provide details about what the long-term relationship will look like? and the race for third place in the election. that will determine the outcome of the german government. we will be in berlin all weekend. matt, a busy weekend for you. plenty to think about in the markets, as well. matt: a lot going on here. not only the election, but a marathon here in berlin that will stir things up a little bit and the gp on sunday. futures down across the board, not huge losses for futures, but definitely red arrows. what do you see on the gmm screen? guy: let's talk about these markets. a window call on the north korean story being priced in. is equities, yesterday's it awful. -- up .5%.strongly the yen is back in focus. i find this fascinating. it is a safe haven despite the fact it is so close to the story geographically. the bloomberg dollar index up .24%. let's talk about what is happening in the commodities. , the iron ore still complex continues to sell off but gold is well bid, up .3%. that safe haven continues to come into the market. let's get the bloomberg first word news update with juliette saly. the uk's prime minister will propose a period of transition after brexit takes affect. in a speech, theresa may will speak about an implementation phase that will run for two years and a 10 billion euros for each year of transition. it will keep trade ties and give businesses time to adjust. gains heading for a third as opec meets indiana. russian energy minister says it is too early to talk about longing the deal past march, but his other in counterpart told the country the matter would be discussed. betancourt, heiress to the l'oreal empire has died at age 94. she had a fortune of $42.5 billion. the swiss company and the betancourt family have a shareholder agreement that limits either side from raising their states until six months after the death of lillian court. as theas set october 22 date for a snap general election according to three people with direct knowledge of the plan. local media says shinzo abe will confirm the election date in a news conference monday. hong kong's credit rating has been cut the day after they downgraded china for the first time since 1999. they lowered the doubling to aaa. linkages fromrong mainland china. saido's former minister the death toll that struck his country's capital has arisen to 273. hundreds of volunteers are continuing rescue and recovery efforts in the wake of a 7.1 magnitude quake. people might be trapped alike in 10 buildings. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. guy, matt. the trait is given a wake-up call overnight. the resignation has struck back at donald trump's threat to destroy it. kim jong-un has warned of countermeasures including testing hydrogen bomb in the pacific ocean. let's talk to mark cudmore. the yen has been again, the swiss franc has been. -- bid again, the swiss franc has bid. war of words but it can turn into something else. other markets being complacent on this? guest: we are seeing a clear reaction even before the launch. a week ago, there was a missile launch and the markets quickly moved on. it's interesting we are seeing classic risk aversion and the idea that there might be another missile launch. the market is more nervous. what is interesting, yet is rallying again. we are seeing the old risk version rather than taking into account that it is not intuitive that the yen is a safe haven if the conflict takes off. this shows investors are nervous in the wake of the fed and this is the catalyst to show that. see andw much do you can you measure those flows? japanese investors actually repatriating currency. forhe yen is a safe haven the reasons people think it is, you would literally seen it happen every time north korea flares up. guest: two things happen. , japanger picture thing has a lot of investments are on the road. when there is risk aversion in japan, people repatriate cash to japan and the yen inflows. trade onf that, we see this news. they are genuine flows, but preempting the money flows behind it. short-term drivers in the short run, what it doesn't mean the flow comes through until we see real action down the line. normally when we see the headlines, we see the yen spike and then it wears off unless the reason escalate itself. guy: will the news out of florence today and over the weekend be markets moving, do you think? guest: i don't know if florence will be massive. the theresa may is critical. -- speech is critical. we have seen the pound rally significantly, especially post boe. retrace the bank of england gates. what theresa may says is important. the expectation is she will take a softer line and impolite a longer -- imply a longer transition period. -- there will be certain lines on a softer brexit. there is a worry that the message would be interpreted if she says anything different from a heart brexit at home. -- hard exit at home. guy: thank you very much indy. -- indeed. mark cudmore out of florence today. we are live in florence ahead of the big brexit speech is next and live. this is bloomberg. ♪ ♪ guy: germany decides. we are live in berlin. matt miller great coverage over the weekend. fantastic tests lined up to analyze what the results of the election will make. let's get a bloomberg is a splash with juliette saly. juliette: rio tinto is going to buy back to $.5 billion of its shares using the proceeds from its australian coal assets. stocksll buy 560 million backt is being used to buy shares after they announced a record dividends. hewlett-packard into prices is cutting 10% of its staff or five dozen workers according to people familiar with the matter. .