Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20171018

Regulations. Going public. Saudi arabias oil minister says a full aramco ipo is on track for 2018. A very warm welcome. This is bloomberg daybreak europe, our flagship morning show. I am anna edwards. Matt and i am matt miller in berlin. We are getting headlines of fourthquarter net sales at 2. 1 billion. Also seeing fourthquarter gross margin around 44 . Just a couple minutes ago, came out with this net sales for the Third Quarter. That is the reporting quarter. 2. 45 billion, beating the estimate. Margin,arter gross 42. 9. It is the forward numbers that matter and make a difference. Fourthquarter outlook of sales for 2. 1 billion, gross margin of 44 , and it sees fiscal year net sales at least 25 higher than they were last year. Anna. Anna other breaking numbers. Chemicals and coatings company, akzonobel, reporting numbers for the Third Quarter. The Dutch Company exiting the chemicals at the moment. It has been a tough 12 months. We had a profit warning for them which adds to the complexity of interpreting these numbers. On the face of it, they look to have underperformed expectations. Some of those expectations have been brought down because of the previous profit warning. Fourth quarter ebit well below the estimate. The revenue number for the Third Quarter, coming just shy of estimates as well. The are talking about future of their Chemicals Business and a supervisory board. Akzonobel reports changes to the supervisory board, making dominations to the board. They are talking about the separation of the Chemicals Business. They say that is on track. They continue to be significant there continues to be Significant Interest in that part of the business. We will have plenty to discuss when we talk to the management of the company. The ceo joins us for his first interview of the day at 7 00 a. M. U. K. Time. He was brought in deal with chemicals. He finds himself as the ceo, trying to dispose of chemicals. We will talk about that and special cash dividends. What has beenout going on in china. Lots to discuss in terms of the chinese story. Let us remind ourselves of where chinese stocks have been. In volatility in many fields 2017. I have got a chart which shows, on the bloomberg. This shows the tightly controlled nature of the chinese stock market in this particular conference. Increasingly, in 2017, we have not seen Much Movement on this particular index. In the past, the shanghai compass and lost more than 3 during these conferences and in the five days after the conferences. We are looking at sue whether we will get any clues on deleveraging and the like from the chinese this week. Some we have already got of movement in asia. Take a look at the msci a littlefic eking up bit, putting gains that to the alltime high we reached a couple days ago, continuing its upward trend in asia. You see the s p 500, emay futures emini futures. We are 9. 5 hours away from that. And then you see the pound dollar trade down a little bit. The Real Movement happened yesterday. 1. 3188. 120 fivewn to a handle. The movement after the Inflation Numbers came out of the u. K. And after connies testimony as well. Let us get the first word carneys testimony as well. First word news with Juliette Saly. Juliette chinas president has warned of severe challenges. Hile laying out a roadmap xi jinpings comments came as he kicked off a twice a decade hisering expected to cement influence. In a speech that ran more than three hours, he declared victory over many difficult overdue problems since he took power in 2012. Withindevelopment is due a great situation. Our prospects are bright, but our challenges are tough. Juliette donald trump has claimed that his tax reforms would be worth 4000 per year to the average American Household. He asked for help in getting legislation passed by years end so he could give the country the best Christmas Present. Donald trump said he plans to choose from among five finalists to be the next Federal Reserve chairman, and will make his decision soon. According to a person familiar with the process, his selection will be unveiled before he leaves for asia and hawaii on november 3. U. S. Senators in both Political Parties to say they reached agreement on fixes to stabilize obamacare just two weeks before americans start signing up for 2018 coverage. The twoyear deal would allow crucial subsidies, potentially insurance premiums for those in the program next year. The Trump Administration said last week it was cutting off the payments, and on tuesday, the president called the agreement a shortterm solution. European Union Countries are seeking to create their own preparatory work on a future relationship with the u. K. This year. According to officials, the council of the e. U. , which represents member states, will start working with the European Commission. Hope aliveuld keep for theresa mays government as brexit negotiations remain stalled. Global news, powered by more than 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Anna thank you very much, Juliette Saly, with the latest. Let us check on how that is moving around the market. Sophie kamaruddin in hong kong. Sophie. Sophie we started the day with muted reaction, but it was the open of chinas Party Congress and xi jinpings marathon that dominated the market today. Bearing in mind beijings directive, chinese stocks are snapping a two day drop, on the losing end of the spectrum. Xinese bond held steady as spoke of reformed Interest Rates and forex markets. Elsewhere, the momentum petered out. The nikkei 225 looking relatively flat. It is looking to snap an 11 day rally. A quick check on equity highlights in asia today. We can pull upf the board to show you the equity movers. We have drugmakers, green stock climbing in china and hong kong spoke of reforms. Health care was the bestperforming sector this wednesday. El scandale ste continues, that stock is under pressure. It has attracted the attention of the u. S. Department of justice, plus kobe steel is said to have hired mizuho to advise on a real estate scale. A last look at Crowne Resorts slighting 4 in sydney, losing the most since