Protestg a symbolic perhaps, or a wakeup call for investors . Can investors expect more pay for automakers, to deal with the biggest industry shift in many matt . Ecades, matt matt we less than a half hour away. Im excited to talk about that story. Theres so many automotive stories to talk about. Take a look at equity Index Futures. Its a risk on day. Possibility of some kind of tax reform in the u. S. We have equity Index Futures up across the board trade ive got, not the bund yield today. Because i was talking about the smp with someone so sucked skeptical about the continued climb of this index, it forward priceearnings ratio, he thinks its too expensive, especially considering what earnings has done. In yellow, actual earnings per share. Although everybody seems so optimistic about the rise in earnings this year and next, this goes back five years. Were just going where we started. This has been moved to that much over the past 3040 years. Guide . Guy the cadillac story is going to be interesting today. A solid day. Erickson have a difficult time. Lets see what we see here. This week, treating for election weekend. Sentiment, is the bloomberg ballet index dollar index. This isnd ride moving right up. Is the dollar about to break out on the story . Market, the treasury many places not releasing numbers. What we have seen is plus 300 volume increase in treasury futures overnight. The u. S. Twoyear is on the move. Pay attention. Everything theoretically prices off the risk. Theoretically, that is the u. S. 10 year. If this starts to move significantly, a lot of things may be meeting we may need to have another look at those. Lets get a bloomberg first word news update, heres ed ludlow. You and for the eu to shift their senses, celebrex agreement can come by the end of the year. Theresa may signaled she is she could offer more on a bill. The european summit helped find her a deal to sell to skeptics at home. Her counterparts responded with words of encouragement, though no concrete concessions. My position was unchanged by two reduction by theresa mays maysnt changed theresa words. Income trust to what you hear in the in contrast to what you hear in the british process, the process is moving forward. You get the impression that after few weeks, you have to note the project the final product. Both sides of the standoff on catalonia are upping the ante. Finalizing plans to take control of the rebel region, with a Prime Minister set to hold an extra ordinary cap it cached Cabinet Meeting. Independents could be declared within days. Ald trump being chosen being steered towards choosing between john taylor, or another person for the next fed chief. The president has not yet made up his mind, although he has publicly announced to announce the decision before shortly. U. S. Secretary of state has said he sees little hope that a saudi this includes gary cohn as well. U. S. Secretary of state has said he sees little hope that a saudi arabia standoff with qatar will end soon. Rex tillerson blames countries around the emirates for casting doubts on american efforts to mediate the content to mediate the efforts. The comments come days before he embarks on a trip to the region, including stops in saudi arabia and qatar. Japanese Prime Minister shinzo abes Ruling Coalition will lose is projected to lose its two thirds coalition in sundays general election. The most likely scenario is a liberal Democratic Party picking up 297 seats, shy of the 310 needed for a socalled majority. That could potentially slow the push to revise the nation past its constitution. Global news 24 hours a day, powered by more than 2700 journalists and analysts, in more than 120 countries. This is bloomberg. Guy, matt . Across the flash bloomberg. Thank you. Business is entirely normal. A withdrawal of cash from some of the institutions. The big story is not catalonia, its now been in the treasury market. The treasury market has taken a hit. The u. S. Senate has adopted a budget resolution that housed chugach that house gop leaders agreed to accept, which paved the way for tax reform, which could see 4 trillion. This is the dollar. It is touching the top end range,its recent trending above its moving average. Is the dollar about to break out . Mark cudmore joins us now. Mark, a story should not be underestimated. This is the thing the market will trade on today, isnt it . Mark absolutely. I think this will dominate everything else. I think its a positive step. It seems to take, in the market, much more by surprise. This took investors by surprise. Clearly, investors are surprised. You see high in the treasury contract. This is not about asia overreacting, this is a genuine market move. So features the u. S. Session the whole reflationary trade, the whole idea is getting another boost. We are seeing the yield higher, commodities doing well, equity markets doing well. There are stories, but this is the dominant story, very much at risk positive one. A risk positive one. Guy do you buy the dip in treasury here surely you dont believe . They will pass real tax reform. Mark my outcome remains quite cynical about the prospects of tax reform coming soon ultimately, but whatever your view is, this has more momentum in the short term. Yields can go higher in the short term. Somebody doesnt believe in this sustainably, but at the moment, you have upward momentum in yields. If got upward momentum in this got upwardand youve momentum in this as well. Up therk, matt brings dips. Of buying the we saw that yesterday in the s and