tv Bloomberg Daybreak Europe Bloomberg October 20, 2017 1:00am-2:30am EDT
anna: a very warm welcome. our flagship morning show. i'm anna edwards. let's talk about what has been happening in the markets of the last few hours. we are on the route towards tax reform. to a slightly more risk on attitude. this is a drop in treasuries that we saw. there is necessary but not sufficient progress in the united states on tax reform. the budget has been taxed -- passed by the senate. we are on the road to tax reform, but we are not there yet. this is a move in that direction, something that markets like.
we have the dollar advancing. up by 2/10. the bloomberg index up by 3/10. suggesting will be higher than up by a quarter 1%. we also have the new zealand dollar in there. that is day two of weakness of the new zealand dollar. 0.64 percent. this is based on uncertainty about where the government will go. let's discuss the japanese election over the weekend. we will talk about it as we go through the next hour and a half. we have guests for you today as well. we will talk about brexit, a corporate angle, and things that are on the mind of the chairman of bp.
in the u.s., the trump administration has taken its first major step towards the plan to rewrite the tax-cut without democratic support. the senate adopted a house for -- adopted a budget resolution the house agrees to accept. remote ins intend to enact a bill by the end of the year. donald's closest advisers are choosing am towards john taylor or jerome powell to be the next spreadsheet. people, the several president has not yet made up his mind, though he has publicly promised to announce the decision before visiting asia on november 3. the short list also includes janet yellen and others. the u.s. secretary of state says cc little hope that a saudi standoff will end any
time soon. they are casting doubt on american efforts to mediate the crisis. there is a renewed push to resolve the dispute. is projected to lose its two thirds majority. is most likely scenario picking up 297 seats, shy of the 300 needed for the super majority. global news 24 hours a day. powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. anna: thank you very much. let's get the latest on the asian market session. there are a few things that
shaped the asian session. that dollar resurgence adding --e pressure on a sinking the nikkei 225 is set to snap a 13 day advance ahead of the election. ae hans tsonga rebounded from drop but hasn't fully recovered. the party congress kicks on for the third day. overall, asian stocks are set to end the week lower. were looking at some equity movers in asia. aia.ave the likes of the worst performer on the hunt said. today. rebounding steel erasing gains in the
afternoon session. the company is set to make an announcement today. that's our check on what is going on in asia this friday. anna: thank you very much. a little bit of breaking news for you. talking about hurricane claims, they see hurricane and played -- quake claims at $360 billion. -- $3.6 billion. a little bit of context for the number. we heard from snp recently. -- s and p recently. likely wipe out global earnings. matt miller joins us from berlin. we have managed to secure him in
position. from this you take european news? point.re at a tipping not just one but two secession battles. britain looks to blake -- breakout of the block. theresa may has signaled she is willing to offer more money on the divorce bill. meanwhile, catalonia is edging towards a proclamation of independence. another one. a separatist campaign group is calling on supporters to pull cash from banks. maria taddeo is in the catalog while nejraarcelona cehic is in brussels. let's talk you first nara, -- nejra.
what has may offered in terms of money? prime minister theresa shethat there are signals may be able to compromise on the brexit bill. to pay thes for her u.k. budget for two years. she made it clear to eu leaders that she needs a deal that she can sell to the public at home. the eu is very aware of this. what we got at this meeting was signs of a friendlier tone from the eu. a more upbeat tone from german chancellor angela merkel. she said there is to year own of brexit not been successful. both sides, not just the u.k., but the u.k. and eu have to work together to move this forward.
as far as a timeframe, we did not get that from her. she said that there has been progress. as far as timing, that is more of a question. the game of spot the ball, it seems angela merkel has cleared that up. there are two balls, one in each court. timeframe, a lot of uncertainty of what will be at you will by december. that's exactly right. there was a lot of question and discussion over whether the talks could move on to trade by december, which is what the u.k. is pushing for. we were hearing yesterday that eu officials were working internally to get ready for the possibility of making a decision by december. you can see how much uncertainty there is already. today, we are getting some signals that there is the possibility. talks might move on.
