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tv   Bloomberg Markets European Open  Bloomberg  October 3, 2018 2:30am-4:00am EDT

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>> good morning, welcome to european markets. we are live from our european headquarters in the city of london. asian stocks fly. oil prices near a four-year high. trading on my china is closed -- on mainland china is closed. to mine or undermine. the euro jumps on a report italy will out the eu pressure. yields fall. theresa may expected to paint a rosy picture of her efforts to reach a deal.
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the golden ipo. attin martin -- aston martin the lower end of its range. how well each trade after the opening bell? welcome to the program. this is the european market open. let's have a look at where we are. the german equity market closed,. contrast to what we are seeing in the asian section. we are expecting a bit of the game. let's show you where we are. this could be interesting. the contrast once again with asia. standout moves from indonesia and india. we do see these moves. focusing on commodity prices. countries where you see imports of commodities, it is an issue. up zerots, euro is
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point 3%. perhaps the italian government is honing in on a lower debt to gdp number for the year 2021. let's look at the bond markets. some interesting moves over and italy. -- fivery, the story year yields. 10 year yields dropping. we do see a relief in the italian bond market as a result of the headlines. thatreen here represents more risk on environment. we have the commodity prices. story, oil near a four-year high. the euro, snapping a five day losing streak. after a report italy will pledge to cut its deficit. the country's draft budget plan will see it dropped.
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deputy pm had insisted the ceiling would stay at .4% throughout the time. -- 2.4% run the time. you have been doing a lot of work on italy. let's talk about italy. it does seem to be moving the market. call me nerves in the markets. you think that is the right move? >> i think it is the right move by the reaction has been excessive. i'm not sure we will sustain a long-term reaction. it is positive the italian government has reacted to market threats. uptick for euro made sense. they are showing a lack of understanding of the gravity of the situation. adjusting the target, it is too late.
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a worrying stage for yields, they start triggering a kind of negative spiral and become self-fulfilling. i am not convinced this will be sufficient to put the italian debt to bed. ec -- is thethe largest risk to markets. does that sound the markets they could step away from? makes it very difficult. october was the month they were scheduled to cut their purchases. worrying.htly not guaranteed to head scenario.oom
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if officials do not understand the gravity, this could get out of hand. ying is particularly worri is the fact that many of the way measures are about welfare spending. which could give you encouragement growth numbers will come in higher. we have to wait until the hard to data comes in. october 15 is when he budget is subdued to the eu finally. if not, we have a serious situation on our hands. remind us why italy matters so much. we do have budget deficits that are bigger than 2%. the limit is 3%.
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a downward recent trajectory recently for italy. that has been reduced. why does italy have this sort of standout importance? a great question. many made the comparison with france which seems to break its budget limits all the time. third-largeste's economy. 2.420 in euros. it is too large to control if he gets out of hand. people make the comparison to greece. the only reason greece and ireland and portugal caused such stress is because there might be contagion to italy. italy is the market that can bring down the entire market. the comparison to france, france's economy is larger than
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italy. is 2.4ack market trillion. what happens in italy, the debt piles over 130%. yields wille make the debt go higher as well as the budget. a two-pronged attack. it is a situation where markets are in control. italy can cope with 2.4%. unconvinced, it will be unsustainable because yields will cause them to hold their debt. for better or worse, it seems markets have the ability to punish the markets. about one other thing. commodity markets.
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the asian equities session under pressure. people are talking about higher commodity prices. is this one of the big risks? >> we have seen some of the worst behind us. the oil price gains have been multiplied by the currency weaknesses. india and turkey. is why we have seen emerging markets stress. they are pressured by the higher wealth. the stronger dollar multiplies intoffect when you put it local currency terms. this has been a theme and continues to pressure emerging markets. we might be passed the worst of it. commodity gains have been extreme. maybe we will get back to two-way risks from now on. >> thank you very much.
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bloomberg strategies. you can follow insights from mark and the rest of the team let's get a first word news update. >> in the u.s., the chairman of the federal reserve has welcomed increases in wages while expressing confidence low cause ament will not hike. he expects to speak with the central beak -- stick with the central banks current path. while monitoring a set of risks. this historically rare pairing of study low inflation and low unemployment is a testament to the fact we remain in extraordinary times. our ongoing policy of gradual interest-rate normalization reflects efforts to balance the inevitable risks that come with extraordinary times.
