tv Bloomberg Daybreak Europe Bloomberg November 24, 2016 1:00am-2:31am EST
yousef: gogo greenback. the dollar surge continues. u.k.'s chancellor sets out a summer framework for host exit britain, conservative mps attacked the fiscal watchdog saying that the eu leaving will cost 60 billion pounds. cut confusion. iraq's prime minister says the country will scale back oil production as part of the broader opec supply deal.
and trump's thanksgiving prayer. the president elect urges americans to put the political campaign behind them and rallied together to build a thriving nation. welcome to "bloomberg daybreak: our flagship morning show alongside manus cranny in dubai, who just returned from cairo. manus: let us get started with breaking news this morning on daybreak. europe's biggest steel producer delivers a bit of a shock and proposing a full year dividend. the bloomberg dividend estimate was for 18 euros sense. -- euro cents. that comes out in line with estimates.
order intake, 37.4 billion euros. that is down from 41.3 on the year before. the dividend guidance is a little bit lower than the market had anticipated. ran aerg intelligence fantastic index, up 21% in the past week. it is up some 300 percent in the past year. billion, and the estimate beenin line, well, that's in line, wellang just a little bit shy. teed to meetogram, its targets, so a stable dividend. it matches the estimates. will talk about those earnings and that is at 7:30 a.m. london time. let me take you to the risk radar.
some of the correlations don't hold up. take a look at this. oil copper and gold. we are marching ahead in terms of the equity story. a lot of liquidity in the futures are not going to be there. have a look at the top of the board here. i have got oil for you there. $48. the overnight indications are that iraq may be prepared to cut while russia is a little bit more reluctant. the iraqis agreed to bear part of the opec cuts. you will talk to the nigerian oil minister. it is struggling. there is an exit from the etf, it -- it is just on a pump. up 22% in november. goldman's and deutsche warned that it was too far too fast, too quickly. yousef: we had the fed minutes
which bolster the case for a rate hike in december. that is one front. of course, you had the other aspect with some of the data including durable goods coming in better than expected. let us put this on a chart and show you how this plays out. this is the story. dollar domination, the greenback against urging, the highest in over 10 years. if you take this chart all the since the inception of the bloomberg dollar spot index. we have added the bloomberg commodity index as well. you can see here, that is your traditional correlation. weaker dollar, stronger commodities. that breaks right here. stronger dollar, stronger commodities. the entree rate hike in december inmly -- the rate hike december -- haidi lun has the story. trump has urged
americano to put the device is political campaign behind them and rally together to build a thriving nation. in a message for the things giving holiday, he offered words of conciliation and unity. prayer thatt is my on this thanksgiving, we begin to heal our misgivings and come together as one country, and very common resolve. donald trump expected to nominate investor roth as secretary of commerce. bybecame a billionaire acquiring and restructuring troubled companies. toched by phone, he declined comment. the billionaire heading one of china's most inquisitive companies says donald trump is unlikely to follow through on his promise of a trade war.
the company says he will continue to invest in the u.s. leaders of both countries are smart enough to find the best way to cooperate. i am particularly concerned. i am actually optimistic about the changes a businessman-turned -president would make you america. so maybe it is good. maybe there are some opportunities. haidi: singapore's government has cut the top end of its growth forecast as exports to the trade has independent nation to remain under pressure. authorities think the economy will avoid a recession. that comes as new data shows gdp fell and annualized 2%, beating estimates. lawmakers have attacked britain's fiscal watchdog. cost 60 billion
pounds inexorable as the economy falters. buying said he was not andndless slew of gloom doom, adding the predictions should be taken with a pinch of salt as it has not exactly had a brilliant track record. lublin's, 24 hours a day, powered by more than 2600 journalists and analysts in more than 100 20 countries -- 120 countries. this is bloomberg. manus. thes: let us check into asian markets. a juliette saly a stunning bar. i am looking at the dollar-yen, by far one of the against and most aggressive trades. how is that translating into the equity story? juliette: no surprise that we are seeing once again japanese equities very strong, just closing out that session, the the nikkei up by 1%. coming back online, you are seeing steel players really lead the gains in the region all
along with another number of exports stocks. this on yen weakness, dollar strength. it is interesting if you look at the technicals on the bloomberg, particularly the rsi function for the nikkei, it is getting close to the 70 level, close to overbought territory. it you are seeing the shanghai composite a little higher. up 0.1 percent. on the strength playing into emerging market currencies and weighing quite heavily on a number of these emerging markets , particularly in jakarta. the composite down by 1.2% today. we have been watching the bond space, some quite a lot of selling coming through in bonds in australia and new zealand. you are seeing the yield higher on the 10-year note in australia, 2.77%. the u.s. bond market closed for thanksgiving.
