[indiscernible] and theresa may flies to poland in a quest for allies. Re aen to elect a new regional assembly. Matt where less than half an hour away from the european open. Futures not getting a great sense of direction. We saw earlier the ftse futures down. They have turned higher. You see dax futures up, point to of 1 . Cap futures down and euro stock futures unchanged. Take a look at treasuries, the threeday picture of the treasuries trade. 1. 2. T we have seen the yield,. It is down by one basis point yield2. 49 fairly strong for treasuries and trending in the last minutes of trade to the upside. Guy lets talk about what kind of legacy is into today. Definitely tough if you were long european equities. Switzerland and germany trading softer. Down 1. 1 . Similar story around the rest of europe. Asia is not looking quite so bad. The csi is up by. 31 . The legacy this morning not that great. They are not telling us what we will be seeing a significant bounce back. Currency has been on a run trading downpipe. 2 of 1 . The pound is softer. Commodity market has gone to sleep. Crude, gold, copper, brent all flat. Lets get a first word news update. You keeper minister theresa may heads to poland later in an attempt to win a brexit ally. It comes after she was forced to tell Deputy Damien green to resign. He had made misleading statements over pornography discovered on his computer by Police Nearly a decade ago. Green is the third member of her cabinet to quit in two months. Denmarks finance minister has joined the chorus of voices warning that postbrexit trade talks between the eu and the u. K. Will be difficult. T s speaking exclusive exclusively to bloomberg. It is important that we take the time to negotiate a fair deal for the u. K. And europe. I do believe that this will take much longer from now till next spring. There will be some sort of intermediate agreements. On how to trade with each other until we have a final agreement tween the u. K. And the eu. The bank of japan has left policy settings unchanged in its final meeting of twice 17 retaining its unprecedented monetary stimulus as it waits for a pickup in low inflation. The central bank said it will continue to target Interest Rates and i Financial Assets to achieve its 2 inflation goal. By all 44redicted economists surveyed by bloomberg. Saudi aramco is looking for natural gas assets from russia to east africa and the u. S. Is hearts for ways to meet soaring domestic demand. A tacitents are admission aramco has failed to years ofserve to fight exploration. He does not plan to discuss Global Oil Output cuts before june. I am looking to the longterm. I am looking for the second half of 2018 to see where were in terms of supply and demand. Itre is no intent to leave at what we agreed on. Has set Justin Trudeau a holiday he and his family took was a mistake for which he takes full responsibility. His comments came after a parliamentary commissioner found the trip to the bahamas broke conflict of interest rules. The report made image of government under fire over the way the minister handled his personal finances. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Treasuries claw back some recent losses after congress voted in favor of tax reform. Yields are hovering around 2. 49 but could be headed higher. A survey has that number pegged at 2. 68 by the end of next year. A survey of economists is more bearish. 2. 88 by the fourth quarter. Joining us now from singapore. What is driving the yields higher . Shortterm european yields have been at catalyst and we have the tech field past so there is a couple of things in the short term. Is a thing a few things that are playing into this. We are still expected to get three rate hikes. The market was not getting the rate hikes the fed was promising. They did [indiscernible] more investors are believing that for next year. There is this narrative that they are gaining control and this will drive yields higher next year. This is tax driven, about what is happening in the as. Westmark we hit waited year and we built in expectations and analyzed it from every angle. Now it is here. What does the market move on to as the next narrative to keep things going question mark mark analysistely the tax is not over. There will be a look into how much will this after growth and how it will expand the deficit. The one big takeaway from the tax deal is the deficit will blowout again and that means further supply and that is why yields are going higher. Theres a bigger reaction to this tax passing than the equity market. In agree market was pricing all year in terms of this long bull market. There are many other reasons to argue we did get the old market in equities. Global growth is strong, corporate earnings are good and there is a lot of equal liquidity. The move has been less about tax at this might have been little bit about tax. We will not be over from it just yet. Here,i have a great chart 8122 and the bloomberg chart library. The effective tax rate for personal income taxes has stayed the same of the last four years, around 15 but for Corporate Taxes you can see it has come down and with this tax cut it will come down even further. Great piecead a saying workers will benefit the most. You were seeing increases