sprint hits a snag. mean?ould this 60% plus holding in that business and a fixed income . bnp paribas says it could not avoid trading slump that drag down its results. it banks cfo tells bloomberg leads to uncertainty. we are less than half an hour away from the start of european trading. there is a lot of stock stories out there to focus on this morning. we will kind of walk our way through it as we work our way to the open and get analysis as we work our way be on the open. at the moment, that looks like it will be a fairly flat one. we saw this did yesterday in the united states. it's used to be driven by this tax talk. that's used to be the main driver. at the moment, we are looking at a mispriced to fair value. it will give us a very, very, very small open either way. so, maybe some markets down by less than 1% of 1%. choice on that. the market makers have a stock specific choice. let us talk about the gmm and what is going on around the world and give you an idea of what the picture looks like. first of all, the new zealand dollar continues to be under pressure. that is a story to keep an eye on. the reason for that is the new government looks like it is going to have an impact on foreigners buying properties in new zealand. yesterday, some markets did reasonably well. the s&p slid by .3%. that seems to have been a taper tax talk that does seem to be doing that. clearly, we have got a lot of politics and interest toward our way through the rest of the week with. a lot of data coming up from the united states and analysis of thursday, the release date for that fed's name. let us get a bloomberg first word news update. here is juliette saly. juliette: thanks. the bank of japan has left its massive monetary stimulus program unchanged even as a trimmed its inflation forecast, signaling further divergence. haruhiko kuroda and the board voted to maintain the yield curve control program and asset purchases. the vote was 8-1. catalonia's independence movement has been left leaderless as spain seized control. have fled president to belgium without warning his party's senior members or giving any instructions on the way ahead. that has left separatists struggling over the next move with grassroot supporters enraged. in the u.k., pressure is mounting on prime mr. theresa may after defense secretary admitted to inappropriately touching a journalist. it brings the sex scandal swirling around westminster to be part of the government. michael fallon said he apologized at the time for repeatedly touching the knee of julia brewer at a dinner 15 years ago, and they had put the incident behind them. brewer said she threatened to "punch him in the face if he did it again" also downplayed the incident. the u.s. treasury secretary has put to rest the idea of doubling in the $14.2 trillion treasuries y might introduce that sales. steven mnuchin said "we have done a bunch of research and reached out and do not see a lot of demand for it." he said it may work under some scenarios. pulled intoetting hollywood's controversy over harassment and abuse. that is after allegations that kevin spacey, the star of the companies "house of cards" theories made a sexual advance to a 14 or old boy many years ago. become an he plans to end the show after season six through the cancellation had already been planned and is not related to the accusation. news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. guy. guy: thank you very much indeed. the u.s.-russia probe intensified as federal authorities revealed indictments against three former associates. a selloff in small caps and a rally seemed to be driven by tax reform talk than russia after writers were said to have discussed facing in tax cuts at the corporate tax level over a number of years. the president wanted it to happen over a number of years. there may be economic arguments for doing it in a more phased basis. this is the talk of the markets right now. let us discuss both issues with kathleen hunter. she joins us now on set. a very big day on wednesday with the cap story. kathleen: absolutely. guy: we are going to get more details entered with the inevitable we would see things coming few like this that there would be a whole range of issues that the market does not fully understand and you kind of wonder what both sides are going to be arguing about? kathleen: we are still very much at the beginning, not the end of debate. they are coming out with the legislation tomorrow. it is not that surprising that we are seeing, you know, some of these initial legislative horsetrading happening. that is really what republican castrated rate is have to be concerned with now is what can get the vote passed in their chamber. we need room to negotiate latitude. that is what we are seeing with them talking about this phase that they might be looking at in order to try to get some additional load. is probably the first of many potential changes we are going to see through this process that will be contemplated. guy: do they care about the market reaction or is this more about a kind of knows count? kathleen: the market reaction carries a degree of weight. we see trump always tweeting about the stock level. guy: it is an important metric for him. kathleen: obviously. but when you look at lawmakers on capitol hill, they are really -- markets could be thrilled with the plane, but if it does not have the votes to pass, they are not going to be happy and nothing is going to get accomplished. the no's counting is where the rubber hits the road in terms of the lawmakers and what they are trying to put together. guy: what is the take away from yesterday on the russia probe? kathleen: the big takeaway is we now know that, specifically, folks within the trump campaign did have contact