there are a lot of stock movers. it is going to be an interesting start. where live at a saudi summit. -- we are live at a saudi summit. this is bloomberg. matt. matt: i am taking a look at what is going on with futures. it is going to be very interesting today because we have a situation where u.s. stocks took a big hit overnight. then asian stocks did quite well are doing quite well. it is look like a concern which was led by the biggest tech stocks, the fang stocks falling for five sessions in a row. have european futures down across the board. i want to win out what we are seeing here as far as the u.s. 10 year treasury. we know that bill gross has an watching this 2.4 level that is highlighted here at the white line. his signal for the end of the bull market. we are there yet but we have been flirting with a level for the past few sessions. we are going to watch it very closely. some of the people on the mliv some of the people on the mliv blog are commenting we may be heading for that -- [no audio] historical and incomplete financials with -- was uploaded to the website and erroneously sent out to analysts. they are now putting out the real numbers, third-quarter net --ome, 2.80 2 billion euros 2.82 billion euros. 13.5% at the end of december, the italian bank must be proud. we are going to continue to follow this unicredit story. the accidentally set out -- sent out a set of numbers this morning and now they are coming out with the actual earnings numbers a little bit earlier. guy: it is interesting because unicredit is one of those companies that could be a full commerce bank. that story being the future of commerce bank. we will keep an eye on that. what happens to unicredit as a get closer to the open. a lot of stocks out with the open. the s&p down by .4%. we are getting excited by .4%. those of the kind of moves we are getting excited about. the only other thing i want to mention is the fact that new zealand, the kiwi, trading a little softer. concerned about the new government and what it is going to do in terms of the mandate of the reserve bank -- the reserve bank has. let's get a bloomberg business flash update with ed ludlow. adco china's ruling party has approved every -- edward: china's ruling party has -- this consolidation of powder -- power and that he might seek to stay on in 2022. leader since mao has managed to put his stamp -- [no audio] kind of trade pact britain wants for the european union. this is a call for an urgent agreement that would allow to trade as usual for two years after leaving the bloc, but the prime minister has fallen in line with eu by signaling the transition would only be sealed with a wider deal. u.s. president donald trump has said he is very close to announcing his choice for fed chairman. he has said he is considering john taylor and jerome powell while praising current chair, janet yellen. a desksident's closest closest aides are steering him toward taylor powell. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. indeed.nks very much let's turn our attention to what is happening in the markets. mark cudmore with me here on set. james athey. mark, what are the prospects -- let's talk about china. the 19th party congress is wrapping up. has been elevated to the same level as mao. where waiting to get a sense of who is going to be replacing -- we are waiting to get a sense of who is going to be replacing at the bank. what is the takeaway as the story wraps up? mark: i don't think we will see wider bands on the u.n.. -- on the yuan. we had a conference here in singapore and it is interesting, a lot of the narrative. it was very much, in terms of deskuan that will accept the yuan will accelerate next year -- the yuan will accelerate next year. in the same way that hundred dollars profits the dollar -- this is all a part of the liberalization of the yuan bond market still happen much quicker than he equity market. -- then the equity market. a seriousght be reserve currency -- the yuan might be a serious reserve currency. [no audio] they said that overall from the congress, they are not worried are trading on the band. we appreciate you without it. guy: james athey, let's bring you in. investors underway china? james: i think there is good reason. i am not quite as hopeful on this whole liberalization and the stakes of the yuan is mark sounded like he was. ofh interests,, there's talk the nominating yuan. until countries have a natural lead for the want -- for the yuan, that becomes is zero-sum game. it received yuan in exchange for oil. it has no need for yuan. what matters is how well the yuan restores value. you have huge cap control and you have a huge undeliverable currency. yet to make all of these liberalization moves. -- you have to make all of these liberalization moves but it doesn't change all the dynamics. got -- matt: mark, do you have a response? mark: absolutely do. i think that is right. that is what has held back the yuan. it is the capital controls, the fact that people don't seem to believe that they can keep their money. it hasn't been a valuable reserve currency. next six change in the months, much quicker than people think. he wants share of global --erves is just you want yuan's share of global reserves is 1.5% so it is becoming really relevant. you are talking about whether people will want to keep their yuan