Against the dollar. The bitcoin bounce. The cryptocurrency surges more than 7 as trading starts on the worlds biggest futures exchange. Are we heading for another new year selloff . Matt were less than a halfhour away from the european open. Lets take a look at how the equity Index Futures are doing with no comment from the on the bitcoin news. You see futures down a third of down. 2 . We saw big gains for futures earlier, so if we have red arrows across the board on futures, that is interesting considering how strong they were this morning about 10 minutes ago. How it is interesting things are starting to turn around, because friday we saw be s p 500 trading up by. 9 . The nikkei overnight is up. Matt i am going to say that those futures were somehow incorrect. I still see strong gains on my bloomberg. The dax futures are up. 8 . I am going to say those should have been green arrows. Guy always believe the bloomberg i think of the message from this. That is the takeaway. 9 . P 500, up the nikkei up. Overnight, australian markets up strongly. That is a more consistent picture. Eye ony, keeping an brazil. The other thing to mention is the british pound up. 2 . It is a reasonably big week. Ofl they decide what kind brexit they ultimately want . I want to show you the second part of the gmm. We have a moving oil. We have a move in oil. We are getting a decent move in oil this morning. Futures are higher. Asia is having a solid day. It is maybe about the tax story. We will get mark cudmores take in a few minutes. Juliette donald trump has said he is not considering firing Robert Mueller in response to a reporters question about whether he intends to dismiss him. Daycomment came on the same that cornyn said it would be a mistake for trump to fire Robert Mueller. Putin has spoken to donald trump for the second time in four days. The latest call was to thank the president for a cia tipoff that led to the breakup of a suspected militant fell. How to target a group that was planning explosions around st. Petersburg. Seven suspected followers have been arrested. You keep Prime Minister will set out her plan for a proposed brexit transition period. After march 2019, she once britain to leave the au several market and Customs Union while retaining most of the benefits of the membership. Sebastian pinera has slept has left to victory, winning by a wider margin than expected. He has pledged to more than double economic growth, create jobs, ease industry regulations, and narrow the budget deficit. His probusiness agenda helped push the index to a record before the first round of voting. Sebastian pinera the latest latest the latest the star wars is ahead of last years movies opening weekend. The latest installment also did well overseas. It opens in china next month. 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 very much, indeed. Speculative long positions in the euro are the longest since july 20 july 2007. The eurodollar is testing the trendline on the upside. That and the onemonth low could be a painful followthrough. Lets get our take from mark cudmore. I will point is the market going to be taking a step back and going, we are long, but this isnt coming through, this is delivering . This isnt delivering . Mark it needs to work very soon. If it doesnt in the next 24 hours, that trendline will creep higher and the market will get nervous. Liquidity will decline every day at the moment. At this time of year, you start looking where there is positioning. Where the positions that might be vulnerable if not working out . Makesome of the sense. The funding squeeze may have already seen its extreme already, so than the dollar could see an ease off. I think the tax reform bill is not necessarily positive dollar as we were thinking. Maybe people are long dollar for the wrong reasons. The dollar can follow a little bit, and that will help the euro. The eurodollar trade can work. I can see it being painful around businessweek. Matt why are we bothering even talking about tax reform . The interesting trade is the turkish lira, South African rand. I have got it appear. I have got it up here. It is one of my favorite charts. Em trade is fascinating right now with what happened with the Turkish Central Bank last week, what is happening with south africa. Is this not the hottest story on the terminal . Mark i think it is absolutely the main story today. With emerging markets, the big stories do affect everything, whether tax or whatever else, but they take so long. Emerging markets come into the limelight for a day or two days, and the whole story can play up quickly sometimes. Suddenlyafrica, it came on the radar in the middle of last week. Suddenly there is this big election. The whole direction of the economy will be decided this morning hopefully. Exciting story. On fridayid very well and is doing well this money. There is still a lot to be decided. Again. Elayed there is going to be a lot of nuances around receiving the results. Will the result, clearly or will it be challenged will the result, out