Transcripts For BLOOMBERG Bloomberg Markets European Open 20161128

Oil cut staff in moscow and ends in vienna on wednesday, with alleged in its effort with a last which effort to cut supply. Matt we are less than half an hour away to the european open. Lets take a look at futures here. A little bit of a mixed picture as far as european futures are concerned. Sou can see here thae ftse if off. U. S. Futures are down as well, but this adds open cash markets around the world, and the msci world index is also rising right now. Well see what happens. It seems as oil goes, so goes the market. That has been the story for the last couple days, and its very important today. Guy yeah, its going to be a big week for crude. Lets walk everyone around and show them whats going on. The big move overnight comes to the dollar. This is the story, the bloomberg dollar index down by around. 5 . The move in the yen is probably a little more pronounced overnight. Its a 1 move. Morgan stanley says the japanese equity market is not a place to be. We will talk about that a little it are on. Cds markets are one to watch this week. European politics will be a big story, not only in terms of whats happening in france, but as we work our way toward next weekend and whats happening in italy and austria, we will carry on that conversation. The story is really the dollar. We will work our way through the day and see if the trade is going to turn out, or whether it turns out to be more sticky. In the meantime lets catch up on what we need to know with the first word news. Juliette guy, thank you. Opecs and parking on a lastditch diplomatic push to reach a Production Cut. Ministers are flying to russia for talks in saudi arabia for the first time, suggesting the organization doesnt necessarily need to curb output. They are due to meet and began on wednesday as they attempt to finalize the terms of the first production decrease in eight years. Resident elect donald trump has claimed, without evidence, that the u. S. Elections saw fraudulent voting. The populare won vote if millions who voted illegally for Hillary Clinton are removed. Meanwhile, Clintons Campaign has joined a push for recounts and four battleground states. Trump says that is also fraudulent and called his critics crybabies. China plans to implement sweeping curves on overseas dealmaking by the nations companies, according to people with knowledge of the matter. It comes as a record outbound acquisition spree puts pressure on the qb to weaken. Cap investments at 10 million. It will also apply to Foreign Investments of 1 billion by stateowned enterprises. The curb will last until the end of september, 2017. Global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. Bloomberg. Guy thanks. The dollar is declining overnight after touching more than a decade high last week. The greenback has fallen by the most since september. Do you have got to appreciate where it has come from. Traders are focusing on oua derailing dollar, payrolls coming through on friday. Pricinget is selling, in a 100 chance of the fed hike in december. Lets talk about king dollar with stephen king, the senior economic adviser at hsbc. Good morning. Too far, too fast . Well, it has been one night of dollar sales. I think many fx dealers are still thinking that a trunk victory means reaganomics mark two, which is all about bigger budget deficits, higher interest rates, and a positive story for the dollar. Im not sure its right, but the people i speak to in the market, everyone is saying it is reaganomics. As long as they believe it and other people believe they believe it, you have the same story. There is very little evidence for this, but nevertheless that is the story. Chartwe showed a twoday in the oneday trade and if you look at the picture of the could longerterm, you look at the dxy or the dollar against any number of trading partners as a fiveyear look the dollar has shown amazing strength. Do you expect that to abate, stephen lets say if we get reaganomics part two, and is that plays out in 2017, do you expect continued Dollar Strength . After the way things are looking currently, so long as there is evidence of hope that trump will deliver this, the dollar remains pretty strong. But we shouldnt lose sight of the fact that the u. S. Itself still has some pretty weak underlying fundamentals. When reagan came in the economy turnedwhen reagan came in the ey turned around after a couple doubledip recessions. They turned around and grew strongly. One of the big problems is a significant lack of productivity growth, and with that lack of productivity growth, it is not clear that trump can deliver what reagan delivered in the 1980s. On that basis what happens in the shortterm is that Dollar Strength may not continue into the second half of next year. But for the time being, this is a story that will run for quite some time, and that keeps the dollar pretty strong. Guy Morgan Stanley switching allegiance, saying that we should be highly into japanese equity markets, that the yen will remain relatively weak, and as a result of which this is the place to be. Would you start to see a shift . One of the biggest problems in japan is trying to make a connection between the equity market and the economy. One of the interesting features back in 2013, for example, was that when you have a big changes from abe, the stock market went ahead very strongly. Pricing in this miraculous recovery just around the corner. It turned out the recovery was in there, so it went up and came back down. Theres a big problem with the japanese equity market you buy it on the story of the weaker yen, gives you a shortterm profit, good for the equity market in the shortterm, but the problem is it doesnt transform the economy. We know back in 2012 that the transition didnt happen. Story in which every country is engaged trying to manipulate the currency to lower levels. I hope it gives you a strong recovery. Do you see i realize you are