juliette: good morning and welcome. we have your first rate of the day coming up. i'm guy johnson alongside matt miller in berlin. welcome. what are we watching? matt: it's a pleasure. guy: we will talk in a minute. flattening off this morning, the trump selloff abating. there is some uncertainty over the president-elect's policy.

european stocks pulled higher this morning. goldman sachs, a former chairman, said to be the leading candidate to become treasury secretary. ande bannon is already in, more bankers will be in the trunk team. and the japanese 10 year yield, 2.0 for the first time since december. matt: we are less than a half-hour to the open. let's take a look at the european futures. a little bit higher, the stoxx 50 unchanged right now. ftse futures of higher, cac futures, dax futures unchanged. looks like things are moving up this morning as we start to get earnings news out from vodafone, from easyjet, from merck, and more. guy: a lot of corporate news to

digest. i know matt likes the gmm function. i think all hang on to this. while i have got it, that's talk about this. what are we seeing? yesterday, stocks were a little more mixed toward the close. now it's what's happening with the bond markets and the dollar. the bloomberg dollar index is softening up, down by around .3%. strength grading back into the dollar. we're seeing the yen picking up, trading up on the yen, 107.90. that move is something we are paying attention to. we are going to talk about that. iron ore on the move. it really continues to be the story of what's happening with the bond market, with the dollar, and of course what is happening up there in trump tower as we figure out who the new team is going to be and what it will look like. that is what we are focusing on. here is the bloomberg first word

news with juliette saly. juliette: guy, thank you. german economic growth slowed to the weakest pace in a year last quarter. gdp rose a seasonally adjusted .21%. that's below the .3% forecast in a bloomberg survey of economists. it can be seen as a reminder of the fragility of the euro area's recovery and the times of rising uncertainty. reynolds american is taking a higher price from british american tobacco after rejecting a $47 billion buyout offer of two low -- as too low. they say the companies are in talks, and b.a.t. is willing to increase the price slightly. they already own 42% of reynolds, the second-largest cigarette seller in the u.s. both companies declined to comment. dallas fed chief robert kaplan has attacked the low interest rate environment in the united states. speaking in texas, he said he hopes that in the near future,

some accommodation would be removed. >> monetary policy being the primary policy of the united states, i think, has come to an end. createsizes savers, it distortion in markets, distortion for businesses, and we have said we would like to see broader economic policy. juliette: the u.k. prime minister theresa may says british companies have a responsibility to help the race the resentment of those who feel left behind by globalization. she spoke last night in london. that we believe, as i do, liberalism and globalization continue to offer the best future for our world, we must deal with the downside and show that we can make these twin forces work for everyone. turning: mark mobius is bullish on chinese equities,

arguing that officials make seller the market opening. he says he doesn't think trump will institute protectionist policies and will be more businesslike and realistic when negotiating with the chinese. since last week's shock results, the chinese benchmark stock index has rallied. fetched $54.5 million. the candidate went under the hammer after a week of options in new york. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy: thanks. a former goldman sachs banker has been recommended by donald trump's transition team as treasury secretary, according to feeble familiar with the process. they await the president-elect's final decision. remember, donald trump seems way

-- potentially he's a very good treasury secretary. let's bring in another voice into this conversation. mea investment officer. good morning. >> good morning. guy: this is the bloomberg barclays multi-verse index, a catchall bond market index. it has been absolutely battered over the last few days. 1.5 trillion coming out. how far through the process are we? where's the pain being felt, and is there more to come? >> it depends, really, if trump is going to inspire inflation and growth. i'm not sure yet. you could say to the people of vodafone, all he has done is raised interest rates, raise the dollar, which will hurt a lot of employers in the u.s. who have to export . i'm a little bit skeptical on infrastructure in the sense that

a lot of infrastructure projects either of them proposed would not be shovel ready in january. these big infrastructure projects take a lot of time to plan. their needs to be governance around them. i don't think they are going to kickstart these projects from january or february onwards. i think a lot of the market 's resultto last week has got to do with investor uncertainty. a lot of people were using the dip in to put cash and the time, iand at the same think the bond market has been setting off the yields already at 1.8%. it was ready for a selloff. i think we are at the beginning ak in bond prices. it would be a very slow unwind. the trend level of growth for the next couple years will be quiteak low. i am wondering, michael,

if you look at -- regardless of what you think is going to happen, we do see these big moves in treasuries. right now, 10 year is yielding 2.2%. i amthat's over the 1.4% we ser gilt, and over the 0.3% we see for bunds. do you think this means we will see dollars continue, money continue to shift into dollars? >> i think the dollar will remain very -- i think, at a 10 year yield of around 2.15%, you get into territory where people begin to have to deleverage, both deleverage holdings of bonds and in the real world. you were going to begin to get deleveraging effects. look at the italian bond markets. there is a really big difference between country performance in the bond market and in the country equity market, for example long japan, short italy.