- 5 million workers hewlett-packard represented did not respond to requests for comment. gone is resident says his 's presidenthana says it's country needs to step up cocoa production. to get the raw materials for the finished product. so far, we have been, out of negligence or difficulties mobilizing the finance and technology, we have not been able to do it. juliette: that is your bloomberg's us flash. -- bloomberg business flash. matt: angela merkel and thomas schulz slug it out. the election might have an outside influence on the next government. -- joint isjoins us here. extreme left-wing or right wing parties are going to make the big difference. that's what the market is hoping. guest: the polls are still showing different positions for third place depending on which hold you look at. that would be the thing to look out for. if angela merkel and her party can hook up with the ftp, if the math works out on sunday, then that would remove the uncertainty at least in the first instance. get 48%, 49%ve to together in order to govern. the other possibility the market is considering is a jamaica coalition, the green party, ftp, and cdu. a 45% of ability on that. how likely are those two smaller parties going to work together? the greens and ftp don't see eye to eye on almost any issue. guest: it is something that will come out in the wash. if the result allows that -- there is the question of stability, of forming a government at all. not to sound alarmist. difficult and parties now are saying, this is our maximalist position. once the votes are in, let's see what will happen. that's where you get these predictions. it is actually a four-way coalition working out. matt: including the csu, the bavarian sister party -- guest: which is not negligible because there are differences in merkel's block on policy issues. will there be a credible opposition after this election and will that mean for its politics? yes, there will be. and again, it depends on the outcome, but the opposition be alternative for germany, which is this anti-immigration, anti-euro party taking on the establishment in ways other pen's parties did in other countries. nobody wants to form a government so they will be an opposition party. they could beat a pesky and thorny one and it will be the first time germany has an opposition party of any significance from that side of the aisle. there is a question of stability there. if the spd goes back into a grand coalition, leaving the afd has the main opposition party, they seem slightly less stable than the pirate party. there are some a differences between the afd. guest: we have never been here before in germany. andming the polls are right the afd gets a sizable result for their circumstances on sunday, so it is very unpredictable. it will go after the mainstream parties and what the mainstream parties are saying, what will be best for german democracy versus this alternative for germany party does not become the main opposition party. we will have to take it from there. guy: final question. once we get past the election, it's monday morning. who will you be listening to? for the time being, it will be angela merkel. they are already setting out invitations for events happening in three or four weeks time with angela merkel's name on them. the coalition talks will surely -- they take a long time anyway in germany, weeks -- the last time was just before christmas, everything was worked out. that is what we will be looking for. it depends if merkel comes out of the election or her hearty block comes out of the -- party block comes out of the election significantly. that puts her in a more difficult. that would make her the caretaker chancellor unless there would be a massive upset in the polls. matt: that is unlikely to be. she is favored with 36% depending on the poll you look at. tony wrote the book on angela merkel and is also our bloomberg politics reporter. guy: thank you for the coverage rolling up to the german election and its effects over the next few days on bloomberg. you can print minister theresa may is expected to propose a transition period that could take effect in 2019. she will seek an implementation phase the bbc proposed would run for two years to give clarity to companies worried about the looming split. anna edwards is in florence. will today marks a change in direction for theresa may and the brexit trusses -- process? anna: you mentioned the headlines overnight around the transition and it looks as if she will ask for that. in exchange, what will she be offering? the 20 billion euros we were talking about in terms of bridging the budget cap, but will she go further than that? the she address the items divorce proceedings want her to? the financial items. she might not get specific, but will there be a suggestion for more money? what about the future relationship between the eu and the u.k.? the model with canada has fallen out of favor. theresa may has always talked about the deal. will she talked about that again? will the cabinet allow her to say -- she has brought some of them with her to florence. will they all look very united as she delivers her brexit vision? what was she say about the other areas, specifically the rights of the eu citizens that live in the u.k.? she would talk about writing into the agreement, the treaty, the right for them being protected under u.k. law. is the likelihood we will see a different cabinet with theresa may? calling forrs are the ouster of force johnson. nson.rest joh are a lot of people's jobs on the line depending on this speech? transition,get a and the two years is what she is asking for, then maybe both philip hammond and boris johnson managed to say they want something here. boris johnson limits the transition to two years. it feels as if earlier in the week there was much more talk about whether the cabinet would fall apart. the fact she manages to get them here to florence. i read boris had to cancel plans to be here. the fact that happens would be seen as something as a positive although the labour party has suggested no matter what she says, which he have the ability to deliver this? she is a weakened prime minister. holding thect of cabinet together, something of an achievement given where we started the week. guy: final question. you are in paris if you are in any of the capitals this thing to the speech. what are the worst you will be listening for here? -- words you will be listening for here? this is a different theresa may speech. how far do you think it will go in satisfying what they want to hear? anna: this comes a couple weeks before the conservative party conference. last year's conference set out redlined around exit. it was the citizens of nowhere's badly byeally taken many in the european union. we will listen to the language used here. it looks like it was aiming to get people misty eyed about a relationship between written and europe