march. This amid whistleblower allegations. Sophiehank you, kamaruddin. A few threads on the u. S. Conversation. U. S. Senators say they reached an agreement on fixes to stabilize obamacare just two weeks before americans start signing up for 2018 coverage. Talks have been extended into 2018 as key obstacles emerge with canada and mexico rejecting what they see as hardline proposals from the united states. Joining us now in london, kathleen hunter, and with us for the hour, the head of Asset Allocation and market research. Very good to have you with us. Tax, the after, the nafta, tax, border wall. What is the significance of this deal . This is not trump saying you can keep obamacare. That is not the story. Kathleen it is a bit interesting because, this is Congress Stepping in to say we will give a twoyear stopgap solution to the problem trump created last week when he decided to cut off these reductions, subsidies that are given to lower income people to help them Purchase Health obamacare. Nder the idea was that these were necessary to help people, help encourage people to participate in the program and make sure they are going to be getting insurance. The system only works if people are getting insurance. Trump moved to undo those at the end of last week on thursday night and now, come with is stepping in to say we are going this. Einstall you have a republican president doing one thing and congress doing another. Republicans are saying the white house is saying that this is something that could provide some time for a more longterm solution to the problems in obamacare, but it is still a bit odd. In a it gives me deja vu little way. Let me ask about the fourth round of nafta talks. Wrapped up yesterday, but all sides agreed to extend the timeline. What is going on with these nafta trade talks . Kathleen it is interesting. They are going to extend the timeline. It looks like there is the u. S. Is taking a hard line in the talks and that is not leading to some Significant Holding up some significant breakthroughs in this. It is worth noting in a broader context. We saw the president last week moved to decertify the run nuclear deal. Nucleartify the iran deal. It has been any number of International Agreements with which trump has been looking to kind of either renegotiate them or scrapped them altogether or scrap them altogether. They are not able to meet their deadline they were hoping to meet. It seems significant. Somewhat significant. Continuing to move the peso around. Kathleen hunter joining us with the latest on the stateside news flow surrounding the president. Let us talk to christoph, at macro research. Good morning to you. I have been listening to these various news agenda items, if you like, from the united states. Do you have expectations for what the Trump Presidency can deliver . Is that part of your Investment Case at the moment . Guest it was a part. It was a part of our Investment Case. Unfortunately, we do not believe that it is the Trump Administration who can do this in the long run. What we need is not Obamacare Repeal but tax cuts to boost growth well above 2 . For the time being, both are subdued. Subdued growth, subdued environment. Because the is monetary policies are running out of stimuli. On the other hand, we need a strong fiscal boost. Anna you think we need a fiscal boost . The potential for the tax cuts ae diluted because we have cost of capitalism that is low. You have these factors in the u. S. Economy, and therefore, tax cuts would not have the same fiscal boost a fiscal boost would not have the same positive as it might otherwise would have done. Christophe what makes the Economic Growth system in the long run is to make it in a virtual cycle. We are not in a virtual cycle because corporate investment, productive investment is too low. The rate is low today, the revenues growth is a real os well. It is because the growth is not high enough. Anna and there is potential . Christophe we need to make growth sustainable in the long run, and the best way to do it is to make sure that growth and andstments are around 10 , when investments go up 10 , you are sure to boost Economic Growth. Matt listen, i understand, christophe i understand you are not optimistic the Trump Administration can deliver this, and really, nobody we talked to is, frankly, optimistic that the Trump Administration can get you the key reforms that are necessary. Nonetheless, u. S. Stocks continued to hit alltime highs. Every day, we have a new alltime high in the u. S. So are you buying u. S. Equities, and if so, what is the reason . Christophe the reason is because the Earnings Growth is despite the Economic Growth, it is in a virtuous economic cycle, opening to us. ,rowth is around 10 this year and we expect 10 again next year, and if we achieve this economic Earnings Growth, then we have leeway in equity markets. The situation is exactly the same for european markets. Growth is subdued, inflation is subdued, including in japan, but on the other hand, Earnings Growth is very high because corporate margins are very high as well. This is thanks to low growth in wages. The phillips curve is broken, and this is why it is higher today. It is very low in the u. S. Matt i understand your Monetary Policy concerns. As it concerns actual investment activity, what would make you sell your stocks . What is going to end this rally . It is so long in the tooth. Christophe we expected continuation of the expansionary economic cycling. It is eight years old, expansionary as i said, investment productive investment is quite low compared to the previous economic cycle. The issue is a very simple comparison. You should look at the accumulative of added value of march 2009 compared to what we had during the 1980s. Economic growth. In the lovee leeway story with the expansion of Economic Growth. Anna the love story. Yes, you can say. Christophe donay stays with us on daybreak europe. Coming up, could islands be the key . We talked through the latest brexit developments, next. Later, an interview with the akzonobel ceo after the company missed thirdquarter earnings estimates. It is his First International interview