it's because of the friendlier tone and the fact that angela merkel clearly signaled that the ball is in both courts. whether that actually happens, we are going to have to wait until december to find out. theresa may is not going to continue discussing brexit with eu leaders. but she is meeting donald twos -- toosk and the impression she may seem to have left you leaders of the sweeter taste in the mouth. want to get over to maria today out in barcelona. in barcelona. we have been hearing that the rebels will declare independence again. even more significantly, the catalog national assembly is calling for supporters to take money out of the banks that have moved. what are you hearing about that? >> that is an interesting note.
these are the two main pro-independence groups. remember, the leaders of these two groups were sent to prison earlier this week. this is going into an investigation for potential sedition. they're are calling on supporters to take money out of cash points and specifically to that are leaving. if you are happy about this, take your money out of the bank accounts. it's your money, take it out. out if you feel like you have a right to protest. they led a corporate exit this of companies moving out of when the declaration began to be floated around by the cap lan administration. to seed be interesting
the reaction receiver people. there should be another reason for banks and companies to be worried about. they're worried about the idea of a unilateral declaration of independence and a major potential legal limbo. now, obviously, calls which are explicit for clients to pull their money out. maria tadeo from barcelona and nejra cehic from brussels. us, market strategist from jpmorgan asset management, mike bell join us. take this aside from your european strategy? ibexnderperformance of the
35 during the course of this crisis going back to the start. what is your attitude towards spanish assets? -- mike: wee been have been underweight. it is more that there are better companies elsewhere than the politics. it is pretty unlikely that catalonia will be leaving spain. we are not too worried about that. these headlines about taking money out of banks aren't a particularly good idea, but the view is that catalonia will stand spain but we are finding more attractive options elsewhere in europe. where are the most attractive opportunities your finding? what are you optimistic about? across europe, we like
cyclical companies at the moment. we also think the companies that are getting the majority of the revenues from within the eurozone are attractive. that's a domestic cyclical focus. we think there is some possibility the euro could appreciate from here. we are pretty positive on the outlook for a lot of europe as far as equities. as margin start to increase, you have some high operating leverage. see quite strong domestic growth and global growth. that's a particularly positive back up. the catalonian crisis had stalled the events of the euro. at 1.18 12.ly it had done quite well throw the summer. you look at the.
between 2002 and 2008 there is a far greater appreciation between euro and dollar then now, but you saw european earnings triple. i think of it as the euro -- zero plane taking off. -- airplane taking off. the euro is a headwinds that stops you from accelerated the same pace, but it is an stop you from taking off. earnings will get you to grow even if the euro goes higher. quite ftse has gotten well this year and we are getting positive news about brexit. ftse companies are mostly operating internationally, so that is why they are independent from the brexit news, but does this give you more optimism on u.k. assets? think that the
outlook for the u.k. economy and the politics surrounding the u.k. entegris negotiations remain highly uncertain and opaque. world, look across the we are in most of the -- we are overweight on most equity markets versus the u.k. where we are neutral. we don't want to be taking large bets on the domestic focused revenues in the mid-cap part of the market. what's interesting is that stands out from the industry as a whole. when you look at the average u.k. fund, there is approximately 42% weight and 20% overweight compared domestic focused socks. we don't think that makes sense in this current environment. you very much.nk mike bell will stay with us. coming up, a taxing time for the u.s. senate. they adopt a budget.
sales figures from volvo. operating profit for the third quarter at zero point 72 billion. the net sales coming in at 77 point 2 billion against an estimate of 76 billion. going into these numbers, analysts have been talking about truck profitability being hit by new model costs. they see the north american truck market. two and 25,000 units. from an overall perspective, they say, market demand is strong. will be speaking to bloomberg radio later this morning. that is it 9:45 u.k. time. me tell you what you
should be watching today. leaders are discussing brexit in brussels today. they continue to discuss brexit although they have other things to talk about as well. the check parliamentary election gets underway today. that is something everyone will be following. on sunday, japan goes to the ballot box as well after shinzo abe called a snap election. up,e are elections to keep check, and japan. fiscal. senate adopted a 2018 budget that the leaders of agreed to accept. it includes an option to pass a tax bill without democratic support or democratic filibuster.