manus and yusuf. yousef: -- youusef. this suggested the economy is strong enough to withstand another rate hike. it could come as soon as next month. let us get some more context from bloomberg's mike mckee. >> the minutes don't tell us much we do not already know about the fed's short-term plan. most participants expressed of view it could become appropriate to raise the target range for the federal funds rate relatively soon, the minutes say. as long as the data cooperates. some members argued a rate price should occur at the next meeting. fullconomy was at or near employment, said officials agreed, although there was discussion about whether they should let it go even lower. some members felt that because the fed to raise rates much more quickly if the employment rate declined to far and pushed up inflation, which is rising, thatugh fed members said
is a good development even if they can be sure it will last. the meeting was a week before the presidential election, and the subject apparently did not come up except for a brief mention about uncertainty. about government policy as one mist of reasons that the business climate had been so cold. there was discussion about developments overseas including brexit and the european banking situation and how that might affect the u.s. economy. michael: the officials discussed the impact of money market rate reforms in october that had pushed down the yield on the short-term paper. perhaps because they were not focused on raising rates at this meeting, members held a lengthy discussion about long-term monetary policy and general agreement that raising -- at keeping the balance sheet at a high level is not necessarily the best policy. it works best when interest rates are at or near zero. fed chair janet yellen saying a decision on that would not have to be made for some time.
but it does appear a decision on raising rates is very close. michael, bloomberg, washington. yousef: let us brought about the conversation with philip shaw. great to have you on the show. let us get into this data we got late overnight. the manufacturing data beat most estimates and also for additional context, i brought up the w.a.r. p function -- wirp function. and theres in the bag are no questions about that. it is more about what happens after that. where is the u.s. economy at in terms of itself? what is your take on it? philip: never say never. nothing is ever in your bag, but it is very likely that we get the fed hike as the strictest pricing in december. you are right. where is the u.s. economy? we have two rate hikes penciled
in for 2017. the underlined pattern in the u.s. economy will be relatively strong and support to hikes bit like the feds dot plot. presidency is likely what is going to happen the fiscal policy. that is not a factor that is going to influence the outlook over 2017 but could be a 2018 milliman but certainly in terms of the way the markets will price in interest rates in 2018-20 19, that will have a big impact on the bond markets and is a huge relevant factor for next year. manus: i had a conversation last year with s&p and the rates job. he is doubtful this fiscal paraphrasing, that they will get aggressive on this. the dollar is hitting a 10 year high around commodities. do you think the dollar continues to trade higher into
perhaps what is expected already, which is a more aggressive fed? rate hike is penciled in. the u.s. is already tightening. mortgage rates are near 4%. philip: certainly, the dollar is ascendancy at the moment. how long that is going to last for depends on just on developments in united states, i.e. the monetary policy, there is another development you have to look at in the eurozone and the european central bank. one thing we are looking at at the moment is relative euro weakness. one reason being we had some soft or relatively dovish statements from leading ecb members, so we have to factor that into the assessments of what is going on with the u.s. dollar. we are not convinced that that dovishness and a continued outlook for qe in the eurozone will continue through 2017.
so, in that respect, we see the dollar being relatively short-lived. yousef: a key intellectual debate has not been resolved and that is the issue as to whether to hike gradually, which could mean you have to hike a lot faster in the future, or you push a high-pressure economy to really ease a little bit the stresses in the labor market. likely andis more makes more sense to you as a chief economist? philip: i think the experience of the last 8-9 years suggest there are big uncertainties around the corner that could hit you at any time, so the idea of raising rates aggressively i think is a particularly that one. you hike once and wait and see for a few months and then get the readings from that. two hikes a year, three hikes a year seems like a relatively sensible strategy is the economic data supported it. other than that, i think the fed will be guided by what is happening in the labor market
and in particular, the wage data. if unemployment falls back to 4.5%,o about 4% they will be relatively relaxed as long as the wage data does not start showing acceleration , thatge growth above 3.5% is when you get the aggressive hikes. i think that is pretty likely. yousef: at one level -- at what level --? at what level does the u.s. dollar become a critical risk for the fed? philip: i think it is a factor at the moment. what we saw about 18 months ago was the strength of the u.s. quite a cap, a capping effect on exports and corporate earnings. as i mentioned, we are quite cynical or skeptical the dollar will rise much further and at some point, we think, markets will begin to doubt the economy can withstand a stronger dollar
and that affected itself could begin to make the dollar slipped back a bit. us get into the bond market because i am looking at -- i'm thinking about the risk and reward. you are talking about the wages side, which is the bulwark. if you want to look at curves, look at this momentum in the back of the curve. 30 year period, but i go back to my point. mortgages could be the undoing of the american dream. --trump does this really does fiscally spend, 4% for cash, this could be the big risk in the u.s. story because if this curve continues to aggressively steepen, it could be the undoing of everything, it could be stagflation. philip: certainly what is happening to the bond market could have a big effect on housing market and we have seen a steepening in the curve not
just post election but over the past couple of months. interestingly, we were quite concerned by the fall in mortgage applications to houses purchased a week or so ago, thinking, well, 30 year rate at about 3% is the effect already but we did see a rebound in the latest data. it is a reminder absolutely that bond markets have an effect on the housing market and the housing market has an effect on the economy. yousef: we will continue the conversation. there is plenty more to get through. philip shaw, still with us. still to come, virgin's blackhole. britain'ss -- blackhole. our interview with nigeria's petroleum minister ahead of the crucial meeting of opec. can a deal be struck? live ine are johannesburg to talk the rand.
