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tv   Bloomberg Markets European Open  Bloomberg  November 2, 2016 3:30am-5:01am EDT

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we need to see what happens during the course of next year, andink for the jobs market, judge the business on that basis. at the present time, we are happy to invest. we replaced the landrieu lies during the course of the year and see a good opportunity. we are optimistic, but we are a little more cautious. much jeff, thank you very for giving us your times morning. jeff fairburn, ceo of persimmon, joining us to talk about the post-brexit votes housing market in the u k. that will do it for "bloomberg daybreak: europe." "bloomberg markets: european open" is up next. ♪
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guest: welcome to bloomberg markets the european it open. guy: i am guy johnson. caroline hyde at the german capital, berlin. stocks slumped along with the mexican peso. our investors finally waking up to the possibility of a trump presidency? the fed is also in focus with the u.s. votes less than one week away. no move is expected. metal bashing. will prices recover or will oil drag the sector low-er? caroline: you're looking at the futures at the moment.
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we are seeing risk aversion. this is seven days, the stocks have been falling. the u.s. also falling to six days. the longest losing streak since all the way back in august, 2015. what is us talk about happening around the world. the trump presidency story is firmly in focus. look at what happened to the nikkei overnight. by 0.4%.up point 7%.s up zero in the general theme and we are finally waking up to even the possibility of a trump presidency, and that is now what the market is pricing in. you can see european futures are trading lower as well this morning. let us catch up on what we need to know. here is the bloomberg first word news with shery ahn. the south korean
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president has named a new prime minister and finance chief as she seeks to restore confidence. prosecutors now want to arrest her close friend, who is at the center of that allegation. he was an advisor to former president. financial services commission chief becomes the finance minister. londonk. bankers believe will remain europe's preeminent financial center after brexit. according to a survey, about 72% agreed the city of london will retain its role as the main hub for finance in the european union for at least five years, but 78% said brexit will have a negative impact on u.k. financial markets with 82% saying that you would also be hurt. meanwhile, ahead of super thursday, reports that mark
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carney will leave u.s. interest rate unchanged throughout his remaining time at the bank of england. according to the national institute of economic and social research, inflation will reach 3% by the second quarter of next year and the u.k.'s growth driver will shift from consumers to trade. it predicts rates will still be a 0..2 private percent -- 25% lead. first outflow since january 2014, the 61.6 million dollar fund has been one of the industry's fastest growers. one year ago, it reached a $50 billion milestone in record time. it has outperformed 71% of its in then 2016 and the 90% last three years. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more
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than 120 countries. this is bloomberg. caroline. caroline: thank you very much indeed. a group of 278 economists have released a letter lending why electing donald trump would be a mistake. it says the billionaire has misled the electorate and promotes "magical thinking and --" in response to the comments, peter navarro said it was "an embarrassment to the corporate offshore in wing and the and that profession," trump's plans would boost growth. polls are continuing to narrow. an abc/washington post survey puts donald trump ahead 46% to 45%, within the margin of error. ile goldes falling wh and the yen strengthened. guy: let us talk with ashok
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shah. good morning to you. what is the right trade if trump winds and have you got it? ashok: to start off with, one has to probably reduce a little bit. we have seen what is happening going into brexit. sometimes they do not use the right indication and you get huge volatility coming out of it. i think the market are already pretty apprised. the only trade you could do was to become more conservative and just wait. effectively, waiting for the market this weekend. of course, all we have seen is that you have big rallies across the board in commodities. i --if trump winds, do wins, do i need to radically reposition? ashok: i think so. it will be very cold for the era.year -- the next
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it will have quite a big impact on the world trade. it will flow even further, and effectively aggregate, a very negative move for the world growth rate. all, the expectation of study, ongoing recovery, recovering inflation, steady monetary basis, etc., all of those things come to a halt. you will get a lot of volatility across the world in all assets markets. i think it is time to take a the back and protect portfolios if you can to be more conservative and defensive. we are beginning to see the first stage of this. there is a lot more to come through. we are now indicating some of this is -- against clinton. caroline: talking of the mexican peso, have a quick look on my bloomberg because we have a great chart showing just how
