And seeing double. Luxottica agrees to emerge with the french rival. But how will investors view the deal . Were less than half an hour away from the european open, and it looks like investors are looking at equities in a negative way, with positive futures over in great britain. You can see futures down about. 5 , ftse futures up about. 25 . We saw the asian market overnight take a real tumble, then recover by the end of trading, to some extent. Not to gains, but not the kind midsession. Saw guy lets talk about whats happening with the pound. You talked about the overnight. The british pound down 1. 5 , treating just, just north of the 1. 20 line. Were clearly watching what theresa may will say on tuesday. We are still trying to figure out what will come through. It does seem as if there is the managing of expectations going on here, issues with donald trump, signaling that the u. K. Will be at the front of the queue. It doesnt seem to be helping out sterling. Its the easiest and most liquid way of making this happen for investors in terms of pricing. The japanese yen is higher. Some specific issues and there are also broader ones with whats happening with the dollar story. 5 . About euro is down by. 3 , interesting to see how they are trading ahead. Lets get your news update with the first word news. Guy, thank you. Is down by. 3 u. S. President elect donald trump has called nato obsolete, and predicted other European Union members would follow the u. K. In leaving the bloc. In an interview, he also threatened bmw with import duties over a plan in mexico. Trump signaled a major shift in Transatlantic Relations, an interest on lifting u. S. Sanctions in russia as part of the Nuclear Weapons production deal. The worlds global elite are preparing together in davos without president elect donald trump. Ahead of the event getting underway tomorrow, the World Economic forum told bloomberg that he may invite trump in the future. But im not, completely illusory to ask him to join us now. Maybe in one of the next years. Juliette south korean prosecutors are seeking a warrant to arrest samsungs de facto head of the group, accused of participating in payments that the company made to a close friend of the now impeached president in exchange for Government Support in the succession planning. Samsung has responded by saying that it finds it hard to understand the special prosecutors decision, and that it did not provide Financial Support for favors. Global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. Im juliette saly. This is bloomberg. Guy . Guy thank you very much. New set of italy, nailing down exactly whats going on. It looks as if we have some Market Reaction. Well we also have Market Reaction is in the british pound. The pound sliding to its lowest level since the october flash crash, the sunday times reporting that theresa may will prepare to withdraw from the eu Single Market in return for freedom to curb immigration. Is options contract signaling that there is much more turmoil to come. Anticipated swings to the pound, climbing to a threemonth high ahead of the speech on brexit plans tomorrow. And a Supreme Court ruling that could come very shortly on whether the british leader can trigger article 50 without involving parliament in any significant way. I want to get to the bloomberg and show you the charge surrounding what is happening with sterling. This is the one week implied vol, options volatility. A big week. To get when we started an understanding of what was going to go on that speech, and you can see, a significantly elevated story. A lot of eligibility potentially priced and around what is happening. Over at hsbc, mr. Bloom handles the fx side of things. Major is the global head of fixed Income Research at the bank good morning. You guys obviously talk about whats happening sterling versus guilt. Is a less easy way of pricing in on a daytoday basis about the brexit story. I talked to blame sometimes. Waymove in sterling is one clearly there might be another side to the story. You alluded to the point that there seems to be some managing of this with the news flow, some kind of deal. There is bad news elsewhere, so if something is bad happening on the continent that wouldnt be good for sterling. But the rest of it is really bad, and if we look at the fee is into Inflation Inflation looks like it could go toward for this year. When 10year gilts yields are 1. 35 they are way below. We may have to look at the levels clearly it is difficult to see if its going down in this kind of upwards inflationary trend. The main source of information does seem to be sterling and we have key levels we are flirting with this 120 level on the dollar, so clearly markets will look at that. The question is what affects the bank of england will have, or whether they view it if they look at inflation in the longerterm. 2009 whenet, it was we had inflation close to 5 in this country and the bank rate was. 5 . Its no. 25 and inflation is ish. Ng for 4 the question is if it stays there. Matt how much can the bank of england control that, and what do you expect carney to actually do about it . Out exactly figure what he is saying what can carney do about this . Is there another way of managing it . At some point you have a mandate you have to deal with, into your question, at what point do they say this is no longer sticky, this is becoming embedded . I will answer to that and to yourself theres obviously a ,ey decision coming up on qe and the idea that we have been debating is whether you see some kind of hard stop, because elsewhere in the world you get this concept of taper, fading the end of the qe. But in the u. K. It might just thatand that is something they are going to have to consider. There are many things that the bank of england can do as i said, its a question of whether or not they choose to look in agh transitory