yousef: good morning, good morning. it is 6:20 here in london. bright & day. the hang seng currently trading lower. really going contrary to the trend we are seeing across equities. let us cross over and see what is going on in the u k. manus: let us talk about the u.k. chancellor. he laid out a somber outlook for the post-brexit britain. he says the government will need to borrow more over the next five years. partly as a result of the vote to leave the european union. >> we choose in this awesome statement to prioritize -- autumn statement to prioritize
investments in infrastructure and innovation that will directly contribute to raising britain's productivity. we will stick to the roadmap we set out in march. corporate tax will fall to 17%, rater the lowest overall of corporate tax in the g-20. we will deliver the commitments we made to the oil and gas sector. the carbon price will be cap to 2020 and wep willp implement the business rates productioned package worth 6.7 billion pounds. we will maintain our commitment to fiscal discipline while whileizing the need -- recognizing the need for investment to drive productivity. manus: meanwhile, a conservative tax the fiscal watchdog. >> it could cost of 60 billion pounds in extra borrowing as the economy falters.
tory said he was not buying the endless view of gloom and doom adding the predictions should be taken with a pinch of salt because he has not exactly had a brilliant track record. philip shaw is with us. listened to had meant yesterday -- to hammond yesterday -- he intends to borrow 110 billion pounds over the next four years. i understand that is looking at a deficit of 40 billion pounds by 2020. the question is this. are you unnerved by the additional borrowing or reassured by the additional borrowing and nearly 50-60 billion of this is down to brexit, they say. philip: well, you can sort of put it that way. i would make a couple of points. firstly, if you look at the first three in our statistical
year, the numbers on the deficit will disappointing and it was clear that the government was not going to get its 20 billion 2016-2017 at outlined in the budget in march. that is arguably nothing at all. that is a miss estimation of economic growth -- am misestimation of economic growth. looking forward, i would argue that 2% growth over the latter years of the economic forecast is particularly somber. it is a little bit below what we hoped would be the trend. the big picture is that in the post-brexit environment, the economy and the public finances have held up a lot better than the worst fears and indeed, i will admit, including our own forecast. chart: i'm looking at a showing the move i saw in 10
year. the autumn statement came out. this was going to be key for investors, how this would impact borrowing costs. where do you see yields going from here? philip: it is a tricky question. that it wase following the national trend and the european bond markets were week towards the end -- weak towards the end. i'd don't think the idea of the fiscal projections unnerved investors at all. we have additional gilt fortunes. if you look at the arithmetic, that was likely to be the case anyway. i think we are probably likely t yields slightly higher through the course of 2017 depending on what happens in the rest of europe, but also fiscal policies coming out of the united states. the conversation i had
this morning was the risk to the reserve status of the currency. look at the wcrs. i love irony. is a bit stronger. when they called brexit, invoke article 50 at some stage next year, d you think there is a real risk to sterling's reserve currency status -- do you think there is a real risk to sterling's reserve currency status? philip: i think so. we might get, at the end of march next year, we cannot be 100% certain, there will be a gut reaction in currency markets even though it is expected. that is really being the pattern since bash that has really been the pattern since july related -- that has really been the pattern since july since the brexit event. i struggle to believe the transpiration of the u.k. --
manus: it is just gone 10:30 a.m. in dubai. dollar-yen continues to weaken. the imperial power. we have got a little bit of -- breaking across the bloomberg terminal. yousef? yousef: we like to indulge from time to time so when the remy cointreau coming in. the estimate was 119.3 million, so a beat on that front, coming
in at 76 million euros. the country confirming its fiscal year target. currentlf operating margin, a beat on that front as well. bear in mind there was downside pressure expected in terms of some of the sales emanating from certain geographies and improving momentum was inspected out of china. this is a company that had seen its stock go up substantially. downe talking 12% so far, 0.1 percent before. the announcement among the analysts, is very divided picture. again, ahead of the announcement, -- a continued strong growth in the united states. us talk about daybreak. it is on everybody's terminal. i love it.
the little kingpin. makinghe dollar that is the lead story on daybreak today. the gains, i mean, the highest in a decade. a stronger case for hiking rates, the debate we just had with philip from the federal reserve. the dollar remains triumphant. yousef: the other stories oil, trading at $48 per barrel after iraq's prime minister said the country will cut production as part of a broader opec supply deal and then pressure is seen as agreeing to a freeze rather than a reduction, so philip, a lot of unanswered questions as we prepped for the november 30 meeting. philip: indeed. manus: daybreak focuses on lufthansa. the ceo says he is giving into the pilot's paid a man's -- pay demands would leave the airline vulnerable.
