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tv   Bloomberg Markets European Open  Bloomberg  December 2, 2016 2:30am-4:01am EST

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finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. ♪ >> welcome to bloomberg markets the european open. where we bring you the first trade of the day. i am anna edwards and here is what we are watching. the fate of italy and its prime minister hanging in the balance as the nation votes on constitutional reform. no encore for a lawns. went -- again as he clears the way for 2017. trump on tour. the victory lap begins as the dollar and stock rally fades.
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welcome to the program. we are less than half an hour away from the start of european trading. let's have a look at what the futures tell us lie in store for the trading day. he generally weak from the asian equities session. futures we are guessing will be weaker at the start of trade, down 7/10 of a percent, three quarters of a percent across equity markets. it seems investors are seeking haven. there is a lot going on this weekend and today. the jobs reports, the payroll later on today. over the weekend, so many political events taking place in europe. investors are feeling nervy, perhaps, ahead of that. the italian referendum, that's more on that. as well.ian vote in the midst of that, we are seeing a little interest as a safe haven assets.
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china coming through on the gmm function. some moves into contact -- some currencies other than the dollar. king dollar is a big theme since trump's election victory. not so much today. a little more appetite for the yen and euro, and the pound. a little bond yields coming off as well. let's get the first word news. juliette: thank you. french president has made a surprise announcement that he will not run for reelection. the decision paves the way for his more popular prime minister to enter the 2017 presidential race. he spoke at a hastily organized address from the palace. >> the power. being in power. the ritual of power, never made me lose my lucidity. either on myself or the situation because i have to act. and today, i am conscious of the risk that such a move would have
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if it doesn't get widespread support. i have also decided not to be a candidate in the presidential election. i wanted to tell you directly, as promised, at the beginning of december as i announced it. juliette: president-elect donald trump has picked general james mattis as the 26th defense sector -- secretary. he is a marine. he called the nominee one of our great, great generals. and referred to him by his nickname "mad dog." south africa maybe hours away from losing its investment-grade global rating. a relegation that could take years to undo. a credit this estimate is due later today. it is at risk of being dubbed junk for the first time in more than 16 years. reduced of countries below investment grade over the last three decades have ever regained it. and that took from 13 months to
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more than 11 years. global news 24 hours a day, powered by more than 2600 journalists and analysts in more , this iscountries bloomberg. anna? anna: juliet, thank you. italian citizens will head to the polls on sunday to vote on a referendum on the constitution. the prime minister wants to reshape the senate to improve political stability in a country which has had more than 60 different government and the second world war. vote does not necessarily mean stability in the long-term. reinforced government power could also be used my more extreme administrations. francine lacqua is in rome for us. good morning to you. tell us what is at stake here? francine: i would say what is at stake is bank stability. you were talking about political stability.
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sozi has made the referendum personal that he will resign if he gets a no go on sunday. let's think about this for a moment. if he resigns, what does that mean? we have had political instability for the last 70 years. 63 governments in 70 years. if he resigns, will he be a rate -- replaced by a technocratic government? nobody knows. ,hat markets are worrying about and we don't have the latest polls because we have been in a blackout. for two weeks -- if he steps out , bankseone else comes in may not be the priority. already fragile banks take a backseat. you do have a couple banks that may be looking to raise capital. if you are an investor, you may decide not to buy into a capital raising if you are not sure about the prosperity or prospect for it to be longer-term. anna: and tell us a little bit about what the alternative is
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here. what the opposition to renzi argues here. process can be another persons landgrab. francine: you are absolutely right. the problem is that renzi and the government has said this is essential reform because it gives more power to the prime minister, takes away power from the senate. it means it would be more governable, more a formidable. at the moment, if you try to put a measure in the houses, it gets blocked one way or the other. he wants to pick -- make and italy which centralizes power. do more labor reforms, may be shut down some of the unions, things like that. the big worryand, -- and this is the big push from the no votes, this gives too much power to the prime minister. he basically becomes untouchable because he has a five-year term.