manner. Guy we have come along way quite quickly. Understandably. Are they pricing in enough . To buy linkue ers . It sounds like you are a big short. To 3re used to having 2 in the past. Depends on where you are in the curve. A big negative yield is a function of how high the break even if, and that is a complicated way of saying it is in the price. We think the markets will continue to outperform the nominals. Then you need to see more of an upside inflation to price. Im not sure people would pile into it, he they will think about what they are currently yielding and into the market with a real yield that is already very negative. It is not as obvious as it seems. We have been preparing since before brexit for this increase in inflation. Where it is more sophisticated than the fx market i constantly rid the tina that this they are very much in the spot, they are looking at todays news flow of what will happen this week. And when you look at 10year gilts you are looking over a long time. You have to look at the discounting of different rates through that period. The 10year gilts is a bit more cerebral. Matt what kind of pressure do expect to be on the bank of england, to be on carney, to do something . Really yield with inflation approaching 4 expect to becomee negative, and british people are going to lose money in addition to the fact that they will be paying higher prices for most of the goods they want to buy. What you expect that to do to the bank of england . One, becauseood the bank of england has to do a certain amount, and within the mandate they are given. I dont know whether we can looked the central bank as being mercurial and negative real yields are not just u. K. Problem, look at them in germany. I dont think you have ever had such a large negative yield in germany. As a function of the elk were moving inflation. Consumers and workers in the u. K. And germany are both suffering at the same time. I wouldnt put it down to just a problem of the bank of england or the u. K. Guy you will stay with us. Plenty more still to come with stephen major. Well get back to volatility. Also coming up, donald trump slammed the eu and nato. Are we in for a major shift in Transatlantic Relations . We will discuss that. And where is the u. S. Heading in terms of its 10 year . We will talk about what that number will be. Plus, we will talk about the strengths of the european economy with the bank to france governor. You will join us later in the program. We are live in seoul, as they seek a warrant of the arrest of the samsung defect a leader on allegations of bribery. This is the open. We are 18, 17 minutes away from the market open. Guy 7 45. Lets get the Bloomberg Business flash with juliette saly. Juliette guy, thank you. Luxotticaeed to buy for almost 23 billion euros. The Controlling Shareholder will become executive chairman and ceo of the new company. The combined business will have more than 15 billion euros in annual revenue. To leave theb is swedish bank after running it for 11 years. Shell step down by july and join as a managing partner of a group. They say they will now start looking for her replacement, aiming to secure a smooth succession. Many of the biggest names in business, economics, and politics gather for the World Economic forum. Sustainability will be a key issue. Sticking exclusively to bloombergs francine lacqua, the ceo of unilever outlined why he thinks investing in the future will raise huge returns. Thehe costs of implementing Sustainable Development would be 2 trillion to 3 trillion per year. Estimate up told 30 trillion. So why dont we do this . Juliette that is your Bloomberg Business flash. Guy thank you, juliette. A couple charts i want to show you whats going on. We just had a move below 1. 20 on sterling. Line, just 1. 22 moved below it on this last bit, because the london liquidity is just coming into the market. The other thing i want to mention lets get through all this whats happening with this, moving sharply to the downside. This is on the dbrs news in terms of the downgrade. In terms of the details, this is a collateral issue. It means that the 10 year bond which used to attract a haircut is now going up to 11. 5 . Quite a decent chunk of change in terms of whether the Bank Operations will work. Lets get stephen majors take on it. Bit of a surprise. It would affect the way italian banks will price the trade with the bonds down the curve, because while the funding rate look attractive on the one hand, they now have to price in this increased haircut. I reminded of the speech the before christmas about sovereign risks and how they need to be a bigger spread between some countries and others. Portugal traded up 4 yield when in fact the data may point in that direction. It is that time of year when stuff happens, you have shown a couple charts that have been breaking through key support sterling, things are happening. I think it is typical of midjanuary, all those forecasts people made over christmas dont sound quite clever. [laughter] matt give me the straight dope here on dbrs. For most people, there are two ratings agencies. For some people there are three. Then you throw in this canadian cy, that only rate 60 of the banking sector. Are they really important or is this market jittery . Canada, they are very important. They are very important in when they affect pricing at the margin, which is how markets work. , two out ofple three agencies had already given their view in one certain direction and they were the only ones who havent done so, everyone was focusing on dbrs because ultimately they held all the cards. Impactcision has added because it has tipped us across the edge and as guy was explaining it is affecting the ecb operations and the way italian bonds are being treated. Dbrs may not be an agency that everyone knows but on the other they are critical to this one entity. Guy