that very much predates the european union. that's what she was people to take away from this. the president of the eu parliament has been talking about the concrete rapoza. michel barnier wants something concrete, as well. we will see if they get enough to move the conversation to trade in october and beyond. that is what theresa may and her delegates want to do. , they arer reporting clear they are sticking to the barnier line. show us progress on the three priority issues before we move on. guy: great coverage. thank you. on can follow the speech can login and access. l'oreal and nestle are two stocks to watch this morning. it will light the torch under what will happen in terms of the stake sale. will there be pressure? and i sure there will be. for nestle to unload that. the pressure will be mounting. matt: there was an agreement that came to light a year ago between nestle and the -loreal concerning the betancourt death. the agreement was six months before raising stakes and many of us hope to make it to 94. that is a decent age and she leaves a huge legacy behind her. a lot of people are mourning the life of lillian betancourt and investors are looking to see what the next move will be on l'oreal or nestle. the ongoing stories erotic north korea and the united states remains one of the markets are focused on. features of square value pointing to a drop around .2% here in europe for european equities. this is bloomberg. the open is next. ♪ four minutes until the european equities start trading. let's talk about where we are. in a position where we are anticipating we will see a small drop. there is a risk out story in the market. more broadly, old bid, frank is , stocks selling off overnight. that is the picture we are looking at. in germany, the politics a big event, as well. matt: i have to give big props to my producer who organized the most incredible shot. we are on the roof overlooking the reichstag and the brandenburg gate ahead of germany's election on sunday. it will be important to markets who care about europe, who care about the euro. decision that pushes germany further away, we could get a decision the polls germany closer to europe. very important to watch the election on sunday. session, the trading let's talk about where we are. london softening up a little bit. a little more to go, but not much on the downside. 7261 is where we are trading. the cac and dax expected to open in similar form. narrative being generated by north korea pervading the markets. it will be interesting to see whether or not the gold miners softly. the reason for that, we have seen steel and iron are coming under pressure. forecastof front, the, pmi 57.1, well above 54 target. french data coming through very strongly. manus: mario draghi will be speaking today. where are we? constancio minutes, will also be speaking. oil and opec will be central to the market discussions. latere buyback came yesterday evening and can theresa may reset the agenda in florence? those are the questions markets are asking. the state of play on the imap as we start the trade of the day. it is a risk off environment that you are seeing here in the markets. you are seeing london, paris and frankfurt on the downside. one dan -- london down by 1/8 of 1%. let's see what happens with l'oreal. what happens with nestle? will the activist investors push them to sell their holdings in l'oreal? let me take you to the prospect of political change or a new pump -- compilation in germany, a new coalition. 5198, what have you got here? dax valuation in the 12 month forward pe, trading around 13.2. relative to the world index, which is in purple. is daxnt of this chart is behind s&p, it is behind those key indices, therefore you ask will chancellor merkel taken with a new coalition, what would that mean in terms of fiscal spend? what would that mean for the dax? i leave you a plot on the gilt markets. these are the december futures, which picked up by seven points. we will wait to see what theresa may has got to say. there is the budget contribution and the brexit bill and we know the two are very different things. we are dealing with a number of different things. also, theresa may, is this her having the ability to bridge the political gap in her own? a transition period of two years, perhaps the hard right and gives her the transition period that is something of the status quo relationship between the left and the right. out onardly rocking it the gilt market. i am off to digital radio. join us there if you are hopping in the car. guy: bloomberg radio, bloomberg tv, plenty of great coverage coming throughout the day. what's take you to your mo blue -- mov screen. smith's trading down. jeffries describes the numbers as satisfactory but softening up. prices are down pretty hard. down, glencore a agasta aofter, antof little softer. let's see what is moving to the upside. i don't know why it is doing this, but that is ericsson. it puts the full name in, but it is ericsson. i think it is an upgrade. by 2.47% this morning. elsewhere, nestle, another stock worth keeping an eye on. nestle trading up by seven -- .7%. those are the stocks. monetary policy continuing to dominate. absolutely. geopolitics, traders have been giving another -- given another north korea wake-up call. struck back at donald trump's threats to destroy it, kim jong-un has warmed of -- warned of countermeasures, which foreign ministers say could include testing a hydrogen bomb in the pacific ocean. with us, the global head of flow strategy and solutions at socgen . let's go through how the market has reacted to this and why because i know it is controversial to buy the yen at times when japan is the very nation threatened with nuclear tax. >> absolutely. i think the market has been concerned, but not to the extent volatilityave exploded. one asset where we see interest is the yen because it is a risk off currency, but you also have a tremendous amount of flows into golds and gold optionality. if you combine that volatility with buying in the currency, the dollar has seen him close in terms of volatility buying and you have the high production. contingent options between gold and dollar-yen and to some extent with the cost be have been popular over the past few weeks. guy: -- >> what