even currency adjusted is a good phrase. i think what's interesting for traders is that for the last three years, the central bank was there. in italy and some of the other eurozone companies, for example, i think we have to consider what people have done in the real economy's for the last three or four years. they have beefed up leverage of low interest rates. as interest rates creep up, that is going to hurt at the margin. guy: you said we are at the beginning of the end of this rollover in bonds. why? >> i think it's not it for a couple reasons. i think the trend growth rate in the developed world is going to be pretty low for some time. secondly, i don't think donald trump is going to inspire a higher trouble of growth and productivity in the u.s. if you look at the policies he has proposed, they don't do that.

they don't add to human skills. i also think -- guy: if we are in a position where he is going to cut taxes -- and i take your point about infrastructure -- the u.s. is at full employment, or close to it. and the extra impetus now is going to be likely inflation. therefore the fed will have to raise more. december, goes 50 in the markets have a price that in yet, but nevertheless, if we start to see a more aggressive fed, that has got to be bad news for the bond market. >> i think these rumors of 50 basis points, given the last rate increase was a year ago -- that's trader talk. if you look at all the work for things he has done with demographics, etc., i think their medium-term outlook isn't going to change. the national bureau of economic research, the length of

fednesses -- i think the will be looking out beyond this. the fed also knows that there is a lot of leverage in the u.s. system. looking at debt levels globally, they are higher than they have been. a lot of that was built up in emerging markets. a lot of that was also built up in u.s. coppers, taking out debt. the system is sensitive to an acceleration in rate increases. i think policymakers will want to see real inflation. it's coming through slowly. michael, stayt, with us here on the open. coming up on the show, will a trump presidency be a tough pill to swallow for the pharmaceutical industry? we speak to the cfo of merck about earnings in the outcome of the u.s. election, next. wen just after the open,

crossed a brussels for the latest on the eu defense minister's meeting. plus at 8:30, we speak to the cfo of land securities, martin greenslade, about earnings in the impact of brexit on real estate. ♪

matt: this is the open. german drugmaker merck has raised its earnings forecast after posting a 24% growth in third-quarter profits.

joining us now is the company's cfo. marcus, thank you so much for joining us. you beat on eps, you came in line with sales, but most importantly, you raised your outlook for the full year. that is a good thing for the near-term. i wonder how worried you are, considering the u.s. election results about trade. are you concerned that it could affect you in 2017 and beyond? >> good morning. honestly, we are not particularly worried about the outcome of the elections in the u.s. the people have voted, and we are accepting the result of the vote. and actually, we do not see significant impact on our business. the u.s. is a very important country for us. we have 25% of our sales in 20% of our people located in the united states. to believe that

the u.s. will be a very important country, and a very fair and good trading partner for us. guy: markets, what are your big as you watch what happens in the bond markets, what are your treasuries? telling you? what are you seeing and how will it affect your business? >> our capital structure after the sigma acquisition is basically -- what we are going to do now and over the next at come iso years to using our operating cash flow in order to pay back our financial debt. we have come from a level of 13.7 billion by the end of last year, and with very good cash flow generation now at the quarter, we have reduced our debt by more than one billion since then and we will continue that way. matt: one of the other things

that you have got to grapple with, marcus, is pricing. that looked very concerning pre-election, because of all the media attention to drug pricing. do you think that is going to continue in a trump presidency in the u.s., one of your most important markets? >> of course, we have to observe what is going to happen now. merckeral, i can say that is interested in a value-based pricing system, and i believe in the long term that politics has to find a way, for a compromise, between encouraging innovation for pharma companies who are doing research and development, while at the same time ensuring that drugs can be paid by the patients who need them. guy: in what is going on in the world right now, it is the families that have a big interest in your business.