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expansion while extending unemployment and inflation. new york state tax authorities have opened an investigation into allegations donald trump and his family empire their real estate through instances of fraud. the president received more from his father then he has previously stated. the white house says the report is misleading. ingyers for two women accus supreme court nominee brett kava naugh of sexual assault say the fbi is not doing a thorough enough investigation of their claims. the attorney said deborah r notez says the fbi have
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contacted more than 20 witnesses . president trump double down on his support for kavanaugh. president trump: it is a scary time for young men in america when you can be guilty some thing of you may not be guilty of. this is a difficult time. what is happening here has more to do than even the appointment of a supreme court justice. best-knowna's actresses has been ordered to pay $129 million in fines. bingbing was personally find more than $60 million. representatives were not immediately reachable, and her studio did not immediately respond to requests for comment.
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global news, 24 hours a day, powered by more than 2700 journalists and analysts. take you very much. juliette saly with the first word news. london, aston martin's debut. it begins trading today. po?l be a golden eye- you will get the latest. this is bloomberg. ♪
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this is bloomberg markets. the european open. 7:44 in london. let's get the business flash. >> tencent music entertainment group has filed for an initial public offering. the online arm of the largest social media company in china listed its size as $1 billion. the amount is a placeholder and could change. santander is staying bullish, even as elections threatened the largest economy. she is competent the brazilian unit will deliver a strong result this year. am proud of my team.
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those are the objectives. we have an election coming up. remember, theo orction, it is not the end the beginning for brazil. i see it as a normalization of politics and i have rate in the company -- country. jpmorgan says the number of companiescly traded is dwindling, in part because of excessive litigation and shoulder -- shareholder meetings. >> i love my shareholders. we all know that. -- i am nots against social groups. the you are going to get hijacked by that.
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thank you very much. aston martin makes its trading debut. that is toward the bottom of a marketed range already narrowed. joining us now, the senior of order in milan. covering car stocks. good to have you with us. what do you make of the pricing? it is at the lower of the range touted. they have had to narrow the top end. how do you see the pricing? clearly, there is 50% discount. on the other side, we have to consider where aston is coming from. that time,t stake at
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the company was valued about 400, 4 50 million pounds. in five years, aston martin rose by 10 times. it is a tremendous success. he will open it day, aston martin, and about 10 minutes. let's see how they react to the 19 pound price. me saying messaged there are few stocks, ipo's that such a dinner party appeal. remind us why it is so a conic -- iconic. >> it is iconic. second automaker listed
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in the global. the first, ferrari. listedhe first to be since 1984. such an iconic brand, famous for the james bond movies, going into the london stock exchange. it is clearly important and iconic for the business environment. you mentioned ferrari. there were talks about aston martin tying up with for arctic the success since that time. fell 40% in the initial months after the ipo. >> yes. exactly. 10% stake.st a
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it went much higher. higher.5 higher ferrari ipo, they had to look to buy aston martin. they are a new type of car. this was something that could have happened at the end of the day. it did not happen. howre getting to see investors react. 25% of the company will be leaving. >> thank you very much. the senior reporter and milan. ofing up later, the ceo austin martin joins us for his first interview of the day. that will be with the bloomberg
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team on surveillance. he will be hoping for no sky fall in the prices. up next, your stocks to watch at the start of trading including sales beatk. estimates. will that be enough to spur the shares higher? ♪
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this is bloomberg markets.
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seven minutes away from the start of the european equity trading day. we have rebecca handsy. -- penzi. rebecca, let's come to you. this is all about 5g. >> this is a record-breaking auction in italy where carriers spent the most on spectrum. the italian government, cash-strapped, brought in 6.5 5 billion euros. what does this mean for carriers -- they will have money to spend. they need this spectrum to like driverless cars in the future. remote surgery. anna: better news for the
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italian government, perhaps. let's go to you. tesco. explain what is going on. there is some good news here. it has been quite strong, 2.5%. and also the markets from warm summer weather. acquisitions performing well. and the margin performance the business performance. anna: schroders. >> they have secured one of the biggest contracts in europe. this is going to be good news for shareholders as the stock has slumped, down 12% year to date. anna: thank you very much. you can get all the stock
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stories. while we are talking about ,upermarkets, credit suisse keep an eye on that. maybe a relief rally. this is bloomberg.
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comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. >> good morning, less than a
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minute away from equity trading. let's look at where we are. euro, stronger on the bouncing off of the report that suggests that the italian government is going to back down its confrontation over the budget deficit. that has rocked the euro higher. we will watch for that. oil lira at a four-year high. the nikkei index, we have that for you. but the picture was one of worrying about emerging markets of their exposure to higher commodity. we did have a fairly weak session in asia, but some of those markets are closed.
