Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20171222

Anna a very good morning, everybody. This is bloomberg daybreak europe. Lets talk about what is in catalonia and what impact that is happening on the markets. The euro down a little bit. Catalan separatist parties taking back control of the regional parliament. A very bad performance by the peoples party. Night for the local opposition. This doesnt necessarily take us any closer to independence, but the spanish Political Drama into used to unfold. Continues to unfold. We will watch for the yields on catalan bonds. The broader equity picture looks positive. A little bit in the asian session. We had some pretty threatened trading. Friday before christmas, fairly thin trading in the asian market. The 10 year yield is unchanged. Recovery. E treasury a little weakness in the yields. Billion, the strongest demand there since august 2012. Some people in the markets looking to protect their portfolio from inflation and perhaps to dual to do with the tax deal. At bitcoin. Oking it has fallen since mondays Closing Price about 26 . Ive got a chart here. 6798 shows bitcoins underlying price in white. Here, pink and pale blue, you see the futures. Still priced higher than the cash price. The spread continues to be positive. We will see how that asked today and throughout next week as bitcoin takes a dropping. It is only up 1300 yeartodate. Anna only. Must be taken in that context. Lets talk about some him and a. A company that discovers and develops new drugs. Yta. E to buy ign is total transaction value 1. 7 billion. This is unanimously approved by the boards of both companies. Its a fairly friendly offer. The bloomberg first word news update. Senate hashe u. S. Given final approval to a shortterm extension of funding runningthe government for three more weeks while shoving a raft of fights into the new year. The measure moves to donald trump for his signature. It will maintain levels through january 19. Give the additional funding for pentagon expenses. Has given the u. S. Criticism for its choice to recognize jerusalem as the capital of israel. Such as theies u. K. , france, germany, and japan all supported the motion. Said they would remember the day. Approved ainet has record Defense Budget. The nation looks to bolster its abilities amid nuclear north Koreas Nuclear threats. Japans first longrange missiles are on the shopping list. It marks the sixth increase in a row. Saidks Prime Minister has britains Financial Services should be optimistic about brexit talks despite eu chief negotiator ruling out a special deal. Counterpart,olish theresa may said the openness to a deal is encouraging. Some say there should be a tailormade deal for the u. K. Peruvian president has survived an impeachment effort. In the opposition dominated chamber fell just short of the two thirds vote theired to find the man Prime Minister morley incapable. Morally incapable. You can find more stories on the bloomberg at top. Near the end of the trading day here in asia. The nikkei closed up. The hot and same closed up. 3 . Australias market closing slightly higher as well but just off of highs reached earlier in the week. Some of the stocks we have been watching. Despite the positive turn on the nikkei there have been a lot of selling in japanese stocks. A drug company has plunged the most since 1988. Tsingtao, the japanese brewer aside he dumping at stake. They are up almost 7 today. Anna proindependence parties have won back control of catalonia and handed the Prime Minister of historic defeat in yesterdays regional elections. Separatist groups claimed 70 seats in the 135 member assembly. Theas it restores majority they lost previously. Addressed, president supporters from brussels. The catalan republic beat the spanish monarchy. The most important thing now is to start a dialogue because thats the only thing the Prime Minister never tried. If they follow the wishes of the catalan people, we will find a solution. Maria joins us from barcelona. This was meant to reset catalan politics and be able to move things forward. Rajoyuggesting this suggesting is in the higher the crisis. How is this Parliament Going to function . We are back at square one. If you look at the results, the proindependence parties to claim theged most votes and seats. They wanted to keep control of the parliament and they manage to do so. They are probably going to go back to the idea of independence. This is a parliament that is going to struggle to even function. Force in the parliament is going to be against independence and vocal about staying in power. So we are back to square one. Reason this election was called was to reset politics and instead it has created a bigger mess. Matt maria, this is a personal blow to Mariano Rivera a. Know mariano rajoy. Where does this leave him and the pp . Maria this is a disaster night for rajoy. He was criticized for calling the election so early. Many in his parlay thought it was a early election. The proindependence movement carries a lot of momentum. You should do it later on. This choice backfired. The people of catalonia have ejected him and his party. Its a bad night for him and his party. They have been thinks thing wished been extinguished in catalonia people catalonia. People have said they dont want me they dont want to and they dont like you. They have to find a different way to move forward with the same political actors and a relationship that is credibly toxic. This a question about would have been different if we had a Prime Minister