and keep the process -- proceeds in yuan. u.s. has sanctions against russia, venezuela and more against iran. now suddenly with that saudi arabia trying to ipo the oil business. in exchange we are getting support and guarantees from china. suddenly, you have four of the largest producers of oil going, we'll support this yuan market. they've got a vested interest of keeping their proceeds away from the dollar. they want to receive currencies that are not the dollar. the idea that the yuan might be a valuable alternative, with that china -- that is coming at the same time. it is important we are seeing the dollar bond this week. that is not even getting a rating that shows china is try to do this independently. it is showing that demand is really there. we have good growth. the handling an economy that hiccups very well. just they are handling an economy that hiccups very well. they still need to take hold of the market. matt: mark, since we are talking currencies, you are bullish yuan but you also have to acknowledge the fact that we could get a more hawkish fed chair. that would be strong for the dollar. the ecb could do more than consensus. that is been the call from jpmorgan. -- that has been the call from jpmorgan. [no audio] that is been the call from jpmorgan. i think the whole narrative about carney doing one and done maybe valid but it is not at the moment. if they hike rates exley, it will be a real positive for the currency. i am long-term worried about sterling. where in this period where it could be very positive for sterling. if they hike rates of week, it is not only sending a message of great support saying, we are into giving this higher rate does. even if it turns into one and done, he will send that message next week. it is a message of economic resilience to remind the investors that u.k.'s growth performances sluggish but it is not recession. there's a story love disappointing growth that post-brexit, we thought it was the end of the world. we have had terrible brexit negotiations but still growth has held up better than expected. remind investors that economy can code with the rate hike desk ope with rate hike. the negative yield that will still exist in the negative brexit negotiations -- and the negative brexit negotiations. guy: interesting stuff. mock -- mark cudmore joining us. remember it is a busy week for earnings. there are a lot of top lives, blogs you can walk away through the earnings. smart analysis. sector. italian banking can it be fixed? the minister telling us moving too quickly. back -- that conversation next with this man. this is bloomberg. ♪ guy: 14 minutes until the start of cash trading. let's get to your bloomberg business flash. edward: volkswagen's proposed fix has beenfix has been approv. [no audio] winning approval from u.s. and california regulators allows vw buy back the vehicles under the terms of a $1.2 billion settlement reached in may. noble group is falling again on the back of the sell of its oil business and a profit warning the analysts say it faces the inevitable restructuring and more than $3 billion of debt. bonds rallied. noble group did not respond to requests for comments. global currencyglobal currency [no audio] victory for u.s. prosecutors in their first attempt to hold individuals accountable for the global currency rigging probe. mark johnson faces a maximum sentence of 20 years in prison, although he is likely to get much less. commerzbank has hired goldman sachs as it -- as financial advisors as it faces takeover bids from european competitors. are advising the german lender on his options and not necessarily preparing a defense strategy for any acquisition attempt. representatives declined to comment. that is your bloomberg business flash. much.add, thank you very italy's finance minister has cautioned over nonperforming loans. speaking to bloomberg, he said his country moves to dispose of them quickly, it could derail the recovery in italy's financial system. >> this was specific to the recent communication for consultation about the speed and timing and features of the program that needs to be implemented to get rid of npl's. this is vital including the italian economy. we must be very careful and getting the speed right, the timing right. if we do it too fast, we could derail the whole system which is now gaining speed. thursday's meeting draws nearer, jpmorgan is warning of risk. that would likely see a strong or euro and wider peripheral spreads. let's get more from james athey. on -- james, first on the italian financial minister, he is pushing back. i wonder what italy thinks they should do when nonperforming loans -- with nonperforming loans and total defaults. james: it is a really tricky problem. dispersal's it occurs to me that that is not necessarily the issue. a lot of these npl's are being marked at a price which is way above the price they would trade in the markets. in order for the banks to dispose of these loans, that either have to accept a price which is below where they have been marked so they have to raise capital to fill that hole. or they need to buy over the market price. the only buyer that would be able to do that is the state. we have seen the italian play fast and loose recently with those rules. for them to be of to get rid of a significant quantity of these nonperforming loans