clearly or will it to be challenged will the result, clearly, or will it be challenged . Think there is still follow through for randy gains in the shortterm your through for rand gains in the shortterm. Guy bitcoin. Are we heading for another break lower . I cant believe matt didnt ask this question. Mark im surprised as well. Every january we see this painful correction in bitcoin. A seems to coincide with couple weeks leading up to Chinese New Year. China used to completely dominate the bitcoin trade. It made sense for some deleveraging to buy cash for Chinese New Year or buy gifts. This year, no longer to china dominate trading bitcoin as much. It has become more mainstream, particularly u. S. And japan. Maybe they wont see the direction in january. My colleagues point out because it is not so easy to sell or trade, people tend to buy and hold. Affect, my a wealth bitcoins have multiplied, they might use that wealth affect at christmas, but then they will have to pay it back when the credit card bills become due. We might still see the painful january correction. Maybe we will get the same this year. Guy thank you very much. Mark cudmore joining us. Go blog. E mliv go follow mliv the mliv blog. Reach it isid trading at an alltime high. Almost 20,000 is where it traded during todays session. It could still go back there. It hasnt come down yet. I want to stick with the bitcoin story, the worlds biggest exchange. Started trading last night on the chicago mercantile exchange. This comes a week after chicago rival a chicago rival introduced similar derivatives. For more on this, a reporter joins us from hong kong. It is significant in that you mentioned the cboe started trading a week ago. When they announced their it isannounce to start tradinge corn futures matt perked up the attention of mainstream investors. Everyone watching the performance of the new bitcoin futures, and so far what we are seeing is the trading premium is narrower. It is looking so far, so good. Why five to one rather than 121. One . O eric the cme is dealing in price volumes, larger data set. Kind of in all respect you are dealing with a product that is larger than what you were dealing with her cboe. With four cboe. Matt it is five times the contract size, and a lot more people can access this, right . Not everyone was able to trade and the website wasnt able to handle the traffic. We havent had any pickups and we have broader reach. Hiccupsickups any and we have broader reach. Eric we also have an cd price halts we have seen we also havent seen price halts of we have seen. Biglso havent seen the price liens we saw with cboe. The premium was 2 from the futures future from the futures versus the actual bitcoin price. Who knows what will happen when it hits 20,000. Thank you so much for joining us. Up next, we will turn our attention to politics. A rocking tax plan. President trump thinks so. Christmas is coming. If you are on twitter, follow the first Global Network built for social media powered by bloomberg. This is bloomberg. Guy good morning. 13 minutes to go to the start of cash trading. Its get a Bloomberg Business flash. Thales has knocked out the. Ompetition to buy gemalto it comes less than a week after the bid, which gemalto rejected as undervaluing the company. To sell tos agreed kkr. Worstal is for one of its performing units. The private equity firms of purchase is the biggest leveraged buyout announced in europe your in europe this year. Atlantas mayor has said power has now been fully restored to the airport. A major outage at the airport forced delta and other carriers to cancel over 1000 flights and led to the diversion of many others. Local utility Georgia Power set a fire may have caused extensive damage in an underground facility. Bitcoin futures started trading last night on cme. It started it comes a week after a chicago rival introduced similar term it comes a week after a chicago rival introduced similar derivatives. That is a win. Canadian Police Continue to weigh whether to open a Homicide Investigation after the death of a billionaire pharmaceutical executive and his wife. The bodies of the 75yearold and his wife were found in their home in their toronto neighborhood on friday under what Police Called suspicious circumstances. That is your Bloomberg Business flash. Thanks very much for that. Asian equities rallying today, as President Trump says the u. S. Ng to start toi the when they pass republican taxcut plan. Closing in on his first major policy victory since he has become president. For more, we are joined by kathleen hunter. What are the remaining roadblocks . What could hold this victory off for the president . Kathleen we have seen that there have been all of these stories coming out and about, lastminute provisions added to the bill as of last friday. We have a story on the terminal that the daily provision benefits real estate investors, including potentially trump himself. Some of the optics of the lastminute changes could give some members of congress pause. The