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much the volatility of the euro versus the mexican peso is spiking across the board whether it is one month in white or one week, three months, we are seeing it pair at one year highs. we know the mexican peso is exposed. which other assets should you be getting out of in terms of volatility? how should you be repositioning? ashok: i think so. we are going to get most of the extreme volatility is going to come through in the emerging market currencies and assets to start off because they are the forefront in terms of the global trade. you are talking about the u.s.. that brunt of the volatility is there. you'll see a coming through across rates as well. the yen andect both the euro to strengthen temporarily as we go through the more volatile phase of the next 10 to 12 days. it will be ongoing because there's going to be sometime where we do not know if the results are going to be
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finalized. wenttime around, we to the courts and it was a prolonged period before the results were finalized. we do not know the level of uncertainty. it is uncertainty the markets do not light, as we all know. that will drive the correction in some of the more forward physicians and so on. if you look at where the bubbles exist, they do not necessarily exist in the mainline equity markets. the bubbles exist in a fixed income market. so we have already seen the telltale sign of the u.s. high-yield wanting to correct the spread, beginning to widen. that is ready big action is going to happen in terms of the equity and bond markets. guy: what would be your first trade if you wake up on wednesday morning and he has won? peso? shortl the you look at your bloomberg on your mobile and say, "did not
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expect that." ashok: gold is already indicating there is interest coming in. more ofll be a lot buying of projections and safety, so whatever you think, you feel is a safer asset, that is what is going to be bought. historically, it has been the dollar, the u.s. treasury that you buy. this time, it is not certain that that is the main primary beneficiary of the increasing uncertainty. yes, they will benefit the dollar and the u.s. treasury cost, but not a lot compared to some of the other safe assets. thisecomes your asset and is more of the same. are just warming up. we have plenty more to discuss with you. ashok shah. this is caroline. caroline: coming up on the show, every meeting is live.
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there is no press conference. an election in a few days. is a shock really possible? we discussed. later, we are joined by christoph eibl. mcgillis -- t evangelos mytilineos. that is all to come. this is bloomberg. ♪
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caroline: welcome back to the european open. 15 minutes to that open. it is a risk off when they. let us get to the business flash so you are up to speed. shery ahn. shery: caroline, thank you. reaction to an aviation market that he says remains "difficult." airline will increase seating rather than the 9.7% previously planned. at the same time, capital expenditure will be cut to 2.5 billion euros as the swiss arm takes few were barred year -- bombardier jets. as it is excluding other items, declined 14% to 144.5 million euros.
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the new ceo has closed failing outlets and improve how the label is displayed at american department stores to ward off discounting. aeller mirsky has reported decline in third-quarter profit. the owner of the world largest container line says about net income fell to fund the $29 million. that missed the average estimate of $501 million in a bloomberg survey. the comment comes up to reports the company was discussing the unit sale to japan's pharmaceutical. theshares fell sharply on initial news. according to the wall street journal, the business could go for as much as $10 billion. that is your bloomberg business flash. guy? guy: thank you very much, indeed. the federal reserve announces it late stay.
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the real focus is on december. the real probability of a december hike has fallen below 70%. janet yellen has been battling a high level of dissent. the stronger economic data has led to an increasing amount of hawkish comments. there are arguments meeting is not live. in the fed raise rates election is tight, indecisive, a republican win? ashok: i think it is getting increasingly difficult for the fed to raise rates right now, i mean, we know that this meeting is really december. i think as trump gets an, we know his views on yellen and the fed and it is likely there will be increased tension between trump and the fed. it is likely that the fed in some matter --
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in the back of one's mine always is that it will come in. the chances really are that it might back off the december 8 hike as the data comes down a little bit. we know that the labor market is doing extremely well. we know the rate raises are already taking up a little bit, especially for the lower paid, but nothing significant to signal that it has to be raised. there is room for the fed to delay the rate hike if it finds it is necessary. the probability of a december rate hike is beginning to come back a little bit. that probably is the right way to think about it, is that if trump does get in, then the fed will feel a little bit more reluctant to raise the rates, but of course, it will want to show its independence, so i think it is half and half really at this stage. flip the coin.