an do you see i reale you are an economist. Your economic you are Economic Advisor to hsbc. Do you see equity markets globally as fully valued . It seems we are heading highs everywhere i look. Well, one of the big problems at the moment is productivity growth. Its not just the u. S. That has week productivity growth, it is also true the u. K. , of much of europe, and it makes you think that while equity markets are making this significant gain part of it is low interest rates, part of it is the promise of some degree of qe. But theres a disconnect between equity markets and performance, and the underlying Economic Performance he has seen coming through. What worries me over the next year or two is that something has to give. I think it is unlikely we will see a significant strong rebound in productivity. Bellarmine markets are potentially vulnerable. Guy we will wrap that there. Plenty more still to come. Senior economic adviser at hsbc. Illon taking on the conservative party. To make france great again. How much of a difference could you make . Then, after the most violent rout in 15 years, selling my not be over in the bond market. Where selloff in treasuries will end. And opec decides. Oils super producers strategize for moscow to begin. Will a deal be struck on wednesday . Investors are becoming increasingly skeptical. 20 minutes to go until the European Equity market open. This is bloomberg. To become thean partys candidate for president. Fillon]ng an outsider until recent weeks, he is now expected to face a close battle with the front nationale Leader Marine Le Pen for the presidency. We are joined now by his spokeswoman. Thank you so much for joining us. Plenty ask first of all in reading all the Media Coverage of his victory, i thought it was interesting that most everyone said he was a distant third until he won. Is that a problem with polling . Because clearly he wasnt a distant third, if he beat out all the other five or six contenders in the first round. Yeah. Good morning. Yes, i think that from the fillonng, francois always said that the campaign will start with the debates, and you know, if the longterm work of three years of the field, meeting french voters, working on a strong project. The debate showed his strong program, and i think that is what made the difference. Had a president ial stature, and they decided to vote for him. Guy good morning, alexandra. Guy in london. Good morning. Guy why do people vote for him . Was it his Economic Policy . We have heard much about the fact that he admired Margaret Thatcher and what he did for the british economy. Or was it Something Else . Well, i think that french voters really understood that we cannot be satisfied with house measures, and we need really strong measures to put france back on its feet. That is what french people want. This candidate always said the realizend now they there is no other possibility to bring back our country, back in the game, back in the international game. Problemst about the relating to immigration in france . We hear a lot about britain because of brexit and germany because of angela merkel, potentially opening the floodgates. But for longer than both of those countries, france has had real problem with immigrations, violence, cried. Immigration, violence, crime. What does fillon c as the solution to the problem . Hes convinced that we need to put programs like other countries do on immigration, and full, wequotas are need to stop immigration. This is why he said also we need a strong grip, to work with europe again, this is how he wants to proceed. Matt but quotas only deal with immigration in the future, and you have a very serious problem with immigration already there. Crime is already happening. Terrorism has killed a couple hundred people in the last few years. Have you deal of the problem you have now in france . Said he is also saying that the migrants, you ind to put these migrants institutional houses, and also see who are are migrants and who are economic migrants in the country. He also says, regarding terrorism, that we are existing in a country where you can bring back these people to their country. French people would come back. You have a series of i wanteddra, to go back to this comparison with Margaret Thatcher. Im old enough to remember when she won in 1979 and got a very big majority. It looked like she had the support of the british people. But in that first term in office, life was very difficult. There was a deep recession. Arguably, she wo her second termn in office only because of the balkans. Although people look at thatcher later on and say her reforms are necessary, they were also extreme the painful the shortterm. You think france is the for that kind of pain over the next few years . Hugeu know, the participation, the huge turn on the primary shows that its much more than the republican party. Its more than 4 Million People in the party. We have only 200,000 people. You see this huge turnout, showing that people who want this program to be l applied, they realize it is the only way. We dont have any other solution. Fillon said it may be difficult, it will be difficult, but this is the right way to go in order to bring back france into the game. Guy how long to you think it will take though, . As stephen said, it took an awful long time for the u. K. To move to that supplyside reform process that we went through. How long do you think it will affect france . We have all experienced this strikes and the problems that france has had in the past. Theyre a very well organized union, labor groups, back and make it difficult for this to happen. How big a mountain does he have to climb . What you must have in mind is that the recent protests happened because francois h ollande was not elected for this. Back in 1995, sakshi rock had a different Jacques Chirac try to do very hard reforms. This is different. Fillon is already saying what he will do. To vote for him, it means they will agree