still with us is mike bell. rule but it a wonky has the market a little excited because it means we are one step closer to actual tax reform in the u.s.. what chances do you give the trump administration of pulling this off? is thehe key thing market is still not giving it much chance. yearu look at 2018 end of forecasts, they are lower today than prior to the election. really isn't pricing in any tax reform. if you do get tax stimulus coming through, there is some upside for the market. if you don't, the downside is pretty limited given there are low expectations. what is the probability of a coming through? it's hard to say. thing that isr moving the market seems to be
the conversation around fed chair. that's a very light one. reporting now suggest that things have been narrowed down. seem to be thell favorites. we don't know exactly what the president is thinking. jerome powell, what are your takes over and if jerome powell were to be the guy in charge, what would that mean? apart from janet yellen, he's the least likely to rock the boat. he makes slightly more hawkish that yellen but not significantly. yellen says there is a put rates of seven times by the end of 2019 and a market is only pricing two or three more rises.
we think rates will go faster than the market expects. estimates that interest rates the to be quite a bit more higher. will the market see him as the taylor rule or more hawkish? will i think markets assume there is a higher path then currently expected. continuing oren powell, but taylor and walter yellent hawkish while more dovish.e either taylor has never had a conflicting opinion with the majority -- powell has never had a conflicting opinion or in some way he thinks he should be
voicing it. let's get away from the fed and political talk and get into asset talk. we still have able market that is pretty long in the tooth. equities still don't seem expensive and volume is low. would you buy u.s. stocks here? mike: we are still overweight in u.s. equities. when we are cognizant of in the medium time, if you take the view out two to three years. the recession risks are rising. we are cognizant of the medium-term risk. of short-term indicators inflection signals are not flashing red. you look at consumer confidence which tends to shut fall sharply before the stock market. job rates seem to be doing alright. recession risk love the little different in the medium-term.
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good morning. 6:30 a.m. in london. in berlin. it is 2:30 p.m. in tokyo. a shot of the palace there. a couple days ahead of the elections. anna? anna: let's look at some breaking news. looking ahead to the elections in japan, but back to the european corporate story for the moment. erickson is coming up. we have a q3 adjusted gross margin of 30%. the estimate was 29.8%. mark.r off the
provisions in the third quarter adjustments have an impact. 2.3 billion swedish krona are. seeing some encouraging improvements. the wording of that seems to contrast what the analysts are saying ahead of this. they were expecting a challenging quarter and a bleak outlook. to see somerting encouraging improvements. not simply. matt, what do you think? matt: i see some daimler earnings coming across. estimates lower just slightly. 3.4 6 billion euros. the estimate was for 3.5 5 billion euros. missing analyst estimates by just under a hundred million euros. 40.8 billion euros of revenue
and we are only looking for 40.41. a little bit of a miss for earnings and a little bit of a beat for top line. cars was 2.1 5 billion. this is a little more important than it normally would be. daimler is splitting apart their businesses. the finance arm will be a separately run business than the cars and light trucks business. it will be severed from the heavier trucks business. very interesting to hear the call this morning. excited for that, to be honest with you. you'll be talking later on the european open in munich. we are covering these earnings this morning. that's the truth. matt miller is excited about that. let's get more on the broader market. guy johnson. is anhink this
interesting part of what is happening in the market right now. despite the fact that a merrill lynch survey shows cash holdings are currently fairly low, you saw some of it put to work yesterday. this was the s&p yesterday. i cap over here with that cap was filled pretty quickly. does that tell you about where we are? not feeling that nervous. willing to step up and make that trade. the tech story have much to do with that? 500 crawled up another 4/10 of 1%. we have trading already on ftse futures. we are going to open up around three or 4/10 of 1% up. we're waiting for the rest of europe to fill in. what's going to go on with the banks in spain.
in 25 minutes time, that will be a distant story. highlight the british pound. it is weakening or week. i could be a factor playing into the story but is happening with the ftse this morning. the pound is a factor. the wind -- the yen weakening into the election. the nikkei is fairly flat. back to you. anna: thank you, guy. it's important what happened in that u.s. session yesterday. let's talk to the bt group chime in -- chairman. good morning to you. discuss the business and how bt is doing but also the political and brexit conversation. let's start with bt. a tough year. a profit warning back in the early part of the year. how is it going now? regain you managing to
investor confidence. a huge amount of process rolling out of fiber and get into content and sport. ray a much stronger company from a balance sheet perspective. -- arday was a's a struggling year. are determined to really find out what happened to take courses steps and determined to move forward on the critical of investing in the of the structure of the country. anna: in terms of that deal, you have a legal separation. how long do you think this relationship has to be tested? you and thetime for other businesses to work out if that's enough separation a weather further separation we call for? -- mike: we are seeing much
more step, much more i -- andent, and what with an independent board it is going very well. it's going to work for the country. anna: is coinvestment something that is -- absolutely, and deals are being looked at right now that will facilitate further investment and competition that we support. anna: matt? >> recently citigroup downgraded bt shares because of competition growing a fiber plan to have in the u.k.. our you concerned that bt will become increasingly insignificant? it's always been the case that there is significant competition.
