Reflecting the snap election in spain. The twoday see chart, down 2 10 of a percent. Look at that wild ride, big drop after the separatists won the snap election. Maybe a surprise to investors. David down less than 2 10 of a percent. Abigail a roller coaster in those two days. David . Now i look other headlines emma chandra has first word news. Emma Congress Managed to give the u. S. Government from shutting down but will face a messy start to the new year. Lawmakers approved a spending measure that will keep the government opened their january 19, but put off action on military spending, raising the debt ceiling and dealing with undocumented immigrants who came to the uss children. The british economy grew at the sinceace in 2013 were well below where they before the vote to leave the European Union. Prices are rising faster than wages. In japan, the cabinet has approved a record 46 billion fund, wanting to improve military capabilities at a time when north korea is becoming more of a threat. On the shopping list, a third layer of Ballistic Missile defense and their first longrange missile. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im emma tonja. Im emma chandra. This is bloomberg. David thank you so much. Time for our daybreak first take, where we discuss the top three stories of the morning. First up, catalonia. The voters elected a new government. The second topic on Congress Goes home for the holidays. They have put off a host of difficult issues. Finally, bitcoin taking a licking, but Goldman Sachs wants to be in on the games report with a trading desk on the cryptocurrency. Joining us is pimm fox and christine harper. Great to have you. Lets start with catalonia. The euro selloff of 2 10 of a percent, but you are taking a look beyond that. It is fascinating. Take a look at this great chart. What were looking at is a longerterm chart of in the blue, the spanish three year yield, and why to the catalonia three year yield. The spanish is in negative territory, below zero. Catalonia, 1. 7 , down from the time when we first had action and volatility in october. So investors, Bond Investors not very concerned. The other point, look at the white out here when we had the crisis. You would think that this would spark volatility, but Bond Investors do not think so. David is this quebec . Pimm it is barcelona. [laughter] and i mean, i understand all the ramifications and all about the Central Government in madrid, but christine you know this i mean, catalonia has a third to a quarter of the Industrial Production of spain. Makes h the nissan their van that they export all over the world. So i mean, this is a Big Industrial zone. I think the question is, the independence movement, when it took office awesome banks talking about potentially moving banksk off we saw some talking about potentially moving. Look at the u. K. Numbers we just saw in what happened to them because of brexit. Pimm they are not leaving the European Union. This is not about the European Union, this is a domestic fight. I mean, i was talking to a producer earlier, john was telling me when barcelona won the world cup you have the same level of demonstrations in the street. This is politics. Abigail the ecb has all of their backs. Pimm when you look at the chart, why does the chart go down, because the ecb is buying all the paper anyway. So the numbers are not david it when i get resolved right away and if it is not resolved all the way, how will they find a government . Come january 19 may need to address longterm funding, the looming deportation of immigrants known as streamers, and as dreamers, and the border wall. Theyve all these things to resolve and a lot cost money and they have spent a fair amount on tax overhaul. There is concern about deficit spending and it has evaporated from the government, although you hear rand paul making noises about wanting to crack down. At this point, even though he voted for the tax bill, which is a deficit bill. Means is theit economy is in a lot of places. In spain, we have seen the spanish Housing Market go on again, despite the fact the government seems completely incapable of sort of reaching agreement on things. All this like tax bill is a big win for the republicans. There are so many unresolved problems, so much conflict, yet economies and markets are taking it in stride. David they are doing so well because governments are willing to spend money. It is through central banks. Throwing a lot of public money to it. Pimm yes. Listen, the buzz word is synchronized Global Economic growth right now and you hav an e inexpensive money. Banks will be able to loan more money, it will go to dividends and share buybacks, and all you have to do is look at the equity market. Abigail this is the third time we have seen this this year at some point, dont may need to act in a way that is not lastminute, you know, to the brink. They do [indiscernible] [laughter] they should but they wont. Buyer Christmas Tree on the 26thth. 26th. Maybe that is a good till for them. Maybe they will start acting in a better way in 2018. There is a a real, lot of people who want more fiscal austerity and a lot of people who want more stimulus. In catalonia, some want independence and is somewhat to be part of spain, the government is reflecting the differences in the population. Good point. Abigail bitcoin at one point down 21 on the day, just in one day. Amazing. The lows down 31 , the worst since 2013. Lets hop into the bloomberg. Another good chart. This is the fiveday chart and what were looking at is the bitcoin spot along with the cbo futures and we see the trend is down. We also see the volume has a spike. What do you make of this, because we have heard that goldman wants in on the action. A trading desk yesterday, long island iced tea, now long bitcoin. Is it the best in