Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20171116

Good morning, welcome to bloomberg daybreak europe. Im anna edwards. Morning, a lot going on today and the Global Market maybe is the turnaround, that i guess is your top story anna . Dont call it a comeback, not yet. U. S. Futures point higher as we said in our headline. An interesting idea as to why there was not as much conviction to the downside as we had assumed, given what we were seeing in markets. Saw the dipsys we open up at the start of the trading session reduced as we went through the day. Corporate earnings, the number of company saying the profits will be beat estimates. 1. 21, the highest since 2010. Optimistics,ceos meaning many investors thought they were able to disregard concerns of geopolitics and north korea. Highyield credit and the fed, getting back in usingbuying opportunities. What is the broader risk radar . Just looking at the nikkei, not as broad as the to pix. Over the last six days it had fallen. Today its bouncing back up for the first day in seven. 1. 5 in tokyo, also again in brent, which we had commodities falling and that was part of the reason for the slump yesterday. Around, thened commodities index gaining and the base metals rising today even as Something Like a safe haven gold is down a little bit. Here you see some Dollar Strength against the japanese yen. Yesterday it was going for now its back over the 113 level. Looks like today i be a little more risk on. News. Get the first word senator ron johnson has become the first republican to the revised senate gop tax plan. He said it doesnt help passer businesses, as house leaders cleared the way for the bill. It would make any individual breaks temporary and reveal repeal a key part of the obamacare law. Claiming gamep respective regional leaders. Saying the trade deficit with other nations is acceptable and that the u. S. Will start to whittle that down as fast as possible. He issued stern warnings against trade violators. Will never again turn a blind eye to trading abuses, to cheating, economic aggression, or anything else from countries that profess belief in open trade but do not follow the rules are led by its principles themselves. Two highprofile opponents of Robert Garvey have returned to the countrys capital as the president and his family opponents of robert mugabe. The former Prime Minister is back in harare. Yesterday troops took control of the state owned broadcaster into what parliament and the central bank offices. The australian Dollar Strengthens and bond futures dipped after the Unemployment Rate dropped more than expected. The jobless rate unexpectedly october, as fewer people saw work while fulltime positions extended their search. Germanys Angela Merkel is said to be wary of pushing the u. K. Prime minister too hard in brexit talks. Berlin see a risk of excessive pressure could begin her at home if she were to replace hardline brexit backers. Stein asorld has been a rediscovered painting by Leonardo Da Vinci smashed all previous records to become the most expensive work ever sold. The 500yearold painting has at 100 million. When a hammer finally came down last night, and unidentified bidder had hiked the price tag 450 million. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Find more stories on the bloomberg at top. Sophie as we have volumes remaining light, goodbye open in march it will be in focus after pricing the idea for the Development Unit at the bottom of the revised range. In asia the stock rally is looking to be back in business if this is a correction. Asian stocks led to snap afford a drop. The biggest boost the regional index, bringing investor focus back to proving earnings. A rebound after the worst drop in four weeks. Tencent creeping closer to 400 hong kong. Chinese port operators are having a tough day. China merchants, the biggest laggard in asia after the government said it should be reduced following the antitrust probe. Rejecting a bid from harper energy saying the offer was too low. Thank you, sophie, and hong kong. Stocks in asia are gaining, shares in japan advancing with the topics on track to lose stocks higher in sydney, soul, and hong kong. The first of this week are seeing most indexes in that region rise. Lets get the thoughts of our guest who joins us for the next 45 minutes, kokou agbobloua great as always to see you. Lets get your take on local equities as weve been talking about a correction of the last few days. Thethis graphic that shows msci global up 70 in 2017, four times the average annual increase since 2000. Stocks have still done very well this year. This is driven by favorable backdrop when it comes to monetary policy, etc. Its also important to highlight the elements, buybacks by companies themselves. Corporate have essentially bought 3. 