Lands to keep you cave rules aligned with the eu. In early is down trade. Is there more to come . We will talk about that with the mliv team. Wrangling over that u. S. To limit will continue today. The next big risk from the u. S. We are less than half an hour away from the start of european trading. Lets take a look at futures. They are deep in the red. You can see here the percent missed price for dax Index Futures is down more than 1 . Indications that we have a weak open in frankfurt not quite as half percent. You can see the middle range if 50. Look at the euro stoxx investors continue to buy treasuries in the u. S. Pushing the yield down, falling five or six basis points in the last couple of days. Were looking at 2. 33 . Now down seven basis points over the last three days. Guy 28 minutes to go until the start of european trading. Lets take a look at what asian trading delivered overnight. Japan down and korea continuing to be hit and hit hard, down 1. 42 . So my conductor stocks out of asia that continue to be in focus. The Mining Sector is something some of you want to Pay Attention to. The korean won traded down, this risk off sentiment driving people into the yen which is interesting. There is plenty more to talk about on the gmm this morning. Lets show you what is going on in the commodities space. We saw copper down yesterday. We have seen the price for some of the london miners already. If they further to come . Iron ore again trading to the downside in singapore. Aluminum and rubber, i could go across the board in the commodities these commodities space. We will have the take on what is going on here shortly. Keeping you fully informed as to what is going on in these markets. Lets get a lumbar first word news update. Heres juliette saly. Juliette u. S. President donald trump will declare jerusalem to be israels capital. He will direct the state department to start the American Embassy therefrom tel aviv. A historic shift a policy that could inflame key allies. And assigned the announcement could be symbolic. The white has warned that any actual move would take years and boundaries are still talk to these talks that have bedeviled u. S. President s ford decades. The u. K. Par minister was the assassination attempt. The plan to detonate an idea downing street and kill theresa may and the chaos. Andrew parker, director general of mi five has briefed cabinet ministers and the plot. Theresa may is facing a revolt from insider cabinet over a plan to keep regulations allied with the eu after brexit. Efforts to rescue negotiation from an embarrassing breakdown on monday prompted fresh divisions in the British Government yesterday. Backers challenged the Prime Minister days before a key deadline in talks, a slip that tends to undermine hopes of breaking the deadlock. The lebanese prime mr. Will attend a meeting friday in paris of countries that support lebanons efforts to cope with regional conflicts. The french president said he remain indecision to office after lebanons governing partners pledge to stay out of neighboring conflicts. Rex tillerson is also expected to attend the meeting which will include the five permanent members of the Security Council and germany and italy. The u. S. Will reportedly deployed be one beam b1b bombers as part of a joint exercise with south korea. A similar drill in september saw the aircraft flight the farthest north of the Demilitarized Zone of any american fighter or bomber in the 21st century. Nhat prompted pyongyang to war n that he has the right to shoot down planes and internationally or space. And completing the 2018 olympics. Their flag will not fly and awards will not count toward the medal total. Following a threeyear investigation into statesponsored doping leading up to the sochi games in 2014. The kremlin denied the allegations and threatened to boycott the event. Foruite has passed 12,000 the first time amid speculation that is a futures will lead to Digital Currencies being viewed as a legitimate asset class. It soared from less than 1000 at the start of the year as optimism climbs for the Block Chain Technology which is at the heart of bitcoin. Accompanied by a chorus of warnings that it is an acid bubble poised to burst. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. 23 minutes to go until the start of european cash trading. Asian down hard, europe looking like it will follow. Not quite as much but we are seeing some weakness in the futures. Copper a factor. The tech selloff a factor. The u. S. Tech story a factor. Lets talk to mark cudmore joining us from our and lift team out of singapore. Our mliv team out of singapore. Can i use the word capitulation yet . Mark we saw some highvolume selloffs across the assets that have been trading well all year. And then this week it turned a bit more negative. We have seen some signs of capitulation. Is this a one day or might this be a states that plays out over several days . One of the themes, this is the unwind of traits that have been. Orking well for a long time asian equities have been roaring all year. Commodities have done well for several months. Technology is outperforming. If there is deleveraging it cannot sustain. The u. S. Momentum portfolio chart up and we have seen a rampup in this. Theeptember accelerating to upside in october. November and december generating something of a selloff. Is this what you would expect after strong yield flows from momentum