tv Bloomberg Markets European Open Bloomberg October 31, 2019 2:30am-4:00am EDT
manus: this is "bloomberg daybreak: europe." projected holiday sales above analyst estimates. iphone revenue was down from a year ago. the iphone 11 will see a return to growth come year-end. manus: apple's rival samsung smartphone sales were up from last year. investors see a return to profitability and their recovery in the memory chip market. carr bloomberg opinion columnist joins us from.
let's get into these results from samsung. what was the offer? not as impressed as the shareholders are. they seem pretty impressed. i think there is a lot of concern they need to be aware of . first of all, the chip business really fell off a cliff. operating profit really fell a lot. the other thing is the smartphone business had a good quarter. it was the second-highest sale on record for that division. incomecompare operating versus a couple of quarters ago, operating profit was a lot lower. margins a lot worse than it had been in the past. they said themselves this quarter, the fourth quarter, they would see a deterioration, not only in shipments, but also a have bees. what they ship will be the
cheaper phones. not the flagship stuff they had in the first quarter. the cheaper stuff. those are the landmines investors need to be worried about as we go into the next. components are weak and their products are week as well. it definitely is downbeat, a column this morning. you sum up by saying what samsung has is not a business model, it is a coping strategy. what do you mean by that? >> they have been pragmatic. i will give them that. in's january this year, december itt year, they recognized was going to be tough times the following few quarters. we are in the middle of that now. they said we are going to be more clever with capex. it takes quarters and quarters to get that back. once you have spent it, you cannot put that back.
you have to be careful with it. they were careful the last two quarters and they remain careful on that. that does not help the top line. that is a coping strategy to ensure they are not spending too much money. that is what i mean by them having a coping strategy. they are not doubting -- they are not getting out of the hole. it is all about coping with the challenges, isn't it? thank you very much. you can grab his opinion piece on the bloomberg. a little bit of breaking news. 1.92 euros. an ice comfortable beat for the new ceo. reiterating their overall forecast. net profit if you are drilling into the numbers, 1.7 7 billion. third quarter business net income, 2.0 4 billion.
they see earnings-per-share growth of 5% on a constant basis for them. nejra: it is halloween. we will discuss costumes later. for now, another brexit deadline has come and gone. eu, the u.k. remains in the uncertainty is still spooking investors. dani burger has been analyzing the numbers. happy halloween. >> happy halloween. sorry i don't have a costume on for you either. there is still plenty of fright. i have some of the scariest charts for investors in the u.k.. thanks to low borrowing costs, we have seen companies ramp up their investment spending. when we look over the past three and a half years, u.k. companies have really been paralyzed by brexit uncertainty. we see u.k. business spending investments trail the rest of the market by about 10%. we have also seen brexit in the profit
market. when we look at an index of prices, they look negative. the number of homes up for sale, they have fallen to the lowest since june 2016, the month of the referendum. finally i have what might be the scariest chart of them all, the ghost of eu deals past. it has taken several years to reach for the eu. it took five years between the block in japan. another five years for canada. this is 20 years to reach a deal with the group of south american countries. because brexit keeps getting delayed, that means the u.k. has very little time to strike a free-trade agreement before the end of 2020. the end of 2020 is when the transition period is scheduled to end. can you imagine two more decades of trying to hatch a deal with the eu? that is a scary story indeed. imagine that. thank you. from halloween to what is being called the christmas election.
brexit may not be happening today. campaigning is underway ahead of the early general election. jeremy corbyn will deliver his first speech of the campaign attacking what he calls the eu's corrupt system. the conservative chairman says a vote for labor is a vote for more delay and uncertainty on brexit. joining us to discuss is anna rosenberg. and still with us, our guest host, global macro strategist at rbc capital. anna, great to have you with us. you think all the outcomes actually are looking benign now. >> when you step away from the have reducedl, we the chance of no deal to 20%. we are either going to leave with johnson's deal or there is going to be a second referendum and another brexit delay. 20% is still significant. i don't want to minimize that. we have to look at what are the actual election results.
