tv Bloomberg Daybreak Europe Bloomberg October 29, 2018 2:00am-2:30am EDT
"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. >> good morning from bloomberg's european headquarters in the city of london. i am nejra cehic. manus: and i am manus cranny. this is "bloomberg daybreak: europe," and these are today's top stories. >> hsbc beats the shares. into thes amazon clouds, dropping $33 billion in cash to buy red hat in its biggest deal ever. rallye bolsonaro continues as brazil's next president delivers the message investors want to hear.
manus: it is not starting well this monday morning. fors show you your risk this morning. that is october. go to the middle of the board. s&p futures are down again. you have also got the brazilian rail marching -- brazilian real marching higher. you're seeing it rally, the s&p 500 dropped by .25% and likewise, the pressure is not relieved in the indian market. you are seeing a little bit lower on the nifty 50 this morning. these markets are starting definitely with a sense of frivolity and anxiousness carrying through from late friday. nejra: the 10 year yield stays on the 3.07 handle. we have seen the yield dropped as equities have been selling off and we have seen a touch of weakness in the euro in this session on a 1.13 handle after merkel.s, hit to
the bloomberg dollar index posting a little bit of strength. real.owed the it links etf's in tokyo. olson are has delivered the words on the deficit of the budget that investors wanted to hear. it jumped as much as 14%, heading to its biggest gain since 2008. manus. asia. look at hsbc's rocking it up by 5%. there you go. 16% rise in the adjusted pretax profit. mr. flynn and deliver growth. progress in terms of the costs with a third quarter beat. that is what we are talking about. your income versus are costs it never -- versus your costs. x gains offset- f
by the reductions in the rates. nejra: the key point is that we are heading towards a positive numbers for 2018 even though we slightly and negative. the growth without the cost. we are looking at the forward price to book ratio, now about 0.9 times. we already talked about the markets. in terms of the shares, we are seeing them jumped the most since june 2017 after they hit their lowest in two years last week, manus. let's check in a broader markets in asia. as i mentioned, it is not a good start to the week. take a look at how we are faring. 300, chinese stocks once again under pressure, down more than 3% right now. these are the session lows. china after we got weak data in terms of industrial profit over the weekend slowing for a fifth consecutive month.
one we gott stronger today, hovering close to the lowest levels in a decade. still seeing a bit of pressure. we have basically ended the day just down .5%. -- a fifth of 1%. here00 closing above 1% today. we got some moves from the chinese government about these new share buybacks plans. we should be able to shore up some confidence. analysts implementing new rules for you to buy back shares a little bit easier when we are seeing more of these sharp corrections, so that is one to watch. let's show you some movers we are watching here today. earnings front and center once again. , 10%, aftera today posting the slowest profit growth in almost three years, fueling or concerns about the
weaker chinese consumer. the stock lost a $10 billion in market value on monday. we saw third-quarter earnings disappoint. jeffries slashing the price targets. the stock down 8%. up eight .5%. -- 8.5%. in operating profit before provisioning, so that is one key thing to watch. to get to the korean government it, plunging 12.5%. missing the lowest estimates, concerns about spending by chinese shoppers. the border checks from a lot of the use chinese shoppers, bringing cosmetics back home for resale. that is certainly going to be a big headwind for some of these luxury stocks out here. manus. in.s: bringing them back the latest on the markets.
and that takes us to our question of the day from the mliv team. how much further does wall street need to fall before it can be called an unhealthy correction? with saxo bank and you're talking about matt, probably another 5% lower and the fed might begin to pay a little bit of attention. first word news. debra mao is standing by. manus, bolsonaro has won the election, marking a hard to the right in latin america has economy -- much of america's biggest economy, promising to open up the resource rich economy to private investment. the u.s. andes to unleash an aggressive crackdown on epidemic crime. wilson are won 55% of the vote to beat the leftist former mayor of sao paulo, whose worker parley had become -- party had become synonymous with --
he promised to reform foreign policy. break theernment will paradigm. we will trust in people. we will cut down bureaucracy, simplify things, and allow people and entrepreneurs to have more freedom to build the future. we will unite result. debra: chancellor philip hammond said that britain may need another budget and prolong austerity. the warning comes ahead of his annual statement setting out spending and taxation plans for the coming 12 months. s have beenement drowned out this year by noises around the brexit stalemate. the chancellor will address the u.k. house of commons at 3:30 p.m. london time. that allows usal to continue trading with our european neighbors was low friction at the border and low friction behind the borders will
minimize any negative effect on the u.k. >> it will be a negative. we will be worse off. >> it will minimize any negative effect. i cannot say. debra: support for germany's governing parties have plunged with merkel's cdu suffering the than 50owing in more years. chancellor merkel's main ally, the social democrats, won their lowest share of the vote since the second world war. the green party almost doubled its support and the far right won for the first time. an indonesian passenger plane crashed during an internal flight. lion air boeing -- boeing came down in the java sea. the plane was a 737-8 and was hearing 138 passengers and crew. indonesia's last major crash was
in december 2014 when it plunged into the sea. 162 people on board. you can follow the latest developments on this story by going to tliv on your bloomberg. that the confirmed duty-free conglomerate was among five people who died in the helicopter crash on saturday. a billionaire bought luster city football club in 2010, helping to fund its surprise premier title six years later. it came down 45 minutes after he watched his team play. no one on board survived. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: debra mao for us in hong kong. thank you so much. october has been a bruising month for global markets so far and it looks like the challenges are still not over.