how does the ecb respond to this . This is making conditions tighter. This makes money more expensive in parts of the eurozone. They say they are setting policy for the region as a whole. Germany has full employment, and its amazingly nevertheless, you have different dynamics at play. Yeah. Maybe the spreads should be wider between different countries. The argument would go that the spreads are part of the natural reinforcing mechanism in terms of the risks between one country and another. The presence of qe has kind of obliterated that spread. It was back in 2012 before the whatever it takes speech when italian yields were 7 across the whole curve, front to the back. Yields were between 2 and 3 . Back then you had a decent spread of 4 or 5 . Now the italian bonds are at 185 , so the spread was a third. One could argue that the presence of qe and the ecbs accommodative Monetary Policy has done something to the spreads, and that the spreads are part of the natural reinforcing mechanisms in place. On how weld focus but the masses point i am making is that if countries are breaking the budget deficits and their total debt numbers are going up, then presumably in a normal market qe is distorting that. I think this might well matter, and clearly the market is showing us that the spreads will widen. T stephen, donald trump and im sure well talk about this a lot about the day has given a couple interviews to newspapers in england and here in germany, saying that he thinks other countries will leave the eu bloc. A couple weeks ago a story about how germans are getting angry about the fact that they have to pay for will have to pay for these deaths in peripheral countries. How strong do you think the eu is right now . Well, there are a number of forces at work. Everybody knows the political timetable. The election in germany comes much later that year but everyone knows the election in holland and france. Then on top of the politics there is the recent evidence that the Economic Data has been fairly good, and i am talking about real economy data in some parts of the eurozone, and the inflation data has been rising, which is a good thing from a low level. That all flies in the face of the ecbs ultra accommodative policies. You could say that there are quite a few challenges to the status quo, whether it be the politics of the eurozone and the or the policy of the European Central bank, because they are all facing challenges. The euro project every now and again gets these kinds of challenges, it comes and goes. I understand why there is volatility. And that is why we look at these prices for an indication. Minutes away from the open of European Equity markets. I want to get some stocks to watch, one is the donald trump effect bmw. Trade indicates it will open down after donald trump threatened again terrorists if tariffs if bmw opens in mexico. They responded that they will open a new factory in mexico, but they may not export those cars they build to the u. S. , in which case they would avoid a big tariff. A bit of a scrap between bmw and donald trump. Guy we are to talk about whats happening fast fashion, moving to paris, luxottica merging. What i think its the more interesting aspect of all of this is that the combined company will be listed in paris. I think this could be another nail in the coffin for italian equities. The equity market has been suffering from a lack of size, and it will be another major part of it that will ultimately be a listing in paris. Something else to bear in mind as we focus on what has been happening. We will wrap things up, london looking gloomy, the radius start. Coming up, the open. This is bloomberg. Guy welcome, you are watching bloomberg markets. Im guy johnson, in london. Matt miller in berlin. Moments away from the start of european trading, and matt has the morning brief. Matt sterling is getting smashed. The pound tumbled as the Prime Minister signals plans for a hard brexit, that is number 10 just managing expectations . And borderline. President elect trump strikes against bmw, saying the automaker will face import duties if they continue plans to build in mexico. How will the german carmaker respond . Seeing double. Luxottica agrees to merge with their french rival, but how will investors view the deal . Moments away from the start of european trading so much going on in terms of Asset Classes in the bond market. Lets see how the equity market story goes first. As you can see we had a bit of pickup at the back end of trade friday, quite positive. Lets see how we are Opening Monday morning. Was 12 days higher for the ftse 100, and it looks like we continue that them. The cac your own is a little the cac is a little bit higher. Why is there a mechanical process at work . Sterling goes down, that she goes up. We will see whether that works for the rest of the session, that the sterlings meaning the ftse is outperforming. Manus this is a quick look at the imap its not just a u. K. Or european distress you are seeing in the markets you look at the msci, down, shanghai down. There is this view that hard brexit, if that is what we are has gotten quite a global ramification in terms of resetting the entire relationship. But there is one woman, and every time she speaks she has a proclivity to move the sterling market. S was her new year speech this was her sunday times report. Theresa may takes on an interesting moniker every time she speaks, a wrecking ball on sterling. Dont even debate it seems to be the view, dont debate whether hard brexit is in the sterling price. This pops up in the middle of my guessed that you steven major talked about the gilt market and that great issue about whether 4 potential inflation is sticky or not, and whether you would have a hard stop to quantitive easing. That issue could be on the agenda for the gilt market. This is volatility one can expect it to rise. Down, i will leave it there. Counselor, luxottica. Can they really save 400 Million Euros . Way, it is set to price lower than luxotticas Closing Price on friday night, including the weight and size of the luxury market. These sales came in six below percent 6 below. Bmw he talks, they answer. Bmw says that they are very much at home in america and anything they produce in mexico is for the word. The power of twitter. Guy thank you. I want to quickly show you the italy, down by 1. 