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the pound, trading a little bit higher. we hear from theresa may, how will she managed to silence her critics? we are expecting to see a bit of a bounce at the start of a trading day and how aston martin traits. -- trades. the european equity market, of course, without germany. so we are expecting to see some upside. the ftse 100 is up a touch. we are going to get some cpi inflation data imminently. gain, a jumping into a bit of a relief rally expected as a result of the report suggesting the italian government will put a lid on , notbudget deficit at 2% 2.4%. for these markets to get into the stride, let's look at the sector.
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we would expect to see financials making a gain as a result. let's show that map on the floor. we are expecting financials to be a little bit stronger as we take a look at what is going on. five-year yields falling, 10-year gilts falling, how will all of that play out? that is one of the big talking points for this morning. let's have a look at where we are. loading up the mmr function. we have got all transact technologies in paris in the upside. the financial services sector on the upside. all of these banks and others trade higher. telecom italy up by a few percent. it is interesting to see the contrasting forces. on the one hand, they have to pay up for 5g more than the market anticipated, but on the other hand, shares have been so
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beaten up by the government story, perhaps that is overriding the negative. 3.8%, itown by provides services in your home and a host of other followers -- fallers. we have got turkish data out of this morning. turkish inflation rate rises to 24.5% year on year in september. i have an estimate of 21%. that is ahead of the estimates. but producer inflation accelerated to 46% in september, so these are i watering lehigh high.-wateringly i was warned to not get too excited about how high these numbers are. of course, the hike in september, how quickly will that curtail inflation? that is something we are focused on?
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let's get back to one of our favorite stories, that is the ipo of aston martin? we want to check out how well it is doing, priced at 19 pounds per share? and it opens at 19 pounds per share versus that ipo price. and the ceo and president of ofon martin, the chairman the london stock exchange, both of them are expected to speak at the ringing of the bell. as this iconic brand lists in london. this is the first ipo of the pay carmaker in three decades. it took a while for the markets to understand for our, dropping 14% in the first months. but since then, it has gained over 116%. european markets opening up.
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as of the bank story. snapped a five date losing streak after a new report that italy's government will pledge to cut the deficit plan. according to some, the country's budget will see the deficit reduced to 2% of gdp. as recently as yesterday, the deputy prime minister suggested the ceiling would stay at 2.4%. joining us now is the global market strategist at jpmorgan and david powell, bloomberg's economic senior. the government is already caving, according to this article on estimates. is that the right characterization of this? there are suggestions the government will back down from 2.4% to 2%. the government knew from
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the beginning that brussels would never accept this budget to the extent they wanted them to. it's is a negotiating practice. you start at an extreme and hope you can compromise. and we have already had words from eu officials, even yesterday. they rejected these numbers. so clearly, they are backing away from that extreme position. it is not just a backing down from the eu, it is also from the markets. the italian 10 year yield was up , so clearly, they don't want to send the bond market into crisis. >> what does that crisis look like? we have got the bond spread and it is falling. bundss spread over german pushed up and it has now backtracked. does this give you relief or do you need to see more? >> it is a move in the right direction, especially over a
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short amount of time. that is our view on the broader european project. but the story is not over yet. there are still approvals that need to be done and agency action that has to be taken which could affect the yield spread, particularly the index. this is a good move in the right direction, but we are not completely done with the story. >> and remind us why the difference between 2.4% and 2% matters so much when the eu target is 3%. it has to do with the trajectory of travel, doesn't it? and the size of debt italy sits on. david: the eu fiscal rules are quite complex. the budget deficit cannot be larger than 3%, but they also look at the structural deficit? the stock of debt is also twice the size of the permitted stock of debt.
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in that case, the overshoot is meant to be reduced by 5%. these budget deficit numbers , they aregiven certainly not catastrophic. they would not be reducing debt quickly enough. eu isin thing with the when you are not complying, you have to show progress in the right direction, and that is the big problem. there is no movement, and perhaps the numbers show that narrowing over the next few years is an attempt to show the eu that this will improve. >> just taking another look at the mmr, we've got tesla sent fewow -- san paulo up a percent. and the link here is obvious. the italian banking system is highly exposed to national government bonds. are they different in italy in that regard?
