Enterprises mean for investors . Tough talk. The eu president said in a brexit any brexit will be paid for by britains. Plus, the Prime Minister think she can have cake and eat it. And we talked to a ceo in about 15 minutes. Caroline we are less than a halfhour from the european owner. We could see a bounce back from features. Today, futures signal an update. About 4 10 of a percent. A Risk Appetite coming out on the back of those numbers from china. Is it something here to stay . Guy lets talk a little bit about what is happening with the stories. Lets get a first word news. Go to first world news. IsPhiladelphia Fed president uncertainty making an argument for delaying the rate increase. Will be al banker voters ear says he is worried about potential policies that would have distorted effects, depending on the outcome of the vote. He did support a rate hike in september. Scotlands first minister says she will publish a draft scottish and referendum deal next week if she feels her nations interests are not being protected during the brexit. Negotiations the publication of the bill does not mean a eminent vote. Eminent vote. They say the question of independence had been settled in 2014. Singapores economy contracted sharply in the Third Quarter. It is a sign it is struggling in the face of a global slowdown. Gdp fell 4. 1 from the previous three months. A big mess after estimates were made it zero change. Growth has been under pressure since last year because of weaker trade and lower energy prices. To mournis beginning the world laura longest reigning monarch. The king died at 88. They said his son would take the throne. He was a symbol of unity. Ill for years, making limited public appearances and spending most of his time in the hospital. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Caroline china has seen their first inflation analyst five years. Ppi rose. It is the first gain since jay were 2012. Since january 2012. What did they tell us actually . Unexpected. It had been trending in this direction. It shows they are making progress on the capacity side of things, cutting back on Spare Capacity and in the coal sector, particularly. Noting the ppi is so important for profits and their expansion plans. It is so important for the debt story in china. That is obviously one of the big drivers in growth. It is a positive. We are in fairly marginal territory. There will need to be significant work done Going Forward to make sure it is sustained. You have to highlight the steel sector. That is a tougher task than cleaning up the coal sector. That is probably where the challenge lies. Guy so much how much of this is supply and demand . There is a base, the commodity price has an impact. That is why they are not completely out of the woods with coal. They are attacking coal mines. Neededw is there is more to be done. The steel sector is more complicated. It is more political, especially heading towards next year. It is probably not the environment where you want to shoot down steel. Theyre preaching for reform, we have seen progress. We have seen ppi heading in the right direction. Fantasy of that will keep going in the year ahead. Us is rick,ining the cio at state street global advisors, he helps manage 2. 3 trillion in assets. Little at very there is little risk of a hard landing in china. What about yesterday . Mixed messages, that is the point. There is a chance for hard landing, but we think it is looking like a soft landing. They do need to reduce capacity. There is some evidence of capacity shrinkage, but more to be done. If you look at the fiscal and monetary stimulus, the weakening of the currency, Household Income growth, it points to a softer landing. Guy how much more stay capacity could be taken out . What are the applications . Implications . Rick it is interesting about the merger between the chemical giant. About pricesalked increasing, people have also asked about capacity. There is more to do. There imf this weekend was a talk in latin america and prices stabilizing in terms of commodities. Maybe there is some evidence that some overcapacity in areas has already disappeared. Caroline what about the demand side. Were talking about capacity going out, but at what point will we see government actions to be leading from the demand, domestic demand. Rick exports depend on the rest of the world. We have relatively subdued demand growth everywhere. The u. S. Economy is doing ok. I guess you could say within europe, germany is a hotspot. It will not make up for the need to really crank up the exports. We need the rest of the world to grow. There is much not much evidence. There was angst about that of the imf. The need for fiscal stimulus, combined around the world. Guy what if u. S. Conservatives consumers slow down . Rick that could be the right tail event. The slowdown would be a serious issue for china. There are some all bits of evidence of concern in the u. S. Housing would be one. If you look at wage growth, when you look at the fact that the gdp is shifting in a sense from earnings. We have concerns about where they will come from in the u. S. , more to the man in the street. It looks less likely that we will have a consumer slowdown. , the cio at state street, staying with us. Talk to axt, we will ceo from paris. You do not want to miss that. China is said to plan a megamerger. What does that mean in terms of enterprises, experiments . Really, the question is what does it mean for investors . The eu president says theresa may needs to wake up, she cannot have her cake and eat it. Those stories and more coming up. This is bloomberg. Guy welcome back, the First Edition of hello tomorrow. Begins today. Francine lacqua is there. Francine thank you. I am very pleased to say our first guest here of the day launching the hello tomorrow conference is jeanlaurent bonnafe. It is uncertain times, innovation is one thing a lot of politicians and Business Leaders want to point to to create jobs and growth. How are you doing this . Jeanlaurent bonnafe as you know, this is a rapidly changing world. It is based on technology. There is a lot coming