2 despite whats happening luxottica. This is the dbrs affected to the financial sector. Luxottica will lift in luxottic. Paris, another blow for this increasingly small piece of high that is the italian equity market. That is very important in terms of the way the country can generate a decent Economic Performance going forward. Ecb decision this week this is euro area inflation picking up, some of it mechanical. Stephen engle is at the Financial Forum with a good guest over to you. Yes, this is the asian Financial Forum in hong this is euro area inflation picking kong, but the news flow out of europe is also affecting markets and sending things into a bit of a tizzy on the reports that theresa may could evoke a hard brexit as early as tomorrow. We want to get early reaction with the honorary governor of the bank of france. Thank you so much for joining us. Good morning. What is your view on whether the u. K. Should take the hard brexit . Make your job easier or what . I have no view on what u. K. Think it wasut i designed by all members of the European Union and the u. K. Played a big role in designing and they arerket basically three conditions you cannot be in and out at the same time. To be in the single and they mau need to implement the regulations of the Single Market. If the choice is westminster must have its own regulations, we cannot accept the call of justice. The first condition is not met. The second condition is that you of runningthe cost the Single Market and economy. If you want to take your normal share in the budget as norway is doing, then the second condition is not met. The third condition is a Single Market theres freedom of capital, services, goods, and people. Extraordinaryof conditions, but normally it should work as a Single Market. That makes it difficult to imagine any else than what we call a hard brexit. Does a hard brexit, under all those conditions is that still less of a chance or more of a chance for a disorderly exit . We heard mark carney say that the eu could suffer more than the u. K. , if there were a disorderly brexit. I dont believe it all that there is a risk what is sure is that the transition must be well organized. Or two toed a year reorganize themselves, i think we should allow them the necessary time. The most delicate thing is probably the manufacturing sector, because there we have the rules of the wto, the customs union, relationships with many third countries, and to do itake more time in an organized way. But the Financial Services i think it can be done in a couple years. Are a special adviser on the Brexit Issues to the government in france. Its an Election Year so you might have a different Boston Report to in the coming months. What is your priority right now . We heard mario draghi say that the u. K. Is clearing business would you agree with that . I think the clearing Business Needs to come back in the European Union for reasons of sovereignty, but most importantly for financial stability. 2011 normous risks in we saw that it was highly the bulk of clearing, 10 is on our side. Clearinge bulk of the is not done in the eurozone under the supervision of the central bank clearing, includine dangerous. T is very that is so far the opinion of france but also germany and commission,uropean it should not be as aggressive, its a matter of financial stability. Dangerous to have a Financial Center that is outside the realm of those in charge of financial stability, and it could be explained within the European Union but not outside. Thank you so much for your time. I will send it back to you, guy. We didnt even get to the ecb Rate Decision on thursday, but we will be having more coverage from the Asian Financial for the rest of this week in hong kong. Matt thanks so much. Stephen engle, joined by the bank of frances former governor. Stephen major is still with us, global head of fixed Income Research at hsbc. He didnt seem terribly concerned. What do you think about his position on brexit . He probably cant comment on it even if he was concerned. The reality is that its very contentious. We are in the early stages of the negotiation, and i wouldnt be surprisedcontentious. If we have quite a few days like this, when we have big moves and sterling. At the moment the market is moving toward a hard exit and therefore sterling is going down. But i think we are going to have many months of this, it will be volatile for a long time. Guy i want to talk about the. Tax take, its ability to then roll that into what happened with the gilt market. Theres a lot of discussion surrounding how the u. K. Can use weapon. O use it as a if you think about this as a war of attrition, how willy gilt sayingreact to the u. K. We are taking Corporation Tax at 10 i dont know. Give us an idea of how that would be priced in. Im not sure that the tax take from the corporations are that high. As they tax it is quite the relevant, it has a very Immediate Impact and they cash flow is real, it cant be avoided. Greece was quite important with that. This,k. , free of all of can do what it wants, and in terms of the negotiations everyone knows that there are certain cards the u. K. Can play, and there were threats and some of them were quite nuclear. Guy this, can do what it how does the gilt react . Take onmpact of the tax the revenues therefore affects me, thatse, and to a very long, slow moving process and the bond market is not