there could be a situation in which johnson needs to enter a coalition or supply agreement with the brexit party and the dup and that could take us closer to a no deal scenario. overall, the scariness is a bit overblown. let us pick up on the nigel farage scenario. that is one of the most underpriced risks. in terms of that and the consequence for negotiation, what would that mean? if he had to do a coalition deal with the dup or nigel farage, what do you think the consequence or the risk would be? a harder fall of brexit? anna: i think that is right. potentially a no deal. the numbers are right. it is difficult to imagine this will be the case. the numbers are going to be difficult for johnson to be able
the dup and the brexit party. it is more likely he will need another agreement with another party. i know it sounds crazy right now. potentially labor sounds crazier. once an election is out of the way, these parties may be more willing to work with a conservative in exchange for a second referendum. we might have a situation where we are asking for another delay and where johnson asks for a delay in order to get a second referendum. what is the most interesting way to trade this? wouldn't be shorting inflation rather than buying the pound? at the pollsk currently, it favors conservatives. the investors,t most people expect this is going
to be a landslide. that is implicitly what's in the market. asking the risk for the thestors, going to election, the clearest risk for me in terms of trading sterling, trading the front end of the curve, treating inflation, is what happens if the pulse change substantially. that is the first risk. having said that, going forward, we assume the outcome is what the outcome is. what currently is expected. i think the next thing the markets will latch onto is what your moderation earlier said. if we have a situation start negotiating and then by the end of 2020 it is very unlikely we will have a deal. it is just not going to happen. the next assumption is going to be, we are going to extend the negotiation period another two years. if we have a substantial majority, the outcome will be seen as relatively but by
markets. then we are talking about risks for the fixed income market earlier. if you take that into consideration, the bank had previously been talking a hawkish game. trade tensions, including brexit, have been on the forefront. scenariohe consensus in which we are drifting further. these are the two scenarios in my mind we have to contemplate going into this election. manus: can we pick up on that? our financial markets believe a landslide. that doesn't give us the sense that is where you are. you seem skewed toward this grand coalition. which might mean a second referendum. can i ask, are we suffering groupthink in regards to the u.k.? that they would vote to remain? you know what? we have had enough of this, we
are suffering groupthink, the u.k. might not vote to remain? >> our base case is that johnson wins and a majority in a deal by 2020 heading into a transition period that is most lightly going to be delayed. that is our base case. a lot of signs point toward that. johnson has implement it so far. he has the cards in our opinion. the second most likely scenario is ending up with a second referendum. it is too early to say after the referendum the u.k. will grow to remain in the eu. -- a vote to remain in the eu. there is a high likelihood johnson will win in the end, leaving the eu with his deal. in that scenario, how quickly do we see a recovery of consumer and business confidence? >> it is going to take a while.
first, there is going to be a big push once we hit the january 31 deadline. then there is a period of normalization, i believe. obviouser it becomes that the next phase of negotiations are going to be as difficult as we have just seen, there's going to be another way. the political uncertainty is here to stay for a while. peter, let's bring it back to you. . love a bullish scenario where does that take me on sterling? is that 140? where does that take gilt yields? >> first of all, let me reiterate. we have to measure what the market is anticipating and then where we are going. if we are heading into that landslide indeed that the market is anticipating, is it is a --
it is a positive scenario for sterling. i am quite reticent making big calls at this stage. it is highly uncertain. we have seen before. if we go into that scenario, a positiverling scenario, a negative guild scenario for sure. t scenario for sure. manus: the estimates have not caught up with the bullishness. , 8648.tv great conversation. anna rosenberg, head of europe at signum global advisors. let's get your first word news. reserve cut interest rates for the third time in a
row. the big question, will it stay on hold? jerome powell says policy is in a good place and investors are trimming dental and more easing this year. debts on more easing this year. the boj drop the timeframe for keeping rates extremely low until spring 2020. now it is saying rates will stay low as long as necessary to avoid losing price momentum. more on the autos megamerger. psa and fiat chrysler have approved a preliminary tie up plan. shareholders of each will own 50% of the combined entity. the deal will create a european power house rival volkswagen. the companies are set to announce the deal today. facebook delivering better than expected sales and steady user
growth. the company can weather increasing scrutiny. as many new users in the last quarter as it did in the last five quarters combined. 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. this is bloomberg. a couple of lines on the boj. the boj a little bit earlier adjusted their forward guidance. they removed the reference to keeping rates low through or around spring of 2020. kuroda is on the tape. -- the boj is not backpedaling. conductsral bank policy for its own economy. it continued very powerful easing and persistent movement in easing. dollar yen, 108
69. slight strengthening in yen this morning. it is trying to understand, where are we with boj policy apple -- with boj policy? plenary plans to merge psa and fiat chrysler. be resulting company would one of the world's largest automakers. sources say under the proposal, shareholders of each company would own 50% of the combined equity. less of a barrier than it was for a merger with renault. year, fiat chrysler attempted to merge with renault, but talks fell through in june. that followed the failed tie up between fiat chrysler and general motors. going to be speaking to
nejra: this is "bloomberg daybreak: europe." manus: swiss re has just printed their earnings. claims due to hurricane dorian and the typhoons in japan. the combined ratio rose to 101.4% the first nine months of the year. it says it will not launch a second share buyback. let's get to the cfo, john dacey . it is good to have you.
this is going to be disappointing for the markets. talk me through your thinking on why this is coming to pass. john: happy to. we are in the middle of completing the first share buyback, one billion u.s.. we were 60% done. when we got the approval from the board and from the shareholders for the potential ranche, it was our subsidiary in the u.k., looking at the potential for a benign season. the reality is neither of those panned out. the season has been losses in an third quarter make this average to slightly above average year.
we suspended the ipo process in the summer. those funds did not flow in. the market anticipates that as a result of those factors, it was unlikely the second tranche was going to launch. this is a confirmation of what they expect. to youi will come back in just one moment. fiat chrysler and psa group plan to combine. this is just crossing the bloomberg. fiat share alters -- shareholders with a special dividend in the deal. ,et's get back to john dacey cfo of swiss re. we were asking about the buyback and you were talking about the fact it has been contingent on capital relief from the ipo of reassure group, which was suspended. my next natural question is you plan to restart the ipo of the
reassure unit next year? if not, are there other options? >> when we announced the suspension, we said we would not clearlyn in 2019, but our objective is to reduce our stake. we think this is a very interesting business, just not a great business for us to own a majority of. we look forward to the opportunities to be able to reduce that stake. the ipo is one of those options. we did a lot of the heavy in the first half of 2019. there are many things we will not have to repeat. it is just a matter of putting in 2020.rs together manus: we have a chart. the world is changing. 17 trillion in august.
