Dan what is next is that we have reported that mr. Renzi, according to one italian news agency, has already met with the italian president. He has to formally submit his resignation and then resolve this political crisis, turning it over to the italian president , who will hold probably two days of Political Consultations with the leaders partiess political before deciding on a mandate government for the country. David a lot of focus was on the italian banks and what this would mean for the italian banks. Do we have any sense of the answer to that question . There aretle bit, but still a lot of Unanswered Questions so far. , the worlds oldest bank is in the midst of a 5 billion euro Capital Raising plan. It has started the first leg of that. The board is probably meeting today. They are likely to put out a statement to find out what happens next. Are they going to proceed with this plan or perhaps postpone it, given that while markets are not as volatile as people expected today, who knows what will happen down the road . Unicredit is also planning a big capital increase. Anywhere between 10 billion euros and 13 billion euros. What are they going to do . They have already set a date of december 13 to unveil those plans, but perhaps that will change. We hear from the ceo later on. David give us a sense of how urgent the issue is with italian banks, in the sense that will the new government need to address the question of how to deal with italian banks . Dan absolutely. Most dei paschi is in the critical shape, needing to get past get back on its feet. If this does not happen, it will impact the rest of the banking industry. One of the scenarios, one of the names that has been mentioned in having this caretaker government is the current finance minister. He probably would be well received by the market. He has already dealt with the industry situation, it knows the story. That he knows the story. That would be greeted well five markets. , thank youliefgreen so much. Jon you wonder whether a conservative caretaker government can actually this through easier than someone who would be more sensitive to political pressure. David i had not thought about that. They may have more leeway to deal with that thorny issue. Jon so many unknowns out there. Lets go to Francine Lacqua, who recchi. Giuseppe good morning. Francine there are so many unknowns because there is a backlash. We had a guest early on saying it does not seem very democratic. Italianfigure out politics are messy. The only thing is that the markets seem to be ignoring it. We speak to a man who has been looking at italian markets for many decades, giuseppe recchi. Great to have you on the program. The Market Reaction is pretty muted. Does that fill you with hope that market reforms will continue no matter who becomes the next Prime Minister . Giuseppe i think so. The vote does not mean that italian people do not want reform. Vote on a, it was a government procedure, but still, especially from the business community, there is a high need and high demand of getting any easier system to work on. David so you do not believe this is a populist vote . You have the head of the fivestar movement who campaigned so strong for this referendum. He won. Giuseppe there are a lot of that nstituencies, the result was kind of scene in advance. It is quite different from brexit, happening in reversal from the expectation. Same. Ason might be the it is a compensated matter to discuss at to press on to referendum. Onbecame highly personalized a progovernment, against current government, which is a typical situation. Francine there is obviously no reversal on italian banking stocks. They were lower when the markets first opened, now they are higher. Are you worried about the fragility of the italian Banking System . Giuseppe luckily we are seeing the stock market maintaining its position, not dropping down. The spread is good. This means that International Investors were at the window, ready for a long time, so there is no pullout at this moment. Today is too early to say what is going to happen. Lets remember, the status quo remains. This is not a disruptive result. The institutions are there. Italy is used to institutional changes. There is a parliamentary majority that is established. Francine the parliamentary majority you are talking about for the pd could change. A code if people move around, which is something that is possible under our governance it could if people move around, which is something that is possible under our governments, and in a new election. That is the key reform. Systemng the election should be the same for the senate and the lower chamber. Francine you are great and looking at the linkage between the Central Banks and the macro economy. What does this mean for mario draghi . Is it even possible that he talked about tapering . Giuseppe again, i cannot comment on this. I will say that probably the spread is resisting, also because the ecb is acting massively. Up, probably. But we will see the day after tomorrow. The main fear was about the spread moving and increasing, affected ourd have economic reform in the Balance Sheet because of all the plans that have been put into place being based currently on a spread. That would have created a correction for the coming year. Italy is a strong economy. Are climbingators up finally. Confidencensumer which is building up. People are waiting for what would have been a problem with the eventual new taxes, with financial reforms that they could not understand. We are a telecom company, so we are pretty short cycle third we see all the indicators going up. There was a turnaround in due course for the economy in due course for the company. Investors are looking at us with great attention. Francine what is your great concern . I imagine for your business is that it is growth, so the markets need to get pushed through at a faster pace than we