in madrid who had been with quite the baggage. The catalonian leader is in a silent brussels and he comes out quite well from this. What now for him . Can he go back to spain . Ria we are talking about a defeaof all a personal t for rajoy. But its a victory for push them mont. Puidge a great night for him. Yesterday, he pulled a spectacular result. He overtook his political rivals on the poor independence front and he is saying he should be back and he is going to want to form a government. The problem is his legal situation. Sedition,igation into rebellion, misuse of public funds is still going on. The minute he gets back into spain, hes going to be arrested. The legal situation still looks difficult but its undeniable that the people in catalonia still like him. Anna maria, thank you very much. Maria taddeo with the analysis in barcelona. Joins uss vamvakidis from bank of America Merrill lynch. We see a little weakness in the currency today. It showed itself to be resilient to political turmoil. Does that remain the case under this kind of pressure . This news from spain should be affecting the euro but as you suggest that it did not have a sustained impact so far. I think this will remain the situation. The situation in catalonia is extremely, wicked. The genie is out of the bottle. But the main issues for the euro has to do with the ecb policies thethe ecb is considering strong euro zone we have this year. Spain remains at ease. We should keep this in mind. If the situation gets worse and effects the debt in spain, this will make things much more complicated as the ecb support is weakening down the road. But for now its ok. Anna ill bring up the bond markets. We have catalan on deals here. Biking durings the challenge to madrid in october. Then it came down. Putting into one side, is there a risk the market has been too complacent around the story . Any input nations and the implications it could have . Thiss the market believes will be contained. Logic will prevail. Is still is, the ecb buying a substantial amount of spanish bonds and also, globally, there is a strong surge. This continues supporting spanish paper. This trend is much stronger but also one could argue it forces market complacency. The thing that is worth following down the road, given there are no easy solutions. If i look at the comparative valuations for stocks around the world, european stocks really are lagging. Here you see the ftse is lacking. This is a concern about the politics . The decentralization and population populism trend around europe . Thanos you could argue this is a case. Positioning about a year ago was short in eurozone equities. After an extent, having to do with the fact that the market has starting seeing the end of qe and hikes, everything contribution. Also there is not a government in germany. There are still lots of questions about whether the eurozone is going to introduce some of the key reforms that are needed consistent with the macron agenda. The risks in the eurozone as a whole should be considered after the alkyl the french elections. , head ofnos vamvakidis strategy at bank of America Merrill lynch will stay with us. A gift with the u. S. Government extending federal funds. Its a stopgap measure but another deadline is coming soon. What happens next with the u. S. Government shutdown . Plus the bitcoin. Goldman sachs is said to be starting of a trading desk for Digital Currencies. With j. P. Morgan follow suit . We will have a conversation later. This is bloomberg. Its 6 19 in london, 7 19 in berlin. We are looking at singapore where it is later on in the afternoon. Lets get the business flash from juliet. Juliette thank you, matt. In a deal valued at 2. 2 billion, the acquisition of you pp austria is subject to action. Ry it allows the giant to come limit its Wireless Network in the neighboring country. One firm is becoming more couple of cryptocurrencies. Up aan sachs is setting trading desk to market Digital Currencies such as bitcoin. They aim to get the business running by the end of june if not earlier but they are continuing to try to work out Security Issues. Says erichairman schmidt is stepping down. Alphabet says schmidt will become a Technical Advisor while continuing to serve on the board. A colleague said he has offered business expertise and a clear vision for the future. Boeing is monitoring a potential embraer. Th it will stop short of a full takeover. The controversial founder of papa johns will step down as ceo. He will hand the reins to the chief operating officer. The move comes less than two months after he inflamed and over nfl players kneeling during national anthem. The company is a sponsor of the leak and he said that their theests were mishandled by league and hurt sales. The Company Later apologized. Anna thank you, juliette. Been. S. Government has given a reprieve with the senate approving a shortterm extension of federal funding, allowing it to run for three more weeks. Current levels of spending can be maintained until january 19. This is the latest twist and turn in the budget story. Kicking the can down the road. Thanos vamvakidis is still with us. To one side at the moment, as we often do with these funding debacles in the u. S. , they seem to be kicked down the road. We wait to see when the taxi will be signed. What does this mean for inflation . This is chart 3696. This a fiveyear tip. They did well. How strong will inflation get and should we make a link to the tax deal . Thanos even without tax reform we would be very likely to see high