p. Ive got the chart. Dip yesterday. Cashitions are low positions are low. Weve got some great charts floating around on the bloomberg about google searches. Is that mentality still the dominant theme at the moment . I think it is. I think it makes sense. Cash levels have fallen down within the last couple of years. There still high historically. Overall, it makes they are still high historically. Overall, it makes sense. The bullish framework remains the same. There supportive for a positive case. Its not like earnings have gone flat or negative. We are still seeing Earnings Growth. Its a good story, and there remains excess liquidity. Investors still need to chase assets, returns, yields. To find that this ultimately makes sense unless things this massively changes the game. I dont think theres anything that will do that. I do think traders should keep an eye on catalysts that could derail this whole market before the year end. The base case has to be the bull market keep marching on no matter what. Even a foot dont get tax reform, thats the case as well. Catalonia is far removed from any u. S. Investors, but here, it seems removed from european investors, even spanish investors, as well, mark. Why is that, when we dont see either side linking . Rajoy doesnt look like he has close to ready to talk, and theres a call for party members, another independent proclamation on the other side. Neither will back down. Situation a worrying still. Are going into a situation where, as you say, neither side bet is backing down. I dont think it ends well. The more goes on, the more it will seriously impact rose in spain over the next year. It is like the catalans will accept the old economy, given their push for independence. Its important to the spanish country. Theyve had a lot of tax revenue. One of the big issues why they want more independence is they feel they contribute to much to the budget. Much to theoo budget. Everyone is wondering, will this turn into a serious crisis . For example, theres a push overnight for people to pull tax from the lenders, scary warning on that potential. That remains unlikely. Or, is it going to remain a longterm drive on the spanish economy for the next few months . Thats harder to trade. Yes, spanish yields widened, the ibex weakens, but how far do you do that story . Is is when you definitely shouldnt stop watching. Guy we will leave it there. Thank you very much, indeed. Matt exhibit up to read the ibex, looks like it will underperform a little bit. If got the calculations here. The rest of europe looks like its going to open up about one half of 1 . Looks like the ibex will open a little softer. Budget stocks moving today, caltex will be interesting trucks and cars. Keep an eye on the six Leasing Companies of germany. There talking about residuals, could get moved around this morning. There talking about the risk of residual values. You the we will bring latest from the eu summit. Waking up to another day of brexit maneuvers. The market open is 17 minutes away. This is bloomberg. Guy 14 markets untilguy market open. Lets get a Bloomberg Business flash, heres at ludlow. Ed a 14 drop in profits, earnings before interest and taxes calling for 3. 6 billion euros missing estimates. That has weaker earnings than projected. Troubling its first quarterly profits since both Second Quarter of last year. Full those thirdquarter earnings surged 30 5 after truck sales in north america recovered, and construction and mining agreement in china rose. Texas rose to 862 million, beating estimates taxes rose. Nissan has fallen in tokyo trade, after the carmakers policy control deepens. They will control output at six months. Feetve been producing 1000 they will produce one falcao 1000 vehicles a day for the japanese market. They continue to follow follow policy checks for weeks. Thats your Bloomberg Business flash. Lets focus in on the european Political Risk story. They one of the eu summit on europes leaders, push this more and brexit negotiations. The carrot ofup possible progress and trade talks by december. Angela merkel sounded a note of reassurance, saying there is zero indication that they will succeed. In spain, they caps on Pain Campaign group is calling out supporters to pull cash. Thats separatists consider declaring independence again later this month. Lets get more on both of those stories with nejra cehic in brussels, and maria taddeo in barcelona. , we are going to start with you. What do it nejra, we are going to start with you. What about the turnaround brought by Angela Merkel . Prime minister theresa may ins the eu leaders at brussels last night. We understand for u. K. Officials, she signaled she would be willing to offer more when it comes to the brexit bill. It you previously, she pledged the u. K. Would keep paying the eu budget for two years after brexit, around 20 billion euros, quite a bit lower than the 60 billion euros put forward by the eu. What theresa may also said, or signaled, is that she needs a deal that she can sell back to her electorate in the u. K. One thing about this cap some it is the previously, both the eu u. K. And eu saying, there seems to be a little bit more of a tone of cooperation. German chancellor Angela Merkel sanctions very motivated to move talks Angela Merkel saying shes very motive to move motivated to move talks up. That doesnt mean theres necessarily a time frame, but there was a little bit of a shift in tone as to when talks might move on. Guy its interesting, still comes down to money, doesnt it . What can