real question is whether the momentum for this is so great overshadows the other considerations for this. I think that is probably the case. Pushingthere is so much in favor of this legislation at this point that it is likely going to get done in the next 48 hours or so. Expectationas this that getting this done is good politically. Im wondering whether the expectation of how good it will be politically will actually turn out to not be so true. Kathleen i am having a jeanluc the end of9, president Barack Obamas term. That year there was a lot of frenzy over lastminute legislative activity at the end of december culminating in a Christmas Eve Early Morning senate vote to pass obamacare. Democrats lost, control of the house. I bring that up as an example. It isnt a perfect parallel, but just passing legislation, just delivering your campaign process is half the battle. If they are successful, they will have to make the case to voters that this is actually benefiting them. A lot of it will hinge whether voters feel that impact in their pocketbooks and what the political narrative is. Matt thanks very much. A very busy week for kathleen hunter. We are minutes away from the open. Up next, we will talk about a cyber battle that may have been decided already. Outbid for gemalto by Tim Craighead by thales. , the board has built a the board has backed a bid from Tim Craighead gemalto, the board has backed a bid from thales. Guy watch ig group this morning. On what is happening with equities generally. There will probably be a tax effect coming from the u. S. Aian equities have been on strong session. Here in europe, the fair value regulations point to a strong start to the day. This is bloomberg. Guy we are one minute to go until the start of cash trading in europe. Watch the u. S. Tax at that story watch the u. S. Tax affect story. You have seen it in the nikkei this morning, appeared you have seen it in the nikkei this morning, a. The s p up by 9 10 of 1 . A solid backdrop for the start of european trading this money. We might get some clarity over the next couple days as to what britain once at of brexit. In terms of the fair value regulation on the bloomberg this morning, generally positive. You are going to see a solid start. London looks like it is going to underperform a little bit. The u. S. H story tax story front and center. Watch the banks. It will be interesting this morning. , rising out of the gate a little bit. The rest of europe is expected to do a little bit better this morning. Italy is turning into an interesting story. Lets see if we can get a number to see what the idea is for the rest of europe. There we go. A. 7 , as anticipated. Up. 7 , as anticipated. Its turn our attention to what is happening with the stocks story and how it affects the sector story. Take a look at this. The imap is definitely turning green this morning. Only a few areas of read this morning, but generally financials are trading strongly, industrials doing well. You will see health care companies, cement companies, but you will definitely see banks doing positively on the back of the stocks story. The stoxx 600, the big measure up by around. 5 at the moment. We priced a little bit in on friday for what was happening in the u. S. We are pricing more in this morning. Health care trading is strong. Matt, what are you seeing on the individual stocks . Matt i am seeing mostly gainers. Have 479 gainers and only 50 losers right now. We have highlighted the gainers for you. Total, hsbc, siemens, all big gainers this morning. Go, the retails sector continues to get hit. Unilever is selling i cant believe it is not better. Some of the defensive stocks down. Lets talk about the tax story. It is the driving force this morning. Weeks, lawmakers are scrambling to lock up republican support for tax reform. They added a lastminute perk as well. Votes planned in the house and senate over the coming days. President trump closing in on his first wager victory. His first major victory. With us iss Alexander Dryden. Is going we think it to get over the line, however there are a couple more hurdles. Of the interesting things is how the tax bill has changed in nature over the last will over the last week. Over the last week you have seen it change. It is now over the it is now about the individual tax bracket. It increases the chance of inflation moving above the feds target. Guy it is much easier to sell bill for the republicans. To sell though for the republicans. The republicans need the pickup off the back of this. Very hard to sell a tax cut for corporations. The dynamic has changed. Ant isnt it a bit of asymmetric risk . Everyone has priced in. We are at an alltime high for the s p 500. Doesnt go through, and without mccain voting, it seems risky. Stocks could get hit hard. Alexander whether it is quickly priced in is another matter. When we are talking to clients and they think and if they think tax reform will pass, there is still some reluctance. I dont think it is fully priced in, but you are right. If it were to fail at this final hurdle, you will see markets correct going into 2018. Going take the tax aspect if you take the prospect off the table, is that a correction . Perhaps no. It could trigger volatility at the end of the day. This would trigger some volatility in Financial Markets were to fail at this junction. It to fail at this junction. Guy i have the city surprised index here. City surprised index here. Do you think the last week will change that . If youre right in this ends up in peoples paychecks, they may spend it. You may actually searches see a pick up in the inflationary story that we havent seen. Alexander great. Going into agreed. 