in any sector. For us, as a bank, customers. Ideally we need to know, to understand the future, and how to deliver better bank for the customers and what will stand out. Francine what do they need . Jeanlaurent bonnafe they need financing. They need to be close to us. They need to be close to their partners. They need to be open globally. You have one nice idea in a country, you need to move the idea in many countries. It is a race. You cannot just say, i have decided this, lets fix it and grow it locally. You have to grow fast rapidly. Global bank is good at that. Francine do you think that banks are as close to their customers as they were 2030 years ago . This is important for startups that are here at the conference today. Jeanlaurent bonnafe not all banks have that, but i think our bank is doing quite a good job with Innovation Centers throughout europe, asia, and the u. S. We have a platform that is striking technology. Butre trying to be close, it is difficult because entrepreneurs ideas are volatile. Sometimes they go so fast, you cannot follow it. You have to try. Francine what sets you apart . Jeanlaurent bonnafe a global approach. Being good at sectors. Technology. We understand technology. We believe we are closer to the mindset of new entrepreneurs. For our own business we need new angles. We need newcomers. There faster. They are faster. It is like pharmaceutical companies, they need biotech. We are the same situation. Francine on that fact, is it a legacy . Is it southern u have been working on for years . Jeanlaurent bonnafe we have a diversified model. Some partners, retailers, the energy sector. We very much are exposed to technological moves, newcomers. It is a variety of the ecosystem pushing us. Francine what does that mean for the industry . Do you think the Banking Industry should be more technologically focused. At the end of the day that would be the difference between winning or losing . Jeanlaurent bonnafe no choice. Francine it is the way that we live our lives and lead our lives . Jeanlaurent bonnafe you need to deliver a better bank. To do that you need to understand your customer better. To understand your customer you have to be good at these things, this is technology. Francine how to use the two millennials . The 20yearolds . They probably have different expectations for their bank. Jeanlaurent bonnafe specialized entry points. They will not join the bank as a customer, like a regular small company. Special entry points, platforms. They are running out of time. You have to understand, fast. They would never visit the bank physically. You have to have it on the internet. It is a totally new approach. Francine what does that mean we talk often about the european sector over banking in europe, possible consolidation does that have an impact . Jeanlaurent bonnafe the old approach will have to concentrate. This is the way it is. This is the old industry. We have to move towards something new. Digital, distance, relevant. You can change rapidly. This is a universe that will never stabilize. It is moving. Every two years there is something they. New. Of time use the a lot with innovators, it seems the u. S. Does it differently. They scale up. Uber. Is why we have ove why is the u. S. Europe behind . Because oft bonnafe local legislation and languages and a number of factors when you are in the u. S. You have a good idea, you have the ecosystem, you can leverage. When you are in europe it is more difficult. This is one of the challenges for us. We need to build that huge european domestic market. Francine thank you for joining us on bloomberg tv. I am going to send it back to you in the studio. We have plenty of more great interviews coming up. We speak to a manual mark Cohen Emmanuelle home. Guy looking forward to it. Francine lacqua speaking exclusively to the ceo of bnp. Minutes away from the European Market open. Up next we will look at todays trading. Singin to planning a major merger. This is bloomberg. Caroline 10 minutes from the market open. Thank you. Merge sinoanning to chem with kim china. Details of the deal are not immediately clear. Bloomberg is being told it is subject to change. Kim china had earlier agreed chem china had earlier agreed to buy syngenta. The government body did not respond for a common. Honda is recalling civic sedans in the u. S. To deal with a parking brake problem. Faulty software may prevent application of the break immediately after the ignition is turned off. Honda says the work will be free. No accidents or injuries have been reported due to the fault. Owners will be informed from the beginning of next month. 30004000 jobs in the next three years. The ceo is looking to bring cost down as he focuses on reinvention in the slumping demand for the markets for personal computers and printers. Hp has about 50,000 employees. Went downys shares 1. 8 following. Samsung has warned the overheating phone crisis will cost an extra 3 billion over the next two quarters. To expandhey hope sales of the galaxy s seven and average to compensate. Theyre doubling the recall in the u. S. To almost 2 million devices. Samsung already cut their thirdquarter operating profit by 2. 3 billion after ending production. Volkswagen is still reeling from last years scandal, losing market share in europe for the 13th consecutive month. Overall car sales in September Rose 7. 3 . 23. 9 accounting for compared to 23. 3 a year earlier. That is the business flash. Caroline keep an eye on vw on the start of trade. Not many calls for that stock. But there are calls 3 higher. Asset funding management is up. That is positive so says goldman sachs. Saying the buyback of 4. 5 of their shares, looks positive. Man group seems to be buying into the u. S. Homes market in the acquisition of alto. Not a pretty picture. Chemkeep an eye on this syngenta deal. You also have the elements being pulled in. There is a state of play meeting today taking place at between the parties and the European Commission to discuss the ongoing regulatory issues surrounding it. Keep an eye on exactly what is happening. The fact that these two movement megamergers are taking place at the same time, i think really creates a difficult story to the regulators. Meanwhile, up 2 . They said theyre close to a deal for the us trillion coal mines. It could be worth up to 1. 