the airline's flights have been grounded. this is a real head-to-head in terms of legacy carrier, flag carrier and the pilots and the reality of pay. yousef: absolutely. let us take a quick look at the risk radar and see some of the asset classes we are watching this morning. you're looking at oil of course, that we just mentioned, just about $48 a barrel, up zero -- office of 1%. the downside pressure off the back of the stronger dollar. it is one of the few correlations that are still out there. finally, copper still on a tear up 3% to extending gains at the highest level in more than a year. it deutsche bank warns the base metals have -- nobody convinced of that, as you can see. manus: absolutely. we have a special guest,
nigeria's petroleum minister, trying to convince the japanese trading houses to invest in downstream products in his country. member has been particularly hard hit by the oil rights and walls the largest gas reserves in africa. cool -- either a k.g. kachikwu. buy nigerianady to lng? are to finding a deal. emmanuel: i am here largely for the petroleum conference. that was in the middle and been verybut i have impressed and encouraged by some of the bilateral meetings that have been held. deepening the market's base for japanese imports. very favored in
that. as you know, over the last one year or so, as the markets in the u.s. thin out for gas, we have managed to move quite a lot of our gas to asia, japan being one of those beneficiaries, which has been very awful. philip: emmanuel: the conversations we have had so far has been a long alliance of willingness to invest in structural facilities. --viding the market business it is very encouraging. great to see you. last time we spoke, you are optimistic and up the that opec would reach a deal and announce .t if you could put it in percentage terms, are you 90% confident, 95%, 100%? if there i don't know is a high percentage certainty
but what i can say for sure is that i am still optimistic. most opec members are still optimistic. we have had courage, which is agreeing to freeze costs. that is the more difficult one, which we did in algeria. i am fairly optimistic whether we arrive at something positive, but we put a very high premium on metacognition. anus: a high premium -- a high premium on the conclusion. that 44eople have said dollars, $45 is pricing in the present state. what is the risk to the market if a deal is signed on the upside? $40?e looking at sub atanuel: probably looking $50, not sure i am optimistic
enough to say more. if we do not sign, obviously, the $44 for the five years, it will definitely be challenged. you have to realize that different from whatever opec does, we have to deal with the issues of the u.s. market itself. it wants a higher production. analyses,tioned, the russia has not agreed to a cost, a freeze, but there is promise about a cut. i am optimistic the releases over the last four months despite the fact that we present over 30% of the world oil, most looks to opec to be the defining sector for pricing. we can find some conclusions that are positive and will spread that positively.
yousef: let us try to put a few numbers to that optimism. if you reach an agreement with opec, november 30, where is oil going to go? obviouslylooking at 50's, slightly above $50, basically. if we don't, $45, $44, we will crunch may be downwards. manus: you mentioned russia there. the russian oil minister in qatar, do you think russia is that shopping -- is backtracking? do you think russia should join him in as the biggest -- join in as the biggest non-opec producer? emmanuel: we are hopeful that it should. it is important everyone contribute to this.
opec does not want to carry this weight alone. not make it will much of a significant difference. russia is cooperative on these matters over the last one year. they may not have a definitive coverage, but they are stepping back to see what opec does. we encourage the come along. a lot of meetings have gone on within the presence of opec, qatar, and russia, and ultimately that would have some dividends. we are all interested in finding a price or rather russia is as interested in finding a price as we are. i don't find why we wouldn't be a will to reach a conclusion that is positive for the market. yousef: how much oil is nigeria producing at the moment and what kind of insurance is can you give foreign investors given the ongoing turmoil there with the rebels? emmanuel: i won't call it turmoil anymore.
i call it a bit of disruption. we have moved back to 1.9 barrels a day. we are about 2.1 barrels over the last year. it is a work in progress. is very focused on china to find solutions to this problem. we are working hard, seeing solutions come up. we are seeing acceptance of what we are doing. like every other time where you have disruptions and conflicts, it takes a while to get where everyone is comfortable. we will move up from where we are. to the end of the year, returning back to productions, 2 the 2.2 werels, to should be in. i'm confident in 2017, we would have less disruptions to our oil production. we would seek peace. ,ousef: emmanuel ibe kachikwu
nigerian minister of state for petroleum. always a pleasure having you on the program. rate decisions for turkey and south africa. the turkish lira has slumped to a fresh low against the dollar after depreciating more than 10.5% and the last month. erdogan -- >> the south african rand has fallen by more than 7.5% against the dollar. this is since the election of donald trump, president elect. for more, let us bring in our bloomberg reporter. can we expect when the monetary policy committee announces its rate decision today, because there is a big shift in all of the emerging market, isn't there? >> yes, there certainly seems to be. this week was
definitely a big rate decision for some of the key economies on the african continent. na came in with a cut. nigeria kept it's rates on hold. all 19 economists in a bloomberg survey expect the central bank will keep rates on hold at about makes hise governor this vision and announce is it later today, menace. manus: -- manus. manus: the last data point coming in at this .4%, which relative to how inflation has held up, is high. is it economic growth or price stability? abo: we know inflation accelerated to about 6.4% in october. is definitely going to be a consideration that will be top as nbc makes his decision and announces a later today.
