that the European Union is a union of 28 democracies, so there are always elections somewhere. There is always Coalition Building somewhere. T does not always go smoothly it is something which we need to live within the European Union. It does not mean our work is stopping. Anna on the subject of brexit, we might see the relocation of some clearing businesses, and some investors are concerned about higher costs of raising money for eubased businesses. Is this something that concerns you, the higher cost of funding for European Business . Well, of course ofare still not in the stage brexit negotiations where we are discussing our future relations. We are discussing First Citizens rights, budgetary settlements, the irish border, and only then can we discuss our future relations. I would say it is a question of how it is going to Impact Business in the eu and u. K. It is going to be part of those negotiations. But in any case, it is clear that brexit is what the u. K. Has chosen. This means that Financial Institutions based in the u. K. Will lose eu passports, so they will need to rely on other forms to continue to provide business in the eu. Manus Valdis Dombrovskis, thank you for joining us from brussels. Lets bring you up to speed with where the markets are. We started our show with the s p 500 trading upward yesterday. This is how europe is expected to open, a nudge above 3577. It still does not look like 1999. Maybe not 1999, but in terms of the asian session, we are at those 2000 seven levels, putting the financial crisis behind us in that sense. Thats it for daybreak europe. The european open his next. Is next. 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. 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. Good morning. This is bloomberg markets, the european open. We will bring you the first chain the first trade of the day. What are we watching . U. S. Equities surged to alltime highs. Asian markets learning to love that flat yield curve. 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