the world . You cannot apply the typical metrics to bitcoin because it is so volatile that in 20 move is not particularly a bear market for them. It is just a day. So there is obvious excitement, part of it is driven by the distrust of government, so these people believe that we need a new decentralized currency. The irony is you have wall street, the ultimate Central Party within the Financial Markets, trying to get in and play the middleman role that they play in regular finance in this new form of finance that is supposed to be decentralized and cut out the record david is cut out the government. David there is volatility here. Exactly. Goldman sachs is not historically known for being the first mover in anything, so it is interesting that they are first out of the gate in this case and being obviously really building up this. Abigail what do you make of that . You cannot rule out that somebody else would get in their first. There have been other movers. I think that they are trading on this. David many things, christine and pimm, great to have you. Catalan separatists regain power dealing a blow to the Prime Minister, mariano rajoy. We are live in barcelona, next. From new york, this is bloomberg. Pimm this is bloomberg daybreak europe emma emma a took over today will cleat and create gambling giant. In a deal valued at 5. 4 billion. Ladbrokes is known for shops and online operations. Jvc has online brands including party casino credit the stage is being set party casino. The stage is being set for going to consider a deal into the highly competitive market for smaller passenger planes. And the parent of google no longer needs the adult supervision of one of the tech worlds biggest names. Eric schmidt stepping down as the chief officer of alphabet. He will remain on their board. That is your Bloomberg Business flash. David thank you. Majority reclaimed, the elections in spain saw separatists take back control of the regional assembly. We welcome back our colleague reporting from barcelona. Give us a rundown of what exactly we know since the polls. It was a very messy election in catalonia. The winner of the ballot was a pro spain party, clearly in favor of staying in spain. They had a very good result. But it is not good enough to form a government. We talked about this, we said they might win the election but they may not get enough. That is what happened. The proindependence party clinging onto the majority and we look at a messy situation in the catalan parliament, and at the same time the winner of the night carles puigdemont, remember he is still in brussels, he is asking to meet mariano rajoy. The question is when he will come back to spain. He is facing a legal investigation that could see him in prison. David far from over. We will have to keep you there. Thank you, maria. The catalan vote sent spanish stocks struggling to gain, traction suffering its biggest drop in three months and futures indicating more losses ahead. The euro took a hit with its biggest decline in a month as investors assess the future of the spanish economy. David, welcome back. Good to have you. Lets start with spain. What does this mean in your judgment for spain, is this a temporary blip . A little bit like quebec in canada . At the end of the day they have the majority in terms of the seats in the house, but they do not have the democratic majority, they did not win 50 of the vote, it was shy of 48 . Situation where we will look at the data really closely to see whether spain slows, you know from the growth that we have been used to over the last few quarters, to Something Like 2 analyzed. Moreover, we would highlight as of january the bond buying was down to about 6 billion euros a month to over 2. 2 billion euros a month. The market will get less support Going Forward as well. As the spanish economy slows, it will affect spain. They could outperform italy going ford. Abigail it is interesting what you mentioned about the ecb coming back in pulling away support, because if we look at the three year yield we are going to see superlow levels. Bond investors right now really not caring about this on that much. Investors think that the ecb does have spains back in this case, but you think they will step away. Why dont Market Participants care more . Why arent they reacting . Mario draghi managed to pull off a very dovish take, but lets be clear, there stepping back simply in terms of the bond buying, particularly government bonds. We do not know exactly how this will work. Something between government bonds Going Forward and agency paper in particular, but also the private sector that the ecb does as part of its program. We do expect to see a sizable set down in the government bonds and it will form more on the german bunds. Now, we are also in an environment where the eurozone is outperforming expectations. We had upgrades to french gdp for the Third Quarter announced today and in this environment investors are generally bullish. But spain will underperform is the economy saw slowing over the next year or so. David that is the question, because europe is on a nice track in terms of growth after struggling. What is the likelihood that this problem with catalonia could slow down europe over all, or is it not big enough . It is not big enough. It is an issue for spain. Catalonia separating from the rest of spain, or indeed leaving the eu, that probability is low. It is more of an issue if they lose economic momentum Going Forward. Is one thing we will look at closely over the next year, but the backdrop at the moment is the eurozone economy clearly outperforming. It is set to grow at 3 next year, which is certainly above where the market currently thinks it will grow, but also very different from where we work even two years ago. Abigail knowing that you are an economist, the