2018, the base case is that inflation remains benign. Markets have gotten complacent about inflation. Market, signsabor that wage pressure is beginning to come through, and tax reform, inflation comes back on the agenda. 2 , u. S. Re to move 10year trading at 2. 4 doesnt make much sense. Benign inflation is our base case, but it is a risk worth watching in 2018. Matt how would you change your Investment Strategy at that point . Alexander you are in a yield curve steepening environment. Something we think will play out in 2018, the yield curve gradually steepening. As Central Banks withdraw liquidity and inflation comes back on the agenda, the u. S. 10year and pulling out of that area be an opportunity. Guy alex, stick around. What do we got coming up . The u. K. Prime minister is set to address Parliament Today about the brexit transition period. This is bloomberg. Welcome back. We are 10 minutes into the trading session. Lets take a look at the world map, zoomed into europe heard Strong Performance coming through out of germany this morning. It is trading up over 1 . London is putting much in line with the rest of europe, excluding what is happening in germany. Story in the netherlands. Paris is up a little more, but it is not completely off in the way it was at the get go of trade. Generally, a solid start to european trade this morning on the heels of what happened in asia. The nikkei was up strongly. We thought in the s p on friday as well. Tax. Matt lets talk about the u. K. Prime minister theresa may will address parliament to set out her plans to to senator plans for the brexit transition period. Parliament to set out her plans for the brexit transition period. Alexander dryden is with us. What do you think is the most important part as an investor to watch . Is it her stability in government . Alexander for us, we are starting to see the brexit negotiations move past the first couple hurdles and really getting onto the meat of the negotiations. This is what investors and economists have been looking for, the trade negotiation and where the u. K. Will stand come march 2019 with the relationship with the e. U. This is where it will start impacting Financial Markets, and particularly the currency. The pound remains one of the most challenging currencies forecasting in 2018. Emerges, thety pound could grind higher in 2018, but it is a tough call. The pound has actually done ok this year, surprisingly well. Positioning would seem to suggest the market isnt short of the pound at this point. I wonder whether the risk lies at the downside. It will be easier to make the moves lower at this point. Michel barnier can tell what is going on. The datato me, given and what we are seeing in markets, that may be in the shortterm the risk life asymmetrically to the downside. Alexander for a man who is now living in new york, i pay particular attention to the pound dollar. The economic positioning of the u. K. I think is starting to get better. As much as some data would suggest, there is still a lot of negative sentiment, not so much from daytoday traders, but Large Institution investors in a handsoff mode when it comes to touching sterlingbased assets. Clarity, youets could see investors begin to return to sterlingbased assets. That is where you see it grind higher. We dont think this is going to go. It is a slow grind higher in 2018. Matt isnt it becoming clear is just asu. Interested in keeping the status quo as the u. K. Seems to be . As is the default position for the u. K. , the breakthrough we had a couple weeks ago, the trade deal may end up being the status quo issue as well when they work it out. We could be in a transitional deal that lasts forever. Alexander that is a plausible explanation. At the end of the day, status quo deal would be something that would work in the favor in investors mindsets. Taking a hard brexit scenario off the table what a mock one of the actors that has been weighing down on the pound. If you close the door on that, you could see the pound grind higher. Status quo would be frowned upon by investors. Guy investors probably would be happy with that. Do you think the data the next year will be difficult . The europeans keep saying, and so far negotiations seem to have gone their way, this is the hard part. That was the easy bit, and this is the hard part. Clear how froms the european line is and how much of a