Highest close, though, since 1996. Good morning, everybody. This is daybreak europe. Matt good morning, anna. Guy good morning, matt. Nna good morning, matt lets talk about whats going on in spain. The chartier tracks the biggest etf that tracks spanish equities and the appetite weve got for that. The president of catalonia seeking talks with Central Government in madrid, not mentioning unilateral independence. That is sending more money into this etf that tracks spanish stocks. We have seen money coming out of. His particular etf we signed trading at volumes that were 700 of normal daily volumes, and we saw the euro gain a little bit. You will see that the euro is Still Holding on to some of those gains. Its funny, i was looking at the exact same etf here on my screen as well. Also, the euro, as you mentioned, holding on to some of the gains. Take a look at the risk radar this morning. I am going to kick it off with the euro. Spain front and center as far as what is going on. In dollarses at 1. 18 terms. There is the msci asiapacific index. The topics bang the topix holding it near record highs. Onlye seeing big gains not in u. S. Stocks, but also in asia stocks, and that could lead into european trade. Take a look at jgbs. We see investors selling off japanese debt, pushing up the yield. Even though the yield is red, it is actually gaining. Im not sure why we continually have gains and yields highlighted in red. There you see the u. S. 10 year yield, 2. 36. Right now we are kind of waiting for this two point four level that bill gross said when signaled the end of a market. Bondbowl of the reasons, perhaps, is what we see happening in the u. S. As far as a lack of progress on a tax reform bill. Anna we will talk more about what the failure to progress on tax means for u. S. Assets. Go to the bloomberg first word news update. Reporter north korea reportedly accused to the preparing to fire multiple skied missiles, citing unidentified person. South korea and u. S. Military authorities have detected that north korea is transferring skut 30 sketch missiles utt missiles. The incident is similar to one in march of 2014, where north korea fired about 70 rockets. The uks Prime Minister has stressed a President Trump the Iran Nuclear Deal is vitally security. For national the two leaders spoke on the phone, with theresa may reaffirming her strong commitment to the accord. This comes ahead of trumps expected announcement on whether he will certified to runs hransance certify teg compliance to the deal. She refused to say whether she would vote to leave the European Union and another referendum. Circumstances move on. When i did last turnaround was i looked at everything and came to the judgment that i would do exactly the same thing this time around. Meanwhile, her deputy told channel four news he Still Believes the country is better off inside the eu. Said thef ubs has worlds wealthiest individuals are staying on the sidelines when it comes to cryptocurrency. Peoplebloomberg that, are more curious than they are willing to invest. People are more curious than they are really willing to invest. I dont think there is any meaningful desire by high net to buy on thisls kind of phenomenon. Day. Obal news 24 hours a you can find more stories on the bloomberg. Back to you, anna. Matt anna thank you very much. Lets get on the asian equities session. Reporter we have asian stocks trading at decade highs. Is set for the. Trongest close since 1996 chinese equities are trading at 2015 highs. The housing bill lost ground as a hong kong chief executive delivered her policy address. Casualties, 7. 8 . I want to show you that stock on the board. We have seen in china on the back foot. There were no details to address plans for the housing markets in hong kong. Toshiba snapping a fourday rise , snapping after proxy advisers said investors should reject toshibas earnings at the upcoming shareholder meeting. Kobe steel is reeling from the today slump, on news that more data was falsified. Back to you. Matt Sophie Kamaruddin there with us. Now lets go to spain. Catalonias president said he will seek talks over the governor of madrid for the future of his region in spain. His announcement, rose back from an immediate declaration of independence to threaten to turn a constitutional crisis into an economic one. Go an economic one. [speaking foreign language] translator there is call for dialogue. Europe is afraid of the outcome if there is not dialogue. Those calls should be heated will be heated. Lets cross over to barcelona, where maria through deyo has the latest. Isdrid going to accept madrid going to accept the capitals offer . Reporter absolutely not. Madrid is not going to negotiate anything. That is a message from Central Government as soon as yesterday night. There is nothing to negotiate if they think this can get an agreed referendum on how to move forward. The administration is not getting the message. Thats what we are hearing from madrid. His cabinet at 9 00 a. M. And he will address parliament. The question is, how tough does he want to go . The question is, how tough didnt want to go in the Catalonian Administration . Did it wants to go in the Catalonian Administration . Trying to come up with a common front on how to deal with this, but we think there is going to be much room for dialogue. That is simply not the case. Anna they are trying to come up with a common front in madrid. What about what is happening in barcelona . What are the implications for which a month and his coalition . Maria thats a great question. I can tell you i was on the ground at the Catalan Parliament yesterday. We got this symbolic move which was very confusing. People were confused. For a minute, everyone went, what just happened . A lot of people within his own coalition, especially the more times, they were visibly angry. On the