like the fx market. Those revenue flows take a long time. Its fair to say that the gilt market does not have a very strong empirical link to the budget position. The level of the curve in the link,swaps do have a good but the level of yield is much more a function of Monetary Policy that will drive longerterm growth. Having a fiscal policy whereby theres less money coming in im afraid to say that it all depends. I can promise you, after years of following this, there is not a strong, empirical link. Matt we are going to continue talk about this. Us. Hen major will stay with double vision. Eyewear makers luxottica and at the lord are joining in a merger of 50 billion euros. Us. We will break down the deal. Then we will speak to the ceo of euronext live, as they repair for a possible hard brexit. You may have heard us mention that. We will bring you our interview with the executive chair of the World Economic forum. We asked him, is davos still relevant . All that to come. This is bloomberg. Matt welcome back to bloomberg markets, european open. The Worlds Largest maker of eyewear has agreed to be bought by their french rival, the deal valuing the combined companies at about 46 billion euros. Luxottica shares are trading up 13. 50 lets head to our correspondent in no one. In the land. Essentially, the founder and owner of luxottica has agreed to sell for it its entire holdings, 60 , they call it a merger but they would be the leader at the end. They will be ceo and coceo of the new company. Up this morning because analysts are seeing is the biggestis money factory in the world and it makes a lot of also and [indiscernible] guy with interesting to my men an mind is where it is listed. Why paris rather than italy . Know, at bloomberg we try to see if this is really a merger or if someone is buying someone. In this case it is clearly buying out luxottica they will be delisted from the milan exchange. The affectsay that euros holding costs will be the biggest in the new company, but clearly it will be a fresh company. Matt thanks very much. Taking a break from his automotive coverage to cover the world of sunglasses for us. I want to get back to cars and talk quickly about bmw. Those shares are down in frankfurt. The reason is because donald trump has come out in an and issued new threats it grants to bmw or maybe he continues his threats that if they build this plant in san make this serious, he is going to try and charge them high tariffs to import the cars to the u. S. The question is will they be importing them . Bmw has plans all over the world, but none as big as the spartanburg plant. They produce more in spartanburg than any other plant they have, including in germany. Guy yeah. You wonder whether what bits go into the bmws. I suspect that the supply chain i suspect the supply chain lets call it north american based and probably a lot of german stuff going into that as well. Port to the engines come from . Where did the transmissions come from . I wonder whether or not the math is actually being done. Matt i can answer that question for you, no. The math is definitely not being done. Obviously, on every car from all thesea, honda, cars are built with parts that come from everywhere around the world. But the issue is where the final Assembly Takes place as far as the import taxes concerned. Bmw is the biggest exporter of Automotive Products from the u. S. They export more than 10 billion worth of Automotive Products every year, more than company, including any of the detroit three. They do big business in america. I think its interesting that mp is taking on the of w, taking on bmw, considering that they employ more than 70,000 people directly and indirectly. They make all the carbon fiber for the cars in this video in washington state. They are all over the place in america and if they make these cars in mexico to ship to germany or to sell in china, its interesting that he would take such a huge issue with it and threatened them with export tariffs. Guy lets bring stephen major into this conversation. We are significantly north of the yield. Prices are depreciating from here. Is that a storm we talk about a hard brexit, are you basing it on a hard trump . Will, the treasury forecast at yearend could be met if there is some kind of event. You mentioned hard brexit what about hard trump . What if the negotiations are hard . We thought before the u. S. Election that the negativity from the tray decide and things like this, this bmw discussion, that negativity would far outweigh any positive news on the fiscal side. As it turns out the market seems to have priced in the good news about animal spirits and ignored the potential bad news. When i think about our forecast i am quite happy with it, because we learned from the last few years that stuff happens around the world whether it be a hard landing in china or a hard brexit or something in japan who knows . Any general concern so far week, we have seen to yearend forecasts hit in the space of 10 days. That was the turkish lira and the mexican peso. Things are happening very quickly. That 10 year treasury forecast it may or may not be right. We will find out but stuff happens. Outliers ve been you have been right. But i wonder i want to give you a chance to handicap this. That is down to more than 100 basis points from where we are right now. Is it binary . You could be right if trump goes nuclear, but wrong in any other outcome. Yeah. Look, based on the bloomberg think of forecasters i 56 there is no one with the yield forecast as low as ours. Wonder i want to give is this was a normalicap this distribution, which it is not, the probability you are asking for would be less than 5 . That because it is a multimodal distribution and because it is are skewed, most people actually giving no informational value at all. Id say the probability of us being right is much nearer to 