we expect in change by december . Nejra it certainly does still come down to money. Guy, to the point what we have heard, to that point, what weve heard from some leaders is that the pledges, the u. K. Has made a signal they will make on the brexit bill, need to be turned into more casual negotiation. Mean we areesnt going to move on to trade talks in december. What we have been hearing before today is eu officials were getting ready, going to a point where they would be ready to do that if they made that decision in december. Its kind of still there now. Theres a tone shift. The u. K. Press, when it keeps talking about there being no progress in these brexit talks, thats just not true. Really, a kinder tone from both sides. Mrs. Is a good performance so far. What they bring and maria in barcelona. Let me bring in maria in barcelona. Advocates have called on customers that side with them, to pull money out of banks that have left the area. The cars run on the bank how seriously can we take this . Its a most like a second referendum, if you will. If customers dont do it, they are not with the separatists, are they . Thats a good question. Atmn tell you, ke ha bank casheautious bank bank atm here, we havent had one person who said they are here because of the message and i want to protest, i think this is the way. Thiseres pressure person was telling me they had banka customer with the for years. She wouldnt go into specifics as to how much money she lost, but she said it is a symbolic amount. Naturalpened after the National Catalan separatists go tear aocial year tim, pull money from 8 009 00 a. M. , and protest that companies atm, pull go to your money. Protest companies that are not supporting it. Guy a couple of quick questions. How much to take out for catalan at one of these banks . Im curious to know if theres a number. Second question, what is the timing on this independence proclamation . What kind of a weekend are we going to have here . That the good question. It depends thats a good question. It depends on the bank and cash you have. Its more of a symbolic measure you said. The pressure that we could get clients pulling their money out, they do want to make a point and have it registered. In terms of when will this come, you know that its been suspended for the time being. What we are seeing now, is that both sides are standing on the edge of this cliff, but they are not willing to take the final step. 155, i wantarticle to say again, this could take weeks. It seems that they want to make this final push, but none of them make the decisions first. We will leave it there. Matt nejra cehic in brussels, maria to on barcelona, covering these stories for us. We are minutes away for the market open. Lets get your stocks to watch. First off, daimler out with something that missed the streets, estimates this morning, forerns are cost to pay admissions issues, the fixes, and a drop in sales of daimler cars as well. It seems the diesel problem isnt going to hurt companies bigger companies, but also Car Companies themselves. If you cant guarantee 100 i will be able to drive this car in every city in germany, europe, then why would i buy it . Guy its a lot of people a lot of its a question a lot of people are grappling with. Take a look at this chart. Cars to trucks, matt. A volvo a solid start to the day. It has been driven, excuse the pun, to what is happening in north america. When the market opened in if youd opens in a few minutes time, could be good. Forvotal start to the day volvo, talking about encouraging signs Going Forward. They beat expectations. Take a look at this one. Its going to be, the guidance apparently implies that this is the guidance applies an estimate cuts. Matt . Matt i want to talk abouts was buried here. Hurricane claims around the world will total 3. 6 billion. Thats the estimate from the insurers the total insured , three . 6 billion for itself, total Insurance Market loss approximately 95 ilion u. S. Dollars. Dollars. Lion u. S. Quite claims will affect the business at 3. 6 billion. Watch that stock. Guy lets quickly give everybody an update of one markets will open. The real story and markets this morning is not, unfortunately, happening in earnings, probably not what happening in catalonia. It is whats happening with the u. S. Tax story, which has investors a little bit by surprise. U. S. Markets by up another one half of 1 . Ibex looks like it will underperform. This is bloomberg. Guy met me take you to the e. U. Summit. Juncker dalgaard taking comments. There are plenty of other things going on out there. Arriving this morning. We will continue to get commentary from them this morning. European equities look like they will open firmer. The risk on trade seems to be back, driven by the u. S. Senate, driven by tax. What do you think . Matt european equities look like dax look like the tax momentum has carried over to asian stocks come into europe as well. I think it is work looking at this chart again. I think it is worth looking at this stress debt chart again. The question is, will that continue . Guy market open. Lets take a look at where we are. We are expecting again. Market makers not there yet. We have a pound factor to bear in mind when you think about what is happening in the u. K. Right now. The ibex is opening softer. It seems to be an idiosyncratic story this morning with catalonia. Lets get the details. The texas story out of the United States really sparking interest in the markets. President trump tweeting this is an important part