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if it is a clinton victory, where goes the fed and the dollar? ashok: then all of a sudden, the risk in the system goes down and we have a lot more certainty about what the clinton policies are going to be and there is going to be a lot less stress in the international environment in terms of renegotiation of trade and so on. i think you are back to the normal way in which the interests are going to be handled. the rate rise in december is a much higher probability. so all of those things, you know, ultimately, the u.s. economy is doing quite well. it has continued to improve. it is doing extremely well right now. wages are beginning to pick up. dramatic,.y, nothing it is a lot better environment for the financial markets as well. guy: how much will politics get
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into the fed debate? u.k.we are seeing in the is theresa may injecting herself into what is happening in the bank of england, trying to make beclear that in you to not regressive and set a progressive. do you think hillary clinton will push from the left, start to put pressure on the fed? ashok: i think so. in the last meeting, the fed actually went out with a q&a and said, politically, they are trying to stay away from it. i think they will try to reestablish their political independence in terms of the way they make their decisions. i think that it will restate all of those things and which is why trump is going to say we want to change the status, which is why he wants to change who is going to be running the fed and so on. if clinton comes in, i think it
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is more of a status quote, more of the same -- status quo, moore became. guy: minutes away from the market open. we are seeing something of a move in the bond market. it reflects what is happening in the equity market as well. we are seeing risk on, risk off. very much risk off today. movers in world trading includes the world largest container line. sinking.rter markets that is coming up. look at london. what a lovely day. this is the open, this is bloomberg. ♪
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caroline: 7:53 in london. 8:53 here in berlin. just a few moments until that european open. keep a close eye on what is happening in the bond market. gilts opening soon. remember, u.s. debt really exposed to the trump/clinton effect. it it is coming into play today. more concerns that potentially we could see what was immediately thought of as unthinkable that we could see a trump win. plenty of unthinkable
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things happening in political circles this year, are today? -- aren't they? the oil industry is going one way and the shipping industry is going another. there is too much capacity floating around the world. that has been reflected in the numbers today. i want to add a little caveat to this, a little kicker to this. if donald trump were to win, the expectations are the global trade would suffer even more. it could be exposed on the native side of a trump trade, caroline. it couldgative side -- be exposed on the negative side of a trump trade, caroline. caroline: it seems the turnaround is working for hugo boss. third-quarter profit topping analyst estimates. we did see earnings declined 13%, but that was an overall beat.
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we are keeping a close eye on another company as well. ryanair looking into eat and potentially. this is bloomberg. ♪
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the are ine watching open. i am in the city of london. caroline hyde is in berlin. caroline has your morning brief. caroline: it is political pain. stocks slump. our investors finally waking up to the possibility of a trump presidency? the fed in focus. the u.s. vote less than a week away. no movement expected, but how soon will the december signals be? metal bashing. with enemy week in full slaying, will prices recover, or will oil
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drag us equity -- drugs the sector lower. yesterday, we saw a little bit of selloff against the european close. they were expected to open a little bit lower. let's show you what is happening with european trade as we start. here is the picture. there goes london, starting to soften up a little bit. not down by much yet, but expected to accelerate to the downside. let's see what is happening with the cac. it is down by 0.2% as well. softness coming through. we will see whether that accelerates throughout the day. all eyes on the polling. ftse 100 with a 68 handle. .ot even a 7000 handle those 7000 highs seem like a long way away. let's find out some of the details of what is happening here with the market open.
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anna has got those for us. heard a lot about investor anxiety surrounding the possibility of a trump win. all our eyes are glued to the latest polls coming out in the united states. let's see how that is playing out into the start of european trade today. will we seemarket, what we have seen and the rest of the european fixed income space? we are seeing a move lower in gilt yields. caroline, you were talking about the move lower in other european sovereign debt market in terms of those yields. more appetite for fixed income products as investors try to find some safety as we try to work out what the latest polling information is doing to investment. that is what is happening on the gilt picture. we have the domestic situation englandand the bank of meeting tomorrow. we will focus on that over the next 24 hours. in terms of the stock market, a flight to safety into fixed income markets and away from equities.
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that seems to be one of the themes of this morning. we are down 0.6% on the stoxx 600 this morning. in terms of individual movers we are seeing -- individual sectors -- financials taking the brunt of the hit, down by 1.1%. i.t. stocks down by 0.8%. let's get to some stock specifics. that is on our chart for you. by's start with next, down 0.7 percent. this company missing estimates surrounding directories business and the next brand. milder weather in september is very nice for us, but not good for retailers, it would seem. we are expecting to see that stock down considerably. the world's largest container line overcapacity issue. that led to overpricing and a 43% drop in profits for the business reported this morning. we put them back -- lundbeck in
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here, a drug company focused on psychiatric treatment. they have increased their guidance and reported strong markets -- strong numbers to the markets early on. as anna says, the financials are getting hit. a standout inered the financials this morning. we will come back to that later, after the numbers yesterday disappointed. just over halfway into the earnings season thus far. a bit of a small change in fortunes for the banks and the miners. stocks have bounced from the 2016 lows on third-quarter earnings that positively surprised. i want to quickly show you the eea function. we can learn about the top line and the bottom line. this is clearly demonstrated by this function. this is sales price. you can see it breaking down by sector. this is earnings to price. you can see the difference.