inflation in the u. S. Next year. U. S. Dollar has been very strong in this late stage of the economy and inflation has been choices. By a number of if you look at the fiscal stimulus, this would push inflation even higher. Fed hasnt been hiking despite low inflation. This is all price in the markets. I know you been having some client conversations. Of what the dow has been doing. Another day, another achievement. Its own closing record 69 times. The here and money, essentially. How much higher do we go on u. S. Equities . How much is already priced in price then . Equities have loved to tax reform but fixed income markets have ignored it. Stretched sois not i think there is more potential. However, what is really surprising is the fixed income market. Responding asy the tax reform has been approved. We believe tax reform is a big deal and will lead to stronger dollars because of more fed hikes. And also because of repatriation flows which are likely to be substantial. Not only next year, but looking forward. Companies from now on will not , they will taxes have to they will be repatriated more. The curve flattening has been interesting to follow. It shows that we are looking at a five 10 spread wider thats been since the financial crisis. Are you concerned about this . In regard to the u. S. Economy . We believe the herbal steepen this year. The fed has been fighting the market but this is the first year that policy has been right in the market has been wrong. The market is pricing only to hikes. Expect more. We expect us to force the curve to steepen. We are going to have more supply next year which also contribute this direction. What you expect from the dollar in 2018 . Thanos we expect the dollar will strengthen. We see eurodollar going all the way down to 110 and dollar yen to 122. We expect three or four hikes. Expect that the market will start expecting a patch ration flows. Back in 2005 we had the homeland investment act, the Dollar Strengthened substantially and that will happen this year as well. Matt Thanos Vamvakidis didier duret Thanos Vamvakidis of bank of America Merrill lynch will stick with us. Moynihansr brian views on bitcoin. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Is bloomberg daybreak europe. Light trading volumes in the asian equity session. Thats typical of today, the friday before the holidays. Its been a busy week for brexit news despite the proximity to christmas. It began with the u. K. Prime minister outline her plan. Barnier outlined his hardline position. The 300 year old argument between spain and britain over gibraltar could derail talks. Theresa may encourage the city of london to be more optimistic despite the eu really out a special deal for Financial Services. Johnson is in russia as britain attempt to win more friends outside the eu. Or at least to talk frankly, perhaps, to the russians about what they are are are not doing in the political realm of the rest of the west. Thanos vamvakidis is still here to talk about the week in brexit. Where do you stand on the pound right now . Lots of news has happened. Some of that has been pound positive. We are bullish. We were bullish for this year. There is a lot of noise, and this is not going to be smooth, but what we have seen is that logic prevails. This is what we expect to happen next year. Next year, the driving forces the transition deal. We are expecting it early in the year. This is important because it will kick the can down the road. It means brexit will take place three years from now. We can discuss about the final outcome, but a lot of things can change. This will be bullish for sterling. It has been good so far. At least compared to what many people have expected. Anna will we see a wobble . Thanos the u. K. Economy has been doing much better than expected. You can go up to 140 or 145. Anna wow. Back to the future. In between here and 145, how much is the pound traded on the daily brexit news . It seems like every couple of hours we get something new, positive or negative. How much money can you make trading the pound all day long on brexit headlines . The best approach has been to buy dips. When they Start Talking about trade, its going to be messy. Its going to be difficult. Think, if there is a you will have a lot of time for this negotiation. Time, i thinke the euro zone and the u. K. Are willing to compromise. They will probably be willing to compromise down the road as well. We have taken a positive view so far. We believe this will continue being the case for next year. Anna he suggested that the bank of england will hike through that. Given what you have described, given the volatility, the bank will put that to onesided hike anyway . Thanos given that the economy well,ovided performed the policies are very accommodative. The most accommodated in the data group. You cannot find this day because of all the certainty uncertainty but if you make a transition deal and by time, there is no reason to keep rates so low. In this case, the bank of england will continue hiking. Anna if we get to 140i might consider taking holidays in the United States again. In thisback with you shortly. With us on the program. If you are a bloomberg customer, you can watch the show using tv and that means you get your hands on all the charts. You can use the charts and functions we show. Thecan influence conversation by clicking on the ask the guest a question button. About the slump in bitcoin. It has fallen today as much as 15 in asian trading, extending his losses to more than 30 days more than 30 . As one of wall streets biggest firms seems to be getting on board with the cryptocurrencies. Goldman sachs is setting up a trading desk to make markets in digital currency, such as bitcoin. To get the business running by the end of june if not earlier. Ceowhile, bank of America Brian moynihan spoke to bloomberg about bitcoin as a currency. Take a listen. When you talked about Digital Movement of money, one half of the money move by consumers of bank of america today, one half. To anonymous currency, thats a different question. Thats a policy question of if we want an anonymous currency of size and scale and so and scope. You think we do . Dont think we do. I think the reason why the 100 bills the largest foundation of bills to make money harder to move. Thats a lesson a lot of economies have learned as they brought the denominations down to improve the transparency of the economy. Find, andy to track, see the money move. You find all kinds of interesting things. Thats important for Law Enforcement and other types of things. The speculation, i will let other people are flecked on it. The idea of digitizing money is not new. The wire system is a digital transfer. Whats exciting is when you can walk around bryant park out here , to be looked to tap your phone or Something Like that as opposed to carrying dollars, those are exciting things. To get that last mile electron a five, thats exciting. Mile electronified, thats exciting. Take coins, currency come in down, and make the ,bility to do it verifiably know your customer and your payer, thats a big thing for the industry. We could pay them to reprint the money rather than have to cycle back in and out because was cheaper to move it around. Partnersur contracting in a be happy that thats the way it is. Its a tremendous challenge but one that i think is met by the current means pretty well. Were going up more and more tools to drive it. That was bank of america chairman and ceo Brian Moynihan speaking to bloombergs david westin. The stalk a little bit more about this. Lets talk about this with eric lam. He probably knows that bitcoin is not anonymous currency. Nothing is more anonymous than u. S. Dollars in cash. Drugs are bought and murders pay for with u. S. Dollars than maybe any of the currency in the world. And there is some worry about the use of this currency of the darknet. Whitey think that is . Why do you think that is . The think thats from origins of bitcoin where he was built by people who want to be off the system. Thats the fundamental tension. You have the stalwarts, the original people who created and used bitcoin and they wanted to be libertarian and away from the system. This whole year you have seen a mainstream institutionalization of bitcoin. We seen the introduction of futures. Goldman sachs today getting involved. Its a legitimization of bitcoin , its a some people good thing for bitcoin but for some other people, thats anathema to the whole point of bitcoin. Kind of a fundamental conflict that really hasnt been resolved. I dont know the solution there is. Interesting to see how that develops. Its been a phenomenal year for bitcoin. The percentage gains we have seen and the acceptance of futures markets in the United States. What else is affecting todays price action . We seen a big runup and bring into the fold of bitcoin but what else is playing on the price . Eric in talking to some people in the industry, the ideas we are seeing that really strong increase this month, to almost 20,000, and theres a little bit of concern that there is panic selling at this point. One person termed it a reality check for investors. ,he question with bitcoin is the thing that people keep going back to, its really unclear how to value bitcoin. How do we know when it is expensive . Today maybe theres a little bit of a reckoning with investors couple dayst a before christmas. Maybe some people are cashing out . There could be all kinds of reason for selling. Because there is not one mutually agreedupon valuation of bitcoin has made it so much more difficult to gauge. What we are looking in the last couple of days a lot of microcap docs microcaps microcap stocks chaning their name. Sland ice tea changed their name to long island blockchain and jobs in value. Jumped 280 percent after changing their name. Thats one of the most read stories in a bloomberg. Asia reporter eric lamb there. The reporting on bitcoin. Still with us is thanos affectsis, head of g 10 strategy at didier duret at. Ank of America Merrill lynch as much as ceos like to poohpooh the currency, they are lining up to trade the asset. Fad is shortlived qualm a shortlived, a fad . Most likely we are at the beginning of something that will be very important in the future. One question, is as a bubble . We dont know. Its very difficult to know a bubble before it burst. Its very volatile. People are buying it because it goes up. Thats what happens with bubbles. The second thing is at what point will investors get involved . This is not far from happening. This will perhaps be the next stage. A lot of people will say it doesnt matter that much. , some it becomes systemic banks will get involved. Anna thank you very much. We will return to this many times during 2018. We have breaking news. Southairman of lotte, the korean conglomerates, has been sentenced to a suspended prison term. He gets four years. The backstory on this one is that the latte group lotte gr oup chairman was facing charges of breach in fiduciary duty. Its a global hotel operator, retailer, food maker. Prosecutors wanted 10 years. He got for. Southowned businesses in korea under pressure on many fronts. That is the latest on that story. Up, from the storm of the emissions scandal to strong comeback in 2017, the european auto sector has been one of the best performers and will discuss their outlook for 2018. Later, more the catalan election was separatist groups again the majority of seats a clip seen rajoys party. We will talk about spain. Anna this is bloomberg daybreak europe. We head towards christmas and the holidays. 