we know the south african reserve bank promises to keep inflation within that 3% to 6% target range. we know that the economy is now selected to grow. that is according to the government's latest estimate. growth won't be a consideration. the rand has remained a bit resilient. some of the political turmoil we have seen over the last two months. we are interested in what the central bank will do today but growth and price stability definitely two of the main considerations. yousef: let us dig deeper into this conversation. philip shaw is still with us. philip, looking at some report a measurethe imf, exploring the portability of some of these markets to the stronger u.s. dollar and is as malaysia, turkey and south africa look to be most vulnerable due to the state of the foreign currency reserves. do you subscribed to that
view? if the fed is tightening monetary policy, you start getting shivers through various emerging markets. i think that has been a factor of life over quite a number of years. , you know, the fundamental impact on the economy, i am less convinced that what happens to the writing dollars going to have a big impact on the fundamentals, and it is a bit of a reminder if you like that monetary policy considerations are important, but monetary policy is not the be-all, end-all of economic performance. in government, you need proper structural reform where necessary and you know, you have to do things different countries within the emerging markets base, in that respect. -- market space in that respect. manus: let us try to draw some differentials. we have politics weighing on the lira, the idiosyncrasies of the
gdp, driven by oil. it is about budget deficits. that is going to draw the division line. where are the laggards going into 2016? i had martin gilbert to saying to me he is worried about some of the bigger emerging markets. what are the biggest risks on your radar for 2017 as you look at it from an economic point of view? philip: i remember waking up in 2016 to this massive volatility in chinese markets and it is quite notable that what we have seen over the past few weeks is a quite sizable weakening in the yuan both onshore and offshore and so far, we have not seen any tremors in terms of chinese stock markets, but one thing we are watching very closely towards the end of this year and the beginning of next year is we don't see a repeat of
investor nerves over china and consequent capital outflows. reserves have been coming down and chinese official reserves, but so far, the effect on markets appears to have been relatively contained. it is just the currency for now that is weakening. that is probably top of our list right now. manus: do you think the americans are heartened the fact -- have a look at yuan yen here. 's planthink donald trump is spoiled that the chinese are not manipulating. what do you think of that as a proposition? they probably are intervening at the moment, trying to keep a stronger or stop it from declining. a traditionally criticism that you get, is it, in terms of chinese forex manipulation. it is interesting where we go. we have the treasury send the annual report on a lot of though, so there is a little bit of breathing space for everyone to prepare for the next one,
which of course will be a period where donald trump will be president. now, what the top administration ,ill do about china particularly with respect to tariffs is a big question. yousef: the ecb's financial stability review is out this morning. we look at the health of europe's financial sector and mario draghi's plan to boost liquidity in the bond market. plus, is december a done deal? allres suggest a hike is but guaranteed. we talked central bank. britain's blackhole. it will cost 60 billion pounds in actual borrowing, but not everyone agrees. this is bloomberg. ♪
another tradition. embarrassing my daughters with a cornucopia of dodd jokes about turkeys. we should make sure everybody has something to eat on thanksgiving. except the turkeys, because -- no way i am cutting this habit cold turkey. to hand ithave got to that man. he has some pretty brutal turkey jokes. happy thanksgiving wherever you are in the united states of america. having a late martini in new york, enjoy it. i hope it is well shaken. let us get a business flash. juliette saly standing by without a martini glass in her hand. anus.tte: not yet, m a fund will buy stakes in hedge fund firms. that is according to two people with knowledge of the matter. partnersthe bank's
will aim to you by minority stakes in 10 to 12 money managers. givingds as ceo says into pilots pay demands would threaten the carrier's viability. airlines't half the flight landed. ivanka trump has separated her personal social media messages from those of her lifestyle brand after facing criticism about conflicts of interest after her father ascends to the white house. the editorial team says she will only be using her instagram, facebook, and twitter accounts messages rather than brand related news. for hq account will deliver content for her business which delivers women's jewelry and footwear. yousef. yousef: let us go over to this story coming out from the ecb
and publishing its financial stability review this morning which will give the bank's statement with respect to the finance sector. it is hoping to lend out bonds to add more liquidity to the market. -- get some a more perspective. it has been pointed out to me this morning, can i get more details on the bond buying program of the ecb? by net even adjust it flow as well. let me warn you, this has an intellectual level of depth that will take a little bit to get around. interesting numbers and an interesting move by the plan of the ecb to ease some of those liquidity restraint. philip: i will have a look at that function when i get back to the office, yousef. a good thing.y
it cannot do any harm really, but the question is, is it going to do good? none of this helps over the past steepening ofthe the juncker. the ecb doesn't have to look quite as hard for bond that can relax.me of those can 1.i would make is that whenever i go into trading that -- the one point i would make is that whenever i go into a trading desk, -- when i go into regulation, they have resulted into fewer institutions making markets in these securities and therefore the liquidity has gone down and that is a regulatory factor, but you will not find many central bank officials missing that. phillip, you think, the ecb are relieved to see there is a push lower in the euro? what is the ecb need to do in terms of scale to continue to affect that kind of market move?