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sales prices, a little thin on the ground. positive, 97. negative, 109. we have the more negative topline surprises, with earnings surprises positive 89. the middle of the p&l is taking all of the weight at the moment. this is where the story is developing. you can see that worked its way forward into next year. mark, we will show you the share price in a moment. you can see what is happening. with us from london capital -- this is the ongoing story. cost-cutting. no topline. cost-cutting? >> every deal this year and next year, the market consensus expectation for earnings growth tends to vary around 10% to 12%. the top line is just not growing. how can you grow your cash flows
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and so on? down, this market year has been no exception at all. we will be lucky if in the end earningsgate corporate growth for europe is in positive territory. there is likely to be a small negative. what we have seen in the third quarter of the year is, some of the pain has passed away for the most deeply cyclical sectors, the commodities. we will likely see some rebound in the prices and profitability. but if the top line is not growing, this is temporary, and what will happen is, the momentum is going to flatten out very soon. theink you will find companies are back to having to work on their cost base, on getting the cost down, and optimizing, and so on. but then the space to do that is quite limited. qe to are waiting for the work through and bring the growth rate slightly higher.
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that is taking much, much longer than what anybody would have expected six months ago. caroline: i want to deep dive in the earnings of today, looking at a slump. in germany, the discourses all about potentially movement against globalization worldwide. we are seeing perhaps a push back of m&a from chinese companies in germany. you are seeing a trump potential presidency. what would that do for globalization? is this a sector you would want to go negative, since we could see a trump when? >> we are already seeing negative news flow in terms of global growth trade much lower than real gdp. and i think this has been flatlining for the last couple of years. what we have seen is that the qe , one of the side effects and consequences has been the uneven distribution of the wealth
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created by qe into the top half or top 20% of the population, and the rest not really benefiting much. if you looked at the bottom half of the 50% of the u.s. population, the real earnings are still below what they were in 2008. they are really still not benefiting in terms of the economic recovery since the crisis. you are getting backlash across the world because similar things have been happening. there has not been the benefit of the improvements since coming out of the great crisis. one of the things is in terms of more globalization, that is where the pressure point is. we are already seeing politicians be aggressive toward immigration and trade, putting in more quotas, and dumping on. i think we should expect a lot more of this next 24 months.
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you could think of more trades to put on it. we knew more capacity was coming online with container shipping. we knew there was no pricing power. we knew world trade was barely growing. it is going to be awful. they are beginning to confirm the story, but it is not a news story, it is an ongoing story. and i think we are going to get more pain in terms of the companies exposed to globalization when you come to that. at the forefront of this are the large emerging market companies, which are the biggest beneficiary of globalization, because they depend on export and import trade. that is going to have more trouble and volatility. guy: thank you for joining us. of london, director capital.
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-- london and capital. we will be joined by the man who runs greece's largest industrial group. we will talk about greece and the industrial sector. the latest dates surrounding greece are not positive. this is the open. ♪
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caroline: welcome back to the european open. just over 11 minutes into your trading day. a risk off day. every industry group is declining on the stoxx 600. the banks, the autos, the insurance sector. we are seeing the cac down by 0.9%. similar moves on the dax. stoxx 600 down 0.7%. this is eight straight days of losses on the stoxx 600. we are currently seeing the longest losing streak since october 2014. guy: i am fascinated that the banks are down today. you would have thought a donald trump when could herald -- win could herald good news for the banks. maybe it is just the u.s. banks. g4 s moving up on the margin story. hugo boss trading higher by 6%. , the capacitye
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story. financials,the standard chartered was down a little bit early on. some of the italian banks are halted. here is the bloomberg first world news with sebastian salek. seb: a new prime minister and finance chief in the aftermath of an influence peddling scandal. a close friend is at the middle of the allegations. the appointed prime minister was a former advisor. another becomes finance minister. will britain remain the preeminent financial sector after brexit? survey, 70 2% a great city of london will retain its role as the main hub for finance in the european union for at least five years.
