We have a great show lined up for you. Weis friday, which means bring you our weekly show brexit, whats next. We talk with the Aberdeen Assets Management cio for property. Of guest host for the chunk the show, the biggest chunk of the show, is an richards of mmg investments. You can see stocks pretty much unchanged. It seems this is probably my chart of the hour. Lets get straight to it. Tos brings europound back 1. 975. You can see currently where we are standing, 88. 93. We did reach 92 a little bit earlier on. We are seeing a bit of movement back to 88. Will we see parity . That is what reporters are watching out for. Market news, but first, the bloomberg first word news. Nejra chinas overheated Property Market shows signs of cooling last month as authorities stepped up homebuying. Prices read rose. Prices fell in six cities compared with four months earlier. A sewing Property Market may provide some relief for Property Markets without killing a main pillar of growth. The Hong Kong Stock Exchange has canceled trading as a typhoon grew closer. Stores have closed and airlines have warned of disrupted flights. The conservatory expect has in place fire warning for most of the day. It is tobacco has proposed buying the shares of Reynolds American that it does not already own. That will cost the maker of lucky strike cigarettes about 47 million. That said, it has been unable to have prior negotiations with the board of reynolds as u. S. Securities rules require it to announce the plan promptly. Journalists and analysts in more than 120 countries. I am nejra cehic. This is bloomberg. Francine if you are wondering why we are all wearing pink, it is for Breast Cancer awareness in the month of october. Joining us is one of the top women in u. K. Finance. One of the top people in finance in europe. She is Anne Richards, ceo of m g investments, a business with 165 billion pounds under management across mutual funds, fixed income, and real estate. She was with us on the day after the u. K. Referendum. Brightly called what we have seen play out in the markets over the last two months. At the time, actually, the market was crazy. And it was exactly two months ago, on a friday. And you told me, they will find a floor. You are absolutely right. Reallyt has been interesting. You have seen equity markets really take it in stride. It is currency markets where you have seen more turbulence than we expected. I think a lot of people thought that currency, sterling in particular, would be weak if there were a brexit vote. But the extent of the moves we have shown this morning, even for those who were expecting some degree of weakness, have been surprising. Francine what does it mean . Does it point to a weak country . Does it point to investors only playing the currency market because they do not know where to go . For exporterss who can find value in equities . Anne the reason you are seeing a different reaction from the equity and currency market is because the u. K. Stock market does not reflect the u. K. Economy. The u. K. Stock market has a great proportion of its earnings coming from under sees. The more sterling is weakened, the better the earnings like in u. K. Currency. So the stock market has reacted very rationally to the weakness in the currency market. In terms of the underlying economics, we are in a couple engagement. It is like someone asking what your married life is like when you have just gotten engaged. Nothing has changed other than a little bit of sentiment about whether instability in the political environment will reduce investment. Nothing has changed, and you saw that from theresa mays comments yesterday with the rest of the e. U. Leaders. We should not be too frightened about what is going on, nor take comfort in the fact we have not seen a direct impact yet. Francine what have you learned in the past two months . I do not know if it is something politics or a function of the market. Anne i think the thing that has been most evident over the last two or three months is, i think central bankers across the world now you heard it from draghi yesterday. They have an increasing frustration that they are doing everything they can in terms of Monetary Policy, and yet politicians are not following through. Governments are not following through with fiscal policy, with structural reform, with those things that are needed. I do think we are at the limits of what Monetary Policy can deliver. What were seeing is the endgame of this extraordinary Monetary Policy we have seen francine . What does this mean for the markets . Is it on Inflection Point . Is it an opposite Inflection Point on how many Market Participants are blaming this on Central Banks doing too much . Anne i do not think you can blame Central Banks, in the sense that Central Banks had to solve a problem and have a mandate to do that, and came in to do that. I think what is evident is that they cannot do it alone. There has been a degree of publication of responsibility on the part of government willingness to address what might be politically unpopular measures that are needed. This is the dilemma we had. I think we are approaching an Inflection Point. Frankly, Interest Rates cannot go very much lower. Ofare at the absolute bound conventional economic wisdom in terms of understanding how consumers are going to react and respond to persistently low savings returns, essentially, that they are getting. Some people think that the cash in the banks that is now burning no interest, and light are negative interest that they will take that out and spend it. But it is not sure that that is how they will react. They might get more conservative. I think we are right at the limits of this. Central bankers are right when they criticize the central