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that is another worry because this constitutional reform would be matched with electoral reform, which has already passed, it could also mean that -- if you have a more , they come into power, and they have full control of the machine that is italy, politically. anna: more from francine as we go through the day and over the weekend. thank you, francine lacqua in italy. manageableportfolio -- manager. joining us in the studio on the european open. what concerns you when you look at the italian story? what concerns you as an investor? is it constitutional questions, security of the bank, what happens to credit spreads? what is at the epicenter of your concern? done very little on
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reforms of the last few years. is also in system need of accelerating consolidation. this consolidation has come slowly. why? is stuckhe government in a complex and slow electoral system. if you are a ceo and have two boards, the two boards need to agree on everything to make a decision. that is how the italian legislative system works. a lower house and a senate and there can be a ping-pong game of thattals between the two goes on. sometimes for thousands of .odifications what renzi wants to do is simplify the system so any makenment in power can laws more simply. this was a system that was made after world war ii with a very heavy set of checks and balances
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to avoid another episode like that. and it is true that a future government will have more simplicity in passing laws if elected. that is the norm everywhere else in the world. i don't see dangers in that. anna: what is at stake for the investment community? thes just looking at spreads. italian 10 year yields over german 10 years and you can see, we were spiking upwards with concern around the italian referendum with a link. we just came down a little bit in recent days. but if i make this a five-year perspective, some what does this tell us about how concerned we are going into this referendum? how significant this is for europe. juliette: -- alberto: unlike brexit and the u.s. vote, the italian referendum is well telegraphed. investors looked at the polls, the polls got it wrong twice, for the third time they were very careful in hedging themselves in selling italian
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assets over the last month, worrying about and no. the basic scenario around polls for the last few months before polls became outlawed for the past few weeks. i think what is going on here is there has been too much avoiding of italian assets. stocksbeen shorting bank and now that we have seen -- in reality, the odds are more 50-50 than the 80% for the know the market is pricing. potential seeing effort from the yes campaign. investors have rushed to cover their shorts. ,nna: so this is the ftse convincing the underperforming the broadening european markets during november. this is the short covering you are talking about. alberto: that is correct and i still think investors are underweight. some italian assets, the payoff
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is very isometric. we could see 160 5-150, maybe 140. if we have a no, we think that is already priced into the market. bank stocks have been one of the most avoided assets. it is true that with a no, you have some uncertainty. probably caretaker government. potentially led by the finance minister. of thes will take care government until the next election, potentially next year. and also, there would be a delay in banks capital rating. as a't see the know catastrophe, just leave things as they are. leaves the petrified forest as it is. anna: thank you very much for your thoughts so far. here on the us open. it is 7:41 in london.
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coming up on the show, the reflation trade. investors consider how bad the selloff could be. the latest at the ecb as well. has the low point for yields come and gone. we're watching italy's banks and xtron.y's ai least popular president won't run again as he clears the way. we assess the play from paris. those stories and many more. as is bloomberg. ♪
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♪ anna: welcome back. this is the european open. its 3:45 in the afternoon in hong kong. the weather looks weather. -- lovely. let's get the business flash. there is juliette. juliette: thank you. buying into the stock rally or what is driving it. tax cuts, infrastructure spending are misguided, he says. donald trump also being criticized by mexico's richest man. he says americans have more to worry about under trump and mexicans because the president-elect could cost the u.s. its place as the world leader. >> if he is going to close the
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economy, its back. if he is going out of the nato and other internationals, he has the risk to lose the international leadership of the united states. howard schultz, who built the starbucks coffee empire over the last three decades and served two separate stints as ceo will step aside next year. he will hand the reins to his top lieutenant kevin johnson while keeping his role as executive chairman. i will remain starbucks executive chairman, focusing full-time on the incredible growth opportunities we have in expanding roasters and building out our portfolio of stores and our social impact agenda, it will be a significant part of the focus going forward. barack obama is poised to block a chinese business from buying german technology coming ixtron. it would
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mark only the third time in a quarter of a century that washington has been -- rejected in investment as a national security risk. the white house has a say aboute they had -- employ 100 people in the u.s.. that is your bloomberg business flash. anna? thecine: let's talk about bond markets. a huge boost in yield since the donald trump victory. is,question for investors has the low point for yields come and gone? here is a bit of history. we bring you a tenure chart ofld on inauguration day these various presidents. we have what has been a 30 year bond rally isn't really coming to an end. the set the presidents label on here on monday arrows point to where they were on press -- the bond yields were on inauguration day. this is a very long-term story
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around bond markets. put it in the u.s. political context. it is clear that we seem to be in some reflection point. d think we have seen the end of the bond rally? the 30 year bond rally we are a part of? alberto: we could be at the end. we are going to see, governments are abandoning austerity and working -- pushing towards fiscal stimulus. investments are pricing hires -- higher. question about whether trump could do all he wants to do in infrastructure spending. this 275 billion over five years. have a first time, we united government in congress on the same side. some of the spending that was delayed over the last five years can be finally implemented. is a key point that investors are looking forward to. also, around the world in europe , japan central bankers are
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taking the foot off the pedal. the accelerator of quantitative easing. had central bankers telling you, i am going to do whatever it takes no matter what. i will buy as possible in financial markets. two central bankers know that it is self-defeating? if you push expectations so far, investors from run these movements and it becomes less useful. also the fact that if interest long,are too low for too banks don't mind. anna: let's talk about the eurozone. markets and the bund being really riled yesterday by this report that suggests that the ecb would extend its qe plan , but also suggests it can't go on and display -- endlessly.