have seen so far. And you need healthy backs and you need healthy banks. Giuseppe there is confidence in italy. The the problems flexibility of the lending sometimes is crucial to their survival. Inhave a huge Cash Flow Companies investing in its own resources. The market is saturated particularly in italy, so we are growing in the stock market. This is where the core of the risk will stay, and we will see if banks can stay after these people. Francine thank you so much for joining us today. We will have plenty more interviews right here throughout the day. We are live from rome on the back of this referendum. Jon francine, great work. Francine lacqua sitting down with giuseppe recchi. Diplomacy, foreign taking place lets get headlines outside the world of business and catch up with emma chandra. Emma u. S. President elect donald trump took on china in a series of tweets. He rejected criticism of his decision to take a phone call and taiwans president reiterated some of his complaints about china, including devaluation of its currency and taxing u. S. Imports, and the military buildup in the South China Sea. Trump will nominate former republican president ial nomination ben carson to be the secretary of housing and urban development. Carson is a new york surgeon who grew up in detroit. In london, the Supreme Court is hearing a crucial case on brexit. Prime minister theresa mays looking against a vote in parliament. A win would allow her to keep her negotiating plans under wraps. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am emmaountries, chandra. This is bloomberg. Alix u. S. Equity futures are right around the highs of the session, but in europe you had the italian banks hitting quite hard. Monte dei paschi hitting up 5 . At one point it was up 7. 5 . Question we have been talking about already is what this means for recapitalization. Paschi wants to recapitalize 1. 5 billion euros of bad loans. Will they be up to follow through on that that will they be able to follow through on that . The euro was lower by 1. 5 versus the dollar, and you saw a rebound in the International Sellers in europe. Nestle gets 82 of its revenue outside europe. Europe gets 44 of its of its revenue overseas. These guys get a little bit of a rebound today. And are very rejected office from coach. David coming up, the italian referendum does not look too much like brexit, at least so far. Bets on volatility are down. Is the year it it is the euro still headed for parity . That is next. This is bloomberg. Jon for once the polls seemed to get this one right. European equities gained. Suggesting the market was not caught offguard like the u. K. Referendum earlier this year. Is vassili serebriakov. It took about three minutes to get over what happened in italy. Why . Sili i think the italian politics are extremely complicated. I think the chances of a next the election in 2017, chances are relatively low and that is what the market would be most worried about. Some of the details around the mics jon we have heard those calls around the table several times. How will populism affect the fx market . The dues say that the doomsday it is a lot more simplistic and alum were difficult than it sounds. For the markets, how do politics infiltrate the fx market in the years to come . Vassili for the record, parity was not our call. The euro and the eurozone bark market the eurozone bond market are not the same as in 2010. We heard from the ecb last week in terms of stories of potentially supporting the higher bond markets, 60 of the italian bond market is owned by domestic residence at this point, so there is a lot Less International pressure. Eurozone as a eurozone as a wh europe looks very different. That is why political events affect the euro differently. If you get the point where you have this massive contagion and where asking essential questions again, the euro weakens. Paribasis is the bnp Political Risk index. The white line is volatility for european stocks. A weaker euro,ee what kind of volatility do you expect . Vassili i think you should still be a buyer for the medium and longterm. The French Election represents another chance for this sort of toestablishment Movement Show itself. The Political Risk is there, but also lets not kind of overplay Political Risk as well. We have big movements happening in the bond market anyway. We have a steepening in the yield curve, rising global bond yields. It is a complex process and politics is a part of it. We have seen many times over the last couple years it does not generate sustained volatility. The market is certainly not overplaying it. Equities are resilient. We go into next year with the lessons of trump and brexit and italy, and we underplay Political Risk because there is a lot of research out there, but the market and the price actions Say Something different. Vassili that is the nature of the market. You swing one way too much and then the other way. We spend a lot of time thinking about, are the markets being too optimistic about fiscal stimulus . There is clearly a a lot of enthusiasm about the new state of the u. S. Economy. Perhaps fiscal spending, infrastructure spending, and all of this has given us quite a bit of support to the equity markets, even as the bond yields are rising. I think there is a danger that through the middle of next year, maybe in reality maybe reality sets in that there is not that much change happening in the u. S. Economy, and with some of the trade tensions coming through. We could see more of a risk up sentiment next year. David we are going to hear from them later this week on thursday. If you are mario draghi this morning, what are your options considering italian bonds specifically to minimize the spread, but overall the strength of the euro . Vassili i think we heard from theecb last week, there is possibility of some flex ability on qe, buying more italian bonds, for