The fed kicks off a swathe of Central Bank Rate decisions. Will the dots deliver a more hawkish message . Delivers. Day of trading. We will take you live to the uae for an update. Matt as you alluded to, we may see a delay in the open, we will see a delay in frankfurt. The trading system has been disrupted because of technical problems. X is experiencing serious issues. Delay, aoking at a likely delay. We do not know how long it will take or if it affects all assets that we will see delays on the sessions eurex trading. Lets take a look at where the futures are pointing us. You can see that the ftse futures are virtually unchanged at the moment. You will see in a moment rates look the same. Down. 1 of 1 . Take a look at the treasuries. 2. 3976 field. It has moved sideways since the close of trade yesterday. This is a three day look at the treasury yields. Not getting a lot of direction from there either. I absolutely. It could affect other markets. Austria could be affected. I am told ireland potentially being affected by this outage. About thealking underperformance we may see from the ftse 100. It did reasonably well yesterday going to the 75 level. We closed on the ftse 100. Rostoxx up. Norway is outperforming. The us trillion dollar is bid, the dollar is on offer but only just as a result of what we have seen in alabama and we have the, space. Bid this morning. Trade down by 1. 9 . For the commodities a mixed picture in terms of the metals and energy. What are some of the Energy Stocks . Lets get a bloomberg first word news update. Heres juliette saly. Juliette the European Union has warned the u. K. Against rowing back on the agreements it made last week. The block was on alert against britain trying to unstick the deal struck on friday. Europes leaders are planning to hand the u. K. The caret carro t tomorrow. Hollande sees possibility of striking a deal with the eu he cautioned the block has certain red lines. A trade agreement is always possible but it needs to be clear that it cannot happen at any cost. There have been discussions over the past year and they have continued and there are certain points that remain extremely resolute, for example might agriculture and what one would call cultural exception. The Donald Trumps position on trade agreement is not encouraging going into discussions with europe. Juliette oil has resumed its advance. Crude stockpiles dropped for a fourth week. Inventories declined by 7. 3 8 Million Barrels last week. Government data do today is forecast to show supplies shrank. Major steps have been taken to support the market. Thate significant progress we have made together with our nonopec friends eight in the oil markets to return to stability. Seeing thisnuously across all regions. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Guy thank you. Or jones has won a stunning victory against republican roy moore in alabamas state elections. Senate election. With all precincts reporting jones led by 49. 9. It has not elected a democratic senator since 1992. The victory narrows the gop advantage further making the task of passing attacks builds a buy a tax bill even tougher. Upset. A big lets focus on what it means. What does it mean for the president s agenda . Kathleen everything will be that much harder. They had a two seat majority in the senate controlling it 5248. Now it will be 5149. Every time you try to do willhing all of that rethat much more difficult because you will have a much slimmer margin for error. Like we saw over the summer when they tried to repeal obamacare, they were not able to keep republicans on board. That task will get even more difficult. Matt what does this mean for the tax legislation as it stands now . Do they still have the ability to push this through before roy moore comes in . Kathleen we saw Chris Van Hollen calling chaim calling for him to be seated. It depends on when the vote happens. One thing to watch is whether there is controversy, whether republicans are a bit cheeky and trying to put off seating jones until they pass their tax bill through. Democrats will balk at that but that is a dynamic to watch. Guy what does it mean for midterms . Kathleen they are bold heading into the midterms. They just won a seat in the most republican of republican states. Special elections are different from midterm elections. There is not a National Wave and a special election. Who comes out to vote. Usually it is the side that is the most motivated. That could have been democrats. It looks a get was democrats. It is something that democrats will take as an emboldening development. They will feel like they have the capacity to pick up republican seats across the country even in the most conservative of areas. I would temper that encouragement by saying what happens in the midterms is not necessarily going to correspond with what we saw in this microcosm of the case in alabama. The me toothis movement in the u. S. Rooting out in congress,avior business, and hollywood. It has affected almost everyone a sitting a few senator and someone who is running for senate. Everyone except for the president is affected. Does it add momentum to that issue . You see in some ways both sides of the argument. In some ways it as momentum because it shows that there could be consequences for allegations of Sexual Misconduct not just for people like al franken or john conyers. Voters might impose a penalty on type ofwho these allegations are lodged against. The republicans, some of them might be breathing a sigh of relief. Great into the background rather than have him be an active member of the senate, some are hoping that will give some breathing room to not be tied to him, likes and time. Matt i am sure