with this program. Its really different this time, and i also want to say that he already has a huge experience on protests and hard reforms. He already has had millions of people in the street and he managed to do the reforms anyway. Im thinking about retirement, for instance. He knows how to do that, and he will, because people will vote for him on this platform. Matt alexandra, we hear a lot of talk about where london banks will relocate if the brexit doesnt work out well for passporting. A want people have suggested frankfurt, which is honestly quite a boring place. Dublin, close. Paris, which has an incredibly exciting city. Of the concerns are high that volatility on taxation policy would block them. Taxes in france are known for being, at times, incredibly high on the rich, and bankers are that. Do you think you would find a solution . Yeah, and its the main part of his electoral platform, to offer more freedom to enterprises, to reduce taxes. Somebody said we need to reduce taxes from private people, that he said, its not realistic. First we must reduce taxes for enterprises, to bring that growth and employment in our country. This is the First Priority of Francois Fillon. I think it will have an impact on all the enterprises who want to relocate after brexit. Guy we will leave it there. We watch with great interest. I think it will have an impact alexandra duprblanche, thank you for joining us. Stephen king from hsbc will stay with us. Minutes away from the equity market open. Lufthansa pilots plan to strike again tuesday and wednesday this week. We will take a look at the movers or nonmovers in todays trading. This is bloomberg. Its going to be a lovely day in london, getting seriously cold this week. Alexandra dupre guy lets talk about some of the stocks we are going to watching today. Aberdeen assets, 9 billion of outflows in the fourth quarter, something we need to be talking about. Plus, the annoyance of my friend, matt matt because i enjoy talking to martin gilbert, and he is not in dublin yet. Guy lufthansa you are grounded, you cant go anywhere. Matt well, essentially, i will be grounded if i plan to fly anywhere within germany on tuesday, because lufthansa how its will strike again on tuesday. If i wanted to fly my dog back to new york, i wouldnt be able to do it with lufthansa on wednesday because they are striking on wednesday for longhaul. However i found a solution, because last week when they struck, i took the intercontinental express train system here in germany, absolutely luxurious compared to air travel. Guy and very dog friendly. Matt an dog friendlyd, yes. Guy anybody that follows him on twitter will know thats very important. I have to say, the german team that came to germany was less than pleased with the performance of lufthansa. It did mess up their schedules. Coming up the market open,. A 50 week, whats going on a busy week, lots going on. We are heading toward the payroll number. , the dollar is softer this morning ftse supposed to open softer. Bloomberg this is bloomberg. Guy good morning. I am guy johnson at european and footers. I am here in london, alongside matt miller. We are minutes away from the start of european trading. What is going on, matt . Matt the dollar is the top story today, turning down at the moment. The dollar comes off a decade high. Will gdp or jobs numbers from the u. S. For some market to rethink . Also, the French Republican vows reforms, but how hard will it be to make france great again . Is that his goal . And the oil markets will be front and center this week. Oil talks with moscow today, in vienna, with all of opec. On oil club will meet there wednesday. Will it finally deliver a deal on supply . Guy . Guy markets are open. Lets take a look at what is happening. We have a slightly softer story this monday morning. We are starting to see london softening up a little bit, down by around. 1 . The Market Makers are softening things up. There is the paris market opening up as well. It is tha busy week this weekk. This week. Lets look at the bond markets. Yousef let me straight to the imap function. More and more of those traits are coming through. You are looking at materials and health care. Down over 2 5 of 1 . Opec jumps into those talks and there is a lot at stake here. Lets go across the 10 year gilts. 1. 389, currently the yield. Lets put this into perspective because the yields curve as stephen. Curve has deepened. Your white line, that is your 10 year u. S. Treasury. Your purple line is your french 10 year and the blue line is the german 10 year. You can see the political anxiety feeding into the sentiment there. Lets show you the stocks we are watching this morning. Aberdeen asset management, the company has uploads of 7. 2 billion pounds. The stock is up 3. 6 . Assets rose to 321 billion pounds. Is under pressure after the pilot union called for further strikes. The strikes will affect the short distance flights. They are making special arrangements for tuesday and wednesday. In total, you are looking at life that have affected 345,000 passengers. Finally, on the oil and gas. Currently, sentiments are down. 8 . Over 600 billion in added value off of the Stronger Oil Prices this year. That is how much is at stake. Guy lets talk about the bond market in more detail. Bond investors are signaling they are not convinced it is over quite yet. That is the move we had in 2013, the first rectangle i ular box. Stephen king, the economic still withages the seat hsbc, us. The train was heading towards, a little awkward in some ways. We are talking about 250 for the First Quarter of 2017. The underlying fundamental are still ones of productivity, low growth, and inflation. That does not change completely because mr. Trump is taking over. Guy is this the story of higher inflation people are expecting . Not necessarily. The forecasts of rising bond yields have also been wrong. On your chart, you have a huge 2013, butelds in afterwards, they