>> yes. hasportfolio structure three strong business sectors -- this is the structure we will go with into the future, and i do not foresee any significant changes here over the next couple years. matt: what about m&a, marcus? what is your strategy for the division? would you consider a sale? is it all about organic growth? what are you thinking about? notirst of all, we do comment on market rumors or any concrete m&a plans in the media. what i can say is that our priority, at least over the next two years, is to pay down our financial debt with a target ratio lower than from 2018. this is definitely a target we want, and we need to achieve,

and that means we have until then only very limited room for further m&a activity. that is the way forward. guy: i want to quickly show people the function on my bloomberg. it shows the price target and where you currently are. the 12 month price target -- the price you are currently trading at, you have seen decent margin improvement. is that margin improvement sustainable? are we going to see more upgrades in terms of the guidance? >> i do not want to comment on our share price, however you are absolutely right, it has risen nicely this year. honestly, i believe that this is not going to be the level that we should think about over the next two years, because as we have already outlined, we continue to invest in our pipeline. we will see for the next 1-2

years of further rising r&d costs, and that should put some pressure on the margin. however, this wasn't managed in a controlled way. a level above 30% for sure is something we should enjoy this year. it. we should enjoy on theeo, joining us numbers the company produced this morning. interesting to talk about the margins. we are minutes away from the start of trading. what have we got in terms of today's movers? reynolds is reportedly rejecting its $47 billion buyout offer. i wonder how the credit story will play into that as we see the continuing selloff within the credit market. all of that coming up. bloomberg this is bloomberg. ♪

matt: this is the open. time matt miller alongside guy johnson. a quick look at a couple stocks moving. d.a.t. looks like it will move down after reynolds says it wants more than the $47 billion the tobacco giant offered, and it looks like they may be prepared to give a little bit more. maybe more importantly, fiat. this story is exciting for

gearheads like me. owners of dodge diesel trucks are suing fiat for the emissions rating that vonnie volkswagen gt busted for. they are alleging that fiat had hid pollution. guy: when we say truck, we mean a big thing that hall's fright. are you talking about free holding or -- matt: no, i'm talking about pickup trucks. the most popular vehicle in america, and the diesel versions are often referred to as rolling coal because of the pollution issues, that may be worse than we thought. guy: everybody should be aware, we will be hearing a lot about engines. you will learn a lot over the next few weeks. matt: i had to sell my pickup when i moved over here. guy: you got the hybrid, i'm

sure. easyjet, the stock has been battered since brexit. looks like it will continue. carolyn mccall this morning saying the currency hit will extend into next year. that has been the stock. michael, do i buy european equities? >> no, we are underweight european equities. we will wait until we get through the italian referendum. most of the polls are saying that matteo renzi will not risk one. i don't think it will means he -- it means he will resign, but for me the key issue is what is left in terms of credit risk and italian bond markets. if you get 20, 30 basis points weher from here, up to 2.4, will see the italian banks come under pressure. as we get into next year, i am less worried about political issues. guy: ok. that's interesting.

it has been great to see you. so little time, unfortunately. joining us from credit suisse. the market open is coming up next. keep an eye on fiat. trucks, pickup trucks, in the u.s., the big focus this morning. ♪

guy: good morning and welcome. you are watching bloomberg market: european open. i am in london and matt miller is now in berlin. i am excited because this is my first european open since june. we will see if the week after donald trump can match of the week after brexit. the dollar looks like it is going to hold its uncertainty over the presidential policy. a former goldman sachs banker is now set to be to be -- is now

said to be the secretary of the treasury. how many more goldman sachs bankers will be on the donald trump team? japanese 10 year yields rise to zero for the first time since september. will the boj decibel the boj let yields continue to rise? the market is already we are seeing a few little rises. there is a london market, picking up a little bit. you think we are done? maybe not. equities came up a little bit before the close yesterday. the london market is up by 0.4%. we are expecting similar performances. equity continues to be well lit. we need to talk about where some of the injured the -- some of the individual stocks are. nejra: starting with the sectors. we take a look at the imap.