we will talk much more about this. Coversn hunter washington for us from london. We will go to singapore and mark cudmore is said to talk about how this will affect markets. The first thing i saw was the dollar was falling on this. How does this translate to a move in Asset Classes . Mark from this two things to Pay Attention to. A negative for the Trump Administration for next year. Positive for the democrats and it will make it hard for the Trump Administration to get further policy past. Lets ignore the tax situation for the moment. It is a negative for the dollar. Some of the hope for those things that mike it pass might get past less likely. We could still get tax policy past before jones takes a seat which means it may not derail the tax fund bit but people will worried the tax fund is brushed. There were hand scribbled notes in the margin. There might be some mistakes, things might he done to quickly without due process and without assessing the impact. I think it is a impact. They seem to be rushing it through superfast because they do not expect to get it passed in the new year. If they are going we know this will not pass when there is a new majority so we need to rush it through now. Passes, itefit still is positive for the dollar and equity and yields are higher. It does provide more data and is taking some of the sheen off. Guy lets talk about what is happening with the fed. How is the market set up for the possibility of more dots, higher dots after today . I am seeing an increasing number of people talking about the idea that the market is coming around to the idea of four fed hikes not three. The market is at two. It will be surprising if janet yellen given that she is unsure that the low inflation is transitory, it will be a strange time for her at her last press conference to go much more hawkish. I think we are betting on a thinkh turn and i do not there are people betting that way. Some people are going the base case is standard, stay the course. There is little to lose betting and on a hawkish turn. There probably are a few positions that we but not many. Matt you have a piece out on brexit that says it is a nonnegligible chance that we could not see of brexit. A brexit. It is possible brexit does not happen. Why do you think that is more likely . Seen the steps forward and negotiations which seem like major progress but it is clear we have not made much progress in terms of what the two sides want. There are two major sticking points. The eu are not giving away a cheap trade deal without allowing Free Movement and defending citizens rights. The u. K. Once the same trade deal but without Free Movement. The other one is the irish border. They have fudged. The dup and Irish Government red lines. I do not see how we can get a brexit deal. If there is anything that both sides would want. If there is anything but the softest of soft brexits and that might be the u. K. Has done a brexit therefore it gets no vote in the future path of the union but is subject to all its rules. Worst case scenario. I do not see how the government would be able to make their supporters swallow that deal. It is increasingly going to look like a no deal brexit. Once the population, this is slowly gaining traction. Once the public loses that it is looking likely it will get a no deal brexit. Brexit will start to rise. It is a nonnegligible possibility. It cannot be a base case but it is a small possibility that is rising all the time. Despite the fact it looks like negotiations are progressing we will see more people talk about exit being scrapped. Not quite so easy to see on live television. On yourfollow them bloomberg. We had a flash about the open. We have been having issues with zetra open. E we are counting down to the oven and 15 minutes time. Distribution shares soaring as the retailing unit begins trading and abu dhabi. We will take you live to get the details at the security exchange. The market open is 14 minutes away. This is bloomberg. Guy 12 minutes to go till the start of european trading. Here is the Bloomberg Business flash. Indetex has boosted store efficiency and remodeled shops. Operating profit rose to 3 billion euros in the nine months analystoctober matching estimates. Revenue reached 13 . Toshiba and Western Digital have and a dame monthlong legal spat that has threatened to derail the sale of the flash memory is of and cut the u. S. Company off from a future supplier of new products. Toshiba is dropping claims that were aimed at stopping the sale by a Consortium Led by in capital. Its legal claims against Western Digital. Airbus faces the prospect of having to find a new leader after the ceo has reportedly decided not to stand for a third term. Aro french newspaper le fig said he will not renew his mandate. The news sparked a leadership contest as they grapple with a bribery probe and flat demand for its biggest airliner. A spokesman called the report your media speculation and said no decision had been made. That is your Bloomberg Business flash. Thanks ray much. Lets get back to the breaking etra tradingng the z system. Angela runs the midcap stock coverage. What is going on with Trading Systems . Angela we are still trying to is to the autumn of what behind the disruption. The central system has been experiencing technical problems. Eurex has been experiencing problems. There will be a delay. Guy which markets will be affected . To open on is likely time. How will this affect germany . Angela it is difficult to say. We do not have clarity. It issued an emergency trading update. Saying that the opening of the Trading Instruments state opening auction has opened, should have opened at 845 cet and clients should check