5 true and of their own stock so you can literally think about this as easing. Anna does that mean when company say theyre going to be estimates, we should disregard that, or take it with a pinch of salt . Their credit expectation management or better these days, but there is that other factor that allows some of the data to be, not manipulated, but change by corporate behavior . Its called financial engineering. Companies are able to generate epf growth and would turn it call it earningspershare decrease in. It only works if the earnings yield is above aftertax debt. Mechanisms are unlikely to be as profitable. At whaten you look happened over the last five or six days in this global slump, what do you think the driver was . Just profit taking, or concern over u. S. Tax reform, or what was happening . Kokou i think the commodity slump was an interesting driver for a bit of the risk off sentiment. Overall, its important to realize that we are a bit stuck, but there is a huge amount of volatility sellers and supply in the market. This is what we call the long effect. There arearket drops, mathematically more buyers on the downside, and when the market rises, theres more sellers of equities in the market. The goods of that volatility slump we are stuck in. Its not that much of a surprise that we see the central bid coming from the amount of optionality hitting the dealers books. Anna does post something of a concern to you . We spoke to a guest recently who said because the level of betting on low volatility that it does pick up. It would have the ability to spread into other Asset Classes and influence them. Is that something that worries you . One fed official earlier this week was not worried about it. Kokou this is something we monitor. One of the things that is amazing this time around is volatility is low. But it is actually expensive. Volatilityrds, low does not mean cheap volatility this is why we still have a lot of supply and sellers, but clearly, if we get a shock, this could end badly. Matt is the possibility of the fed raising rates a concern for is, at least at the pace it predicted . Kokou it depends on how the pace of that rate hike and normalization occurs. Slowly and gradual, its unlikely to disrupt things unless we reach a much higher level. Reduction of the 4. 5 trillion is probably a bigger concern and something that has been put on autopilot. Its one or two years from now that the fed would have shrunk its Balance Sheet and that could create more volatility. ,ts also something to monitor the correlation. As long as it stays as it is, i dont think we will see more volatility for portfolio managers, but the changes it could be more nasty. Anna trying to guess which of the thoughts [indiscernible] you mention the Balance Sheet being on autopilot. Is this an issue that bond markets need to be aware of . I was doing some research talking about what happens if its look like its going to occur. Like watching paint dry. Does it remove a tool theyre using to address a potential inversion . Kokou the number one element is that raising are increasing rates is another mechanism they can run in parallel in that exercise. Analyticsthat most expect a rate hike next year, for example. If it starts to increase volatility and reduce liquidity in the system, i suspect the hiking cycle or progression of the rate hike will be slow down to manage that transition. Anna thats what we heard earlier this week, if the Balance Sheet is on autopilot, they have to reduce expectations around Interest Rates. Thank you very much, kokou agbobloua. He stays with us. Bloomberg radio is always there on your mobile device. The team will be discussing the u. S. Tax overhaul, coming up next. Matt also coming, Angela Merkels brexit dear. German chancellor said to be wary of pushing theresa may to hard in divorce talks. Mugabebabwes robert remains in military protection as his third a pretty returns to harare. We are live in neighboring south africa. This is bloomberg. Matt good morning, welcome to bloomberg daybreak europe. Berlin, 2 18 in smoggy, foggy, singapore. Still a nice looking city. Germany, in selfimposed deadlines will come to an end, completing exploratory Coalition Talks that expire later today. And are very soft, politicians may not have a problem kicking the can down the road a little bit. U. S. President donald trump due to speak about taxes with a full commerce of house republicans. Thats one thing the markets will be paying close attention to. Tesla unveils its first longrange semi in hawthorne, california. Pickup trucka would come first, but were looking at the big 18 wheeler from tesla. Lets get the Bloomberg Business flash from london. Export to telecom considering an initial Public Offering of its dutch unit or merger in the country. The ceo said he is given local management the freedom to come up with ideas for the business. Telecommute telecommunication jointrs, with blasters venture with vodafone. Stepping up drilling in ouray for a second consecutive year. The first indication of the expiration plans for next year. The Company Looking at wells in norway next year. It suggests they could end up 2018ing as many wells in as it participated in globally this year. Wells fargo will invest more than 10 billion euros with his partners to develop a range of new Energy Vehicles in china. Saying they will make the investment by 2025. Venture will start production of electric vehicles in the first half of next year and sales will start in the second half. Thats the Bloomberg Business flash. Angela merkel said to be wary of pushing theresa may to hardin brexit talks amid fears it may backfire. Officials see risk that excessive e. U. Pressure over the divorce bill could weaken may at home if she were replaced, most linee successes are hard brexit backers within her party, at least. Lets talk to the global head