come it seems they would have to be even more capital raised -- there would have to be even more capital raised. we were seeing results from those national champions earlier. this is more about finding a price and being able to dispose of those loans without causing a massive capital hit the banks. how theam curious about ,arket for distressed assets is especially italian npl's, in which the borrower has declared bankruptcy. is there a decent market for these kind of assets? james: there's a market for everything. conversationis with a few of the guys back at aberdeen who look at banks and balance sheets and stocks and corporate bonds. there is an active market for the stuff and it tends to be an activist collection of nonperforming loans. au buy these loans at such low price from banks and you offer them and i steal on some settling -- a nice deal on some settling, you can turn a profit quite quickly. that is where the activity in that market comes from. it is an active market for distressed loans. that is a problem. guy: let's talk about the ecb decision is coming up in the spread of options. some people think we go to 20. of 30 ande thinking there is a language that draghi is likely to use. i want to get your sense of where you sit on the survey. dovish? neutral? hawkish? euro-dollar, 116? where do you sit? james: it is really difficult. there are so many expectations. it does feel to meet the market has shifted toward expectation of a more dovish policy as we sit here. the risks are to a more hawkish outcome. i am happy to be positioned for a more hawkish outcome. in terms of actually what they -- what we have heard from the length of program may be important to the bank, more important to the bank at this stage. there may be a lower monthly rate. we have had these ecb meetings and sources stories being placed in the press. seemingly to try and calibrate the reaction. we are little more in the dark than usual. guy: you areguy: you are biasede markets positioning -- [no audio] matt: is it possible to see draghi saying he is going to raise interest rates as soon as he is done? that could be a very hawkish move as well. james: i don't think so. that is the thing they are most keen to avoid. previously they have guided us to say, we won't begin hiking rates until after the end of the program. that means they will start to price rate hikes when they believe the program is going to end. the best thing the ecb can do to keep those rate hike citations further down the line is have a because the rate rise expectations are good to drive the euro higher. ,hat we've heard from the ecb they were not initially bothered, they were. matt: james, we are going to keep you here with us. we have a lot more to talk about . there is a lot going on with all of the earnings, the week of ecb, everything in china and spain. i want to talk about some of the earnings. -- it plans to buy back $1.8 billion worth of shares on a surge in the prices chemicals helping to drive third quarter's earnings. -- up 74%. we are going to talk to the ceo later in the program. sales were up 17%, more than 3.5%3.5% -- 3.5 billion euros. [no audio] is -- isrtis it interesting. pay attention to what novartis does from the get-go. commerzbank, looks and process. this isn't a defensive strategy, this is an outward looking, try to figure where the business would be best placed. keep an eye on electrolux as well. a big hit overnight in the united states. they could have a big impact. the market open is four minutes away. this is bloomberg. ♪ is this a phone? or a little internet machine? it makes you wonder: shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. so all you pay for is data. 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. guy: a minute ago until the beginning of trading. the s&p was lower yesterday area a little that is in europe. asia may be a currency story. that is how europe physics acted to open this morning. that may be a bigger factor in terms of the shape of these overall markets. that? a very interesting chart that was put in the emailed last this morning. the dow jones rsi has not been this high since 1955. you can check this chart out as well. in note to send up this morning. clients would love to see this. not been this high since 1955. this is a big one. guy: let's talk about where the numbers are right now. not looking at a clear move right now. maybe a 1/10 of 1% move for the ftse 100. keep an eye on the ibex as well with the politics there. the dax is expected to open a little softer but not much. i will move my coffee cup and you will be able to see what happens with the ibex. that's the picture we find ourselves with. on a headline level, not exciting. individual stocks, that's what gets interesting. matt? a little bloomberg lesson, guy. oh you get an wec screen that looks like this, it makes it easy to look for data from any specific country. i click on the french flag and i can see the french pmi's here. manufacturing pmi, 56.7. services.he 57 and a half for the composite. that we go screen on the bloomberg. the lead-in has earnings. admiral in the insurance sector is trading off. pool --ack of the world whirlpool story, electrolux is suffering. phillips is trading softer as well. teicher bank coming back a little bit. the downside, today is about earnings. --re are a few earnings there are a few exceptions in there. always good to see sob still up there. always good to see a sob anywhere. more a defense company and less the one that gm shutdown a few years back. market,ok at the dropped the most in 10 weeks. president trump's promise not to touch 401(k)s may be a driver in the slump. big technology group. facebook, amazon, netflix, and google. since the biggest retreat november 11. this is a chart that goes back to the beginning of 2000 17. 