with russia and sought to get dirt on hillary clinton dating back to march 2016, and so, who knew what went? papadopoulos, who pleaded guilty yesterday, for making false statements, the about house -- the white house is downplaying his role. if you read through the plea document, it talks about several high-ranking trump cabinet officials that papadopoulos said he gave -- the justice department contends papadopoulos gave information, relayed to them what he found out from the russians. the question is, "what is miller's next step? drop?s the next shoe to who is next person to face charges or be called into? the special counsel?" -- into question by the special counsel?" guy: is it easy for the white house to kind of rush to one side? but it is the underlying story, as you say, after the russian relationship, that people are tried to finesse this. kathleen: even though the manna for it -- having been the former campaign chairman -- the real potentially damaging from yesterday with the papadopoulos plea because that is much closer to these allegations of russian collusion. through that read plea document, it really reads like someone is laying the foundation for a case, a further the of collusion between trump campaign at some level and, you know, russian government officials. i think that is really kind of the more damaging aspect of yesterday going forward for the trump administration. guy: thanks very much indeed. bloomberg kathleen hunter joining us from the latest coming out in washington. the reaction to all of this. marc renfield joining us now. ways, the headlines about the russia investigation is somewhat of a distraction. it seems like the market is focused on this tax story. delayeed, the potential is coming through and a bit more damaging to the markets. equity markets are pretty much got used to the idea it would happen this year and it would take -- be a significant boost for investors, but as you told them, it has to be spread over several years. a little bit disappointing on that side. in terms of the russian investigation, obviously what investors will be concerned how much time does the president need to spend away from the business of the country? if it is keeping him away from implementing new policies and working on a better tax plan, that is a concern to investors as well. it: just for the cap story, is that for some sectors of the market. it may not be bad for all sectors of the market inasmuch as it may be prolonged the rally and may be not quite as dramatic. it may be good for emerging markets. is this a zero-sum game here. is the market losing out? marc: probably in the short-term -- mark: probably in the short-term, we see the market go down a bit. people start to look at which sector has underperformed in which one can catch up, which one has better prospects. you will start to see the switching. it is the right time of year for that. fourth quarter is a time when people naturally will be making big adjustments in their portfolio. as people look for undervalued sectors, everything will look at again in a few days time. in the short-term, i think it is a general disappointment for the market. guy: one final quick question. was the market right to not panic about the catalonia situation or is it more nuanced than that? honestly, i think the market was a bit surprised at how quickly it wound up. i think there was a moment at the end of last week when people thought it was going to spill out of control, and you could see the equity market in spain was looking very nervous. but suddenly, it all seems to have evaporated. i think investors are very pleasantly surprised that it is going into the background. i think people were getting ready for a bit of serious damage to spanish bond and equity markets. it is not going to happen now. guy: it is interesting to see him showing up in brussels and the brussels reaction to that. mark cranfield, thank you very much indeed. you can follow mark and the rest of the team all morning, overnight. fantastic on what is going on and the smart analysis. mliv on your bloomberg. up next, talking to the third advisers. largest we will bring you that story, the airbus story. there is a big emp banking story we need to talk about as well. this is bloomberg. ♪ guy: 7:45 in london. a bloomberg business flash. here is juliette saly. juliette: bnp paribas has not been able to avoid the trading slump that dragged down the results at its biggest u.s. and european competitors in the third quarter. income from trading bonds, currencies, and commodities at the french bank fell from a year earlier. while it did increase revenue from buying and selling all, it's global markets business posted the lowest quarterly sales and almost two years, missing analyst estimates. >> in the past quarter, there was some uncertainty in the market. that is why some corporate waited to see what was unfolding. we will have to see how that goes forward. it is not impossible with the clarification that that tapers getand therefore that we some more normal kind of revolutions. juliette: airbus has reported a 4% decline in third-quarter profit after the company said deliveries of it play in will miss its annual target as engine glitches continue to afflict the jet. 697 million euros, beating analyst estimates. ryancare gained 11 -- ryan air gained 11%. more than the cost of a pilot shortage that triggered a flight cancellation for 700,000 passengers. income rose to 1.2 9 billion euros. morgan stanley has dropped out of an industry record that allows financial advisors to -- the world's biggest brokerage by advisor counts of the agreement known as the protocol for broker repleteing has become " with opportunities for gamesmanship and loopholes. morgan stanley added member firms have