in minimum wage to 15 an hour at wells fargo and fits are pfizer. Others giving 1000 bonuses for christmas. Could this against all odds, the , is it leading to wage increases and adds to inflation . Mark theres a bit of all political view and how you answer that question. Some people feel this will be the final thing that will stimulate Wage Inflation without the massive for the economy. It will be a big boost not just because you get inflation, we get a more normal economy and future consumer spending. Butwe might see a tick up over all we are giving corporate more catch cash. One of the big themes is the have too much. They are not spending to reinvest. Why are we giving them even more money to buy more share buybacks . We will have to wait to see. I am in the latter camp. It seems bizarre that there will be too much impetus against corporate that have lots of cash even more cash. It will [indiscernible] a little bit. Guy the futures markets are signaling about the bitcoin market. We were waiting for this to happen. An indication that next year not quite so rosy. View thiss hard to is an indicator. Aunched last week they are in a large premium and that implies that people believe bitcoin will be higher in january. Because it is inefficient and expensive to trade in and out, people tend to trade to futures which are more liquid. The fact that the futures have expectlow spot, people the settlment price to be lower. Sentiment is shifting and it is an effective the fed. Largew that one of the bases of marginal demand is the retail base. We were expecting demand to commit of the market and this site is saying we might be in for a couple of weeks pullback. That we should know is a correction. Even a large correction does not mean you write off bitcoin for the long run. Guy thank you. Mark cudmore joining us in the mliv team. You can follow his views and the teams views on your bloomberg terminal at mliv. The Energy Minister does not intend to revisit the issue of global oil cuts before june but he says he is optimistic for 2018. We will bring you the best from that interview next. This is bloomberg. Matt good morning and welcome to the European Market open on Bloomberg Markets. I am matt miller. Bloombergst to the us flash business flash. At t is giving a bonus to its staff. Part of the effort to defy criticism that tax cuts will benefit shareholders more than workers. Boeing has pledged 300 million for employee training come improved work twice infrastructure, and corporate giving. Renault is searching for a new former one. Ce the headhunters are looking for candidates in the board named a successor. He may similarly hold onto the chairmanship. That is your Bloomberg Business flash. Guy thank you. Opec should not revisit its output agreement for june according to the Energy Minister. He discussed the relationship between the kingdom and russia. And the outlook for aramco. Changes premature to views from what we had in november. December, theted first few months of 2018 to be the months when we are going to oil in generalon and we have seen builds that peopleed a few especially with gasoline. If you look at the totality of the number of oil and product, their consistent with the seasonality and the continued high level of conformity and compliance by countries that are party to the supply and constrained agreement. Overreactll always to short term. Accidenteen them bearish way. I am looking for the longterm. I am looking for the second half of 2018 to see where we are in terms of supply and demand. To revisit intent what we have agreed on. Yousef you were invited by Vladimir Putin and there were pictures and video of you in thick winter clothing which is a rare sight. Give me a sense of the appetite that saudi arabia has in terms of pursuing projects with russia, being in russia, and the arctic, or elsewhere. From my perspective it is to capitalize on the clear might meant alignment of interests and we have seen that come to where both oil side countries are probably benefiting significantly in terms of market stability and its impact on finances of the two countries. An environmentd mytrust, of interest, and various visits to russia, i have become impressed with the capability of the russian industry and their ability but i become equally convinced that we can do business with russian partners. Partnersnvited russian to invest in the kingdom and there is a 1 billion fund between the pif and direct Russian Investment Fund to invest in companies in energy, oil, and guess in particular and we are evaluating a number of these investments. Aramco may invest with russian majors abroad. That is a clear possibility including euro they are question on gas but also on refining investments and markets that could take either or both of our crude oil. There are discussions between saudi aramco and Russian Companies about investing and refining and downstream assets. Ouroil ministry there with anchor. Ast markets great stuff out of riyadh. Lets come back here to the european union. Eu or give it is a schedule to lufthansas acquisition of lgw. They willuggests secure trust approval after agreeing to give up some dusseldorf airport slots. Lgw important . I have not heard of it and i live in germany. That is a airline based