trades . Mark it is something we have been discussing over the last week or two. Going to the end of the year after a great year for equity markets we had extreme optimism for a few events whether it was the brexit negotiations or the tax deal or the opec deal. Whatever it is, people seem not to be worried about anything happening and it will be wonderful. We are in an environment where we are vulnerable to any kind of risk or disappointment. ,eople have made so much money they are inclined to move to the sidelines if there is any risk and they are not diving back in, not before the holidays or christmas and not with things like the debt ceiling coming up. When they found out this tax plan had been brushed through so quickly there is confusion about whether the amt close will help parts of the u. S. Sector or hinder them. So great, plan is not maybe this has gone to quickly. Lets move to the sidelines and wait till the new year. I do not think the amt has helped anyone. You could argue it helps government revenue that they want to scrap that so they will need to find somewhere else to go. , 41 ofplan in a survey americans said it would increase their taxes. At 150, 250valued and copper slow down that makes sense if china stops investing in roads and subways and the like create art all of these problems combined with the fact that the key debate on the debt caning whether to kick the great reasons to sell stocks . Mark you are dead right. But not trying to solve the debt ceiling problem, they are pushing it into a worse time of year to have that problem which is worrying. That helps the negative sentiment. There. S weighing and there are a lot of reasons why people want to the risk at this stage. After a good year, this is not a panic or turning bearish. I do not think this will be a better major correction. We will see more volatility until yearend. It will be two way volatility but no incentives for people to say this is a great time to take new risk. It is not like the pullback is large area not like people are going, this is a great opportunity to buy and ahead of all the risks. There are some reasons, china concerns, frustration over the tax plan, there are reasons to take money off the table. Matt let me bring you back to europe and the u. K. The pound, you predicted we were not ready for a downside. We did see that move to the downside and now you are saying we could see the pound strengthened again because the irish issue although it cannot be solved, they can be fudged to some extent . My big concern last week is everyone was complacent about brexit. You are aware of the irish situation, the red line from the dup and the Irish Government are polar opposites and id it not see how we would get an agreement. That was the basis for my argument that sterling was underpriced. We do not need to have an excess elon the irish border. But we need to see is the eu saying there has been sufficient progress so you can talk about trade and a transition deal. It had to involve the clear conclusion on the irish border but that is not the case. They might fudge this and make a clear commitment which is a different thing than a cleared deal. Kicks the can to six months down the road. It will rear its head again. Wants and the Irish Government wants is different. There is a real risk that this threatens the conservative government. I am not saying the problem is going away but my thinking has evolved when i was worried for the sterling outlook. It has fallen a bit but not too much. Much political will to say we will move on with talks. That is likely the base case for next week and that is why traders are staying with the pound and it might squeeze liquidity at the yearend. Surveywas reading the results, the market may be more positive on the pound to throughout next year. A lot of volatility. Any Central Bank Action we will see surprises on . Mark all the big events to watch, india, some people think they will cut. I do not see why. Growth is roaring and while it was slightly lower because of the demonetization and lower revenue, there is still rampant growth and it does not imply that policy is too restrictive. They can let the currency appreciate and do some tightening for them. I do not think they will cut tore and they do not need stimulate the economy further. On brazil everyone expects a cut. Rates were 2. 5 . They are expected to be at 7 today. The yields are still positive, brazil has inflation under control. Is unlikely to hike again. People will look for guidance as to when that hike will come. Cudmore. K you, mark survey,ant to take the you will find the survey on your bloomberg. Rrier on thisme one. It is crowd surveying. And helping part out the mliv guys as well. Matt i have more bloomberg functionality that can help clients stay smart. Take a look at tv. You have your interactive television, you can click on that to see a live stream of us and you can hear radio with that panel. If you click on event coverage, you will see bill ford speaking live. Fortune forum you could catch speakers including jack ma, tim cook, stuart gulliver. You see mark mobius. At the conference. The ease donation indonesian Prime Minister speaking there. You can listen to what some of the smartest investors in the world have to say about what is going on. Koppers meltdown. The worlds third most widely used metal suffered its worst day in almost three years. We will talk commodities next. This is bloomberg. Matt welcome back to the European Market open. Looking at pictures of our beautiful new headquarters in london. You can see 12 minutes to go until the start of european trading. We want to go out to get the Bloomberg Business flash. For that we go to juliette saly. Shares in Steinhoff International holdings have after the ceodon resigned with immediate effect after the global furniture retailer reported irregularities. The owner of the francebased store chain and pet Clothing Stores in africa has appointed a n agency to investigate. That values the Real Estate Company at 3. 