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but 78% said brexit would have a negative impact on u.k. financial markets. 82% said the e.u. will also be heard. reports suggest mark carney will leave u.k. interest rates unchanged through his time at the bank of england. inflation will hit 3% by the second quarter of next year, and the u.k. growth will ship from consumers to trade. but the prediction is that rates will still be at 0.25% when carney leaves in june 2019. it is less than a year before the german election, and immigration and turkey remain high on the agenda. the code leader of germany's green party says turkey is a long way from joining the e.u. it is not realistic to expect turkey to join the europeans. , thatot see that erdogan turkey is moving toward europe. turkey is moving far away from europe, discussing the death penalty, cracking down newspapers, opposition
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politicians -- just elected mayors lose their jobs because our demand is not democracy. seb: global news powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. a swiss-based asset manager is adding a new quality fund. it expects to return more than 10%. he currently manages seven process -- seven investment funds. the guy that runs them is sitting next to me. good morning. you are here for lme week. last year was horrible. everybody was crying into their champagne. this year, they are drinking the champagne rather than crying into it. how much difference does a year may? christoph: it has been through the worst so far. sentiment is improving slightly. i would say the miners are doing better because they have done their homework. fxsee the emerging market
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has helped most of the companies to produce cheaper. we see that funding costs are cheaper. i would say the once struggling most is the trade, the metal merchants. they are not doing well because margins are really compressing. we have seen more compression in the industry. the conception side is really quite stable. china is doing as it has in previous years. it is not study. the u.s. is quite stable. europe is still chipping away. from that point of view, i would say we are in a constructive market. guy: how do i make 10% in commodities? christoph: i would say you have to look at spreads. i think there would be a strong distortion between individual commodities. you see that this year, when metals like team that went up 60%. that in itself bears a lot of how to goyou know long and short the commodities. the second is, if you look at
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relative value between commodity sectors -- you look at the agricultural space versus the mental space, which in itself is no direct correlation. commodityltural products have been treated since metals, there is a pattern. caroline: i want to go back to a comment you made about china. you see manufacturing is going relatively great guns at the moment, in terms of pmi numbers in china. that seems to go in long -- in lockstep with the metals. you see how they seem to be dragging each other higher. today, metals go a little bit lower. we are seeing the metals index trading up, and chinese pmi doing the same. how much is this banked on china's ongoing strength? or how much do you look at a global outlook in terms of the economy? christoph: with china, you need to understand the cyclicality of how flow enters china.
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the second, more important aspect, is you see that chinese are buying on the dips. when we see the lows in january, february, people thought this was the end of the year and china is finished. the reality is, you have seen restocking. you have seen accumulation of stock. you have seen acquisitions of producers. that is what we have always seen over the last decade, chinese stepping in at smart points throughout the cycle. when we look at our trade, the sales we are conducting with chinese consumers, it has somewhat slowed down, but it is still constructive. it is not the same volumes as before. hence, i can only paint somewhat of a structured picture. guy: everyone is trying to figure out what is going to happen with oil. the oilluence does sector, the oil trade, and the oil curve caps on everything else? opectoph: one element --
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is a toothless tiger somewhat. i think we have seen my now. while it is jumping up and down the weight oil once, and not how opec wants to trade. -- oil is jumping up and down howway oil wants, and not opec wants it to trade. that has an impact in the commodities industry. where oil is trading, that is where based metals will trade, and agricultural commodities. there is somewhat a strong correlation. input costs? labor has become cheaper. funding has become cheaper. funding rates are pretty much zero. relatively, even oil has dropped relative to the percentage that the overall cost has increased. we asked producers, and consumers are heavily reliant on the oil pricing. in percentage terms, more than
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prior to, let's say, five years ago. what we feel is, if you do not have a clear view on oil, you will struggle in the rest of the metals and agriculture companies. guy: we will talk about donald trump in the next block. the meantime, breaking news crossing my bloomberg. this relates to a legal case that was underway in south africa, led by the president, jacob zuma. withdrawn. this relates to his relationship with the group to family -- the gupta family, and whether the thats were able to use for their interests. zuma was able to halt that graft report coming out. we will see what is in that and how the relationship works. we will follow this story carefully and will continue to of thethe trajectory finance minister as well.
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we will get more analysis as we work through this morning. up next, we continue the political conversation. it is a tight contest. we will look at how the markets are reacting when a new poll puts trump ahead of clinton in the race to the white house. ♪
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guy: welcome back. i want to show you what is happening. the land is under pressure.