is the strength of the dollar? ?orry we have seen dollar strength since the fed decision last week, or this week, what does the strength of the dollar due to safety been trades? in neutraly we are territory because you have seen the whole reflation story of the higher bond yield not really gaining much momentum and this is something that has helped gold stabilize and is behaving more as a safe haven. even if the fed is more hawkish and talking about reduction of its $4.5 trillion balance sheet over the next five years, it is not enough to derail -- derail the moment -- momentum we have emerging markets and the gold at this moment. interest in owning options on safe haven assets and today, no one really knows the path of least resistance, but volatility is cheap and owning these risk options is very popular. guy: before we come back to the subject, l'oreal has opened strongly, trading up by 5% as about begin to speculate the future of the nestle stake and the overhang that exists as a result. over 5%.rading up back to geopolitics. does it not strike you odd that the yen is the big story this morning? here is a country that has been directly threatened by the north koreans. it is so in the firing line of this story, yet first day -- instinct is to buy when it comes to this sort of story once against -- it begins to ramp up again. kokou: the first impact is risk reduction and a lot of investors are short the yen and this is founding currency of a lot of traits out there. as markets are nervous, the yen starts to go up. if we get an actual strike and things get worse, it wouldn't be impossible to see the again reverse or go the other way. guy: we are mislabeling it, saying it is a safe haven trade. that is not what is happening here? kokou: it is in terms of its behavior. it is a question of supply and demand. you typically unwind the stuff you are short and sell the stuff you are long, so the market as a whole is reducing risk and this potentially drives currency like the yen higher when the market goes lower and you have the same phenomenon with the euro, when we went into negative interest rates where the euro has become more of a safe haven currency and has a negative correlation with equities in europe. guy: we will leave it there. kokou agbo-bloua, global head of flow strategy and solutions over at socgen. may delivers aa key speech in florence. our next guest says 70 percent chance of a hard brexit. this is bloomberg. ♪ ♪ guy: we are live in florence. the speech that will be delivered there by the british prime minister theresa may. the subject, brexit. what will she say? what will be the message about the long-term relationship of union.. and the european we have a top live function on the bloomberg and we will be having extensive coverage on bloomberg television and bloomberg radio. cross-platform coverage every agle, our next guest says hard brexit remains a 70% probability. the global head of flow strategy at socgen still with us. how high was that number a few weeks ago? is it coming down in your mind? the narrative seems to be a move towards transition, debate over single market membership, over the nature of the model that is going to exist in the long term relationship. it seems we are moving towards the philip hammond end of the spectrum, rather than the boris johnson and. does that number come down? kokou: this is based from an theysis taking into account dissolution of atoms. it is our two-year view in terms of -- >> what i am asking, when did you do this? is it changing and how dynamic is that number? kokou: this is a number put together by our in economist team and it hasn't changed because this is a process that will take two years. market to market probability number, it is something where we see most plausible, given the issues at stake. we haven't really had much progress when it comes to the softening of the stance of the eu. but you have seen a softening of the stance in the u.k.? kokou: yes, but we have to see if the theresa may speech is palatable or goes far enough. guy: do you think that number will be different after today? lower or higher? kokou: after today, it will probably be lower. i think that is a fair statement to make. are: what be you think we going to see in the markets to today's speech? is it going to hit currencies first? will we see euro and pound move? kokou: this is a good point because in the past few weeks, one thing that has surprised investors, the strength of the sterling. theas essentially driven by hawkish stance of the bank of england. you have to remember that one of the key risks today is that a hard brexit would mean lower economic at unity and this is part of our long-term forecast for the u.k.. because of the massive imported inflation rates -- risks which would be disastrous for consumer spending. after today, we think the currency should stabilize and inflation fears should drop marginally, but the ultimate question will be whether we get a hard or soft brexit and the odds of our economists are more hard brexit today. matt: how important is it to the eu -- we have a great story on the bloomberg about the bridget don't -- bridget jones days of the eu sitting on the couch eating ice cream out of a box is behind them. does the eu care as much as the u.k.? i think you have to look at it in terms of the size of 27 countriesrket, and the u.k. economy is relative. damaginghis will be for the european economy, but nowhere near as damaging for the u.k. economy. if you look at asset prices and the way currencies are behaving, we had a strength of the euro against sterling for the past few months and clearly, things have changed recently but it was more a question of the bank of england policy trying to defend the weakness of the currency and trying to avoid imported inflation in the u.k., which would be damaging for the economy. guy: is a weak currency good or bad for the united kingdom? i have yet to get my arms around the subject inasmuch as you could argue that the current accounts, the way it is -- a whole bunch of factors would argue for a weaker currency, yet all i see is the weaker currency is causing a consumer squeeze, it is re-pressuring to a large part of an economy that needs it to be functioning. on balance, where are we with the weak