u.s. stock futures pared gains. the s&p 500 on pace for worst months since 2009. that leads us on to our mliv question of the day. much further does wall street need to fall before it can be called an unhealthy correction? joining us now is stephen bell. great to have you with us. good morning to you. let's put the mliv question to you first. how much more do u.s. stocks have to fall for this to be an unhealthy correction? stephen: i do not think it is a binary thing. behind a level and it's unhealthy. i think the fundamentals are pretty good. earnings are growing. people are getting spooked because they are not growing as fast as they have in the past. they are up 25% year-over-year. as far as the individual consumer is concerned in the united states, he is in great
shape. he has high savings, which is not something you often say. his wealth is going up on that. on balance, if the correction. i do not buy this unhealthy/healthy business, but it has cleaned out a lot of lazy loans. although i have not bought yet, i think we are pretty close to a buying opportunity here. manus: that is going to be one of the greatest debates of all, when you look at that whether this was the worst october since 2008, so whether it was a prescient moment or fools jumping in. isn't it more relevant that we happening?what's there is no backstop, qe, coordinated rate cuts on the cards for markets this time around. i look at it from a financial conditions position. things are getting tighter. these markets have got to live in a world' with the central live's made of a sense -- in a world with the central bank.
steven: the world is healthy today. central banks are gradually raising rates from emergency fed.s led by the the market realized the fed was serious about these tightening's and the market crack, but it has not cracked apart. financial conditions, as you point out, the fed started easing in christmas, 2015. nejra: given what has happened to the equity market, investors are pricing in fewer fed hikes in 2019 compared to what they were pricing previously. if we actually look at the nuts and bolts of the selloff in the u.s., the fingerprints of the selloff visible in banks, homebuilders, cyclical. this means the market is worried about future economic growth despite what we saw in the numbers on friday. i have got a chart showing as well that investors are not heading on high inflation. long basket versus the short basket.
stocks do better during high inflation, now plunging. so does this equity market at all make you concerned about the economic fundamentals and about inflation? steven: it does not make me concerned. actually, we got into the word where good inflation is high inflation. we have a very important statistic out on the last they have this month, which is the employment cost index. significantly, it will be bad news because it's bad news for fed policy. on top of this, ahead of the curve. it's the market who got behind the curve. pretty good situation. growth is slowing. corporate earnings growth is slowing from a high pace. these are tricky times. but overall, i think the stock market looks attractive to me.
certainly market repricing the fed for 2019. , chief economist at bmo global asset management. we are on the phone to mr. flynn at hsbc. a couple of lines coming from him. he does not see trade tensions affecting the u.s. turnaround as we have just been discussing. he does not see the saudi situation relevant for the gcc. he does not see it affecting the long-term appetite on the market. he is speaking with the team. trade tensions will affect the u.s. and saudi situation. more on hsbc and mr. flynn very shortly. coming up on the show, brazil takes a pivot to the right as also motto sweeps to victory. what does it mean for the markets? what does it mean for south america's largest economy?