decreased because the fear factor, such as with trump, obviously drove markets in the shortterm. But longerterm, the issue is the fundamentals are still very much in favor guy this is what the trend is. Absolutely. And if you look at the forecast yields,e tenur10 year bond every year it says they will move higher, but every year, they fall. That is partly because of this weak performance from the global economy. And frankly, aging populations, which have moved to more safer and safer assets come expecting their equities to be more bondlike thatn n in the past. Matt stephen, i love to follow your work because it has often times been the outlier, but also correct. You mentioned steve major. Do you still see a lot more weakness for the pound versus the dollar . Do you still see more weakness for the euro versus the dollar as we look at the changes in the u. S. Treasury market . Sterling is the one we have been worried about for a long time. The simple fact is, apart from the huge uncertainty over the brexit negotiations, you have got the u. K. With a very large current account deficit. It needs to fund it, and that is much easier when you are part of the single market. Investors will have second thoughts about investing in the u. K. , rather than investing in continental europe. There is a chance sterling will weaken further over the next few quarters. What could change perhaps, is the Political Uncertainty elsewhere in europe. We have the italian referendum next week and the uncertainties within france. Those could make a difference, as far as eurosterling is concerned. As far as the dollar, it seems sterling is pretty vulnerable. Matt i was just going to ask you about your thoughts on the strength of the European Union. Not only have you got the election in friends, you got the referendum in italy, you have the European Commission attacking ireland on the sovereignty of its tax policy right after the brexit. Do you see a European Union stronger postbrexit, or is it kind of fraying at the edges . At the moment, it is fraying. The difficulty is that each country is producing a political sayingive, which is ayin the problem the country has is associated with the European Union. One more thing as well, the euro is a half finished project. It is half finished because a proper Monetary Union is also typically a fiscal and t political union, too. The euro is a halfway house, which is worrying because it means the natural transfers or within u. K. , germany or the u. S. , are not happening within european borders. Which means economic adjustment will be painful indeed. Guy take a look at the target numbers. We are going to talk about european politics a little bit later on and dig into france and italy. Still to come, we need to talk about what is happening with opec. Opec divided and oil falling. We will be live in vienna. And new comments from saudi arabia, suggesting low expectations of a Production Cut agreement. Later, we will look at how the bond market is pricing in those political problems in europe. And it is cyber monday. Did retailers get the bounce they were hoping for . This is bloomberg. Matt welcome back to the European Market open. European markets are open and trading with a sea of red, really, after mixed indications on futures. The ftse is down. 6 and the cac is down 2 3 of 1 . European markets are not moving up in the way we saw overnights with asian markets and Global Markets then. We do see u. S. Futures down as well. It could be a red monday, guy. Guy something to watch out for. Aberdeen is doing well. Aberdeen, up 4. 2 this morning. The market is liking what it is hearing from that business. European Banking Sector is off this morning. Commerzbank, softer. Unicredit, also softer. So, some fairly big names and numbers coming through. I think italy will increasingly dominate toward the back end of this week. We put the board up for martin gilbert. I think we can do this enough times to make sure that everyone knows he will be joining us later on, talking to francine lacqua. Here is the bloomberg first word news. Reporter cant wait, guy. Francois fillon has been nominated for the president ial election next year. Is taking a promising tough economic reform and embracing traditional value. He will become the main rival to marry lie la penne. President elect donald trump has claimed without evidence that the u. S. Election saw fraudulent voting. He claimed that 2 Million People voted illegally for Hillary Clinton. Meanwhile, Hillary Clinton has pushed for recounts in three battleground states. Trump called his critics crybabies. Cuba is following National Mourning following the death of fidel castro. His funeral will take place on saturday, followed by a burial. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. This is bloomberg. Matt. Matt sebastian, thank you. Now, the Saudi Energy Minister has opened the door to leaving opecs Oil Output Unchanged ahead of a Group Meeting to finalize Production Cuts. The meeting will take place in vienna on wednesday. Welcome. Let me ask you first, what are the implications of the saudi ministers comments now . Well, this morning, we can see pressure on oil. Int he said yesterday saudi arabia was that the oil market could balance the opec deals. He is leaving the door open to the saudis to rebalance their position. Many are saying they are trying to prepare the market for not getting a deal. Or, they are trying not to look so desperate that they need a deal done. Right now, it basically needs to happen within opec. The saudis get their two biggest rivals on board, iran and iraq. Iran is insisting that they continue to pump at precinct in levelsanction levels. They have been offered a deal of 3. 