of at societe generale, who still with us. Your latest out of the brexit and what it means for the u. K. Economy. Lets reason to buy the pound in the next month or so, building toward the summit in december. A lot of nervousness toward the end of the year. Kokou absolutely. If you look at the decision and the distribution of outcomes, ultimately we see the gap between the u. K. And the for freedom principle of the e. U. One of the things thats interesting to bear in mind is that a lower pound would create more important inflation and will of we heard the purchasing power of the middleclass. And on the flip side, a higher rate is what is required to help the currency, but yet it will help it will hurt the housing market. Meanwhile, watching for signs the u. K. Economy is slowing. It has slowed but has not slump or fallen off a cliff as some of the more doomsday forecasters have forecasted. I have a chart of what has been going on. This is u. K. Employment over three months, Something Bank of england likes to look at, we know. Rate, on the unemployment but there are signs in the jobs market that perhaps that engine of positivity, which it has been over recent years, is perhaps waning. Kokou this is something that a lot of hours have predicted. As you pointed out, brexit hasnt happened yet. We are seeing consumer and Business Confidence looking to decrease the amount of uncertainty when it comes to Capital Expenditure or hiring plans for the next two years, saying this could be the beginning of a slowdown in investment. That being said, brexit has not occurred yet and there is still a long way in terms of negotiations. So it is fair to be optimistic to some extent as well. Matterow much does this for european stocks . , nearly asportant important as for the u. K. Side . , becauset as much were talking 27 countries on the european side and aggregate 15 trillion. And thesense the ecb eurozone is more important when it comes to european equities in a pinch. Anna you mentioned that brexit hasnt happened yet and say theres a 70 chance of heart rate. What is the percentage you attach to know brexit at all . We havent around 5 , 6 . But it is still out of the equation. Anna what about the change of leadership . Faces daily tests of her leadership, it seems. If he thought around strategies of the labor leadership labor leadership. Jeremy corbyn becoming u. K. Prime minister, talking about more fiscal stimulus into the mediumterm, more borrowing and pushing up interest rate. Slightly aside from the brexit conversation, but is that something you are thinking about . Kokou clearly, this will create more volatility. Its something we have been considering under that scenario but its also an interesting trade that could be around dispersion. Some will benefit and others will suffer. We suspect why the key series will be relevant. In a nutshell, its fine volatility on single Stock Options matt . Matt which sectors to you think will benefit, pros postbrexit . Kokou if we see a brexit lower currency, exporters will benefit. Importers who rely on goods and services out of the eurozone will suffer because of the important inflation and the pressure it will have on their margin. You can obviously think about financials and what it means in terms of the yield curve, whether will have a negative impact on interest margins. So theres a whole host of the actors. Anna that is around the brexit story. If you are going to pick any sector that would be less damage in the u. K. , are you suggesting strategies around that one . Clearly, companies that are mostly exporters will be the ones that will benefit because of the lower currency. A lot of the ftse companies tend to be dollar earners, and have to think about energy, etc. Anna thank you very much, kokou agbobloua who stays with us on the program. Lets bring you uptodate with something going on in the currency market. We are the south korean currency 1100, thet strongest since september 2016. A red headline just crossing the bloomberg, jumping by 1 , the strongest since september 2016. Postg up, Angela Merkels election test. As the selfimposed deadline nears, that conversation is next. This is bloomberg. 7 30 good morning, its a. M. In the germ capital of berlin. Look at gorgeous it is at 3 30 in the afternoon in tokyo. The sun bathing that palace in warm light, just an amazing shot there. We just got french unemployment out, the Unemployment Rate in france came in worse than expected, 9. 7 is the number. The survey was 9. 5 , and the prior number was 9. 5 as well. It doesnt look like weve got a revision there, but french unemployment at 9. 7 . To the best of my knowledge, matt miller has no meteorological qualification so dont believe what he says. Buildingto the french media and telecom business, giving us their numbers, raising 27 . 017 ebitda goal to confirming their 2017 outlook, giving us their ninemonth net profit. Considerable uptick, restructuring their telecoms unit, competition has been driving down phone and internet prices although the regulator said consolidation is not needed in that market. French economyhe has been supporting the print side of the business. We will keep an eye on that at the open. The market out action. The msci gaining, not tracking what happened with what happened yesterday. It looks like the selloff or whatever you want to call it in Global Equities has stopped with asia at the moment. Where we did see the correction over the past few days, asian stocks dropped 3 , the biggest correction 2017 so far. The chart makes the question, was at the site of a deeper direction to come are just a healthy pause . Looking at the fixed income space, 10 year yields have been very much in focus. Yesterday going above 4 for the First Time Since 2014. The 10 year yield taking back 3. 