nejra: let's get a check on the markets. we are seeing a little bit of a mixed session in asia, but china and a performing, posting losses. a little bit of gains and flat trading elsewhere. meanwhile, the one trading -- yuan trading. loser pboc policy driving that. we are seeing weakness in crude and also hedge funds have been getting their bets and wti. below $68 per barrel, manus. manus: the s&p 500 -- morgan stanley says the bar is high.when
more wash had to come. $8 trillion has gone from global equity. yields on u.s. treasuries made it down to three points or 6%. where will we go -- 3.06%. where will we go? euro-dollar. does the market really care about angela merkel getting the slapping in her elections and the fact that politically it all looks little bit fragile? euro-dollar completely flat as a pancake. no impact. let's get your business flash with debra mao. good morning. debra: good day, manus. ibm is to buy red hat for more than $33 billion in what will be its biggest ever acquisition. the deal confirms an earlier bloomberg report and is worth $190 per share, a 62% premium friday at revenue is expected to top $3 billion this year and the ceo says the purchase is a game changer for the cloud. we will be speaking to the
chairman and ceo. do not miss that interview at 11:30 a.m. u.k. time. will manufacturer abb spend $150 million to build a robotics factory in shanghai, aiming to capitalize on china's rising consumer demand and its tech aspirations. production should begin by the end of 2020 an annual capacity will be around 100,000 robots or a quarter of abb's global demand last year. the shanghai facility will have an ai and machine learning research center. that is your bloomberg business flash. nejra: debra mao in hong kong, thank you so much. geneo grissoms -- bolsonaroon -- promised to open up brazil's economy to private investment, but he has also drawn controversy by reviving nostalgic feelings for a past dictatorship. manus: not without its
controversy. there is a rally in the country's stocks. just spoke to -- there will be more upside for brazil. >> i am very optimistic. towill never be able accomplish everything he said without to accomplish in view of the chaotic situation in the brazilian congress, but i think he will be able to do a lot, and it will be more upside for brazil. there will be corrections along the way. manus: joining us now is justin carrigan. put this in context. needsof people wrote he the strongest of mandates. we have lula da silva, bolsonaro, and the leaders of brazil. like,oes a mandate look
the magic words that he will deal with the debt? does he have a strong enough mandate for the radical change he is promising? justin: one interesting factoid here is the margin of his victory was narrower than that which linda -- andries and roussefflula -- that luala and rousseff got. ands a sizable margin it is a margin everyone pretty much expected. so it remains to be seen whether he can really bring everyone together and get that kind of consensus pull together, as i say. nejra: great to have you with us. now, markets certainly seemed to be cheering this victory for bolsonaro, but how
long will they actually give him to turn things round? in other words, how long could the rally last? is a greatt question. ,here will be almost certainly you know, a kind of happiness rally as a result of this. the market will say we have got a fresh start in brazil. remember that a lot of the optimism here is based around the notion that we have not got a worker's party victory, which is something that the investment community did not want to see because they wanted to see a government that really has, you know, a serious stab at brazil's fiscal problems. how long does bolsonaro have? he has a mandate for some years now. they will give him a little bit of time. we probably will not see anything this year in terms of meaningful adjustments. the consensus seems to be we might get some action in the early part of 2019, but of
course, it remains to be seen how well he can get the support needed for that. manus: justin, thank you very much. great context there. our emerging markets managing editor, justin carrigan. chief bell is the economist at bmo global asset management, still with us in our london to deal. inn you look at this swell assets, there is a probable that of relief and markets bolsonaro has won. if you look at turkey, at ,razil, at emerging markets have you shifted your view in terms of emerging-market routs ? we had ahat we did -- big get-together of our investors in our form recently. stay overweight emerging markets, but deemphasize china. i did not expect china to fall that wes it did, but think is the right way to go. emerging markets have good
fundamentals. interestingly, our stock pickers -- we are macro guys -- but our stock pickers are underweight china. a lot of them have poor governance records, so if they make money, it does not end up a shareholders. i think china has serious problems in this trade war with the the united states. it is more than a trade war. we are worried there. i think the rest of emerging markets, on the longer-term basis, are attractive. nejra: concerns around china, rest of emerging markets attractive on a longer-term basis. do you get that exposure to em directly through em or more through developed markets that have exposures em? steven: that's a very good question. weston companies with good western companies with good governments have attractive properties from emerging-market areas. they are attractive. when he going into emerging markets, you get higher risk directing markets, higher
returns. thatsomething our stock pickers have done very well. it's interesting. it's taken them underweight china and week, from a macro point of view, looking at the in chama, the dilemma all of those things, tricky navigating the macro side. so yes, companies that are benefiting from better growth, better demographics, the technological leaps, the countries in africa where they are leaping beyond the immediate technologies, getting real serious benefits. india, for example, for their farmers to improve productivity, and that is a real positive. manus: thank you very much. that is steven bell, chief economist at bmo global asset management. it is rocking hsbc in the asian sessions up over 5%. sheadjusted pretax -- there goes, up she blows, 4.3%.
nejra: after the work week, a loss for u.s. equities, the s&p 500 heading for its worst month since 2009. we are seeing a sea of red in asia. the csi 300 down. 3.3%. overall, the equity route continuing in the asian session. let's check in on the markets around the world. here is dani burger. let's start with you. it looks like indi