negative yielding debt around the world. welcome this readjustment in pricing. what does this do in terms of your thinking about investments? >> the insurance industry , declining long-term rates are problematic. we have long-term liabilities on our balance sheet. we need to invest the money in premiums. we have been able to maintain our yield through the first nine months, 2.9%. bringingpressure into the running yield down as we ,ave to reinvest our portfolio the government bonds in particular and corporate bonds, occur. us isk one solution for to be able to continue to push for higher pricing reflecting we
are going to get fewer earnings out of the investment side. a number ofatic for insurance companies is decide where that opportunity is less clear. another challenge for insurers generally is climate change. today you're combined ratio rose to 101 .4%. a ratio over 100, meaning claims and expenses exceed revenue from premiums. you are targeting a 98% ratio for the full year for the key property and casualty divisions. how can you reset that ratio with the challenge of climate change basically driving up demands for coverage and making natural disasters more drastic while price is lagging? >> you correctly identified climate change is having important impacts. we were careful not to create a causality between any particular
storm or event and climate , more, but warmer sees drought affected areas are going to create more challenges for owners of assets and therefore more losses for insurance. our goal over time is to get adequate pricing for this new reality. we continue to update our own models of what prices are required, whether it is for typhoon coverage in japan or property covers in california. as we adjust those models, we sure that information with primary companies. manus: thank you for being with us this morning. , cfo of swissacey re. fiat chrysler and the psa group plan to combine. it is a 50-50. equity will be 50-50 between the two. the guidance, 3.7 billion euros in annual synergy.
nejra: good morning from bloomberg european headquarters in the city of london i'm nejra cehic. manus: i'm manus cranny from dubai. this is bloomberg daybreak europe. these are your top stories. change of language. the fed signals it's time for a pause. as they cut rates for a third time in a row. monetary policy says jay powell is in a good place and the b.o.j. tweerked the guidance to allow for swift easing. eye on the prize. the offshore yuan brushes off poor chinese manufacturing data. and market attention firmly fixates on positive trade signals. top negotiators set to -- for tomorrow. and megamerger, fiat chrysler and p.s.a. confirm that they
will combine. the automakers will own 50% of the equity each of their shareholders get a 5.5 billion euro special dividend. nejra: welcome to barry europe. just breaking in the past few minutes a deal that could see an auto powerhouse to rival volkswagen. we heard that fiat chrysler and p.s.a. group have planned to combine. fiat shareholders will get a 5.5 billion euro special dividend in the p.s.a. deal. and we've got yet more details coming through as we speak, manus. manus: absolutely. this is creating the division in many ways, would have probably been proud of. this comes down to the numbers stack together?
the hard numbers. p.s.a. and fiat chrysler, 3.7 billion euros worth of run rate synergies. where will those come from? the board will be split. when we say the deal will be 50-50 this is what it comes down to. five board members will be nominated from fiat chrysler. five will come from p.s.a. the listing, euronext, boresa talia and nyse. nejra. nejra: yeah. and we've also heard about in for of tavaras the c.e.o. four or five years and a board member as well and what we'll see shareholders of each company owning 50% of the combined entity. and the agreement would create as i said one of the world's largest automakers with a combined market value of about $50 billion based on current prices. we'll bring you more on that through the hour. but we have loads more breaking news in earnings season. let's get to the third quarter, p.p.i. charge comes in at 1.8
billion pounds. something in focus for investors. the estimate was 1.67 billion pounds. so there is a bit of a higher p.p.i. charge there for the third quarter than investors were expecting. the third quarter statutory pretax is a key number to look at as well. 50 million pounds. the estimate was 163 million pounds. so for the third quarter, statutory pretax, we come in significantly lower than what was estimated as well. some of the other details in terms of lloyds seeing its full-year operating costs they're expected at less than 7.9 billion pounds and says that the cost income ratio is to be lower than in 2018. the full-year net interest margin what lloyds is saying it sees that at 2.88%. it previously saw about 2.9% so it's downgrading that a little bit but costs coming down. and it says the underlying return on tangible equity that profitability measure remaining strong at 15.7%.