to the tax story. We talked about that earlier. This is a picture on the stoxx 600. It is a broadbased. All of the sectors moving higher across the european equities space this morning. On expectations now and what can be delivered in the senate. We move onto the tougher negotiations around tax over the next couple months. Thats move on to the spanish story. We have maria tipping the us uptodate on what is happening there. How interested are you in the banking story in spain . Working everything is normally in their Banking System this mine. This chart goes back to the end of september. The Political Uncertainty cloud your view of spain . Gilt markets opening up this hour. This is driven by commentary from the central bank governor, mark carney. We have more Central Bank Chatter overnight from the bank of england. John cumin,om raising questions about november 2. Are we certain that is one they will increase Interest Rates or could be coming months be later, the start of 2018 . Guy, matt. This is what we have got right now. Erickson is trading up. Dickson carr phone trading up also. Anglo is up. Rio is up. Interesting considering what is happening with the dollar. I am waiting to see a volvo trade. Daimler i am not seeing in the mix. We will keep an i we will keep an eye on some of these movers. Matt . Matt i get excited just to see the name husqvarna. It gets me revved up. President donald trump achieved the first major steps toward tax reform after the senate adopted to pass plan yesterday a tax code without democratic support. According to people familiar with the matter, trumps advisers are steering him towards choosing jay powell, jerome powell. With us is william hobbs. Lets talk about this tax reform idea. It seems to have gone the market pretty risk on around the globe. Do you think it is worth it . Giving budget resolution the democrats no chance to filibuster really worth selling your bonds in going after to buy stocks . Will a couple of great questions. We like stocks generally. We think they are going to continue to outperform bonds. We like to pour some considerable cold water on the tech story. There are two angles. One, you made this point several times, this is the easy bit. Getting the budget resolution passed. Now that means and ways have got to writing the legislation. You have been hard work to come. You have the hard work to come. We have seen a lot of the sweeties and not a lot of the punishment. The other point is because they are using the reconciliation vehicle, that means they think they can go it alone. Republicans, can they . Can they get this stuff to . Can they get this stuff done . The other point is, although there could be a cyclical boost and you alluded to the difference between tax form and tax cuts earlier. Lets called them tax cuts. That is what they are. Of changes torms trend growth coming about from tax cuts. The simple way to look at it, if you look at history, 1870 to 1930, the u. S. Almost had no taxes whatsoever. The yuan had to was worth, you go to the 1947 to 2000 period, and you have the marginal tax rate average. There is no difference in the gdp per capita over that time. In the gdp per capita over that time period. Point, and a good the chances for real texan form, and thedifficult chances for real tax reform, it is just so difficult. We talked you about the stock point. I am looking at the smb here. Price earnings ratio trailing in 22. N at 21, almost is it still a goodbye, the smp . Buy, thestill a good smp . Will i think it is. There are a couple of reasons for that. I heard one of your earlier guests talking about that. We would argue it is not that important. Stock markets in general are forwardlooking instruments. They dont care about the past. With regards to valuations that that high, i dont think it is fixed yet. There are reasons for that. Earnings growth this morning them. Earnings growth is one of them. A lot of people look at longterm valuations. People are focusing on that it is at high levels in the worry about that. The interesting thing about the cyclically adjusted number is the earnings but back of the great the earnings bloodbath of the great financial even without any Earnings Growth on the smp, your longterm isolation becomes more friendly. The thing to focus on with stocks is growth and prospective growth. ,f we look forward next year you have probably 12 Earnings Growth expected and quite a nice broad range to the growth. We are not going to get that earnings and revenues downgraded into the event, you have room for some valuation contraction and Interest Rates go up. You have even room for earnings to disappoint a little bit. Even then even in those circumstances, you will be well compensated by u. S. Stocks. Guy in aggregate or individual sectors . It is an important distinction. Nestle, unilever, png, they are bond proxies. If you start writing, you have to think about those. In my bicycles mi buying cyclicals . Buying cyclicals . I am tree is to know where you think i should be rotating in of and out of. Know whereious to you think i should be rotating in of and out of. Proxy,our Interest Rate that effexor longduration growth story. That affects your longduration growth story. The more complete way to think about bond proxies is cash flows that reflect perpetual bonds. Nestle, when i talk about the consumer staple brands. Lets say people are still going ketchuping heinz tomato in years from now. Pharmaceuticals can be kind of the same. Technology can also be the same. The present value of cash flows