currency? kokou: the bottom line here is the weak currency is bad for the u.k. because it does import a lot of its goods and you have seen a period where companies have for a long time tried to protect the consumer by squeezing their margin, but they had to past that -- pass that cost back to the consumer and the middle class is feeling the squeeze. inflation in the u.k. is going up and if this is let to go further, it could have an impact on discretionary spending and economic activity. matt: thanks very much, kokou socgen, therom global head of flow strategy and solutions at socgen. he will stick with us here. when we come back, we will talk about what is going on in germany. on sunday, we will have a vote. angela merkel likely to win, but who will make up the coalition with her and what will that mean? ♪ ♪ into the equity session in europe. let's look at where we are moving this morning. european equities off, but there is a risk story being priced in around north korea, talking of bombs in the pacific. the miners are the biggest sector that is losing this morning. does look like steel and iron will be under pressure. household goods is one of the leading sectors. the l'oreal story, the nestle ,tory, the estate sale story that is why the cac is trading a little strongly. nejra: some interesting things happening below the surface here. lamprel has dropped as much as 23% in the session. our revenue numbers said the four-year outlook is challenging and revenue will be about 10% lower than the full year 2017. also, not recommending the payment of an interim dividend. that pushing shares lower for lamprell. smiths group, a global technology company, u.k. energy u.k. energyt is a and medical technology and it airportong half due to transportation. it says oil and gas is likely to remain challenging and whitney -- when he came to the numbers, full-year operating profit beat, but revenue missed. onegative view down 3.7% smiths group. ams interesting because we had an -- a report that the customer turnout for the iphone eight launch was muted. fewer people than usual lined up outside the store. might open lower and we have seen that, ams down 1.9%. i'll pick it up. thank you. angela merkel is on course for a record-tidying fourth term in office after sunday's election. while polls point to her remaining in office, there are still a number of possible coalition outcomes. still with us, kokou agbo-bloua global head of flow strategies at socgen. let me ask you what the market would prefer to see. joining withblock the liberal party, the fdp, the best scenario for the markets? kokou: yes, i think the coalition would be the most because it markets carries a signal of continuity and division for germany, but the markets today did not have the same degree of focus on the german election as it did for the french election because the distribution of outcomes were much wider with the extreme right. so today there seems to be less stress in terms of volatility risk premium and the focus tends to be more on the italian election -- or italian process that should occur in the first half of next year. macron said that withe liberals get to work angela merkel, he is dead. that may have been a little political theater and the liberals are indeed only going to be did junior partner in the coalition, but they aren't as pro-europe as the std -- is it a concern for europe if the fdp gets in the coalition? kokou: this is clearly a risk and one issue is the process of the coalition in germany will take several months and the different possibility between spd is going to be something to think about. but macron trying to take a bigger leadership when it comes to the european position is an interesting one and i think this -- with and a merkel will be a necessity. but today, it is not clear what coalition is most likely at this stage? of thetrapolate out german election into the town in election. it sounds like a weird thing to do, but you have an election where germany is going to poll very strongly. the migration story remains an issue. the nature of german politics is changing and in some ways, kind of you wonder whether or not i can pump that up and extrapolate that into what is happening in italy and look at the megatrends affecting us here. i wonder if there is a relationship i can draw between one and the other? andu: this is a good point we can clearly see there is a change in the political makeup. a frustration of the middle class in developed countries, and it is not a surprise to find a connection between the election of donald trump in the u.s., you have the brexit -- situation in the u k and italy and spain, and france as well. i think this is why did -- where democracy is being tech -- process ofthe democracy been tested. if democracy can satisfy the requirements of freedom and the modern values that we have today. -- the marketink -- doeseurope, do you the german election mark the peak positive europe or the you think the economic data is strong enough to maintain us beyond -- is the politics peeking out and becoming more difficult, what is beyond that? with thewould agree latter point. the economy has been so strong, the momentum, the policy is more in the second stage or backstage than it would otherwise be. if you look at the french election last year, it was the opposite. matt: thanks so much for joining , globalu agbo-bloua head of flow strategy at socgen. he will be joining us on bloomberg radio daybreak europe on dab, joining guy and myself after this program. this is bloomberg. ♪ who knew that phones would start doing everything? entertaining us, getting us back on track, and finding us dates. phones really have changed. so why hasn't the way we pay for them? introducing xfinity mobile. you only pay for data and can easily switch between pay per gig and unlimited. no one else lets you do that. see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to xfinitymobile.com. ♪ call.a korean wake-up investors sell stocks ended by yen as the north says it could detonate a hydrogen bomb in the pacific. but is the market still too complacent? we are live in florence ahead of theresa may's brexit speech. the u.k. prime minister is expected to propose a transition. bang, but will she provide detail on what the long-term