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how did you read that? german bonds having their worst day this year in yesterday's session? alberto: tapering. anna: yes, tapering. alberto: they say they haven't discussed it but they have. it is fight club. never speak about fight club. is going to happen. there is going to be an extension of quantitative easing from march till september or december. after that, there will be a slowing of purchases. story withhat is the ecb, they give with one hand and take with the other? alberto: for policy, less is more. interest rates are going to be lower for longer, investors have distorted financial markets and favors have seen less returns. at some point, the collateral
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effects of quantitive easing have become bigger than the benefits. that is what we want -- what the central banks want to avoid. what i think is going to happen is they will expand and not break the capital, they will not buy more bonds, they will not buy below the top -- deposited rate. they will just extend the duration of quantitive easing. after the extension, you will have some flexibility to reduce. anna: thank you very much. you staying here with us in the studio. we are minutes away from the start of european equity trade. coming up, the u.s. president is set to stop the chinese bid for aixtron. this is bloomberg. ♪
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♪ anna: welcome back. the european open. it is 7:54 in london. six minutes away from the equity training day. some of the stocks we are walking -- watching. .ixtron reports overnight, we were running a story that obama is poised to block a chinese bid for germany's aixtron. would mark only the third
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time in a quarter century that the white house has rejected an investment, -- as a national security concern. if it came to pass, it would put the attempted purchase into speakingaixtron and is this morning. they are waiting to hear the merger decision in the united states. we are working -- looking at berkeley homes. they said reservations for new homes dropped by 20% in the six months through october from a year earlier. buyers delayed their perches after top -- property taxes rose and the u.k. voted for brexit. that certainly seems to be one sign. we are in italy. francine lacqua is in italy covering the run-up to this crucial vote over the weekend. the referendum. keep an eye on banking stocks, they are likely to be active before or after this vote.
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we will keep an eye on those and other italian investments. coming up on the program, market open. futures point to a negative start in trade. this is bloomberg. ♪
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♪ welcome back. good morning and welcome to bloomberg markets: the european open. city ofere in the london and moments away from the start of trading. -- the fate italy of italy hangs in the balance while the country votes on a constitutional reform. the french president will not run again. donald trump on tour.
