Numbers from germany higher than atected, Business Confidence 115. 1, estimated 114. 5. Global stocks advancing. Nestle is the one we are watching. It did spark a rally in european dan loeb looking at the company. The other one im looking out for is intesa. Lets get straight to bloomberg first word news. The u. K. Prime minister due to meet the leader of dup. Also, theresa will publish details how she intends to protect European Union nationals living in britain. David davis has said that in said britain will fight any demands. Are secretary of tate says qat will find it difficult to meet demands from of the Rex Tillerson said they could be a basis for talks. The list of demands includes shutting al jazeera, cutting back ties with iran, and ending turkeys military presence. Pakistan, more than 150 killed after a tanker exploded. Officials said dozens more are in critical condition. Villagers had gathered to collect leaking fuel. The final round of election showed a resurgence in for former Prime Minister silvio berlusconi. Candidates showed backing and an independent candidate. They made significant setbacks for the ruling democratic party. Spacex has launched its ninth rocket, topping last years total. The lift off from vandenberg in california follows another launch on friday. It is caring 10 satellites for iridium communications. It is the first time spacex has sent two rockets into orbit in such a short time. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you. Italy has approved emergency ,ules for two ailing banks mobilizing as much as 17 billion euros. On friday, the European Central bank declared the lenders failing or likely to fail and said both would be wound up under italian solvency rules. Is there a better alternative the pointdecree from of view is supporting families, the banks, the some favors, the stability of the Financial System . I wish that people who criticize me would tell me what a better alternative could be, because frankly i dont see it. Francine for more, lets bring in our bloomberg managing editor for finance and head of multiasset at royal Asset Management. Thank you for joining us. Break it down for us. This is a complex deal that was done last minute. It was. They have been working on this for quite some time. These are two banks that tried to go public just several years ago. Exploredvenues were unsuccessfully, including trying , so this is a 17 billion euros split. The good assets will be taken over by italys secondlargest bank. The bad assets will be slowly unwound. Questions over the banking unit and the rules that were sidestepped to allow this intervention. Francine i have a chart that tells you the story for these two banks. These are nonperforming loans to total loan ratio for the two banks. The main controversy is around the eu rules and the role of this good bank . Thats right. The italian state is putting the banksaving deemed were not too big to fall under the European Union rules, but were going to be dealt with under a tight insolvency law. Under italian solvency law. The liquidity would have continued at a steep pace throughout the last few months. Francine how do you see all this . Is this the beginning of the end because this could go badly or is this the beginning of a better place . Thing is that this is a legacy issue from the banksial crisis, so these have been zombie banks for quite some time. This is a way of winding them up. Made ist that was just is set thatecedent state aid is not meant to be allowed, but the rules have been twisted here in order to allow italy to put this money forward Something Like 5 billion euros of state aid is and 12 billion euros of loan guarantees. Managed to structure it in such a way that the senior bondholders have been protected, but the questions will be asked about whether this is a big country being treated differently from small countries. Is it different because it is the moms and pops of this world . This is the backbone of the , thehier Italian Economy myriad of small and Medium Enterprises could have been affected by a disorderly resolution, but it is not dissimilar to spain. Santander was covering the capital gap that the state is now covering. Francine who are the winners and losers . The market is telling us that intesa is a winner. Theyre getting good assets for free. They are expanding their Balance Sheet and expanding into the region that is the backbone of the small and medium sized enterprises. Francine would you go back . It anynt think there is. Ajor impact on strategy what happens next . The deal has the European Union backing. There will be questions as to otheremains of the lenders in italy struggling with capital raising. Francine thank you so much. With surveillance. Plenty coming up. Deploys 3. 5 billion in his biggest bet ever, shares jump. Prime minister may will give theity, but will it move dial in negotiations . We will discuss that next. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine this is bloomberg surveillance. Takata has filed for bankruptcy protection in the u. S. And japan. The filing listed more than 10 billion in liabilities. A russian billionaires Investment Vehicle has reached a deal to buy one of the Largest HealthFood Retailers in europe. T will pay 1. 