in dortmund. For lufthansa it is a different story. Too much jargon, that is an airline that is flying on its own terms. Lufthansa has faced resistance from its labor union in its effort to cut costs. Whenever that problem arose they switched capacity. Option tobe another fly planes way they are cheapest to fly. Germany operates under all kinds of restrictions as you know living in germany. Airports are closed at night. You cannot build a new Landing Strip somewhere. Airline that has slot landing at airports is of great value. Guy it could not get all the assets it wanted out of air berlin, why not . The one thing they decided not to keep bidding for, a thaner with bigger ones lgw. The commissioner felt it would add to much market power to lufthansa which has a pretty hefty position from a market share perspective in germany. Her job is to ensure we do not europeanolists and any country and this time in air travel. Smartse that was a move time will have to tell. Lufthansa after the signals from the European Commission dropped out of the bidding process. Niki is in limbo. Inre is a deadline to hand finding offers for niki. To lufthansa back which is what they wanted to avoid. Guy an interesting twist is the end. At the end. Euronav i talking abouts taking over [inaudible] the market open is seven minutes away. This is bloomberg. Guy five minutes to go till the start of cash trading. Buying generate. These are companies that move oil around the world. It will be funded by stock. Euro euro now of of 400 sell assets million. Watch,nd a bank to cutting costs by cutting jobs. It had 7500 offers a voluntary redundancy. It will accept those and has agreed with unions through 2020. It will hire 1500 people. A net cut of 6000 jobs. Going exe stocks dividend. The market open is next. This is bloomberg. Minutes to go until the start of cash trading. Issues around these equity markets. Reason may heading to holland. It has been an interesting 24 hours. The nikkei actually closed down. Were starting to see divergence. Oil has been picking up. Yesterday, u. S. Treasuries were on a tear on the downside. Equities kind of flatlining. Lets take a look at the wei screen. Ftse looks like it is going to be the only area we see some gains but they are going to be limited. The market was quite was down quite sharply. Keep an eye on some of the metals stocks. You have seen some the metals markets doing well. That may feed in. About this market open. We are anticipating a flat start. Flashing in and out of positive and negative territory. Other markets are going to be a little softer. See the cac opening up next. It will be down. 2 . Opened, 7525. Keep an eye on the minus. On the miners. The cac opening softer this morning, down by. 4 . What is happening on the imap, basically the picture you see by 10year is a lot of red. It is not that your medic. You need to not that dramatic. Health care looks little weaker. Like it is the financials and some of the Health Care Stocks that are coming under pressure. Matt, what are you seeing . Matt i am seeing more stocks down that up. We have only been open for a minute of trading but we have 292 stocks down on the stoxx 600. Take a look at the losers first, because we are down. 1 of the stoxx 600. Youve got names Like Unilever on the downside. Some of the more defensive stocks falling. You dont see a lot of the financials other than that on the downside. I did see the big red financials on your imap. Clearly, it is a down day for banks, but if you look up the winning side, hsbc is adding the most points to the stoxx 600 this morning. You see more financials in the green. Allianz is a gain or. Lloyds Banking Group is again or. You see some the oil and Gas Companies on the plus side. Here are bp and total gaining. You see bhp and allianz on the plus side. Guy lets talk about what happened stateside. The u. S. President declaring the republican largest tax cut in history. Trouble sign the bill on january 3 trump will sign the bill on january 3. Joining us, neil dwane. Gary cohn over at the white house expected to expecting the market rallied to continue. Neil we think it is merely rallied far enough. Result earnings of 6 in the market has rallied five. What are you going to be talking about in 2018 . Impulse . Is the next say thewould have to lessons of the obama crisis, lots of boost pension funds. The problem with the infrastructure is the states have to spend the money rather than president trump. It is difficult to see that helping the economy. Matt one of the cool things i have noticed from the tax reform , most people in the u. S. This is only going to benefit the wealthy. Unpopular. You are starting to see wells fargo, with 15 minimum wage, comcast giving one is thousand employees 1000 christmas bonus. At t giving christmas bonuses. I wonder if the Corporate Tax cut is going to add a little bit to wage growth in 2018 . Neil i would agree with that. The early signs is exactly what the politicians are going to need to see from corporate u. S. , because so far we know that 80 of u. S. That on the s p in if they are going to have any benefit that these houses are going to juggle through, we need to see these types of announcements. Seeing more capex. Billnk we need to see this as we enter