nonpersistent orders and the aware that could be delays for some products due to manual state changes. That is as much as we know right now. Matt right now i see on the piece, seriousg issues are being decided by them. We note anything else other than it is serious . Angela they have toned that down to experiencing issues might technical issues right now. The serious seems to have disappeared from the language. Itther they are resolving remains open. There has been a change in the language in the last few minutes. Guy we will look forward to seeing what happens in a few minutes time. Angela collins giving us the latest on the story as she has indicated, the market open eight minutes away in europe. Or may not happen. Could be further away. Selling at 16 . The Parent Company raising 851 million by selling a 10 stake in the unit. Bloomberg markets of sick executive editor Tracy Alloway joins us now. The firstpected to be in a wave of ipos. We should put that into context. What does today signal about that pipeline . Tracy this is the first in a wave of listings expected to come from National Energy champions. In the gulf we have these state owned nationalized companies from the 1950s to the 1970s onward. They are expected to sell stakes drasticternational and investors. Saudi aramco is the most highprofile talking about eight to two in dollar valuation which will make it the biggest ipo in totory but adnoc has managed beat them to the punch. There are a couple of key differences. Adnoc is listing a 10 state gas redistribution business where saudi aramco plans to list as a holding company. The Current Trading we are being in the valuation will closely watched by anyone who wants to get a piece of that middle Eastern Energy complex. Matt what does and not do with the cash that it is raising here . Tracy they have lifted their shares at 2. 5. We did that had see that pop up to 2. 9. It has pared back to 2. 7. This is not a company that is strapped for cash. It is backed by some deep pockets in the form of the abu dhabi government. What this is about is sending a message about the future of abu dhabis National Energy giant as well is the future of the abu dhabi economy itself. Noc is open about how this is about attracting investors. It is part of the transformation of the company and they will talk openly about how this means have to adhere to International Reporting standards and they have to publicize their financial results. That is a huge change for a company that has been nationalized for the duration of its history. That is the message here. This is the glasnost moment for adnoc and abu dhabi itself. Matt thanks for a much. There at the glasnost. A minutes away from the start of trading. We could have some delays in frankfurt. Should open onn time. Clothing of the zara chain, revenue rose and also in the Third Quarter earnings rebounded from a threeyear low at zara. Things are picking up. Guy keep an eye on airbus at the get go of trade. There is your media speculation that they will not the ceo stand his role. There is a scandal swirling around this business and tom has been impacted by that. There is speculation as a result and he may not continue post. It will be interesting to see if this ends up affecting the stock at the get go of trade. I am looking at the wei. Reasonably. Ing the market open is next. This is bloomberg. Guy one minute to go until the start of cash trading. Lets talk about the background. The cable rate, absolutely flat. Remember, we get wage data later today in advance of the banks decision. We have the fed coming up today. The nikkei, closing down by your point but present closing down by 0. 5 . Oil is trading up by over 1 this morning. The s p 500, a fairly flat session. Lets show you what is happening on the wei screen. London looks like it is going to outperform a little bit, but elsewhere, a slightly softer open, down by 0. 2 . Lets check the numbers and see if we do get an open. The picture tells us things are green. The ftse trading around this 75 level. We think it will be down. 1 to. 2 . This is what the energy story looks like. We are expecting pretty much Everything Else to open down. 2 . There is a report out of italy this morning that we are now going to be seeing the election happening on march 4 and department will be dissolved just after christmas. Just be aware of that for the political backdrop. We now are able to start pricing that in. The dax, down by. 3 this morning. Lets look at what the imap shows us. We see some weakness in the key sector in europe. Energies are trading down. I would have thought energy had a slightly better bid this morning. The oil price is up this morning. Bitrials actually showing a of strength year. The general picture around europe, and the financials are a big chunk of it. Health care alsoo trading softer. Imapajor parts of the are trading down this morning. Matt, what are you seeing . Matt im surprised because we do see crude up 1 . 