should lower a little bit. You would say that technology of those sectors has enough cyclical attraction to whether that storm. Look at the Semiconductor Story happening now. On the other side, interest raising rates tends to coincide with financials, industrials doing well. Those are two sectors we like at the moment. Financials for obvious reasons. Loan growth picking up in europe and elsewhere should be helpful. Industrials, look at the pmis around the world. That should be good. Guy will is going to stick around. Will hobbs, head of Investment Strategy at barclays. Watch this. They are going to talk until the cameras cant see what is going on. Angela merkel does the same thing. This is bloomberg. To bloomberg back markets. This is the european open. I am in the german capital it in berlin. German capital in berlin. A bit of a risk on day, just 14 minutes into the session. We see the broader European Index up almost a quarter of a percent. The ftse index up. Ibex is unchanged. Important to point out that the ibex, even with this Catalan Independence saw that, has still outperformed the ftse year to date. The ibex is not doing poorly in the face of possible problems. Guy. That is one of the clinical problems we are focusing on here in europe. It is interesting none of them are moving the markets now. The u. K. Stuff is having an effect of a pound, but the pound has been weakening over the last few days. Angela merkel has cuddled the u. K. Has called on the u. K. And e. U. They are still talking about money. About the money. Theresa may has tried to find a deal she can sell to the skeptics back at home. My position was unchanged by theresa mays presentation, because i telephone with her. What i heard today was a confirmation. In contrast to what you hear in the british press, the process is moving forward stepbystep. You get the impression that after a few weeks you already have a final product. I found that to be absurd. Is still withs us. Businessiness, britain , german business. We are getting excited about what is happening at the summit. It is is it having any meaningful impact on how i am running my business now . People want clarity. It is early to get that. View,perational point of does that mean anything to you . Will probably not. Is theyg for business want some certainty to plan. Our corporate clients are trying to plan for the worstCase Scenario. To look at a no deal scenario. Most indices in the u. K. For most industries in the u. K. , the worst Case Scenario and is survivable. The reason why businesses have survived within particular industries and thrived is they are adaptable. They adapt to the incoming scenarios. Most of the time, using from a goods perspective the u. K. Has moved a long way from selling commoditized goods. We now sell a lot of valueadded stuff. The most annoying thing is going to be being outside of the customs union, having to check rules of origin. That would be another cost of business. The u. K. Economy has durable economic advantages. Even hard brexit represents a headwind for the economy. That is probably worth bearing in mind and that is the way most businesses are trying to see it. For some industries, it is harder than others. It is survivable. Guy how do you feel about the Consumer Sector in the u. K. Right now . The bank is paying attention to it. The bank is telling us it is going to raise rates. The data out at the moment, not exactly painting a rosy picture for that part of the economy. Car sales data is week. Would it be a mistake to raise rates at this point . Do you think that portion of the economy is . There are things happening that are more here and now relevant. Will that is true. Looking at this in the last five years of retail sales, before the u. S. Under before the referendum, they were running at a sustainable level. We have gone to a lower trend since then. How much of that is a necessary correction tomorrow to a more necessary to a more sustainable level . Is having an that impact on retail sales, as it should, but it is transitory. We know that. We should see inflation trends back to where wages are at the moment in nominal terms over the course of the first half of next year. Removing thee for extra monetary accommodations that the bank of england put on after brexit . Yes, certainly. Is that the start of a rate rising cycle . That seems more unclear to us. Matt why has the ftse underperformed almost all of the other European Indexes this year . Is it movement in the pound or is there any other explanation . Will there is a number of expeditions. The areas we like our u. S. Equities and Continental Europe equities. If you look at what the pmi and global trade is doing, it is to weighted down by commodities. The ftse is the materials and energy, but also if you look at the rest of the sectors, we have a high allocation to staples, pharmaceuticals and banks as well. That probably suggests that if you are looking for a cyclical index, it isclical likely the u. K. Gets left behind in that scenario. Thank you very much. We have a lot more to go through. There is a lot of news on this friday. Cut on National Assembly called on supporters to pull money from region banks this morning. This is bloomberg. Guy lets take a look at what is moving the markets and stocks. Volvo on a tear. U. S. Numbers are good. The stock has been marked up. On premarket calls we had ericssons it is opening softer. It is not happening. Take a look at what is happening in the metal space. Anglo american is up. Rio is up. Some of the banks are