manus. manus: well, nejra, swiss re have team on their share buyback. and interesting lines coming from shell. so what they're saying is that there are risks to completing the share buyback within the time frame that they had originally announced. so that is the top line coming from shell in regard to that. third quarter adjusted, earnings 4.77 billion for shell. and i can tell you that we have 3.91 so a beat on that. and just to get in a little bit further into this, so shell's goals on the buyback and net reduction of debt remains unchanged. so these are going to be the two headlines that the market really focuses on. the third quarter cash flow from operations is up by over 11% at 12.25 billion. but again, the market is really going to focus on this line. shell sees risks to completing the share buyback within the
allocated time frame. the dividend is 47 cents a share from them at the moment. so the cash flow is up 11%. those are the top lines and the debate by b.p., are they or aren't they really on the dividend watch? everybody sees the competition there. this was interesting. and when i was in rio for past couple of days what would the listing of aranco for dislocation of asset to chevron, that is potentially a very short-term dislocation for the oil majors but all about keeping the dividend right and tight. nejra. nejra: yeah. you hit the nail on the head, manus. you wonder how badly the market might take that buyback headline from shell given the focus is so much on the capital return with the challenges of a lower oil price. but that said the oil majors we've had in europe so far have generally been beating on the numbers as shell has today on that third quarter adjusted profit. but let's get back to the fed and officials have cut traits by 25 points for the -- interest rates by 25 basis points for the third consecutive time. and unless the economic outlook
changes materially. the fomc dropped its pledge to act as appropriate to sustain the expansion. and added a promise to monitor data as it assesses the appropriate path of policy. fed chairman jerome powell justified the central bank's position of a news conference following the rate decision: >> the policy adjustments we've made since last year are providing and will continue to provide meaningful support to the economy. we believe that monetary policy is in a good place. nejra: joining us from frankfurt is cyst cyst head of rates and credit research at commerzbank. cristoph, great to have you with us. so a signal of pause from jerome powell. but the market doesn't seem to buy it. is it right to trade the way it is in reaction to powell and the news conference? >> well, the long end seems to be not big it. and still rallying the but if you look closer at the shorter end, the probability for december rate cut has been
lowered even further to now 15% only from about 20% before the meeting. interestingly, it is now a very similar level where it was in september after the last rate cut. and we know what happened since then, of course. the probability has converged to 100 and now -- obviously it will depend on the data whether we will see the same thing. and clearly the next couple of days will be crucial already in that regard. manus: if we look at the data, cristoph, good morning to you and this is where perhaps the fed wants to reinforce this pause rather than the market's hurried nature for another 25 basis points in 2020. in terms of the data, what's your view on inflation? >> well, inflation in the u.s. actually has picked up beneath the surface. a bit more than some in the market seemed to be making out of it. if you look at the analyzed
increase in the last few months or -- so indications of wage growth, so i think the fed is at least slowly getting there. they're still below target. nd given what powell said last night, i would presume that at least the downside risk to the upcoming data releases have been somewhat mitigated. especially over the next couple of days. you know tomorrow we have the all-important payrolls as well as i.s.m. and what we -- in for a large miss in those data, then probably the fed should have known about this and probably powell would have -- yes, sounded a bit different at least when characterizing the labor market. so therefore, what i'm just saying is that the downside -- the immediate downside risk to some of the data have been reduced. and given the rally that we've
seen, surprising rally i would almost say after the statement at the longer end of the treasury curve right now, yeah, the risk is that -- the markets, getting a bit too -- ahead of itself and we suggest fading this rally at least today. nejra: that makes sense. because before the meeting you were saying in your outlook, cristoph, that the reference that the fed will act as appropriate to sustain the expansion, which it did, would be a signal that the fed is done with its precautionary rate cuts. so in terms of fading the rally from here, what sort of level of a backup in rates do you expect into year end on the long end? >> well, i think it's going to be rather a matter of weeks and then we need to see whether the easing in the trait conflict in particular is also spilling over into sentiment indicators. so far it hasn't. whether this rally or this
backup in yields, rather, will have legs, we're still more cautious on the outlook especially on the euro zone. but also on the trade front. so therefore by year end, i think we could still be in for somewhat lower yields. but near term, i.e. the next stage and probably weeks with the market simply lacking inspiration from trade, from central banks and data to rally further i think the risk is for weaker bond prices, higher yields. but like i said by year end, things may again look different again. manus: and you're right. if we get this phase one deal done, and we don't know whether that's the chicken, poultry deal and don't know where that deal is at all, but let's say it's a moderately good phase one deal. janice anderson say 2% by the end of the year and the market is a little bit too aggressive on additional easing from the fed. now, they're driving it from
the fed point of view but on phase one good trade deal, do you back up to 2%? >> well, phase one is not equal to phase two as well. and we've seen how things tend to change in this trade conflict rather quickly. and i think the riff between china and the u.s. goes a lot deeper than just these pure trade headlines. and i think we're in for a multi-year perhaps even multidecade conflict between these two superpowers. and therefore especially ahead of the election year, i would not think that this is a lasting easing in the conflict. so we need to see it. but i'm skeptical whether this is the all clear and basically all the trade concerns that have been built up over the last year will then evaporate after this phase one deal which we may get in november.
and not signed yet of course. nejra: does that mean that we will see meaningful continued flattening in the twos-tens curve into next year, cristoph? >> yes. i think the u.s. is in for structural flatening with the fed on pause as limited downside in the shorter end. while the longer end of course is still longer term subject to this global low yield negative yield environment which will persist. and over the medium to longer term, i don't know we can sustain u.s. treasury yields near 2% while the rest of large part of europe, japan, are below zero and the bank of japan actually is looking to lower their rate and yield targets even further. manus: do you think the bank of japan, let's pick up on that, do you think the bank of japan
is slightly confusing the market? because on the tape right now saying monetary policy is data dependent. there's a shocking headline. but he does -- he doesn't think the cost of easing will stop the bank of japan from action. where possibly they were clarifying a little bit on their position from the statement this morning. your interpretation of the lines from the b.o.j. does -- for all of our bloomberg users at t-live and bank of japan is open to additional stimulus on the risk rise and has options. what's the biggest option on the plate for the b.o.j.? >> i think rate cuts. and i find it quite noteworthy that they have adjusted their forward guidance in a sense to include an easing bias or rates and also their yield curve control target is expected to stay at present or lower levels. and i think this is a clear signal that if things don't
improve after the b.a.t. hike that they could be in line for a further rate cut and compared to at least the european .1 there is s at - still scope. nejra: scope for a rate cut from the b.o.j. cristoph rieger from commerzbank stays with us until the end. show. stay with us, cristoph. we will be back with you shortly and coming up the fed, e.c.b. and b.o.j. the world's most important central banks all in focus today as we just been discussing. we'll carry on that conversation next. and when you travel to work, tune in to bloomberg radio live on your mobile device or on d.a.b. digital radio in the london area. this is bloomberg. bloomberg.