8 billion pounds the payroll securities fraud trial is set to begin today. He came to public attention after raising the price of a life saving drug by 5000 . He has been free on bail and has taken to social media to make strongly worded statements about members of congress that criticize his decision. That is the Bloomberg Business flash. Francine nestle is in the s thirdrs of dan loeb point. The fund in tens to encourage management to pursue change with a greater sense of urgency by selling its 23 stake in loreal. Thank you for joining us. We do have a new management in charge. He has said he will pressure them, but give them enough time to do more . Actionrly he wants some faster than new ceo of nestle took over this year. He already signaled he was going to move to change the company. He is a new ceo who comes to nestle from the health care industry, so clearly there is a shift. Why are European FoodCompanies Targeted at the moment . They have lacked in performance and have not rewarded shareholders as much as shareholders would like them to. Fended off a hostile bid from kraft heinz not too long ago, then moved to improve shareholder return and would put some underperforming businesses up for sale. Francine this is nestle stock. Compared tog at 11 peers, 4 , over the past two years. We calculated it on a blended ford pricetoearnings. Do you own any . In terms of Food Companies and defensive generally come they are quite high multiples relative the market. This is nestle versus its own sector. Element tod proxy the ownership we have of these sectors. What is interesting is the last 12 months or so has seen strong inflation rising bond yields, which has been a challenge to the sectors. The tailwind is picking up and you could find multiples go up as bond yields go down. Francine what can they do to defend themselves . They can review their portfolios. Nestle has gone about that with mark schneider. Unilever is doing that more aggressively. They can do buybacks and other things to boost returns. Spreads or the confectionery business up for sale. That may be the best response. Youcine trevor, how do view the fact there is an activist investor now . Can you say the industry in the europe will be targeted by activist investors and what does it mean for shareholders . In thenot involved analysis of individual battles, but you are starting to see capital being deployed to unlock value. If you look at the relative performance of european stocks versus u. S. Stocks, it has been a disaster story for the last 3040 years, plus the fact the european economy is doing better. Many people are thinking maybe that will unlock value. Francine why have these companies been such poor performers . Part of it is the european economy. Part of it is the fact that consumers are turning away from big food in some areas, this sugary, salty food, and so there is a big challenge for these companies that have legacy products in their portfolios. Moving to get healthier and slimmeddown, but it is a long process with these brands they have invested in over the years to keep them performing. Francine they are kind of emergingmarket companies, arent they . They so much sell so much to the emerging markets . Thats true. There is quite a significant emerging market exposure there. An ideal environment would be rolling bond yields, rising commodity prices, a bit of dollar weakness. We have had some of those things over the past few years. There are individual companies not keeping up. Francine european companies, you like them better . We do. The political story was the big thing this year, and the u. K. Has negotiated that. There are lots of reasons why people are moving in. Also, the european economy tends to like the rest of the world. Europe is playing catchup. We dont believe it will be a permanent outperformance. And china slow down, europe will cool off as well. We believe that will happen next year. Francine gdp or they cant stabilize the economy . Look at chinese Business Confidence, it has been dropping. Chinese Interest Rates have been rising. Once we get the Party Congress out of the way, you will get more focus again on reform and monetary tightening, so i think we have had 12 months that you can look at as pump priming. After that, we get back to a slowed down china where bonds can do quite well, but stocks will have a few challenges. Francine interesting. Thank you so much. Up next, Central Banks in focus. Mario draghi speaks in portugal today. We will have the details next. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Inncine i Francine Lacqua london. Mario draghi will speak in portugal later today. John williams has made the case for more Interest Rate rises. He said he expects inflation to rise to the 2 target next year as unemployment edges lower. Viewsmments suggest his are in line with those of janet yellen. When you look at Central Banks and we talk about Balance Sheets in the second, but if you are a fed washer, you have to take simple bets you believe the economy is strong or the labor market is Strong Enough to push ,nd collation up automatically is that right . Yes. The economy is growing Strong Enough for the Unemployment Rate to drop. In 20082009, but wage growth is very muted, so 2 two. 5 wage growth, where as it was double that level in 2007. You are seeing muted wage growth , and Central Banks have to make a call as to whether something has changed. Yellen seems to be on the side that says we need to reload and raise it Interest Rates. Is no compelling evidence they need to raise rates rapidly. If global inflation starts to ebb, you may find some of this pressure goes away for a while. Francine what are they worried about . They dont have enough ammunition when the next crisis hits . Wage inflation kicking in and becoming a trend. Phillips curve argument that no unemployment creates Wage Inflation, but it is a process that can take quite a long time, so i think the fed is worried that Interest Rates are too low and they have left nolate, but there are still signs of