in the last 10 years competition has been committed gas created. -- has been created. we are some of the best feeds at best prices. competition is always good. advantage of profits. -- go visit your anna: how aggressive can you be? mike: we are completely committed. we need to result of the whole country gets high speeds of broadband. ubiquitously, right across the country. we are determined to roll a fiber to the rest of the country. we've invested in technology to enhance speed. people are a wider, deeper coverage. also talking about bt and then perhaps we'll move on to other interests of yours, the
subject of english rights, the , you haveague matches to decide how much to pay up. will it change with new players like twitter and amazon? mike: i don't know. we will watch it carefully. we got into content we created more competition and pay-tv. it's been a great success we feel. we are going to be very careful that what we invest makes return for our shareholders and continues to drive the business in an appropriate way. think abouto you the little progress the looks like has been made it brexit? how important is that to bt's business? they you get a good trade deal between the u.k. of the other european nations? bt is not importing and
exporting goods in that sense, of one indirect affect the u.k. is important to us. like others, the ball in the value of the pound increases the cost of importing technology equipment. we also have a large number of forpean nationals working bt at our global services business and we need to be sure we have access to be skilled labor and supporting need. matt: let's talk a little bit about the thin tech play. you are on the board of world play, i believe, and there has been a ruling that base have to share more information within tech partners. you previously worked with barclays. what do you think about new regulation and you think it will fintech growh --
and compete with other banks? mike: i think they're trying to create as much competition generally. opening up access to accounts is an interesting way to do that. to payre issues you have 50 two. security of data and so forth. in principle, competition is good. anna: do you see the retail banks trying to resist this anyway? they got the value. mike: data has a huge value. big big that has an even bigger value. it subject to a lot of questions about privacy. the insurance that you have a lot of the right controls, defenses, and can ensure that copies of data is retained confidentially. anna: thank you very much. .ichael drake stays with us if you are a bloomberg customer and you are watching the tv
channel on a realogy the, you might want to move to tv . the the video stream but also the charts and functions we're using. you can influence the conversation by asking the guests the question. votes in a satellite on sunday with many seeing the vote is a safe bet for shinzo abe. says hisa new poll coalition will lose their two thirds majority, slowing the push to revise the pacifist, the best constitution -- the pacifist constitution. what outcomes looking likely at this point? continuity? >> obviously nothing is over until it is over and there's still a lot to play for. our best guess on the polls we've seen in the past few days is that always -- abe's coalition will win just under 300 seats.
he needs 310 for the early majority and to push forward with this plan to change the pacifist constitution. threat with a reduced majority be? it might not necessarily be a huge threat but you have to look at the size of the loss compared to what he had before. he feelings is too many, it becomes less desirable as a leader and his party might even be tempted to replace him. there is a party leadership election in a year and if they can find another leader they think will be more popular they might be tinted to put someone else in. at the moment, that seems unlikely. the losses will be too bad so we will probably see a continuation.