2017. is it a concern about tax reform? why are the things stocks dropping? is still with us. let me ask about the tax issue. president trump seems once again at odds with what the people in congress and the senate are doing. how confident are you that we are going to get tax reform out of the u.s.? header --s in incredibly difficult to be comforted because there is so much noise and congress doesn't always seem to agree with the white house. the house and the senate doesn't always seem to agree. there are special interest groups that want to protect special parts of the tax code. those bits are part of the reform effort. you have a lot of different parties with different desires. it's quite difficult to feel comfort that we will get the full gamut of what we see. i think the worst case scenario is that you get some sort of giveaway, a tax cut, and there's not much reform. i'm hoping that we get a fair amount of tax form. -- reform. i think it's incredibly relevant and important. it's tax code is quite regressive to me. the more tax you are supposed to pay, the more likely you are tax lawyer to a help you avoid paying, it doesn't seem progressive. even in the best of times under president reagan it wasn't easy. we will see if president trump is able to accomplish this with his majority in congress. issue.go to the fangs we saw this drop in tax stops -- stocks. over the summer it was a rotation in winners to losers. it could be that or it could be that burning estimates for tech stocks are being brought down. what you think about this? that's aboutk right. it's difficult and again, even though 1.7% relative looks like quite a big move, that's still pretty much noise. right here, right now, i don't think i can draw some huge conclusion to the future of those businesses or the markets expectations. this is largely about sector rotation. this is largely about the fact that more tax reform or greater tax cuts or tighter monetary policy will be effective in different ways. we will see the added of those winners and losers. we saw some incredible results from netflix. that's a stock that has done quite well. it's rational to look further down the line. chips off thee table because i don't need to swing for the fences anymore. think tech stocks are interesting with respect to how they might react to tighter monetary policy. it occurs to me that some of those are savers rather than borrowers. they may not be held back the same way others may be. about increasing monetary policy. i have a chart here. to tens. 5/10. two 30's. does that scream rising interest rates to you? the front and is coming up and the backend is not going anywhere. you wonder whether or not we're going to flip over and pointless towards a recession. necessarily signal we should see interest rates going higher. this notion that flat interest curves in the past have ,een recession indicators that's a crazy thing to say given that central banks have been buying these assets for the last seven or eight years. central bank seven taking an incredible amount. you can't just take that price signal. i do think that flattening curves are an indication that we have seen interest rate rises in the future. we don't see a huge amount of inflation. we are starting to see some of the global inflationary indicators just warn us a little but. chinese ppi. see taylor at the fed, i think the curve will flatten aggressively. the market will assume that mr. taylor would be more hawkish than the other candidates or the incumbent. if we saw powell, maybe we see because hesteepen would be more akin to what janet yellen has been doing. there is some expectation of a hawkish chair baked into markets. when i look at those slackers, i worry about a earnings that aligned. how is a flat girl like that affect the economy? james: it depends. the interesting thing about the u.s. economy and part of the that iof many reasons have been so frustrated with the federal reserve's intransigence thenterest rate policy, in u.s. economy is not the rate that is so much relative. they have a fixed rate mortgage system. it's a very market-based, corporate, finance sector. relevance forar the cost of bargaining -- borrowing. depending on what economy you're talking about, they have different sensitivities to some initial rates. your observation is relevant. it's not good for banks. it's not good for insurance. they are going to find their interest margins squeezed and therefore their profit margin squeeze and it's going to pressure them. do you see the u.s. treasury yielding much more than 2.4%? we think it signals the end of the bull market. we haven't seen them push. do you think we will see yields rise above that and is in the end of the treasury market? i hope so because it would be rubberstamping the normalization of financial markets and economies. on the reliance of monetary stimulus. you need some help