6 as it comes down. Different movements happening on the 10 year treasury yield. Along with other global bonds in the u. S. And europe, we saw yields coming down yesterday and the day before as well. Down0 year treasury yields 10 basis points despite a beat on the u. S. Data. Some key technicals to watch, if you look at the bearish head and shoulders patent and the moving average, if it drops below the the fedmoving average, might start to question themselves, according to the technical chart. Some dollar weakness yesterday on the dollaryen, perhaps to do with the lower treasury yields we were seeing. The dollar recovering but you want to watch at the baseline in yellow and the 55 day moving average, the red dotted line. German chancellor Angela Merkel under pressure to me to selfimposed deadline today to kickstart no relation kickstart negotiations. Matt is perfectly placed to give his thoughts on this story. Lets get to the nuts and bolts of it. What issues are tripping them up . You mentioned climate, and that is an incredibly important issue. The greens are pushing for as much as they can get. They would like to reduce co2 and reduce emissions as much as possible. That means banning the soul engines, diesel cars from german cities. Something the party of Angela Merkel and her sister party have been fighting against. This is the main issue that is tripping them up, an issue of climate control. Climate control, how the green lobby rubs up against the car lobby. What are the chances that we get a deal done . Perhaps we should not hold them to it to such a great degree. Its a really important distinction. Its not a legal deadline, it is a soft deadline. It is magical imaginable that they could push it to sunday night or even next week. Even though it is unlikely they will do that, they should come to an agreement. They will always be at loggerheads until they are not. Its more unlikely that they dont come to an agreement at all. In the history of postwar germany, there has never been a reason to call second elections. They feel it is their patriotic duty to form a coalition. In kokous bring ibobloua, listening to what was saying, the importance to you that we get a deal done. Matt suggesting that something will be done even if not by the selfimposed deadline date. Ofou its clearly the path least resistance is something markets have looked at closely when it comes to elections and political risk. Investors are looking through this and assuming the likelihood of something, some other deal either after or before the deadline, but its not going to be a market disrupting event. To see hownating Angela Merkel manages to square the circle. Yet she has flexed her green credentials very visibly and loudly in recent years. How she manages to get through the green issues surrounding his, maybe there are Investment Opportunities around that. Clearly something that is getting a lot of traction. I would say this is probably more a structural theme as opposed to an ad hoc or link to germany specifically. She has clearly done something quite incredible, dealing with the Immigration Crisis and being able to come out ahead in the election. Thebiggest risk is for strengthening of the euro, which was something that caught a lot of Market Participants off guard. We could see a further strengthening of the euro unravel some of the outperformance we saw in german equities. Yesterday we had in the office an important member of the liberal party who said the greens are pushing for things like a speed limit on the autobahn, which gave me great pause, and also the possibility of banning older diesel cars from driving in over polluted german cities. I could not believe they would even go there. Does that concern you, the fragility of maybe the german automakers are the bill they may have to foot . Fair, banning diesel cars has been talked about in several European Countries. A lot of the German Companies and manufacturers in general have actually embraced the transition to low carbon emission cars, the electric car position. I would not think this would be an issue in terms of business model. Clearly they are more exposed than other manufacturers but this has been well communicated by the current industry. Matt what about the idea that deeper european innovation is going to allow Bank Consolidation . We heard talk about the possibility of consolidation for intragerman banks. Theres a story about him getting involved to make that happen with commerzbank and deutsche bank. Even cross border mergers have been tough to do. Will that be a game changer when this is done and dusted and allowed . Kokou this is an excellent point. Its trying to create synergies between European Countries with big savings and others with a lot of need for landing. The bigger issue is when it comes to regulation. We have regulation around too big to fail, and systemic banks. Think there