trading higher. Barclays is trading stronger this morning. It is an interesting mix in terms of what is happening on the upside. A quick look at the downside. Husk of anna trading down. A husqvarna trading down. Matt i am excited. The catalog National Assembly is calling on supporters to pull cash from lenders, including caixabank and banco sabadell. Banco sabadell says its business is entirely normal. Scheduled and has already past. Will hobbs is with us. Is this catalan saga more bark than bite . Will difficult to say. Independence looks difficult. They had the constitutional clout to make changes, but more are against Catalan Independence. On saturday. Appens there is room for this to be economically. From a european perspective, focus on these regional list movements. Differ from the nationalist movements. And how they differ from the nationalist movements. It probably makes them less disruptive existential he but it makes the fiscal unity debate that macron wants to push more difficult. Guy will is going to stick around. Will hobbs, head of Investment Strategy at our place. We will keep an eye on the markets. European stocks trading up quite nicely this year. Is an important feature. You have the stoxx 600 showing you what it is doing your today. You do this double can do this easily. U. S. An change it to dollars. The fx. Ntion to this is bloomberg. Matt treasuries tumbled at the u. S. Senate passes a budget resolution, paving the way for some kind of tax reform. Is there reflation trade back on . Catalan cash call. Separatists asked supporters to pull money from lenders, including caixabank and banco sabadell. Is this a wakeup call for investors . Keep on trucking. Volvo shares surge as sales cover in north america, driving up 45 jump in thirdquarter operating profits. Good morning to Bloomberg Markets european open. Guy. The driver this morning to the European Market space is coming out of washington. The fact that the senate has passed a resolution on the budget, it has driven s p futures higher and is driving European Equity cash higher. There reflation trade, it feels like back in the water. The house looks like it is on board. That seems to be one of the drivers. , volvo, big names on the move today. Getting some outside moves. Quite interesting. Lets get the bloomberg first news update. Merkel is calling on the u. K. And e. U. To shift their stances so her brexit negotiation to be reached by the end of the year. Meanwhile, theresa may signals she is willing to offer more on the divorce bill. She urged leaders at the summit help find a deal she can sell to skeptics at home. In spain, both sides of the standoff over catalonia are upping the ante. Minister is that you hold an extreme Cabinet Meeting tomorrow. Catalan could declare independence and days. The Trump Administration has taken its first major lands to rewrite the tax code. Has beenresolution agreed to accept. That will set up a furious lobbying battle as republicans try to enact the bill by the end of the year. President trump has not yet made up his mind for the next fed chief. The shortlist includes janet yellen, kevin warsh, and gary cohn. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Guy. Much,hank you very indeed. Earnings season very much under way in europe. Leading Economic Indicators signal good news for stocks. I give you exhibit a, it german manufacturing. I give you exhibit a, german manufacturing. Tim. Bring in still with us, will hobbs. Good morning. This survey data. It is impressive right now. . The headwind is the euro, isnt it tim the headwind is the euro, isnt it . Tim it is. If you were to pare this chart the earnings expectations of the stoxx 600, you would see a march higher, just straight up. That is a good backup for earnings. Theynsitory transitory issue with currency comes to fruition the transitory issue with currency quarter,fruition this next quarter. We are curious as to what companies say. If the euro stays at the same level, it will be upwards of 8 headwind. It is an annualized issue, where is this is a sustained issue. These are the two tensions. Guy europe is a big economy, and the bulk is the and the bulk is in the eurozone. Tim 60 of the stoxx 600 revenue is domestic, within the euro region. 40 is not. If you look at a group like health care. Pharmas in particular. For left is domestic. If you look at telecom, real estate, utilities, it is far more. It depends on which group you are looking at if the currency issue is a victim. 40 of revenue is a big deal. 40 of revenue is a big number. Matt i have a chart that shows a bank,ofwar between european leading indicators and blue, in white the euro index inverted, and in yellow the stoxx 600. Which one will win out in pulling this index . Tim that is the question. The important point to think about is the biggest impact on earnings for the currency is over the course of a couple of few quarters. The impact of currency on the market is when it happens. When you see big inflections we have seen over the course of may through september when the euro was on fire versus what they case was several years ago when it dropped in an equally precipitous fashion. That is when the market trades in the opposite direction. Forward now and looking from that perspective is, where does the euro go from here . , will, whenou think we look at this and how important it is for european stocks and when we get set up for mario draghi to finally give details,e reduction how is the outlook for you . Will i would agree with tim. The difference