4 billion pounds, the offer would create a Real Estate Investment trust with 21 billion pounds of assets. The company says they expect to sell 2 billion pounds of property if the deal goes ahead. Mark said it has made his biggest desk was asian acquisition yet. Buying aetrium innovations. It is acquiring aetrium from an group. Ent in a bid for growth beyond stagnating mainstream brands. That is your Bloomberg Business flash. Guy thank you. Copper had its worst day in on years yesterday. The prospect of so demand in china, the dollar picking up. Below. G k lets get some thoughts on this. This is china. It is all about china. Copper prices are extremely sensitive to any worries about chinese Economic Growth and we have had some stories in the last couple of days suggesting it might not be as strong as people expected. In particular, there was one forecast that the chinese copperction sector with grow it all. T giving peoples for thought people pause for thought. Matt what is the outlook . Is china going to pull back on investments in infrastructure, what dost a slowdown, you hear about the demand side here . Is strong. Nd side there is a feeling that the prices may have run ahead of themselves. The fundamental driver of the Copper Market will be on the supply side. Supplies are balanced in 2018 but from 2019 onwards, a lack of new supply means people see your deficits. On the medium to longterm, people have reason to be bullish. Some people are feeling that prices have gone ahead of the longterm bullish story and the makes it sensitive to any concerns about chinese gdp growth. Trimmed wedp growth could see further falls in the price of copper. Take fromsignal can i this story . I doubt copper has been always seen as a useful predictor. Blue line is the s p 500 and the white line is copper. What can i take away from this . Will a lot of people think it is a thermometer for the broader economic index. Constructional sector in china, it does go into new homes in china, it really does go into infrastructure spending. If you are believer a believer in the thesis it may give you thought for prospects. Guy we are minutes away from the market open. We will take a look at the stocks you need to be watching including steinhoff. The resignation of the ceo and an investigation into their books. That is another stock that can move in london. The market open next. This is bloomberg. Matt minutes away from the open up your paid in trading and equities. Lets get some of the stocks you should keep an i on. Steinhoff is one of them. This is a company that trades in frankfurt and operates a furniture business, Retail Business in france and operates a south African Clothing store. Owner thatea near kicked out billionaire owner that kick out the ceo because he does not trust him near the books. Drop, a 70 drop for thisstock is caused breakaway gap. The massive loss there. We want to mention nestle buying aetrium innovation. That is the shift with the new ceo Mike Schneider getting more into health care stocks. Andave to look at stocks futures on the way into the European Market open. We are down across the board, it could be a bloody open in four minutes. 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. One minute to go until the start of cash trading here in europe. The background actors that could affect the market. London looks like it is going to outperform. The pound is near the bottom of the range against the dollar. The nikkei had a pretty soft day. Youve got to think about the legacy into the european space. Il, Pay Attention to that there was a story yesterday with a s p 500. Lets take a look at the numbers this morning. The mispriced numbers that we need to be looking at because we have been selling off a little bit. London looks like it is going to outperform, only down by. 4 . The dax looks like it is want to open down a full percentage point. Into hammerson, some of the stocks you need to be paying attention to. Lets get into the market open and show you some numbers the kicked out some numbers being kicked out. We will see what the Market Makers have to say. That. L come back to lets move on and talk about what is happening with the imap. A sea of red across the screen. Health care is one of the sectors standouts. We get a little bit of safety coming to the markets. Every sector, very few piece of the pie and they are very thin slivers. There is a bit in health care, a bit in industrials but the rest the imap is trading into negative territory. As we go along, those bits of green are just beginning to disappear. There is a little less in the i. T. Sector. Some pretty aggressive selling in the european space. Matt i am quite surprised that 10 socks on the leader side. I will preface that by saying, it is going to take a long time to open these stocks today, especially those who had the downloads. You had big down moves. The big names, novartis, hsbc is down. Nestle is down, even within acquisition. Investors are going to the above to smile. It is only a drop of 0. 