will be a downward rusher or more resistance to consolidation as banks are becoming too big and systemic. Big balanceedded in sheets will be higher than any sort of synergies you could get. Its more likely to occur, but the bigger systemic ones are more unlikely to be probable. Anna you mention the strength of the euro earlier. Shows gains in the common currency. To what extent, and how damaging . The logic, where you see where the euro was at the beginning of the year, it made sense. The likelihood of moving out of that after the dovish paper today on mario draghi, i think the momentum is unlikely to be sustained because we are expecting the first rate hike in 2017. There will still be at a decent amount of liquidity injected. Matt thanks very much, kokou from societe generale. In zimbabwe, two highprofile opponents of robert moog abe every turn to the Nations Capital as the president remains in military detention. President ght vice arare. Back in h excuse the pronunciation there. A reported joins us from neighboring south africa. Whats the latest on the situation in zimbabwe . The latest reports coming out of the capital is that the army is still very much in control of the capital city. We know they have shut down parliament and have been manning various checkpoints in the capital city. We know that the south african president has sent an envoy a south african ministers to go in hold talks with president robert e. Gab we are yet to hear exactly what comes out of those meetings but we are also hearing that they may be negotiating with gabe for him to give up power over the next few days with the implementation of a transitional government. The country holds elections next year. It looks like were in a leadership vacuum at the moment. Who will fill that, then . Keeping his wife out of power, lots of speculation about who could follow after him. Two of his biggest opponents, including the former Vice President of the state, have returned to the country. That is what we are hearing from the ground. And possibly what is being said is that ruling party will be holding an Extraordinary Congress over the next week or so and they could possibly enlist the former Vice President of the ruling party to step in and leave the transitional government. To step in as the interim president while the elections for next year are being prepared for. Opposition parties have called on the Southern African Development Community to step in and see if a snap election may be a possible option at this point in time. That fromks for johannesburg. Viceg up, the black rock president talks about robots and what it is like to work with ceo larry think. This is bloomberg. , 7 47 in therning german capital of berlin. 1 47 in new york, the Empire State Building lit and classic white and s p futures gaining. It had been worse before recovery and bancshares. Asian stocks turned around overnight so it could be the end of this one week Global Equities slump. Philipp hildebrand has warned about concerns that concerns about retirement had the potential to destabilize the economy. Hes had protracted low Interest Rates could lead to people spending less, resulting in precautionary savings. ,eres a preview of the latest where he talks about the future with robots and life as the worlds biggest money manager. Larry is a bit older than me, and i tried to keep fit, but traveling with him is a workout. Yes, but noing, more demanding that he is on himself. He has coined a phrase that we all have to be students of democracy. There is no excuse for anybody at blackrock not to be a baileys a daily student of the market. That shapes the culture very much a blackrock. , neverlentless kind of be satisfied, always remember that the world moves on. We have to continue to learn every single day. Issues where we force and encourage everybody to live that model. The people cannot or do not want to do that, they have no place at blackrock. The culture that he carries very much runs throughout the firm. Francine what is a robot advisor, and i might going to worka robot as a boss is i if i work at blackrock . Ofyou will have a lot interface, through our distributors, they will have tools and Technology Tools to make it much easier for them to deal with their clients and work with their clients and bring value to their clients. We want to be that platform for our distributors. You will also see that in your product, a combination of technology and human driven investments will increasingly be visible. The whole distinction of saying we have technology and then we that isple, i suspect not going to be the world we live in 10 or 15 years from now. There will still be important roles to play by people, learning about the markets, experience, history, all of these things will continue to be important, but our people will be empowered by technology in many ways, hopefully to the benefit of our clients. Francine you have an advantage due to size and scope. Do feel therell be more consolidation among your investors . Will be a lot of companies that disappear. Some Companies May simply not be worth buying. So the clients will simply migrate away from these companies and by other products from a different company. It doesnt necessarily mean consolidation, but i do think we will see a lot of change in the Asset Management industry and those companies