struggle it will be for the u. K. To get around that we make it to a good place in the end, but adding there will generate volatility. When you talk about the grind oneer, is it going to be and a half steps forward, one step back . Alexander you are right. It is not going to be smooth sailing. There is going to be backandforth and it will move around. Guy the timing and entry points alexander it is going to be difficult. This is not going to be an easy currency to be trading in 2018. Is going to be some volatility. None of that should come as a surprise to investors. Brexit was never going to be an easy transition. Matt i just wonder where you see the gilt curve. Concerning with the bank of england did last weekend forecast, how do you see that playing out . Economy has not entered into the recession people originally anticipated. Inflation has now exceeded the 3 range, triggering the chance to have to write the letter. That still gives the bank of england an opportunity to continue raising rates in 2018 ended the 2019. Is it going to move as fast as the federal the Federal Reserve . No. We think one a year for the next couple years until we get exit clarity. Clarity get exit until we get brexit clarity. We are expecting no major shift in the gilt curve going to 2018. Matt Alexander Dryden stays with us. It is great to have him back in london. Guy absolutely. Just to point out, the ftse has done 5. 61 yeartodate. Only 2 of the upside. You make 2 if you are a euro investor investing in the ftse 100 this year. Up next, austria gets a new leader and long bets on the euro hit a multiyear high. This is bloomberg. 21 minutes into the equity markets session in europe. Its tech about the stocks on the move this morning. You gemalto. W who would have thought that thales would come in and knock out atos. It is trading 300 its normal volume at this point in the session. The markets certainly paying attention. Gemalto looks like it is going to go that way. What is interesting is the idea that we are seeing more and more hostile bids coming through in europe. May be an indication of the idea that europe is finally getting on the front foot. Matt lets talk a little bit more about what is going on in europe. Formally becoming austrias chancellor today. Theparty struck a deal with nationalist Freedom Party on friday. Long bets on the euro hit a multiyear high. Still with us, Alexander Dryden. Austria haslear, had a far right aspect to its government in the past. Im assuming this doesnt concern you as far as European Economic growth and strength in the euro . Alexander austria was interesting from a political point of view. It doesnt have a wide ramifications for the eurozone equity market. I dont think geopolitical risk in europe has gone away in 2018. We still have the german election, Coalition Talks in progress, breakfast on the agenda brexit on the agenda. There are clouds on the horizon, but it is clear that it was. That but it is a clearer than it was. Is portugal, germany, italy, germany. What we are seeing at the moment is italy starting to move. Italy, people are pricing in risk. Portugal is going the opposite way with the ratings upgrade coming through. When you talk to investors stateside, are they in a similar position they were at the beginning of last year . Are they now more focused on the fact that the european economy is getting back on the front foot and italy is nothing to worry about . Alexander letter more than the former. More focus on the improvement in the european economy. They seem to be more company to pull taking risks in the european economy. The European Market. There is a good chance you see some sort of hung Coalition Talks or Hung Parliament in issue and italy after the vote. There doesnt appear to be any leading party at this stage. Matt i have a chart here as well. We have here is priceearnings major, s pthe three 500 in white, nikkei in yellow, and blue the euro stoxx 50. Why is the euro priced cheaper than the u. S. And japan . Alexander some of this is interesting. This is getting into the composition of some of the indices. The white line is 25 tech stocks. Similar story with japan. Market, 1 ofean the index is invested in tech. It is the sector that is starting to see that multiple expansion coming through. That is why you are starting to see a divergence between the white and blue line as tech has been the sector that is most move forward in 2017. Guy some people say that the lack of tech in europe is great, because it is the hedge. The exposureve asia has. As a result, when things start to go wrong and we start to see that advantage coming through, but in this last phase, if we are late cycle, it is these kinds of companies that may show the real expansion. Get does parts of europe get left behind . Alexander i think some do. The more defensive sectors in europe are likely to be left behind. We think the tech rally has been through this year and there is no reason why it cant continue. The economic backdrop looks good. There is still a level of exuberance. Alex, you will stick with us. Speak to p. M. Will moscovici. Matt are 30 minutes into the trading day. Lets get your top headlines. European equities surged as republican lawmakers try to get their tax bill on the president s desk before christmas. Aranda rally as the ruling handed votes for a new leader. The South African currency hits a three month high against the dollar. Bitcoin bounced the trip to currency surges. Trading starches start is started on a new exchange. Welcome to the european open. Im matt miller in her land alongside guy johnson in the new European Headquarters in london. Guy you know that conversation we were having just a minute ago , the tech sector in europe is the bestperforming sector. Could have seen that one coming. Up by 1. 