through the results season in february of next year. Do you expect it to provide a boost to earnings . Cutting your tax bill doesnt necessarily drive earnings. Need to see investment in boost sales. How is that going to happen. We think the headlight narrative of 35 being cut down miss narrative because the average is the company is paying 25 . That is why we dont see tremendous boost. You and i would argue with Interest Rates where they are, with credit markets fully open, if companies wanted to invest and employ more people, they have five years to do so. The move from the fed is going to be much of investment spend. Guy we have done it. We have priced it in. We are not going to see much of an effect coming through. When you think about what this all means, essentially that the only been we can probably count on is the fed is going to have to look at this and say the debt is going up. Probably want to lean in on that. , thee risk to the upside fed does more next year . Neil yes. We are in the camp of the promised three and we believe they will deliver three. Decree reason the key reason is because financials in the u. S. Are also loose. Wall street is not listening to the fact that fed wants to raise rates. Hoping that matt is right and we do see some wage growth and some investment and they can say, we are running the economy hot, now we can justify raising rates. Matt ive got an interesting chart here. If you look at stocks and the impetus behind the gain in the s p has been this tax reform of late. Im looking at stocks only back to this is stocks priced to stale. We have reached the highest level that we have seen on price now. Le, 2. 3 is the level since the internet bubble, we have gotten their on pricetoearnings but those numbers can be massaged. Sales can be a little more difficult to fake. Are we overvalued in u. S. Stocks . Neil what we would say is we are richly valued. We use the valuation is a way of finding a compass for equity markets. U. S. Looks richly valued on that metric. Suggesting that you will get 2 return for the next decade. Europe and asia are more attractively valued where you can get somewhere between 5 and 8 . Inside a Global Equity portfolio, the u. S. , the market looks at a richly valued, yes. Ralliest stock market and in a your ford phase in a euphoric phase. It is in for liquid got into that point where the markets are it doesnt feel like we have gotten to that point where the markets are comfortable. Is thehat i would say underlying drivers are some of fundamental, the earnings, the fangs have been there. What worries me is what we are seeing in the m a sector. Broadcom is going to borrow 100 billion to buy another chip company. That feels pretty euphoric to me. I would say in the last month, the on the thing that has been euphoric [laughter] and. We are six minutes just six minutes and. In. Ix minutes matt bitcoin has had bigger drops than this and come back. Neil dwane is going to stay with us. Still to come, bank of americas Brian Moynihan says no one can predict the outcome of brexit but he is a little bit bearish. More on that from our david west and david westin. This is bloomberg. Guy welcome back to the european open pit we are 12 minutes into trading. Lets take a look at where the markets are. You can see a generally kind of that is selling but not a lot. 2 . Arkets down london is barely budging because the material stocks are doing well. That is why london is outperforming just a bit. Oil and gas. The underperforming sectors, financial services. A big move yesterday. We are not bouncing back from it at this point. Matt lets talk about a big interview we had here. Bank of america chairman, Brian Moynihan says exit remains a big wildcard. He spoke with david westin the began by asking on the confidence growth aspects. David we see it in the midones, 1. 5 levels. We think it is fairly fundamental. It is caught up with itself, the structuring of the financial sector. It is not going to hurt the economy. E feel very instructive how brexit will fallout and you just dont know. You read the paper one day and it is going to like this. It is hard. This is trying to rewrite tremendous 35 history of how they came to this point. Nobody can predict the outcome. I dont think it is good overall for europe because it was moving along and people were spending a lot of money to figure out what to do. They are not good to get anything more out of this i think it is a negative. Incentive to make this thing growth rate. We feel pretty good by europe. David you spent time figuring out what to do is negotiations seem to go on forever. Expecting you to say what youre going to do but is there a first move or advantage for large bank to tell employees, we are going to paris , we are going to dublin. Is there some pressure . Brian if there was a decision you can make, that would be an advantage. This is tough on people. Ago andere a few months our teammates say real people have real kids in school trying to figure out where they are going to live. His is very difficult as soon as we figure out what is going to happen, we will tell people. We have made some decisions. We moved some people there, Bruce Thompson was over there and he is trying to steer this thing through it we are building up capacity. Work with them to get the approvals. Those are structural things. One of theestion was rules of where you can work and live . You have to be inside to talk to customers. It is tough on people. Matt you can watch more of our interview with bankamerica, Brian Moynihan. 