It would be inconceivable that you would be forced to leave london. I would say to you if you are in london, and you are originate from the eu that youre welcome here. Anna very warm welcome to bloomberg daybreak gear. Our flagship show here in london. Let us talk about what we have seen in the banking stocks. Theerday, the focus was on banking sector. Investorsking many risk off in the asian section. The italian stocks are underperforming the rest of europe. Yousef a lovely charts here you can pull up on bloomberg. The brunt of the selling has been felt by rank stocks. Leastally vulnerable, at as a proxy to overall sentiment. We are seeing some of the fiveyear credit default widening against it to date highs. In the spread between italian and german 10 year paper as well. Anna we need to bear in mind the context. If you take the same spread between italy and germany, and go back to 2012, we are nowhere near those levels. We are not talking about levels we saw even in february. While there is tension in the market, it is building towards the market. To see howcinating it is all priced in as the countdown goes on. Anna a lot to factor in including the latest Political Developments in south korea. , 47. 80. They failed on monday, the opec meeting taking place. A 10 hour technical meeting. They failed to agree on specific production levels. Yousef look at what is happening with gold. By 0. 25 . Ownside at 112. Aryen slightly above the flat line. Work let us get the first first word bloomberg news. South korean President Park says she will let the National Assembly decide how much longer she will stay in office. Her comments came as a televised address to the nation this morning. Tell koreas first female president is embroiled in an influence peddling scandal. The next president ial election is scheduled for december 2017. Donald trump has met with retired general David Petraeus as senior officials in the Transition Team say that the ciaer director of the ca is being considered for secretary of state. Mitt romney is said to meet donald trump later today amidst an extraordinary public lobbying campaign against him. Hassouth african president dealt with the most serious challenge to his leadership yet. Contingent of the Ruling Party National executive meeting failed to topple him. His presidency has been marred by scandals and policy missteps putting the nations Credit Rating at risk. The u. K. Will work to make sure that Global Markets make keep access. Bloomberg, he also said the government will be focused on free trade in upcoming brexit negotiations. Has beenvernment clear. Theresa may has been clear that she wants the u. K. To remain the most passionate, convincing, and compelling country arguing for free trade around the world. That is where i see the future for the u. K. Being passionate about free trade and having a fantastic future for the country. Or says heon spain has received private assurances from the British Government that European Union citizens living in the capital will not be compelled to leave the country after brexit. He spoke with bloomberg. The argument that people could be used as bargaining chips is offensive. I have no doubt that what i been told by the theresa may government that it is inconceivable that you would be forced to leave london and that certainty is crucial. I am saying to you that if you are a londoner, that you are welcome here. Haidi global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. This is bloomberg. Let us cross over to the markets in asia and get a feel for the fallout is like from the latest in south korea. Julius sally has the story. Juliette have a look at the south korean index. It had been tracking fairly negative territory before the president spoke. The kospi is now in positive territory. Up by 0. 2 . Quite a turnaround. Holdingan wan is also on to gains. It has been higher for three sessions in a rope having quite a jump as well. All of this occurring in the last half hour or so since President Park said she would allow parliament to decide her term. ,he rally in the korean wan higher by 0. 2 . That is the longest running streak that we have seen three days of gains since september 23. You are also seeing bonds rise in south korea. The yield on the 10 year note down. Been quite an extraordinary turnaround in the last half in terms of korean equities which had been tracking pretty flat for most of the session. Elsewhere, you are seeing weakness coming through in hong kong. The nikkei closed lower, down by 0. 2 verifying 025 . 0. 25 . Juliette saly in hong kong. And details on the south korean story and much more. Oil is a big story. The foundations for in opec output deal are looking increasingly shaky with officials said to still be divided on production cuts. Talks are being held before the meeting in vienna. So far, they have failed to bridge their differences. Talk to you. Ood to hours of talks. 10 hours of technical talks. Are they in the are they any closer to an agreement . Not closer to an agreement. 