smartest investors are going to be looking for dislocation and opportunities, are there any you see right now . Not really. I mean, the Market Reaction has been fairly muted in the currency market and bond market. It is a market where maybe it is more about risk, and even that if you have a strong eurozone economies spain will still be growing. At the moment we are not seeing anything being thrown up, which looks odd particularly. David david from jeffries. You will stay with us. We will talk about brexit and what is going on in the economy in london. This is bloomberg. David this is bloomberg. Im david westin. That is london. That is bloomberg headquarters in london. St. Paul to the right, that is a gorgeous shot. Abigail stunning. David david owens is with us. We want to talk about brexit. We will put up a chart, the brexit barometer. You do not need to know what the numbers are, but the numbers have gone down, come back up, now in the middle. Is that reflecting where we are in terms of the economy in where negotiations are going . Where are we with brexit . David owen i think the recession was after the vote itself, we are now living in a world where the longerterm growth expectations for the u. K. The u. K. Has slowed. Most people are thinking that the u. K. Will grow summer between 1 and 1. 5 on average in 2018 and it compared with the eurozone growing at almost 3 . The u. K. Clearly is o underperforming. In terms of negotiations we have only agreed to move to the next stage. We have to agree in the First Quarter in particular, the transitional arrangements, and it will be more difficult than people think. Could have more discussion about whether actually postbrexit, will would be so aligned with the eu . Or will we move away from it . This is brexit in name only. It will be incredibly, i think it will be used a lot in 2018. Abigail relative to the second part of the brexit negotiations, trade negotiations, what are the biggest sticking points and why do you think it will be so challenging and perhaps more challenging than some think . David owen firstly, the u. K. Is linked to the eu supply chain. It has been in the European Union for a long time, so manufacturing has deep supply chains. And they have many Service Sector industries, including Financial Services industries, but it goes beyond that. How do we continue to have access to the eu market in these key areas and at the same time able to strike new trade deals with other countries . This will be a completely new thing altogether. And with the u. K. Wants is not aligned with the eu itself. I think it will be very fraught. The next stage of the process is a transitional deal and it is unclear whether we will be able to get anything there. The easiest thing could be to extend article 50 beyond march 2019, but it would mean this u. K. Hasnt left the eu at that point and it could prove politically challenging for theresa may and her government. It will be a long process. We have conceded certain things and we can move on to the next stage, but the game is only just starting really. Abigail what is the optimal settlement in your view, that would be the least disruptive to the u. K. s economy, the european economy, and the World Economy . What would be additive . David owen i think the u. K. Will have less access into the european markets in general, but as much access as possible. You could argue the u. K. Would pay for access. As much access as possible. It is difficult, because that might not be conceded by eu partners. They could say you are either in or out. You cannot have access in areas like financial and Business Services more generally into themes problematic for complicated supply chains. At the moment, it is clear that the eu does not want the u. K. To have its cake and eat it. I think discussions will be difficult in 2018. Abigail good point. They sound like they want to their cake and eat it too. Difficult to do that. David does not make mark carneys job easier. David owens. Me . Of me . Prardon david owen cannot really control the process. David thank you so much. David allen coming from london. To us from london. Ask whattocks, we will is in store for the new year in 2018 . From new york, this is bloomberg. Abigail this is bloomberg daybreak. Im abigail doolittle. Happy friday ahead of the long weekend. And not a lot happening for the u. S. Market, but in europe a little bit more. Take a look at the european vix, up. The ibex down 1. 3 after the separatists voted in a snap election. The s p 500 and many futures ni futures are down, reflecting of only 1. 7 . And bitcoin, down 21 , a bear market it one day if you can believe it. So much volatility. David with the bitcoin, i can believe anything. Lets look at what is going on outside the business world. Emma thank you. A split in the white House KeepingPresident Trump from carrying out a campaign pledge, including a loophole that benefits Investment Fund managers. White house economic adviser gary cohn wanted to close the loophole in the tax bill, but the treasury secretary Steve Mnuchin urged keeping the carried interest with new limits. That according to people familiar with the matter. China signaling it is ready to back another round of you and sections on north korea. The secret Council Votes today on whether to cut deliveries of Petroleum Products by 19 . That would be in response to north koreas missile tests last month. A Palestinian Leader says many countries can replace the u. S. In the peace process. He says the u. S. Disqualified itself in the process by recognizing jerusalem as the capital of israel. They are working on innovative solutions. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im emma chandra. This is bloomberg. David thank you. Media and Telecom Stocks showing strength going into the end of the year after underperfo