since taking up the role. Plenty to discuss. This is bloomberg. Matt good morning. It is 6 20 in the morning here. 4 20 in the afternoon in sydney. A gorgeous picture of the opera house. Sydney, wherer to Juliette Saly has gone back home and brings us the Bloomberg Business flash. Good morning. Great to be home. The securities and Exchange Commission is preparing to give wall street a reprieve by telling firms they will not have to overhaul their operations to comply with you european rules governing Investment Research according to three people familiar with the matter. Expected to provide formal assurances it will not object if brokerages rate out the cost of Market Analysis rather than bundling it together with other services. Saudi arabias oil minister says the kingdom is still aiming to complete both international and domestic portions of the aramco ipo next year. Declined tolih answer questions on whether chinese investors are interested in buying stakes in the state owned oil giant. To callos calamitous deal in mozambique keeps coming back to haunt the minor, grappling with another african misadventure. Fileduthorities have fraud charges against the company. The former ceo and excfo violated saying they inflated the value of the call assets. It intends to vigorously defend itself against these allegations. Has left the board of three companies after making racist comments in his monthly newsletter. The publisher wrote that the u. S. Would look like zimbabwe if it had been settled by black people and not white. A frequent commentator on markets is bearish on what he called contrarian views. That is your Bloomberg Business flash. Anna. Anna thank you. Juliette saly in sydney. European Union Countries are owning to complete their preparatory work on a future relationship with the u. K. This year, a move intended to keep hope alive as brexit negotiations remain strong. Ireland is considering pushing for guarantees that no border will be reimposed on the country as the price for allowing brexit talks to move ahead. Y, still withna us. Your thoughts on where this will go . This,u someone modeling talking about the possibility that we get a no deal situation here . Christophe exactly. It is a very difficult situation for much longer. Two years, as expected by probably politicians today. To make agreement, to make sure the u. K. Are able to continue to deal and trade with the rest of europe, it will take probably a decade. It is a long story and painful echoes in the meantime we have some doves regarding the capabilities of the u. K. And the rest of europe to make agreements. Our side, we are quite skeptical regarding the capabilities of the u. K. To deal in a soft way with the rest of europe. As a consequence, we are quite negative on the Economic Trend for the u. K. Economy. Inexpect a slowdown both consumption and in corporate investments. For the time being, the u. K. Economy is quite resilient. Anna with a rate hike into that. Matt. Matt exactly. You can be negative on the u. K. Economy and want to buy gilts or the pound. Is that the case, christophe . Christophe it is absolutely the case. And just to complete what i was just saying one minute ago, what we expect is a slowdown in the u k Economic Growth, and probably the u. K. Slowdown in the u. K. Economic growth, which probably should be the weakest at 1 . What we expect is a sharp rise in the inflation rates, well above 3 , as we can now experience since a few months. This situation should probably continue for a while for the u. S. Economy for the rest of this year and probably for next year as well. And for this reason, the pressure is still there on the equity, u. K. The assets, including u. K. Equities. Anna what happened to the pound than . Chart is showing wage growth stagnating, Unemployment Rate coming down. We get an update later on today, btv 134, if you want to put it up on the bloomberg. How week does the pound get how weakesnt havewea does the pound get . Christophe we expect weakening sterling versus the euro. Our best forecast for the sterling versus the u. S. Is compared to 1. 20. We expect a weakening despite the correction behind us. Now, the pressure is diffusing in the rest of u. K. Can assets, including potentially the u. K. This is the reason why we are, globallys begin, quite globally speaking, quite negative. Anna Christophe Donay stays with us. Our next, the sec is set to tell wall street it will not have to overhaul operations to comply with the european rules. We will explain, next. This is bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. 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. Anna this is bloomberg daybreak europe. 6 30 a. M. In london. We see the dollar against the yen at 112. A new edition of daybreak is available on bloomberg. That is how you find it on the bloomberg. Lets have a look at the stories that have made it into todays edition. The cover story focuses on the new rules, said to win a reprieve. They will not have to overhaul regulations to comply. According to people familiar with the matter. Most exciting imagery i have seen to illustrate a story which has many in our audience excited. Matt i did and every time we put out the story our clients do genuinely care about this dry regulatory story. Lets talk about what is going on in china, a little bit more exciting to a rudder audio broader audience. Xi sees a reinvigorated sector driving growth. This is part of his goal to contain the economy, no longer looking for a soft landing but continued slide in china. So far, he seems to be doing quite well. Than he spoke for more three hours and no need for any cough medicine to get him through it. Matt focuses on the u. K. Story ahead. The u. K. Jobs report data which is key to the bank of england rate decision, Bloomberg Intelligence says the strength of the numbers may convince officials to hike wage gains. We have the inflation data yesterday. Hunting of excitement as we head toward november. Lets get more details about that. Will not have to overhaul operations to comply with new regulations. [inaudible] by there is plenty of audience interest. Give us the back story here because this