financial and material stocks leading the game. similar story today. financials up. at 0.6%.ocks up also you are also seeing material stocks still gaining but not amongst the bigger gainers today. a stunning rally in the wake of donald trump's victory. we have to move on to the gilt market. the selloff in global bonds since donald trump's victory has a global bonds on track for the worst month since 2003. that selloff has taken a pause. the 10 year treasury yields have come down from seven basis points. if we look at the 10 year guilt yield, and that -- and how that is moving, it is only down one basis point. not as much of a move in treasuries or the periphery in europe. moving on, i wanted to take a look at it u.s.-german tenure

spread. it has been rising in recent days. the drop we are seeing in the 10 year treasury yield is far outpacing the move we are seeing on the tenure went -- 10 year bundt yields. let us look at some of the stocks i am keeping an eye on. i am starting with easyjet. theain's decision to quit eu will continue to weigh on earnings next year as a weaker pound plates -- inflates. moving on to vodafone. it beats analyst estimates. continental european operations performed better than expected. we are still waiting for merck to move. merck reported a 24% jump in third-quarter profit. it also boosted its earnings forecast for the year on lower than expected research costs in

its health care operations. guy: thank you. talking about the bond markets. peter shaffer is with us. he kindly agreed to come see us today. peter, we have seen big moves in the last few days. this is the u.s. 10 year. big move to the upside. big oversold. did we get overdone a little bit in the last few days? peter: it is quite possible. -- if yousually see get a move like this, you get some kind of counter move. watchinge things i am is the composition of the yield increase. it is so different from the composition of the yield increases we have seen over the

last few years. the break evens are going up in the inflation expectations are going up. the quality of the selloff is quite different. matt: is a great? mario draghi, janet yellen have been trying to raise inflation expect haitians, steepen the yield curve with no luck. donald trump is able to do that in seven days. is that a good thing? >> i think it is if it is to herbal. we have to see -- if it is durable. the new president was just elected and everything changed. the break evens jumped. having said that, you are on the right track. this is exactly what the central banks have been trying to do. if this can happen in conjunction with the rising that is exactly what

central banks are asking for. matt: they have been begging? trying to pass the baton and they wanted some fiscal stimulus to complement monetary simple miss. talk of a trillion dollar in infrastructure spending in the --., that israel fiscal's that is real fiscal stimulus. exactly what should complement monetary policy as we see it today. in europe, it is probably much harder, but if we get some of will lifte u.s., that gdp growth to some degree and it is likely to have an impact on in laois and -- on inflation as well. guy: the way this rolls out will be important as well. calculateu going to

how the process is going to rolled out in terms of policy formulation that will come with it? >> any type of calculation at this might is a bit premature. apart from the campaigning, we do not really know many concrete plans. pointingsay, you are out something that is important. the composition of any kind of fiscal boost is important. multiplies how they translate into economic growth. some measures may be better and some may be less good. matt: we saw the german economy lack the growth that had been expected. quarter over quarter, 0.2%. we were looking for more like 0.4%. if we get a weaker euro, is that a good thing? domestic demand has driven what little growth we have seen in germany.

or is the political uncertainty from brexit and the counter trade position from trouble going to counteract that? it is much more important for southern european countries because germany is competing on the global stage. not necessarily on price but on the quality of some of its goods. if you ask me specifically about germany, some of the uncertainty has gone away but if you look at what has been driving german growth and what has not, what is really lacking is investments. investments could be coming from the government and in some form from the private sector and both of them are currently relatively weak. in germany, we have elections going in september 2017, what is the government going to promise going into these elections? >> -- guy: we may have to purchase

some tanks as well. peter is going to stay with us. let us talk about what is happening on the security front. nato firmly on the line. we will cross to brussels next for the latest on the eu defense investors meeting. air force one is approaching the greek capital. 8:30 a.m. u.k. time we will speak to the ceo of greenslade. pessimistic. bob dudley gives us his take on the opec deal and what is coming up as we head toward the end of november. this is bloomberg. ♪

matt: welcome back to the european open. i am in berlin alongside than in london. a quick check on the markets. gains across the board. there you see the stoxx 600 up about 0.4%. bigger gains in london. the ftse. --.dax up by deutsche bank is one contributor. it has risen for 5 -- for six solid sessions. in a row. of stocks stand