4 but it is a very heavy stock. Also the miners down today. Glencore. Rio tinto is down. I suspect that if you scroll through the losing side, you are going to see almost all miners on the side. It you look at the winning side, you dont see anybody connected to commodities. You see a lot more of the defensive stocks. You are going to see some of those utilities and Consumer Staples stocks on the upside but really going to be very few winners, as far as todays trade is concerned. Guy matt, the dax is still waiting to open. Elsewhere, we are getting some numbers that are shown you the extent of the drop. The dax is likely to show the biggest drop this morning. Many sectors in negative territory. Many stocks trading to the downside. We are expecting the dax to open down a full percentage point. London looks like it is outperforming. We will talk a little bit about the pound later on. This comes after we saw a fairly decent selloff. We are talking 2 in some markets out in asia overnight. Copper a factor in all of this. Tech stocks have been hit hard. Sentiment now being transferred to europe. Lets talk about what we are seeing in terms of the dax, down by 1. 2 at the get go of trade. The dax is underperforming as anticipated as we see the German Market opening up after its peer Group Already opens up. Joining us, will hobbs at what you make of these numbers . Will hobbs. What do you make of these numbers . William that is going to catalyze a bit more profittaking. The thing to reiterate is dont get too worried about the shipbuilders. This is still in oversupplied market. Trade,investment, global the tech heavy investment we are seeing, that all plays a desperate all plays nicely that all plays nicely. On a 12 month view, if you look forward, if you look at the 12 months behind us, you are not going to get that situation again. You had a very lenient bank trump. Thank drop. Bank trump. China is doing ok. Healthyr, you got the Global Economic backdrop. China will slow a little bit. A bit more headwind and central bankers will be a list test will be a little less lenient. It is the easiest way. Youve got the high semiconductor story. Matt how much of this i am looking at the broader selloff, well will. How much of this is taken the profits . On the decks, we are echo 1. 23 . Looks like a bloodbath. It is not as bad as it has been. Will there hasnt really been much in the way of a serious pullback. Markets dont use ago long for this deal of time period of time. It is a function of healthy markets. At the election of donald trump you look at the election donald trump, analysts are looking around and saying the only thing we can predict is volatility. I guess we should be humble about what comes next. The outlook for these very cyclical markets, markets very sister to trade. Dax is one of those debts very sensitive to trade. Dax is very sensitive trade. Dax is one of those. Matt do you think it is time to take money off the table guy table . Will probably not. Not going to have the World Economy continuing to accelerate. Whereas at the beginning of this year, there was a bit of fractured consensus. People were worried about medical risks. Test worried about medical risks worried about political risks. The health of the World Economy has been much less debatable. Alongside all that, such a banks are going to be less lenient. Itould find that is a is tough for stocks in general. Guy momentum. You have bought a stock that is done well any short of the stuff that hasnt done well. This is a pure u. S. Momentum portfolio that we can bring up behind us. The rates of change except but it is now beginning to fade. To be axpect momentum valuable trading strategy next year to be a valuable trading next yearext year . How do i position myself . Will very interesting question. This cycle hasnt been a great one. Winners has been a difficult strategy. Generally if you look over time, momentum is one of the factors that really does have quite of impure desk quite a lot of empirical support. Quite a lot of empirical support. In our opinion, momentum is something to always be interested in. Timing is very difficult but generally exposure to momentum and portfolios. 2018talk little bit about and understand what the dynamics are. Rally. A sickles people try to reposition. Or you get the exact opposite. How different is 2018 going to look . The political narrative looks very similar. , you seemic backdrop think slowing down significantly. Bitrate may alter little but the Global Economy looks like it is on the front foot. As we reach this point here, do you think we will be able to say the same things . Is 2018 going to be a pivot point when that starts to really bite . When we start to think about the ecb exiting policy . When the boj is starting to look less some of the stuff . How different is next year going to feel . Will very different. This year has been about proving the World Economys health is in a much better state. If we argue that you are missing something the hiking face of the economic cycle, people want to borrow a little bit more. Asset allocators the become much more a job of looking for economic hubris. At the moment they are are patches there of signs. That is what 2018 is about. That is why we welcome that