6 48 here in london. Lets get some final thoughts from Thanos Vamvakidis. As we wind down and looked towards 2018, lets talk about big calls. Explain yourself. We have a view that Monetary Policy will continue diverging next year and the s p would be on hold. After the french election, we finally are starting to see some outflows from switzerland. We believe this will continue. Is hiking, as the ecb is preparing the end of qe, the s p will relax, be comfortable, and see the fruits swiss franc weakening. Where do you see the euro this year . With the ecb pulling back, letting off the accelerator a little bit, where you forecast the currency . Shape for see a new the euro. We see eurodollar weakening to 110 because of the impact of u. S. Tax reform on the u. S. Economy due to repatriation flows. But then we see it strengthening two 119 because of the end of qe and ecb starting hiking in nine 2019. The short weakness has to do with tax reform, which we believe is still underpriced. Matt thanks so much for joining us. Thanos vamvakidis from didier from Thanos Vamvakidis bank of America Merrill lynch. Boeing is considering a potential combination with a brazilian company. For more, benedikt kammel, joins us on set here. Are we talking about a full take over here . A joint venture . The likes of which we saw with airbus . Thats the part we dont quite know about. The Companies Remain vague about it. We are hearing this might be a joint venture and not if full takeover. The reason being that the brazilian government is looking at this keenly. Investors are excited but the brazilian government want to take a close look at it and it might be difficult for them to stomach a full takeover of one of their crown jewels. They are also a sizable military player in brazil. For you is coming to take them over, that would be very difficult. Round outwould this boeings portfolio . How much is this a response to what we have seen elsewhere in the industry . Its a somewhat unusual deal for boeing to entertain here. It would take them into the market of smaller planes. They dont make the big widebody jets. They make plain to see team 35 to 130 people. City hoppers that take you from say, berlin to london. Regional jets. Its a highly competitive segment. You have a lot of other players. Theres mitsubishi. We saw airbus try and stand here. A lot of movement in the industry right now. Reacting to what airbus did and doing something here themselves. I misspoke when i said cessna. I meant bombard ea. Thats a hot story. Airbus is going to produce those in alabama and get around the tariff. Is this a strike back from boeing . It feels that way. The choreography of when the talks may have started isnt quite clear. We dont know whether they started before or if airbus jumpstarted the talks. It seems the latter is the logical move. Boeing was unhappy about the airbus move. They said that this might jeopardize their smaller 737. Maybe this away for them to say, if we cant push back that deal, we will try to protect that flank ourselves. Matt thanks so much for joining us. Benedikt kammel is bloombergs editormanaging business here in berlin. The european Auto Industry has weather the storms of collusion industry collusion scandals. Recovery in the latter half of the year has driven autos in the top five sectors in the stocks 500. They are up. But with the push towards electrification, how will europe fair . Lets ring in mike dean to talk about this. The sector has been robust since august. Considering the Diesel Scandal and how ongoing that is, what is the valuation outlook for 2018 . Thats interesting. We have had some Strong Performance in recent months. In terms of actual valuation multiples, the european auto sector still trades on a significant discount. Trading on about a 45 discount. That compares to an average of about 30 . Anna still prized for crisis . I think so. Profitability, we are having record profits for many automakers but that hasnt been reflected in valuations because of uncertainty caused by technology, particularly electronic vehicles and autonomous driving. Its impacting the traditional business model. Anna ive put up this chart. You can talk us through it. One of the key Industry Trends . Many of them result in more r d spend. Thats correct. Although electronic vehicles and economist driving will crave the headlines, they will have little impact on topline sales but they are causing a significant increase in r d spending. It could hit 35 billion euros in 2018. Hing thats a 20 increase over 2016. Your of 60 this year. In f1. D quite well this is going to encourage other auto brands to spin off . Lamborghini is undervalued. Thats correct. We talked about the traditional european automakers being a low valuations. Times. Is trading on 16 thats compared to the likes of product or hermes. It would be encourage for lamborghini. They are expected to double profits over the next couple of years. The brand alone could be worse 7 billion euros. Worth 70 billion euros. Thank you, mike team. Up