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the victory lap begins as the trade.and stock rallies welcome back to the program. we are waiting for european equity markets to open now. european equity markets getting into their position for the final trading day of the week. the donald trump dollar has not been what it has been since the victory. the handover from asia has been negative. to see thingsing considerably weaker. down by around 0.2% if we look at the euro stocks 50. of movement in the indian stock market as well. some changess made to the limits on its liquidity control tool. they boosted the limit and that
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has been having an impact on indian stocks. let us get more on the european open. good morning. straightet me take you to our favorite function. it shows you the state of play. if picture -- a picture that is mostly red. a lot of pressure on energy. down 1.25%. where are the financials? right here. down almost two thirds of 1%. a lot of pressure on the banks. i.t. stocks were battered in the overnight equity session. 10 year yields -- how are they holding up? at 1.467%. down almost three basis points. speaking of bond yields. i have pulled up an amazing function that shows you the 10 yearspread between german and 10 year italian
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paper. you can see what has been happening. this goes back to the beginning of november. we were at a high of 192 on november 28. this gives you context. currently, that spread is narrower at 165. let us show you some of the stock movers this morning. i need to practice my italian. the italian finance minister has held discussions on the european -- with the european commission on how the government can help the troubled banks. thatan see that currently is going to be one to watch out for. diamondkoil sold its mine for 1.45 billion dollars in cash. that doc is lower. on a re says it will focus
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return for equity target after the ceo held his first investor day. monte paschi is higher. anna: let us turn our attention to the oil story. 60 is the magic number. worst production cut for opec for years. -- for us to production cut for opec in years. goldman sachs has said that crude wellhead that target if producers keep to their promises. our guest is still with us. weekto, it has been a big in oil. we did see a deal forged in vienna. the key question, i feel like a cynic asking is will they stick to the production limits they have committed to? >> we did expect this agreement to happen but there is still a
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lot of former capacity between opec and non-opec members. you have a production cut of some percentage points, but there is still basically a 10% over capacity that can be absorbed. but also governments in the u.s. and the u.k. are increasing production by building with new technologies and building fracking. these are types of oil extractions that have a breakeven second start at 50 or 60. and sometimes, a little above 60 but generally when you hit extreme you start having new technologies becoming more profitable and capacity increases even more. which is a cap on where prices can go. to can have a spike of up 60. oil can be there but it is not going to go back a lot higher than that. anna: you would say that the u.s. shale producers will put a
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cap on production. i have a chart showing wti. it shows some concerns on future supply constraints. that seems at odds with what being saying about supply more plentiful from the united states. thatat has happened is there were a lot of concerns for a long time about oil going lower. hedge andery popular now we are reversing that. however, not only around the u.s. but even between opec and non-opec members, you still have a lot of supply. more importantly, you have geopolitical risks across these countries. withare financing wars each other. think about yemen for example. level, thehes a high incentive will be to pump a little bit more to fund the
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deficit. undergoing ais transition from a purely oil economy to a diversified economy. they want to transform their economy into services and tourism. more thanworkforce is 50% of the population and where women can drive. for aan ambitious plan country that does not give civil rights to its people. during this time, they are borrowing more debt and they are withdrawing money from their sovereign funds. of these of these economies are more reliant on the oil price. >> it helps the middle east and economies like venezuela or brazil and it helps russia. but again, we are not going to 70-100. this is a normalization of a very crowded short. i think 60 is a level where new
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production comes in and we are not going into a huge reflation. a bloomberg piece suggested how amazing it was russia has gained as much as it has. alberto, thank you. alberto will stay with us. the french president rules out running for a second term. help the political landscape on the left? bill gross says the market optimism is based on false issues. calm bull market. a guest says the bloomberg will rise inket 2017 by 20%. that is all to come.
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anna: welcome back to everybody. you are watching the european open. 10 minutes into the european trading day. here are the big market moves. on thelooking at the mrr stoxx 600 which shows which stocks are moving the most. indicessee the major
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moving down on the future -- ftse 100. mrr on the stoxx 600. barclays doing well. up by 4.9%. commercial real estate businesses are doing well. to the downside, some of the mining groups moving a little bit lower. bhp billiton is in there. and a little bit of unwind in the trade we saw yesterday. the spanish bank is down by 3.9% this morning. speed on the to other stories you should be aware of. >> president-elect donald trump has picked general james mattis as secretary of defense. he is a career u.s. marine. donald trump called him one of our great general and referred to him by his nickname -- mad
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dog. singapore plans to bar a former goldman sachs banker. the penalty is the latest handed down. goldman sachs says the matter was a clear violation of the standard and has refused to cooperate with officials. south african might be just hours away from losing its investment grade. it could take years to undo this. a credit assessment is due later today and the foreign-currency debt is at risk of being rated for the first time in 16 years. other countries lost their credit rating. global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries.