out featuring what we were talking about earlier. stock is up 4%. the line looks pretty good. about to talk to the business of fiat. going on with the pickup trucks. it is down by 2.9%. some of the miners are running down a little bit. the miners softening up a bit. the miners have done well since the beginning of the year. just rolling over a little bit. what do you need to know this morning? sebastian: i want to take you back to germany where economic growth has slowed to the weakest pace in a year. zero -- 0.2%, below the zero .3% -- 0.3% expected by

economists. reynolds american is seeking a higher price from british american tobacco after rejecting a $47 billion buyout offer as too low. they say the companies are in is willing to increase the price slightly. bat are ready goes 24% of the company. kaplan has attacked the low interest rate environment in the united states. he said he hopes that in the near future some accommodation would be removed. >> monetary policy being the primary carry -- being the primary policy of the united states is coming to an end. savers.izes it creates distortions of markets and business decisions.

we have been saying that we would like to see broader economic policies. if we believe as i do that liberalism and globalization continue to offer the best future for our world, we must deal with the downsides and show that we can make these twin forces work for everyone. sebastian: global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. this is bloomberg. you.thank the u.s. says it will not back away from its commitments to the nato alliance. donald trump has told president obama who is currently on final approach into greece. he is about to land. he is going to reassure european leaders that he is interested in maintaining the core strategic relationship.

joining us from the belgian capital, jones, how much clarity do these defense ministers have about what security arrangements in europe will look like? >> at this point, they were a bit shellshocked by the donald trump victory in the rhetoric on the campaign trail leading up to that but in the past couple of days, there has been some reassurance and especially from obama last night before he took off for europe where he will be today. there is a little bit of reassurance but it was a wake-up call for the eu especially in terms of security and defense. a lot of the ministers now feel like europe has this about and do more for itself you in coordination with nato or in other ways that parallel nato. doesn't europe want to do that anyway? election of donald

trump should not be the only catalyst that they need to defend themselves rather than relying on allies. >> to a certain extent that since world war ii, nato has been the main defense umbrella for europe and they have really looked towards that end done their operations in coordination with that. but donald trump shook them up and now they think they cannot rely totally on that. they are thinking in other ways. they have decided to move forward with more coordination. you can bet that it is one of the things they will be talking to obama about a lot will he is here. guy: the brits are making a lot of the fact that we have one of the core militaries in europe and as a result that will change the brexit negotiations. how seriously are others taking that? >> i think they are taking it very seriously. with brexit, everything is still wide open.

there are not any certainties at this point even in terms of exactly when the negotiations are going to start. about there uncertainty of donald trump and brexit. it is telling the other eu countries that they need to do more for themselves in this realm. guy: thank you very much indeed. with us.still our the germans going to have to spend more money? >> i reckon that they will have to. but how will they spend it because there are multiple ways to skin the cat and tax cuts are a popular theme in germany going into the election and then there is infrastructure spending and military spending. which will it be? a bit of all three. matt: how much more should germany be spending on the military?

they did away with mandatory service. and the german military for decades and decades was one that no one wanted to awaken. has that changed? years,the last couple of there is a stronger recognition that military needs to play some kind of role in germany also. if you go back a couple of years to when of the munich assemblies, there was a big speech by a german representative saying that they needed to play a bigger role in the world. at the actual spending has not really gone up that much. i think it will be a crucial way of spending public money. i am not a be done, military expert but from economic terms i am certain that the increase in spending will, one way or the other. guy: how does that affect the market? >> let me say that i am generally thinking that what central banks do and what the economy does and inflation is

way more important then what actual issuance there will be but it does play a role. if german issuance goes out significantly, it has the potential to add two other curve steepening themes. if you have an environment going forward where there is more public spending in the u.s. and in europe where there is inflation that is slowly rising and the central banks which are holding back their increases with interest rates and deliberately trying to beef up inflation, you can see a steeper curve and i'm sure it will contribute to that. matt: when we are looking at the u.s. now talking about fiscal stimulus, do you expect the slough to sloth off -- off their values and spend some

money? >> in my opinion, this is going to be one if not the key battleground going into the elections. if i may make that point, whereas the french, it touch elections, a lot will circle around what europe is going to case ofe, in the germany, the battleground is going to be different. the battleground is going to be -- what are we going to do with the money that we have? will we spend it? will we stick with the black zero? merkel's government in particular is advocating relatively stringent fiscal stance and the centerleft parties that are trying to it seems to be the conclusion that if you have a lot of money, you will want to spend it. matt: peter, you are going to

stay with us. theresa may has called for capitalism. she says companies need to play a role in championing free trade. more from her first major foreign-policy speech,. -- foreign-policy speech, next. this is bloomberg. ♪

guy: welcome back. let us talk about what is coming up. inflation data out of the u.k..