centralbank backdrop. Centralbank is getting less toward and moving untangling themselves from the economy. Thing weeally the better look out for. The big risk is easily inflation. Is basically inflation. The market has had its longest rally since the 16th century. Matt i was going to ask about that. What do we get a spike in inflation . We are starting to hear people want about that as it is the one thing to watch out for in 2018. How will that affect european stocks . Mohamed it affects everything will it affects everything. It is hard to know where it comes from right now. You can have the commodity price shock of some sort. What we are talking about is demand exceeding supply. The wages strengthens higher. The wages driving things higher. You get central bank is trying to untangle themselves from their economies a little bit quicker. You get the bond market reacting a little more ugly. That could create real ripples around the world. Recessions is of Interest Rates rising too quickly or too much. That is one of the major things to watch out for across the world. Guy stick around. Will hobbs staying with us. When your bloomberg customer, you can watch the show using the tv function. You can also access the video stream as well. You can pull up some of the great videos. As you can see, mark mobius talking commodities and bitcoin to very germane subjects. One of the biggest pieces of news, trumps plans for the jerusalem embassy. As eu Officials Say friday is the deadline of deadlines for brexit rs, we are going to focus on the u. K. That is next. This is bloomberg. Matt welcome back, the Bloomberg New building. We are 15 minutes into the market open and it is turning out to be quite interesting session. He much every sector off this morning. Lets take a look at the individual markets. The dax is the big underperformer this morning. Some of the Technology Names certainly feeling the pressure this morning. Some of the other confident the markets are from the pressure. The French Market down by nearly a full percentage point. Italy is trading down. The london market is outperforming relatively. I say relatively. Big names suffering losses. Lets focus on the u. K. From a different angle. Theresa may is facing criticism from prebrexit cabinet for a plan to keep aligned. We willcial said see pierce still with us, will hobbs. Given the trends that happening, the global winds that are blowing, this brexit have any meaningful impact on an Investment Decision at this point . The traders are going to buy and sell sterling. In terms of the Bigger Picture stuff, what does this week tell that code just tells you . What does this week tell you . Will there seems to be will on both sides to move this forward. Whatever regulatory alignment means. With regards to the broader ,uestion, we need to remember it is important in terms of Global Capital markets. Curve tends to dance closer to the tune played by the u. S. Economy and the stock market. Guy i know that matt wants to jump in. The wei screen, the london market has been the underperformance of the london market this years eye watering. Domestic investor, you you may 2. 2 year to date. Yeartodate. 2 if you are euro investor, you have made a negative number this year, down by 1. 4 . Those a horrible numbers in a year where Everything Else has been going up. Will i think that is a great point. Where rates world are accelerating, the u. K. Is the last place you want to be because it is very defensive. It has a high allocation to pharmaceuticals. The banks are quite boring. Youve got this huge commodity weight which is not doing much for you at the moment. When you got this kind of world, we lean toward the hightech component, high u. S. Asia. Those are the places you play. U. K. Tends to be more defense. That is not the story this year. Matt have to go back to the point you are making about the relative size and importance of the care economy. Is your point that the eu really doesnt care that much . Not as much as you think reading the papers from inside the borders of the United Kingdom . Will i think the eu does care. It would be in on goal of them to have a really is it just really ugly exit from the eu really ugly exit from the eu. U. K. Doesnt want to damage their economy. There needs to be a balance. Aey would be very in negotiators to allow the u. K. To leave with the same terms of trade. That means the worst deal for the u. K. But how much worse . The balance their try to achieve is something that makes it look ugly to leave the eu for the Member States who might be considering the same story. Without something to punitive what makes the you suffer. Makes the eu suffer. It is a bouncing act that makes it feel like they are target. Matt how much does it matter how much does the brexit negotiation matter to your strategy as far as u. K. Stocks are concerned . So often we talk about a disconnect. Companies that are massively international and trading around the world is more important to them than trading in the u. K. Will that tends to be the case. There is definitely, if youre looking at the u. K. Specific story, the midcap segment. Remember this is where most active managers are going to go fishing. That is where they think they are going to make money so they tend to focus more than midcap segment. There is a valuation opportunity within the segment. Assuming pretty good times for u. K. Economy so the businesses can operate their. Just