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this is bloomberg. anna: let us talk about french politics. the president will not seek another term as president. primeaves the way for his minister to enter the presidential race. he enjoys a higher approval rating. the french president is the least french leader in history. where does this leave the 2017 race. let us get to paris. caroline can take us through the latest developments. president, the french had enough lucidity to understand that his candidacy would have meant no chances at all for any left-wing socialist candidate in this next election. he has said that he would only seek reelection if you managed to curb the unemployment rate. he has managed to do that in the last few months but he acknowledged that it came too
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late. >> the power. being in power. the ritual of power never made me lose my lucidity of myself or the situation because i have to act. today, i am conscious of the risks that such a move would have if it does not get widespread support. i have also decided not to be a candidate in the presidential election. i wanted to tell you directly as promised at the beginning of december as i had it. that learned this morning were than 80% of the french people actually a proof this decision. approve thisually decision to not run next year. we did have reaction from the prime minister who said last night this was a mature, serious statesman. if you look at the front page of this morning's newspaper, this came as a shock to many
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political observers. we have the front page of the saying --liberacion without me. and another -- the end. anna: where does this leave us in the broader political story? thenus up to april 23 and may the seventh. wewhat they for sure is that will have a new president in france next year. nore is new -- there is nicolas sarkozy. the prime minister is considered to be the natural candidate of the socialist but he will also have to face some primaries at the end of january. the prime minister could declare himself a candidate in this primary in the next few days or this weekend. the road will be difficult.
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a poll published before the president's announcement. is thes fillon front-runner followed by marie le pen. the fourth man would not even be valls. he would only have 9% of the vote meaning that the fourth man could even be the communist party candidate. anna: it could be a crowded field. thank you very much. us return to our guest, alberto. it could be crowded. there could be various names on the left. we know who will be on the right and the center-right. what is your best case for what happens in france next year? >> when you have gaps in power in inequality and stagnation
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an economy for a long time, this creates fertile ground. is, we are worried about marine le pen. problemas a equality and an immigration problem. policy leaders have been complacent. there is a story about the titanic where the captain told everyone to abandon ship. some passengers remained in the warmth of their cabins. they preferred to stay there. i think that is the level of complacency that some european elites have been showing in the last years. inclusiveed are fiscal policies and growth measures, not just quantitative easing. there are not too many months to do that. france is a political battleground. fiare very close between llon and marie le pen. i am not sure that fillon has
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the policies to beat at marie le pen even though he is leading in the polls at the moment. anna: to what extent should investors look at the victory of donald trump? and the way he has been received by the markets. how much can we translate that to the other side of the atlantic and look at the populist parties in europe and say -- maybe they will mean more investment spending and higher wages? equality are a global phenomenon. what do they breed? in the u.s., we have more fiscal policy which is good for the u.s. economy after many years of inaction because congress and the president were on different sides. there can be some collateral effects like trade wars or terrorists -- tariffs. in europe, you have many moving parts. there is a tipping point. if you have many populist
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governments in many countries and breaks it in the ok, then -- ,n the -- brexit in the u k then it your becomes weaker. if they decide to implement the fiscal policy that the ecb has been calling for but has been delayed for a long time, then we see for example, germany think they want to double the yield ker in europe. otherwhat are the political challenges in europe that we have not talked about yet -- in austria. 10s is the austria-germany year yield spread. the yield is going higher through november. our investors too complacent?
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too complacent? the national front versus independent. are markets to relaxed about this? >> france and austria and others -- in these countries, you do have populist risks. in austria, the extremist candidate has come by a whisker to win. the election is being redone. the problem is not just for austria where the spread could widen but this could it -- this could influence germany and scare policymakers from doing more proactive action before the german election. anna: thank you very much alberto. trump shine donald
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fades. more on the market is next. this is bloomberg. ♪
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>> i am here today for one main reason. to say thank you to ohio.