9 2 Million Barrels a day, but whether they can sell that back home domestically is the question. And the iraqi Prime Minister said they are willing to do a deal, but the question is about supply estimates. They are still questioning how much they would be able to strike. Guy how committed are the russians to the process . What is happening in moscow today . It is very interesting. You would think everybody would be in vienna, but there is a sideline meeting in moscow. The algerian oil minister and the Venezuelan Oil minister are going to moscow. They would like nonopec members a cut 600,000 therell barrels day, but putin said he is not willing to cut production, but is willing to freeze. Right now, the russians are critical. A are critical in the sense that two opec members got on a plane today and that are going to moscow to shore up the russian position. Guy great stuff. Thank you very much indeed. It is going to warm up there, temperaturewise. It will be an interesting story throughout the week. Stephen king is do with us from hsbc. Do you anticipate a deal . Again, so much politics involved in this story. These relationships are not terribly good, lets face it. Getting a deal itself is tricky. Saudi is worried about nonopec producers. One thing the report did not mention was trump, because he is promising reinvigorated oil, pushing the shale and Energy Market in the u. S. He wants to turn the u. S. Into a much bigger Energy Producer and that does not help opec. The tricky thing is not what is going on in opec alone, but what is happening elsewhere that limits opecs power. Guy lets look at what is happening more broadly. Is this an admission from the saudis that we are now ina declining story for hydrocarbons. They will not be what they once were for the economy. There is evidence of that because in saudi arabia, they are trying to push through significant reforms over the next few years. They are doing it because they realize they have to look beyond hydrocarbons. Doing that is difficult because the population is very young, not particularly welleducated. They are too dependent on oil. They are trying to get away from that addiction almost to oil. It will be difficult, but the policies are there. Matt what do you think about demand, stephen . The saudis mentioned it. Many people are talking about demand, which continues to grow, just at a slower pace. Isnt that slower pace going to continue . Tol that growth continued decelerate . If you go back to the financial crisis, it is pretty obvious that chinas strength was a big driver of the global oil market. As china has slowed down and shifted the balance of growth away from basic Raw Materials to other kinds of growth, they have tried to become less important as a commodity consumer. So, the significant reduction in the role of china has changed the dynamic of the oil market. So, chinas slowdown, alongside the weakness elsewhere in the world is not a particularly helpful backdrop for pushing prices higher. Matt on the other hand, the supply side gets easier and easier. 1990sber when in the and late 1980s, nobody counted on technology making it easier and most importantly, the much cheaper to get out of the ground. Do you see that breakeven price continuing to fall . Well, i think in one sense, the oil price has limited the growth of those non opec producers, those new technologies coming through because they were much more barrel. Ve at 100 per nevertheless, the chance of to 150 return to 100 a barrel, that seems very unlikely. Guy stephen, we need to talk about the european political story. We will do that in just a moment. Stephen will stay with us. We are winning the race in france to recover the republican candidate. Italy is preparing for prostitution on reforms. That story is next. This is bloomberg. Matt welcome back to the european open. I am matt miller in berlin, alongside guy johnson in london. A gorgeous shot of the brandenburg gate, though it is 2 here. I do not know what that means in real temperature, but 2 in celsius. It has been a busy week for european politics. In france, former Prime Minister Francois Fillon was nominated as the republican candidate for the president ial election next year, but the bigger uncertainty comes on sunday when italy votes on constitutional changes proposed by matteo renzi, was promised to quit if he loses the vote. Guy . Guy i have a chart for you, matt. Lets talk about what is going on in terms of the market. As you can see, we have seen a certain widening. This is the italian let me move this out of the way. 0t is the italygerman 1 year spread. Let me show you what the longterm trajectory looks like. This is where the euro starts, and we get this amazing compression in rates, and then we get the financial crisis and the eurozone crisis, but we are picking back up again. Risk exists within the euro. It should not, theoretically, but it is an uncompleted project. It the reason for the unease is italys performance compared to germany. Back in 1999, the Living Standards and germany were about 90 of those in germany. Guy that trajectory is continuing as well. Exactly. The gap could widen further and further. So, the importance of the renzi reforms and the constitutional reforms is the idea that once you get that out of the way, you can try to change the way the Italian Economy behaves. If the voters lost, and it turns out renzi is vulnerable, those reforms cant easily happen. You then are in danger of having low growth and low inflation, and have danger to the Banking Sector. It becomes a very difficult situation. Matt how far away do you think we would be here in europe, stephen, lets measure it in decades, from a situation like the u. S. Federal government . Because we could have West Virginia in a state like italy for 100 years and it would not bother anybody, as long as you had you know, a state like California Holding them up. Or i should say texas, probably. But you know what i mean, right . We do not expect all of our 50 states to be doing well and indeed, most of them are not. That is absolutely right. My favorite comparison is massachusetts and mississippi because the distance between the two capitals of the state is further than athens. There are transfer