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you see a move lower. i show you this shot because i want you to see the context over the last couple of days. we are seeing a fairly substantial move to the downside. the second chart makes it look back ofressive, on the the fact that president zuma is withdrawing his court case against the idea that we should investigation relates to the general public. six days to go until the u.s. latest election, the polls from abc and the washington post have the race within the margin of error, with trump ahead by a point. election angst sending asian stocks down overnight. the peso crumbling as well. is still with us. if you woke up next wednesday and sought donald trump had won, would you reposition your portfolio? christoph: not that much. i think it would be good for the
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dollar. we will probably see every enactment of the new deal. that led to an appreciation of asset prices for a while. that would be stimulus, somewhat. even if you say you are concerned about the development, where do you want to park your money? the move it into euros? do you move it into yen or renminbi? alternatives are not there. because of the lack of alternatives, people will most likely stay in the dollar and will most likely see that, from a u.s. point of view, it might be a good thing in the long run. we need to distinguish between the talk and they walk. we know there is a lot of jitter before an election. whoever gets elected, i think it will be a more rational day to day operation. meanine: what does this for your sector in particular, the commodities outlook, when you have dollar ramping up? what does that mean for metal
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prices? what about gold as a haven? christoph: four industrial commodities, metals we consume in the economic cycle, it is probably somewhat positive. might be opposing dollar appreciation. i think there is a good chance we could see correlation of both. if youend of the day, see infrastructure programs being started all over the u.s. -- airports, infrastructure on roads, and whatnot, that is positive. you would see more aluminum consumption and iron ore production. that would lead to higher prices. economy concedes that is positive for the u.s. economy, with a strengthening dollar as a consequence, you see that big correlation. as for gold, you likely see for a short time gold as a reaction of, we are not sure what is going to happen. we need to protect our wealth. we need an asset that is the correlated -- is de-correlated. ratingsnext, s&p global
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says it will stay low for longer. overvalued,robably but will stay here for a while. ♪
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guy: 8:30 in london, 9:30 in berlin. this is the eeathis is the pict. stock stories -- ap muller mark being hit hard on its outlook. capacity is going to remain crunched. i am struggling with this. a raised guidance maintained this morning. the numbers look ok. the numbers, though, are clearly a problem for somebody, because the stock is down 5.51%. someone send me a postcard and tell me what is going on. standard chartered is down 4.3%.
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hugo boss and lundberg up. on its earnings margin, which continues to do better. interesting stock stories. fx remains front and center, doesn't it? caroline: it does. and the great british crown, currently training of 0.2%. said thel ratings pound is likely to remain close to its current level after a sharp fall since the u.k. referendum decision in june to leave e.u. the chief economist at s&p global ratings joins us live from paris. fascinating views. the pound undervalued, you believe, but here to stay. guy: i think we may have a -- caroline: a few technical difficulties. guy: i think we may be having a
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few problems. john michelle -- jean-michel, can you hear me from london? jean-michel: i can now. guy: apologies for the confusion. undervalued, but it is going to stay low for a while, right? michel: i believe it is. it is always difficult to say for sure that the currency is undervalued, especially a developed market currency. if you look at parities and current account rebalancing and other methodologies, they all consistently suggest that at the moment sterling is undervalued by about 15%. guy: i am looking at my bloomberg right now and have a function showing me a ppp on oecd basis of minus 70 .91. about similar numbers you are seeing as well.
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to changet not going the gap? recover any time soon? grexit -- jean-michel: at the moment, it depends on the stance the bank of england is going to adopt. if you look at the last 20 years and wide variations of the pound exchange rate, you see there were two different factors influencing the exchange rate. one, a structural factor -- the weight of the city, the weight of the financial services industry. that is what we call in our report the dutch disease, the influence of one sector on the currency. factor, have a second which was the bank of england's monetary stats. on that, we believe that in the next year and half, the bank of
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england will still be in and using mode, supporting a currency that is rather weak. or to put it another way, relatively competitive. do you get a sense that the market is -- that the market is pricing in too much grexit ricks -- brexit risk? is it correct to price in the worst-case scenario, and is that what it is doing? jean-michel: i am not sure that it is. i think indeed the markets are worried about what is going to -2018. in 2017 at the moment, so far so good, as far as the economy is concerned. but looking forward, i think indeed there are good reasons to expect the u.k. economy to slow markedly. a genuinever forecast recession in the u.k., but we expect a significant slowdown.
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and of course with the markets have in mind, and rightly so, is that the negotiations between the e.u. and the u.k. are likely to be protracted and difficult. you will have rumors. whenill have also periods the news will be quite worrying that they are close to breaking up on those negotiations. i think that is what has been priced by the markets at the moment -- difficult and long, painful negotiations. guy: when you look at how the pound is trading against its here group, do you think -- it seems as if the cable rate versus the u.s. dollar, you have most of the pressure been priced in there. do you think we will see the euro starting to strengthen versus the pound in a more meaningful way? jean-michel: that is probably the case, indeed. although what is interesting here, in terms of the currency markets, is that most central
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banks, probably with the exception of the fed, do wish to see -- they do expect their currency to remain rather weak, or rather competitive. that is the case for the ecb. the ecb does not want a strong euro at this point in time. it may not escape that particular configuration of a slightly stronger u.s. against the sterling. guy: always a pleasure to speak with you, and thank you for the time. us fromhel six joining paris. thank you very much indeed. i have got an answer on the curve. i said answers on a postcard, and straight on, i got answers. up next, i will be talking to one of greece's leading industrialists, the chairman and ceo of greece's largest
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industrial group. he will tell us what is happening with the metals market as well. it is an alley week. -- it is mle week. ♪
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guy: 8:39 in london. kluber was out with numbers this morning.