that cannot sponsor the need to change will simply disappear. You have to remember is easy for a client to change his or her Asset Management. Anna you can see that full interview with Philip Hildebrand tonight at 7 30 p. M. In london and hong kong. Also it should a Second Chance to catch it across the weekend globally. U. S. Crude stockpiles unexpectedly rose. Two weeks from now, opec gathers in vienna, and the outcome is far from certain. Propertyng in a inager who has 16 billion assets under management. Thanks for coming in speak to us this morning. Lets start by asking your shortterm expectations around opec. We carried a story about russia, whether they would go along with the opec pan plan to extend Production Cuts. Vladimir putin and a leader in saudi arabia have endorsed an extension of a Production Cut agreement through 2018. We think that is important. The surplus has to client, but it still has a ways to go. If we extend the Production Cuts, the surplus goes away and oil prices will probably respond positively to that. Anna you still think there is room to go higher if we get an extension . Absolutely, and there is a geopolitical risk that comes back to the oil price. You have iranian sanctions that potentially could come back online. We have the situation in venezuela with a humanitarian crisis. That could endanger supplies that potentially prove pushes oil prices even higher. Matt what are the dangers to the demand side . Were contentkers making diesel for the rest of their lives and all of a sudden want to make electric cars is your. Is it going to change the demand they want to make electric cars is year. You make a very good point. That is something we watch and analyze every single day. Demand response to oil prices has been very strong. Isbal demand for oil probably 50 higher than what it has been normally. Bys year we will grow demand one point 7 Million Barrels a day, higher than the normal demand of usually about a Million Barrels a day. It has spurred demand even higher. If you look at all the shortterm forecasts over the next five years, we continue to see oil demand growing globally every single year. The u. S. Will be important to acquire crude all Going Forward. You see supply endangered, demand continuing have beend the price a lot more room to move up, what is the best way to invest . That . T to invest in thes the best now you best value . Producers in the u. S. Have not traded up with oil. You can buy a bunch of u. S. Oil producers that are still negative returns for the year and wait for them to catch up with the positive returns it oil prices. You want to buy highquality Oil Producers that operate some of the best assets and locations in the u. S. Shale basin and have low debt, and all run by great management teams. Anna a lot of people are talking about junk bonds in the u. S. And the oil story crops up in that conversation. I have the 30 day correlation between the s p 500 and oil. When oil goes higher, stocks are in the mood to go higher. At what lowok aroundprices have done, the world, its been a great thing for economies. Global demand for oil actually increased every single gear higher than what it normally grows. Consumer demand and economies are strong. We think that is a good indication of where we are going. Anna thank you very much. Up next, asian equities rising for the first time this week. This is bloomberg. Matt holding the slide. Asian stocks rebound and u. S. Futures higher. Higher inflation and raises may justify more rate rises. Very likely that the Unemployment Rate continues to drift down. The economy is growing faster than potential. And brexit fears. The german chancellor is said to be wary of pressing theresa may on brexit amid concerns in a backfire. Matt welcome to bloomberg daybreak europe. Im matt miller. Im anna edwards. Lets go to the auto sector. Have revive sales growth with a 5. 9 rise in october. And the general demanded france helped revive european car sales in october offsetting another month of consumer unease in the u. K. On big ticket purchases. Shrinks a seventh month as brexit talks struggle. 8k es surrounding the u. K. Car industry. British land also reporting numbers in real estate. They are giving a Dividend Increase of 3 . Is one of the real estate businesses in the United Kingdom that has been more optimistic in terms of the post brexit vote. Brexit vote period. We heard from one of the real thoughtusiness that skittishness amongst consumers could danger the business. Asset value up by 2. 6 . That looks to be a little bit ahead of where analysts had it. Lets look at futures. Were looking at a positive start to trade. The asian equities have bounced back. Days of buying the depths on the u. S. Market, investors seem to be in a different mood this morning. Perhaps stressing the positive. The Global Growth story. Putting that ahead of the concern about geopolitics, chinese growth, and fed rates. Matt i was looking at the peugeot 5000. Its a handsome looking vehicle. Important in france. Heres my google image search. Ands look at the risk radar see the nikkei. It had been down for six days in a row. It was the longest slump since may 2016. It was not looking good. We have an up day today. 1. 5 . Brent crude gaining as well. 62. 