can operate there. Can operate there. That uncertainty created is going to continue to me relatively speaking, u. K. Gets less investment. That seems to be the case elsewhere in the world. Ok onceumption story is then inflation spike pulls through. The u. K. Is not accelerating like the rest of the world. Guests iss our this will be a suggestible head for the care economy. It is quite an interesting opportunity. Guy will, thank you very much indeed. Up next, we are going to bring you the stocks in the move. Butk is trading lower morning. Down 49 this it very aggressive move on the downside. That story next. This is bloomberg. Matt welcome back to the European Market open. We are down across the board with a loss of more than 1 in germany on the dax. On the euro stoxx 50, and loss of. 1 . The ftse relatively well. Often only 20 . 1 . Take a off only nejra im starting with steinhoff. It is dropping more than 50 , the biggest drop on record hitting a 2011 low after the ceo has resigned over a possible issue of accounting wrongdoing. Theres an issue of mistrust that is come between the ceo and a billionaire. The stock down significantly in the session. Also down is the travel agency, saga. It sees fullyear profit barely growing in it expects a decline asked year. The earnings have been impacted by more challenging trading. The stock has dropped on the most on record. It hit a record low. Down more than 21 . On the upside, i am looking at properties. It has risen the most on record at one point today. Now it is up 18 . It is up by the most since 2008. Guy up next, hitting the ceiling. The u. S. Ceiling debate comes back into force as we work our way toward the end of this week. How much of an impact will it have on the market . We have discussed a little bit. At the moment, the sentiment seems to be the market has very little priced in around the story. An expectation expectation that the can will be kicked into for the next year. Guess into further next year. Into further next year. We will discuss that next. How will the markets price this in . This is bloomberg. Matt welcome back to Bloomberg Markets european open. 30 minutes into a trading day. You dont want to be long equities. Global stocks tumble. European markets follow asia lower with mining in tech stocks leading the decline. Will the selling accelerate . Brexit backlash. Theresa may faces a result from our own ministers of her plans you cables aligned with the eu. The pound is down in early trading but will it bounceback . Hitting the ceiling, wrangling over the u. S. Debt limit will continue today. The question now is whether to kick the can to december 22 or december 30 . This is the european open. Imf miller in berlin i am matt miller in berlin alongside guy johnson. Guy 31 minutes into the trading day. Youre the talked about the selloff we are seeing. Asia is down hard when it comes to the equity story. Europe getting to follow suit. Lets break it down. Correctionation or a that we are now getting into . What we are seeing in every civil sector every single sector, it is now down in negative territory. Story. Got the nestle media, health care, oil and gas are doing all right. You get down to the more cyclical and of the market. Technologies are at the bottom. Chemicals, basic resources, all trading lower. The banks are showing signs of weaknesses. We are getting a classic riskoff story developing. Tech is leading us down. Lets get a Bloomberg Business flash a state Bloomberg Business flash update. Serco dess sebastian President Trump said that he will officially consider jerusalem to be israels capital. It could inflame key allies. The announcement to be more symbolic. The white house is warned that any move would take years. U. K. Prime minister was the target of an assassination attempt that was broken up less week. Was tobelieve the plan kill theresa may in chaos. Members. Cabinet theresa may is facing a result facing a revolt from inside the cabinet. Negotiations from an embarrassing down on monday opted fresh divisions in the British Government yesterday. Brexit backers challenge the Prime Minister. Minister will attend a meeting on friday in paris. A country that supports lebanons efforts. Macron noted yesterdays decision by the Prime Minister to remain in office. Your secretary of state Rex Tillerson is also expected to return to the meeting which will include the five permanent members of the Security Council, as well as germany and italy. U. S. Will deploy mamas to the Korean Peninsula today as part of a joint exercise with south korea. Bombers to the Korean Peninsula today as a part of a joint exercise with south korea. That prompted pyongyang that warned it had the right to shoot down u. S. Warplanes. Play and notoment flight will and their flight will fly. Theshment from International Olympic committee follows a three investigation into statesponsored doping. The kremlin denies the allegations and has turned to boycott the event which takes place in south korea. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt sebastian, thank you very much. Wrangling over the u. S. That selling will continue after republican plan to avoid a federal shutdown on saturday were thrown into disarray by infighting. A key issue is whether paul ryan is going to agree to extend the measure until december 30 as demanded by the House Freedom caucus. The current proposal only extends funding through december 22. Not a great couple of choices. Still with us, will hobbs. We are talking about a weeks ference instill this means and still this means investors have to be on edge. Is it concerning to you . Will it is probably nothing that we need. It is a game that we have played before. Mark stipulated before. We know within game is just markets have played it before. We know what that in game is. Just with the endgame is. In the end you get a push back until next year. A, the this means to be democrats will try to extract some other stuff that may lead to an eventual parlay. Guy have you found that the tax plan has many different . Not. Probably theselly, we look at things. History gives a very little calls for optimism with the effects of tax cuts on structural Economic Growth. This may create a single bump in consumption but it doesnt change trend. Therefore it is not investable. You can see what is going on at the moment. Too quick for us most of the time to get on top of this pick what youre looking at is does the trend change . The answer is no. This tax cut seems to be selected toward the higher income segment, there is very little historical evidence that trickledown economics benefits. This doesnt change much. It is bad for the bond market but not the end of the world. No real change. Ford,we are hearing bill the chairman of the Ford Motor Company saying that this is going to help his company earnings. Retain we are hearing from bank of america ceo, this is going to unleash clients because it is going to get rid of uncertainty. Is there no reason to be optimistic for a bump here in investment . Inequities . In equities . Will this is to be some trade in regard to that. Almostng fronts is treated like the oil shock on the negative side. Oil had a negative effect on u. S. Corporate earnings. The 2016. 014 of in realty, there was no change to the underlying trend. It was a oneoff hit. If you look at history this is a bit of a mess but go from 1870 to 1912, the u. S. Doesnt take action. Gdp is about 2 . 24 7 to 2000 come by then, taxes average a sustainably higher level. Taxes into dpr about 18 . Gdp per capita is about 2. 2 so there is no real change. Of claim to regard what taxes due to trend Economic Growth. Evidence is really there or compelling. Isnt really there a compelling. Guy come back to the point where you said it is fairly regressive. We were talking about this on surveillance yesterday. If i am a ceo and im looking at what is happening in the United States and i am looking to invest. Im looking at the consumer and im wondering where that spark comes that is going to turn the consumer turn the tax on for the consumer. The consumer is the u. S. Economy. We get tax cuts that are regressive. He took about two down economics. About trickledown economics. Will which look at in regard to investments, tax rates and tax relief, it is quite marginal. The real thing is that demand. Am i going to get a return on investments . Consumption has been going along. This inequality affect consumption . So far, what you say is because of the translation if you look at income to consumption hasnt really been altered my one looks like a widening trend. The degree of inequality hasnt had a Material Impact on the degree ofsumption. What the point is is quite difficult to know. If you go back to the 1920s, he got to such a stage where the electorate voted in as change in a change, a higher marginal tax rate. A consumption boom in the 1940s. At which point this the u. S. Reached a point . Reach that point . Not yet is the answer. You can see that parts of the electorate are getting more restless. Guy we will wait and watch with interest. Us on going to join bloomberg will is going to join us on Bloomberg Radio and 9 a. M. Set to, theresa may is facing revolt, were going to focus on the United Kingdom and the prospects for a great prospects for a breakthrough. That is next. This is bloomberg. Guy big moves in some of these European Markets of the individual trading lines. We are 44 minutes into the session. Lets find out what we should be focusing on. Here is nejra cehic. Nejra i picked up novo nordisk. Approvalter it got fda for its type 2 diabetes therapy. Theres some good commentary on that. How it will enrich its franchise. This approval wasnt necessarily surprise. That is why we are seeing such a lift in the shares on novo nordisks. This is a commercial committing commercial Catering Company rising 5. 9 . It also forecasting growth in 2017 to 2018. Despite that, the stock is down 5. 9 , hitting its lowest since february 2016. On the downside, im looking at hammerson. Intuuld euro there, properties. Hammerson is buying into properties. Itntu hammerson shareholders would own around 55 of the combined company. Hammerson down to. 5 . Down 3. 