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the sensitivity is certainly heightened. i certain amount of government bonds are held by italians and the rest of europe as well. france and germany own quite a few. >> that is a nicer way then i put it. >> this is something we are monitoring and watching closely, but some slight optimism is that it has worked out in the past that some amends are made to make sure the stability of the countries involved are going to work, particularly because germany and france holds some much debt. it is in everyone's interest to get something that works. when you are looking at the italian story, are investors worried about italy defaulting? we heard years ago that politicians involved talking
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about exiting, and now they say they do not have that intention. but investors are trying to second-guess. david: clearly, investors are worried about something. it is hard to tell if they're more concern over potential for the italian default or italy leaving the area. mentioned, the percentage of italian bonds that are domestically owned is very high. is a populist government, it difficult to default and it might be easier for them to campaign against the euro then a default. that is probably why they were so sensitive. that something along the euro is not our currency, something like that. the euro did not collapse, but it fell in response. >> absolutely. and we had an issue with a backtracked. david, thank you.
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mangini -- nandini stays with us. up next, we bring you the stocks on the move. a record five g auction in italy, telecom italy is a little bit higher. we talk about that next. this is bloomberg. ♪
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>> welcome back to the european open.
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we are 12 minutes into the european equity trading day. let's get to our top stories of the morning. >> good morning, i will start with one of the biggest movers to the downside. more than 5%ed human though they had second-quarter sales beating estimates. they did see first half numbers miss, so the site that is not enough to satisfy investors. sscom. on to swiss, -- swi they participated in the option for 5g, but they are suffering a downgrade. saying their peak of market shares is a peak. alsoom italia participating, one of the biggest bidders, allowing shares to rise along with italian assets. anna: now, onto brexit.
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the chair is optimistic about a positive outcome with divorce talks, but the bank is focused on servicing customers in all scenarios. she spoke exclusively with bloombergs francine lacqua. >> u.k. banking is difficult. it is very competitive, contrary to what people think. and we're proud to be a challenger in this market. a challenger not just to the big the synetex.but to that is because we are bringing this group to bear to benefit u.k. customers. we are very proud to have launched the first blockchain payment service. that is available to our customers. that is an example of this platform we are building. santander,ion for and we will have help from around the world, is he wants to go from this infrastructure to a
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single mobile platform. and this is what one pay affects. but we also have brazil, the that states, spain, poland on this platform. the plan is to offer payment to third parties. it is not just that we develop software for ourselves, we can do it for others. >> is that independent of the brexit outcome? thee are very tied to british economy. i am still optimistic we will find a good solution that supports growth. but my responsibility is to my customers. and my team on focuses on is that we can offer the best services and are able to service customers in all scenarios. anna: that was the chairman
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speaking exclusively with bloomberg. part of the conversation there, and there's much more to it about brexit. i have been in birmingham at the conservative party conference. i listened to boris johnson yesterday in his speech. he said that theresa may's plan was sad, desperately wrong, would lead to the u.k. being locked in a tractor beam of brussels. case of thesease tail risks on the rise? nandini: we see this is having to issues for theresa may to sort out. first, getting everyone onside with a cohesive plan and then going to the eu to negotiate. it seems we are still stuck in getting the eu on the same page.
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overall, we think the plan did outline key issues prioritizing important, in terms of them being the highest in terms of goods and services. as well as the fact that there were some strict issues and nonnegotiable's that would have appealed to some of the more extreme brexiteers or those who voted in favor of leaving. speaking, we do have optimism about a soft brexit being achieved. but as we said, it certainly would not be a smooth and easy ride and we are seeing that. and we should be alert because theresa may will be speaking. we will see how that goes down. let's talk about where u.k. asset could go. 8% if thereop of was no deal. i saw some housings calling it down to 1.10.
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what is the downside risk? nandini: sterling is the first place that would get hit on the global markets because of its sensitivity. think the key thing for longer term or medium-term investors is thinking about the equity market. what we have seen over the past years and over these negotiations is the sensitivity of the pound. it really does support the ftse 100 companies who surged 70% of the revenue from abroad. the ftse 100 large-cap is the biggest market allocation you can make. and for us, having a more neutral allocation to those parts of the market makes sense in this time when sterling is going all over. one thing to note is that, in terms of active managers, the allocation to mid and small cap has increased around 40%.
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that is a 28% overweight to the benchmark. just thinking about your active allocation is particularly important. anna: just underlining how important this chart is. given the link between the pound and all of those stories you have outlined, that is why this matters. nandini: definitely, you have to know how quickly the pound will move and what that will do to the underlying companies. anna: thank you very much. up next, price pressure. turkish inflation accelerates more than 24%. the lira slides. we talk emerging markets next. this is bloomberg. ♪
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anna: good morning, welcome back. let's check out a share that has ipo today, aston martin on the -- lagonda. let's look at where it has opened up, opening at 19 pounds per share. but it has been moved lower to 18.4. vantage falling 3% in london trade. that is just the first day of trading. let's check out the turkish lira.