more tips simulate the economy. anna: thank you very much. when you're traveling to work and you have to turn on bloomberg tv, you can now turn on bloomberg radio which is available on your mobile device or on the radio in london. we will talk about the yen ahead of the elections. when we come back. coming up, support for may. merkel looks to talk brexit talks forward. a run on banks possible. catalog separatists asked supporters to pull their money from the top five lenders. we don't know if they will do it. the call comes after lender said they believe the region. we are live in barcelona. this is bloomberg. ♪
♪ matt: good morning. 7:47 in berlin. you're looking at a picture of your city. that is the empire state building and green. 1:47 in the morning there. unlikely anybody but european traders are way get, though some people are still away from last night. let's get a bloomberg business flash. volvo's third-quarter
earnings surged 45% after truck sales in north america recovered and demands for construction and mining equipment in china rose. 860 $2 million, beating estimates. the tracks division expected -- to 8.6% from 8.6% from 8.2%. nissan producing one point 6 million -- nissan it is by the violation. received offers sports margarine and spread units. according to be will familiar with the situation, a group also made an offer for the underperforming spread business valued at around 7 billion
euros. from unilever, blackstone, and others declined to comment. telecom italia is open to a spinoff of its landline network. according to people familiar, the ceo did not rule out the possibility of a plan to separate its grid. that signal came during a meeting with tie-in minister yesterday. represent is were not merely available for comment. that is your bloomberg business flash. the german chancellor angela merkel has offered the u.k. prime minister support over brexit. this happens after theresa may signal she is willing to give more of a divorce bill. merkel is calling on both sides to take further steps so ideal can be reached by year-end. ifwe are in the process and
it takes two or three weeks to move forward or a bit longer, that won't stop us the read -- working hard to reach an agreement. it will be more difficult in the first stage. it did not affect future relationship. anna: thoughts on the subject? we talked about this in the past but the mood music seems to have changed. officials say it improves banks. do you see improvement? i think we are in a critical moment. we are not only seeing the inevitable cuts mrs. of brexit, but the consequences of uncertainty. with the devaluation, with inflation, with productivity increaseseady, wage are difficult. concerns over availability of labor.
it's a critical moment where we need to move forward and break the deadlock. conference, the chancellor was sick -- was calling on businesses. help me convince them. how much more will business invest? a business perspective, it's clear that what we need is a transition. . two years in my view is not enough. five to 10 years. absolutely. to deal with the fact that we had 43 years of legislation, we have a single market, we have 52 treaties with countries outside the union. we have regulations that we have to reestablish. we have trade treaties which take on average five to eight years and can take 10 to 15 years. period where wero
can get access to the single market in the customs union because the cost of doing this and ensuring that we have that timeframe and continue to invest and establish the future trade treaties. -- how manych businesses will be left anyway? we saw after the catalogs declared independence, after they voted, 550 businesses left barcelona in a week. lloyd blankfein tweeted out of fright for it, i'm going to be spending a lot more time here. that smart for businesses need to be operated europe to be already moving to the continent? mike: two things. level, the uk's silly country of 65 million people. a sophisticated financial system in london.
but many businesses are executing in developing their contents he plans. banks are having to look at where they can base their activities in europe. frank for his one. dublin is another. are many japanese and other companies who would like to keep as much of their business as possible in the u.k. that are having to look and take steps that they protect their investors and their stakeholders during this. -- during this time. anna: what do take of the actions to get ahead of the parliamentary process or negotiations? city -- citiuk is taking action. he was quite optimistic. will that take too long and be too late? mike: i think businesses trying to engage with government to find a solution to this issue. parliament is ultimately the
sovereign body. corporation, are really trying to sit down because it all of our interests. brexit is not good news for us, or europe, for the global economy, so we have to try to do everything we can to accept the parliamentary decision and implemented in a way that will be most -- least damaging. london is good for the u.k.. it's good for -- give us as much of a voice as possible. we need to be the leader. we created the single market. anna: can we want to the financial services infrastructure? mike: already there is a minimum. nobody denies that there will be lost jobs. the question is what's the number. what we are trying to do is ensure there's a certain reality about the skill base in london.
euro clearances are still very important, not just to london, but to jobs across the u.k.. what do you think about the strength of the pound? i have a chart showing the pound index. the pound against a basket of trade weighted currencies. you can see that we have traded at a relatively steady rate. since the big drop. is this the new normal? with theyou have seen pound, it is inevitable that the pound was slump after the brexit vote. it was a shock. it was a surprise. i think what we see is clear to me, when people feel a little more optimistic, the tablet up. then we had the political eruptions about whether or not that would be acceptable, the power goes down again. that's the pound goes down again.
the pound goes down again. you mentioned earlier on that you think five to 10 years would be what you need. when i was talking to the cbi and talking to the bcc, they are talking maybe three years. they are trying to push the government from two to three years. anybody deliver on five to cap? mike: -- on five to 10? i'm pushing for reality. let's do it in an open way. lost a lot of time. we had a general election. there are some political questions that have to be resolved. anna: absolutely. thank you. thank you for joining us. next, we are at the front line of not one but two eu secession battles.