12 00 p. M. U. K. Time and that you can do with the anchor who conducted the interview, david westin. U. K. Prime minister theresa mays first ticket to your state gaming green has resigned. He made misleading statements over pornography allegedly discovered on his elementary computer by Police Nearly a decade ago. Green is the third member of mays cabinet to quit and three months. Still with us is neil dwane. About damien green accusation but i think it is interesting to talk about what theresa may is doing today. She is courting a polish leader as the you schools that country authoritarian. Is this the right strategy for neil as we leave europe, i think we have to rebuild quite a few bridges. I wouldve said historically we have had strong links with poland in the past. They have been an ally inside the european union. Asrefore, i would expect 2018 goes through that theresa may will be doing her level best to build oneonone relationships with many of these countries, rather than using the european union. It is clearly to dramatically difficult for today, i think she is doing exactly the right thing. Guy the bank of england came out with a series of rules that will allow banks not to have to move significant amount of capital to london if they want to maintain their operations here postbrexit. Are we starting to get an understanding of how the u. K. Sees the city involving . The seek the u. K. Seems to be positioning itself as a much easier place to do business. Kind of deferthat some of the decisionmaking . Neil you cant really defer it. If youre going to have a big european presence, youve got to have it in Continental Europe think bank of america has a decision to make. Flexibleing to be about some of these things, we are going to be open and relatively transparent. I applaud but the bank of england did yesterday, followed by the fca and the changing of those rules. We want to make sure that we stay the Financial Center of europe. I think europeans luckily admit that if they remain quite bureaucratic than london will be fine, because a lot of business wont choose to go to Continental Europe. Matt what do you expect to happen with happy prices . With property prices . I am thinking about in london. Does it never fall . Is, matt, the funny thing u. K. Property looks pretty expensive. You come to london, it looks unaffordable for most people. We have to calibrate how many people will leave the city of london. Most people are saying 80 people, some people are saying 70,000. I would probably say london is still there are a lot of sterling takexey another to who would like to say would like to see sterling take another tumble. I wonder with the big property stocks in the u. K. Trading it 25 discount, whether the market is sitting there saying, that weve got some momentum or progress for the first time from the politicians and u. K. , maybe london looks cheap compared to a lot of property in europe that is trading at 25 premiums, albeit with better fundamentals is some real rental rates. Guy how little Interest Rates change . Trying to link the conversations we have had, Interest Rates are going to rise next year. You think the fed is going to go three times. What does that mean for sectors like property . Neil the dynamic is Interest Rates are going to rise at the short end. The global mark just the global bond markets, youre going to see the rising early start to hurt all the negative yielding areas of the world like japan and the eurozone and switzerland. At the longer end, in the shortterm doesnt affect the real levels. What we will see in the medium term itself the markets start to price all the issuance, we are expecting 2 trillion to come out of the u. S. Next year. They may find some of that across the curve which may mean we see the yields across the curve rising or increasing, because we are setting market rates. The fed is a seller. Story. It is a big i would argue with the Property Cash for the utilities and big stakeholders in helped her stocks or the tech stocks, a rise in the discount rates effective valuations. Rates could affect their valuations. Matt he is going to stick with us. 21 minutes into the session. When we come back, we will be talking to the managing director of londons Harrods Department store, not immediately when we come back. That is an interview you will want to watch out for, especially this close to christmas. As catalonia goes to the polls, we are been the focus of the european politics story and discuss what that means for investors. That is our will house. That is our wheelhouse. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Just 24 minutes into the session, two days, this is a penultimate day before everyone goes out on a legit christmas break. We are seeing equity indexes that are down across the board. Catalogs vote to elect a new parliament in barcelona with polls closing at 8 00 p. M. Central european time, we will bring you results after restrictions left. Allianz Global Investors outlook report for 2018 suggest geopolitics and plain old politics remain major risks for investors next year. Still with us, neil dwane. Do you really have any concerns as far as european politics . It seems to matter what happens with the afd parliament or far right ring party just far right wing in austrian coalition government, european stocks cannot be derailed. Neil i dont think they will be derailed in 2018 by european politics. E are quite relaxed alicia passed by relatively smoothly. It is going to be hard italy should pass by relatively smoothly. It is going to be hard. I do think as we go through 2018, what i call the plain old politics of brexit will to some extent come into focus, and clearly there are sectors both in the u. K. And in europe which will have to get some thought to. When asked him back and think about the geopolitical risks, we have just seen overnight the trade news on boeing. That could be a flashpoint between europe and the u. S. We had a situation around iran which can be a flashpoint between the u. S. And europe. The down my biggest concern is the geopolitics of the middle east and the fact that i think the oil prices are too low for something that could go wrong next year. Guy how do you play that . Neil go long big oil stocks. You have big yield. Guy what do you think a reasonable price would be . Think an event would put oil through 100. We think generally fundamentally 70, 75 for oil. Guy that next decided budget look very different. Neil is wednesday around. Neil is going to stick around. The outlook for 2018. We are down a touch in europe. Matt we are 30 minutes into the trading day. Here are your top headlines. Whats the motion is adopted without objection. It is laid upon the table. Christmas comes early for the republicans as Congress Passes a tax cut. Firstresident trumps legislative victory proved a vote winner . Mays trouble as u. K. P. M. Is forced to fire her deputy. She flies the poland and a quest for new allies in her brexit negotiations. Catalonia votes. Polls are open to elect the regional assembly. How should investors play europe in 2018 . Welcome to Bloomberg Markets european open. I am matt miller in berlin, alongside guy johnson at europeans new headquarters in london. Guy how are things looking . Yesterday was largely a negative session. 4 . 600 down by only one sector in positive territory. We are outlining what metals did in the asian session. The only sector to be trading higher. Think about what matt said. If you can remember, what happened with bonds yesterday. I wonder if it affected the markets this morning. Utilities are down. There is activity in the Utilities Sector today. There is is trading hope. It is interesting to see all of the sectors do have some exposure into the rates set up. That is the picture at the moment. Markets down. 4 . Bloomberg first word news update. Donaldust sebastian trump declared that republicans have passed the largest tax cut in american history. Not a single democrat voted for the measure. Trump intends to sign the tax bill on generate third to ensure automatic spending cuts for medicare and other programs dont take effect. We are going to bring 4 trillion back into this country, money that was frozen overseas and in parts and worlds and some of them dont even like us and they had the money. They are not going to have the money long. Poland andmay has to in the in an attempt to win a brexit i like. Brexit l. A. Brexit ally. Australiamelbourne say they believe an incident in which a vehicle hit pedestrians was deliberate. To make testament were arrested two men were arrested. Policyk of japan left unchanged remaining its monetary stimulus. The Central Bank Says it will continue to target Interest Rates and by Financial Assets to achieve its 2 inflation goal. Setting aramco is looking for natural gas outlets as the the comments [indiscernible] domestic gas reserves despite exploration. He does not plan to discuss cuts before june. From my perspective, im looking for the longterm. 2018 to seealf of where we are in term of supply and demand. There is no intent to revisit what we have agreed on. Sebastian global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt thanks very much. Allianz Global Investors say beware of liquidities or fall and volatility spikes as Central Banks reduce the size of the easing programs. Reports suggest Holding European equities over u. S. Stocks. To discuss that, neil dwane. Why european stocks over u. S. . Principle, itin is because of valuations. As we look into the future, obviously 2017 has been a great year for taking risks and earning every turn. Into earning a return. As we look into 2018, the yield component will generate or the return than the earnings and the ability of companies to into a return. As we look rerate and therefore the income sits in europe for the structurings and arguably with the diminishing, you are going to see a stronger currency. For Global Investors, they can see the money in euro and markets. Guy have a great chart showing how your socks just how european stocks how european stocks versus the u. S. If you believe in tech, you buy u. S. Of the the lack overweight to financials. I think the valuation gap is also there because it europe doesnt do his own share