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that inflation number rising 24.5%, the fastest in more than 15 years. how much will that dampen the economy? that complicates things for the central bank. they have already acted with a basis point act -- hike. is it enough to guarantee a landing? let's talk about emerging markets. this turkish story, we have got the cpi number, high levels of inflation. but half we passed the worst on turkey or is it too early to say? nandini: i would say it is too early. i would say we must understand because of its external vulnerabilities, which can be categorized in a couple of ways. we look at the rise of external debt, what percentage of their gdp is external debt?
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deficit,urrent account which for turkey, is quite high. in terms of their dependence on foreign inflows. and you have seen a self-fulfilling prophecy in the balance of payments issues. turkey cannot afford to import what it needs and is now weakening even further. rising, inflation levels feeding into currency depreciation. and a spiral downwards for the assets in turkey. reason, a few countries, turkey, argentina, have suffered because of these vulnerabilities. anna: let's show the chart. this is the picture on turkish inflation, its highest level since 2003. prices surging. but let's move from the turkish story. where does your focus on emerging markets sit?
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we have covered the indian story quite a lot. the rupee at a all-time low. high oil prices seem to matter for the economy. nandini: india is in a precarious position. i loved argentina, turkey, south africa into vulnerable ones, where you except -- expect fluctuation. india sit somewhere in the middle. issues becausent of the oil situation, and the rupee has fallen quite a bit, hitting some of its lowest levels. there is some confusion. the fundamental story is so strong. you have got reforms over the past few years. you have got strong demographic situations, a rising middle class willing to spend. you have also got quite a lot of interesting industries coming about. a lot of this developed market crossover between the countries that are available.
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in that sense, we would not put it in that same first level of vulnerability. but it is a country we have to watch closely. anna: just briefly, the long-term story of the world largest democracy, that has not gone away. nandini: it has not. that is the reason for its view. thank you very much. let's have a quick check on emerging markets as we go to a break, because we were just talking about emerging markets. got the turkish lira on the chart, falling against the dollar. the south african rand, also falling. let's stick with the emerging markets story as a plan to discuss what is going on with the fed. coming up, jay powell says the fed expects to stick to its rate path, but what of the rest of the central banks?
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that is coming up next. this is bloomberg. ♪
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anna: into your trading day. here are your headlines. the euro jumps on a report that italy will about the eu pressure over its long-term budget plans. btp yields fall. shaken, but not heard -- third. aston martin dropped 3% after its trading debut. to paintay is expected a rosy picture of her efforts to reach a brexit deal as the conservative party conference comes to a close. the pound gains. to bloomberg markets, the european open. i am an edwards in london. this is the mrr function on the stoxx 600, showing you what is
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gaining. technologying and consulting business, up 9.6% this morning. a recent report how, 10-euro price target on this business. it trades at eight euros and something. thehy price target has market a little excited. elsewhere, financial italian services. ubi, bpm and others, trading higher. telecom italia, trading up. that is caught up in the updraft for it hellenic these generally, but newsworthy because of the above expectations spending we saw from telecom italia and vodafone, and iliad in the auction of 5g in italy. the downside on the mrr on the stoxx 600 and see what is bringing up the rear. north hydro, down 12%. they seem to be having problems in two brazil due to their
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aluminum refining business. we see the share price has moved lower. keep an eye on aluminum prices, because they are also moving higher as a result of the supply concerns. tesco down by 4.8%. they beat estimates, but you can pick holes in the margin data. let's get a first word news updates. >> the euro has snapped five days of losses, according to the courier, italy's populist government will bow to european itsn pressure to reduce budget deficit to 2% gdp in 2021. as recently as yesterday, the deputy prime minister said the administration would stick to its plan for a deficit ceiling of 2.4% to fund an election pledges to cut taxes, create a minimum income for the poor and
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lower the retirement age. in the u.s., the chairman of the federal reserve has welcomed recent increases in america's wages while expressing confidence that low unemployment won't spur a takeoff and prices that would force him to hike interest rates aggressively. in boston, jerome powell says he expects to stick with the central bank's current path of gradual interest-rate hikes while monitoring a set of risks presented by low unemployment and low inflation. >> this historically rare pairing of steady low inflation and very low unemployment is a testament to the fact that we remain in its ordinary times. our ongoing policy of gradual interest-rate normalization reflects our efforts to balance -- balance the inevitable risks that come with extra maritimes, need extend the -- we will stable employment and low inflation. new york state tax