to get there. i think you need help from more than one area. for example, the bank of japan's policy is providing an incredible amount of demand for higher-yielding assets elsewhere. government bonds are attractive to japanese investors because of where 10-year boj yields are. fiscal policy of the u.s. and tax reform can help. brexit negotiations can help. next six or 12 months, i absolutely think we will see higher treasury yields. guy: is the market ready for that? a lot of people put money into risk parity trades. there are definitely overweight bonds. you've got a lot of people that are longer risk, bond the proxy trades. those kind of businesses. big -- it's about the rate of change here. if you get a quick repricing, if we get taylor, you go to 42628 pretty quickly. what is the ripple effect? --is a synonymy effect tsunami effect? what do i have to worry about it taylor gets it? i wouldn't worry it taylor began by understand what you are saying. and financial markets that it happened quickly. the machines. the price-sensitive buyers and sellers. is there ability to make? is that will liquidity be a nice you that an issue? james: i think it will be a factor. longer,s take a little the fact three months, that banks are less able to use the balance sheet will exacerbate. the more important thing is to consider how that would affect the economy and if there is a feedback loop there into the economy. if you have an aggressive repricing of the treasury market, it may looks very, but i don't think it will have a huge economic impact. japanample, the bank of policy, what you find is very quickly the treasury is at 3% look at -- incredibly attractive. we would stay there for very long. in reaction to the event, john taylor been appointed chair, i think would be a volatile. and it might look nasty but i think it would settle quite quickly because the underlying dynamics will not change a huge amount. matt: he's got the best odds. my severe? -- am i still here? guy: we have the lights off the --al we're still back area back? we had the betting odds here. lines here at 58%. the pink line at the bottom is john taylor. i'm pointing at these lines. janet yellen and kevin warsh up trailed off. it would be the easiest for the market. has never dissented from a fed's decision. he doesn't seem like want to rock the boat. [no audio] ♪ guy: he's going to stick around. ♪ guy: we are 17 minutes into the market russian. european equities mixed. the ibex trading up. let's talk about what's happening in the italian banking center. we saw numbers come out a little earlier than anticipated. let's look at the npl story. nonperforming loans could be a negative. it could derail the recovery in italy's financial system. we are discussing the challenges for europe and the ecb. >> the biggest challenge is to define as precisely as possible, a long-term strategy. vision bring together and reform the programs. implementation of reforms is have to job of designing reforms. i want to use this opportunity to talk about the drives and attempts for more economy in -- economy. in spain, we have catalonia. the lombardi region in italy. is this trend going to intensify? is a challenge. we in europe must find new ways to combine the only that's the overall systemic dimension with the national and local dimension. we need all these dimensions in a harmonious way and need to reshape our instruments in order to make that happen. >> what else can europe due to mitigate the risks? recognize there are some european challenges that require european responses, like migration, like security. national responses are insufficient. lot more work that needs to be done in order to slow down that trend we're seeing for further autonomy. these are structural problems. >> these are structural problems and there is an opportunity to do with them because the european economy is growing at a healthy rate. there is lots of job creation. this is not enough. we must reform our institutions. >> let's talk about the italian .conomy can we see a little bit more outside to the growth? it could be a little bit stronger. they're upside risks this year and the coming two years. they are in our forecast. >> by how much more can the economy grow? >> if all the reforms were fully implemented and if all the and fullymobilized spence, we could go up to 2%. >> how would that translate into the country's debt and debt to gdp ratio. it we see a falling despite the lack the rise of debt finance? it will accelerate the decline because of real growth but also because of nominal growth coming up the little bit. inflation is much too low still. recently you have talked about the ecb's reform efforts and have expressed your perplexities when it comes to supervision. the ecb going beyond itself is. can you clarify your position? >> these are specific to the recent communication about the speed and timing and features of the program that is to be implemented to get rid of npl's. for allabsolutely vital economies including italy. my point is we must be careful in getting the speed right and the timing right. if we do it too fast, we could derail the wall system which is now getting speed and strength. there is a question about the job opening up at the bank of italy. if it was offered to you would you take it? >> a minister cannot take up that job or at least the