1 . Num nymex, up 3 4 of take a look at the down side. First off, you see some of the banks here. Bnp paribas is down. Santander is down. Also on the downside, royal dutch shell. So, integrated oil not benefiting from the boost in crude prices we are seeing today. Switch over to the winners here and we see one big bank at the top, hsbc. There, after the big action yesterday, buying westfield for almost 16 billion. And then you see glencore and a Anglo American winners. Some of the Mining Companies are adding a little bit to the stoxx 600 this morning. Now, republican roy moore, switching back to the u. S. For a second, but something that has affected assets around the world has suffered a stunning defeat in the alabama election. Doug jones became the first him that theo win a senate first democrat t doug jones became the first democrat to win a senate seat in alabama since 1992. This makes cash reform tougher to get through. The fed will announce the final policy decision of the year, expected to be an increase in rates. The market has priced a 99 chance of a hike. The focus will be on Janet Yellens post meeting address, and the dot plot project since. Oining us is Michael Metcalfe. Let me first ask you about the roy moore issue. It has affected the dollar this morning. It has affected other Asset Classes. Treasuries as well, as it looks like it might be difficult to get the tax reform through. How do you see this . Michael exactly as you said. Because we are in a crucial , thisin the tax bill could have wider implications. This could work both ways, it could encourage them to try to send something before he leaves. Tear the work. U. S. Ere a warning that the midterms next year could be more of a market event . In the nearterm, does this mean they look at the tax reform through . Matt does the tax reform look almost like a brexitstyle unraveling is going on here . We start to see the corporate creeping up by 1 . We only see the top rate coming 39. 5. O 37 from it does not seem like much of a reduction there. Will it affect the u. S. Economy that much . If it gets through. Michael yeah, that is a good question. I think compared to the original promise from tax reform, it will be far more watered down, if we do get something. The u. S. Economy is operating at full employment. Weve got some inflation numebrs today. Maybe core inflation has bottomed out as well. Tonight the fed will update its growth forecast. There is the question of whether the u. S. Economy needed large fiscal stimulus in the first place. Actually, moderate fiscal stimulus might be better received because large fiscal stimulus could create inflation, meaning the fed needs to do more faster. Guy lets talk a bit about Market Expectations and the fed. You can see this on doas. 2019 you see the market way up there. For the last 24 to 48 hours, ive seen banks coming out saying we need to start pricing four rate hikes next year. The market is pricing in two. What do you think how would the market react if we need to start moving in that direction . Michael first of all, i think logic to it. Mple the economy is at full employment. The Downside Risks are temporary. The fed needs to get rates up. The usual rate has come down. Theres a long way to go. At some point, certainly not next year. The fed needs ammunition. Thats the rationale to move on this quarterly tightening cycle. The problem for me, guys, this year the fed delivered on what it said it would do. Reight now, the market is not pricing in the three hikes. Its almost like the fed has done what they said they were going to do, and they have not gained any credibility from that. Guy you would be right betting on the market, wrong betting on the fed. Michael exactly. The market4, 2015, was right and the fed was wrong. But this year the fed has been right. Fullconomic trend, employment come inflation not being too worringly low, its difficult to argue against that. It will be interesting to see if they do move the dot, how quickly the market will reprice. The market needs to get to the three dots. Guy yeah, yeah. Matt i realize they look at core pce. That is what we are looking at right now, the core number, which does not include Energy Prices. Energy prices do seem to be on the rise. How does the affect the core number they look at and how does that affect the inflation outlook . Some of us have been talking about the possibility of a spike. Though i cannot see a rise in energy carrying through to the core that way. Michael sometimes there is contagion from headlines into the core. The two series do trend together. One thing i will be watching in the cpi released today, which will have some implications for thecourre number, Prescription Drug prices. We think the downtrend in core pce is transitory. Partly because of that fallen core pce we see this year, half loweris due to Prescription Drugs prices and Lower Services prices. Even though those two goods are less than 5 of the basket, theyve fallen so much, and they have taken a lot away from the core inflation weight. November last year was the first time we saw a big fall in Prescription Drugs prices. One of the thigns we will be looking for is to see if that gets repeated this year, or if the medical inflation starts to move up again. There will be a lot of debates over the next couple months that will give us little pieces of evidence to see whether this downtrend in core pce is transitory, or whether it is more worrying. Its sorry, to see whether transitory . Do you think we wont see if Energy Prices rise, people falling back on spending other areas as well . Michael yeah, that is always a risk. But there is always a risk you get a bleed of goods that are related to Energy Prices in the core that go up. I think theres a you could argue the impact of Energy Prices both ways. In general, higher headline inflation can quite often drag up the core as well. I do think thats a risk. Particularly, those two sectors you are watching watching the trend in health care and the Services Prices will be really important over the next couple months for the inflation trend. Guy this is the u. S. One. Its been in range all summer. When you break out of those ranges you tend to get a decent move in either direction. Do you think this has got legs. We are at 1. 