payments between states that support those undergoing difficulty. That does not happen in the eurozone. Italy would normally devalue under current circumstances. If you cannot devalue, then you got the danger of a continuously danger of a continuously weak economy. Guy i just but with a bunch of greek bank ceos last week and from a legislative point of view and a dealing with poor loans, they are further ahead because they have a Better Process in place. Than italy . It is possible, but italy has not dealt with this yet. It is possible there is a strong recovery around the corner, but in the absence of that, the danger for the italian banks is that good loans turn bad, and then you get into serious financial difficulties. Guy again, italian bankers are trying to get their heads around how big the npol books look like. Stephen king, thank you for joining us. , black friday fades to gray. We will discuss discount driven shoppers and the rise of cyber monday. That story is next. This is bloomberg. Guy welcome back. You are watching Bloomberg Markets the european open. Lets talk about where we are 30 minutes into trade. European equities are on the back foot this morning. We have got banks a little softer this morning, the computing factor. Politics will put a big part in this week. We have seen the republican vote in france and now we will work our way to the italian referendum next week. Some of those banking stocks under pressure this morning. Its good to be more specific stocks we need to focus on now. Yousef has the details. Yousef let me pick up on the more detailed story here. These are some of the stocks on the move. Aberdeen asset management, still up 1. 6 . The Company Announced it thought net outflows of 7. 2 pounds in the fiscal quarter as investors pulled money out of the emerging market funds. Here, down 1. 5 . And gashe stoxx 600 oil index is under pressure, uncertain as opec prepares for the talks this week. Bp also picks up that 10 stake in the gas field in egypt on friday. Finally, banca monte dei paschi is down with the stock price getting decimated, 7. 25 down. The company has obtained approval on the debt to equities swap. The offer period will begin on november 28 and ends december 2, unless an extension is provided. Guy . Guy thank you. Matt thank you. We are talking about america here. U. S. Shoppers spent less money over the black friday weekend than in 2015, according to the National Retail federation. The weekend was characterized by heavy markdowns and a shift towards ecommerce. 44 of consumers did shopping online, compared to 40 at brickandmortar stores. Joining us now to discuss is mark mahaney and Bloomberg Intelligence analyst charles allen. Charles, is there really any difference now between black friday and cyber monday . Are these becoming a big gray mass at this point . I think increasingly, they are essentially the same and people are shopping more and more online. The idea that you go to the shop on monday and you go on the internet on another day is becoming, i think, is history. Matt mark, how much longer are people going to be doing any of the shopping at brickandmortar stores . Are they more of the showroom at this point . You go there to see what you want and then you push the button to have amazon prime delivered to your house before you even get back home . Might be some of that going on, but lets put this into context. You will still have 80 of retail sales done offline in traditional retail stores. What is interesting, however, is the rate of migration from offline to online sales is exhilarating. This year in the u. S. You have online sales growth north of 20 , the fastest in four years. Something of going on that is causing the inflection point. You are dimension the growth of amazon prime. It is faster and faster shipping and delivery. It is the increasing ubiquity of mobile devices and consumers have shifted to making his holiday purchases off of smartphones. So, they essentially have the cash registers in their hands, 24 hours a day. That is also causing this tipping point. Guy mark, is there a danger here that this becomes concentrated around these key events . We all know did with great in we all noted with great interest with amazon having difficulties with pilots, trying to build factory space. How does it work from a logistics point of view and the level of investment that is required . It is an issue for every retailer. 40 of retail sales every year occur in that fourth quarter, the key holiday season. They call a black friday because that is when companies go into the black. For amazon, the issue came up last year. They missed gross margin estimates because they did not have these the filament capacity. This year, they built 18 new Distribution Centers globally to better meet demand in the fourth quarter. Whether they get it right this year or not, we do not know yet and they do not know yet. But yes, it becomes an issue of a readout when and where to place these centers and if you do not get it right, people will be unhappy. Guy charles, where do you sit on the rise and rise of online . Is it inevitable that we will see brickandmortar stores becoming a showroom . I think there is a degree to which it is the other way around. People do an awful lot of browsing on the smartphones. And the conversion ratio from a smartphone into a purchase is lower than in other things. One of the things we are seeing in sharhops is fewer people are going there, but when they do, they are more likely to buy. Guy there is also the novelty factor of just going into a shop. Wow, what is this . People used to come four times before they made a Major Electronics purchase. And now they come three times and the other time they go online. I think the other point is, the suppliers and retailers actually like people to come into the shop because you can actually upsale people to a better item. And there is a degree to which nature of online only actually means people are dissatisfied