joined and dropped out of the deal or changed scope when included them and that is your bloomberg business flash. guy: data dropping in france. the cpi number look largely in line, annualized at the figures year on year. 1.2%, up a little bit. every little bit helps. up from 1.1% the last time around. the french data dropping as we speak. the output gap remains of a thing a focus in europe. it remains something of an issue as we look at the wider measures of employment. let us talk about what is happening in the telecom sector. talks between sprint and t-mobile appeared to have hit a serious smack. people familiar with the matter said the parent companies of both businesses cannot see past differences when it comes to valuation. board members of sprints owner, softbank, giving up control of the unit. let me show you the share price. shares falling. germany has closed. it is 500 years since martin luther, reformation, etc., etc. we are going to see no trading today in the german markets. it is a big day for the german telecom. let us talk to our asian technology editor out of hong kong. robert, what is the problem here? robert: it is going to come down to parts. t-mobile,ave is with which is controlled by deutsche telekom, that is worth 50% more than sprint. so not surprisingly, the deutsche telecom side of things, they want to have majority of whatever it ends up being. sprint, under the ceo who has the have it of doing deals, to be in control. it is going to come down to price and you get to call the shots. both of these companies have a very rich desire to do a merger that if they can agree to who will be in charge, is going to stall like we are seeing right now. guy: is this negotiating tactic being used? or is this something more fundamental? to say at is hard this stage. it certainly seems to be more than just a negotiating tactic. the arguments that sprint have been putting up and the softbank side of things, is that even though it has a lower market value and it has got fewer subscribers, it has a variable spectrum. what is going to be important for rolling out services across the united states and giving a competing with verizon and at&t, so while the different,ation is sprint have long argued they have a very important asset that will be recognized. as something they do not want to give up, and are not getting any signs they are willing to give up on that just yet. guy: if i am sitting on a merger arbitrage agreement. i am figuring out how to prices one. if i have gone 100% the deal is going to get done to 80% the deal is going to get done, or am i way off those kind of figures? robert: you probably are still above the 50% market. -- 50% mark. the other wild card is the antitrust authorities of the united rates under the previous administration. they certainly pushed back on this and it remains to be seen whether the trump administration's regulators will be more open to it. the fact that they are still talking to each other and trying to negotiate a deal is a fine they are committed to trying to get something happen. this has been dragging on for months and it is something that will lower the odds of a successful completion here. guy: robert, great stuff. we will watch with interest to see how this one develops. editoran technology joining us out of hong kong. minutes away from the market open. remember, not only is it halloween today, but it is also reformation day. those sortears since the brakes with catholicism. that means the german markets are not trading today, as a result of which, we are not going to see much reacting, but we will see reaction in airbus. it continues to have problems. problems on the 320 line. we are watching to see how bnp is good to open the 20. we'll see how ryanair is going to open. plenty of stocks to watch. we are going to talk about those, next. this is bloomberg. ♪ guy: welcome back. five minutes to go until the equity markets open. germany will not be opening. let me keep reiterating that for you. we will not see trade in german stocks today. bnp paribas out with numbers. the gravitational effect of the problems we are seeing when it comes to a lack of trading volume and volatility does seem to want again be having an effect. the thick division did not do well. the i think a result had intact from that. they are sticking with it though. that is interesting. wpp is downgrading its estimates. keep an eye on it at the beginning of trade. stock that comes under pressure this morning. airbus still having problems with the 320 line as a result of the engines. still having problems with the 350 line. keep an eye on bp this morning on the back of its numbers. keep an eye on this this morning. looks like they have cut them. so pay attention to that one as well. more broadly, equity markets don't look like they are going to go anywhere in a big hurry this morning. at a headline level, seeing some of these indices really flatlining into the open. take a look at the apple supply chain as well. at could be something worth paying attention to. apple was the reason the u.s. equity markets did not do as bad as they did yesterday. anyway, the market open, four minutes away. 