eurozone gdp up later. mark carney is scheduled to be quizzed by parliament committee. peter is still with us. to the u.k. very quickly. this is gilts versus treasuries. treasuries are back to zero. gilts are underwater. they have suffered a little more in the last few days. what is the trade? >> one of the reasons they have suffered is the rise in inflation. currently, i think, we see a rebound of sterling. i think this is also going to help the inflation expectations of it. i think there is a good chance to get involved because mark carney is not going to raise rates even if inflation stays

above the average. matt: when do you think we will ecb start tor the get pushed around by the markets? when do you think we will see the bond vigilantes, and force the central banks hand in europe? >> if we stay in the continent of europe, i think it is going to be very tough. it us face it, inflation, even if it calms, is going to be years behind where the u.s. and where the u.k. is. i think the ecb as unlikely to change their policy in terms of rates. qe, the ecb has to stay the course for the time being. i think that is going to be very tough. when you look the bank of england, we are already there. the market is trying to push it. when you look at what is priced in, the market is already implying the possibility of

higher interest rates. i think ultimately that will not hand out. i think for the bank of england some of pressure will be much harder because in laois and will stay off target. peter, let us talk about japan. gdp has gone positive. back in september, they said they would anchor with zero. how big of a problem does boj have? >> for years now, one of the central banks that has been trying to push inflation as hard as they could. they have tried all of the tricks in the book. without being the biggest japan expert in the world, i think it is fair to say that there are other structural impediments they have for their economics, and demographics, and lack of immigration.

whyt is not accompanied inflation rising, it is going to be a big problem for them. matt: japanese yen looking crazy 108.e awake -- at peter, thank you for joining us.

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matt: welcome back to bloomberg markets, the european open. we are seeing our sixth rally on the dax. up 0.2%. it has been a long string of gains since the election of donald trump. the stoxx 600 up 0.25%. little more than two thirds of 1% and the cac in paris gaining as well. guy: let us talk about some of the key stock stories. nejra: i'm going to start with easyjet because the low-cost

carrier has been hurt by the pounds impact on his purchasing confidence. the brexit currency hit is going to extend into next year. pretax profits of the fiscal year just ended was not in line with estimates. the ceo gave us an insight into a discussion with david davis on the future for the aviation sector. after britain leaves the eu. >> every single one of us are saying that liberal and deregulated aviation which we have today is what the industry wants. david davis understands that being the and i think third largest aviation market in the world and the largest aviation market in europe, i think there is confidence that there will be an agreement. nejra: onto market which reported a 24% jump in

third-quarter profits helped by a previous acquisition. it also boosted its earnings forecast for the year. we spoke with its cfo who gave theis stake -- his take on change in the leadership of the united states. >> we do not see significant impacts on our business. it is an important country for us. we have 25% of our sales and 20% of our people located in the u.s. and we continue to believe that the u.s. will be a very important country and very fair and good trading partner to us. nejra: we looked at two stocks that are gaining but here are some of the worst performers. the index has shown that the 10 year treasury selloff that has been oversold. copper has been overbought. commodity producers coming down today.

the worst performer on the stoxx 600. guy: let us talk about another he's not. london properties. the return of international investors seeking a safe haven. let us talk about what is happening when it comes to some of the bigger equities in london. , i am going to ask you a more general question. we have had brexit. trump. have donald how much confidence do investors have in bric and border -- brick and mortar? >> an interesting question. what investors are looking for when they buy real estate is a certainty of income. if you look at a portfolio like ours where across our portfolio we have a lease length of nine years. in london, it is 10 years.