87 at the moment. You start pushing that further and you are signaling a different story about where the u. S. Economy is going further down the road. Policy works with a lag. Draghi loves this. Other central bankers Pay Attention to this as well. How useful is this now . Michael i think this is really important. What it demonstrates and that debate with matt highlighted this. The fact is, the market is leaning strongly one way. And that is that there is very little inflation in the syst em. The reality is, inflation is probably a bit stronger than markets think. Guy plenty of interesting things are about to happen. You can follow all of this on your bloomberg. Michael is going to stick around, joining us from state strett. The fed will deliver its decision at 7 00 p. M. London time. We will bring that decision for you here. And Anthony Scaramucci will be joining us at 1 30 u. K. Time. Plus, we will see what is happening down in alabama. Up next, we will get president hollandes vision post brexit. Thats what is coming up. This is bloomberg. Matt welcome back to the european open. You are looking at a shot of our European Headquarters in london. Lets take you to a shot of all of europe. You see a little grey across all of the continent here. We have not had really big moves. Is absolutely unchanged there. So, no real trends. With spain trading slightly higher. In russia trading slightly lower. Had at least open trading, though. This morning, guy, that was the hard peaart, actually getting everything open. Even with technical issues. Guy that is a reflection of the weather, i think, as well. Grey around europe. The European Union, talking about which house ruin the u. K. Michel barnier said the block was on alert against britain trying to unpick the deal struck on friday. Still, european leaders are planning to hand the u. K. A carrot when they hold a two day summit in brussels tomorrow. Speaking exclusively to bloomberg, former president Francois Hollande said the u. K. Cannot expect to keep the same trade deal as other countries in the single market. Eresident hollande a trad agreement is always possible, but it needs to be clear that cannot happen at any cost. There have been discussions held over the last few years and there are points that are extreme the resolute, for example, agriculture and the cultural exception. These are very important issues. I think Donald Trumps position on relationships is not very encouraging. Guy Michael Metcalfe is with us. My colleague wrote this morning that there is a possibility that brexit want happen. Lets not talk about that, but lets talk about the middle distribution of outcomes right nwo. Right now. Is the distribution now a quite soft brexit and do you think thats priced . Michael i dont think theres any doubt in that. Arguably, it moved that wway after the u. K. Election. It ms of whats priced, probably the best way to think about it for me is to look at st erling, and think that we know sterling is undervalued. Our he undervaluation metrics against cable would have fair value against the u. S. Dollar at 1. 42. We have taken back about half of the undervaluation. Is yes, some level of brexit it is not as cheap as it was. And also, if you think about Investor Holdings of sterling, investors are no longer underweight. Compared to everywhere six months ago, 12 months ago, sterling was undervalued and quite an attractive option. I think we have someone to price in a softer brexit because the undervaluation has halved. Positioning is very different. I think we are getting there. That i mean, isnt undervaluation the market saying ats the market said, we are terrified and we dont know how this will turn out. Now they are saying, it is going to be bad, but not as bad as we expected. Certainly worse than the tpp would tell you. Michael i think it is exactly that. The other thing to bear in mind is the political outlook in the u. K. Is still quite uncertain. So, maybe sterling should have a discount because of that as well. I just think that compared to where we were at the start of the year, when you could make a being constructive on sterling because of the valuation, the Valuation Case is not there as strong as it was. Right now, i would not be looking to expect sterling to appreciate further from here on the idea we get a softer brexit. Guy so, this is asymmetric. If you go to your bloomberg, you can see the forecasts, we dont butout to 1. 40 until 2021, the asymmetry you are talking about, the positioning thing is fascinating. Youre the second person in a couple days who has told me the positioning is much more neutral. And if the positioning is much more neutral, the much more significant risks are for the downside for sterling. Michael i think there is another factor which is not brexit related which is one of the other things that made sterling attractive this year was its undervalued and underground and one of the few Central Banks raising rates. Theres an expectation that that continues next year. We are a little concerned about the consumer rolling over and yes, inflation is very high. Guy we have got repricing data. What is it telling you . Michael what its telling us about the u. Kk. Is there is a risk it falls much faster than we are expecting. The inflation data online is much softer than the official data. If you take out the prospect of rate hikes next year, sterling becomes a little more fundable. GoingMichael Metcalfe is to stick with us. We have a lot more to talk about. Were going to look at the midcfaap movers. We will look at Dixons Carphone. Its also planning to scale back its mobilephone business, which then makes you wonder, what else do they do . We will look at why. This is bloomberg. Matt welcome back to the open of european stocks. We are 24 minutes into the session. There is not a lot going on if you look at the individual indexes. But if you look