30 . I would back myself on that basis i think it is a good forecast and that is why we have got it. What do you think the chances are of the fed not reinvesting . That is one that has been mentioned by a few of the committee in recent weeks. I go back to jackson hole last august i came away with the impression that there was unambiguous support for all the central banks, and those are operational reasons, to do with providing liquidity for the Banking System. Its not about policy. We have to be careful not to mix operations and policy. As a policy tool, nonreinvestment would be tightening. It replaces the need to lift fed funds because they are moving in the same direction. The fed has 200 billion per year of treasury reinvestment i have played that this idea of whether they would but ultimately i think the Operations Side of things the need to give liquidity to a Banking System that is really important. It is one of the key factors that i think probably outweighs the policy. I will take you to the spread here as we become more elevated. Would you continue to buy this . Do you think we are working our way we havent talked about Marine Le Pen yet. Would you buy that . I reckon all of these spreads will go wider. France and italy are the two sovereign markets with the most important the big weight on foreign holdings, which means that they will become independent on the domestics as we go into key elections. Will we learn from brexit and the u. S. Election . Be very careful. I dont think people are going to want to fight that moves going into april in france. My suspicion is it goes wider. Matt where else do you look for this stuff happens and we have seen stuff happen over the last 12 months where else outside the u. S. , the u. K. , maybe france, would you look for a socalled grey swan . You could play with this idea of hard brexit, hard trump, then you could look for hard landing somewhere. People have talked about china for the last few years. This time last year it was all about china. It probably wont happen anytime soon, that is a fear at the back of everyones mind. We should worry about hard stops i mentioned qb in the u. K. Iare hard realities think that markets are presuming there will be a benign path toward normalization of rates and if there is one thing i am sure about, thats not going to happen. The idea that we would just see yields move 20 to 30 basis points higher isnt going to happen. Guy always a pleasure to see you. Stephen major, global had of fixed Income Research at hsbc. Next, the euronext ceo. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Anything with a screen is a tv. Stream 130 live channels, plus 40,000 on demand tv shows and movies, all on the go. You can even download from your x1 dvr and watch it offline. Only xfinity gives you more to stream to any screen. Download the xfinity tv app today. Guy welcome back. Dates 30 in london, 9 30 in frankfurt. This is how things are shaping up. Why is london outperforming . Well, because the sterling story is the dominant theme. 73. 35, 12 days of record territory for the british index. It has come off the boiler a little bit, but not by much. We are seeing it on the continent shelley talk about the movers . Work your magic. Matt well, it illustrates nicely why london is outperforming right now. On the downside here you see a number of European Companies daimler, access, novartis, ubs it takes you about six movers until we get to barclays, a british company. But here on the gainers side, luxottica is at the top because of the merger, but then rio tinto, dilettante, anglo american, diageo. You have all these dish gainers, very focused on mining or drinking. The market likes this morning as far as adding index points to the stoxx 600, and that is why you see london outperforming. Guy yeah. Lets talk about whats happening with the pound today and show you whats going on because it was some of 120 earlier on and that is something we have been paying attention to. I have another good chart for you i want to talk about the impact of these sterling moves. Let me just show you this chart that the Production Team put out. That is the brexit move. This is the flash crash. This is mays a speech. While its producing a decent story this morning we are still north of 120 in holding within it. In terms of the size and scale, while this probably isnt going brexit, ite order of is potentially going to be quite significant. The other thing i want to mention is whats happening with btp futures. We are still within the weekly range and we are getting lower but we popped a little bit inher on the back of that terms of the story and its going to be interesting to see how it affects the italian banking sector. We will see how it works its way through. I just think we should point out to viewers that we talk about mays speech, it still hasnt happened. She is not the king until disco day, tomorrow. Discount today, tomorrow. Guy lets get another brexit talk into the conversation. Tomorrow in paris the paneuropean exchange will agree to pay 510 Million Euros to buy the London Stock Exchange french clearinghouse. How are they going to handle the challenges of brexit . Euronext ceo joins us now from paris for an exclusive interview. Good morning. Good morning. Guy do you expect to gain or lose as a result of brexit . People are watching this acquisition do you think i am wondering what the balancing act is. Do you lose access to london clients or do you gain clearing . How do they balance out . Well, the conditional acquisition was a natural move for us irrespective of the brexit momentum. Clearing . How do they balance out . Dont forget that clear and it used to be an asset owned and controlled since 2003 and the represent the top line come 50 from unix flows. Line come 50 from unix flows. It was a natural move irrespective of the dynamic of brexit. It was generated by the