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i wanted to look at why the stock was lower. the reading suggested a reasonably positive picture. i was asking for help on iv on this one. -- on ib on this one. organic growth was disappointing. this is interactive television. you want to get hold of us, send us an ib and help us out with stock stories like this. let's get a bloomberg is a splash with sebastian salek. seb: an expansion in capital spending in reaction to an aviation market that remains difficult. the german airline plans to increase by 7.8% rather than 9% previously planned. capital expenditure will be cut to 2.5 billion euros as the new jets.takes on a third-quarter profit topped analyst estimates on deeper than expected cost reductions and growth in china. excluding other items, it
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declined 14% to 144.5 million euros. close failing outlets and improved how the label has stopped american department stores from discounting. a 42% decline in third quarter profits as the shipping industry suffers from overcapacity. by 25 million dollars, which missed the estimate in a bloomberg survey. valeant pharmaceuticals has confirmed it is in talks to sell its gastrointestinal drugs business, after reports the company was discussing a sale to cicada pharmaceuticals. sharply on that news. that is your bloomberg business flash. guy: industrial metals are posed to have the best run of gains since march following a tightening in the u.s. presidential race.
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the bloomberg industrial metals index for the first time in eight days is seeing drops as much as 1.8% in london. to its daily limit. our next guest is here for lme week. he is one of greece is largest -- greece's largest industrialists. let us look at what is happening in that story. mytilineos is one of the biggest industrial groups in greece. thank you for getting up early to see us. i know an alley week -- i know the week has many evening events. we have not seen each other for a while, and i am curious to get your take on how the story in greece is developing. i have been watching the pmi data. it is still at a very low level. the manufacturing data that came out recently, still very weak. what is your assessment of the picture? we met last january
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15 in athens, if i remember, right after the election, when i greekou there is no drama. greek drama is over and we move on. unfortunately, i was wrong. there was greek drama to come. guy: certainly was. evangelos: i'm afraid to say the seven months of the left-wing governments have been a disaster, with finance minister conducting a very bad negotiation with our partners. after that, the new tsipras government, after the referendum and the elections, we have had a much better government. more guys are trying much than the previous ones to come to terms with the reality. what i call the realism of the new governments. they are trying to abide by the new laws and regulations in agreement with our creditors. that is where we are now. ahead of us, we have the second
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review, which is going to be difficult. including labor laws, insurance, and everything. second, we have the repro filing of the greek debt, which has been promised by the creditors. we have the ecb buying greek sovereigns. once we are through that, greek market, greek economy will take off. guy: let's talk about the takeoff. how is the banking system? the banking system is critical to that take on happening. so the banks shattered. we saw deposits fleeing. give us a sense of what the banking system is, in its current state, and what it is capable of delivering to fund the takeoff you are talking about. evangelos: capital controls are still in place. they are a little more lax, but still in place.
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therefore, the supply of funding to the economy is still limited. deposits are not yet returning to the banks. external funding is still difficult. aerefore, we cannot expect big jump in the gdp next year unless this funding issue is resolved. the funding issue is a matter of trust from abroad. to get trust from abroad, we need repro filing of the debt, and greece to be included in the qe. you have these things, the imf says we go next year for 2.8%. that we are not there yet. caroline: this is caroline in berlin. give us a sense of your own business. let steep dive into your industrial business, the metals, the appetite. are you seeing things pick up for you? evangelos: as you have seen in with the chance to
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speak with guy about it, it has been a relatively good year. remains things.a starts to do in our group, which is 85% export group, we are not that much affected by the problems in the greek economy. so this year is going to be a good year, and we expect, and our plans show, that 2017 is going to be another record year. by that would be accompanied a group restructuring, which we , andnced two weeks ago which is fully in place and ready to go. guy: asking more broadly, you are an exporter from greece. where are you exporting to? where is demand improving in europe, and where is demand shrinking? give us the global overview. evangelos: demand in europe is steady to positive.
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especially in the northern parts of europe. this is aluminum and all this stuff. epc projects, plans for using energy and electricity, we have a very good competence. that is very active in the middle east. couple of years, very active in africa. guy: because of low energy costs. evangelos: low energy prices and big energy needs. caroline: talking of energy, i want to bring in oil a little bit. we are seeing funds starting to pull back. we are seeing bearishness on oil again. opec not really managing to seal the deal, it would seem. i am looking at how much money has been pulled out of exchange traded funds related to oil. we are seeing skeptics. are you skeptical about the oil price?