10 hours that yielded nothing concrete. Game is thes poker best way to describe it with everyone keeping their cards close to their chest. It comes down to we are seeing iraq and iran increasingly not wanting to budge. Putting them in opposition to the saudis. Over everyghting single barrel. It comes down to 7 . Theians do not want to cut 7 that the saudis are asking them to cut. Until we can get them on the same page, it is looking likely that they will not be able to bridge a gap. They will need to agree on who will cut. Is not just about barrels of oil. How does the complex political backdrop play into the discussions . Baggage atpolitical its finest between these two countries. Especially the iranians. Yesterday in the state newspaper the Iranian Oil Minister said this is the will of the iranian people and they demand that they should be able to pump at presanction levels. He spoke to state tv before he got on the plane and he said that politics is complicating and opec deal and those able to raise output in past years will have to shoulder a bigger share of the cut and accept more responsibility. Indirectly calling out the saudis. To pump you were able at presanction levels and we will not bear the burden of this. They are insisting that they maintain close to 4 Million Barrels a day. Yousef bloombergs annemarie the yen a. From increased volatility of ahead of the opec meeting. Below 47 a barrel. Let us bring in lloyds private banker, mark. We will bring you in with an amazing charge. This really shows the widening gap. Notice the volatility. This is the highest we have seen this year. A lot of these investors hedging against price swings in either direction. Where is this going to go at this meeting . Are you upbeat at all that they can find some Common Ground . Regarding the chart, what is happening is we have seen talks members to agree on cuts before. More incentive to find an agreement this time around. Since the summer, inventory buildup has gone negative for the first time in a long while which also increases volatility in markets. The challenges are both inside and outside opec. Russian Oil Production is at a postsoviet high. Have anducers do not incentive to cut back production either. And in the u. S. , where we have seen a significant reduction in production, the marginal costs of production are about 41 a barrel. They could ramp up production quickly should prices rise behind beyond the Current Trading price. In context of what the market is referring to their the importance of getting the nonopec members on board. Nonopec production outpacing opec production in terms of the incremental buildup coming through oblique. Why wees to the heart of need the opec members on one page but we need to get russia on board if the important thing is to get the deal. Absolutely. I think it is a challenging discussion within opec. As annemarie has just pointed has every incentive to increase production further. In saudi arabia is the biggest producer and has to take the other side which is tough to do at the moment given the challenges outside opec and i think it will be an interesting discussion tomorrow. Dont the same time, i think we should get overly excited if there is an agreement. The last time they met in vienna, the same thing happened. They agreed and there was a lot of excitement but it quickly theorated because implementation of the agreement proved to be difficult. Yousef the market got it wrong twice this year. What happens to oil prices in either scenario . Prices falling down to 20 a barrel. What is your outlook . Andf we combine nonopec opec and look at the Global Production and global demand, we are Still Producing up of demand. That is very important. Buildup going negative further which just started and it needs to run negative for at least a year or a yearandahalf. To make a significant change. We could see supply going under demand globally. China is not a problem. Us supply plot staying with for a little while longer. And takes us until the end of 2017 realistically with the current speed of inventory reduction in the current construct we have just discussed in terms of opec and nonopec production. Anna it seems this week that the saudis started to put forward this other line of argument which means do we need to be talking about this cut if we see a stronger demand picture in the u. S. . Are they reading too much into the victory of president elect donald trump or you see that as a possible outcome . It is early days and is much as donald trump want to strengthen u. S. Energy independence, what he wants will take quite a while to put in practice. I would not get overly excited. Look at the facts. Production, demand and with the behavior of areas producers inside and outside of opec. The supply glut will stay with us for a while longer at least for the next 1218 months depending on demand. If the Global Economy continues to strengthen, that will happen a little sooner. If the economy is weakening next year, huge Political Uncertainty in europe around brexit and other topics, so then i think it will take a little longer, up to 18 months. Yousef marcus, there is still plenty to get through. Come on the show, later this hour we will get the cfo who willf a join us for an exclusive interview here on debris. That will be 6 30 a. M. U. K. Time. Anna highlights. French gdp at 9 30 a. M. London time. Half an hour later, Eurozone Consumer Confidence followed by german inflation at 1 00 p. M. U. K. Time. Half an hour after that, u. S. Gdp. Yousef also to come, pricing in Political Risk. Volatile could markets get before the key vote in italy . And high hopes. Norways oil industry is in during the worst downturn in a generation. We speak exclusively to the cfo as exporters try to force an agreement to lift prices. Londons mayor says he will fight for a sensible and pragmatic brexit. We will bring you that interview during the show. Stay tuned. This is bloomberg. Anna very warm welcome back. 6 19 a. M. In london. By 0. 