potential merger and by the willingness of the party to facilitate the approval of the transaction by the european commission, but it was a natural move. For sure in the first brexit mosteing integrated competitors are integrated with clearing houses and that was a natural move. For sure there will be opportunities arising from brexit in europe and the eurozone in particular. I am wondering about your lobbying efforts, or maybe you dont call the lobbying. What are you pushing for as far as the eu regulating derivatives clearing . Do you want that to stay inside the eu . Are you having lunches with any people at the commission, talking to them to get an idea about which way they will go . Exchanges and houses are heavily regulating on many we have many sources of concern. Whats true is that wrecks it has created volatility and purpose of and the the regulators, the purpose of the leaders, is to create that environment with more visibility, certainty. So the regulators are assessing what is best for europe and the eurozone in terms of his ability. For sure, the future of clearing is one ofthe location multiple issues for which regulators and issues on this side of the continent must for visibility, certainty, and stability in an environment that has become more unstable and uncertain because of decisions that were taken on the other side of the water. Guy let me turn to what is happening with corporate news. You must be delighted to see that walks on a gut is being bought out and they will be listed on the Paris Exchange good news for you. What is the outlook for the ipo Market Going Forward in 2017 . What will we see in terms of equity issuance and the ability of Companies Just go to the Public Market . We are cautiously optimistic. 2016 was a poor year, but what we are seeing are that large numbers of deals that werent possible we are talking to sponsors and they are telling us that the number of political events are going to rise in 2017. The general elections in the netherlands, france, germany they arent going to delay their plans. Its true that the prospects of increased rates, revaluing upwards in the interest of going back to the equity markets. We are optimistic. The market has already 1300 we are, tech companies, launching a series of initiatives to attract technology companies, even if se companies and others we are seeing a good momentum of tech company ipos, whether they come from the core euronext countries or other european countries. Have you ask talked to any of your u. K. Or ranking members about possible contingency plans to move on to the continental postbrexit . Is that something you are hearing people discuss right anyone in the u. K. Has to consider all the options in a context where there are relationships between the United Kingdom and the European Union in the process of being fundamentally redefined. To hise i am talking thinking and considering, investigating and planning because there is no other way with what is about to happen. Its a fundamental change, and only those driven by wishful the world asthink it was operating will continue in the future. Is when it is things that potentially being discussed is the idea that the u. K. Can significantly lower Corporation Tax, that we may end up as a result of which seeing companies the sterling to the u. K. , not from the u. K. This is a twoway risk, isnt it . I mean, that the decision of the British Government and the british people to design and shape the positioning of their country. I would assume that there is a tradeoff between being offshore,e and being different, with difficult access to the Single Market. Elected stop the guy the ceo of your next. They give very much for sharing some much of a time with us. Up next, doubting devils. As the growth in the goods gather, is the annual mountaintop meeting still relevant . Is this a place you want to be seen this year, given what donald trump is saying . We will hear from the founder when we come back. This is bloomberg. Matt this is the European Market open on bloomberg markets. South korean prosecutors are seeking an arrest warrant for onsung groups de facto head allegations including bribery. For more, we are joined from seoul by peter pay. Whats the latest on this possible billionaire arrest . Chaos, it sounds like at least at samsung. We just got a report that Foreign Investors pulled about 240 billion won from the market, the bulk of it in samsung shares. A lot of our next among them a lot of angst among investors about what will happen to samsung with the possible arrest of its head. Guy what our markets pricing in . These allegations we dont know how deep they could go. What does the market need to price in . A breakup of the group, new leadership . What are we talking about . Both. Basically, the leadership vacuum is something they are worried about, but also the possibility of the breakup, which should be a good thing for Foreign Investors who have always complained about transparency, particularly with samsung, because of all the ownership issues. It was hard to see what the value of the company was, so this should work out. On the other hand, there is a disarray that could come from a leadership vacuum, particularly at a time when it is struggling. They have to pull back on their note 7 because of reports of battery fire, and they are facing some headwinds with smartphones. The growth is not as there is it used to be. A lot of things going on with samsung, the fear that the management isnt there to film it to helm it. Guy thank you very much. Lets turn to something closer to home in europe. Never before has the gap the between davos man or woman in ned soal world john syaw widely. Erik schatzker spoke to the executive chairman of the World Economic forum, who insisted it is still and still has a place for public debate. See tremendous Impact Technologies will have, which we will have