i know the fed potentially is in play. what do they need to do to affect a continuation of that good wind? philip: well, the weaker euro certainly helps. yield curve helps the ecb and arguably liquidity into in part of euro area on markets, but you don't really want higher long-term lending rates because that is a hindrance to economic activity. in terms of what the ecb should do and monetary policy, we have been hearing softer news from senior government council members recently and it looks very much as though we are going to get a full extension to qe announced in early december. at some point, they will taper off the programming, we think 2017, but core inflation is still very weak. loose monetary policy will continue, but the ecb will make the point that several eurozone
countries and need structural reform -- countries need structural reform. yousef: wouldn't it make sense to beef up the bond buying program? the inflation is not really where needs to be. isn't this a test up the game a little bit? how else are you going to get inflation in? philip: i don't think monetary policy can be the savior of the eurozone economy and ecb inflation target on its own. you need other things to contribute towards that. were the ecb to step up the pace of bond buying, i think their problems in finding more boston bondsld reemerge -- more to buy would reemerge. the effects in my personal opinion would be fairly negligible anyway. arguably, you need this fiscal policy. yousef: philip shaw, joining of us this morning.
freeze rather than a reduction. the president-elect urges the divisiveput campaign behind them, rally together, and build a thriving nation. ♪ welcome to bloomberg daybreak. our flagship morning show. of breaking news. yousef: we are looking at economic data. let's get you those third quarter economic figures. that is year on year. the estimate was for 1.5%. inrter on, -- quarter coming at .2%. once again in line and growth
adjusted at 1.7%. year on year, estimates was 1.7%. dead in line, no other way of telling this story. let's cross over now to see how we are set up with features. u.s. equity futures are trading but you can imagine there is -- treating u.s. futures at the moment. stocks -- stoxx is lower relative to futures. sincengest winning streak 1999. europe is carrying over that momentum from late yesterday evening when the u.s. went home to bag a turkey and boil up the cranberries. let's see what is
happening on the risk greater and go through the key indicators. we looking at the commodities story. branches up above the flat line. it is all about what is a big going to do, we heard from the nigerian stroll -- petroleum minister. they're going to come to an agreement although he refrained from giving 100%. we have on the futures for december, currently gold, safe haven down 1/5 of 1% off the stronger dollar. 1000 $186. copper up 2.8%. deutsche bank putting out a note saying that the base metals had overshot fundamentals in the near-term. the extending -- extending the highest level in more than a year. manus: let's get into the first word news and what we have got. let's check that for you. americansmp has urged
to put the divisive political campaign behind them, rally together, and build a thriving nation in a message for the thinks giving holiday. he offered the words of conciliation and unity. mr. trump: it is my prayer that on this thanksgiving, we begin to heal our divisions and move forward as one country, strengthened by shared purpose and very, very common resolve. doll trump is expected to nominate investor wilbur ross as secretary of commerce according to a person familiar with the transition planning. he became a billionaire by restructuring troubled companies. and the billionaire heading one of the most acquisitive countries said donald trump is unlikely to follow through with his trade war. will continue to invest in
the u.s. as the common interests will outweigh any of trump's protectionist leanings. believe the leaders of both countries are smart enough to find the best way to cooperate. i'm not particularly concerned. i am actually optimistic about the changes a businessman turned president could bring to america. it is worth looking forward to so maybe it is good. maybe there are opportunities. cutting the top end of its 2016 growth forecast. exports in the trade dependent nation remain under pressure. authorities think the economy will probably avoid a recession. nude data showed gdp fell -- new data showed gdp fell. manus: conservative lawmakers have attached the -- attacked the conservative watchdog.
the tory mp said he was not buying what he called and endless gloom and doom. predictions the would be taken with a pinch of salt. --global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more of those stories. in on thet's check markets and martinis and asia. we are seeing some mixed movement coming through. the shanghai composite just closing pretty flat. that is a market trading at 10 month highs. the bond market in late trade, we are seeing some downside down by .25 of 1%. interesting to see that these insurance players and the casinos have been very well today.