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. welcome back. yesterday we sell the tax story dominating u.s. trading, sending u.s. markets lower. we are called up and down by less than 0.1%. remember, the dax is closed today. that is why you see that little bit of red there. that does not relate to what is happening today because that market is not becoming a reality. there are a lot of stocks to watch out for there. paribas, that will be a featured story today. weir out this morning. bp is that with numbers. there is a lot going on. plus, we have got the deutsche telecom story. the market is beginning to open up. let's look at the numbers. i have swapped out the dax. as you can see, we will get a quiet open, as anticipated. the ftse 100, barely budging. by 0.1%. up paribassee how bnp trade this morning. bloomberg's fair value calculation is kicking out the right kind of calculation, hugging the flatline cautiously. manus: slightly weaker numbers from china. the new order's numbers are not invigorating. focus will be on the oil companies and likewise come on the airlines. financials are up by 0.2%. let's see if we have an opening point there. a little bit higher versus last year, bp up 3.5%. wpp, of course, cutting the full year forecast. the pesky packaging companies are spending less on their advertising than the markets would like. they will have a broadly flat set of numbers. oil, still around that $60 level. what adelivered, wonderful set of numbers. monsieur macron must be happy, indeed. we see a delivery on the french economy. however, one could attribute in part some of the spending to the tax break introduced by the former administration. it is the best quarter since 2011 and a revision to the former quarter as well. 4202 gives you a sense of the kind of momentum you are seeing under the macron tenure. the gilt market is fairly important to this country. these are gilt futures. this will hardly rock the boat. i did notice a nice piece yesterday talking about, fear not, mr. hammond because there buyer strike. there was a net buy in of 7 billion pounds. to thehas been irked yet point were they don't want their gilt position. they are fundamentally concerned about the lack of progress, the lack of ability to foresee where the brexit negotiations are going to go. i better go before the old voice gives up. i am off to radio. it is not looking good for the next hour. tune in. guy: it is not a great start, i will have to admit. mani wilus will get a glass of water. ryanair is treating up 3.9% this morning. by as they mention, up 3.43%. easyjet picking up some business as well. the swiss engineering company is trading up 1.55%. let's look at where the downside moves are coming through. the market is generally higher in that is why that is on the left. by paribas is trading down 2.87%. raw mills, giving up some ground. wpp trading down by 1.47%. a slight discrepancy in price is the reason for that. that is life, what you see on the screen. let's talk about what happened yesterday in the u.s. the world's eyes are fixed on the russia probe, but the markets are focused on tax reform. treasuries are rallying because tax cuts could be phased in over a number of years. stocks in the dollar fell. tomorrow is a big day. we will get the tax story coming through from the u.s. how pivotal is it that that tech story delivers? what is priced in from the market perspective? ,> it is an important point but i don't think it is as important as last year. guy: it is not as aggressive. >> absolutely, but if you remember the tech results, amazon bidding numbers and apple doing well as well, the valuations of the u.s. equity market are not completely overstretched. it is fairly narrow, but is also backed by strong numbers. this is one of the key arguments. the second key point is the biggest buyer of u.s. equities today have been share buybacks. to $400 billion. guy: jpmorgan has done some work on this. i think there was zero equity issuance this year and negative last year. effectively, the availability of stock, that could be one factor. >> yes, and one thing to bear in mind is corporate's are sitting in cash.rillion it is almost an equity easing. creatingdifference is policy. the tax reform will be key, but the expectations have come down somewhat. guy: so, what is the difference? the president wants to go to 20% corporate tax rates asap, wants it doene yesterday. the talk on the hill yesterday was this big phase in through 2022. from a market perspective, what is the difference between the two? one strikes me as being a sugarhit now that the market does not need. the other is it could provide a much more slowburn, something that keeps the markets a little more elevated for a little bit longer. >> he has the markets are a discounting mechanism. if you are going to do something over the next five to 10 years, with visibility, it is better to have the whole thing now. it is important to remember one thing. the effective tax rate is not as high. they've been able to optimize. the question is, how much of that will be falling down to the earnings side of things? also, how much could be reinvested into share buybacks and create a positive earnings secretion, as we call it? guy: when we think about the market,, though, the narrative is an issue. you raise a good point. the reason the equity markets did not follow yesterday as aggressively as they could have done was because apple hit a new high. huge stock saved the market. that highlights how narrow the market is. it's being driven by tech, and a few other stocks, but not man. -- but not many. >> absolutely, by having such a huge market cap, that could drive the index. one thing to bear in mind is tax stocks have benefited from a weaker dollar. this is one among other things that are helping the u.s. equity. guy: i think we use this on a daily basis at the moment, but it highlights all the daily stories. i've done 3.19% year to date in the s&p 500. this is an fx trade. >> we've had the same thing with the nikkei and the dollar-yen. we've had the same phenomenon with this currency war with the euro, when we saw the quantitative easing by the ecb. but the other thing is, it goes up and down. hedge ins will be a big topic. guy: back to your point with the tech stocks, and how they trade with that. >> 30% to 40% of tech stocks' revenue come from the