to face. Createse changes which this feel we have an emotional realization. Respondhave to do is to to the individual fears and to offer solutions. It is not just enough to listen to people we have to provide answers and for that we are here in davos. Guy eric joins us now. Is this a place to be seen this year . That is very much an open question. As you know, having been here yourself, there is a lot about this meeting the exclusivity of the skiis resort, the delegas being shuttled around in black audi limousines, a cocktail parties where people ship on same pain, that seems out of place in an antiestablishment world that reject the status quo. But lets be clear there is an important distinction to be drawn between what the World Economic forum dollars and its business model. This is an organization dedicated to improving the state of the world and it does a lot of great work in that regard. But it is a business underwritten by large multinationals, and that is why theres this question of relevancy. Can an organization that is funded by corporations be seen as anything but a voice for the corporate world . That is why relevancy is the question mark, this year more than ever before. Matt eric, i remember covering davos at the turnofthecentury, to date myself a little bit, when antiglobalization protests were blown away by Water Cannons at the base the mountain. Theye image problem have worse than then, because it recovered quite nicely. It did for a period of time. There is no question that there will be a lot of attention paid to the cocktail parties it did. Before a distinction needs to be drawn. These cocktail parties arent hosted by the west they are hosted by the companies that underwrite this event. For carltunately schwab and the World Economic forum, nobody draws that distinction. People conflate the west with everything that happens in davos, so the image problem is, to answer your question, worse now than ever before. I put the question to carl schwab. Does he agree . Vos hast forget, dat only 15star hotel. Most of the participants are living in small rooms. Its not a place where you celebrate outrageous excesses of life its a Global Village where we want to bring back everybody to a certain level of modesty. I think we have just spotlighted a frame of reference problem. It may be true that there is only 15star hotel, but that is not what everybody outside the security perimeter care about. What they care about and recognize is that this is a club, a members only club, and there are only two ways of getting you buy your way in, or you are invited in, and everybody else has there face pressed against the glass. Guy absolutely. Erik schatzker, great coverage. Thank you very much. Stay tuned. The full coverage of the annual World Economic forum includes a panel on the future of finance, guests including the Deutsche Bank ceo john cryan. Thats coming up tomorrow. Wednesday, we bring you discussion on the crisis of the middle class. Francine is going to be hosting that. Included in that lineup, christine lagarde. A former u. S. Treasury secretary some pretty interesting coverage coming up, both on tv and on the radio. Matt i wonder if dead mou53. Will be back. We will take a look at how cold weather has left Energy Suppliers scrambling. This is bloomberg. Guy welcome back. Lets take a look at with happening with sterling. The cable rate, the Jonathan Ferro cross rate, didnt work out that well thi for me this morning. This is what we have seen this is as we price in the gap coming from 10 downing street. We are waiting to see whether the speech actually delivers the same kind of narrative going forward. Im just going to change things call this the miller ferro cross rate. Matt miller is moving to berlin, john to new york. As you can see, this has been going in the wrong direction. Matt yes. Guy i just like to point that out. Matt yeah. It wasnt all bad. It was 105 on the day i came here, november 11. It . Re not patenting guy no, miller shows up, just pointing it out. Guymatt right, ok. And we are back where we started. Lets get to the parts of europe , in the grip of the surprising cold snap. Any jew markets are taking Energy Markets are taking a hit, sending prices of natural gas to a twoyear high. It gets cold in the winter, and that shocks people. We are joined by kelly go blow to talk about. , kelly how cold is it supposed to get . Without a problem problems that creating for natural gas providers . Is going to be very cold. If you are one of the people lucky enough to be going into davos, it will be 20 degrees sius, particularly across central europe. One of the issues this creates is a lot of this fuel, heating fuel and fuel for power, is stockpiled in the summer, and is running out. Theres a bit of a mad to get it, a mad dash to get and some rivers are frozen over, so its hard to get additional. Guy our markets correcting it . They have been reacting very strongly. Lisa lagasse go to a twoyear high just last week. In france we saw it rise to a record. Even this morning, german power prices are searching. Away hink the take you heard her correctly when she talked about the fact that it is going to be 20 in davos. Matt celsius . Thats right. Matt well, it does get cold over the winter, and i find every year people seem to forget it. It also smells in the winter. Kelly, thanks so much for joining us. Stay with us. Up next is surveillance. I believe guy will be joining you. Im going to bloomberg radio. This is bloomberg. One thing the pound pushes lower as theresa may signals a hard brexit blueprint. The government scrambles to reassure investors the for tomorrows big speech. Front on the attack. The u. S. President elect slams nato, threatens bmw, and backs brexit. Markets brace for the new world order. Davos disconnect. The global elite descend on the ski village. Never before has the gap between the haves and