02 apparel a barrel. The u. S. Dollar gaining some strength against the yen. Yesterday the dollar was week against the yen. Investors were looking for safe haven. Today looks like more of a risk off trade. Lets take a look at bond and. Lended futures specifically futures buying bush the res. They look to be gaining a little bit. You could see a little bit of pressure on yields. The first word news with ed ludlow. Ethic of then first republican to oppose the revised gop tax plan. He says it doesnt do enough to help partnerships, limited liability companies, and other small businesses. Synnex that senate tax writers added latenight additions that would make breaks remove part of the Obama Health Care law. Jones said the trade deficit with other nations is unacceptable. The u. S. Will trying to whittle that down. Issued stern warnings against trade violators. We will never again turn a blind eye to trading abuses, cheating, economic aggression or anything else from countries that progress a belief in open trade but do not follow by the rules or principles themselves. In zimbabwe, two highprofile opponents of Robert Mcgahn they mugabe are back in harare. Yesterday, troops took control of the state own broadcaster and sealed off parliament and the central bank. Australian dollar sanction strengthened after the joblessness rate fell. Since february 2013. Fulltime positions extended their surge. Is saids Angela Merkel to be wary of pushing theresa may to heart and brexit talks according to a person familiar with the german position. See a riskofficials that excessive pressure can weaken may at home. Her possible successors are hardline brexit backers. Unknown painting by Leonardo Da Vincis smashed all auction records. At 100been estimated but an unidentified dinner at heights the price tag to more than 450 million. You can find more stories on the bloomberg top. Lets check in on the markets in asia. Be back inrket might business here with asian shares sent to snap a drop. This is set by japan. Today, the effect was in play, its healthy hunt saying sendh helped the hang boost. Its topping even the best estimates. Chinese port operators are having a tough day. Chinese merchant ports are lowered by 7. 25 . Anna thank you. Lets talk global stocks. Stocks in asia are gaining. Halting a fourday decline. Japan is advancing and will break its longest losing streak this year. Paul mortimerlee joins us in the studio. You see there is no surprise but dont think it is sustained. I think its a healthy correction after a long. Of oneway traffic. I think weve had a correction and were coming towards the end of the year. Some people are inclined to take profits. I think its a healthy correction. Aybe goes a couple of weeks it may be more difficult for stocks to make progress towards the end of the year. If you look, growth is great. Inflation is low. With Central Banks withdrawing accommodation they are doing so very slowly. Its been pretty low. Ive got some of the comments around corporate learning. This is chart 6319 on the bloomberg. It shows what evolved of the last five days on the s p 500. The way the market dropped and then we saw some buying. Its a similar vein to what youre saying. Are confident of beating estimates. Said, there are a lot of share buybacks there. Paul yeah, there are a lot of share buybacks. Anna do we just regard that then . Paul its a factor thats out there. Corporate seems to think its better value bind her own shares back to invest in capital. Thats how you raise returns to your investments and i dont see why thats changing. When you look around the which region seems the best value to you . In terms of price earnings, the u. S. Is more expensive than europe is more expensive in asia. What makes the most since the yuan terms of growth, the best buy . Paul i think in the u. S. We are fully valued. I think europe has more potential to keep on surprising on the upside in terms of growth and therefore earnings. I like europe quite a lot. I think it will continue to surprise in terms of growth. Its not so fully stretched. The next downturn have artie been sown in the u. S. Ratios drops such a lot because stocks of one up. Out, theirevel growth, we could see the savings ratios start to rise. Having the what happened in the next year. I do not see that happening in europe. In europe, Capital Expenditures much stronger than in the u. S. Momentum is going to build whereas the danger the u. S. Is it could fade. Matt is the danger in the u. S. Also the path of fed rate hikes . We are not quite there yet in europe. We are definitely not there onan, but the fed is well its way to normalizing Interest Rates. We will see how the changes at the top of the fed change the trajectory of the fed rates. My feeling is there will be a conflict, a fork in the road, where President Trump once the fed to go easy and people at the fed or worried about higher inflation. Stage, there is going to be big pressure on jay powell to go easy. How will he react . We dont know. In the near future the is the continuity candidate and they will keep on hiking rates. Growth is substantially above trend. Have tax cuts, i think, by the First Quarter of next year. That will take it even further. You say the seeds of the downturn of been sown. That makes the yield curve flatter. Could invert . I dont think it will invert but there are two factors. As we raise rates, yield curves should flat. They