nejra: and i'm nejra cehic in london. facebook shares rose after hours after reporting sales that beat estimates on strong user growth but the cloud over the social network giant include regulatory issues and the company's decision not to block political ads. bloomberg's caroline hyde asked cheryl sandberg to explain facebook's decision in an exclusive interview. >> we're not doing it because of the money. this is less than 1% of our revenue. and the revenue is not worth the controversy. but what mark said is that we believe in free expression. we believe in political speech and ads can be an important part of that. we're really focused and i think we are leading is on transparency. we put out an ad library. we now announced a presidential ads tracker which means that you can see any ad anyone is running who is a political candidate anywhere in the u.s. and anywhere in the world even if it's not targeted at you. and that kind of transparency we think is really important. to people understanding. and you also talked about investing. investing in protection.
one of the things we talked about on our earnings call just now is the size of the investments we're making prepared for 2020. working with election commissions all over the world. hiring engineers, using machine, using queue end reviewers and doing what we can to make sure people are kept safe. reporter: when twitter decides to go the opposite direction, does that make you question your indecision or you still stand by the fundamental reasoning in transparency that you can bring? >> well, mark has said on the call that we thought about this for years. and certainly we've been thinking about it now. and we fundamentally believe that political ads are an important part of the dialogue. and can be important against incumbents, can be important -- we also believe that compree expression across the board is something we stand for as a company. and people all over the world are using that. certainly politicians are using that. but people are using it and that's how you see -- that's how you see our growth continuing. reporter: let's talk more about politicians because it will be a tough year in terms of
regulatory scrutiny. do you worry about talk of the business model being under attack? how do you see your role in educating particularly those on capitol hill about this? >> well, i think we really have to help people understand that targeted ads and privacy are not at odds. we can do both. so if you're an advertiser and you're the biggest company in the world or the smallest company and we have seven million advertisers, 140 million businesses using our services. and you want to show an ad to, you know, women in their fists. that's me. who live in california. we take the ad and we show it to that person and give you back aggregated results. we can do very good ads targeting that really makes ads good for people. and really helps advertisers reach the right person. without violating privacy. and that's something i think we need to do a much better job of explaining. manus: c.e.o. sheryl sandberg
speaking to caroline hyde. let's carry on the conversation about central banks. a third straight rate cut from the fed and a signal that it may stay on hold for now. the bank of japan leaving its policy rate unchanged. dropping the time frame. from -- mario draghi's last day as the e.c.b. there's a new woman at the helm. christine laggard. cristoph rieger is head of rates and commerzbank and we have a story this morning, cristoph, sub zero skepticism grows and it's a threat to christine laggard. is the company underpricing the price of normalization in 2020 from the e.c.b.? and when i say normalization i say getting back to zero. >> well, i think we've come a long way if you look at what the market was pricing just a couple of months ago. here basically was discounting -80 b. depot rate from from -50. so right now we're hardly
pricing in any further rate cuts. still a little bit. and i think yes, the risk is that the market will take out the rate cut speculation altogether and at least start talking about normalization or higher rates. because i think the information that we have gotten this week, especially again from mario draghi on monday, and also madam lagarde last night suggested that there may be some discussion going on about the merits of negative rates on the broader scale. i mean, we know the large opposition from the usual corners. but now with draghi admitting basically that -- the additional benefits of negative rates may be questioned and lagarde at least implying that there should be a review of the costs and benefits of negative rates at some point. i think all of this adds to this sentiment in the markets,
general macro sentiment that no further rate cuts may be needed. nejra: should we expect then cristoph given what you were saying about long end rates in the u.s. earlier a tightening of the treasury bond spread? >> yes, i think that is a structural trend if you like that has started some time ago which looks set to continue. i mean, the markets -- and different currencies. but we're seeing increasing demand from traditional euro-based accounts that usually only bought u.s. treasuries and accentuated still attractive and now it's not. so an unhedged basis and without a fixed hedge it is still attractive. because you can discount quite a bit of a dollar depreciation given the carry that you have. so i think we're seeing more and more of this which adds i
think to this secular spread tightening which has started about a year and a half ago. manus: can we get to brexit as we go to the close. we've got this in the g.t.v. headed for the biggest slump and repricing and sterling is repriced and some say capped at 130 until the outcome of the election and look at the gilt market it seems to be pricing in victory to boris and a deal. are you part of this? and where do you go to in terms -- in terms of the next move on a boris victory in december? >> well, on the broader market impact of this, i think the key thing is that the hard brexit isk is still being removed for and after the election it has become less likely and the
market has given up on -- yeah, discounting too much of a risk in that. so yes, the market has adjusted, though. and from here, i think most of it is in the price. clearly we see a very soft brexit and also the other major political risks around the world, mitigating and then clearly the market will start talking about bank of england raising rates at some point. they still have the implicit tightening bias. but given this uncertainty which is more likely to prevail after the election and into next year, into the -- into january 31 and beyond, i don't think the bank of england will be in a position to raise rates any time. nejra: ok. so not in a position to raise rates any time. but to tie everything together, cristoph, in terms of some of the risks out there receding, brexit, perhaps also a little
bit of a positivity coming through from u.s.-china trade talks, how do you position on fixed income risk markets at the moment? because we have recently seen some spread tightening both in investment grade but also in high yield. >> yes. i think the environment is quite conducive for spread risk in general. be it in sovereigns, periphery. we still like italy. also some of the -- semi core markets and less so the core markets and also in credit. the cyclical sectors, because i don't think the recovery in macro sentiment that we are seeing will have legs. nejra: yep. but more the cyclical elements do look quite good. nejra: cristoph rieger, head of rates and credit research at commerzbank. great to have you with us this morning. thank you so much. fiat chrysler and peugeot have agreed to a 50-50 merger.