they have a certainty of income that comes from that and they can compare that to other forms of income. class, it isent still very attractive. guy: bond markets though are seeing yields rise. does that change the advantage of investing in a property portfolio? ini can get a better pick up terms of my risk-free return on treasuries? >> i think that is a fair question. if you look back over history though we are one of the largest gaps between the equivalent yields that you get on property and the five or 10 year gilts. the gap is still large and it can close as it does through various cycles. it does have an impact but i think it is not the only factor to consider. marketsat about bond

also determine the price of the mortgage or other funding land and realg estate purchases. as that gets more expensive, does the price gain slow down even more? >> i think you have to look at it over the medium term. between march and september, there was a terrible decline -- there was a considerable decline in the 10 year gilt. from where it is today to dropping to just over .5% in the summer. during that time, property prices came off somewhat over that six-month timeframe. seen a direct correlation. over the medium-term, the correlation with gilts is only around 0.5%. there is not an enormous correlation. guy: where do you expect the

and --?etween nav >> it is difficult because the market is projecting ahead for what it sees in underlying values. there is a huge degree of uncertainty over the outlook for a number of sectors and real estate is just one of them. at the close yesterday, our market price was around a 30% discount with the underlying net assets that we have reported to date. quites clearly projecting a reduction in asset values. we have seen a tiny amount of that in our results today. matt: i wonder what you expect to see -- i know you are focused on commercial real estate but we are seeing a lot more people consider moving to london

because of the donald trump victory. have you heard even and it totally anything like that -- have you heard anything even anecdotally anything like that? >> we will have to wait and see. it is very easy to make comments like that but nothing that we see coming through in terms of demand. what is your assessment of how the perception of property works with people's portfolios right now? a lot of people took fright when we saw some of the big funds being gated. how big of a discount is the market applying for liquidity? liquidity is a concern of some of the funds. the realrying to push estate sector too hard, but that is one of the advantages of investing.

it is the ability to get in and out we are easily. and so i think that people need to understand that if they invest in some of these funds, then their money may be tied up and they may not be able to access it when they want to. that is different to the stock market where the clearing price may be something that you do not like. matt: you have a different kind of investor. but when someone looks at the economic growth situation in the u.k. and then sees the inflation situation noting that mark carney probably will not be raising rates to fight inflation of a target, maybe they want to park money in real estate younger term. yes, and there are a number of ways of doing that. the question was about liquidity and people wanting to come at a the funds. if people want to park money in

the listed real estate market, there is some considerable discounts on offer. guy: if you look on either side of the atlantic at the moment and you look at london and new york, which of those two towns will you see the biggest investment in property in the next few years? between two to say cities as we do not know what what theme is -- donald trump presidency means or wire -- or where the brexit negotiations will take us. , weou look at where we sit have come to the end of a large development program in london. let. close to being fully we are actually positioned well for that uncertainty because we are not particularly largely exposed to the speculative

market. guy: thank you for accepting such a wide ranging conversation. shares are doing well this morning. congratulations on your numbers. i want to take you to southern europe, to athens, to greece where you are just seen desperate i can assure you that it did happen. air force one is currently taxiing in athens. in thent obama arrives greek capital. he is going to be are arriving in europe as you heard. he is going to convince the europeans that we do still have the necessary security arrangements across the atlantic and nato is alec. and therefore, there is nothing to worry about. except, i am not sure that a lot of people are going to share that view. is big in that issue. you are looking at live pictures as air force one arrives in europe. this is bloomberg. ♪

touching down one in greece as president obama arrives in europe to convince the europeans that we do still have a security arrangement known as nato, fully functioning. there are a lot of nervous people in europe worried about what is happening. air force one has now taxied.

the stairs are in place. we await the arrival of president obama within the next few minutes. little repositioning of the red carpet may be in order. the the a goals. limousine butac it is built on the platform of a general motors gmc suburban. it is an suv but they have put the body of the limousine over it with seven inch thick armor. look at how they have to reposition the carpet. >> fiat chrysler has become the first u.k. automaker. claim some owners

engines. they are reviewing the climate. -- the complaint. organic service revenue, what the company earns, the company's monthly phone bills rose by 2.4%. its continental operations performed better than expected. opec nations have begun a final diplomatic effort to secure a deal on oil cuts. they have two weeks to finalize an agreement before the meeting indiana. bob dudley told bloomberg that the oil market is pretty pessimistic. manus cranny is in riyadh. does not think the deal will happen. manus: it is interesting. i caught up with him in abu dhabi seven days ago and he was