example. Lets not dismiss a verbal intervention. They support of bond market quite effectively. I think inflation, low inflation remains a concern for the ecb. They extend qe until the Third Quarter of next year, so that should help support sentiment as well. There is a tricky spot because they have to think about how they are going to get out of qe eventually. We might hear more of that. I think Mario Draghis point will be confidence in the eurozone, confidence in the bond market, and the way the markets are trading, they will think it is credible. Great to have you with us. Coming up on this program, tough tweets from mr. Trump. He comes under fire over a phone call with taiwans president. Time, thetes unicredit ceo joins us exclusively to discuss the impact of fallout from italys political limbo. This is bloomberg. Alix donald trump goes after china yet again, this time on twitter. He wrote, did china ask us if them to devalue their currency . U. S. Does not tax them for them to build a military complex in the South China Sea. Mckeet think so. Michael joins us. There are two prongs to this. Foreign policye come and the other has to do with currency manipulation for it is more significant . That it it is exactly is hard to tell exactly what he is trying to get across. If you look at the South China Sea aspect of it, remember, this is a guy who said during the campaign that maybe japan and south korea should defend themselves and the u. S. Should loud of that area. So is he being and the u. S. Should blowout of that area. So is he being belligerent . He does not even have a secretary of state in place, so we do not know what his policy will be. The other question on currency i have a chart that shows the dollar has been appreciating against the chinese currency for years, and all of a sudden the chinese devalue and start letting they revalue because yuans is let the thousand five strengthened. The chinese have been experiencing capital flight out of the country into the United States. They have been spending money to prop their currency up, so mr. Trump does not seem to know what he is talking about in that case. It is hard to know what he is trying to get at. Jon there is mr. Miniature and there is mr. Mnuchin. I wonder what the objective actually is. Are you telling me that Steven Mnuchin does not understand what is happening in this fx market . I would understand that he does. I want to understand with the real objective is. Stating something you may well know isnt true. Michael this is a man who campaigned throughout the last two years by saying lots of things that were not true. They play well, and it goes over politically well to say the chinese are manipulating currency for trade reasons. I have another charge here. You can see that the chinese yuan, the white line has been going down, getting lower. Chinese exports to the United States have been falling. If they are devaluing their currency for trade reasons, it is not working. Is not helping. Alix david how much of it is atmospherics . There,issinger went over certainly with mr. Trump knowing it, to try to mend fences. How much of it is a highlow game . Michael with trump, you cannot really tell. He has refused security briefings. That is keeping markets on edge, which is maybe what he wants to do up to where he is inaugurated. Alix we do not really know. Thanks so much, Michael Mckee. Coming up, italian banks get another hurdle. What the prospect of Political Uncertainty means for banks next. This is bloomberg. Alix this is bloomberg daybreak. 7 30 a. M. On wall street. Heres what you need to now. A crushing defeat. Matteo renzi announcing resignation after voters rejected a constitutional referendum, sending the country into political limbo. You did markets. After a stocks gaining 20 month low despite his defeat. And trumps twitter tactics. The president elect is taking a fresh sweat that china, accusing the country of currency manipulation. And that is what you need to know. Jonathan lets get you up to speed. The biggest oneday pop on the stoxx 600 in about a month, futures positive in the United States, up seven or eight points on the s p 500. 18 out of 19 Industry Groups in europe gaining in todays session. Btp standing off, italian yields go higher. Were still short of where we were, up 15 basis points to 190. Euro strength, there is the story. Overnight. Ne point , shrugging it off very quickly. David for more on the italian referendum and what it means for italian banks, we go to our colleague Francine Lacqua in rome, who has an exclusive interview with the ceo of unicredit. Francine thank you so much. Im very pleased to welcome him onto the program, his first interview since he became ceo of unicredit. Thank you for joining us. The reaction for the banks was muted. Unicredit is currently down some 5 what are your shareholders worried about right now . Afternoon. I think as we saw today, a classic fact for the market, and clearly for unicredit, but we are a strong European Commercial Bank with a unique central, eastern, and western european network. Strategy,unce our new based on the longterm view of a buyback for more than 300 years. Strategyot change our and the plan for the longterm. If you were to raise capital i know you have confirmed it, but you have said this is an option if there is market turmoil, will you try and limit the amount you ask shareholders to buy into . Said, we will announce our strategy, but the event wont change at all our plan. Worried so you are not about market volatility on the banks Going Forward . We are not worried about market volatility. Italys a strong country. Our bank is a strong paneuropean commission bank, and we plan for the medium to longterm. So lets separate until december 13 when lee will announce a new strategy. Monsieur, how much i do looking at monte dei paschis Capital Raising exercise to give you a look at what the