governments. Educate the population that we need to take some palatable measures to get the economy on a better footing. Francine it also comes at a realtime where there is a way for populism. You see that with the rise of donald trump. This is something the markets have ignored. Either populism or the tensions in geopolitics. Anne i think that is right. I think markets have largely ignored it because they have this underlying belief that central bankers are going to continue to be able to run to the rescue. Again, we have seen overnight, with draghi saying tapering will be later. Again, it is like feeding the dragon. Markets think, we are still ok for now. Volatility is pretty low at the moment. That is the risk. Markets are right to respond like that, because every time there has been a crisis in the last eight years, central bankers have written to the rescue. Francine unless we have a recession. Ise unless everything turned upside down, and we do not have any tools to combat it with. We look at anne the disappointment in earnings numbers from corporate coming through. Perhaps the underlying economic engine might just be beginning to flow, and what is the next step on that . It is too early to say that, but there is the bit of fear in the background. If you move into recession, we cannot cut much further. Francine what is your best play . Tactically, how do you move in the markets . Anne there is still an awful lot of merit to be willing to go up the illiquidity spectrum. In terms of real assets, in terms of the less liquid parts of bond markets, of credit markets. Some of those slightly harder to access areas, you are still getting paid for the risk that you take on. I think it is a bit harder in public markets. There are still some pockets of value. But it is harder to find ways of accessing that, because Dividend Growth looks like it is slowing. You do not necessarily have the safe underpinning. I think real assets, less liquid assets that is where you are getting paid to take the risk. Francine thank you. We will get back to Anne Richards shortly. We will talk about portugal and china. Stay with surveillance. Portuguese debt gets reviewed today. We break down the consequences of a downgrade. New data out of china suggests the overheated Property Market is cooling. We will also take a look at how brexit has affected commercial and residential Property Markets in the u. K. We will bring you are special brexit show. Francine this is bloomberg surveillance. Ajra daimler has reported 10 rise in thirdquarter profits. Adjusted earnings before interest and taxes rose to just over 4 billion euros, who it by surging sales of mercedes luxury cars in china, as the brand rolls out the new class sedan. Volvo profits have been hit as a purchases inruck the u. S. A drop in truck orders in north america prompted volvo to cut production and lower for your sales expectations for the region. Ericsson has afforded a thirdquarter net loss totaling 26 million. The company surprised investors by reporting a 14 drop in thirdquarter sales. It warned that poor results will significantly trail its forecast. Francine Rating Agency dbrs is set to look at portugals investmentgrade rating today. It is so important to portugal. It is a canadian Rating Company. The rating makes the portuguese debt eligible for the bond purchasing program. In april, dbrs kept the rating at triple b, the lowest Investment Grade. It is rated junk by grade. It is rated junk by fitch, movies, and s p. Moodys and s p. Mario draghi outlined the consequences of a downgrade. Draghi debt instruments guaranteed by the republic of portugal would become ineligible as collateral for Monetary Policy operations, and for purchases under the pspp. Having said that, we should acknowledge the remarkable progress that has been achieved in portugal. There are vulnerabilities that the government knows very well. Jet blackfor more, joins us from preferred. How likely is it that we get a downgrade for portugal today . Jeff as you just heard, mario draghi gave an endorsement to the portuguese government for the efforts they have made to reform their economy, clean up their banking system, and so forth ands the Bailout Program. It does not seem there is a kind theroundswell against portuguese government, or disapproval about what they are doing. Even dbrs in recent weeks has given them a fairly positive fairly positive comments. On the face of it, it does not seem very likely. As you mentioned, because they are the only Rating Company that gives portugal and investmentgrade, and because that gives big consequences for banks and on qe, it is a bit precarious. Francine worst case, they lose the investmentgrade, and what happens . They have to take a Bailout Program . Jeff in theory, there are two channels through which this works. The first is the collateral policy. It means portuguese banks can hand in portuguese Government Bonds and collateral for refinancing operations. They get downgraded, in theory, they cannot do that anymore unless the last ditch Liquidity Position at the ecb starts to look a lot less secure. They may have to take emergency liquidity assistance, which we have seen elsewhere. The second one is qe. The ecb may decide to stop buying their violence as part of qe, and that would have an impact on yields pretty quickly, given that portuguese debt is around 30 of gdp. That is not really a situation you want to be in. That is the worst that could get, and it is pretty bad. We do not have any indication it is going there straight away. Francine thank you so much. , bloomberg news. I wanted to show you the curve for portuguese debt. It is in green. It is so much higher than anything else, at 4 for 30 year maturity, in yellow. Italy, they have a referendum. That is