next, we will be back to catalonia. Separatist surge. Proindependence groups gain the majority of seats, eclipsing Mario Morales party Mariano Rajoys party. More details next. Matt good morning from berlin, this is bloomberg daybreak i am matt miller. Anna i am anna Edwards Edwards in the city of london. These are todays top stories. Proindependence parties restore their majority in catalonias parliament, the people party take a hammering. Anna u. S. Lawmakers passed temporary funding to delay a Government Shutdown for another three weeks. Matt and goldmans crypto strategy. Said to be building a trading desk for Digital Currencies, while bitcoin drops below 14,000. Good morning, welcome to bloomberg daybreak. Our flagship morning show out of our new london headquarters. I am joining anna on this prechristmas week out of berlin. At thegive you a look futures trading on the last day before the holiday session. Take a look at what we are expecting. Not so positive, although not horribly negative. Ftse futures down. 25 . Cac futures down a little more. The real impetus or enthusiasm from the tax reform has cooled off completely. Investigators are seeing something off the table in order to finance christmas presents . Anna one explanation, isnt it . You have seen the selling in the cryptocurrency world. On the risk radar, we are around one eight of a percent on euro versus dollar this morning. That ple are taxing tacking that to what we have seen in catalonia. Something of a victory for the separatists. A number of those parties doing well, but also a colleague pointing out in madrid, doing well too. This is a party that is in spanish unity. That clearcut picture moves us closer to independence, necessarily, then we were in october. Muted reaction in the euro. Msci ac asiapacific up a little. That flowingtle of into the equities market in asia. ,he 10 year yield, unchanged 2. 48 . Not far from 2. 5 , where we were this week and that did marc a substantial move in yields on 10 year treasuries. Auction fascinating. You thism a news for last trading day before the holiday. Have reached an understanding. They are making an officer, the 3. 2e values the business at billion pounds. Details coming in on this. Operator in businesstobusiness marketers and business to consumer. Internet gaming, a move from ladbrokes, which was only put together. What are we seeing in the market . Matt the bond market just Getting Started now. Forill look at the futures an indication into how the cash trades are going to turn out. The futuresup board, we can see the bund futures up slightly as those futures you could expect to see a little selloff and a slight rise in yields. We have seen a real rise in yields the last few days. 0. 41 , from at low of 0. 3 even a week ago. Asd futures pointing down, our boat futures. Treasury futures unchanged. Lets go to singapore for the first word news with Juliette Saly. China has signaled it is ready to back another round of United Nations sanctions that will exports of fuel to north korea. That is according to people familiar. The u. N. Up Security Council is expected to vote on the fourth resolution against north korea in 13 months in response to a missile test last month. Japans cabinet has approved a record Defense Budget of about 46 billion as the nation looks to bolster its capabilities amid north koreas growing Nuclear Weapons threat. A third layer of Ballistic Missile defense and japans first longrange missiles are on the shopping list. Onget for april was up 1. 3 the previous 12 months, marking the sixth increase in a row. The u. S. Senate has given final approval to a shortterm extension of federal funding to keep the government running three more weeks, while shoving a raft into the new year. The spending measure heads to donald trump for his signature and will maintain levels of spending through the january of 2017. It funds missile spending and other pentagon funding. Criticism of the United States , thenition of jerusalem nonbinding resolution passed 1289 with or deny nations abstaining. U. K. ,lies like the germany and japan supported the motion. Will haley said america remember the day when United States was singled out for attack. Theresa may says britains Financial Service should be optimistic about the top brexit talks amid Michel Barnier ruling out a special deal. Theresa may said his openness to a deal on services was encouraging. She also cited comments by italys Prime Minister last week that there should be a tailormade deal for the u. K. As evidence that other eu leaders are open to carving out a Smart Trading relationship. Has survived embraer kuczynski has survived impeachment when there was not. He two thirds vote he has been accused about lying about dealings with a company at the center of the biggest Corruption Scandal in latin americas history. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Pretty good and to the trading we hear and the regional index on track for another monthly gain. 2 . I finished higher by hong kong in late trade looking good. We did see a switch out of the large cap stocks in australia. January 28t shy of 2000 eight highs. A big cell in samsung shares. Other stocks we have been watching, the pc maker acer jumping in taipei, a threeyear high after it announced a turnaround in its operations. These are two japanese drugmakers which have fallen significantly due to setbacks on the drugs they are working at. Eisai working on an alzheimers working on ann eye condition. Both of those eating asked more questions and falling substantially in the japanese session. Anna Juliette Saly in singapore. Lets recap that an end a found out on the Gaming Sector in case i was vague. In a dealng landbroke valued at 3. 