5 . Matt Prime Minister theresa may is facing a revolt from insider cabinet over a plan to keep u. K. Regulations aligned with the european union. What would then be the point of brexit . Johnsonsecretary boris and michael go raise exactly those concerns about the plan which is a part of maize plants to mays plans. Lets get the thoughts from carsten brzeski. He joins us from our studios. It seems like may is trying to fudge this. Shes got to make the irish happy. Ino her partners in the the dup in northern ireland. Would you expect is the outcome what do you expect is the outcome . Carsten she will have to deliver something. Next week is the big summit. The eu summit where the leaders are supposed to decide on whether the negotiation with u. K. Could go toward the next up. If not, completely bad news. Matt how bad and for whom . Does it really that just does it really matter that much for the to get a good deal flacco for the eu to get a good deal . Doesnt. No it the eu has less to lose but the you has to watch out that it makes the u. K. Government not look like complete loser after the negotiations. Guy what do they do, carsten . This feels binary. It feels like the u. K. Is heading for a hard brexit with a lot of egg on its face, or we end up with a situation where we get a very soft brexit. Kind of both of those carry huge tail risks. Is it possible to quantify those tail risks . And understand what the implications are . The middle ground looks increasingly difficult. Carsten honestly, it is not. A multilayered gain. Game. You are to figure this one out because what matters is the mustek politics. Is domestic politics. You can only go for a best Case Scenario which would mean they will find a compromise with the eu. There will be a transition period after march 2019 and is hoping will have a soft brexit ending. Until this are actually big. Guy how many of the scenarios you have and up with a Jeremy Corbyn administration at the end . Carsten i think how many do we have . I would have to pass it on to my colleagues in london. U. K. U look at u. K. , the the messy politics, it is possible we see a change in government again. It is not our best Case Scenario. Matt the interesting thing is the brexit negotiations really could affect growth, Interest Rates, boe policy going forward. Whereas the brexit negotiations arent likely to change the way you model the ecbs activity. Carsten not at all. The Economic Impact for the rest of the eurozone is already happening. Due to the weaker sterling. We will not see an end to the trade between the you and great britain. It would only be less or differently which means for our ecb colleagues, it doesnt matter at all. For the outlook of the british economy. Matt carsten, we are going to hold you year because we have a lot to talk about. Carsten brzeski, he is going to stay with us. Well talk about what the stp the stp is going to do to keep as a merkel and power. To keep Angela Merkel in power or not. Next. This is bloomberg. Guy 52 minutes into the market session. I think you should know about the rest of the day. What is coming up for the rest of the section. Faces are ministers questions. We get decisions from india, canada and brazil on the Interest Rate front. Matt . The sdp is going to meet tomorrow to decide upon the future in the German Government the place of the leader martin schultz. The leaders have already agreed to Enter Coalition talks with Angela Merkel and the union. They still need approval of the members at the National Convention which is not the last at least until saturday. Still with us, carsten brzeski. The likelihood we are going to get some movement here before christmas, as far as the grand coalition 2. 0 . Carsten this seems to be a big get between the berlin bubble in the sdp members. The members when i like to go into the grand coalition. Berlin bubble says yes which means apparently at the convention we will get the green light that the sdp will start the coalition talks. Matt the sdp members who live in berlin also they need to stay working. Carsten they are afraid of the jobs. In four years, it could be even worse. Try to make some good within this government. Matt what if they didnt get coalition . That isnt writing on. The vote is to agree on entering talks. If they dont get an agreement on coalition talks, and we have a minority government. Does that concern you . Thing isthe only merkel is not there to do it. It would be good for german because it would upgrade the role of german parliament. It will either be grand 2. 0 or 3. 0. 0 it looks as if the sdp is willing to compromise and the cdu want everything except snap elections. Guy will be the outcome of snap elections in your mind . Carsten going to the polls, not a lot would change. Legislation for ms. Merkel to go to minority government. Cdu would still be the biggest party. Sdp could either lose, i dont know why. Even the fda would not be strengthened as a would also stick to the current levels. Matt carsten, thanks so much for joining us. Guy, we are heading into the end of the first hour of trading. Indeed, we have red across the screen. Guy European Markets on the downside this morning. They are feeling the pressure. It is the Technology Sector that seems to be under pressure. The miners from some pressure. Theres some big stocks on the move. Steinhoff one of them. Trading u. K. Is down aggressively in the red. I saw it down 20 . The stock has been hit and hit hard. The conversation is going to continue. The markets certainly on the move. Surveillance team is go to pick up the bag. Matt and i are off to Bloomberg Radio. It want to carry on the conversation with us, dab digital. This is number. 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. Market stocks while european stocks lower. Investors consider taxes and a possible government jet them. Theresa may faces a possible rebellion as she pledges to keep u. K. Roles aligned. A bid above 12,000, for the first time. But could this make or break declines . Good morning, everyone and welcome to bloomberg surveillance. Im Francine Lacqua in london. Le