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we did not have much help at the top levels. you know that, right. it turned out that it did not matter. but we had help with the people and that is what really did matter. anna: donald trump kicks off his cincinnati,ur in ohio yesterday exulting his surprise victory and mocking critics. as he continues to celebrate, the market rally is losing steam. the dollar and stocks are following this morning meanwhile bill gross has said the rally is built on a false promise. alberto is still with us. it is job stake in the u.s. -- it is jobs day in the u.s. there is so much policy going on in europe but the jobs story in the u.s. -- is that something you are investing around or is it a side story? >> i think there is a strong
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momentum in the u.s. economy which donald trump will inherit. more job creation. some acceleration in inflation. and also, people in the workforce -- people who have been out of the workforce are coming back in which is a good of energy many years workers and others being at of the workforce which was a big social problem. i think that donald trump is going to inherit an economy in good condition that also slightly accelerate that you have the fiscal boost from some of his policies. we do not expect all of them to be a applied. 5225 i have a chart, talking about the spare capacity in the u.s. economy. how much do you think the u.s. economy will start to run up again and as a result higher
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wage pressure? >> there are two stories. there are people out of the workforce which have been out for so long they cannot come back in. and therefore, you will have inflation and wage pressures on the rest. the other story is that these people will come back in because you will have inclusive growth measures like infrastructure spending which will give jobs to energy workers and former construction workers. i think the good story is what we will see because there is finally infrastructure spending which has a good fiscal multiplier. if you spend a dollar on infrastructure, you get about a dollar in increased gdp. tax cuts are not so good. the trickle-down effects from 1% of the population does not really work but the infrastructure spending is what we are looking at. what we are worried about is the migration controls because those would increase wage pressures. anna: alberto, great to see you
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this morning. thank you for spending the hour with us. commodities bull market in 2017. we will discuss. this is bloomberg. ♪
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anna: a very warm welcome back. this is bloomberg markets: the european open. the top stories you need to know for today's trading day. yousef: exciting as always great let me run you through some of the highlights. aixtron. the u.s. president is expected to block a transaction. that stock is down 6.74%. and it will prevent the chinese aixtron, am buying german company. blocking of an
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acquisition and the stock is getting punished. italian banking stocks are in focus with that referendum. downsize pressure. we are in a broadly negative market. the stoxx 600 is under pressure. the berkeley group is currently up 3.5%. this is an interesting one. mind that they did publish results. the company is saying excluding a hiatus around brexit, reservations were down around the same period. what they are doing is they are reiterating guidance. 3.46% as it stands. anna: we want to talk about oil a little bit. $53 acrude price is about barrel.
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after opec agreed its first output cut in eight years. other commodities such as base metals has been on the rise. joining me now in the studio is .he chief strategist very good to have you on the program. little changed against the close yesterday on the oil price but what a week it has been. $53.85 on brent. a lot of market repositioning around the deal we saw agreed in vienna this week. >> you do not see a big market like oil move up 10% every day. i have only seen it a few times. this is repositioning. did not believe there would be a deal. that there was a deal has surprised the market. anna: i have an interesting chart. the contract.bout
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talking about what that tells us about supply constraints in the future. --have gone back into regarding the oil market. -- we have gone back into backwardation in the market. in the marketon -- it is a concern about future supplies. we have roughly one billion barrels a day oversupply. 1.2 the decision to cut million starting in january, this oversupply has vanished. this will be a good thing in the market. the second thing would be remember the drop we saw in
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australia a couple of years ago concerning the prices of wheat and corn. s were interested. you are not buying into something that is too established in price. anna: this is more about how hedge funds are doing. >> know, it is a matter of financial speculation in general and also in financial market. who can hedge at this level for the next 3-6 months and also russia like opec members do not profit. anna: looking more broadly at the commodities market, you believe we are at the start of a new commodity bull market. what is this based on for you? >> since the beginning of the
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year, since april, we have seen a re-emphasis in the capital outlook. looking at the bloomberg -- 22ity index commodities. on the fundamental side we are in bad shape. there is an oversupply. reduced sincen the beginning of the year so it is moving towards scarcity. from a technical point of view, we saw autumn building in january and february. -- we saw bottom building in january and february. commodities without donald trump trade moved into volatile technical trade territory. anna: what does donald trump do on commodities? >> the move for example in six -- intong up to
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-- in terms of future infrastructure spending is too much in the short term. and the same move on the other side in gold. we have seen a lot of people hedging against the u.s. election results because they do not know what is going to happen. contradiction between base metals and precious metals is too much and the donald trump trade the donald trump trade is reverted. anna: gold does not like inflation. where do you think these precious metals will head? inflationties like because they are an inflation hedge including gold. oil is better. it is not only nominal interest rate it is also inflation so it is real interest rate. the market is not pricing in two
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steep and-- too expectation. the donald trump trade is too fast in this direction. $60 aect wti to trade at barrel by the end of the year. anna: talking about the oil price -- we were talking earlier with alberto and he talked about the cap that shale producers are putting at $60. is that the type of ballpark number you're thinking about for oil? is solidnk $60 oilining all of the inventories and the supply trends. two weeks ago when we did the , we saw it was a bit lower. insee this overshooting
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september as well after the decision in algiers. we expect oil prices to come down a little bit and then move up in the second half of next year. anna: thank you so much for your thoughts this morning. up next on the program, renzi's referendum. we go to rome to speak to the vice-chairman of the rest child dank and a former -- rothschil bank. weakness in the european story and the ftse 100 is a clear story today. this is bloomberg. ♪
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♪ anna: welcome back. this is bloomberg markets, the european open. it is 9:41 a.m. in italy and we focused on the italian story. european equity markets weakening at the hour on the stoxx 600. the ftse 100 holding up a little bit better -- down 0.9%.