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nejra: good morning. welcome to bloomberg markets. the european open. we're live from our european headquarters in london. i'm with matt miller in berlin. matt: the hawks have eyes. european stocks are poised to start the day on a high after asian stocks survive a fed cut and p.m.i. misses from china. the cash trade is less than 30 minutes away. anna: dial m for merger. fiat chrysler and peugeot agree
to work toward a 50-50 combination. john elcan would be chairman and carlos sevaras would be joint c.e.o. of the companies. jerome powell calls an end to his -- policy in a good place he says. and how you did last summer. b.n.p. paribas a 35% rise in fixed revenue for the third quarter. european rhythms, i.n.g., also beat estimates. matt, a very good morning. i hope you enjoyed the loosely halloween themed headline sequence. matt: yes. absolutely. i very much enjoy halloween. do you have a costume for tonight? anna: no. but i've had to make a few. matt: all right. well, i look forward to dressing up and seeing the costumes you've made. here's the 10-year yield. i got -- why have i got a month? i got a month to show you here the yield had been rising throughout october.
and then there was a rally in treasuries after -- or a -- amid the fed cut push yields down right now. 1.77 in terms of treasury yields. take a look at the mixed picture in futures this morning. we have a little bit of a mixed picture in terms of european futures at least with ftse 100 -- ftse futures unchanged and dax and cac futures rising. ftse futures were down earlier and coming back up. dow jones futures were down earlier and look at u.s. futures. there was a mixed picture there. now we're seeing some very light green arrows in terms of dow and s&p futures and nasdaq futures up .2% as people look for apple shares to gain. what do you see on the g.m.m., anna? anna: yeah. nothing spooky about the nasdaq
futures. and in terms of the read across into chip markets we'll be looking for that. apple and samsung effect and we will be looking for that in europe in the asian session and the g.m.m. quite a mixed session but slight bias to the upside. weakness in chinese equities and we had a trilogy of disappointments on the p.m.i. front of china. that didn't move the yawn and did d weigh -- yuan and it -- asthan sector has been to the upside. some market participants giving the narrative that perhaps this is the case, powell is very far away from hiking interest rates make of that what you will. we do see substantial dollar weakness in today's session and that's quite broad based and the pound is on the rise. the swedish corona on the rise and the asian session and korean dollar weakness perhaps in conjunction with that fed meeting yesterday and also part of the story. also bear in mind what we do and don't know about the trade nare active going from here. it seems that the meeting in
chile has been canceled. and so as a result, we're not entirely sure of where we go to next on the trade nare active. the markets with our bloomberg markets live managing editor who is in singapore. and mark:, i want to start with the markets live question of the day. as to whether we should be pricing out a recession and this looks back to the fed last night but also takes into account the latest data that we've been seeing whether we've been seeing a bottoming out in the data picture globally. what are your thoughts? mark: i'm not sure if we can be pricing a recession because i'm not sure there's a recession priced in. that was one of the issues. some sector of the market that's been very concerned by recession and i think there are some surveys showing that almost half of u.s. c.e.o.'s fear a recession by mid 2020. that kind of risk. but you can see that equity markets never really price that in. and i don't think that the chances of recession, never the base case. there was a risk which i certainly am worried about and i remain worried about. i don't think that risk has gone away. i think the data is coming as
expected. and i don't think any particular change. just because the fed has managed their communication very well. and hasn't changed the underlying data there. matt: a new record in stocks, mark. have you considered going as a bull for halloween tonight? mark: no. i'm still sticking with the same levels i talked about for many months. as a k 3105 or 300.65 closing level. stocks are really going nowhere at the moment. that said, though, i can't see myself becoming a structural bull after many years being a structural bull until may this year. i can't see myself returning to being a structural bull that quickly. i might have to step away from being a structural bear because it looks like this stock market is impervious to anything. we had some terrible chinese data overnight. no one seems too concerned. we're getting a consistent message. the global economy is slowing fast. we're also getting -- a message that earnings aren't great. i will say that earnings have done probably slightly better than feared. and that's a positive point
there. so i think that overall, the input that i expected to cause stock decline have come through. we haven't had the output yet and that means that i'm wrong clearly unless we get something going rapidly changing the next few days. but i reckon by that next tuesday, i'm going to have to concede defeat and actually see a severe decline by then. anna: it sounds as if mark is still going as the grinch for halloween. mark, what about the b.o.j. and what we heard from the b.o.j. dropping the reference to the time frame when it comes to their goals? was that significant for you? mark: i think it kind of makes sense given that these time frames have always seemed quite ridiculous as -- last few years. it's good because it's progress. it's an element of b.o.j. policy that won't be marked for a while. so i think it is a positive step. but i don't think it's necessarily significant market wise, no. matt: all right. mark cudmore bloomberg mlive