2 billion pounds. 0. 1 for one ordinary shares. This is the online game buyer. Lets get to one of our top stories centered around the independence moving in catalonia. Proindependence parties have won back control and handed rajoy a defeat in the regional election. The groups claim 70 seats in the 135 Strong Assembly to restore a majority in they lost in october when rajoy ousted them. Reporters were addressed from exile in brussels. The catalan republic beat the spanish monarchy. The most important thing now is to start a dialogue because that is the only thing mr. Roy never tried. Never tried. If they follow the wishes of the we will le, anna this was meant to reset catalan policy. A defeat really for the leadership in madrid. Oor mario know mr. Rajoy also fueling support for enos. How will parliament function . Is a very messy situation because on the one hand, the actual winner of the election was a processing party. Clearly there are people in catalonia who did not like what they saw in october and who wanted to reset the clock on politics. That will not be enough to form a government. What looks likely now is the proindependence parties will be able to form a government and the parliament, because they managed to cling onto the majority. The only reason the election was called was because rajoy wanted them to lose control of the catalan parliament. It wasll not happen, but a messy election. That is what you get as a parliament that on the one hand will be controlled by proindependence forces, but the biggest force in the parliament is going to be a very vocal processing party. It is a difficult situation and we could get stuck in a side call where independents just doesnt go away. At the same time, it is difficult to see how the proindependence party moves on with their agenda because the government of rajoy will still be in control of the region. About theare talking overall winner as far as individual party results . I think they are 25 of the seats. Lost eight of its 11 seats. Absolute rubbing. What does this mean for the pp . Could they see a bigger position on the National Stage because of this victory . Is a great point. They could, and it comes to highlight what a disaster night it was for the pp and roy. Back when he announced the election, people within the pp said it is still an early election. We should probably wait until the dust has settled and he decided to go with the early one. It backfired on him, his party came out last. The catalog people have sent a clear message to the pp, we dont like you. The risk for the pp is it disappears as a political force. It is also a bad situation for rajoy. He is still in a minority government and it looks like it will be a difficult year to get the Budget Approved and fighting on two fronts. A minority government in madrid and the situation in catalonia is still stuck in the proindependence tension, with a government that still may be led to proindependence demand. No doubt, some votes having to do with a separatist movement and others cast as a verdict on rajoys more general government. Anna thank you. , oneng us in london on set who lends an investors perspective. Good morning. Lets talk about what we have seen in spain overnight and with the catalan parliament. I have pulled up this 1993 chart on the bloomberg. It shows the underperformance of spanish stocks versus the rest of europe as we see the politics unfold. To thehis doesnt stick meat here asset classes, there are assets that do move on this story. But we should not overestimate the Political Risk in the situation because more or less, what we have seen in the vote is a normalization of spanish politics because it was the initiative of the spanish government. Of course they will be dialogue ing the negotiation, but it is within the framework of the constitution. Probably, we have seen underperformance going back to the market and underperformance of spanish stocks because there was so much chaos within spanish politics, but now it is going back within the frame of spanish politics. It is maybe a contrary in opinion, but maybe it is the probably probably the end of the underperformance of stocks. Be that, does there have to the end to the separatist push . They could be emboldened white what they have achieved. Whatis battle course with madrid wanted, but they had a good night, the separatists. They could try and push for independence once again . They will go for renegotiation of the autonomy of region, autonomy. It will be within the frame of spain. Not a spanish brexit, if you like. Matt i wonder what you think about the stability of the euro, the stability of European Equity investments, european debt in spain,se concerns amidst the concerns and austria where the far right government getting slapped with article seven. Does this lower the valuation on European Assets . Didier i think there is still a Parliament Permanent Political Risk premium in european stocks. It remains, but what we have to keep in mind is the recovery we have seen in europe is really takesedented and precedence over the Political Risk. That is the most important thing for the equity market. Earnings have been recovering very nicely. There is a positive Capital Expenditure dynamics that is more important than the political environment. , abn amroer duret Private Banking cio will stay with us. Point itsng at the drop is accelerating bitcoin, dropping below 13,000. 