normally do. Stillher factor is we have quantitative easing by the bank of japan and the ecb. The spillover of european rates to u. S. Rates if european rates go down by 10, the u. S. Goes down by five. Rate hasas been been really clever. He is not given a precise timetable for ending qe. This is avoiding the sharp appreciation that we saw in the u. S. And 1415. Draghi is determined to avoid that. At the time, it was a trailblazer and draghi has learned precisely from the missteps but that made. The market reacting with a taper tantrum. Dear expect the ecb to continue this incredibly smooth Communications Policy . Paul i do. I think they have learned a lot. I think the big mistake the fed made was talking about hiking too early. They subdued inflation expectations. Or as is not talking about hiking. He is avoiding it. Whereas the fed have a target for equilibrium, you nothing about from groggy. You hear nothing about that from draghi. The fed has a dual mandate looks at employment and inflation. Isn the fed things the job half done, the ecb will think it hasnt even started. By keeping softer for longer, draghi will be successful in raising inflation. Anna could that mandate change . The fed and side push for radical policy review. Paul mortimerlee stays with us for the rest of this halfhour. The german chancellor is set to be wary of pushing theresa may too high into for stocks in divorce talks. Is the most since may result. What does it say about markets . Good morning. Its 20 past 8 00 in the german capital of the lynn of berlin. You are looking at a live shot of what i believe is st. Pauls cathedral. Lets get a market check right now. Take a look at where futures are trading. Just about 40 minutes to go. The 10 year chairman bond yield is up 1 10 of a basis point. Higherures are trading as the global stocks rally may have been stopped. We will see in about 40 minutes stocksw your european stocks trade. We go to have a low. We go to add blood low. Low ed . To bed blood telecommunication carriers are facing intense competition. Statoil plans to step up drilling in norway in the first indication it has given of its exploration plans for the next year. Company is looking at 25 to 30 exploration wells next year. End up drilling as many wells in norway as 2018 has it participated in globally this year. Volkswagen will invest more than 10 billion euros to make a range china. Energy vehicles in it will make the investment by 2025. The also group will start production in the first half of next year while the sales will start in the second half. That is your Bloomberg Business flash. Anna and, thank you very much. U. K. Is said to have not done as well as it would have without brexit. Germanys Angela Merkel is said to be wary of pushing theresa may. It maya mid fears backfire. Officials see risk of weakening may at home and if she would be replaced they fear who she would be replaced by. There were a number of u. K. Politicians on the front page yesterday morning. Watching whats going on, what is your take . Theresa may survive and we end up with a deal . Paul thats my best case. Mais interest to offer more to europe, i thought the 20 billion offer was a lowball. She is going to come up. As we said, mays domestic weakness is are international strength. They dare not push her too far. The incentive is on both sides to come to a compromise by the end of this year. Does a transition deal boost the u. K. Economy. We see this chart. Spots, we have a low Unemployment Rate overall. Does a transition deal shore up the u. K. Economy stopping it declining. Down butstops it going does not give it particular strength. Say we have a transition. We dont know the deal at the end of the transition. As a manufacturer im thinking about building a plant for the next 50 years. Im not going to build it just for two years. The uncertainty will remain. What is important is what happens to sterling. The weakness in the economy primarily comes from the fact that inflation is so high that it is squeezing real incomes. The fact that we see a market like this shows what a bad mistake it was for the bank of england to take hike rates. The boeat do you see doing Going Forward . Paul sitting on its hands. Hike was taking back the panic cut from 2016. Carney anticipates he will have to write to the chancellor and say why hes missed the target by more than 1 . He wants to say hes done something about it. Its not in the interests of the u. K. Economy. Would it have been sold better . Or it make no difference . If you hike once and you cannot followup within a reasonable. , you should not have hiked in the first place. Central bank rate hikes are like london buses. You wait for ages and then they come along together. If you deliver on orphan rate hike, you are not terribly sure you should have delivered it in the first lace. Anna thank you for a time. Good to see you this morning. Comments he is next on your in london. Thats it for us. Guy Johnson Matt Miller will be here. They will be speaking to the airbus coo at 2 p. M. U. K. Time. Guy good morning. Youre watching bloomberg. About to open here in europe. We will bring you the firstrate of the day. What are we watching this morning . Stocks stabilizing. Future points higher in europe and the u. S. Is it by the dip today . Merkels deadline to lock for party talks today