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authorities have opened an investigation into allegations donald trump and his talent -- family created their real estate empire through instances of outright fraud. according to "the new york times," the president received more from his father than previously stated and fred tromp backstopped businesses during financial distress. the white house says the report is misleading. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. anna: that was your latest news in dubai. jerome powell says he expects to stick with the central bank's current path of gradual interest-rate hikes. he called it a reflection of the strong economic times we are in. this historically rare pairing of steady low inflation and very low unemployment is a testament to the fact that we remain in extraordinary times. policy of gradual
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interest-rate normalization reflects our efforts to balance the inevitable risks that come with extraordinary times. to extend the current expansion while maintaining maximum employment and low and stable inflation. anna: that was jerome powell at the nab annual meeting in boston. the feds as it will stick to its rate path, but what about other central banks? joining us, simon kennedy. nandini ramakrishnan is still with us. would talk her we central banks next, she gave me a thumbs up. simon, good morning to you. you have done this great piece. you and the team, i should say. the bloomberg guide to what the world central banks have done and what they will do next. any big picture messages coming from this? clearly, the fed is setting the pace. terminalis is on the on the web. it is a quarterly guide to what central banks are doing by the
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reporters who cover them and economists to analyze them. two things. the monetary policy is haulaning and as jerome would say, it is being led by the fed, but we have seen 10 of the 22 central banks we monitor have tightened monetary policy since july and that has been led by the fed. at the same time, global policy remains historically loose and the reason is even with fed tightening, rates still aren't that height. the are still grouping for neutral rate that is the difference between a break and an accelerator. japan,, the bank of people's bank of china, three major central banks are still leading easy. you have a son -- sense of divergence, at the aggregate level, we're seeing the removal of easy money. anna: let me bring a chart into the conversation that helps illustrate when you are talking about. here is the fed in yellow on this btv chart on the bloomberg.
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interesting to hear powell talking yesterday about what higher wages mean. great story about amazon increasing their wages, what does this mean for the u.s. economy. powell thinks the increasing wages is not necessarily going to overheat the u.s. economy because of what it does to productivity or what investments are being made in productivity. what is your take on when we start to see wage pressures really building in the u.s.? it has taken a long time with low unemployment levels. nandini: this is the key question for when is our rich -- recession view going to be more risk than not? when is our cycle view going to start turning? how will central banks around the world begin to cope? if wages continue to rise -- and they have not risen quickly thus far, we will see friday. we would expect them to rise for the first time in many years.
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the number of the jail jobs open are more than the people unemployed to fill those roles. we see indicators showing wage growth should be coming through. that is not a bad thing, if spendolders and consumers the money in an animal spirits type fashion or crucially, if companies can afford the higher costsbecause, unit labor don't rise. happens, then we won't have to be talking about recession risks in 2019 and 2020. we connect them to that further. if what jay powell says and the optimistic case happens, this could be a cycle that goes on for a few more years. anna: let's talk about another central bank, the ecb. in the context of italian risks. a colleague on the mliv said the italian risk abound -- around btp's and the budget deficit is the biggest risk for the markets ahead. does that sound like a backdrop
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to the ecb stepping away from the extraordinary amount of easy policy we see? they are supposed to be reducing their bond buying this month. simon: they will stop bond buying at the end of the year. on they enough to weigh ecb? the message you will get from the ecb and coming months is this is their plan. they set monetary policy for the whole of the region and there is reason enough to end those bond purchases. you might get that concern at the margins, but mario draghi, italian though he is, has been pretty level with the investment community in laying out how he sets monetary policy and the pressure is on the italian government to kind of control its deficit spending. we are seeing signs of that overnight. anna: another chart that illustrates the fed in the lead in guessing to higher interest rates, this is balance divergence.