relationship is going to look like? plus, battle for the bronze. angela merkel and martin schulz slug it out for the third-place willnday's election, likely be more important determining the outcome of germany's government. we are live in berlin. the european open, i am matt miller in berlin. guy johnson is at lunch -- our european headquarters in london. guy: survey data is strong ahead of the german election. markets on screen, but i am looking at german data on my bloomberg. german manufacturing september preliminary pmi has come through a eye waterings inglyigh number -- water high number. of 60 isnorth sensational in terms of economic expectation. that is what the soft data is showing us about the german economy right now. we will learn more about the politics over the weekend. let's talk about british politics. let's talk about theresa may's mission. she is in florence to give a speech that could fix brexit. anna is in florence for us. will this market change in direction for the prime minister? anna: it could be, couldn't it? good morning. we are expecting some news on the transition. we are expecting theresa may to say she wants a transition, to ask for a transition. what will she give in exchange? we have been talking about how she might put 20 billion euros on the table to pay for that transition and bridge the budget gap. don't want to have to be stuck with. will she go further? will she go further on the money, will she also go further in terms of talking about the future relationship between the eu 27 and the u.k.? will she discuss whether canada has been ruled out of the template? wants something more like the other models on the table or will she stick to the line she has given us around the need for a this spoke deal? will her allow her? -- cabinet allow her? ownwill be talking to her cabinet and showing a united front in terms of the cabinet's view here, which is no small achievement given the week we have had and she is also expected to say something about eu citizens rights. guy: great coverage. looking forward to continued coverage throughout the day. tliv is your function on the bloomberg. westminster, heidi alexander joins us from u.k. labour party. supporter of the campaign group "open britain." is a two-your transition period long enough? heidi: i'm not sure it is. i know the eu said they would consider a maximum three-year and it may be we find ourselves in that position as time progresses. the thing i find staggering hast all of this is that it taken 12 months for the prime minister to accept what many of was blindingly obvious, that we need a transition to give certainty to businesses and that we need to be realistic about our financial obligations and what we have committed to pay into the our obligations to our neighbors. i am concerned about the time we have wasted over the last year. this has taken over 12 months for us to get to this period and during that time, it is the british people who have been paying the price with the devalued pound and every economy going from the fastest-growing in the g7 before the referendum to the slowest growing now. guy: your role is to hold the government's feet to the fire on issues like this. do you think you are doing enough to hold feet to fire and are you doing enough to exploit the divisions that exist in the cabinet, providing this ambiguity on what the next direction is? heidi: i think the shadow brexit secretary was right in the summer to come out and say clearly there should be a transition period on the terms as we currently enjoy the single market membership and being in the equivalent of the customs union. personally, i would like to see the labour party going further still and talking about single market membership permanently. i am tabling amendments to the legislation that we are currently debating in the commons, which would require mps to vote before the governments try to take us out of the european economic area. that is one thing i will be listening out -- for carefully today. about the end state, because i think it would be wrong to take the option of an eea style arrangement off the table. i know the prime minister has her own internal problems, weinet divisions, but if want to remain a country where businesses want to invest, where we can trade easily and businesses are invested here and keeping their operations in the u.k., i think continued membership of the single market and the european customs union is absolutely vital. matt: i just heard you say the devalued pound has been a drawback for the british people. would you prefer to see a stronger pound? i think one of the problems we are experiencing in the u.k. at the moment is that the devalued pound has meant that prices are rising faster than wages are going up. problems --rienced the basics, where people are wanting to go on a foreign holiday for example, that has become more expensive. growth in exports that was promised hasn't materialized to the same extent people were claiming it would. i think this is a problem for us at the moment. matt: what do you think about the actual price tagged that the brits should pay? you can't just check out of a hotel and not pay or bill because you are not staying there anymore. you still have to pay your dues, payer dinner bell. what does that total up to in your opinion? heidi: i am not privy to all the negotiations. what i would say is that in the budget we have set in the u.k., there has been an allocation made up until 2020 to be making contributions to the eu. if we have promised a certain amount of money, we not least walk away, because we are trying to have a grown-up debate about our trading relationships going forward, and so to go back what the shadow brexit secretary has been saying, it is right that we try to agree some basic and suppose on this. of course, the government themselves did sign up to the sequencing of talks this year. matt: you talk about the -- can i just come you talk about the allocation in the budget. what is that allocation in terms of a number? we hear reports the prime minister wants to pay 20 billion and on the eu side, we are hearing she owes something more like 60 to 100. heidi: my understanding of what has been set aside with regard to the payments going through to 2020 is about 9 billion