held back a little bit in terms of his conversation. when i listened to his interview this morning, he put up some big red issues. the confusion coming from iraq. the different noises from russia. -- oil producers exempted from cuts. i loved that phrase from erik. i thought he sounded much more skeptical on an oil deal. >> there is a lot of surplus. it would surprise me if one or two countries cut for that amount. i think they will try to reach some consensus. i am sure that is the objective. manus -- matt: interesting stuff. it seems like a little bit of depressing outlook from him for the oil market. what does it take to be optimistic and get back to $60

oil? manus: it will take something much more substantial than what we have at the moment. matt, welcome to europe. it takes me to go to riyadh for you to be in berlin. he suggested that it is all about getting the cuts in place. they are in place, it takes you much closer, much faster to rebalance. >> if you look at supply and demand today, it is generally in demand. demand is growing in china, europe, and north america. it is about equal. but you have a tremendous level of stocks around the world. it will take a long time to drain them off but if there were substantial cuts from opec, that would signal that the stocks are going to drain. there is not that much of spare capacity in the world right now. in riyadh, the heart

of what it takes to control, move, cajole the oil market. reassert itself as the true swing producer? it is all about change. be sure to come back with me. i have manuel just over there. we are going to talk about banks and donald trump. guy: firmly on the agenda. manus cranny is in riyadh. let us move on to the m&a world. reynolds is seeking a higher buying price from british -- bat. they say it is the second largest cigarette maker in the u.s. and they see the offer as too low. this isus to discuss ruth davis. they want a bit more money. how much -- what is the market saying about how much more

money? >> the market feels like they are not going to dump too much more. up to 10%. if you see the price -- it is trading below the original offer price. people are saying -- who else can reynolds go to. bat has 42% stake in the company. they are talking about synergies of 400 million. they will not have as much antitrust as other companies. has ans like bat advantage in this negotiation. matt: reynolds advantage is their foothold in the electronics a groep market. electronic-- in the cigarette market. thatey managed to retain 42% stake in the company. it is a good deal.

it is a better fit than some would say imperial tobacco. bat and reynolds are a better fit. like it is taking a little bit longer than they originally expected. guy: the credit market is on the move this morning. donald trump was confirmed to be the next president. do the credit markets change deals like this? >> we are not seeing a change come through just yet. out with a $20 million financing package just last week. from what we hear, that is going fine but it depends on what we see in terms of the political ramifications. as brexit gets closer, you will probably see more around that, more around the deals. bat -- this is a cautious deal.

they are ready have a 42% stake in this country -- in this company. i am interested in the regulatory changes are going to be. and the market changes. ruth, thank you very much indeed. up next, has the global selloff in bonds still have legs? we will see manus cranny again in riyadh. this is bloomberg. ♪

matt: welcome back to the open. i am in berlin joining guy johnson in london. a global bond selloff has seen the japanese 10 year yield turned positive. last and where to position next? marcus ashworth joins us. he was trading in these markets -- you do not look a day over 35. i will say about 15 years. let me ask you first what you think about the fed and central toks and how they will react this huge jump in yields around the world starting in the u.s. do they have to raise in december? due we see 50 basis points to the incredible inflating yields? >> i do not think we will see 50

basis points but i do think we will see 25. the fed is perfectly capable of pouring cold water on that. the market is leading them rather than them leading the market. they definitely have to hike here otherwise their credibility is lost and it will be seen very political as well. in essence, i do not think the fed will be too concerned about the selloff. the fact that they are able to stabilize just above 3% and rally back a little bit is a positive sign that value buyers have been waiting on the sidelines who were heavily in cash before the election. many saw this coming. many positioned for a risk off and are able to buy back into this and that is important. fund in focus?ny >> the risk as far as hedge

concerned. all of the funds were hurt and that is why a lot of them saw this coming. they protected themselves. and will always lose money it is a relative situation. talking saw bill gross about this. they called it although timing is most important. gun lock sees the 30 year yield going to 6%. vindicated in his view. a number of the big fund managers including pimco and blackrock and goldman, a lot of the street predicted this and this tree is as well-positioned as they could before this. it is a trading market. they came in and saw some value.

i think yields are going to go up to 240. guy: we will leave it there. matt miller and i are going to leave you there but surveillance is up next. francine lacqua will be up next. this is bloomberg. ♪

francine: top picks. team -- trumption plus transition team top fundraiser. a transition to a capitalism that works for everyone? theresa may want -- might opt out. lee akayev --