16. This is the grr function. The services are doing well, construction and materials are doing well. ,e talked about the tax story that infrastructure story. Health care is doing well. There is tax in there, as well for the European Health sector. Utilities are trading to the upside, as well. Every single sector is in positive territory in europe. Lets get a first word news update with sebastian salek. Added, located revision in the added a complicated revision in the process. Change,rts say the which allows real estate businesses to take advantage of a new tax break, says they wouldnt help him financially. The president said he is not considering firing Robert Mueller in response to a question about whether he has dismissed him. Trump says hes not. It came the same date the senates number two republican said it would be a mistake to fire him as many gop lawmakers has been criticizing his probes. To donaldutin spoken trump for the second time in four days. Spoke toir putin donald trump for the second time in four days. According to a kremlin statement, it targets a Group Russian d a the u. K. Prime minister will set out her plan to how a proposed transition period owwould work. She was britain to leave the European Market Customs Union while maintaining benefits and membership. She tries to keep different factions inside the conservative party on her side. Billionaire sebastian can europe has swept a victory in the chile president ial election. He has pledged more than double industrygrowth and regulation. Agenda pushed the stock to a record high for the first round of voting. Metlatest Star Wars Film the High Expectations at 220 million in u. S. And canada ahead of last years spinoff movie which took 158 million in its opening weekend. It also did well overseas. It opens in china next month. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thanks very much for that. Leaving six years of shackles behind, the stoxx 600 earnings per share should escape the feeling of 24 euros since the financial crisis according to Bloomberg Intelligence research, which also points out risks still remain. Joining us in london is the head of Bloomberg Intelligence, and is still with us is a Global Market strategist at jb morgan asset management. What is the single biggest driver of that positive outlook for you . Its all about earnings from our perspective. As we look into the next year, we have leading indicators regionally that are at record levels. You have the global sink and iced recovery. Synchronized recovery. We dont have the dropdown that we had to drag we had from various sectors, whether that be energy banks on successive rollovers. All told, we see earnings half foroward 26 and a the stoxx 600 next year on were stores 28 potentially. Positivepretty backdrop we think will be there for stocks as we go into the new year. Guy expensive, arent they . Guest they are. Couple of things to keep in mind, rates are very low. Europe isat we see in rate driven. If rates stay where they currently are, which is our expectation, you adjust the pe for low rates, you are only at about average levels in the past 10 years on rate adjusted multiples. Thats not that big of a deal. Tech we were talking about stocks with alex earlier. Where do you see the best financial prospects across sectors or regionally . Europe, given again that backdrop, we tend to be in growth oriented from the standpoint of where we see the best outlook. Technology, energy, industrials are all there. The one interesting thing as far as tech goes, it is good in terms of the outlook. It is only 5 of the market, unfortunately, unlike the u. S. Where it is 24 . Its positive, but not that big a deal. You look at financials, which we think should be benign, and industrials with leverage and thats where we think the best stories will be. Guy investors have to be foreignexchange strategist at the moment. Im going to use this screen as evidence for this. S p 500, im a dollar investor, i made 19 . But if im a dollar investor in europe, i made 24 in the cac, 29 in the dax, im going to make 15 if im a domestic investor. You for the numbers around and the s p barely performed if youre a euro investor. This is a factor in determining whether you made decent money, if you have performed this year. Is