Are at fault. We will take you live to beijing. Parabolic problems. Is, whichestion market could be next . And the winds of change. Andwable tax credit is safe the tax overhaul. We will ask investors, what this means or this business. That conversation at 8 30 a. M. U. K. Time. , firstets take a look off at equity Index Futures in europe. We have a little bit of a mixed picture. Direction a lot of here although we do see more redn on the screen than when you look at the equity futures indexes. We are getting continentale earnings. The outlook more important typically to investors than the trailing numbers. 1. 0 9 billion compared to the estimate of 1. 1 one billion euros. We will take that as in line. Net sales in the trailing quarter were 10. 7 alien, a little bit at her than the street estimated, 10. 6. Beenarnings forecast have confirmed and we will speak with the ceo later on in the program. Guy as we move to electric cars do we go away from these fast tires, the cost of fortune and do we go to smaller and thinner electric vehicle tires . That is the question we will have to ask later on. Is probably a fan of those big fat tires. The japanese is something to Pay Attention to. The mostticket is interesting story out of japan. We have seen the momentum trade in the nikkei which is going parabolic as late. We are going to talk to mark cudmore to get that trade. The aussie market on the front foot. Lets roll this off and show you what is happening around the world and give you an idea of what the picture looks like. Some of the risk on trade, risk off trade stories there. Thebond market them a flatter curve bond market, the flatter curve in gold. Hat continues to widen he juliette saly. Re is juliette republicans aim to release their tax proposal later today. Markll be a conceptual instead of detailed legislative text. Treasury secretary Steven Mnuchin stressed how crucial getting tax reform through is to the white house. To this is the president s most important domestic agenda item and we are going to get this past area did passed. December we will get it on his desk for him to sign. Guy the story she would have been talking about is p the fact pretiti patel is that patel is out. That will be something we will focus on. Take on wheree the u. , u. K. Is going at the moment. Brexite are focusing on throughout the program. Also a top story, the u. S. President s trip to china. Donald trump says china is taking advantage of American Workers saying that it is taking on fair advantage with unfair trade practices. Hisu. S. President blaming predecessors rather than china for the trade deficit. At a briefing which sought to 350 billion dollars of investment deals announced he declared he has very Good Chemistry with the chinese leader, president xi. Are going to tom mackenzie. How significant are these deals, is this a big number . The top line is 200 50 billion is a big number. Some of the deals, boeing announcing that it is signing a deal worth 37 billion dollars u. S. For 300 aircraft. Cal come is providing tips. We have a 43 billion deal involving sinopec. Others involved in infrastructure in alaskas well. More deals coming through over the next few hours. We are expecting. A note of caution on this number. A number of these deals are them or nonbinding. S some of these will help to reverse the deficit the u. S. Has with china. He said it was shockingly high and blamed on previous residence, previous u. S. President s and said he gives credit to the chinese for taking advantage of the u. S. Is how President Trump frame do this. Xi said the relationship is historic and the vision visit is historic. Many executives we have spoken to are waiting to see if that materializes. Many would say that it has become a more difficult place to operate under president xi. Thank you. Lets stay in asia. The nikkei has wiped out all of its games today, tumbling 1. 7 . This is triggering declines in s p futures and the euroyen moving on the back of this. The other markets, think the have anythingthey to fear . What is the reader cross . Is every argument previous care has not worked. There has been no real followthrough and ignore this. And alltemporary blip will be wonderful again tomorrow. This risk was highlighted yesterday. There are certain technical signs this is getting euphoric. It is not that there are any structural risks for decline ford the has been decline. Line is a nearly straight to. It forces the weak hands, all those people who are suspicious end up buying. The price action was negative. We saw the market up 2 . It reversed late in the afternoon. They were various reasons given. Most were tenuous and salespeople say stop, that is the explanation. We cleaned out the market and what it will do is remind this rally is not invincible. It does have some fragility. You can get correction. In the next few days you may see other markets suffer similar consequences. Youre in hong kong and not in singapore. Where do you see the biggest hits being taken, the biggest reverberations being felt after this dropping, the plunge in the nikkei . It leads the recent rally. Some of the best performances have been asian equity indices. Hong kong is vulnerable and the in india. Semsex this is a technical correction. We are looking for longterm decline but those markets are vulnerable to a pullback. You should know to that any is outperformed if we get wider risk aversion. They will be positioned deleveraging. Oil were s pan futures. Some of the commodity related indices have done well and they could also be vulnerable to a pullback. Matt thank you. Joining us from hong kong today. When we come back we will talk of earnings that have come out especially out of germany. A lot of dax companies coming out. Cfo andoined by mercks then speaking with munich res cfo. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. Imf miller in frankfurt. 