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how much does it help or hinder your business? evangelos: opec, a potential opec agreement would definitely be positive for oil prices. thewe should never forget swing factor whose name is american shale. if oil prices, by opec agreement or anything else, move toward 60's and 70's, there is so much american swing shale production ready to come online. already, the most competitive american producers, they have started production at the area of 50's, which gives them another three years of life. i am not very optimistic on oil prices in the near future. but i can tell you, in the lme week, this week, the dominant themes were two. one was china and the other was the fed. guy: ok. evangelos: no u.s. presidential
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election. very little brexit. the two things was the american interest rates hikes, and china. guy: and what are they saying about the american interest rate hikes? are people expecting them in december? are they expecting more next year? evangelos: december is almost no w for sure. and people are thinking about 2017. there may be one or two more hikes. and that would shock the commodity industry, which is related to the strength of the dollar, as you can realize. as far as china is concerned, china, for the first time ever this year, made a move that surprised the markets. to underline once more the importance of the chinese market -- the chinese, they reduced the core production by /13. -- by 1/3. by reducing coal production, international prices were raised by 1/3.
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as a reflection, steel prices were raised by 1/3. cost prices and other metals, including aluminum, are tremendous. we see aluminum price has gone up by $300. that means that china is markets.guiding the china -- everybody looks at china and the fed. china is suddenly becoming a price maker rather than a price taker. thank you very much. very nice to see you. evangelos: have a good day. guy: the ceo and chairman of mytilineos group. caroline: pmi numbers coming out for the manufacturing and france, and it is a mess. actually, it is a beat. this is a growth situation for manufacturing, picking up on september and outperforming the survey. 51.3.rvey, it followed the expansion, 51.8.
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we are seeing a buildup and finally into expansion territory. france pmi data for you. we will be up next looking more at britain. british banks impact. if you look at how stock prices have surged since brexit, we get behind the trend. this is a beautiful london. ♪
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theline: welcome back to
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european open. almost an hour since equity started trade in the region. -- in a fewhlights minutes time, we get european manufacturing pmi. france just beat its number. at 6:00 p.m. u.k. time, the fed policy decision. guy: we are going to watch out for that data. watching the data on the pmi front braking as well. we'll put it on the screen for you. reversed for u.k. bankshares a little more than four months after brexit saw their worst slump since 2009. up 23% tracking them is since the date of the referendum result was announced. we are joined by a european equities reporter. why are they going up? what has changed that is changing the story? alexandra: if you look at valuations of u.k. banks, you would not be able to tell that they survive brexit.
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they survive the first interest rate cut in seven years. what has happened is that at least in the meantime, until we get more clarity on brexit he, they are focusing on the other things, such as the fall in the pound, which has been very good for hsbc, and better than expected economic data at home, which has been good domestic banks. theline: talking about economic data, let's bring ourselves to the viewer. a beat for germany. manufacturing data coming -- 55 is where we are coming out. it is 5.1 was the preliminary. we are seeing serious strength in terms of business expansion, well above the 50 level that separates contraction from expansion. for france.a beat the loss of passporting rights -- we are going back to the banks, looking at economic data improving. but there must be an overwhelming shadow of of the banking sector with worry about passporting rights or the u.k.
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aleksandra: yes, so this is not to say that brexit has not or will not affect them. it is just that we have had quite a few beats. we had the gdp beat. we had consumer confidence beat. that has been working out well for these banks that have some domestic exposure. in addition to that, there is the rebound in government bond yields, which is always good for the banking sector, because things make more money when rates are higher. so all of those have kind of combined to create this environment where banks have been able to rally twice as much as the broader market since the vote. they erased briefly their losses for the year. that we will see if this is sustainable. there is a big question next to whether this will go on, how long this will go. so it is definitely something that we will keep monitoring. guy: we certainly will. thank you for the focus on the british banks. we will be breaking the data throughout the morning.
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that wraps things up for carolina and me. but stay with us. up next is "surveillance." francine lacqua will be here in london. tom keene joining her from new york. london looks lovely this morning. new york does not look bad either. ♪
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♪ newest election polls
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tighten. vix near highs not seen since the brexit. presidential scandal. fifthkorea gets its finance minister in four years. this is "bloomberg surveillance." i am francine lacqua in london. tom keene is in new york. the market isat only focusing on the u.s. elections. there is a clear candidate that the markets want. tom: i agree with you. the second onto tuesday of november, next tuesday. a remarkable switch in the last 12 hours from the bond route. look at where equities are worldwide. francine: have you seen anything like it? tom: that is


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