5 billion. Guy lets bring rick back. Lets talk about equities. The multiples look good. Therefore you would argue they looked he valued. Nevertheless, investors are nervous about buying them. Rick that has been the story for a long time. You have topped by a growth in europe, in theory the week labor market would feed through the bottom line. It never happens. Guy a relatively weak euro, lest yesterday we saw a break below the 110 line, if that continues, this does precision this dispersion of Interest Rate will we start to see european equities become more attractive . Rick i think you have to look at each country. Germany is different from the rest of europe in terms of the economy and in terms of how companies extract earnings. The last time the euro weekend, you had a Significant Impact in germany. Not itt it was was felt by the rest of europe. Italy was about 25 down. The equity market suffered because fundamentally the domestic economy and become honeys relating to it, the banking sector, in particular, was weak. If you look at it country by country and sector by sector. We have had false stalls in europe before. Stick withick will us. State street global advisors, coming up. Futures pointing up. We slipped down more than a percentage point yesterday, will we see its reach race . Retrace . Mrs. Bloomberg. Guy good morning. Welcome. You are watching bloomberg markets, the european open. Here is the city of london. Caroline hyde has joined me on set in london. Caroline, you have got caroline chinese cgi unexpectedly turns positive for the First Time Since 2012. Is this a blip . Chemical experiments china is 100to plan more than billion in assets. What will the state in state enterprises mean with investors . And tough talk. The e. U. President says any brexit will be painful for britain. May still minister think she can have her take and eat it . Guy nine seconds away from the European Equity market open. Indicating a positive start to 0. 5 after 0. 1 a negative session yesterday. We will at the Market Makers roll their way through. Thann is opening up less 0. 1 higher. Well below the records we were setting a few days ago. A little bit of a sport now. Lets find out what is going on in detail. Us equities are getting that little reprieve you said. Is the great global export from china gone . I am talking about inflation, of course. Our guests suggested this was merely a temporary reprieve in china and has not played out in europe. Yesterday, we worried about trade. We may be trading equity on a global basis, that you are seeing the cost of production rise. European equities are slightly better this morning. Consumer staples of by 0. 8 . We have had weeks of outflows in European Equity markets. Have a look at gmm. You see wti up 1 . Leftr is by 0. 3 on the side of the screen. The currency is where you see the magnification in terms of risk. The pound down. And myselfith anna this morning. A break of one point 20, and you will start to see a change in the basket case. Arkets are down when does this relationship in the gilt market began to unwind between sterling and the guilt . To will be returned where will we returned to . You are seeing a little bit of a change in direction. Let me take you to three stocks recover watching. One group has seen a significant ship in net inflows. We are waiting for an opening flash price on man group. Funds, believe it or not, have had the best quarter since 2013. Nicredit opening down by 0. 5 we have a report in republic of republica that they may go for a capital increase. Why . Investor interest and return. Rom the ecb Software License revenue has died. Guy manus cranny off to radio now. Lets get ricks picks. Be say the market should signaling risk on, but your not position for that. Rick we are a little bit underway in equity. We have hedges for that position. We are over weight in gold and some credit. It is a bit of an unusual portfolio, because we have gone short government owns but long on credit. We like credit. We think we are being rewarded for some of the risk. Because we are a little bit pessimistic on Earnings Growth we are very worried about volatility. We retreated a little from equities. Within equities, we like small cap. Small cap is a little less sensitive in some ways to the fixed income Interest Rate switchback we have had in markets. Also the alpha potential a small cap is much greater. We have seen that over several years. The strategy we have found it easier to extract outcome from small cap of the market and large cap. Caroline we will dig into the u. K. Story morning and bit. Are you talking across board or across regions . Are there any regions you are particularlyk u. S. , the switch is from largecap to small cap, i think you could apply it to small markets. We know there are governments issues. We found smallcap not exactly a safe haven, but a different place. Guy why are bonds and equities so correlated at the moment . The same direction. Have been since the end of august. Walk us through what is happening. Rick it all operates through a discounted cash flow model. The particularly where you have got people who look at some parts of the equity market as bond like, there is a tendency for the correlation to start increasing. As investors get trampled out of the short end of the yield curve, theyre looking for an answer. They do not like bonds, especially in the u. K. , almost 50 basis points. The equity market it increases correlation. Caroline talk about the credit is you are buying. We are seeing the druggy effect not only driving sovereign bonds below the deposit rate, but equally corporate. Are you going into investment grade, or are you chasing it down the credit curve. We are Long Investment grade and high yields, both in europe and u. S. Based portfolio. Clients are also interested in spread. Many are facing troubles from qe. They are trying to avoid markets that have