has to do with the 2 andct between mifid existing sec rules. I am glad you have got that up there. I cannot emphasize how significant this development is. There is a conflict between the u. S. And europe. The aim is to provide transparency and one big part is they will have to start unbundling research costs. Providing transparency and the issue is in the u. S. This withoutnot do registering as investment managers. They get all kinds of extra oversight. There has been a questions over how u. S. Firms will do this. No doubt regulars have been talking to the sec. He said this is an issue that we are trying to address because they had a meeting with 40 Asset Managers and banks who are saying we are concerned about the cost of research and the conflict between the eu and u. S. We will provide these action letters to firms so if they do unbundle the cost of research the sec will not [inaudible] about y can comply without worrying about the sec. Matt as far as the cost of research we get these eyepopping numbers from the sel l side. How does that stack up, how do the banks compare on costs . We had news from goldman that they will charge for basic research. Them they will charge for an allyoucaneat package. It is very well to provide numbers of cost but what does that cover, we talking about the which the byearch sites say is not a lot of used to them or are we talking about tailored access to investment analysts and that kind of thing that could come at a premium and we are seeing a lot of the embers come in from the sell side. Over whether we will see a race to the bottom with the cost of research. Regulators are looking at this, there was some reports that the fca was looking at this. They do not want Research Firms to a so low that the an inducement. That would be past the point of having transparency and fairness and competition in these markets. We are talking about the sell side. Questions about whether and how pay for the will cost of research. We are getting news from the buy side whether they will absorb the cost of research or pass it on to clients and this is something we are keeping an eye on as well. Anna thank you very much, joining us with the latest on that story and the bloomberg televisions focus program on what regulations mean for banking and investment. Friday 8 00 p. M. London time. This is something that you can catch up with when you are able. Allocation andet management still with us and the something that is keeping many in the Financial Services industry working out what it means for january. You have got many internal conversations going on about this but in terms of what it means for the sector many people talk about the wave of m a we have seen in the sector and says this is part of the reason because of the cost of research. It is rising sharply in terms of legal respects and everything is [inaudible] the margins for financial sectors. For this situation but we could trends which have started the past years. Especially in the sell side sector. And and now the buy side sector is affected. Smaller companies, the smaller players should be eager or acquired by the bigger. About people getting Investment Advice from countries that are not as heavily regulated, do you expect this to move the needle as far as people, banks, investment houses moving actual locations because they are overregulated in certain areas . Guest no, for the time being we do not observe any specific move. What we observe is much more about the situation in the sector. It is everywhere in switzerland or france or the rest of europe, broadly speaking including the u. K. We do not observe any specific move for the time being. Anna thank you. Are a bloomberg customer you can watch on the tv function on your bloomberg. You get the regular video stream but you get the charts of the functions we are using and you get to influence the conversation by clicking on the ask the guest to question button. The question button. The question of whether or not it would the public was an doubt the last few days due to reports. The Saudi Oil Minister described the plans as ontrack. On track. Bute are doubts about this we are hearing that it is intended to go to the public and not to private investors as had been reported over the Sovereign Wealth Fund had been reported over the last couple of days. Yusuf it is not clear quite yet. It is on track for 2018, then announced that would happen. Reporting suggested could be delayed out to 2019 and the other question was, will there be a cornerstone in the International Component of the ipo which could be the biggest ipo ever in terms of valuations. There is no clear answer on that front. The view that it will go ahead remainshe location unclear, we understand there are conversations with quite a few venues, everything from tokyo to london to new york. This could be a 5 listing if you assume a 2 trillion 100ation, youre looking at billion dollars. There is a lot of commission and fees at stake for the investment banks but this is a crown jewel of the ambitious reform program. This is tied to the countrys execution risk. Anna we have seen the oil price moving higher and we talked about the violence in iraq and how that has been one of the drivers. Goldman sachs citing geopolitical risk as the driver for prices. We understand that a lot of the Oil Facilities and the hasflow from the oil fields not been as badly effective infected. Were looking at the u. S. Crude inventory. Important to to be keep in mind. Also jumping to the bloomberg because they have a fascinating technical indicator. Thes the golden cross for view ti, the 50 Day Moving Average looks poised to cross above the 200 Day Moving Average. You could ask me when is the last time it happened, it happened in may 2016. We were looking at an 18 price gain in one month. There is continued commentary from the likes of iran about a possible extension, another usual variable to keep in mind. Matt my second favorite technical indicator after the dead cross. Debt cross. We have plenty of big guests from the oil world. T 10 30 a. M. U. K. Time and again taylor joins us at 3 00 p. M. U. K. Time. If that is still a thing. When youre traveling to work tune into Bloomberg Radio live on your mobile device or on dab digital. Is about to talk about the u. K. Economy ahead of the jobless data. Anna there are people using that technology. It is still a thing. Chinas president warns of severe challenges and more reforms. We are live from beijing. We will bring you an interview with the axo novell ceo. After that company missed earnings. A lot to discuss. This is bloomberg. Anna good morning from london. 