per year, which would take you to a figure of 27 billion. guy: can i take you back to what you said about single market membership, but he would favor you in perpetuity -- that would favor that in perpetuity. what would be the price tag of that? areu: i'm not sure if you asking that question to me, but i will -- >> i am curious to know. you think we should stay in the single market. that comes with a cost associated with it. and that comes with a price tag. we would be outside the eu, but looking for access to the single market, what do you think it will cost? heidi: if you look at the arrangements that a country like norway has, which is part of the european economic area, they make what are called cohesion payments, and this is partly about bringing the less-developed parts of the eu up to a higher economic standard, not least so businesses can be trading and exporting. if you think about the increase in the trade between poland and 2004, it hase increased from below 4 billion pounds to being worth 13 billion pounds. stylewere to have an eea arrangement, i think it would be reasonable for the u.k. to be sort of cohesion payments. i think the norway payments are about two thirds the amount per head that the u.k. currently makes in terms of its payments to the eu. do alearly, you can't just complete cut and paste and there would have to be considerable negotiations. none of this is easy, but the idea that we can have some sort espoke long-term deal is fanciful and what we have seen in the past couple of weeks is the prime minister accepting the reality of the need for a transitional deal to give the certainty to business. my concern is that you are just delaying the economic edge we are talking about and rather than 20 19, it would occur in 2022. it will turn to what the long-term and state arrangement should be. you think the next general election will be fought with the labor support -- labour party supporting the idea of permanent membership of the single market? to be oneis is going of the big debates as to which way your party will position itself on this. the impression that is the direction of travel. will the leadership support that and is that the platform on which the election will be fought? so.i: personally, i hope the issue at british politics at the moment is that it is incredibly turbulent. who would have thought we would fed -- have had a general election in 2017? at the moment, we are not on course to have a general election until 2022. it is hard to know what will happen over the next four to five year period, but it is my hope that were we to be going into a general election, that the labour party would be abdicating a position of permanent single market membership and remaining as close as we can to customs union membership, as well. the electoral calendar takes things difficult, i appreciate, but that election could come sooner rather than later. you wonder if a new leader of the conservative party would be forced to go to the country for a fresh mandate. i expect many backbench mps would want that, but i am wondering if you need to make that shift in the near term allowing theimply constructive ambiguity that exists at the moment to persist that much longer? said earlier, this will be a live debate at labour party conference next week. i think having voted for a aneral election back in 2017, number of conservative mps are going to not be keen on the idea of voting again, given the outcome of that election. of course, prime minister theresa may went to the country a strengtheneded hand on brexit negotiations and she, in effect, pitched her hard brexit which was coming out of the single market, coming out of the customs union, not being subject to the jurisdiction of the european court of justice and she lots -- lost seats in labor gained 30 seats. it is a question about the mps inity of mps -- tory particular, to vote for a general election. we have a six term parliament, which would affect that vote to take place. guy: heidi alexander, thank you very much indeed. heidi: thank you. we are going to take a quick break. when we come back, we will continue to cover the important issues moving markets today. from the continued threat in north korea to theresa may's speech in florence tonight and the german election on sunday. i have writer bergen here, bloomberg berlin politics reporter. this is bloomberg. ♪ matt: welcome back to bloomberg markets, this is the european market. i am matt miller in berlin. want to get the first word news with sebastian salek. sebastian: north korea has struck back as donald trump increases pressure. kim jong and has warned of the hardest countermeasure in history. it includes testing a hydrogen bomb in the this effect. it came after president trump -- companies and banks doing business with pyongyang. heiress has died at age 94. she was the world's wealthiest woman with a fortune of $42.5 billion. her death fuels expectation about the stake in l'oreal. there is a shareholder agreement that limits either side from greasing their stakes until six months after her death. set a snap general election according to three people with knowledge of the plan. local media has reported that shinzo abe confirmed the election date at a news conference yesterday. africa's richest man says he has upped the ante on his attempt to buy south africa's biggest cement maker. offering cash and shares as part of the takeover deal. speaking to francine lacqua at the business forum. we are at acquisition kind i am sure you are aware we will be companyto ppc, cement in south africa. i hope we will be able to agree -- really because needs consolidation and i think it is the right thing for us to go in there and it is not really a rumor. sebastian: global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. thank you. oil heading for its third weekly gain. a meeting in vienna today to discuss ongoing production curves. we caught up with nigeria's oil minister in the capital. >> we would like to see a lot more. -- there is a level below, which we can -- is there a scenario where this -- where yoube a come together and make decisions on a quarterly basis? is this something that will not go away anytime soon? >> i hope it goes away. i hope we get to a point where the market naturally