years of this is out of the question. italy's finance minister -- minister speaking to bloomberg in riyadh. earnings andrted be the highest analyst estimate. the plastics and chemical company is up and announced a one and a half billion euro share buyback program. that was unexpected and he could be a positive for the stock. joining us from the recusing, germany is the ceo covestro. let me ask you about the buyback. there are taking in a positive fashion. having to come to the decision is that the catholic this? decision to spend the cash like this? >> we were generating very high cash flow throughout the course of quarter three. we expect that to continue. that is driven by high margins. at nine months we have generated operatingn euro income. trading on our stock has increased significantly. we have a free flow of about 75%. we have looked at external in m and a, but money is relatively cheap and the multiples are very high. we decided the best investment was in covestro. that's why you see our share buyback announced today. we would always say we would offer this i back if we couldn't find anything sensible in the m&a space. matt: you beat the expectations with earnings and sales. you beat and every single unit, although polyurethane was the main beat. if that is the case, why just hold your fiscal year guidance? why not raise it? the way in which we give guidance is not to give specific numbers. that we were significantly above last year and four quarter for we will be significantly above quarter for that that last year as well. have given some analysts notes of around 300 million greater pricing power. most of the analysts have done the math and have got a much higher number than before. ishink the important thing that the buyout is only about 10% of our portfolio. we expected to continue into quarter four. we do not expect that to decline to the middle of next year. i think that pushes up the view of next year as well. i think people are just adjusting their models. they are getting better outlook's for next year is well. guy: it is guy in london. the latest big chunk of stock came off the block in september. those who bought can't sell until december 11. when they do, are you looking for an anchor investor to come in and pick some of that lockup? with that be desirable? >> you can argue either way about me or invest there. i think the important thing is that every time the stock has gone out there we have seen a short term the line in value that has recovered rookie fast. -- recovered pretty fast. with freehe point float above 75%. we are not worried about the buyer placement. they have limited impact now on the stock. the share buyback will have immediate back. we will leave it there. this is bloomberg. ♪ partychina's communist promotes the president the same level as mouth. is china the leader of the world's economy? covestro announced a one half billion euro by barak. they see nothing sensible for an acquisition at the moment. we are at the saudi at iis summit. good morning and welcome to "bloomberg markets: european open." i am matt miller alongside guy johnson. the me run you through the numbers quickly. the german manufacturing pmi, 60.5. these are sensational survey numbers. are they translating into real hard data? the survey was for 60 so they beat that. the cop number, 56.9. a little softer than the 57 the market was looking for. the manufacturing line out of germany is doing really well. let's take a quick look at markets this morning. a lot of markets being moved by individual names. let me give you a top-down picture plus a sector breakdown picture. we are fairly mixed. the real estate sector doing well. technologies doing really well. buta great sector in europe better in the states. are seeing money exiting his travel and leisure. mostly the aviation sector. last hour, has put a move to the upside. let's get a bloomberg first word news update. hasommunist party of china revised a charter that enshrines disease name -- xi's name in it. leader since mao has put its stamp on the parties documents before. spain has chosen to use constitutional powers to remove the leader of catalonia. could mean to secede he is found guilty of rebellion and he gets a prison sentence. in the u.k., theresa may's cabinet meets today as pressure mounts for it to agree to the kind of trade pact britain wants for the european union. the prime minister has fallen into line with the eu by signaling the transition what have a wider deal. isn't expectednt to be finalized shortly before brexit in march 2019. donald trump says he is close to announcing fed chief. is considering john taylor and jerome powell while praising janet yellen. ,ccording to people familiar because a's are steering him towards taylor or powell. it decision is expected before he flies to asia. global news 24 hours a day. powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. x-ray much for that. tofrankfurt court has opted for insidertion trading by carson can get her. carson kengetter. joining us from frankfurt is bloomberg's financial supervision reporter. let's talk about this. kengeter is still the ceo of deutsche boerse. will he stay on through this investigation? it was a bit of a bombshell yesterday for deutsche boerse. they operate on a tight schedule. they say they think he is innocent and they only agreed to