managing editor. thank you for joining us. you too can join the debate on today's question of the day. should assets be pricing out a recession? mark doesn't think it was ever really priced in. reach out to us in -- and type i b-plus tv go on your bloomberg terminal. up next a done deal. fiat and peugeot agreed to a 50-50 combination. at least that's the stock split. creating a company worth about $50 billion. we'll get the latest from milan. and remember, blerk radio is live on your mobile device or on d.a.b. digital in the london area. this is blerk. ♪ ♪
anna: welcome back to the european market open. 20 minutes until the start of equity trade and we have a positive to flat picture for european equities. so the ftse 100 futures looking flat and more upside potential elsewhere. a lot of earnings for markets to digest. bloomberg, in london. >> thanks, anna. let's start in the u.k. and opposition leader jeremy corbyn is set to blast what he calls a britain corrupt system. that's as he kicks starts labor's election campaign. he plans to attack billionaires including rupert murdoch and mike ashley. he will also reiterate labor's plans to nationalize rail, mail and water companies.
warning that return to investors may be less generation than they had opened. and lagging risks from completing its share buyback on time. but and continues the industry trend of comfortably beating profit estimates. net income for the third quarter was well above even the highest estimates. now to the scandal with the u.s. justice department has struck a deal with futures -- joe -- it will recoup $1 million from the malaysian investment fund and set a record for the biggest ever recovery from a u.s. anti-corruption crashingdown. russia has a major boost from an unlikely source, denmark. the nation is letting the controversial north stream two pipeline pass through its territory and help moscow tighten its grip on natural gas supplies in western europe. danish approval was the last permit needed for the $11 billion project. the pipeline has drawn the threat of sanctions from the
u.s. global news 24 hours a day on air and at tictock on twitter powered by 2,700 journalists and analysts in more than 120 countries. this is bloomberg. anna, matt? anna: thanks very much. now, london petroleum is snapping up a stake in a nor weemingen hydropower project in a bid to cut its own carbon footprint. up until now the swedish firm was exclusively an oil and gas company. the announcement came along with third quarter earnings that saw ebitda beat the highest analyst estimates. alex schneiter the c.e.o. of london petroleum. good to seek to you. let me start with this investment in norwegian hydropower. is this about changing what you do at london or is this just changing how you offset what you do? alex: good morning. no. it's part of a strategy. we always aim to be one of the most efficient companies, producers, offshore company. and we showed that on the
operating costs where we have -- i would say leading operating costs at close to $4 a barrel. we also have very high up time to put in 96% to 98% and we among this efficiency we wanted to show we have some of the lowest carbon footprint and we've done it in semple ways. one is we have electrified our platform. and we will be using onshore power which is mainly coming from renewable. and we have now made a decision to also fully electrified grid at the time we will reach stage two. record low co2. and offset what we are using offshore in terms of power usage. so i would say just a logical step to continue to be
efficient. matt: what about other ways to offset your -- to offset your carbon footprint? have you thought about for example voluntary purchases of carbon credit purchases, emissions quota purchases? alex: there are many ways. number one, as an oil and gas company offshore, you first have to focus on the efficiency. is to be the most efficient and to achieve that, there are many ways to do that. one is obviously technology. and could be digitalization. the second one is obviously the electricification which significantly reduces your co2 emissions and has a business case. because you -- you obviously pay less taxes. your taxes, we have one of the highest co2 taxes in norway and incentivized to reduce your carbon footprint. secondly, the up time, what we e is that the up time on a
platform that is owned by turbines is lower than an up time when it's run by electricity from onshore. and then there are many other ways. bviously reduce the traffic of people back and forth from offshore. and carbon, natural carbon capture, and others. so i think our industry is doing a lot of work and a lot of good work in terms of reducing as much as possible this footprint as producers. anna: ok. let me ask you about the oil and gas production itself, though. you obviously we got johan up and running now and expected to get to full phase one capacity in the summer of 2020. but it does seem to be ramping up very quickly. why do you think it will take that long? alex: well, first of all, the ork as an operator is simply extraordinary. and it's an extraordinary
field. and what we seen so far and also with the execution, there hasn't been any major problem and now we see the benefit of it. first of all, we came onstream earlier than anticipated. secondly, we see the ramp up of the pre-drill wells coming faster than anticipated. are now producing from over 200,000 and we expect to have eight wells up and running by the end of november. which will account for 80% of phase one which is 440,000 barrels a day when at 100%. the next guidance that we are saying that we will reach the 440,000 which is phase one capacity. but by mid year of 2020. this is predicated on the fact that we may need two to four new wells to reach that level. so we need to see the -- for the activity and the production from this existing eight wells. and that will give us a better
understanding if -- if in terms of the guidance for big production for phase one or we can do it earlier. but it's too early to say now. matt: alex, thank you so much for joining us. alex schneiter. c.e.o. of lundin petroleum. alking to us about their carbon offset and oil production. we're minutes away from the open of next -- next a look at your stocks to watch this morning including chip makers after a strong forecast from apple. and good results from samsung as well. looks good for tech today. this is bloomberg. ♪ ♪