6021. This shows a percentage gains losses in one day. Today, percentage drop is the biggest we have seen in the last 12 months on bitcoin. The biggest drop of 2017 happening on the session before christmas. Maybe bitcoin investors need to cash in to buy those toys. No, santa brings the toys. Maybe bitcoins just want to cash in for tax purposes. Down 18 , falling as we speak. The u. S. Government efforts assessed shut down, but only a stopgap measure. How long can it keep operating like this . We discuss kicking the. Anna later, should businesses be optimistic about brexit . Seems to minister think so, especially for Financial Services. We will look at why. This is bloomberg. This is bloomberg daybreak europe. 7 20 in london. 8 30 with matt miller in berlin and many places beyond continental europe. Lets check markets. Futures suggested weaker at the start of trade. Perhaps the result of tensions around catalonia. Markets getting their head whether this will make a sizable difference and whether this is because it doesnt necessarily push us closer to independence for catalonia, but a good night for Pro Independence parties and a less good night for rajoy in madrid. Lets get a business flash. Juliette Deutsche Telekoms tmobile austria unit agreed to apply liberty mobiles austria division in a deal valued at 2. 2 billion. The acquisition is subject to Regulatory Approval and the closing of the deal is not expected until the second half of next year. It gives the german phone giant a landline business to complement its Wireless Network in the country. One of wall streets biggest firms is growing more comfortable with cryptocurrencies according to people with knowledge. Goldman sachs is setting up a trading desk to make markets and Digital Currencies like bitcoin. The aim is to get the business running by june if not earlier. It is still trying to work out Security Issues as well as how it would hold the assets. That is your Bloomberg Business flash. Anna juliette, thank you. Moving to the United States, in connection with what we were talking about in the last conversation. Spanish 10 year bond yields block. G out of the perhaps tension due to the n story. The u. S. Government has been given a reprieve with the senate approving a shortterm extension of federal funding, allowing it to run three more weeks. Current levels of spending can be maintained until january 19. It provides 4. 5 billion in emergency funding. Didier duret, abn amros Private Banking cio still with us on set. Inking the can down the road the funding story in the United States. Baker picture, how significant is the tax story for you in the u. S. . Is a big deal, but it will lead to Dollar Strength next year. The fed will be about to move higher, inflation is coming. What inflation story are you telling at the moment . Didier there is a cyclical inflation coming out, but not dramatic. The curve is pretty broken in the u. S. It is not the case in europe. You have very low unemployment in the u. S. , very little foritivity to the tension inflation. What is important for inflation is not so much the weight, but really the unit level cost. That is where inflation is for capitalanies and expenditure is growing, so i think it is very solid. From that perspective, it will tame the pressure on inflation. Anna to what extent are you looking to protect yourself from inflation . This is the outperformance of treasuries, we saw that in yesterdays session. They are a proxy for government safe bonds and if you were to buy some form of bonds, tips is one of the things to do. They have outperformed, but probably in the tips market, the inflation boost we can expect next year. You think about u. S. Stocks versus european stocks . More highlytainly valued. The stocks 500 is trading at a higher valuation than the nikkei, which is trading at a higher valuation than the stoxx 600. Why are european stocks the least valued of the three Major Regions . Stocks benefitn consider andremium to the european environment. This riskminished premium this year, but there will be a residual risk premium for europe. U. S. , theres to the is more horsepower to be expected on the u. S. Economy. We are seeing a revival of the Capital Expenditure, which will have a lot of multiplier affect. , itsew tax environment very broad basis, so we can expect growth in the direction the nextleast for quarters in the u. S. , which is higher than what we expect in europe. It can provide a little boost to the u. S. Dollar and going in the direction of 115. U. S. , theyeld in the are willing to digest the 1. 5 trillion new tax for the next 10 years. To see eud you like countries reevaluate their tax codes now in response to the u. S. Tax reform . Didier it is a difficult exercise. What we can say is we are not anymore in in austerity mood. Were looking to give money back to the people in europe, but not as dramatic in the u. S. There is a advantage in the u. S. Matt thank you for your time. Didier duret, abn amros Private Banking cio. Bloomberg markets the european open is next. You can tune into Bloomberg Radio and dab digital in the london area. I wish you a very merry christmas. This is bloomberg. Welcome to bloomberg markets, the european open. Im mark barton alongside matt miller. Cash trade less than 30 minutes away. Guy mark Pro Independence parties take the majority of seats in the catalan assembly. How will rajoy deal with the setback . Boeing considers a megadeal with embraer. What would it mean for the market . Reality bites