streets, people had scattered to celebrate the new republic, and they were frustrated, disappointed. Puigdemont is under a lot of pressure jury at his coalition about to collapse . That is something that could happen. Anna maria, thank you. Joining us, a real friend of the daybreak show. After watching all of this on full in catalonia yesterday, and on the the conversations live blog seem to be, in a emont did not get anything out of this, had he did not make enough concessions to madrid. I think we are in an interim period at the moment, and it is clearly in madrids interest to play a very hard negotiating stance. The rationale behind that stance is that he is hopeful that the catalonian independent coalition is going to collapse. It was not obvious from the referendum. There could be a debate about the legality of the referendum. The Constitutional Court of spain said this is not legal. Voter turnout was disrupted, and it was not a satisfactory record random satisfactory referendum by any order of magnitude. If one breaks it down and looks at the economic impact, lets not forget that catalonia accounts for 16 , 70 of spanish gdp. If you did get independence, that would be quite a shock to the spanish economy. Not tove to be careful push the catalonians into almost a forced independence. It is also probably catastrophic for the catalonian economy. Like he has made the wrong move here at every step, and is there any room for optimism that he does the right thing . Reporter two it to address your comment, i think the answer is yes. But we have seen over the last week is a number of local companies in barcelona move their legal headquarters to madrid or elsewhere in spain. The catalonian corporate economy is voting with its feet already, and it is concerned it needs hedging against an independent move. I think that is reasonably clear. In terms of your question of, s negotiating stance, at this point i think he has no alternative. He has to follow this hard approach to the negotiations. At the end of the day, you are going to see probably a lot of tension, and it is not going to be positive for spinach markets for the next month or two, but by year end, i would assume some form of more autonomy for catalonia. Anna i doubt there is much about this that the ecb likes. One thing they might like is the fact that the euro has stopped tightening on the back of political tension. Where is the euro headed . Guest i think there was a clear message from the ecb in september. The dollar recovered. Did all currencies around the world, that we had a turning point in the dollar. As for the euro, the ecb did not like the pace of appreciation, and they did not want a euro. Reakout beyond 120 ideally, they would like to get it back to 114, 115. Anna 118 is where we are now. Thank you, bob. He stays with us on the program. Bloomberg radio is available to you live on your mobile device. Matt . Matt i also highly recommend bloomberg radio. I think anna and i both have been on that medium. Coming up with the minutes from the feds latest meeting do, we bring you our exclusive interview with Sergio Ermotti. Has things to say about his own company. We will take a look at the deepening scandal in japan affecting kobe steel. This is bloomberg. To daybreak in europe. It is 1 18 in the afternoon in singapore. Gorgeous day there. 6 18 in the morning in london, 7 18 in germany. Lets give you a look at what you should be watching today, your day ahead. The u. K. s theresa may faces the first Prime Ministers questions since her disasters Party Conference speech last wednesday, just a week ago. Canadas Justin Trudeau is due to me donald trump as nasa talks resume in north america. Is; 00 it is 7 00 a. M. U. K. Time. We will get the latest from the policy meeting. Surely you are waiting with bated breath for those. Reporter kobe still has plunged again after admitting it suspects data was falsified on another of its products, iron ore powder. The products have been used in cars, engines, and belligerence. Japans ash and bullet trains. Trains. Es, and bullet it may also play a role in japans snap election. The head of Elliott Management has built a stake in smith and nephew. It is not clear how much of the maker of artificial hips and knees the activist investor owns, or when it plans to push for. A representative for elliott declined to comment. A spokesperson for smith and nephew said it does not comment themor or speculation or identity of investors that are not publicly disclosed. The Worlds Largest retailer says it expects u. S. Read u. S. Ecommerce sales to surge 40 . The forecast added almost 4. 5 to walmart shares, and pushed the combined net worth of the owners to 140 billion. Sticking with business news, weve got a little bit of news coming out of the german ceramics sector. Symantec will be sold to a group led by bc partners. Last night, we were reporting that they were close to doing a deal to sell symantec saran tech ceramtec. The price would be substantially higher than they paid for it in 2013. An ipo, but ited seems they have gone for a sale. Notes from the meeting will reveal how toward the fed was. Yesterday, we spoke to ubs Ceo Sergio Ermotti on his view on the Central Banks next step. He sat down with bloomberg exclusively in new york. Sergio the market is already pricing the probability, the apectations that you may see three quarter of a point hike in the future. The equity markets are implying this kind of potential hike. I dont expect the fed to move aggressively. They have a nice path of being by the fact that a lot of the bonds they have will expire and they will be able to contrast the Balance Sheets smoothly. Wildcards is a u. S. President to his notch i about sharing his views on Monetary Policy, if that occurs to him. About sharingshy his views on Monetary Policy, if that occurs to him. Are you