a settlement to get behind them and move on and do business. they are operating on a tight schedule, they say. they need to get a deal with the courts and after that they have to seek approval from to german regulators to whether kengeter and the rest of the management board is fit to oversee the company. that is all before the end of march. looks morethis and and more challenging. i think the realization is setting in for the board that if they didn't have a secession -- succession plan, they need to take it out and show people they can have some continuity is a company. guy: what does this mean in terms of the timing? they are involved in the future of exchanges, the future of clearing. what it be better to get a new management team in as soon as possible? it's all. awful timing. frankfurt is trying to position itself as a winner for brexit. boerse would be a key party to that. just when they have this business opportunity of a lifetime, their ceo comes under investigation. going to be spending more time away from the operating business but let's not forget the reputational issues. if the head of the company with a public authority or public ,ontract is question like this whether it is true or not, it has to hurt the company. it's awful timing in terms of securing deutsche boerse's future. matt: as a financial supervision reporter you are aware that catalonia is pushing back against the ssm's nonperforming loan rules. has such a massive bulk of npl's. how do you think the italians would prefer to the ecb to handle this issue? the italians would prefer they do not handle it at all, frankly. if i were the ecb i would say to myself that only one country is unhappy with my plan, is a good sign that it's a very localized problem and that the criticism is not so broad. , whetherans clearly the new npl plan looks pretty bad. some banks but not systemic. the italians are lobbying hard that's the issue -- lobbying hard against the existing npl's. that's the issue. the new npl plan, which only covers nonperforming loans from next year, let's kind of aggressive, you are saying. existing stock of light 300 million euros of nonperforming loans. is it possible in new plan is applied to those? , a plan for new npl, which would be painful for some banks but wouldn't be such a catastrophic event, according to the analysts we are speaking with. if you apply the tenants of the new plan to the existing stock, you get into a painful situation for many italian banks and will put them into a tough spot. the ecb has to be aware of that. they are known for pushing ahead regardless of what other parties think. it's not a popularity contest for them. but still, they don't make policy are, what their plans within a vacuum. they have to be aware of criticism around this. they will find some way to say, the existingtackle npl's we're going to do it in a way which will not occur a cataclysmic event. guy: we will leave it there. thanks so much. out of frankfurt. i'm just getting my tv ready. i want to show you what this function does. you can see the charts. then what you can do is use the functionality to pull out some charts that we will be using onset. plenty of options that. market checks. connect with matt and i, do it directly on the terminal. novartis gives the business more time. our interview with the company ceo coming up next. this is bloomberg. ♪ ♪ guy: 42 minutes into the session area novartis trading down. it is funny to give its eye care division another year and a half rebound before deciding to spend the business off. the ceo spoke to anna edwards and manus cranny a little earlier about the business which is starting to show signs of a turnaround. i feel really good about the quarter. all divisions contributed to the growth. of new drugsple that are firing on all cylinders and generating good growth. generics business, despite competitive and pricing pressures in the u.s. also group. i think the best part about the quarter was that our outcome business grew sales 7% and profit almost 20%. i feel really good about where we are as a company. we are positioned as a focused company with a strong pipeline for the future. >> let's talk a little bit about that. it must be uncertain times about people working there. once the new bar for you without con? itieve acts, we keep it? doesn't achieve that, it goes? hat is the current thinking? this morningnounce is that the strategic review is well underway and we made a lot of progress recasting the strategic land. we have confirmed that this business should be able to grow at or above market rates and profitability in line with the sector. i think you are starting to see that. the business has turned. it's generating some nice growth. it will benefit from continuing on that path. when i think about our con associates, they are working on that very hard. the strategic review said if the business continues to permit , thewell -- perform well standalone company would add suitable shareholder value. have looked at tax structuring, carveout financials, a lot of work has already gone into that. in the near term, we are focused on getting multiple orders of sales growth and operating income growth. if we do decide on a spin off of this business, it will come to market from a position of rank. let's get some more analysis on this talk. sam, it used to be around 