50 minutes to go before the start of trading. We are getting a slew of earnings. Came out with thirdquarter adjusted ebitda. Beats analyst estimates and that is the line that a lot of experts look at. Its outlook for 2017 but sees the operating profit as a low end of guidance. Joining us from where the company is based is marcus kuna. The lowyou looking at end of their range, were you disappointed in 2017 . Marcus good morning. Recalibration of our expectations for the Performance Materials business in our q2 Earnings Call in august. Ofare facing a little bit different competitive situation in liquid crystals. Was the main reason why we were adjusting our expectations for Performance Materials but we said we would overcome the challenges, we will compensate this on the level of the group and keep our guidance intact and have not changed the guidance on for the group. Since august we have seen significant headwinds from currencies which clearly have developed much worse than we have expected earlier in the year. Given this challenge on top, we say that we still confirm the guidance but we will land at the lower end of the corridor. Matt you have some stiffer competition from newer players in the market in a couple of drugs. How much of a problem is this and how do you intend to make it up . Us this is not a bigger problem than we were used to over the last couple of quarters. Thee do not see that competitive situation has markedly changed. Inhave a tough competitor and we are exposed to price pressure especially in europe. We continue to manage. We have just given the recent Capital Markets the outlook that we aim to keep our base business so our business without any sales from the pipeline stable now until 2022. This is guy johnson in london. I want to take you back to the comment you made about the euro. I am looking at my bloomberg this morning at some of the ppp metrics. Undervalued, it should still appreciate significantly. On the oecd number it is 14 or 15 undervalued. What would of 15 appreciation of the euro which would take you back to fair value due to your numbers . Not publisho Sensitivity Analysis what currency fluctuations are doing to our numbers. We have relatively different exposure across the three businesses whereby the material andd be most exposed bolster actions positively and negatively. We have the lowest natural hedge. Sales are predominantly denominated in u. S. Dollars and asian currencies why while the major part of the cost bases euro. Have the cost space in the u. S. With various manufacturing sites and health care somewhere in the middle. Appreciate would further that would give downward pressure on our results. That would be a fact. Guy another quick question. The Consumer Health business has done very well. This is the business you are talking of offloading. Do these numbers change your thinking . Marcus not at all. Just to make it crystal clear. We do not sell the business because it is not performing well. We have said that we would be exploring Strategic Options because we think we might not be the best strategic owner Going Forward because we have set our medicines, we want to invest on our Health Care Pipeline and we believe given the current leverage situation not have enough funds Going Forward to invest into the business as much as we should to develop it to its optimal business potential. Top you mentioned at the of the interview your liquid crystals business and the issues you are having there. With competitors in asia. Mark makes liquid crystals for flat screen televisions. Is that a market you will need to readjust to in the form of when do you expect it to normalize, is this the kind of market you want to stay in . Our longterm plans for our Performance Materials division remain unchanged. Asia and liquid crystals will be very important markets for us. Solution of the problem will come basically from or has to come from the top line. If you think about our margin levels that we have an Performance Materials which is around 40 still, and furthermore, take into account that liquid crystals is significantly above average in terms of profitability within the segment. Then you will note that we would have not much air to breathe in the cost structure. We are very lean there with limited potential to counter the market induced challenges by further cost cuts. It is rather the story is behind revitalizing topline growth. Has been great to speak with you this morning. Thank you for spending so much time with us today, marcus merck. T the cfo of of natural disasters has made it costly for the industry. Munich the anr chart of re. Current price target and you have this Price Movement here, this short movement above and look how much we are seeing this gap emerging emerging. The stock is over its target. You can see this clearly, take a look at the moving averages. Here is munich re. The stock has rocketed into this 19 six. Trading at joining us now on the phone from munich is the companys cfo. Just how difficult a year is this going to be . We are satisfied about the Price Movement but there is a to of hope with regard stabilization market which we share and we are confident that performance is continuing. The outlook for 2017 and 2018 looks fair at this point. E said it was selling its portfolio to pay for claims. It mentioned valuation as well as being pretty toppy. Do you want to sell first . Joerg no. Policy a rather stable with regard to our asset Liability Management policy. Our assets are derived from the character of our liabilities and moves are not that drastic with us. We have a decent share in equities. And we intend to keep it. We see the consequences of the ofy low Interest Rate policy the Central Banks, especially of the ecb. We intend to stay with our parent asset allocation, more or less. Third biggestthe reinsurer in the world and you still expect a small profit after so many natural disasters am a could it be one of the costliest years in the history of the industry for everyone involved . What about 2018 . Is this owing to give you the chance to raise premiums and make a lot more money next year . Joerg we expect rising premiums. Closer to the events, the more and for the market we expect at least a stabilization of what was a declining