worried, Going Forward . Usually when you look at this kind of political intervention they may attract the contrary reaction of people trying to show that they are independent, and therefore i do not think it is a smart move for politicians to interfere in central bank and Monetary Policy. That when you think about policy specifically, is there anything that excites you, the prospect of a change excite you . How would it benefit your business . We are not outwardly focused on those kinds of leadership changes. I think the angle that is a matter for us is not necessarily Monetary Policy. It is more of there is any implication to the other side of prudential part of what the fed is doing to our industry. I think that is the path that seems to be the taken. That they seem to be taking. Parker is still with us on set in london. Taking on that conversation, it seems that he had some comments to make about the fed and where we go. We get minutes later today. What is the big concern at the fed right now . Is it a lack of inflation . His is valuations on the s p the fed has mentioned it a few times, they have talked about stock prices being high, increased risk tolerance among investors contributing to elevated asset prices. I think if you break it down into the various different components, my own view has always been no change in view that they will raise rates in december. I challenge whether the path of Interest Rate increases is going to be, as they have indicated, a further three interestrate increases in 2015. I think one could say with some clarity that they will raise Interest Rates further once in the first half of 2018. Thereafter, i think it is unclear. On the pace of tapering, they have said we are going to 10 billion a month starting out. That is very small indeed, because if you compare that 10 billion a month to the size of their balance sheet, which is 4. 4 trillion, i think that tapering will not have an impact on markets. To come back to your question, are they worried on the valuation . There are many different types of valuation. In one case, the schiller riggio, which you have. Ratio, which you have. Normal pe calculations what i would suggest the s p at about 18. That is not sending the correct picture. The fact of the matter is, the corporate Earnings Growth this quarter is going to be poor. The next quarter, it could rebound to 10 again. Matt ive got to a priceearnings ratio this is not forward, but if you use the ged screen, you can find ratios on the s p 500. I am looking at 21. 8 for trailing earnings. My question, bob, do central feel that Monetary Policy is the right way to control asset bubbles . Heavenly scene in the past that if they try that, they typically fail, the unintended consequences are too great, and it is not part of their mandate . Bob if you look at most centralbank mandates, there is a very clear objective, which is to control inflation. For the fed, it is plus or 2 . For the ecb, it is close to 2 or slightly under 2 . The first mandate is a very mandate. Lation in the case of the fed, they have this dual mandate worthy objective is to keep unemployment down in a very low level. That objective has been achieved. Thank you very much. Bob stays with us. Up next, an activist investor is building stakes in germanys g8. And britain smiths nephew, what is the after . This is bloomberg. Matt welcome back. Is 7 30 in berlin, 6 30 in london. In tokyo, to 30 in the afternoon. Lets check in on the markets. For that, we go back to london. Reporter weve got asian equities gaining for a fourth day. Looking at the msci asiapacific index, rallying to its highest since the two that since 2007. Asia,lly continuing in and it is actually tech stocks leading the rally in this session, up more than 1 if you look at the Industry Groups on the msci asiapacific index. We saw the euro rally yesterday. Eurodollar. 817 on it is also approaching and 55 Day Moving Average. Saying that 55 Day Moving Average might provide assistance at the upper end resistance at the upper end. If we go above it, it could change this outlook in the mediumterm. A key technical level to watch. Speaking of technical levels, ive got the dollar as well, pretty much unchanged. 1. 1243. , youve gotn technicals, youve got resistance and support levels. Check this chart out. Matt, anna . Anna lets talk activist investors. Paul singer is focusing on europe. Inger is that s smith andtake in nephew. Singer has increasingly targeted companies in europe. Bob parker, Investment Community member that core best management still with us. Lets talk about activist investors and what it is thereafter in europe. I remember hearing a commentators investing that in the u. S. , there had been a culture of activism for a long time. Andas quite new in europe, there were a lot of u. S. Activists waiting to get their hands on underperforming u. S. Underperforming european businesses. Thats probably true, and it goes back to priceearnings ratios. The price i can ratio of europe is cheaper than the u. S. Ratio ofice earnings europe is cheaper than the u. S. That driving activist activity towards focusing on European Countries away from u. S. Companies. Whats the objective for activist investors . Its either achieve a higher share price through management change, or through a change in Corporate Strategy to drive improvement in Corporate Strategy, or to achieve a high dividend payout. Main objective of activist investors. As you recommended certain cases, it is hugely successful, but there have in failures. Another objective is to package a business in a way that might attract a takeover. Bob it goes back to strategic change, or management change. One of the outcomes could be a breakup of the business or a sale. The smith and nephew is up against businesses that could be interested in buying this, such as striker in the united states. Mig