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♪ exit lifeline, angela merkel calls for britain and the eu, so a deal can be reached this year. we are live in brussels. and, upping the ante. catalonia says it could declare independence again within days. officials finalize plans to seize the region. we are on the ground in barcelona. plus, trump tax momentum. a resolutionopts for the president's fiscal plan. treasury yields rise with the dollar. finally?, as yellen out ?white house advisers are said to prefer john taylor or jerome powell as a central banks next chief.
♪ >> welcome to bloomberg daybreak: europe. i'm matt miller, here in berlin. >> i'm an edwards hearing london. us. to have you with let's look at the feature. as you were saying in the headlines, maps, we've got progress in the united states. 2018 budget passed by the senate. that seemed to ignite some of the markets, certainly the dollar, mosher -- moves in treasuries. what is that all mean for european equities? if we could go higher at the start of the trading day, up by maybe two quarters of 1%. president trump has been on
twitter overnight, saying this is an important step on getting that done. >> let's take a look at risk radar as well. it looks like it's going to be a risk-on day. -- dollare the gaining today. if you see any of the basket occurring fees, the pears, especially the defensive pears, like the swiss franc and japanese yen, they are losing more ground to the dollar today, as investors pull that money out, put it into risk assets. fallingzealand dollar in value against the u.s. dollar as well. the new zealand dollar, yen, and frank, probably most interesting currency pairs to watch. as far as bond futures, take a look at where german bond futures are trading. it looks like investors are selling off bond futures. thatill see that spread has really widened between u.s. treasuries and the german
bund's, as the whitest in 17 years, coming back in a little bit. that makes sense, you see '05 features -- of futures down as well. ad load low for first word news. ad load low -- and love low. : the senate adopted a fiscal 2018 budget resolution, the house gop leaders agreed to accept. the house -- a house committee will have legislation by early next month. intend to enact bills by the end of the year. donald trump's closest advisers are steering him towards choosing either john taylor or jerome powell to be the next fed chief. according to several people, the president has not yet made up his mind, although he has publicly announced to announce the decision before -- shortly.
u.s. secretary of state has said he sees little hope that a saudi arabia standoff with qatar will aendnd -- and soon -- soon. the comments come days before he embarks on a trip to the region, including stops in saudi arabia and qatar. japanese prime minister shinzo abe's ruling coalition will lose its two thirds coalition in sunday's general election. the most likely scenario is a liberal democratic party picking up 297 seats, shy of the 310 needed for a so-called majority. that could potentially slow the push to revise the nation past its constitution.
global news 24 hours a day, powered by more than 2700 journalists and analysts, in more than 120 countries. on the find more stories bloomberg at top . the budget deal over in the united states, the senate at least -- igniting some assets. >> we had that dollar researching. that drags those asian currencies, the kiwi, yen as well. dollar yen about that one 13. japanese stocks -- managed to close the day higher for another straight session. rebounding, though not recovering all of 1.9% drop. chinese lunch caps on extending. we are seeing shares here -- on this hate share gauge. elsewhere, these chairs are writing -- are rising. are rising.res
take a look at some equity movers in asia. some big movers, we have ai a groupon our rate -- aia in our radar. third-quarter results is appointed. rebounding from the drop we saw thursday. kobe steel arranging gains in tokyo here. the company saying it is considering making an announcement. anna: thank you very much. catalonia is edging towards proclamation of independence with a separatist campaign group calling on supporters to pull --h for banks, for the four get us up to speed them. how significant this court by the nationals stash assembly, maria? >> good morning.