u.s. guy: when we think about what we will be doing into next year, how much repositioning are we going to now see? if you've had 20% of your portfolio exposed to the u.s. this year, that's going to sting. how do i deal with that? >> an excellent point. many investors we have spoken with today are talking about hedging. people are looking for low volatility environment. that does not necessarily mean cheap volatility, but hedging is everybody's mind. i think smart hedging is something to consider. guy: there was a piece in the '. i this morning, an issue they have done with the imf. the imf warns volatility products boom with the next big market shock. i'll show this to you. why is that not a problem? >> well, clearly, there is a sort of styling issue. when you look at exaggerated notes, or etf's or etn's on the vix, positioning is a problem. sort ofclose to a record high. this is the medic of -- this is thematic of the pump for yield. the spread is quite high. guy: underemployed volatility. >> absolutely and this is counterintuitive because when the market goes up or down 10 basis points, this is 1.6% realized vol. the option implies that you can't go below 5% or 6%. you end up having volatility being low. it's not getting what you need. guy: i have one or two questions. if i've got this incredibly low volatility period. i'm's going to screw -- going to get outside that very narrow channel. that's going to be something the market has to pay attention to. if we get a 3% or 4% down they s&p, howhe self-fulfilling will that become? >> we estimate that if the vix were to go up by three to four vol points, the average buying would be 3% to 4% of the daily value. we could see a self-funding process, whereby vol going higher gets even higher. guy: how much does that affect other asset classes? >> taken definitely affect other asset -- it can definitely affect other asset classes. we are definitely in a low volatility trap. this is one of the things that is keeping volatility and realized volatility low, almost like a gravitational pull -- almost like a gravitational pull next to a black hole. central banks are ultimately the biggest seller of vol. you need to have a much higher level of interest rates. finally, a breakdown in the equity bond correlation. therefore, they will have to ultimately buy volatility. guy: the risk parity trade will get interesting on the back of that. kokou agbo-bloua, joining us from socgen. plenty more to discuss with him. bnp paribas, kicking off the french bank's earning season. this is bloomberg. ♪ guy: we are 15 minutes into the equity market session. let's talk about one of the important stories this morning, that is bnp paribas. bnp paribas was not able to avoid the trading slump we have seen elsewhere with u.s. banks and european competitors suffering from this. low interest rates and the demand for clients has curbed activity. the cfo said the market continues to wrestle with uncertainty. >> i think in the last quarter there was some uncertainty related to uncertainty in the market. that is why some corporates waited to see what was unfolding. now we will have to see how this moves going forward. it is possible that that tapers off. guy: kokou agbo-bloua is still with us. how does that change? how does that curb inability to get clients to trade? what will it take for people to get out there and start making moves? >> that is a very good question. a lot of of people are asking this question. but i think it has to be driven by events. i think most of the time a client trades when they have to adjust the balance of their portfolios. we have been in an environment of low volatility for a while, so there's no need to hedge or change asset allocation. the bond market has not created, as we thought it would with the trump reflation agenda. we are expecting next year, for example, with the italian referendum to bring a little bit of volatility. we have the new fed chair at the end of the year. guy: a few tweaks. >> yes, i agree. this is not significant enough to change the current dynamic. guy: how do i look at u.s. banks at the moment? you kind of have got, on this hand and this hand going on. while draghi remains cautious, the european story is delivering. but we are coming from a low base. the european economy at least is on an upward trajectory at the moment. >> yes. guy: and you would have thought that if you believed that and if you would have thought that credit demand therefore what increase, that the banks should be -- if you want a high interest rate on that, the banks should be number one. so, you buy the banks. the problem is, trading is tough right now. as a result of which, that drags down your numbers. there are all kinds of issues with individual banks, from deutsche bank to some of the portuguese banks. the list is long, with some of the italian banks. where do i sit? do i not worry about the idiosyncratic factors and say, i think europe is going to do well here? >> as you said, banks are the best way to get exposure to domestic gdp. the ecb has done an amazing job in trying to repair the mechanism. one thing to remember, going back to where we were five or six years ago, when any issue around the periphery look at the market tanking. we have gone through a darwinian process of natural selection. by that i mean the banks have essentially deleveraged quite a bit, increased their capital buffer. number two, we have had three banks essentially going under without it creating a massive spike in volatility. so, the better earnings volatility in the banking sector is less than what it was before. therefore, if you think about the ratio of roe versus cost and equity, you see lower roe because of cost leverage, but the quality is much better than before. therefore, you