between translation and transactional impact of the currencies. There is going to be a transactional translational impact. The big thing to think about is whether this is transactional. The real thing for us to look at at the moment is the global trade story. The Early Warning signals you get with mobile trade with global trade, look at the korea trade statistics. They tend to be the first to release export data. Those are hooking up. You see it in taiwanese trade statistics and china as well. The global trade story cyclically is coming back strongly. European companies are going to have a nice market to sell into. That outweighs a lot of the currency impact in a sense when you are thank you but longterm investments in companies, because you have a family global atmosphere. Imf is upgrading their forecast and talking about a more robust recovery. That, for us, outweighs currency. Guy picking up on that cyclicality point. Break it down for me from a sectors point of view. What kind of numbers are we going to get . If we look at a clean group of earnings are we have solid consensus expectations, we are looking at 9 growth in output for the thirdquarter growth. If you take energy out of that and one or two mega caps like anheuserbusch that has outsized numbers, then we end up with something that is 7 . Are the sectors to watch are industrials, energy , and financials. Expectations are low in part because of hurricane issues for the Insurance Companies and because in banks we are not seeing the expectations come through the rebound and revenue. If we have a stronger economy and see modestly higher rates, you will see the interest margins, fees, and this and that and the other come through. It should be interesting, especially next year. Had, Bloomberg Intelligence equity strategist joining us on set. Will hobbs is going to join matt and i on the radio shortly. Next, we will bring you the latest from the e. U. Summit. This chat is fascinating. Look at the top behind their hands. Look at how they talk behind their hands. Diplomacy and action. Guy 8 43 in london. Lets talk about the political story where we are this morning. Day one of the au summit. We saw european leaders push the u. K. To offer more in negotiations. Angela merkel sounded a note of reassurance, saying there is zero indication the discussions will not succeed. It depends on the money. A catalan Campaign Group is calling on supporters to hold cash out from banks this morning. That was earlier. Whetherget a take on that actually happen. We will see what this weekend brings in terms of article 155. Nejra cehic joins us from brussels. Maria joins us from our salon a. How did the talks go . Who offered what . How was it received . Nejra in terms of how the talks went, there certainly was a better tone from both sides then there has been at previous comments at previous summits. What was offered was that theresa may signal she might offer more and go further. She did also say that she needs to take a deal back to her skeptics in parliament and the electorate that is going to get them on their side. She needs the deal she can sell to the u. K. Public. Angela merkel seems supportive. She came out and said there is there a possibility of brexit talks not succeeding. She said she is motivated to move the talks on to trade by the december by december. May pushing for trade talks to move on to december. We know the e. U. Has been working on that to happen, but there was no guarantee. They want more concrete negotiating positions from the u. K. Maria, let me bring you in and ask about this call from the separatists in catalonia to pull money out of the banks that moved out of barcelona. Break it down for us what happened, and what have we heard from banks . Maria good morning. This started yesterday night. There is this message that is been circulated across social media, put out by the catalan National Assembly. One of its leaders was sent to prison, nobel earlier this week. No theyll earlier this week. No bail earlier this week. We are getting statements from ericsson and were getting statements from and banco sabadell. We went to an atm and we saw five or six people. They said it is normal. We did speak to one person that said, i am here because i want to protest. I amhappy with how unhappy with how caixabank handled this. I want to point out both banks have said everything is going normal this morning. Guy pretty important point to make in terms of the importance of how banks work and the confidence required in them. Nejra cehic in brussels. Maria in barcelona. Lets start in catalonia. The market seems calm. Is that your take . Carsten it is still might take. Mediator, will get a moreome solution to get rights, and also financial rights. Guy does it have to get worse before we get to that point, or do you think we are at the point where the mediation line is possible . Carsten the Central Government will want to go for article 155. It can get worse before we get to this point. I hope the government leaders in some european mediation to bring both parties together for pragmatic dialogue. Matt i woke up this morning pretty surprised to read about the comments that Angela Merkel made last night. I didnt think anybody else besides the brits heard about brexit. She seems to want to get a deal done this year. How likely is that to happen . That mr. You also know week thesaid this government is actually not able to make any deals at the european letter, be it on brexit or the future of the eurozone. That the brits will ther or money, the