buyback. Your prefers to return money through dividends. We see in the u. S. Much more whether companies. Maybe the credit to buy back shares in the u. S. Is going to come to an end. Matt i wonder you see rates rising. How do you see the shape of the curve playing out . We also have the shortterm rates rising. Does that mean flattening . Neil we would expect global bond markets to see flattening as the fed yanks shortterm rates higher. As we have seen in 20 in 2017 come what that means, your lost money in the seven bond markets. They have been yanked higher by correlation to the u. S. Guy can i go back to thing you brought up early on that as politics in oil and the price of crude and you get long oil stocks this year, the ftse 100, there are a lot of miners and their. A lot of miners in there. The reason for that is some of these sectors are not done well. Does the ftse outperform next year . Neil i dont think so. Let me say, i am not sure. Ftse will outperform if we have ad brexit because the ftse if we get a good brexit, a lot of oversold u. K. Domestics will have a doubts. Will have a bounce. You let plenty of opportunities to trade brexit. Matt it is all about the currency play for u. K. Stocks, right . Is there a lot else you have to factor in in 2018 for the ftse . Neil as i said, the dynamic is we think the ftse is quite unattractive highyielding markets when you think about imperials. The return of maybe lloyds producing a decent dividend. You are going to get a lot of income that you have to be able to look through what you think is what happened to brexit. The key difference between 2018 is we have to stop pricing some of these of this. Just some of these risks some of these risks. We are going to have to press brexit because companies will be making decisions about how to position themselves. Wherek we have had a year we havent had to really manage musk risk managed much risks. Therefore i think clients think the volatility may come from. You are going to have to expect some of the positive pole to test positive political decisions to impact markets. Here. Got the chart if you look at the right hand side of this chart, you will be able to see that the bar charts showing you the clip that has gone through. That is about 18. That is double where we are now. Is next year about where we start to see the vix bumping around a little bit . If we get a big day down, is the market set up to deal with a monitor percent increase in the vix over a couple of sessions . I would be nervous including positively that the markets can deal with that. What we are seeing is that the risk parityith the inside of structures we have out 22 trillion that is playing this barbell. Getse ball goes down, he i think at some point we could from a market perspective see that change, and then there is huge leverage on either side. It is controlled by the low level ball. Even the markets to change. Guy would there be liquidity issues around that . Neil i think that could be. What we have seen about 2017 is one way. A lot of the other goes withstand their instead against the change in the trend. There goes withstand instead of against the change in the trend. Matt neil is going to be joining us on bloomberg radio. You can tune in for that, or just type radio on your bloomberg terminal. Quick mention of some breaking news. The chemicals maker is has named a ceo. Basf is naming some new management members. Angle will become cfo. Margaret bruder will be the new cfo to see kurtenbach. Up next, a ring endorsement. 2017 and telecom saw solid growth. Saw solid growth. We will take a look at what is happening with the sector. This is bloomberg. A guy we are 44 minutes into the markets session. I want to show you what the ed looks like. You see the stock is down by 10 plus. Very big down day relative to where it has been. This relates to proposals that are being pushed around about the idea that we see u. K. Greg ground brent being set to zero. This is a result of disruption of housing supply. This contradicts the governments stated objective. Anyway, it is good to be interesting to see how this is going to work its way through. The land bank in focus here. That is why the stock is being heart hit being hardhit. Stuff. E very cool European Telecom operators have struggled to deliver topline growth. Revenues have been hit by a greater sectoral competition and price cut it just price cut will election prescott regulation. The sector is at the bottom of the indexes, press return rankings propelled by french operator share price plunge. With next omitting regional economy in one in 80 of europe covered, could 2018 see tailwind for telecoms. Joining us is matthew blossom. Are things looking better for telecoms in 2018 . Matthew they are looking promising. It has been a promising it has been a challenging year in 2017. You have some regulatory it wins and we see a continuation of those trends. Inenue growth is about 1 2017. Were looking for a similar level in 2018 which isnt that exciting. We are going to see more in terms of driving earnings. If it focus on costcutting now that telcos have been costcutting ever since i can remember. It is taking a different shifts now. It means they are putting a lot. Ore into their web services they are using