it going to be the same next year . Guest i would agree. Currency is going to be a volatile factor next year, whether it be the u. S. With various medical issues political issues, who knows . Whether it be policy issues with tightening we all expect. With that drive a stronger dollar next year after being disappointingly weak this year . , youyou have brexit climbed a wall of worry and it hasnt been a big deal. My guess, next year, thats a wall of worry that needs change. Guy euro investors made a point made a big difference in the ftse. Run ifts been a great you are a u. S. Investor investing in europe. Its a Foreign Exchange story, nothing to do with fundamentals. Europe is going to be going in euro is going to hell in a handbasket. How as an Equity Investor in my making rational decisions about whether where im allocating money from an equity point of view when my numbers can get loan out of the water if im bottomup or doing a sector or story because of the Foreign Exchange story . Guest the fx market is clouding the picture, making it difficult to try and work out whether it should be allocated. With that being said, there is an opportunity for u. S. Investors to be getting to the more International Markets right now. The u. S. Is relative to its international peers. Storyind relatively and you have single pmi numbers hitting some of the highest levels in nearly half a decade. The dollar does remain relatively strong. When you see the dollar change direction, it doesnt just do it for a quarter or two. The dollar has gone from being your foe to being your friend. Thats still a trade that will make sense going into 2018 and beyond. Matt i have to bring it back to the tax cut story and its one of the most read stories on the terminal right now. What happens if you get all of those Companies Bringing their money back . Or 3old to join dollars trillion overseas, what does that do to the global picture . Roughly 2. 7t trillion overseas. That is already in u. S. Dollars. Theres not much of an impact per se. As that money comes back to u. S. Companies, we think it will be like a steroid shot in the arm to the u. S. Equity markets in 2018. More share buybacks, special dividends boosting markets. What i would like to see is more investment. More money put into longterm R D Development plans. Started trend we just to see emerge, particularly as we went through the thirdquarter earnings season. Companies putting more money toward investment were being rewarded by investors, a trend we hope continues in 2018. , the numbersnumber are printing incredibly strongly in europe and i struggle to see how much more headway we can make with that. Earnings will have a lack, but nevertheless, is this as good as it gets for europe . Guest its an interesting thing. The pmi is a diffusion index. It only tells you how many people think its good. It doesnt tell you how many how good it is. The upside scenario is, if you want to play bullish, we have a positive bias, the Growth Numbers will continue to take up with a broadbased economic recovery. , its asis clearly good as it gets, the best of both worlds. Theres no doubt about it. From our perspective, its an earnings phase in the market. Theare not going to see Market Driven by evaluation because we are at expended levels. Cheap relative to the u. S. , but part of that is sectorial difference. It comes down to earnings delivering and coming through based on the current positive economic cycle. Matt can come up having you on set with us. Tim craig and alex dryden, Global Market strategist at j. P. Morgan asset management. Alex, thank you for spending time with us. Guy . Guy who is going to be the best the next anc leader . We are going to discuss the Political Climate for both essay and the region sa and the region. If you are on twitter, follow this on bloomberg. Great products. This is bloomberg. Welcome back to the european open. We are 45 minutes into the trading session, european equities very much on the front foot at the moment. It seems we are picking up nicely from the asian session. Matt absolutely. Lets talk about emerging markets. South africa is ruling African Congress for a new leader to replace president jacob zuma. Its a tight race between the president s former wife and his deputy. It follows the bitter dispute to include delegates to the party who were not properly accredited. Joining us is sean astin from anchor capital. How does it look right now . Im assuming since the rand is rallying, it looks like a win. Guest that seems to be the consensus view at the moment. Increasing 10 since its worst levels in the last month or so. Up significantly. In many cases, 5020 or more. The consensus view is that it will be winning, but id say its too early to say for sure. What changes would you expect if rim of pozo wins . How will this affect the South African economy . Breakaway a serious from the policies weve seen so far, or will it be more of an evolution than a revolution . Think its probably more evolutionary than revolutionary. Id say the