30% margins. now it runs around 15. where is it going to be in one year and a half? >> the ceo said it will be more in line with what the ears are, so that would be around 25%. that's the number that it needs to get to. this quarter we saw a margin improvement. it's two quarters that we have seen a sales growth. the key unit is the surgical unit. it has the bigger proportion of sales. i think people want a little bit more certain the. they are waiting until 2019. whatever they do with that, it is a drag on the business. it's a higher-margin is this and this is dragging them down. you might say consumers are the g -- consumer synergy but this is the last piece and i am pretty sure he will do that. the pharma business is having problems because of generic competition. what about pricing power? do they have any pricing power outside of that? it's been a problem for other pharmaceutical companies. very big price pressure on the generic side. we expect that to continue into 2018. when there is a lot of competition you get the payers being able to dictate the pricing and the rebates. they have quite a few new drugs that are quite nice. one for psoriasis. despite the fact that a competitor launched, they are doing well and that's based and it is a crowded space. is pricing methodology positive. we will continue to see pricing pressure across the board. some areas will start to see it. that's manageable when you have a drug that is driving volume. guy: in terms of investors wish list, where does the company stand now? here, what aret we going to learn? >> there is a group of pharma companies that are in a. of time where 2018 looks like a year or a rebound. novartis is one of them. merck possibly. if you look across the stories here, they all have different attributes and potentials. which one would you focus on particularly? the one we see and a lot of agree with us that has the biggest potential sales and earnings rebound 2018 disaster astrocenica.18 is there are risks everywhere but that's the one we think has the most potential for the big strong earnings rebound. guy: how big a factor is currency? european hast how performed this year then change the menu to euros or dollars or pounds, you get very different outcomes. the pharmacy sector seems very exposed to that. are international companies. novartis reports in u.s. dollars. whatever happens to the strength of the dollar is impacted. but they had a relationship with the swiss franc of the u.s. dollar. it's a meaningful cost base and pursuant -- cost based in switzerland. the euro strength is more of a problem for the euro reporting companies. i think that is where you will see some more damage. the dollar reporting once make the little bit of benefit. not much more than that. it's difficult for me to remember which drugs are which. you mentioned percent to mentioned cosenti x. what are the other promising products in the pipeline? what are the big new things? intresto is the other drug. it's a drug for our failure. it got off to a rocky start. is where the company was delivering but it's beginning to show some lines of life. it's coming down to the two to 2 -- coming down to the 2 billion to 3 billion range. it's in the right place. the drug for breast cancer will be what to watch because it's going up against a formidable competitor. therapy a brand-new with such powerful effects that is curing a type of blood cancer. -- intresto and cocentix are the big ones. up next, and hsbc employees convicted of fraud. we will discuss the implications for that. standing over big portions of this kind of trading. you want to pay attention. this is bloomberg. ♪ ♪ matt: welcome back to "bloomberg ," i'ms: european open matt miller. mark york jury convicted johnson for fraud for front running a currency trade. he is likely to get less than the maximum. stephen morris in london. is front running currency trades something voice in the city are famous for having done on a regular basis in an open way. is this something that was fairly normal? there is an argument of what it is important for a bank to act when they know if their client is doing. the accepted way to do this is to tell your client before hand, and it looks like it just easy in this case do it and bragged about it afterwards, making it look bad for a jury. it'll make things look closer at lyons and regulatory seizures around this. this previously was a semi-acceptable way of working in the industry. guy: one of the implications? >> you have to go back and look at your procedures because banks ought to show they have the right procedures and lays and if anyone does it wrong, the employee that doesn't is personally responsible. you also have to think for all the traders involved, this case goes back to 2011, mark johnson was arrested the air lounge on his way back to new york. a lot of people are going to be sitting very nervous thinking that they did anything in 2009 that can be dragged in front of the doj? guy: guy: stay with us. bloomberg television continues. this is bloomberg. ♪ >> becoming this party elevates president xi to the same level as mao. what does it mean in terms of achieving reform? the u.k. prime minister's cabinet meets as she talks down the chances of a swiss deal with the eu. caution in italy. the italian finance minister warns over the disposal of nonperforming loans. >>