the u.k. was the standout. index higher. atstraight -- streak we have sen in japanese markets in 17 months on the back of the stronger dollar. a weaker yen pushing those export stocks particularly steelmakers higher. if you look at the function on the bloomberg, the nikkei is close to that 70 -- 70 level. flat today.ose new zealand was higher by around .5 of 1%. that we had seen, the greenback at a 10 year high is weighing into those emerging-market currencies and having quite a lot of from education in terms of the ems. we have seen the indonesian rupiah touch its lowest level since june. if you take a pen the picture you're saying the regional index a little weaker today due to the forces in emerging markets and also the korean kospi.
manus: thank you. there is a little bit of skittishness in the market. federaltes for the reserve meeting suggested the economy is strong enough to withstand another rate hike and it could come as soon as next month. mike mckee has the details. not tell usnutes do much we already do not know about the feds short-term plans. most expressed of you that it could become appropriate to raise the target range for the funds rate relatively soon, the minute say. as long as the data cooperate. to maintain credibility some members argued a rate rise should occur at the next meeting. the economy was at or near full employment, fed officials agreed, although there was discussion about whether they should let it go even lower. some members felt that could cause the fed to have to raise rates much more quickly if the animal planet rate declined to far and pushed up inflation
which is rising. although members said that is a good development even if they cannot be sure it will last. the meeting was a week before the presidential election, the subject did not, except for a brief mention about uncertainty. about government policy as one of the list of reasons that the business investment climate had been so cold. it was discussion about developments overseas including exit and the european banking situation and how that might affect the u.s. economy. impacticials discuss the of money market rate reforms in october that had pushed down the yield on short-term paper. notaps because they were focused on raising rates at this meeting, members held a lengthy discussion about long-term monetary policy. general agreement that raising -- keeping the balance sheet at a very high level not necessarily the best policy. it works best when interest rates are at or near zero. janet yellen saying a decision
on that would not have to be made for some time. it does appear that the decision on raising rates is very close. michael mckee, bloomberg washington. yousef: let's welcome david zahn. great to have you on the zone -- show. takeaways,our key did anything change in terms of your outlook? confirmed fed minutes what we saw. the job market is doing well, it means the hike will be hiking -- that will be hiking in december. you have to see what trump is going to do with his policies as far as stent -- spending tax cuts and what the fed can do. manus: have 10 year government far --one too far, too too fast and have the bond markets overreached? david: the bond markets have reacted in a different fashion to what most people would have expected. this move up in yields which has
happened in europe as well as in the u.s. is really being driven by people thinking we will have reflation, we will have this fiscal spend that people anticipate. in the u.s. it is about appropriate but in europe it is definitely going to far, too fast. i brought up this great chart to put things in context in terms of this crazy move we have seen across asset classes. this is the return to gold and silver and the s&p 500. as you can see, over one year, despite the record highs we are seeing across the equity market, you would have been better off putting your money in gold or even silver, for that matter. what is an accurate reflection of the state of mind of investors at the moment, which asset classes have a lot further to run, which ones are really stretching themselves at the moment? what has caught your attention? david: i think bond -- the bond
market has had a correction which is think is appropriate, yields were definitely too low. in europe some of the valuations or mayipheral on markets be slightly stretched given you have an ecb meeting coming up in december. i think you have to look at several different asset classes to get it to her picture. -- a truer picture. growth will be better and inflation will be higher. whether that is completely correct or maybe they are getting ahead of themselves, we will have to see. manus: you just mentioned i have a three day of the european curve, and that is what i decided to pull up. he said perhaps we have gone too far, too fast. u-curvs the spike in the e. if the ecb comes back into play at christmas time, what should i see? trump the ecb,
where are you most concerned? david: the dynamics and italy are interesting because we have the italian referendum on december the fourth and we have the ecb that same week on december 8. i think the referendum, we will know the results and it could be a know if that is what markets are saying and then how does the italian political environment change or does it change, does tojust say, we will wait 2018 to have elections? there is also the banking system in italy that is in the midst of being resolved. you will have the ecb where they will extend qe and we will have more buying from the central bank. that puts that in start -- start contrast. the ecb will continue to be easing policy. you get that do virgins between the two different central banks. an analyst gave a few of his thoughts and he said even if italian referendum goes
pear-shaped, it will not lead to a collapse of the euro. the contagion might spread but people would wake up and realize the reality of populism and swing to the other way. it would correct itself in a way. is that something you agree with? david: we do not think europe will break up, it is a political project and it will continue to drive forward and the ecb is behind that. and should support that and keep yields will gently low. problem is making sure the peripheral bonds remain low enough they can finance themselves at an attractive rate. i do not see the big low up that people are talking about. infinity, that is going to be the debate of 2017. david zahn staying with us. up next, bankrolling brexit. how stable are britain's
