>> the italian prime minister matteo renzi will offer his resignation today after conceding defeat in a landmark referendum. early electionn would see the antihero five-star movement sleep to power. the euro drops to the lowest level since march, 2015. the nation's stocks trend lower, and now the focus turns to the banking sector and bond markets. tough tweets. the u.s. president-elect donald trump takes a hard line with china on social media, saying he won't be told who to talk to after criticism of his phone call with taiwan's president. plus, supreme task. the frexit debate moves to the

u.k.'s supreme court, with 11 judges to hear the government's case on triggering brexit. ♪ manus: you are welcome to bloomberg's daybreak europe, are flagship morning show in london. good morning, i manus cranny. all eyes will be on the bond and equity markets, and the currency market. the world wakes up to its third political dislocation in as many as six months. brexit, trump, matteo renzi. what happens next in the bond markets will be critical for the policy of the european central bank. this is italian market calm before the potential political and market storm. paul krugman is trying to gain a possible euro prices.

what you have is 10 year government bond yields, the best rally in as many months. we've rallied nearly 20 basis points. the spread against germany widens, with action down now 160 basis points. will we retest those wide areas? the risk premium for holding italy, of what happens next, of who is the next leader of italy, is what's going to play out in global markets over the next couple days. talk dei paschi, let's about the risk radar -- how have global markets taken on this new political risk? one has to say that global markets are becoming perhaps just a little bit more, i suppose, sanguine in terms of their ability to assess risk. dear-dollar is testy. what is the next big move? the odds of parity on the euro-dollar have jumped above 50%. deutsche bank is saying $.95 is

on the way. the euro is under pressure, money going into the dollar. that is the haven of choice this morning, as opposed to gold. we rallied .9% at one juncture in the market. hedge funds, in terms of their positioning in the gold market, they have raised their short positions by about 13% at the end of last week's trade. then of course you have the oil market down. oil coming off that 16 month high. back to the assessment of the market risk this morning. let's get you up to speed with christine harvey. very good morning. christine: good morning. a new prime minister is to step down next week in a surprise announcement in wellington where he backed bill english to succeed him. pm said that for family reasons he could not

commit to serving until the fourth term if his national party wins the election, due late next year. the dollar slipped on the news. a green party backed leftist will be the next president of austria. he ran as an independent and took almost 52% of the vote as he defeated the freedom party. the victory comes in the face of a resurgence of right-wing, anti-immigrant parties around the world. >> i think that's something [inaudible] it signals to all of europe, to europeans, [inaudible] christine: the uk's a will start to hear the government's case against holding a vote in parliament before beginning britain's exit from the european union. the scene for theresa may is a

ministration would mean debating, amending, and passing an act which the prime minister would likely try to limit in size and scope. officials are expecting unprecedented numbers of spectators, so much so that they have opened a video link to deal with demand. president-elect donald trump has used twitter to renew criticisms of china after backlash over his phone call with taiwan's president. he tweeted that beijing didn't ask permission to devalue its currency or build up its presence in the south china sea. beijing compared after trump flouted decades of diplomatic protocol by speaking directly with taiwan's president. the south korean opposition may have secured enough votes to impeach the president this week over the influence peddling scandal. a faction in her ruling party has agreed to sit a motion and on friday.

they would just reach the 200 votes required. park may address the nation in the next two days. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . i'm christine harvey, this is bloomberg. manus: thank you very much. let's get straight out to asia and pick up on the market with david ingles, standing by. the dollar seems to be the haven at the moment, but equities are just a little bit more under pressure this morning in your part of the world. david: yeah, certainly. since you brought up the currency, we thought again was going to be a haven -- it didn't strengthen initially, because when there was the news that down, the yenping

got an initial bit. have a look at how things divvy up. just about everything will area is down except for the mining stocks,. financials very much in focus you guys are watching italian banks. 1.6% underwater. how do things look by a country basis? i guess the story is that volumes are light, and in that sense you have a silver lining that people are holding their positions. you had an initial selloff at the beginning; things a stabilized, and as we enter the last few hours of trade, we did get another leg down. when you look at chinese markets, is the first trading day, the first day of the shenzhen hong kong, not exactly a rush out of the gates. about 6%-15% depending on which way you look at it, not a lot of people are rushing in. have a look at the bond markets.

long story short, yields trace ack a little bit, 2.34%, and quick look at the currency market. dollar-yen flat here, the euro, .06,session low in asia, 105 just barely above 105. the other currency we are watching closely was the key we jar. the prime minister saying he will be stepping down, not seeking reelection. that's the story across asia as we get started. manus: thank you very much, david ingles with the latest on the markets. italian prime minister matteo renzi says he would quit in the early hours of this morning after losing a referendum. he called to push for constitutional changes. >> [speaking italian] >> it is clear that my government ends here.