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the fed dipping and the ecb in the white, still at the very high levels. nandini, your thoughts on whether the italian story delays the ecb in its exit from the policy. nandini: possibly. after the summer of 2019 is when they will start raising interest rates, they said. it will be a slow increase and depends on where we are with the u.s. economic cycle because we do go into a global slowdown or downturn, then it is a different scenario where you have the ecb and other banks were still behind in the path now having to catch up and start cutting again. there are a lot of variables at play. at the moment, it seems groggy and the team are focusing on the pan european economic story, which is good. lukewarm growth, but still strong enough to be a bit more hawkish in terms of policy. anna: thank you very much. thank you, simon kennedy. thank you to nandini ramakrishnan at jpmorgan asset
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management. she will be joining me on the bloomberg radio, "daybreak europe" program live on dab digital radio. that will be the top of the next hour. charles evans, president of the federal reserve bank of chicago will be joining the bloomberg team at 11:00 a.m. london time. later, the president of the federal reserve bank of philadelphia will be joining the team. let's talk about oil markets. oil prices have studied, but at high levels. near the highest level in four gears. lingering fears of global supply outweighed a gain in u.s. stockpiles as president trump slammed opec for ripping off the world. >> we protect saudi arabia. would you say they are rich? and i love the king, but i said king, we are protecting do. you might not be there for two weeks without us.
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you have to pay for your military. anna: president trump, piling on the pressure. russia energy weak kicks off in moscow today to the great good of the oil industry. annmarie hordern has followed that event. she is there for us this morning. what do you expect this week? it is pretty telling that we have president trump speaking just last night about the saudi king. the oil minister and his russian counterpart met in st. petersburg, they were yet again under pressure from the united states to boost production and bring prices down. this is through a tweet. u.s. ramping up the pressure about donald trump speaking over the weekend to the saudi king, then taking a met him last night. last week, he said opec was ripping off the world. these two are under a pressure
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again, but these -- this time, oil prices are at a four-year high. $90 traders say we will see a barrel by christmas and $100 by the new year. that is what everyone is talking about. anna: no doubt, they are talking about iran, as well and the change in the supply dam amec in -- dynamic in the industry. the russian oil minister, saying today russia will maintain energy cooperation with -- i ran. -- with iran. that won't go down well with the trump administration. mariano rajoy certainly not -- annemarie: certainly not, and russia is under sanctions. around midterms, we could potentially see more russian sanctions hitting energy projects, as well. last week, novak was talking about the 50-50 deal they had with iran about oil trade they are working out. the iranian oil minister was supposed to be here and at the last minute, he pulled out of
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the agreement. as we talk about higher prices, iran is part of this picture. many are trying to figure out how many barrels will be coming off the market from iran. sanctions were first discussed, they were saying maybe 600,000, now traders are saying nearly 2 million barrels a day. -- spec --acity spare capacity to make up for those losses? anna: bloomberg's annmarie hordern in moscow. she'll be bringing us the oil story through the week at the rush energy weak. let's look at the morning mid-cap stories we maybe need to drop your attention. dani burger has that for us. aboveschroders punching 1% after it secured one of europe's largest investment contracts, with lloyd. it is coming in at 109 billion pounds. this next one is after an upgrade from jeffries.
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the company has seen weakness, sentiment has gone too far. organic revenue will need to improve at the company. shares moving up 1.3%. 10% on thepps gains year after the company said it sees a higher full-year forecast, though it thinks the weaken, it isill concentrating on cost and margins, giving investors positive sentiment this morning. anna: dani burger with the mid-cap movers. in italy, really important story for us. italian in saw falling for us today after a report the government will cut its budget deficit targets. the ruling populace agreed to a shortfall of 2.2% in 2020. that is down from a planned 2.4%. joining us, the managing director and deputy director of research at two mayo intelligence. let's talk about italy and that your thoughts on the u.k..