2g seng is down percent. Overall, the asian equities session fairly flat right now. Samsung electronics will allocate 50 of cash flow to shareholder returns and conduct a major buyback from the end of january. It is also looking at creating a Holding Company structure. Elliott management has been urging samsung to restructure and return more cash to shareholders. Lufthansa has lost its latest bid to of her more strikes. The german court denied an injunction. Highlights set to stop work today and all pilots will walk out tomorrow. It is heading to its longest ever industrial action which is caused almost four and have thousand flights. Lufthansariff shares have declined. Politicians should resist the call to regulate facebook is a media company. Fake news spread on the social network affected the u. S. Election results. They made the comments in an exclusive interview with bloomberg. The only restriction for facebook i think should be rule of law. What is against the constitution. What takes people to jail. That cannot be published on facebook. But i think the whole idea that they should have a super editor would turn facebook into a global media monopoly and that is going in the wrong direction from various points of view. Juliette the u. S. Securities and Exchange Commission is investigating a deal that rio tinto booked on a mozambique called deal. The investigation is ongoing and is separate to an internal rio tinto review. That is learn your Bloomberg Business flash. Yousef italian citizens well head to the polls on sunday to vote in at in a referendum on the constitution. The Prime Minister once to reshape the senate so it can no longer block legislation indefinitely. Loseso wants the senate to the power to call a vote of noconfidence in his aim is to improve political stability which has had more than xd government since world war ii. Concerns over the potential has been felt in the last month. Talian lenders you can see that in this lovely chart right there. This italian story. We are seeing some disparity. The Political Risk is being reflected in the equity space and in italian stocks. Read on how investors are interpreting Political Risk at the moment . The Prime Minister made some early Reform Efforts and has been quite successful. Italy needs a lot of change. It has a huge volatility challenge on its hands and it has started to tackle that significantly. He is seen as credible. He is supported by the business establishment. What is mainly behind the widening spreads is the Banking System has a number of issues including bad loans that amount to approximately 20 of gdp. Heavily rely on ecb liquidity support. Coming back to the prime italy is seeni, as the next milestone. Have thelist protest upper hand on december 6 or will renzi be able to continue his Reform Program . He has been reasonably successful so far so i think it is important for him to continue. If not, there is not a likely successor. Anna how nervous do investors being we do not see renzi successful in the referendum . The widening italygerman 10 year spread. This is a year to date charge. ,f i took it out to five years we are not talking about levels of investor nervousness as measured by the cds spread as we saw back in 2000 back in 2012. We are not talking about levels that we even saw in february of this year. Our investors not nervous enough about what is happening in italy . They are right to be nervous to some extent. The renzi government has struggled. The fivestar movement is gaining ground and that will be a very difficult thing to figure out where the government what the government would look like if the fivestar government leads. It is the center of attention from the international perspective. The italian bond market is huge. It is not about the equity market or the shortterm and therefore investors are mostly concerned about credit spreads moving out. Learnedns and we have to not trust the polls, we could see the spreads going back to normal levels pretty quickly. If however he does not win the referendum, and he has already said he would resign. We will see if he follows through on that statement. If he does, we could see spreads widen further. Yousef how does the meeting on december 8 they will make a decision on their qa program and announce you details. How does the italian referendum and rising yields complicate this . Mario draghi gave a speech theerday on his outlook for european economy and he focused ina lot on european banks that speech. I dont think that we would see immediate change on the eighth of december. He will take the Election Results into account. Italys banks today are heavily reliant on target to balances which will continue to feature whichever the a Election Results go. But it will be more important if it goes the other way. Yousef our guest will stay with us. Opec objections. We will talk oil. We will speak exclusively to the cfo from statoil. Ive spent my life planting a sizesix, nonslip shoe into that door. 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Trump thed currency will strengthen to 98 per dollar. Around tos are coming the fact that japan could be the place to be in in 2017. A new edition of daybreak is now available. Some ofake a look at the stories. The cover story samsung. Electronics giant has responded to shareholder calls. It will add at least one independent director next year, short of the three saw by elliott management. It will also use 50 of Free Cash Flow in dividends. About a third of the special dividend that elliott wanted. Our next story is opec. Yousef the organization has differences ine production cuts yesterday. The issue now goes to oil and oil opec ministers. The Russian Energy minister is saying that russia is ready to has