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italy's constitution and renzi's job could be on the line this sunday in the last seismic vote of 2016. investors are not taking chances as they hedge against swings in the italian economy. let us go live to francine lacqua who is in rome now. francine: this-- is a crucial referendum. a lot is at take. the political stability of the country and it may cost renzi his job. it goes back to the banks. banksare large and medium that need a plan. this means inhat terms of italian growth, i am pleased to welcome the former ne ceo. for many years, he has been one of the most respected men in
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europe. international investors are worried that this may spell out something very ugly which could ben that this country will leaving the euro. is this crazy? >> it is crazy. the referendum is still in front of us. to say that i have since most of the business community thanks that the yes should prevail, maybe that no will prevail because the business community has been have no reason to be particularly optimistic. having said that, what should happen even if they know prevails -- not much. renzi may stay on. i think. and we would probably go to an election next year but only after having changed the electoral look. anna: that is crucial.
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-- that is crucial. if this reform on the constitution goes through, it gives to much power to the people at the top. ? do you agree? >> i do not agree. this referendum will not change much at the top, in terms of the executive. what will change is our country will be easier to run and this has been a problem for many years. everyone wanted to change the constitution for the last 30 become tooow it has politicized. the steps for are movement to come to power again? many investors may be jumping the gun. renzi is out and this is an anti-austerity movement. down then renzi steps
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a new transition government will be named and then it will go to elections. this is a possible outcome. going tosee mr. grillo power before the next elections. anna: investors are focusing on the fact that you have a fragile inking system in italy and it may delay taking care of the banks if we have political instability. >> this is true. -- wee to have several have to have new international money coming to the banks. uncertainty will disappear though after monday and there will be room for the new capital and new banks. francine: we have had 63 governments in italy for the last 70 years. what does that mean for day-to-day?