should see a lower cost of equity because of that lower earnings volatility and therefore, see higher multiples. banks are short, clearly the way to get explosion to the -- clearly the way to get exposure to the european story. trading is low because of low volatility, but that's not something that will be the same for the foreseeable future. markets are uncertain on when things will start to move again. guy: kokou agbo-bloua will stick around. we will talk about when that first recession is -- when the next recession is in the u.s. we will talk about the next ecb, or if you can't even remember it, the ecb rate hike, and if that comes through. we have got the fed meeting. jobs data friday. we have the fed pick coming up. we are not sure what things to talk about right now. kokou is going to stick around, as i hope are you. this is bloomberg. ♪ guy: suffering in the united states yesterday. but what is happening here in europe? nejra: it is a bit of a mixed picture. we are looking at a raise of 3%. it raised the full year guidance, exceeding 2 billion s wiss francs. weir group dropping the most since april, seeing the full year operating profits lower. finally, i am looking at rodtor k, dropping the most since july, after goldman downgraded it from buy to neutral. guy: thank you, nejra. it's tuesday and there is a lot that is happening this week. let's get our thoughts from kokou agbo-bloua. how long before the new fed chair has to deal with the recession in the united states? . >> this is a good question and something our economists have been looking into. are 80%ate that we through the current business cycle, which has been one of the longest. therefore, we see a slowdown in the u.s. activity in 2019 to 2020. this will eventually drive a slowdown in business activity. guy: when is the ecb going to raise rates? >> according to our estimates and forecasts, the first rate hike should occur somewhere around june of 2019 after the tapering process. guy: so, you are telling me we have a recession starting in the u.s. in 2019 and the ecb rate hike in 2019. anthis is obviously not exact science and is based on projections. one other thing that could obviously occur, if the tax reforms are to be successfully passed through congress and therefore, could extend the business cycle. you have to remember we have been under unprecedented monetary policy by central banks and eventually, a lot of that easing must end. this is where the tightening cycle will have to precipitate poor occur at the same time as an eventual slowdown. the question is whether it will be one year or two year. these are catalysts for more volatility. guy: how close to the dots do we get next year with the fed? >> it will be a question of how the balance sheet reduction program goes, and the repercussions on the asset prices. i suspect more alignment between the dots this time around than what we have seen in the past. the fed wants to be behind the curve to get inflation going and this has been one of the frustrating arguments determining the phillips curve. this is ultimately something they need to do to have enough ammunition once we get a recession in 2019 or 2020. guy: great stuff. kokou, it has been very nice to see you this morning. we want to carry on with the smart analysis he has been providing. you can listen on digital radio. up next, we are talking about what is happening in the shipping sector and more broadly, the economy sector. 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: stocks are lower yesterday. the president wants to go to 20% asap. it we will find out tomorrow. sprint's merger with two mobile -- t-mobile it's a snag. what does this mean for german markets? fixed income falters. they could avoid the trading slump. they tell bloomberg that's the key to uncertainty. good morning and welcome. it you are watching bloomberg markets. matt miller is out this week. we will see how things are shaking up. germany is closed. it is reformation day. let's break the market down. oil and gas is doing well. those rvp numbers out this morning. the dividend reinstatement is going down well with investors. oil and gas is trading higher. travel and leisure is doing well. the numbers look good. they seem to be coping with the turbulence on the scene this year. plenty of people are still flying with ryanair. the weaknesses in the banking segment this year. basic resources are up as well, construction materials trading a little soft. let's get a first word news update. seth: donald trump's former campaign chairman and a deputy have captured the headlines. second action may reveal more about the invest station. they are pursuing leads of his associates may have colluded with russia in the election. he had a pre-agreement with a policy adviser. spain seized control of the region's government. catalan president has led to belgium without giving them any instructions on the way ahead. grasp roots supporters are enraged. the u.s. treasury secretary has government that the might use long-term debt payment. he reached out and we don't see less demand for it. he did not offer the notion completely. they have not been able to avoid the trading slump dragged down the results of its competitors in the last quarter. fell 26%. bank it did increase revenue from by selling stocks, it was the lowest orderly sales and almost two years, missing analyst estimates. >> there was some uncertainty in the market. why corporate waited to see. now we will have to see how it goes forward. that it impossible tapers off. we will try to have some normal. seth: global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. much.hank you very belgian-based happening said market is plunging. toughestt is at its level since 2013. this is the ceo. good