december 4. In blue, it is germany. Germany, the finer yield curve by far. What does this chart tell us . They are not pricing in that much risk. Anne the market thinks there is a tiny risk, but not a very high risk. You have to think it would be a completely selfinflicted wound, in the event there is a downgrade, that the ecb did not come up with some mechanism for permitting it to somehow make sure that portugal stays where it is, within the group of countries. Francine where do you put your isey if you think there likely to be a mess in these european elections . Is it treasuries . That is the milliondollar question. Nne it does push you back but sort of down to the german end. I think what this tells you is that there is not a lot of return for the risk you take on, for example, in peripheral europe. If you are going into 2017, you have the italian referendum in december, and the french elections in the first half of next year. You have the german elections in the second half of next year. There is a lot that could come out of those election campaigns which could spook the periphery in europe in particular. I think that feels too complacent, to my mind, in terms of spread. Francine i was at Imf World Bank meetings. There was not that much good news. Seeing a little bit of growth. Inflation is coming back a little bit. Are there any bright spots you see around the world . Anne i have always had the view that the problems we have seen in emerging markets in the last two or three years have been cyclical rather than structural, even through this period where if you just read the headlines, you would think the emerging markets had the most crushing recessions. In fact, the growth rate has stayed comfortably above developed markets. Much more positive on emerging markets as a group. Not necessarily every emerging market. But within that, put some of the more developed markets. I think you can see, with the increase in appetite for emerging markets that has come through the last three or four months, that is in part because of the realization i keep coming back to this. You are getting paid to take some risk. There is risk in those parts of the world, but you are Getting Compensation for exposure to that risk. I think that in a world where Asset Classes around the world have been elevated by cheap money, the absolute measure of value becomes harder and harder to find. I think that is the challenge the world faces. Francine thank you so much for that. Up next, fixed data first owsa out of china sh property prices dropped. Has china over did a ruinous housing bubble . Francine i am Francine Lacqua, right here in london. Lets continue our discussion on where to invest in a currency environment that does not look great, with the cao ceo of m g investments. Me a liquiding asset can give you some returns. How do you find them . They are always more tricky to access than straightforward markets. Sometimes you have to access on issuance if they are publicly traded. For things like loans, you need specialist help to get into those markets. Could buy parts of the Infrastructure Capital spectrum. Could be equity. Debt. Be distressed debt, you have already seen a knock down in price. Commercial loans, for example. Those areas are harder to access, but if you can get into them, you are getting some pickup for the risk you are taking. One of the other areas where we are seeing real interest is how you drive down actual investing costs. Less traded portfolios, where you effectively match your cash flow needs with the underlying maturity of the bonds that is another way of eking out a tiny bit more return for your exposure rather than trading turnover when the costs are higher. Francine you are not concerned about a complete dry up in liquidity . If you already have liquid assets, how much at risk are they . Anne i think there is a growing realization about the investor base. There is a tradeoff between instant access to your money and your ability to generate return. In a world where you get nothing for cash, it is surprising to think there is less available in the more liquid market. That is the tradeoff people have to realize. There is a price to pay for effectively treating Capital Markets like an atm. Francine Anne Richards stays with us. We took property and real estate. Up next, hard brexit also means hard negotiations. U. K. Prime minister celebrates 100 days in office at the e. U. Leader summit in brussels. We bring you our weekly brexit show. Francine welcome to our weekly brexit show, live from Bloomberg European headquarters in london. Up theriday, we round news, analysis, and conversations that will make you smarter about britain and europe. This is brexit whats next . Lets get straight to nejra cehic. Nejra divisions between the u. K. And the rest of the European Union have begun to take shape, as germany has said britain faces a difficult path. The warning came at theresa mays first use summit as Prime Minister. During a closeddoor session in brussels, task told tusk told may the remaining members will meet without britain, despite her protests. Michael gove, one of the leaders of the u. K. Campaign to leave the eu, has added his voice to criticism of bank of England Governor Mark carney. Then article, gove laid blame for economic disasters at the door of technocrats like carney. He included in this group mario draghi, and lengthen by former careers at goldman sachs. Merkels government is said to be battening down the hatches for the coming brexit talks. Officials have been instructed to avoid any backdoor contacts that could hand the u. K. An advantage. They sent merkels chancellery is receiving u. K. Diplomats, but politely refusing to grant them favors in advance of official negotiations. Brexit secretary