yousef: it is 7:13 a.m. in london and 4:17 p.m. in tokyo. looking at the imperial palace on a gloomy day. tokyo was getting november snow for the first time in 50 years. in all the record-breaking, yet another one there. the dollar-yen 112 .92. 112.92. juliette: advisers to donald trump are said to be exploring ways he could greenlight the pipeline. the issue is actively being discussed. forincoming president looks ways to jumpstart infrastructure development and deliver on a
campaign promise to approve the pipeline that would connect canadian oilsands with u.s. gulf coast refiners. credit suisse is calling investors to raise his much as $2 billion on funds to buy hedge fund stakes. they say the banks partners unit will aim to buy minority stakes in 10 to 12 money managers. rio tinto wants to generate $5 billion of additional free cash flow over the next five years. the mining giant will cut its capital spending target this year as well as finding additional savings of $2 billion by the end of 2017. while the outlook for commodities has improved recently, the top producers expressed caution. the gainselihood that can be sustained. in august, rio tinto reported its worst profit since 2004. lufthansa's ceo is giving into pilot pay demands. amid a strike that left almost
half the airline flights grounded. -- firm stance no stat stands no chance of surviving if [indiscernible] the u.k. chancellor has laid out in fairly frank terms quite a sober framework for post-brexit written. he says he has cut the forecast for the economy in terms of growth for 2017. the government will need to borrow more over the next five years, partly as a result of the vote to leave the european union. >> we choose in this autumn statement to prioritize additional high-value investment , specifically in infrastructure and innovation. but we will directly contribute to raising written productivity. we will stick to the business of -- tax roadmap that we set out in march. corporation tax will fall to 17%. by far the lowest overall rate
of corporate tax in the g-20. we will deliver the commitments we have made to the oil and gas sector. the carbon price support will continue to be kept out to 2020 and we will implement the business rate reduction hackett's worth 6.7 billion pounds. we will maintain our commitment to fiscal discipline well recognizing the need -- while recognizing the need for investment to drive productivity. yousef: conservative lawmakers have attacked britain's fiscal watchdog. warning that brexit could cost 60 billion pounds in extra borrowing as the economy falters. saying he was not buying what he called an endless slew of gloom and doom adding that the predictions should be taken with a pinch of salt. it has not exactly had a brilliant track record. is still with us.
what is your key take away from the latest autumn statement? we heard from philip schall earlier. he said the u.k. economy is holding up a lot better than he would have thought. do you agree? david: a lot of people have to have a that looking at the economic data now saying everything is falling and nothing has happened, brexit has not happened. none of the negotiations have happened, nothing is -- has changed. everything is the same. the impacts will beef help further out than what we are looking at at the moment. manus: it is trying to work out what those impacts are. you stick your finger up in the air. what we have done is represented the impact, the potential impact for borrowing for the u.k. government over the next four to five years and that essentially is going to drive market risk or s aception of risk as gilt, a reserve currency and 110 billion, did that worry you, did that concern you, should that
disconcert the bond markets in any quantum? david: i think overall we have seen that the bond market, the guild market -- [indiscernible] it started to discount all the buying. i was disappointed they did not do more because i thought this changeate opportunity to the way of their policy going forward to address some of the issues like infrastructure that they said. numbers camee the out slightly less than i was expecting. for the gilt market, this should be ok. yousef: is this even a realistic figure and is it too early to be putting numbers out? david: it is too early to put out a hard number like 60 billion. -- the other part that people are not looking at as much is the impact in europe. europe will be impacted and they
will he be hit as much as if not more than what the u.k. will in dollar terms. in that perspective, people are making these numbers up and we know it is going to have a cost but nobody really knows what it truly will be. is interesting to see the other side of the consideration. you're talking about europe potentially will have a residual impact. from a bond markets perspective, i am wondering in terms of spreads and differentials among the u.k., italy over germany over the u.k., france over the u.k., that differential attentional widens next year, should i be looking for spread whiteners? -- wideners? being the markets are driven by two different factors, the central back -- bank and politics. in europe you have the big support of the central bank that will be ongoing and the u.k., there is some support but not
nearly the same size. when you look at those two together, the u.k. will track the u.s. more to a greater extent than europe. there is advantages to having u.k. and the european portfolio or european bonds in the u.k. portfolio because it does give you that diversification but it really is country by country, as you said. yousef: what about the upcoming italian referendum? where do you fit in on that spectrum? david: it is different to the presidential election and to brexit. most people discounted one side of the equation that there is no ways -- way these outcomes will happen. everybody is expecting it to be a no and i would tend to agree with that with all the polls we have seen. the real question is how does -- how do politicians specifically renzi react afterwards? and if he loses by a smart -- small margin he may stay on and that may be good for italian
bonds. if he resigns he gets more interesting. a lot of that is starting to be priced in. manus: i am keen to understand what amount of market risk there is in his resignation or going for the bpp market. s&p said it would not impact the credit rating but would it [indiscernible] btps are getting to the level where you want to buy them. i think if the resolution which we have to remember, this referendum is unchanging the way the upper house in italy works. it is not just about renzi. were to have elections, whoever would come into power next would have a difficult time changing policy. for italian government bonds in general, that is probably good. manus: thank you for joining. at franklin
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