late cycle excesses in the labor market that would say they need to be in a hurry about it. Francine what do you worry about the most in terms of Balance Sheets . , the ecb inboj yellow. The japanese are doing something quite special here. They are trying to create inflation and going through an experiment of pushing harder and harder until they get inflation to come through. Market, they have parttime workers, lots of structural changes, which means wages are not picking up the way they would like to see. On the other side, we are wanting Wage Inflation to pick up because they are trying to get nominal growth to a level so that they can erode government debt. It makes a lot of sense, but it is a highstakes game. Francine thank you so much. Next, the brexit battle as theresa may lace out her plans for eu citizens as david davis says he is ready to fight over the role of the European Courts. Plenty of details next. We would do that next. This is bloomberg. Frances you are watching bloomberg surveillance. Lets get to first word news. The u. S. Secretary of state has said qatar will find it hard theeet the demands to end crisis p Rex Tillerson said they could be a basis for talks. The list of demands includes shutting the Al Jazeera Network and ending turkeys military network in the process. Than 150 people have been killed after a take or exploded. Dozens more are condition. Leakinged to collect fuel after a tanker overturned. Firefighters are battling blazes utah. Ifornia and in southern california, a wild fire out after a car crashed. Officials said Better Weather conditions have limited the growth of a wildfire may utah. In utah. Re in support for silvio berlusconi. An independent candidate is. D in its ninth launched rocket of the year. Follows another launch from friday. The craft is carrying 10 iridiumes for communication. It is the first time they have sent two rockets into orbit in such a short period. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Theresa may will give her plans for the use of People Living in the u. K. Further talkshold with Arlene Foster this morning. For more on this, we are joined by Simon Kennedy and jonathan portis. Greentham. R thank you for joining us. It is a 15 page document. It will pad out what her willsal on friday david push back their demands. He calls it the fight going forward. Out there be readers wanting to know with these rights are, how far she is willing to go. Of can read this as a test how she wants these talks to be. Francine how hard does she want these talks to be . It was one of her original red lines, not just on this one, but on a range of issues. The eu proposals would say that. The british proposals will not. That is going to be an issue. The second Sticking Point is the , they would ensure citizens kept their existing rights. Would take some of those rights away from them. They care about a few things, the border and the hardness between the border between the two islands. She needs to be on board by thursday. The dup leverage. Francine we have the you deal, how would this play out . Euro pound, primarily. Cable, you have the big swings in the u. S. Dollar, which pollute the picture a little bit. Scenarios atave this stage. Cane are lots of ways it break up. There will be done to know where people may think there will be a breakdown in talks. There will be moments where it sells off. Alternatives. One as we move in the single mpset, which is what most in the labour and conservative party want despite their leadership. In that case, the pound ought to strengthen. Lifted allakness votes and gave people strong returns last year. The pound is quite strong. Asset returns end up being quite weak. Strong or weak is theresa may at the moment . It is unclear what her tone and language suggested last week. She is weaker than she was before the election. What that means for the talks is unclear. We are in a position where she may want to make those compromises, but eu leaders may say we are not sure you have the political strength to deliver this. Why should we make the compromises . That is what worried me that theresa mays weakness means it will be more difficult for her to make the concessions she needs to make a decent deal. Francine is she going to go soon or is impossible to tell . It looks like she will hold on for a while. The potential leadership candidates, there is a comic about it. They probably want some stability. Of blood, if a hint were in the water, the sharks would calm. The tories are known for taking the labour party dont to kill off the leader if they see their own future is in peril. Does she need a soft brexit to stay in power . We dont know what the bounceback you could argue there is a majority in parliament for making the compromises needed for a softer brexit. On the other hand, she may be held hostage to the hardline who doon the brexit wing not want to see compromise on , such as the role of the European Court of justice. We also have the fiveyear fixed on parliament act. Limpe on in this. It will be messy for quite a few years. Francine what does this mean for the boe . The probability of a u. K. Hike y the bank of england. I find it hard they will hike with this political difficulty in the background. October, you get past october, inflation starts to come down. Find it hard they would hike. Markets dont really buy that. Worryne how much do you about the u. K. Consumer . Wage growth is falling like this and inflation going the other side. I would be worried. We have had a strong period since the referendum. Consumer confidence held up after the referendum. The medium to longterm implications are sink