deeper at the movers, there are some interesting stories, including Dixons Carphone. Some investors have lost half of their money this year. It is up this morning. What is going on . Nejra the challenge for Dixons Carphone is customers are holding off upgrading their mobile phones. It will shrink the mobile unit. Its also cut the guidance, though. Its taking action to reposition the mobile unit. So, perhaps we are seeing the stock rise on the fact that it is doing something about the challenges it has been facing. Also, we have had positive comments come through from the cfo. For examplke, saying early interest in the iphone x hasnt really good. Dixons carphone, one of the best performers on the stoxx 600. And the ncc construction company, dropping the most in almost three months, seems to be, as it has raised positions. Finally, im looking at the private Equity Conglomerate ratos. That is lower after the boards that it was not satisfied with performance. So, the ceo is to step down immediately and they have named a new ceo. Guy thank you, nejra cehic, with the movers. General elections will be Held Next Year in italy, according to the newspaper. They will be held on march 4. Michael metcalfe, europe has had a good year. Maybe a little bit of growth does change the mood. Thinking about italy and start pricing it. Michael well, probably right now. We have learned from elections, that currencies are good proxies to hegde election risks. But look, as you said, from where we were at the start of this year, we were so preoccupied about the French Election and the Downside Risks that would bring. The shocks didnt happen. In a similar way the market has gotten the nine about the fed, it is benign about european politics. We are not talking about the catalonian elections towards the end of the year. In terms of Investor Sentiment towards european assets, theres no sign that there is a discounting for Political Risk at all. 2018 outlookt a from michael next. We will factor in the politics and talk about what is happening around the world. Thats next. This is bloomberg. Matt we are 30 minutes into your trading day. No more. Doug jones delivered a stunning upset to the gop in the Alabama Senate race. What does this mean for trumps agenda. Monetary policy marathon. Of fed kicks off a swath central Rate Decisions. And the abu dhabi debut delivers. Adnoc distribution shares surge as much as 60 on their first day of trading. Welcome to Bloomberg Markets the european open. Matt miller alongside guy johnson at the new headquarters in london. Guy grr, matt. Lets break down the stoxx 600. Retails trading. We were just talking about Dixons Carphone warehouse. Retail is trading by 0. 6 . Autoparts, matt millers favorite sector, up by. 3 . Banks are trading quite strongly as well, which is interesting in terms of the mix. The bulk of europes sectors are trading. Oila and gas is trading down. Chemicals, construction, food and beverage, industrial goods and services, that is where we are seeing the weakness this hich did open on time, despite technical glitches. Reporter doug jones has delivered a stunning defeat to republican roy moore. Jones was predicted as the one with 49. 5 of the vote. 98 of precincts reporting. The stronglyce in republican state of alabama, split the gop even before the nominee was accused of Inappropriate Conduct with teenage girls. Alabama has been at a crossroads. We have been a crossroads in the past. And unfortunately, we have usually taken the wrong fork. Tonight, ladies and gentlemen, you took the right road. Moore did noty immediately concede. I really want to thank you for coming tonight. I realize when the vote is this close, it is not over. Weve still got to go by the rules, by this recount provision. Ed the European Union has warned the u. K. Against going back on the agreement it may last week. Michel barnier said the block was alert against britain during the first phase of negotiations. Still, they are still planning to hand the u. K. The caret for future discussions when they hold the summit in brussels. The governorof south africas Richest Congress says they will lose the majority and extent an economic slump if it chooses the wrong leader this weekend. He says the party faces a critical moment to regain public and business confidence. Some of the most outstanding south africans are in its banks. And i am confident that when the delegates come together to the conference, they will elect a team of leaders. The team of leaders will ensure that we forecast fundamental the problem of inequality. The problem of unemployment and fourthly, the problem of corruption. That is how we must be measuring this leadership. About how determined will they be to take on the fundamental issues . Ed global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Guy thank you. Lets talk about what is happening in istanbul. The turkish president is addressing the conference. Gan is talking about the president s decision to move the capital to jerusalem. The u. N. Security council ruled that no nation can have a embassy in jerusalem. The southern flank of nato. This fact is probably worth paying attention to into 2018. The risks that surround it. More immediately, remember we have the turkish Rate Decision that is coming up. And that will happen on thursday. Very strong data early on this week. The market is pricing in about 150 basis points of a rate rise to come through. The question is, will the president the on board with that . Indicated hehe would favor dealing with an inflation story by cutting rates, not raising them. Lets take a look at you look at grr, and i will look at gmm. Its an amazing function we look at every morning. If you click on this