645 in london and in new york it is 1 45 a. M. Suggesting a little [inaudible] in trade. Records being hit again yesterday in session in new york. Lets get a Bloomberg Business flash. Heres Juliette Saly. Saudi arabias oil minister said the kingdom is still aiming to complete international and domestic portions in the aramco ipo next year. The plans are still ontrack but declined to answer questions on where does whether chinese investors are interested in buying stakes in the state owned iron ore giant. Coming back to haunt the worlds second biggest miner. U. S. Authorities have filed fraud charges against the gileny and the ceo and cfo elliott claiming they inflated the value of coal assets acquired in 2011. The intent to vigorously defend themselves against the charges. The publisher of that the u. S. Would look like some bubbly if it had been settled by black people and not white. Faber, a frequent commentator is known for bearish and what he calls contrarian use. That is your number business flash. Matt thank you for that. Jinpingpresident she touted the progress made during his first five years of rule. Assure thech, xi party that the future is positive that laid out some of the many challenges facing the country. One must clearly see that our work has some perfection. We also have [inaudible] facing many difficulties and challenges. The problem of inequality of growth. The quality and efficiency are not high enough. Haidi lun joins us now from beijing. What were some of the takeaways from xis long speech . Haidi it was three hours and 20 minutes it ended up going for it and then some. It was that, expansive, sprawling speech and he seemed very relaxed and took on an emboldened tone. One of the key themes that struck out and stuck out, he talk about china standing up to the rest of the world and presenting this vision. By 2015 he wanted china to be the most powerful and demonstrate the nose most National Power in the world. A bold statement when it comes to what he sees as china future chinas future role. There was a focus on socialism and marxism, socialism with chinese characteristics and spoke about putting the party at the core of every decision making, every policy for china over the next five years. It was largely delivered to the domestic audience. He went through what we already know saying that they would drop barriers when it comes to foreign investment. Saying they want to open opportunities and deleveraging would continue, that was the key thing we were watching, that reform would continue and china needs to seek a better quality of growth, not just high growth. A lot of the same messages and a street a hint of structural isms and the question is their appetite for these reforms and that is something we do not have an answer to. Anna we are listening out for clues. One of the key issues facing the Chinese Government that we talk about anna daily basis . Haidi the delivering campaign depending on who you ask is coming along, baby steps, the latest report from s p seeing some progress has been made to cut debt. Bloomberg intelligence explaining that debt to gdp will search by 30 right 2022. The tension lies in this idea of growth and stability and structural reforms. Some of these reforms are going to result in shortterm pain and a slower pace of growth if they want to set out a longer term pace of growth. One thing we did get from the speech was a reference to medium and high level rose being maintained. That seems to suggest to us looking at it that 6. 5 gdp target will not be abandoned just yet. We are getting thirdquarter gdp Growth Numbers out tomorrow. It is expected to stay at the 6. 8, 6. 9 level. There are many upside surprises but the question is that window to put through these painful reforms is starting to close. Anna thank you very much, haidi lun joining us with the latest on the congress in china. Joining us is christopher lee. A very good morning to you. The 20 first of september you took ratings action with regards to china, s P Global Ratings downgrading on september, citing some of these concerns we have in discussing. At the time, many people said that perhaps it did not have the impact on the market you might have thought. Chinese authorities cracking down on excessive borrowing in the Financial System and their keep on they are piling on debt. We look at the fundamentals which is the dead can the debt continues to increase. Overall it is still increasing and had to gdp continues to climb. This we think the debt burden will create economic and financial risk for the system. What do you think they should do about that, what do they need to do to get there debt levels down and keep growth on a rising trajectory . Guest there are a few things, they have to need to rein in the fed level at the state owned enterprises. When we talk about the china debt problem, it is the corporate debt, and it is the state owned enterprises debt. The supervision and oversight of Financial Management and set specific targets for leveraged levels for prices that will be a way forward to [inaudible] is to reduce spending on investments. We have a window here this year, the growth from consumers and consumption has been much stronger than expected. That creates room for the government to reduce spending which is on infrastructure which is debt funded. Anna is the move into a consumer driven economy, is that happening quicker than you expected . It is progressing as we expected. It is contributing more than 50 growth in gdp. The rebalancing will mean that the economy is moving toward less dead intensive, part of the economy and the reduction in spending on infrastructure should help ease the debt ridden. Burden. Matt well your outlook