morning. let's talk about what's going on with the ships first of all. there are a lot of big crude carriers out there at the moment. --simply a gift pressing depressing factor. >> we price at the margin. if we go over, everything gets priced down. if the whole architect priced down, that 30 ships is 5%. guy: moore are going to be hitting soon. strongdemand his bend so . added 7 million barrels a day of demand growth. the issue really is when we get rid of the old ships the need to fall off the back of the fleet. that should come with lower rates. the clue -- cure for low rates is low rates. guy: ships are staying longer though. paddy: the salaries of cut back on their production and they cut back on their sales to the u.s. of their heavy grades. that means ships of had to go empty from china to the u.s. the load light oils and come back. heavy past, they carried oils to the u.s. and came back with oil from the u.s. or caribbean. of our ships are going empty longer. that drives up the rates. this development with china demanding more oil, it's half $1 million per day, that is expected to continue to row. it, it looks strong enough for us. guy: what would be the indication if opec extends its supply cuts? paddy: there is a point at which this is hurting the government. they do need a budgetary requirements are cash. at what point is the price high enough and are they prepared to make a decision? among the shipowners, we think they will push the price out further and cut and continue cutting through 2018 and support the story of the sale. that is to deal with the price. guy: we are getting into uncharted territory. we are sort of topping out already. you expect the price to go further? paddy: it will bring on u.s. shale. list price needs to be supported through whatever decision. if that goes to the public market, the rights of oil is radical area that whole story could get blindsided by the decision if the chinese decide to buy that. it's like to national policies, saudi arabia meeting one belt one road. it's interesting to see where we ultimately go. does it matter what the prices from your point of view western mark it's a derivative of what happens with opec. it will ship it regardless. paddy: we are increasingly hostile. the is profitable really in 40's and a little bit higher. we can expect 60's to bring on a lot of u.s. oil. if that is a substitution from saudi arabia, we are getting mild growth. the negative for us is potentially distraction in the consumer countries and we do run it as a fuel. it increases our expenses. guy: just out of curiosity, has there been a noticeable change in post harvey what happens on the gulf coast and where refineries are and the mechanics of making them work better? paddy: to start with, the risk is always been there. a lot of it will have shorted played that risk. it's a permanent feature of the target of the gulf coast because of the bad weather. are the storms getting worse is not a weston were us. -- question for us. they knew how to bring back up quickly. what surprised them the damage to power infrastructure. normally, winter is the time. occasionally a little bit of a driving season. guy: what do you see right now western mark -- now? paddy: we have through primarily driven primary -- chinese demand. there is more consumed in the winter. we are still too long on chips. there will be a ceiling effect on the rates we can achieve over the winter. there will be an occupation because people don't want to use older ships and we hope that drives the scrapping and that sets up force -- or structural improvement in -- improvement. guy: there has been the search yield is driven people into all kinds of asset classes they don't traditionally occupy. they have ended up in shipping and all kinds of places. if we were to see yields going higher, would that mean the money would exit some of these? paddy: it's a very complicated problem. privates equities were seeking at yields and most got burned because there was no way the. -- liquidity. it is almost state-sponsored. people are being encouraged to buy through their national banks, central banks. we don't yet know whether the owners can finance the delivery time comes. the risk to us is how loose is the chinese capital availability? the rise of chinese leasing, not just finance or domestic objects or regional governments, but also third parties, orders building foreign it should yards. if we start to see that, alarm bells will ring. there is more yield tourism. guy: thank you very much. we are talking about what happening out there on the water. what is driving the metals and mining industry question mark we will talk to the tiberias group ceo. he will be joining us next. this is bloomberg. ♪ guy: welcome back. metals are descending on london or meetings. one of the the events of the year or the metal world. what does it mean to your port olio -- portfolio? he is the tiberias group ceo. he knows with going on. it's nice to see you in london. let's start off with the big question, how do i make money can commodities? chris: one of the main topics you see is the electric vehicle story. everybody is on that trend. people expect more consumption of lithium and the related commodities with the batteries as well as the car. this is why we still see copper outperforming. tosee nickel coming up 12,000 again. i think there is a story there that can be properly analyzed. we probably need to look at all the specialty metals not traded on the exchanges. lithium, cobalt, so on and so forth. they are rare to some degree. there is a big change with disruptive technology, for drone technology, for robotics and those new technologies that will change the consumption structure to some degree. that will lead to higher rices. guy: how