rest of European Countries will offer a conditional period, and then they will Start Talking about a new trade agreement, but only in 2018. Matt then we are back to square one. You have to bring a check if you want us to talk, but the question i have is how long this transitional period will be. You expect it to be two years, five years, 10 years . Carsten i would go for two initially. Much intonot read too Angela Merkel sports. Into Angela Merkels words. It was just being very friendly. It is also that the europeans dont want to be blamed if these negotiations fail. They reach out to the brits, but the fact remains that the brits will still have to deliver the money before the other countries are willing to continue to talk. Guy what kind of money are we talking . You have your ear to the ground. What would do it in terms of that number . Thing north of 20 and the anything north of 20 and the conservative party is going to have issues. How high does that number have to be in your mind . In europe, it is always a compromise. Ballpark figure of 60. It will be north of 20. Good european compromise would argue for something around 40. Guy funny you should say that. If we get 40, how quickly do things accelerate . Then at least they will accelerate in terms of really going into indepth talks on the trade agreements. Will we get results . No. But the europeans have blocked any talks so far on the future trade agreement, which means after the money is on the table, they can go into these talks, how long it a second other freetrade agreements, the european canadian trade agreement, this could take years. We need this transitional period anyway to get this trade agreement done. I wonder whether it is possible to get the trade agreement done in 12 months. About, yout to ask are an economist, so i went to ask about the actual european economy. In terms of companies, how is it doing . So much positive talk about earnings in the u. S. , even though if you just look at earningspershare we are back to where we were in 2013, 2014. How does the european economy look in terms of Company Earnings . Carsten the European Company looks strong. I would expect the economy, which has been growing strongly, we have talked about three years in a row of constant growth. We also see that the Unemployment Rate is dropping. You also see that investment in the eurozone has picked up again. Europe for a couple months is again a good place to be. This should show up and Company Earnings. Show up in Company Earnings. Guy were watching the u. S. Story develop quickly. The dollar is close to a breakout. What does this story look at from an ecb engle . They would keep a qe4 until the end of qe floor until the end of 2018. They would like to make this as dovish as possible. Introduced tapering without any reaction on bond yields, on the euro. It could work. They will hammer on this sequencing on forward guidance. I think mario draghi will hammer on this and Interest Rates will remain low, even after the end of qe. Really appreciate your time this morning. We know you have a lot to do there in brussels. Carsten on the ground. Lets talk cars. Daimlers profits fell 14 in the third quarter. A recall contributed to that slump. Earnings of the mercedes car unit dropped. For more, i want to bring in chris reiter. On the earnings side and beat by event on the revenue side. In general, investors havent reacted negatively geared is the Diesel Scandal going to hurt them or has it been priced in . Chris it has been priced in. That is the reaction. Daimler floods these costs that were coming. Flags these costs that were coming. The underlying profitability at mercedes is still be sent is still decent. Acrossw do i read this all european carmakers . Chris it is hard to say. Comparison a good when they come out in a couple weeks. There is a lot of daimler things going on with the daimler numbers. There recall costs were going to be more than bmw. Then there is volkswagen, which has its owned issues. Which has its own issues to deal with. It looks like it is solid, decent fundamentals for the market. The bottom hasnt fallen out of diesel, which would be bad news for the european carmaker. In that sense, it is a solid basis. Matt the problem is a residual values. We see diesel sales, especially on the use market falling and getting cheaper. Are they going to be will to sell as many diesel cars Going Forward . Do they have to come up and say we promise you will be able to drive these . Chris the real litmus test for is the fleet market. As long as the business customers continue to back diesel, and the reason they do is because of low cost of ownership. Diesel fuel is cheaper in europe. The cars are actually good enough and value. Signs of the residual value, which are important to the fleet market. If they start falling at have concerns about their portfolio, than they are going to get out of diesel, and that is when you know matt and that is what we see happening. If i was when to buy a diesel car, i would meet in writing the carmakers say we promise you will be able to drive this in every city in germany. Chris, thank you for joining us. Me and guy. Or we are headed to radio. Is surveillance. Francine optimism on u. S. Tax reform. Treasuries tumbled. Equities edge higher. The greenback climbs. Offers the paper ministering the you could print minister a lifeline. Angela merkel offers the u. K. Prime minister a lifeline. Good morning. This is bloomberg surveillance. First thing is first. This is what we are looking at on the m