improve . Will your outlook improve . Christopher corporate debt growth is slowing it the next two years are still going to be fairly high, traveling around 10 to 12 but after 2019, it starts to slow down and taper off. We are reasonably comfortable that some of the government policy to tackle debt will work overtime but it will take some time. The emergence of state owned enterprises, this is fairly promising in terms of stabilizing financial the they areecause merging strong players with weaker players. That is going to help in terms of liquidity. I think it is an interesting metaphor, slowing but still aggressive right now. That is how you look at this corporate debt problem. Christopher what we mean by still aggressive is if you look isthe debt mix, the overall growing. Where we have seen the fastest growth is the Household Debt. Household debt will grow 20 every year. It is the fastest sector that is piling on that. Anna i am sure you are watching the political relationship between the u. S. And china because of what that could do to trade relationships. Changed its has tune on china and manipulation of the currency. Saying that no Major Trading partners manipulative currency to gain advantage in trade. It moved in a direction that would help correct the bilateral trade imbalance with the u. S. Line how pivotal is this conversation in terms of what happens with chinese currency . Christopher the chinese currencys strength has surprised a lot of people. Capital control has worked. Firmes them a form footing to go back to the treasury and say we are not manipulating. Us. thanks for joining appreciate it. To point out this amazing chart we have, we have such great charts that you can access on your bloomberg. Showing this chinese Household Debt problem that christopher is talking about. 9489 if you want to ask is that ceoour bloomberg, Akzonobel Terry van likert joins us for the first interview of the day. They missed estimates. Details next. This is bloomberg. Matt chinas challenges. President xi warns of severe obstacles as he kicks off the twice decade coming is Party Congress. We are live in aging for that. Beijing for that. Challenge is also tough. Catching up obamacare. U. S. Senators reach a deal to keep Health Subsidies days after trump says he was cutting them off. The president says he aims to deliver tax cuts this year. Lets give our country the best Christmas Present of all. Massive tax relief. Matt regulatory relief as well. The sec is said to plan to tell wall street it will not have to overhaul operations to comply with mifid 2 rules. Going public. Saudi arabias oil minister said a fuller aramco ipo is on track for 2018. We will give you the details. Welcome to bloomberg daybreak europe, our flagship morning show. I am matt miller in berlin. Anna i am anna edwards in london. Lets talk about aching news, it has gone 7 00 a. M. In london. We includingorporate reckitt benckiser. Thirding their numbers, quarter comparable revenue falling by 1 is the red headline. The estimate was for an increase of 0. 5 . They faced a trio of challenges, the ceo had been hit by a triple whammy of issues slowing the company down. There was a cyber attack that the Company Forecast in july, consumer health, they had a field not act in the foot care range, they had been trying to convince the shareholders in the company of their potential interest in acquiring the brand and they warned that may fall in the second half months after they paid 17 billion to the infant formula company. Lots of things to talk about in terms of Market Positioning and they are saying the Third Quarter will be affected i known issues by known issues and challenging markets. Their fullyear sales growth of 2 , that was the previous target we got. We will see if they leave that impact intact. A quick look at the futures on where we expect to be on the european trading day. A strong session in the u. S. , more records in the u. S. Equity market. The is one headline that u. S. Session was range bound. The Peoples Congress taking place finally underway in china. Atare expected to be flat the start of trade, not going anywhere in hurry. A mixed picture for European Equity markets. Lets take a look at the risk radar. Asiapacificfic index. We do see some trends continue because the msci asiapacific index is close to an alltime record. It just hit one a couple of days ago and it is headed act up there. S p 500, many futures up slightly. Very slightly. Issidering that the s p 500 also at an alltime record high. I do not have to say alltime record high. I can say record high and that would encompass the phrase. You see the pound trading at 1. 81. We had gilt yields gilt yields down after the inflations came out of the u. K. Hang in line with expectations although costs were higher than the market was looking for. Here we see bond futures bund futures, moving out of its range from 45, 46 we were saying over the last few weeks and months. Oat futures rising as well. Expect to see the yield come down. Lets get the bloomberg first word news with Juliette Saly. Juliette chinas president has warned of severe challenges while laying out a roadmap to turn the nation into a leading global power by 2050. He kicked off a twice a decade Party Gathering expected to cement his influence into the next decade area in a speech that ran for more than three hours, xi declared victory over long overdue powers as since he took power in 2012. Is slight butt our challenge is tough. Juliette donald has claimed his tax reforms would be worth 4000 a year to the average American Household he asked for help in getting legislation passed by years end so he could give the country the best Christmas Present of all. Donald trump has said he plans to choose from among final five finalists to be fed chair and will make his decision soon. His selection will be unveiled before he lives leaves for an asia and away. I will be making the decision over the fairly short period of time. I like them all. U. S. Senators in both Political Parties say they have reached agreements on fixes to stabilize obamacare two weeks before americans start signing up for coverage. It would allow crucial subsidies to Health Insurance to start flowing again potentially lowering insurance premiums. The Trump Administration said last week it was cutting off the payments and on tuesday the president called the agreement a shortterm solution. European Union Countries are seeking to complete their own preparatory work on a future relationship with the u. K. This year. According to two eu officials familiar, the council of the eu which represents memory states will start working with the European Commission as soon as this month on the key points. The move would keep hope alive for theresa mays government even as negotiations remain stalled. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Thank you for that. Lets get an update on the markets in asia. As traders woke up this morning to trumps tax speech, we got reaction to that but then we looked to the china Party Congress open and president xis marathon speech. The hang seng fluctuated, lower by. 8 of 8. 8 of 1 . The region looking mixed, the nikkei closing higher. The best winning streak since the summer of 2015 and a six day of gains for sydney. Stocks are trading from a record. Checking on some stock movers in asia on this muted trading day, we will take a look at chinese drugmakers. Xi spoke of developing health care in china. Health care is the best performing sector on the msci china index. Continued l has scandal has continued. It has attracted the attention of the u. S. Justice department and it has hired [inaudible] to advise on the sale. Akzonobel has missed estimates. Profits are forecast to be in line with 2016. Johnny nash joining us now is joining uss ceo now is the companys ceo. Good to see you here. Can i ask you about the task ahead for you because this is a business that has been through many challenges and big changes at the top in recent months. How do you go about rebuilding trust with shareholders, what is the most important task . The most important task for shareholders is a sides the dialogue that you stepped up massively, to explain what our plans are and what our future steps are. The other step is to deliver. The Third Quarter is a mixed message, one encouraged by the volume momentum and affecting a positive turn on markets. At the same time the Third Quarter as you have seen from a variety of industry announcements, everyone else is in the same boat create a number ,f natural disasters hurricanes, earthquakes, all sorts of items happening that have made it a bit more muddled in the Third Quarter. The best way to get shareholders back on board is to show our plans and get granular on how will will get to the 2020 targets and showing the steps to go in that direction. Execution, your chemicals unit is something shareholders are watching closely. You had said you had interest from corporate bidders. How soon do you expect to give investors results . Ierry we have financed meeting to askgm for formal approval. A legaldo it for demerger. We were on track which is a complicated process to get a big chunk of the company basically independent. We have seen in the prephase lots of interest from both strategic players from private equity companies. In that sense i believe as we get into the process as soon as we have approval from shareholders that we will be able to execute the process and it is theres going to be some buzz around what will be the right ownership. Sale, ifyou go for a you would prefer to go to an Industry Player or private equity owner, do your labor unions have a preference, what would push you in one direction or the other . Thierry i think what we will look at is accommodation of what value offered but also the assurances of what new owner is planning to do with the business. It is not to the identity of the higher, it is what the what is the best overall package to ensure the future continues for stakeholders. Anna you have expressed confidence that ppg will not come back with another bid for the business. Why are you so confident, are you speaking to ppg . Not part of our management meetings. Publiclyny that is traded, if there is an offer you have to assess the offer on its merit. My point is it is not part of our agenda, not part of my Management Team meetings. Makeve our hands full to sure we deliver on our 2020 plans and that was what i was indicating when i made those statements. Today you said youre not going to meet your profit goals that have been previously announced, you previously have given a profit warning. If you continue down this path, doesnt at some point a 20 billion bid look like a better option for shareholders . You have to put it in the industry complex. The industry has changed so the the first after quarter including akzonobel. You see specifically for the eurobased companies so Exchange Rates going down, run material prices going up. That is why i am encouraged to see that happening and we see that volumes are starting to grow in what is typically a flat market for everybody. You have to look not only at what we are doing, you have to put it in the context of what is the health of the markets you are operating in right now. Very confident, we announced stepping up because i cannot talk every time around external events, that is around Cost Management and pricing and continuing the momentum of growth in markets to return targets. Anna what conversations are you having with elliott management, what do they want to see from the business . It has been published on the stand still with elliott. Conversations are in line with what you would have expected with any major shareholders. Do withee much as we other shareholders elaborating what we are. Elliott gives their input on what they suggest on doing but it gets to a neutral to positive dialogue as you would expect with any other major shareholder so there is no real specifics. Turnarounduch of a , inou see in prices Exchange Rates, you cannot obviously for to natural disasters. How can you be so confident, very very confident with these things that are so difficult for you to control . Correct. That is there are a couple of elements, we cannot foresee natural disasters and maybe that is a good thing to some extent. If we go to what we