much of this is fashion and reality? good: that's a very question. everyone thought the cornfields were going to the gas tank in the end area it wasn't feasible to actually put corner into a vehicle. intorned out to transition the fracking story. that's what change the energy supply-side victor. -- picture. if you look at the electric vehicle process, it will change the degree people realize, there is none of lithium and copper. there would be so much investment needed in the power grid. subsidies will have to make it happen. the fuel cell will come back. right now, fuel cells are out of fashion. if you look at the commodities of the fuel cell, it's more attractive but no one is talking about it. for now, it's the electric vehicle. the process is driving the demand and some of the metals, cobalt tripled in price this year. we might see this for a while. i agree with your question. this is probably a fashion element right now. ago, everybodys wanted to have a big chunk of commodities in their portfolios. let me see if i can find this. here.was a phase the super cycle was on an every anyone it to have commodities area -- commodities. chris: not interested. , this look at the chart was before the crash. you had or hundred $50 billion invested. today, you're looking at 220 billion. you have seen outflows of the asset olio in general. you need a driver for commodity investment, whether it's china or technology or inflation. inflation is not a theme right now. china or asia in general is a weston mark. -- question mark. andfind some in cobalt nickel for example. this is how people look at it is days as a general portion that has been on the back corner back -- back runner. -- back burner. if you look in relative terms, you compare commodities to equities, we are on relative lows we haven't seen in half a century. allocation,oking at 200 billion. this is the equivalent of what we see me commodity market area -- market. this will change demand, in the sense that you might not see the industrial commodities in the first phase. anda was looking for coal iron or and steel. now we are looking at an upgrade, and efficiency process. you need more copper for wiring. relatedtechnology technology -- commodities, this will have to shift. as so many have burned over the last two years, it's very difficult or them to reapply along the portfolio diversification approach. you will see dedicated themes and investment approaches with trading elements. guy: this is the question i wanted to ask, everything is very correlated. works for current strategies. within they space commodities arena you think occupies an uncorrelated asset? that has that? if we start to see things moving, the s&p goes down or bond yields, if the starts happening, is there anywhere in the space i can hide out? chris: the agriculture space. they have been correlated to any asset class. everything else is going up. you will find a lot of diversification. agriculture commodities follow different factors, which is whether related. ant is something for institutional portfolio in esther that they can't manage or get hold on. is it a real alternative? is it deep enough in terms of volume western mark -- volume? most likely not. they will look at the asset class. this will most likely have investors looking back at commodities. guy: it's very nice to see chris onset this morning. profits slide as the ceo it's the production cycle looks backloaded. be low target. we will discuss the details next. this is bloomberg. ♪ guy: welcome back. ever stock is trading higher. there is a decline in profits and glitches on the 320 line. the 350an issue with line as well. the production is extremely backloaded. we are joined by the bloomberg transport team. walk me through the numbers. rally. a relief the analysts we spoke to our maintaining guidance for the year. that's despite blowing the targets as discussed. potentially the overall delivery target being missed, 720 planes. despite the scene out on those targets, they are still forecasting they will meet earnings at the end of the year area this year. this is the mechanics of how this works. where they sell planes as were the problem is beginning to emerge. littlen: the use of minute probes going ross europe, they are being investigated by the british, french, the austrians, the germans. these middlemen and the sales operators, today we learn that airbus has disclosed to the u.s. department that it had failed to include specific information about the use of middlemen and its application for export licenses area -- licenses. they added a new blank to the corruption crisis that has engulfed the entire company. guy: the buck stops somewhere and presumably with the ceo. paddy: he is the one the board -- on it typically backed unequivocally backed. he has put in a bunch of different compliance initiatives and they reviewed the sales apparatus. they replaced some people at the top as well. this is where the issue lies. the is taking action to implement this. there is a lot of pressure. guy: thank you very much indeed. up next, it is bloomberg surveillance and you can also listen to us on radio. this is bloomberg. ♪ tom: trick or treat. manafort was paul absent from the white house. george papadopoulos' guilty charge in this hour. our discussione and a stephanie baker will join us. wednesday and thursday, fed and boe meetings. governor carney can't make up his mind. maybe governor carney will go as hard data. ,print meeting with t-mobile that might not happen. they disagree over command, control and valuations. this is "bloomberg surveillance" and i'm tome keene. nejra, they after day, in for francine lacqua. i'm going as cash. what will you go as? nejra: oh, i dont know. maybe i will go as a call opti on. u can dress in gr