dropdown box up here, you can check it out on year to date or month to date, what have you, and see what the Asset Classes have been over that time period. The s p 500 block on the top left corner of the screen has a black center to it, meaning it has moved by more than three standard deviations this year to date. Its up 19 . We are back here with Michael Metcalfe, from state street global markets. Thist to ask you about amazing equity performance we have seen, not just in the u. S. , but in a lot of market. S weve seen a lot of oneway movement. Does that look set to turn around in 2018 . Michael that is almost always the concern when something goes up in almost a straight line. The interesting thing about your gmm function, actually, theres been many days where its all green. What thats telling you is markets are not reacting as they normally are. Even though we have had some country shocks we are worried about turkey, we are worried about south africa, and we are watching all the potential risk we have not seen any propagation of risk. When you get a shock in one country, there is no contagion. Key factorsof the that support of the rally this year and is one of the most important things to look forward to for next year as well. Guy volatility has been very low across Asset Classes more broadly. Its meant that you are able to manage the risks between those relationships and theres a liquidity backdrop to all of this. You talk about this amazing story, teh fact that the grr is green sometimes across Asset Classes. Does tha tbreakt break down . Michael the other reason we get concerned is that it encourages leverage. I think that the one of the arguments, why there is a lcack of correlation is its qe. We point to liquidity. Liquidity support for Central Banks will be less next year. It wont be negative until the Fourth Quarter at the earliest. And even then, a weaker dolalr would mean that Global Reserves cover that anyway. The other thing to bear in mind, though, is there is an underlying fundamental trent here, which means we are getting simultaneous growth. Therevery goods local will store there are very good local go stories. We are not just relying on the u. S. Or china. There is an underlying fundamental reason for the lack of correlation as well. Matt i want to finally ask you about bitcoin. I know we have not talked about it today because it is only moved by a few hundred dollars over the last couple days and the volatility has come down some. These are the futures we are looking at here. You can access this part of the bloomberg. The top panel shows the futures price. The futures are trading for 17,700. The underlying is trading for just under 17,000 right now. At the bottom panel you see the volume. What do you think about the steadying of the ship that has been brought about by the futures contract . The previousnswer question, when i talked about the fundamental factors that help support the rise in asset markets, when you look at the trend in bitcoin, you have to ask fundamentally what has changed in the last month to try to justify the rise in prices we have had. Theres a narrative around that. Part of the narrative is that the release of bitcoin will allow more investors to partake. One thing to watch is the volume on teh cutures. Is the volume on the futures. If it does not go up, then that narrative is going to bring a lot of new Investment Capital into bitcoin. Going to be a key test going forward, whether the rise in volumes justifies that narrative we have created to explain why bitcoin has gone up so much. Guy thank you michael, for coming up so much. He is the global head of microstrategy at state streets global markets. He will be joining matt and i on daybreak radio at 9 00 a. M. In the meantime, we will be talking about merkels next mo ve, beginning exploratory talks with the social democrats. Will there be another grand coalition in germany . Thats next. This is bloomberg. Matt welcome back to Bloomberg Markets. You are looking a picture at our new European Headquarters in london. We are 43 minutes into the trading session. Not a lot going on as far as the equity indexes are concerned. That today is a big day for the politics in germany. Angela merkel will begin exploratory Coalition Talks with the social democrats today. Last week the sdps caucus leaders said her party has no red lines. With us now is josef janning. Thanks for your time this morning. These are preliminary talks to see if preliminary talks could begin. Nobody has made a decision about a coalition yet, though lately there has been talks about a possible cooperation coalition, which is a step below the grand coalition we saw. What is most likely. You see how weak the sdp coalition is, how they work hard to get out of the physician they took on election night. And you are wondering, why does it take so long when they have been in government for the last four years together . It now looks like there is a strong trend in the party to have a packed coalition, cooperate on a number of fields, but leave it open on some others. I dont think it is going to work. The democrats will want a government partner that shares responsibility across the full spectrum. And that is going to take some negotiations to get that on the agenda. But this Corporation Scheme is a sort of a camouflage to coalition building. Matt and it is one merkel said she would prefer not to see happen. A minority government is one of the things you are spoken about around berlin, especially by members of merkels party that maybe dont sincerely want to see her continue as chancellor for another four years. Whats the likelihood that this is the beginning of the end for chancellor merkel . Josef