i want to thank my ministers for the extraordinary venture, and i will offer my resignation to the president of the republic. manus: with the euro dropped to a 20 month low, let's get straight out to francine lacqua, standing by. great to see you. another huge political upset on the global landscape. what did the papers say? give us a feel. four of: we picked up the biggest papers, ranging from the papers supporting him, the most populous party who called for his resignation, and also calling for a fresh election. "five-star," saying it's a dramatic picture. they say the ballot -- he needs to leave. one -- a more pro-market renziay the wave of no, leaves us. ublica"f all, "la rep

saying that the no triumph, renzi leads. this is a century. and this is the more right wing ally of sylvia broyles scotty, saying that renzi goes home. i think, like brexit, like donald trump, we are seeing a wave of populism. what's clear is that it has really divided the country. some of the talk has been extremely divisive, and now our political parties are trying to get into the populist ones. for the more moderate politicians, their first goal would be to find some kind of government stability. matteo renzi will go to see the president this afternoon, and formally tender his resignation. then we also need to change

possibly the electoral law, because this was reform seven months ago, and the way the electoral works is that it could clearly give a majority win to one of the populist parties because of the way it is structured. manus: that is going to be the critical part, isn't it, for markets in terms of assessing risk. who like the caretaker be? what are the possibilities of snap elections? it is still too early to make the assessment. it is, but because he has seen such a big no vote -- if you look into what was priced into the markets, what was priced in, with a little bit of market turmoil, was a possible no. what we thought would happen would be around 52, 54% no with a 60% no. they had a huge turnout, and 60% of the people that turned out to vote wanted this.

they didn't want this constitutional reform. with a large majority, it is difficult to see how matteo renzi can be part of the transition team. it may force early elections. the problem with early elections is you have this new electoral law, and it would do a french style election, which means that even if you don't have a majority of 40%, if the two main candidates have a lot of power, than they face off to get the majority. that would clearly give the populist parties a chance to govern. manus: interesting, one of the lines was my objective coming into politics was to put an end to jobs for the boys, and it is my job which is going. to reminds me of ireland, in so many ways. let's talk about the banks, the potential market assessment of risk.

francine, bang in the eye of the storm, trying to raise capital. what does it mean for the banks? isncine: again, the problem -- if you don't have political stability, manus, you really point out that if you have one of the largest banks, monte dei paschi, looking for a capital increase, and we were expecting sales to start. you are an investor, you say you can't buy into the capital increase and you shy away from it. that may feed through some of the smaller banks. it's not listed, it's a medium-sized bank, but the ecb has asked it to strengthened its capital position. again, they need to find some capital raising or go to shareholders, institutional or otherwise. if there is political instability, it may mean a lot of these investors are shying away. at the moment everything is up in the air, but we will know in

the next two to three days exactly what we will face in terms of the government plays and whether we have a caretaker government or not. throughout the day we will bring you great exclusive interviews, talking to the second-largest bank, biggest in terms of market cap, and also to a former finance minister. he joins us in about two hours. manus: great reporting. we look forward to trying to read the tea leaves of the third major political upset. francine lacqua in rome, to see you. joining us on set in the city of london, daniel morris, senior investment strategist at bnp paribas. thanks for coming in. >> pleasure. manus: round three, ring the bell. markets -- this is 10 year government bonds, italy over germany. are you surprised by the scale of the no vote, at 60% on this election referendum? >> yes. at least this time the polls did

get it right and that people expected to lose, but not by this big of an amount. even though you have a result, i think of him losing, we have more uncertainty in terms of interpreting the consequences. manus: if we break it down to the markets, the risk is that the premium to hold italy over germany -- the risk to hold italian banks versus the risk of your peers -- all three markets have a propensity for risk. where will the warning sign come for you and what should i look for? >> the thing we will be looking for is will we be able to manage to get a caretaker government? otherwise, if you think you will fresh elections on top of everything going on, i think that is the biggest uncertainty right now. otherwise, the government has some stability. but if you add in the possibility of fresh elections, and if you look at where five star is in the polls, it's certainly going in the wrong

direction. manus: francine talked about monte dei paschi. there in the middle of raising 5 billion euros, trying to convert bonds. this is a mammoth task, given the market risk at the moment. what does monte dei paschi encapsulate for us? failure to raise the 5 billion -- would that be the beginning of a systemic risk warning to you? >> necessarily, because i think -- not necessarily, because i think the ecb is aware of the risk. it's not ideal, but this is something that has been going on for quite a long time. with the ecb it is in terms of their position of regular in the banking sector. it may fail because at this point it doesn't look like a great opportunity to invest in italian financials. but i think you'll find something that will allow them to get over the turbulence, get political stability, and come up with something else. manus: that's what politics is