it could be quite significant. want to see what kind of reaction we get from people in the streets in barcelona. they could make a difference. this idea of pulling out money from the main banks -- us as a banks -- to several this is a reference to several banks. leaders,back to two this investigation. the idea here is that they are saying, if you are against this, go and get your money out of the banks. we your bank has come under a lot of pressure. they are also heavily linked to the government here. they're very symbolic and iconic. we could see a little bit of back out from people who don't agree. result of this unilateral
declaration of independence, it could be made over the next week. catalonia makeld a true proclamation of independence? obviously, we saw? sign one already, then suspend eight seconds later. left wing of his party wants to come out with a real declaration of independence now. is that right? >> that's right. did encourages public -- say i will spend it, then he spent -- sent many things to madrid. we announced that a member of the coalition said, if we see the government in madrid trigger article 155 -- that we don't have specifics. when it comes to that, we are getting the impression that it might be triggered on saturday when the cabinet meets. it might take longer for it to
be implemented. the sense we get here, they don't want to take the final step. >> if i could squeeze in one more question here. i know there is speculation for mark bigelow -- for mark to testify. could he be arrested as well? him going to madrid, quite right if there is debate. he might -- they might want to hear from him. in that case, i don't think he would be arrested, or the government but actually want to get that picture of him being arrested. we should interpret that as a sign of goodwill. conference and regional presidents, and he
didn't attend that either, and hasn't been there in years. they wanted to engage. madrid wanted to see him. this is a positive. anna: maria, thank you very much. maria taddeo joining us from barcelona. let's bring in the conversation from the cao -- good morning. good to see you. when you look at what has been happening in catalonia, do you manage to put it aside and see it as a vet -- investment opportunity, or does it worry you, separatism in the eu? >> the eu just want some other. we are try to leave. you can't say it's a positive and spain -- it's important to all countries. for to go that way would be disastrous. withdrawing money from banks is not help. not good.
the unemployment rate is still high double digits. to get too carried away by recovery in southern europe. missouri director from turkey , it's at -- let's not very strange moment. >> you don't sound like someone who is stocking up on spanish assets. >> its nationally focused. there aren't many in that area that's the problem. ibex indexuch the itself, you very much think, i'm comfortable. especially, when these things happen quite rapidly. >> i would wonder, why you are just not getting paid for that. when you look at peripheral debt, the spreads aren't that big. why would you bother, right? >> there's no such thing as a high-yield fund, matt. there is no yield anyway. there's absolutely no yield for anybody.
precisely zero. >> glad to hear. >> we will take your word on that one. those concerned about maybe defaults in europe, should they take solace in the fact that the ecb is not moving anywhere in a hurry? i have this chart, generated 9612 for anybody with a bloomberg. this is showing you the output flat -- cap closing here in blue. intelligence refusing to budge, or is it? is a ticking up? >> there's wage processes in place. there is still that vacuum outstanding jobs and other jobs. you were not getting that tech shift in wages -- you're not
getting that shift in wages one would anticipate. is the same as it has been for seven years -- will keep taking money, and optimistic assumption that will cause inflation. inflation onst cpi. their companies saying, we have cost inflation. even china come many countries have a real challenge of this. there's rising cost pressures. they may not be translating for things like the internet, things that we know like cpi numbers. they are at 45% now. number one cap -- they are at four or 5% now. companies are stirring to tell us. peter, the default comment led me to think of how well the stress that has done. if i look at this -- the stress debt has done.
if i look at this chart, the bankamerica distressed debt index. in blue, u.s. corporate credit index. distressed has been the right but to make -- the right bet to make. on the other hand, a lot of players -- 300 billion euros in the stress debt specific funds -- they have about one third of their holdings in cash, and are free to use it, because it seems to have topped out. you think this is going to turn around? >> they should they've got is the can't see this -- there's no valuation at all. central bank has convinced us there will never be another cycle. i wasn't kidding on the european high yield. that's an astounding statistic. that's what forcing money into markets, forcing people to risk assets has done. the investment professionals, who a talk to -- they don't want
any cash. if they can, they are rejecting cash. market is shrinking in europe. you've made the cost of capital so low, you've kept so many companies alive. the people who aren't getting paid for taking risks -- the risk. this is why it is unnerving. but this is why it's like leaping off a cliff. >> speaking of launching off a cliff, i am going to go out to left field, peter, and pulled out a bitcoin chart. >> wow. a shock. [laughter] >> it is for you. >> bitcoin chart shocker. [laughter] >> i remember doing a story on this a few years ago, buying bitcoin for $600. everybody said it was going to crash, now we are looking at $5,600. there were bankers like daily
diamond, who hated so much, can't stop talking about it. anyone who has invested in this has made a ton of money. what is driving the price? is it just liquidity? things are driving the price. my favorite statistic on it is you measure your price in dollars at the end, which is all you need to know about how useful it is. block chain is amazing. think it's going to change a lot of the way a lot of things operate. people realize -- so many jobs. that's what's driving it. you traded, people want to buy it. there is assumption that central bankers of the world and governments have gone into deals with. i get the reservations, but it is one of those things where you are relying on the next person, find, not a problem. i will stick to the principle. get the yellow shiny thing.