mode in the last couple of years. Therefore we are confident but i would not exaggerate here. So it is still negotiations leveln parties on an even and there is shrinkage of capacity on the supply side. Markets are in very good shape. Matt is there still a chance for a fullyear loss in the event we do not have any natural disasters between now and december 31 . Fourthwe expect the quarter would show a normal result which would be if we divide our original target by 4, it would be 500, 5 hundred 50 million or so. This is not a prognosis. It is such a normal quarter, we would end up with a small profit as we said. Originalfrom our target but under the current circumstances, satisfying. Guy what do you make of the incredibly flat yield curve it at the moment and the lack of term premium that seems to exist . I look at the treasury market in the states and the term premium is disappearing. Joerg that is true. Assets are an enormous challenge in our assets allocation policy. We believe there is strongly in it is alsotion, geographic versification. Highly oriented to the character of our liabilities. That is what we can do. Also with regard to the duration , it is a very stable and reliable policy, somewhat. Thank you for taking the time this morning, it has been great to speak with you. The cfo of unit greek munich re. Futures are pointing to a flat story. What we have seen is a moment of momentum selloff in the nikkei. That is one of the interesting trades of the day. We will talk about some of the stocks to watch. This is bloomberg. Guy a minute to go until the start of castrating in europe this morning. Lets talk about where the bloomberg is pointing in terms of the fair values. At the moment, it looks like we could see a mildly negative start. The market look like it on the from form a little bit. Underperform a little bit. That is a factor. Flat at the get go. So many numbers. A market of stocks rather than a stock market this morning, matt. Matt one of those stocks is, bank. Is commerce not able to lift its revenue in the third quarter. 587,000 new corporate clients. It wants to have 2 million more by 2020, so it is well ahead of its goal to do that. I will talk to Stephen Engle in just a few minutes in frankfurt. Guy looking forward to that conversation. We are seeing weakness coming through in the ftse 100. 75. 26. Very much a sort of story at the moment surrounding brexit. It does seem to be setting the tone for the u. K. Markets right now. You can see what is happening with the ibex, down. 1 . Let us show you what is happening in terms of the movers. Im going to move this on my big screen, and then we can take a look at what is going on. Moving. The banks are you can see that on the upside this morning. Cocacola out of reese. Greece. F im going to move this to index points to pick up some of the big names. Novo nordisk, daimler, and vodafone. Energy rising. They are with numbers out this morning. On the downside, but us show you what is going on here. Gfa which has gone exdividend this morning. We can pretty much ignore what is happening. That is the story on that one. Let us change that but to percentages. Jen mathis trading down a little bit. Erickson showing weakness as well this morning in terms of the movers. It is earnings season, which continues to be the dominant theme throughout this week. Graph tim,m good morning. Are they delivering on what investor expectation looks like . Absolutely. Generally, q3 has been a continuation of a very strong q1 and q2 earnings seasons. Europe is a little bit more youd, particularly when look at european financials. It is a little bit more of a mixed picture. When you look at where the surprises that have come are, it is fairly reassuring in that this quarter in particular has been Energy Materials that have really delivered. It is coming from a low base of expectations, i suppose, but when you see the moves in Commodity Markets and you see that translated into more robust earnings, it is a good sign, i think, at least for the next quarter or two. You are seeing buildup and earnings in tech as well. Theking to the notion that narrow breadth in markets is at least being driven by strong earnings. Guy the market has gotten narrower and narrower. This is from the other side of the atlantic, brent versus the ratio of stocks to oil. You can see this underperformance youre getting coming through your. Brent is the blue line. There. S the ratio down how much potential do you think there is in the Energy Sector . We have upgraded our views in the last week or two because there is this gap between an oil picture that is being given by stronger demand. For a long time, you had the imbalance between supply and demand favoring supply as a consequence of shale production and slow oil cuts by opec that did not really match quota levels. That is starting to change with demand. Chinese oil demand is absolutely through the roof. The demand side of the equation has changed, and yet equity valuations have not accounted for that. Commodity currencies have not accounted for that in the last three to six months or so. Guy i want to draw everybodys this. Ion to the stock is beginning t give us a few signs of may be how the day is going to progress. We had a massive gap lower on the stock. Let me show this on the screen for you to highlight it as well. We were indicated down sharply, but now getting confirmation coming through. You can see it more reasonably. That is the cap. The stock is down 14 , 15 this morning. It back, take it back a month or so, you can see this volatile period. This is the second gap we have seen lower. The first cap was on the tax credit story. Now, we are getting another one. This stock has gone from kind of mid 5, 5, 6, 7, trading in the midfour. We have lost it in the space of over one week, matt. It is going to be interesting to talk to a little bit later. It has missed the target by a long shot. We will see if that 15 drop that we are looking at there is justified. Im going to get back to him from state street. Talk to him about earnings. We have