well, the longer this lasts, this open negotiation situation, the more people will warm up to the idea of a minority government. It is very unpopular and it could be very difficult. The german public is not convinced this is a good way. They prefer a stable majority. On the other hand, you could have all the Party Members from the top ranks at the cabinet table. You have six more seats to fill. You could present a fresh cabinet to the people. Whenever you win on something, just you win. Whenever you lose, it is the others obstructing it. It could be an option. For merkel, it runs against her instincts. For the party, a lot of people have begun calculating. Guy my sense is that germany went right in the last election, not left. Yet, if we were to have another grand corruption with the another grand coalition with the spd, the german public would go right. Josef a grand coalition these days is not an automatic move to the left. Sure, christian democrats would have to make some concessions, but they have positioned themselves pretty much in the center. They have moved left, so to speak overtime, in an attempt to capture a center that was moving left. What we saw during the last elections with the emergent of a right french, something that could grow. The nationalist wing and the Christian Democratic Party is lacking key figures, they are lacking symbolic figures to signal to voters on the right fringe that the christian democrats are the party for them. I see germany still being centered around the middle very strongly, but the cdu struggling to fill the right gap. Guy the election didnt really focus on the future o f europe t all. It was a domesticfocused election. My sense is, the discussions will have a much bigger element of europe in them, than the election did. Why the difference . Josef that is true. Merkel on purpose chose not to speak about it because she knows the german public is not very eager to see germany enter into new commitments that involve spending german money. The europews that issue is the one issue where both parties share a lot of common ground. Couldhe one issue they sell as a supreme goal, as an important responsibility of german politics. That will help justify their turnaround on building another coalition. Matt it seems like schulz is taking it a little too far. He was speaking at teh spd, talking about a United States of europe, and even talking about scrapping the charter as it is now. New healthsked for a care system and made some demands that it seems everyone knows is impossible for the cdu to meet. Scuttle theseo preliminary Coalition Talks before they even start . Josef well, schulz is trying to hedge all his bets. He is clearly a temporary leader of his party after the colossal loss in the elections. He has got to pick up all the areas around which the wings and factions of his party rally. The General HealthInsurance Scheme is one of those issues. This is not something that an spd coled government would do, but it is something he asked for to please the various constituencies he needs to stay at the helm. Matt i wish they would focus on fixing the autobahn. Josef janning. Coming up, airbus faces a possible leadership change amid reports that its ceo will exit the company. Well get the latest. This is bloomberg. Guy 53 minutes into the market session. Airbus might have to find a new ceo. That is if the reports suggesting tom enders wont stand for a third term are correct. Airbus has described the report as pure media speculation, adding that no decision has been made. Before i get to my colleague, who covers all of this, i want to show you the gb function. Nothingennest, theres to see. That tells you the market is not terribly surprised. Chris jasper joins us. That the market should be more surprised by the fact that he will last until 2019 because the scandal that is swirling around this company kind of stops at tom enders desk. Chris absolutely. The background to all of this is a series of bribery allegations, which we will not get into, but concern a lot of defense deals. There is a suggestion that this goes as far as enders. Guy he is the boss. The buck stops somewhere. Chris there may be a significant hit coming along, w hich might settle those claims, which we have seen in the past with other companies. If that happens, it could make amendable anyway. Guy even if he wasnt responsible, it may end up dropping his desk. Matt yeah, i wondered who might be the successor. You know, guy, im sure has thought a lot about this as well, not just today. Im sure everyone who covers airbus has thought about it. Who is up next . Chris the intriguing thing here, matt, is that the man who runs the Main Commercial unit, he would be expected to take over. He is french and there is always an alteration between french and german ceos. But there is a feeling and the reports suggest that he might not be preferred to take over. Expecth case, we would to see another french executive fill that position, either from within the company, or maybe from a different company. Guy he is a lovely guy, but he is a nuts and bolts guy, an operational guide and tom is the operational guy, the smoother. Chris you can characterize the two that way. Tom enders has taken a broad view of his role. He has had to involve himself himself at an engineeringbased level. Guy thank you, chris jasper. Seekingamco, for pictures. This is bloomberg. Guy Democrat Doug Jones wins a stunning senate victory. The height before christmas. The last fed reich. The last fed rate hike. Janet yellens final post. And the abu dhabi debut delivers. Sharesistribution chair surge on the first theyve trading. We are live from the capital. Welcome to bloomberg surveillance. Im