it could be a risk-on day. u.s. 10 year yield gaining, even though we colored it read. you can see the up arrow. u.s. 10 year yield rising to 2.36 right now. a budget resolution will make it easier for tax reform. people more optimistic on tax result of that as well, up 3/10 of 1%. >> will -- to talk about that more, the fiscal 2018 budget resolution, republican leaders in the house agree to accept this. final approval of them -- of the measure will allow republicans to rewrite the tax code without democratic support. the house tax writing committee plans to release job -- writing legislation by the end of next month. peter, it's a little technical, idiosyncratic, the way this seems to be happening.
the big picture thing is that we closer to tax reform in the united states, just a little bit, one baby step. >> same old thing. this isn't new. this isn't tax reform, it's a tax cut. >> this is one of the big projects of this administration, and many of -- in the market are waiting to see if he will have success. >> you could argue one push in the market has been for this to happen. it might be interesting news, one ofs been priced -- the main trump precepts was this. >> does a matter for u.s. stocks? >> not really. nothing has changed, they are ghastly expensive. the expectations for the rest of the earnings are hardly worth 2000 is a matter of fact, forward-looking. i know everyone doesn't want to. come up about sort of where we are. the only thing left is relative
valuation for interest rates, fixed on someone anyway. the bond yields are insane. >> that's prompting a few questions from matt miller. >> i've got a chart here. >> you know the numbers, matt. matt: i think you make a great point. to go back to the tax issue, people keep talking about tax reform, like real, reagan 1986 tax reform. that's clearly so difficult. i can't see how donald trump is going to manage at. they be a tax cut is what we are hearing is more likely, and they will try to -- to call that tax reform. on the bloomberg type in ge with any indexer stock, and you can see a series of different valuation levels. right now, got smp in here. we can see price to the forward earnings estimates ratio at 19.4. it is relatively expensive.
what you think is going to bring that down? there's no ball -- it seems a is nocent markets, there volatility. what could bring the sin for correction at least, peter? >> kris kobach. ds and p earnings for share is no higher than it was in the end of 2013 -- let's go back, the s and p earnings for share is no higher than it was in the end of 2013. we haven't gone anywhere in real earnings, it's a terrible thing to admit to. you mentioned reagan. reagan had eight or 9% on yields. in the early 80's, 12% bond yields. we have bond yields of nothing here. part of its the reason i think this maneuver is a fiscal position -- we tapped the monetary position. look at that gdp, what the u.s. has done the. it's not reagan, it's not that reform. companies were stuffed full of cash when reagan came in.
everyone talks about these huge changes that could happen. the best you get is a brief tax cut priced in. the valuation peace, what i'm saying, that forward valuation, you've doubled up debt in the last 15 globally. ,e are all intended to pieces cars, houses, god knows what else. the next 10 years will be different. >> at low interest. >> that's the point. it's already at low interest rates. the japan, don't expect stock market to go up. companies will stay afloat, nothing goes to fault, but nothing makes money. >> let me take you back on earnings. the earnings story -- to justify what people saw in u.s. stocks. what about forward-looking earnings, looking at earnings revision?> this into stabilize this era little bit. in thet of what happened first half of the year was the oil story, yeah.
google -- sorry, alphabet, and others. go back to is making money. this is my favorite example. this tells us where there's nothing in five years. everyone earns it. if everyone is going for a glorious recovery, there's a 94 style breakout. but i want this to be -- long of all these stocks, when i should be of energy and economic incentives of stocks, and even banks? they are still all of the -- same things driving this market. you've got five standard deviations away from its norm, practically where we were in 2008. wish you luck. >> thank you. so much energy. [laughter] >> we appreciate it. fabulous to see it was always. that's it for daybreak, europe. bloomberg markets: european open, matt miller and guy
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♪ >> friday morning. welcome, good morning. you are watching "bloomberg: markets." this is the european open. treasury market story fascinating. live, guy johnson, i'm in london. matt miller is in berlin. whate artie seen him in we're watching. treasuries tumbling, as the u.s. senate calls for a budget resolution -- making way for tax reform. as the reflation trade now back on? take a look at this --
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