Artificial Intelligence to take that next leg of cost out of business which they are hoping will drive Revenue Growth and allow people to sell more effectively. They will upgrade to fiber broadband. Guy the u. S. Has consolidated. This consolidation seem to continue over here . Is one to beink it about fixed operators coming together with mobile. That is being driven by the need for more scale. Theiry global might sell austrian cable businesses. Those of the local mobile operators. A situation between virgin. Well see something happen in 2018 as well. The bigger crossborder m a in europe to bring genuine regional powerhouses, i think that is some way off. Here in europe we have seen a boost in regulation as far as prices. The consumers love. In the u. S. You say rollback of regulation in the form of the reduction of Net Neutrality regulations. Is it europe set to follow suit . Matthew i think it is unlikely. Europe has Net Neutrality role took four years to get through european parliament. Backu see the kind of push you have seen in the u. S. Already around that rollback, i think the politicians in europe wont go down a similar route. As much as the telcos in europe would love to see a similar rollback, it isnt going to happen anytime soon. Guy i look back over the last 10 or 15 years at the euro come European Telecom center and it is become more imposing than that period. Can i when you state when you take a step back and you look at global, the big powerhouses, can i assume that the benchmark can be applied elsewhere . Matthew you mean can it be applied across other sectors . Guy it is a big consumer facing have one aconsumers loss in this whole phase. Burden that has been applied. Do you think we are done with that . Do they shift attention elsewhere . Matthew i dont think we are done with it. You already seeing more attention go into the likes of facebook. Of a creepis more then moving it which is see is a new Telecom Framework that uses are looking to put in place. There is a focus around joint dominance. Cable operators have escaped much scrutiny. They can control the more. They still look at the sector and see that it is about the right side of being competitive. If these guys get too big, then there will be too much power with them and not enough with the consumer. Regulation is going to continue to be a strong theme. Us. Matthew bloxham joining and nice resolution. Merkel agrees to have talks next month. We will have the latest from berlin next. This is bloomberg. Matt welcome back to the european open. I am matt miller alongside guy johnson. Angela merkel will begin exporter talks with the new government next month. The parties will discuss policy areas, and the consideration of who will lead germanys financial industry. Lets bring in richard jones. Say that the cdu wants to get this done quickly. No one is going to be doing any work on the holidays. Richard it has taken a long time to get here. The election was an awful long time ago. Does look like an early january we are going to get some sort of Movement Toward the formation of a government. It has taken longer than anybody anticipated but it does look like there is a deal to be done. They will be up to come together , all the details at the worked out and i will take a little bit of time. Maybe this time next month we have a government in place in germany. Guy who will be the winner this echo germany . Or france . Richard i dont think this is a zerosum game. Both merkel and mr. Schulz are keyed to get on with reforms with mr. Macron. That is a win for emmanuel macron. In germanyat brings and france together will be a victory for germany as well and probably for the broader you are area. Area ader euro broader euro area. That is everybody is a winner. Matt what kind of reforms do you expect them to get done if this works out well . Banking union is one everyone can agree on. Richard they inch toward having a euro area finance minister. I dont think we are going to get this federal europe that mr. Schulz was talking about last month. European reforms is two steps forward and one step back. Reform hee banking discussed is the lowlying fruit. Matt richard, thanks for a much. Thanks very much. Guy matt, this is a subject that we kicked around. A slew of major u. S. Businesses say they will give handouts to workers try to celebrate the republican tax bill. Theres a lot of new pieces on the bloomberg which is fascinating. I wonder whether or not actually while this may look like politics, there is more to it. It is verynk interesting and a little bit surprising. This tax reform bill has been painted my many in the media and certainly is disliked by your citizens because of concern it is only for the rich. Arguess a piece that many economists think that protects cuts actually work to the benefit of the workers. You are starting to see some evidence that maybe was unexpected. Workingclass america make it a little more of a boost from this in the form of thousand dollars bonuses for hundreds of thousands of workers, as well as 15 minimum wage payments for people who work at wells fargo. Very interesting things to think about this morning on bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. 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