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that is another political stories you have thoughts on. let's discuss what is going on in italy. are you optimistic or pessimistic, described for us where you think the story goes next? >> this is the new normal of the political conversation in europe and rich democracies. a restructuring of the party political space with populist forces really defining the political conversation. all this back and forth, speculation this morning, didn't mean the 2.4%, where are we heading next? this volatility is with us to say -- stay for the foreseeable future, because it works out for domestic politics. anna: until maybe the bond market puts the squeeze. looking at this from another perspective, if rome is kicked into line by brussels, what does this do to the populist narrative? in the short term, that could be a win for brussels but longer-term, does this fuel the
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populist movement? this is the tension we are talking about. carsten: at this point, we haven't seen proper pressure from brussels. we have juncker's statement saying we are unhappy with the proposal, but the question whether brussels rejects the budget, we are nowhere near this point. i would argue that this far, we have seen market pressure playing out and europe remaining relatively calm. what is important with a story from the european perspective is you have two populisms. the south pushing in favor of fiscal expansion, but don't forget about the populism in the north that you have to cater to. people in the finland, the netherlands, austria, germany, saying what are they doing with my taxpayer money? anna: doesn't matter who leads the european commission with all of that in mind? is that important? jean-claude juncker comparing italy to greece this week. he's in that post for a long
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time. carsten: he is, but we are looking at an overall setup of leading post on the european stage cheney -- changing. we have the european central bank, the parliament and commission. all of that is up for grabs into 2019. it will be interesting to see where we are in terms of centrist majorities after the parliament election. anna: there is a lot in play into u.k., as well. the conservative party conference taking place. what is your assessment of the agreement that will be done? rsll it look like the cheque plan? carsten: that will never see the light of day, let's face it. it will provide cover for theresa may and domestic u.k. politics, but the withdrawal agreement, the stuff that matters in legal terms, that is going to be drafted on the basis of what the commission has been proposing. the backstop on northern ireland and customs union for the u.k. anna: does that mean we are
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getting little detail on the future trading relationship? carsten: that is what we are looking at. right now, there is speculation around three pages or something like that. it will involve all this wording theresa may needs to get this through west -- westminster because that is the key political battle. anna: vague enough to get her westminster and give her political cover and satisfy the europeans. doesn't that push the cliffs edge into the distance? carsten: it does, and for the u.k. specifically. base case, we end up with a withdrawal agreement that covers the back end of the ireland. will be kicked out after the transition period 2020 and at that point, the choice of the u.k. will be accepting the backstop as agreed or ending up with no trade agreement at all. anna: what do we expect from theresa may today? she response to boris a little, maybe not fighting him by name and hoping the set doesn't
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collapse. carsten: the best thing she can do is focus on areas she can portray herself as a strong leader who delivers on some of these key concerns of brexiters. this whole new immigration regime, not treating citizens any different from immigrants from the rest of the world is potentially a winner in very relative terms because her situation is precarious. anna: does she stay in to post until, when? we are done with this brexit deal march 2019 and then, it will be a new game. let's see if this was her last party conference. that will be assessed once we have actually left the european union. anna: thank you very much. carsten nickel managing director and deputy director of research at teneo intelligence. will speak to the economic advisor to league leader matteo salving he -- salving he -- he has been taking comments the past couple of
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hours that are of interest. a quick word on france. french second or services pmi coming up, 54.8. the preliminary number was 54.3. a little stronger than expected in the market. let's get to our stock of the hour, aston martin. this is the picture we see across the aston martin story for you this morning. aston martin, extended losses 5.3%. this is the maker of iconic cars. they have been driven by james bond and many other people. the db models, how will these go down with markets? at 19 pounds per share. that would have been a market cap of 3.4 billion. it is trading at 18 pounds and 36 pence. a little early to judge how early how -- how this goes.
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you can interact with the charts using the gtv function. browse charts, and save them for future reference. next, the battle of the charts. this is bloomberg. ♪
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anna: welcome back to the market open. we are 54 minutes into your trading day. dani burger goes up against alec
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longley in the battle of the charts. >> i thought i would reach out to commodities more broadly. the bloomberg commodity index, three weekly gains we are heading for, the best run since may. commodities are coming off the back of their worst quarterly losses in three years. jpmorgan, goldman sachs have been turning bullish on ammodities lately and it -- stronger dollar had previously weighed on the sector but things seem to be turning around and we have seen in the crude market, reaching from 80 to 85 this week. traders have told me that is hardly because of big index binding commodities. you have seen in commodities surging up in a straight line this week and three weekly gains, the best run since may, signaling the worst may be over for commodities and that says something about trade war fears. anna: perhaps it does in the demand story. dani: has he is sticking to commodities, i am sticking with the qantas.
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-- quantz. according to the qantas -- quants it might not be over. trend, it at the looks poor for value. on the top line, momentum versus value. the most popular stocks needing value the most since 2009. growth stocks the most in five years. in other words, this is a picture where the winners keep winning. anna: i love the function on the bloomberg, so i like the quants and your chart, but i will go havealex on this because i been having an interesting conversation with mark cudmore about whether the rating commodities and what that does for emerging markets, whether that story is close to an end or is beginning. thank you to both of you for the charts. you can find all the charts we have been using through the program. gtv is the function to do that.
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-- in contrast to the french number of of estimates. a mixed bag on services. "surveillance" is up next. ♪
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francine: the euro jumps on a report that italy they cut their budget deficit. bond yields seat relief. theresa may is set to paint a rosy picture of her efforts. as the conservative party comes to a close, the pound gains. sky fall, shares in the james bond's favored carmakers slide. we talked to the chief executive shortly. welcome, i am francine lacqua in london.

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