matt: ok. welcome back to bloomberg markets. thfers the european open. -- this is the european open. about nine minutes to go until the start of equities trading. let's get your stocks to watch around the newsroom. annmarie hordern looking at chip makers for us. danny berger focusing on b.n.p. paribas and tom lavelle from our equities team is covering the airline sector. and let kick it off with and you chip makers. what's the tech story this morning? annmarie: well, chip makers will fare very well this morning after we heard from apple and samsung. so apple saying -- they will have a strong holiday sale demand. the market liked that. and samsung posted better than expected results and also projecting this recovery in the chip space in 2020. so keep an eye on the usual
suspects. s.t. micro, infineon. anna: the banking sector. this time the french side. b.n.p. par bags. >> the third straight quarter of gains and their fixed income division and trading there. they saw that their profits rose 35% in fixed trading and beats their wall street and their e.e.u. peers so a clear positive on that. cost cutting program also on track to basically in the middle of it right now. morgue morgue -- morgan stanley saying the shares are very much likely to open higher this morning. matt: tom, what's the story with airlines today? tom: air france k.l.m. in particular focus because they had a rather severe miss from analyst estimates on their earnings at all levels. and that was basically they cited economic weakness. they did not have last minute bookings and cargo that they had been expecting. and also they are predicting a
higher fuel cost than previously forecast. in contrast, i.a.g. also fell. but that was a bit more in line with analysts. however, their earnings fell because of the strike. a pilot strike and that labor dispute has yet to be resolved. anna. anna: thanks very much. back to -- thanks to tom, dani and annmarie. the function on bloomberg, we had numbers out of shell. and they came in at better than the estimates. but risks to the buyback time frame. and seems to be the headline that many have focused on. we just talked to london and their numbers the -- better than the highest estimates and how will they react to that investment in norwegian hydropower? sanofi better than anticipated. and carlsberg in the drinks sector sales better than estimates. and an increase in guidance from delivery hero. it does seem like we're getting a little bit more upbeat news flow surrounding the earnings
season. although, you know, we -- these -- the estimates that we're judging them up against, move around a little bit. before the earnings come shall we say. matt: and let's remember that markets can read these things a little differently as well. yesterday we had santander and credit suisse both beating the street's estimates and the shares cratered throughout the trading day with deutsche telekom. so we'll watch this as well as the deal, anna, the french car maker peugeot and italian american rival fiat chrysler have approved a preliminary plan to combine. the resulting company would rank among the world's largest automakers with a potential $50 billion market cap. under the proposal, shareholders of each company would receive 50% of the combined entity. and anna, this is why a lot of people want to call it a merger. and for public relations purposes, it's great to think
of it or pitch it as a merger. but in the end, one side always buys the other as we know in the end. one side always ends up with the control of the company. there's no such thing. as a merger. anna: so if you're loorg at board seats and you got p.s.a. with six when you include the c.e.o. versus five, five at fiat chrysler. and interesting maintaining three listings so in paris, milan, and new york. and we also know that p.s.a. will be meeting with unions later and this will be interesting because the only statement we've had has been supportive from the french government. but the only statement we had so far has suggested -- suggested that they are going to be keeping a close eye of course on the french contribution here. let's get to our colleague dan lefgren who has been covering the auto story for us. and your response to what we heard this morning. dan: well, not a whole lot of surprises. what we've seen so far, certainly in the statement.
clearly these talks indicate that the two sides are moving very quickly to dissemble this combination. and a few questions emerge such as what is the role going to be for fiat's current c.e.o. mike manly who took over for sergio marcrone when he passed away last year? it's not a signed and wrapped up deal. they're moving toward agreeing to a memorandum of understanding. but the level of the details that they've given out so far, the makeup of the board. who's going to be the c.e.o. and chairman indicate that clearly they're moving quickly on this combination. matt: all right. dan, that you can thank you so much for joining us. bloomberg's dan liefgren from milan on what looks like a purchase of fiat chrysler by fiat. coming up, it's the market open. we have futures pointing mildly higher. it could turn into a risk on day as anna says. we got a lot of earnings out
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francine: a minute to go until the start of cash equities. let's have a look at where the markets have positions. a little bit stronger over in the asian session. the fed may not be in a hurry to cut rates. certainly the cut from the fed having an impact the markets. the yields weaker than they were. the u.s. dollar also on a weakening track. we saw the pound popping higher. oil markets and focus. pacific news around pipeline ruptures.
futures.e a look the we are flat on ftse futures entirely. maybe it is the earnings story coming through. better than anticipated numbers. the banking sector, the oil sector, both still in focus for us as we start this equity session here for european equity markets. pound looking to be quite strong this morning against the falling dollar. maybe that is the weight on the ftse 100. spanish ibex opening. we do see a little bit of room for gain. some of the pound turned up by .3%. do see moves to the upside. the german dax up by .2%. let's look at the sector you point and see where we are. financials arey