with purchases because it does not quite have the feature that they thought it would have because they bought a cheaper one. I dont think it will go away completely. Thatne hsas to remember in things of apparel, the rate of return from Online Purchases is huge. 40 to 50 is returned. Op isthe ability to unsh now part of the process. If the stock is coming back, you havent got it on sale. And it is more difficult. Matt i wonder, mark, i was a bit surprised when i came here and i saw that black friday exists in germany, which is a company that hates to have stores open at any time. It has pushed them to even open on a sunday, which is pretty sacrilegious. Is this spreading across europe, black friday . I thought it was an american only kind of thing. You are probably asking the wrong person on that, but we will make broadpoints. We will make a couple of broad points. The more efficient the retail environment, the better for some online retailers. I think it is fair to say that amazon offers faster shipping, speedier delivery, and more selection. And always on store hours, that is a pretty compelling offering in retail market, where there are large store hours that are offlimits, or there are stimes and days when the store is closed. Its psung is rolling out rime program. We have seen, once people sign up for prime, they become more loyal. People spend more frequently. There is more cross sell opportunities and once they do that, it is hard to get those dollars back into Offline Stores again. It is a long process and we will be talking about this 20 years from now and we will have the long majority of retail sales offlinonline. Guy as we work out what has happened friday into monday, how good a guide is it to where the consumer is right now . By i think it varies country, but yes, retailers want consumers to spend. There areint is, many other things they can spend money on. One of the reasons you get black friday in germany and the getsnd france is, it people to actually commit. Yes, in that sense, it is a guide to where retail spending will be. Matt thank you very much to you charles and mark many. And mark mahaney. Up next, trump and tech. What will the president elects policies mean for internet stocks . This is bloomberg. Guy welcome back. Lets take a look at london. It will be cold and matt miller is complaining about the fact it is getting quite cold in berlin. I always thought a man from new york would appreciate the fact that it gets cold. Matt i dont think it gets as cold in london or new york as it does in berlin. We are on the same level as warsaw here. Whatever celsius means, we are on the bottom of the zero there. Deal with theant look, we are down on the the mom at her. The we are down on the thermometer, and stocks as well. The broader measure of european stocks are off almost one full percent. Deutsche bank and commerzbank are down in frankfurt this morning, weighing on european banks, down 1. 6 . They are not as large as they sueused to be, but they are a bg heavy measure. Olkswagen is down 7 year to date. Volkswagen again, a loser today. And there you see oil, trading at 46. 78. Even if we have an agreement at the opec meeting on wednesday, maybe it will not lift oil that much, guy, because if they intend to freeze production at record level production levels, that will not do much for the supply side of the equation. I will let guy think about that. In the meantime, i will talk it here. With sebastian phalli says it isufthansa working on special flight paths for the strike days. The strikes have affected 345,000 passengers on 255 7000 canceled flights. On 257,005. Sticking with airlines, korean air has been fined 1. 2 million for paying undo profits to its owner family. Korean air was not available for comment. And businesses in the u. K. Service sector are pessimistic about the future of sales. That is according to the confederation of british industrys. In a report, most committees surveyed said they were less confident about the business situation in the Third Quarter compared to the second quarter. That is your Bloomberg Business flash. Matt sebastian, president elect Donald Trumps proposal for a 10 tax rate on u. S. Companies affectedearnings has purchases. This chart you can access yourself shows the nasdaq buyback achievers index steadily beating the snp500 because this is actually a ratio. This is the buyback achievers index over the s p 500. The companies have repurchased at least 5 of their outstanding shares in the last 12 months. So, real action there in buybacks. It might continue if companies are able to bring back cash from overseas. We still have mark mahaney. What do you think of that . 2you believe in this trillion, i think its a boy donald trump said it would be 4 trillion i think at some point, donald trump said it before trillion dollars that Tech Companies are holding overseas . The first derivative that people saw with the trump election victory that his comments about repatriation, teax efficien tech large companies, half of their cash is overseas. You want to bring the cashback efficiently. Tech has become more mature and the internet sector has become more mature. Google is buying back stocks, as is facebook. In terms of a stock catalyst, it is less useful to this group. Investors typically buy for the topline growth, not for the sheer repurchasing. Guy what happened with the homeland act back uin 2008 is that it went into buybacks and fairly little of it went into the capital goods and investment, but these are the companies i go to because i want investment and topline growth. These businesses are actually dealing with growth rather than anything else. Innovation rather than infrastructure is one way to think about it. We have had a change in the investment horizon. We have Seen Technology stocks and internet stocks go up 5 to 10 . Guy i have got that chart here. I dont think it was so much, one of the interpretations that this was a political comeuppance