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>> it does not mean much. for the very reason that we have so many governments, we are used to some political instability. of course, some crucial moments like new money coming to the country to finance banks needs stability and this is the only order we have. francine: we also have a crucial agreement coming from opec, the first in many years. you were not too surprised i that because you say they just want a higher price. i am not surprised because i thought the turning point was the meeting in algeria on 29 september. for the first time in 18 months, i heard the word price rather than the word market share. on the 29th of september, they really changed the complete mood around oil and what happened the
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day before yesterday was simply to translate this mood into action. action does not mean the end of the story because the devil is in the details but i believe the betweene would move $50-$60 in the next 12-18 months. francine: you travel often. to the middle east. you are an expert on libya. what do we do with iran if donald trump agrees to pull out of that agreement? donald trump said the position of the u.s. towards iran was going to change. was this just a promise that a politician made during an election or will there really be a change? we don't know. the situation in the middle east is complicated enough. will go out again
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from the international community as it has been in the past. to think aboutve consumer spending and households wanting to buy things which would expose the economy. does a higher oil price impact how much money families here in rome for example has -- have? >> no one is forecasting oil prices going back to $100 in the near future. i don't inc. the oil price will have an impact on consumption in this country. francine: what has to happen in italy for this country to be more competitive? >> the real issue is the productivity of our labor. we have not been increasing productivity at all all other countries have been increasing productivity. their requires a series of reforms in terms of reduction of bureaucracy, in more of making things
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effective. many other things have to happen which mr. renzi promised. -- a has been an hit hindrance in changing the system in italy but i hope that from monday on you will have a new incentive to change the system and make it late more productive. referendum could be dividing this country and the rhetoric is ugly. you have mr.e, renzi and on the other side everybody else. these things happen. everyone will start their life again when this is all finished. you so much as always for coming on bloomberg television. we will be talking to one of the key economic advisers for mr. renzi. francine looku
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all. impacting us as we talk about the brexit situation, french elections and the italian referendum. speech the first major that johnson has made since being appointed. organization nations meet their defense spending commitments are being discussed. brexit is a vote of democracy, not antiforeign rhetoric. the austrian voters head to polls on sunday to elect a new president. an election after the green party candidate won why it narrow margin. good morning. what is expected this time around? again.that
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anna: what is expected in this referendum, this time around? a close race.ave too close to call in our polls. it will depend on how big the candidate and which will win the votes from the mainstream parties this time around. anna: we have the independent going up against the freedom party. power does this role normally convey? it is supposed to be ceremonial but we have suggestions that that is not the case this time. >> it had been ceremonial traditionally because every incumbent so far has chosen to execute it that way but looking into the constitution, the president can dismiss the government, he can cause
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elections and he can appoint a government. the power is there if the president chooses to use it and both have said they will choose to do so. one said he would not appoint a government by the freedom party if he has the feeling that it would put at risk the position of austria in the european union. and the other candidate has said he may dismiss the government if that thee feeling legislation is not right for the country. we can prepare for a president that is more assertive than in the past. boris innk you, vienna. europe could be up for a double upset. austria and italy. david lee is here with us. he joins us here on the program.
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starting with austria. upset but not crucial to the overall european story -- what is the context? >> the presidency traditionally is not a high-powered role. for all of the candidates to say that it will be different under me and i'm going to make all of these changes -- once whichever is in the office, they will find it more difficult to do. i do not think this is as crucial as some are making it out to be. anna: are you more focused on the size of the economy, the banking sector at risk and the risk of political upset next year? >> i am much more focused on is late for italy's sake. -- aink a lot of the eu
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lot of hoops will have to be jumped through. a referendum about governing italy and making italy a more governable country and that is going to be important for italy in itself for the long-term. anna: it should be about that. on the paper as we have seen in many referendums, the voters may be looking at something else. think that with the banks in the position they are, this is clearly a difficult time for the italian banks and a referendum like this is going to potentially create more instability. but the markets, unlike the brexit vote, the markets are watching the winds blow. poweris there any path to that we can draw towards that? >> it is still quite difficult.
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guest just's suggested, there is a lot to be done with renzi in power. he may stay in power. i think there will be negotiations between renzi and the president and even if he does resign, a technocratic government will take them through to other elections in 2018. this may not happen. is it a path to power? it is not impossible. we are watching the brexit conversation ongoing in the u.k. boris johnson is making a speech today. regarding nato spending. viewg to forge some common with the new administration in the united states. britain trying to find favor
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with america. >> that is a common ground to strike. u.k. make commitments to defense spending. message -- this is the common ground we already have and maybe we can build on this in the future. anna: does a victory for the liberal democrats change anything? it gives a slightly reduced majority to theresa may in parliament. is it material to you? >> some of the coverage this morning about how it is massively significant to the brexit boat -- brexit vote. this is not that big of a deal. it was made into a double-single issue with heathrow and brexit. throwing a lot of national
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resources at this. a lot more to come with david. stay with us. up next, it is surveillance and a lot more from italy during that program. this is bloomberg. ♪
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francine: renzi's gamble. the italian prime minister stakes his future on the results of a referendum. banks in the balance. lenders teeter under the burden of bad loans as the political storm brews. jobs data usa. a december hike is priced in, but investors scour numbers for clues. good morning. i'm francine lacqua with "bloomberg surveillance." we're live from rome. we look at the political fallout in europe. ital


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