biggest shortterm impacts, the next year or two, would come about by a change in confidence levels by both business and consumers. Theyve become quite downbeat from entrenched corruption in the government. He represents a stepping out of corruption, even if it doesnt take place in the purest form. Id say you would seek a significant confidence lift, which are be self reinforcing. Youd see more tax receipts and corporates, which would be fed Investment Strategy that would last a while. It may start to make decisions. I think thats going to be the bigger impact from a longerterm perspective. To seet obvious to me structural reform in its purest form. I think the anc itself doesnt seem to be mostly aligned to the idea of hybridization of underperforming privatization of lot. By itself changes a lot. Guy is there any way the mood is downgrade . Guest there is a possibility, but the probability of that happening, im sure thats why theyve waited until after the september conference and the budget before making a final call. One of theis is thinking and if he wins, the probably the will be much diminished. Probability will be much diminished. Guy what will the first budget look like in february . What are the key levers he getdnt he could move to things going in that budget . Guest from an expenditure perspective, the first thing that needs to happen is a paring back of the size of the cabinet and the commitment to keep government expenditure under control. Thats been prodding at the private sector for quite some time now. From a revenue perspective, the only major levers they have to pull is that value out of tech. Thats obvious they the main area they can move. We have a narrow tech space in this country. Its difficult to be pushing up income tax rates from where they are right now. Im not convinced you can collect more money. You might collect less money. Dohen you think about we have an understanding of what state finances are really like . They produced a series of surprises and theres a bunch of say, firms that i have to look really opaque at this point in time. What are the chances that once people start going back through the books, that these numbers get much, much worse . Guest i think theres a good chance of that. The key issues with african finances at the moment is that once you add up the contingent , thelities at the moment debt levels look somewhat scarier. The official numbers are tobably approaching 60 debt gdp but once you add in all the extra figures, the numbers go higher. When you are comparing it with developed bull markets, it doesnt look as its, but actual Interest Rates are significantly higher than you have in the u. S. Or other parts of the world. It absolutely doesnt look great at this point in time. Matt how solid is the position of the anc . Have,less of whether we zuma winning or rem opposing winning, what does the opposition look like . Guest i think its becoming stronger. It has captured the fair chunk of the vote. Depending on which part of the fence you stand on. I would say that if zuma is the winner of this conference, that would significantly increase the chance the anc mighty force into a position of having to engage in coalition arctics come 2019 Coalition Politics come 2019. Thats under the assumption the election takes place in a free and fair manner. We can discuss all elements of interference at this point in time. If they believe there may be the support base might be slipping. I think its part of this conference, there has been a lot of talk around the potential for money exchanging hands in exchange for buying votes. We are not sure. The reason we are not sure on the outcome despite the numbers you are seeing going into the conference is the extent to s can be taking place by bribery from the delegates involved. Guy one final, quick question. Volatility at the highest level since lehman collapsed, if were to win, just walk me through what you think the trading session would look like around that. Has magical is the story . How symmetrical is this story . Guest i think it was symmetrical up until a week ago. I think its skewed right now. Wins,ng is that if you probably have 78 upside from a strength perspective. Thats become the consensus view if he doesnt win. If its zuma, i would expect the downside to significantly exceed that number, probably more like 15 . If zuma is elected, i would expect to see a violent reaction in the other direction. Guy great stuff. Lovely to have you with us. Next, interesting morning from a stocks one of you. Point of view. This is bloomberg. We are going to speak to the eu commissioner later. Tune in. Hes going to join us at 11 00 a. M. U. K. Time. Up next, louvered surveillance. This is bloomberg. Francine Global Equities rise as republican lawmakers plan to get their tax cut bill on the president s desk. Voting for leaders to replace zuma. And transition friction. The ukip Prime Minister lays out her postbrexit plan, which could upset the eu in her own party. 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