can control, this is the first quarter, rum materials started to increase. Protection take marine shipbuilding is down. We are looking at the five elements of performance coatings, volumes are up and pricing is starting to go up. We are keeping pace with materials and starting to gain ground. I am frustrated about how slowly that goes but we are on the right track create when i look brand paint business, our , the most major brand in the world, you see it was impacted by pigment pricing, what we have seen and local pricing, that we have made the turn and prices are going back up create you have to scrape away a layer of regional differences, price mix regional Exchange Rates, etc. We are encouraged i us make the turn if you take away all the events. If you look at what is happening on the chemical side but also urto paint and coatings, o warehouses, our logistics, look how we can leverage and standardize our organization, i confident we have lots of tools in our own hands in addition to Market Trends to bridge that gap and reach our 2020 goals. Matt thanks for joining us this morning. Appreciate your time. Akzonobel co looking to execute his strategy. European Union Countries are said to be appearing for future trade relationship with the u. K. All 27 . We will discuss brexit and the pound. This is bloomberg. Matt it is 7 20 a. M. In london and 8 20 a. M. Here. Youre looking at the Brandenburg Gate with the sun struggling to come through the clouds. Lets get a check on the market. We have equity Index Futures that are little changed. You can see totally unchanged on the 10 year german bond as well. At a 36, are fairly low considering what we have seen recently. Not really moving and you have dubai stocks, also very little changed but with a red arrow. European Union Countries are did ig to complete read on to long . Anna you carry on. You started so you finish. Matt eu countries seeking to complete preparatory work on a future relationship with the u. K. This year, a move intended to keep hope alive for theresa mays government even as exit negotiations remain stalled. Mark carney has reaffirmed that the bank of england is close to its first u. K. Interestrate increase in over a decade as brexit fueled inflation hit 2 . Joining us now is jordan rochester, number fx strategist. Did the Inflation Numbers move the needle because they were being in line with expectations . Jordan they did not. 3 just forecast of like it came in on cpi. Been a few cpi releases where we had upwards surprises and yesterday was not that. Part of the Market Reaction was the cpi but it was the testimony select committee and mark carney. When it comes to inflation you have to ask yourselves why inflation had is lois the bank of england expects and also the market. They have a lovely survey which looks at the economists on the street, the same set that said the bank of england will not hike until brexit is over. That same table of economists at around saying there is going to be a rate hike in november. We were early on that gun. Most people said we were crazy. Here we are looking at november for a rate hike and everybody else agreed. That table if economists are saying very different things. The second hike comes around may inu have a heightened line with what the bank of saying. Economists are seeing saying the opposites. Anna did they say you are crazy . The conversation is around november and you have been talking about that for a long time. They referenced the economists and that we will not get another hike until 2019 but the market is pricing in something in 2018 so what is it you see that you think other economists are missing . We have 50 basis points by the end of 2018. The market is listening to what the bank of england is saying. It is tied with inflation. The same set of people were saying no hike next year, theyre saying unemployment will rise. Because eventually it will not get down there quickly. Is whyalking 2 and that they have the hike in november, one of the reasons why the current forecasts to pick up toward the end of that forecast, that is them saying the market is not pricing enough. The next question is whether they hang onto the asset purchase of qa. And like the fed we start the market is pricing in the slightest possibility of that but not talking about it enough. Anna a quick word on breaking news we have coming across the bloomberg. We are hearing that we have crossing the bloomberg that guy elliott is standing down fighting rio proceedings. A lot of news surrounding rio. Guy elliott has stood down as the nonexecutive director coming through just this morning. Lets jump back into the conversation with jordan. I was wondering about his take on the pound. I know you are long the pound and youre looking to it go to 140 in the shortterm to mediumterm. Why the bullish outlook on sterling question mark jordan you have 140 and that is our forecast for the year and yearend. The times and tables in terms of the bank of england that is the november rate hike in the should be positive for the pound. But we doyet to hike talk about it like it has already happened. The next step will be the economists adjusting themselves saying maybe banking guidance will lead to another rate hike. The data might surprise positively. You have higher labor markets if employment stays low and keeps creeping lower. On the eu side in terms of the summit, nobody i spoke to, no one in the press or the media was talking about any progress at the summit. It really is about december. Anna we will focus on that. Thank you for joining us. Guy elliott is leaving the board of shell with the excfo over at rio. We will continue to update you on the rio story. Facing charges over a 4. 7 billion call calamity. Watching stocks and rio tinto is one of those. This is 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. Guy good morning and welcome. You are watching bloomberg markets, this is the european open. Your first trade when it comes to cash equity. We will bring you the first trade of the day. I johnson in london. Matt miller is in berlin. What are we watching this morning . Focuses on reform. How should we read it . The sec is said to be