for these names, where the ceos were pretty open about which candidate they favored and it was not the one that won. I think it is something different. Investors are looking at who the clear beneficiaries are. It is not that tech was a negative from a trump victory. But when you look at anything infrastructure related, like industrials, those sectors got the incremental growth boost from a trump presidency, and that is why they are being bid up. Tech has outperformed these banks for the second year in a row, which is rare. Matt is there going to be a problem with immigration under trump because these Tech Companies want to have people with advanced degrees, people with the ability to get the job done, but maybe not with american passports are green cards, right . You know, i have seen that issue and i have spoken about it with clients and investors. I dont think we will be talking about that for too long. We will see if the immigration policies, if the h1bb issues become huge issues in the next year. That could be a really negative quarter or two, over the next couple of years, these Tech Companies draw a very significant amount of highlevel talent from asia, from eastern europe, from other parts of the world. And if you want to undermine that, and some of these companies have been founded by people coming from overseas, it is a huge advantage for those industries. If you are going to tax immigration and turned on immigration, if you are going to try to block immigration, even if high quality skilled workers come from their, it is a negative for the companies in the country. Matt what about the fact that old economy companies, if you look at steel factories, coal miners, these people voted for donald trump. Thiel was the only person in donald trump who voted for donald where is peter thiel was the only person in california who voted for donald trump. None of them support him and his bid. Is that a problem for the industry if they do not get behind the president elect and were so vocal against his campaign . Hopefully, it is not a problem and there are enough checks and balances and there is not a lot of political retribution. So, i dont think we will see that. Also, keep in mind, i get the point about the different economies and Different Companies that supported a different candidate. But just to make a broadpoint from a high level, where the job growth has been, where the innovation has come, where the capex have come from, these are not companies that have been buying back stock. They have been investing in more servers and infrastructure, and hiring more people. There are hundreds of thousands of people now who work at amazon throughout the united states. You are not thing that job growth out of traditional retail. These are the innovation engines and economic engines of the country. There are plenty of other good growth sectors, biotech comes to mind. You talk about tech and software and internet, that is jobs growth, it is ideas growth. Those of the sectors that you want to promote. You dont have to do actively. But those are sectors that you do not want to undermine. Guy give me a stock pick. I think you can stick with the stocks. They have got management teams that over a decade have built enduring businesses. Amazon has the major Cloud Computing conference. First, we would go netflix and then we would go facebook. Netflix is the most interesting new growth story in 2017 with a huge amount of international growth. Some interesting new shows in the u. K. And facebook is probably the least expensive stop. You can buy it at half of its growth rate. It will be growing irts ra tings at 40 . Guy thank you for sharing your time with us this morning. Mark haney, internet analyst. Opec, jobs up next, jobs day, and the italian referendum. What could destabilize the story Going Forward from here . That is next. This is bloomberg. Guy welcome back. You are watching the open. I bring you the first exhibit, opec. The white line is the most important one. This has been opecs output. Can they produce a reduction in this line . That is the big question. Oil is unconvinced. That is the brand anent and wti contract. That spread there is the one that needs to close. Matt i think it is a fascinating chart because it shows you what is going on. It is not just that for some unknown reason the price of oil has dropped. The are producing so much more oil as we use cars that consume less and less. Obviously, there are other reasons for oil demand, but that shows you what is going on. In a sense, they have themselves to blame. I have a chart that shows u. S. Gdp in yellow quarter over quarter, versus payrolls inw w white. On friday we will get the u. S. Non pharm payrolls. Down, ande gdp leads then jobs come down after. Gdp down, jobs follow. Right now, quarter over quarter, gdp is down. That is the longterm trend. And jobs are still on their way up. The question is, will that white line turn around and come down, or does the yellow line have to come back up . Guy we are watching the italian referendum. Politicawe are becoming increasingly familiar with the italian referendum. Is it a referendum on constitutional change, or a vote in favor or not of matteo renzi. This is the italian 10 year spread. Italy bdps and bunds. We are bunds. We are at 1. 8854 at this time. I want to show you this chart here as well. Let me maximize this inefficiently. This is the unicredit and deutsche bank. Unicredit is now trading above deutsche bank, matt. Matt definitely something we are going to watch closely. Another thing we will watch closely is bloomberg surveillance. They will speak to martin gilbert, the ceo of Aberdeen Asset management. This is bloomberg. Francine and upset victory in the republican primary in france as governments break into the opening. Needs a deal . Saudi arabia said demand and supply will stabilize without an opec cut. And, theresa may posts are polish counterpart today. She admits the protest is keeping her up at