determines and where others consistently who are not there, private mechanisms we can afford, so it does not continue to be -- yousef joins us from vienna. talk about the discussion and where it is likely to go today? it is still not clear if it will be a formal item on the agenda. to pick up on some of the --mentary, the minimum minister said the challenges they face. we will show you how they are stacking up with that kind of volatility. output asou nigerian a percentage of total opec output and you are seeing that is the challenge they are facing with the security. about bigger conversation what we can expect from today's deliberations. we heard from alexander novak, he said it is too early to talk specifics when it talks of -- when it comes to a extension, but we are hearing others argue it is time to look more tangibly at where this deal goes. goldman sachs put out a note saying this group cannot afford to wait and if the past is any suggestion as to how things could shape up, they are likely to do exactly that, because they cannot afford to do that these conditions. members andan opec non-opec members -- i know they are both at this meeting -- do to rebalance the global oil market? to continue on the path to advancing the global oil market and hold it there? extension is one scenario and it is seen as a base case by many analysts. have anr option is you additional 1% cut from all members to accelerate the kind of momentum and rebalancing inventories. statistics showing inventories are already going to build if they don't make an extension or cut, but also export policy is going to be key in discussions. that will be another layer to force compliance more strictly among members. guy: thank you very much indeed. theext, we will carry on conversation around the german election. we will break down the state of the race and what it means to the markets. this is bloomberg. ♪ ♪ matt: welcome back to bloomberg markets, i am matt miller in berlin. guy johnson is in london. the germans decide on sunday. the election will beheld at the same time as the marathon in berlin, but hopefully without any hitches. i've got to bloomberg politics reporter with me and one of the things you have been saying a that theis program is third-place position is the most important. is it really the fourth or fifth place? because it looks like the linke, the radical parties might take third place. >> very close at the moment. the lefte afd and party, the post-communist left party, the greens fighting for third place. , it isirman of the fdp really important for him to come out strong. it will make a difference. matt: but the fdp is polling behind the linke. situation.complex i think we can probably see at the moment that the afd is slightly ahead, then the ftp -- fdp and further behind the green. if we get another grand coalition, then of course, whoever is the third strongest party will be opposition leader and that will be a key point. matt: what could the afd -- a lot of people are interested because it is one of the first times since world war ii you have a far right party in parliament. what could the afb in the opposition do? what could the opposition party yield? rainer: it is a really big stage for the party. they have failed in 2013 to make it narrowly. they will have a voice and as the opposition party, traditionally, they will do a lot of power. for example, traditionally, the biggest opposition party gets the chair of the powerful budget committee, which is now held by the left party. question is will discontinue or not? also, outside parliament, as the advisory board. it could make a difference. unimportantnot an position. nonetheless, the markets are seeing it more likely that the spd ends up in the opposition, that they don't -- join a grand coalition again and we are hearing there is a 45% chance of a jamaica coalition. is that possible? -- candy fdp and the greens agree? rainer: both say it will be very difficult. when in office, he said there are so many problems, especially in economic policy. remember, the fdp wants to wind out the -- wind down the european stability program, so how will that go together with the probe european green party on the other side? then there is a debt -- industrial policy. the green is opposed to decent, pro-market. has been absent in parliament for four years, they have incentive to go back in. they have pretty good reason to stick their heads together and make it work. he is all for a haircut for the greek debt as long as we throw them out of the monetary union after that. ,hat's talk about angela merkel she could get a record fourth term here. jamaica for example, a coalition -- can she play the greens off against the fdp and hold the centerline? rainer: she is a great tactician. the way she has been handling alliances has been exemplary. she has done a good job of that. i don't see why she couldn't allen's the interest of all the parties involved in the coalition. but don't forget, she has the union as part of her christian union box. they are the most conservative -- thatthe -- what we creates another difficulty for her. she has a pretty good track record of holding things together, so why not? matt: thank you so much, rainer burden covering all this for us. it will be fascinating to see how the boat shapes out. merkel is polling at 36%, but , might polling at 22% get the lowest amount of votes it has gotten since the second world war. a historical defeat for the spd and then it will be interesting to see if they decide to go back into a coalition which hasn't seemed to help, or go into the opposition and build up more momentum -- any momentum for the next race. guy: i'm going to throw another number into the mix and that is what the german economy is polling at, or at least the manufacturing. german manufacturing pmi, you don't often see a 60 on these kinds of numbers. we have got one in germany. interesting ahead of this week's election. this is bloomberg. ♪ francine: the u.k. prime minister prepares for a crucial speech in florence. can she break the deadlock? north korea ups the ante as it hints at a hydrogen bomb test. as angela merkel and martin schulz slug it out. inace for third place sunday's election that will determine the outcome of the german government. good morning.