about, that's the essence of compromise. its ironic. we saw these black swans, brexit was the first, donald trump is the second. markets -- markets have not reacted. i have to be careful and not be subjective. they have not reacted as very lightly us far. -- -- as virulently thus far. money poured in for five straight days. we had the biggest inflows in almost five years, and the market assumed there would be a no vote. >> that's probably a little more ambitious or optimistic than might be appropriate for the situation. with brexit, the economic consequences i think are negative in the markets reflected that. with the victory of trump, it is less clear. i think there's a difference in terms of market reaction. italy, you have to come down with it being more negative. you know you need reform, and

you say the likelihood of that reform has fallen. be more optimistic about the economy. manus: dan, stay with me. we have a lot more to debate during this first half hour. here are some of the highlights for your week ahead, and what a week it will be. the supreme court in the united kingdom starts hearing evidence on last month's ruling that the u.k. government's approach to triggering brexit. tomorrow, we get the u.s. trade deficit figures. wednesday, there's a bank of canada rate decision. followed by the next day, by a policy announcement from the ecb. on friday, european commission president jean-claude younger gives a keynote speech at an the event working the 25th anniversary. coming up on "daybreak," keyboard warrior. the commander in chief elect, donald trump, takes another shot at china after speaking to taiwan's president. see you in court?

the uk's most senior judges deliberate whether brexit can still mean brexit. will that derail the government's plans? and one last her a. the economists see another euro area boost from the ecb reaction to mario draghi, but will it be the last? this is bloomberg. ♪

manus: 6:22 here in london. a beautiful day. you are looking over tory harbor. christine has the business flash. christine: thanks. rom unicredit, according to people familiar with the transaction. is valued at as much as 3.5 billion euros. a purchase of pioneer, which oversees about 226 billion

euros, would be the biggest acquisition for amundi can propel it into the top ranks of global money managers with almost 1.4 chilean dollars in assets. native american of american and environmental protesters have victory, with the u.s. to nine the permit needed to complete the dakota access pipeline. the army corps of engineers says there is much work that needs to be done and's alternative route must be found. in what across land sacred to native americans and protests against the project have resulted in hundreds of arrests. david walsh and nicholas udall left man group after the closure of a stock cooler helped oversee. according to a person with knowledge of the matter, the hong kong-based managers exited the unit after the firm in april shuttered the asian equity alternative fun. a spokesperson declined to comment. and that is your bloomberg business flash. thank you very much.

christy harvey. donald trump has taken on the chinese government in a series the president-elect very and his 61.7 billion followers, "did china ask us if it was ok to devalue their currency, heavily tax our products going into their country, or to build a massive military complex in the middle of the south china sea? i don't think so." the yuan is lower amid concern that the china could be named aa currency manipulator. stan morris from b.n.p. paribas investment partners. dan, the prospect of labeling china a currency manipulator, what are the real applications of that in 2017? is that the role that he travels? >> not so much. certainly if you contrast it, it to them immediately -- currency manipulators starts a steady -- they look at the current account deficit and make

estimates. that really doesn't have much of an economic consequence. it is more important if and how the chinese might react. manus: this is the yuan and capital outflows. for anybody who has the terminal, have a look at this. this movement in the yuan, we are down since donald trump won the election, is there a crisis point, a break point for the globe? dollar will to the we become concerned that he will go into full overload on this? >> i think you're probably going to get to that pretty quickly. we are expecting the depreciation to continue. if it goes at a modest pace, it allows other currencies within emerging markets to adjust, and that is probably fine. what we are concerned is the stepped down depreciation. manus: how quickly could we get to 7, and do you think he give beyond that? >> the rate appreciation of the last year has been steeper. at this point we will expected to turn around, not necessarily

because we still have fairly persistent capital outflows. that is what's driving the currency lower. manus: talk to me about the trade deficit. those numbers come out on tuesday, and normally i wouldn't do that. but you are. >> one of his things is that running an account deficit is bad for the economy, and if you close the deficit it is good. givenonomic logic aside, that you have this announcement coming out on tuesday, one that investors don't pay much attention to given the current political environment, you might see something centered around that, because it allows him to pick up on this theme of we need to export more and import less, but that means you also on the phone else to import more. manus: decades of geopolitics etiquette undone in 140 characters. stay with us. gray? up, hard, soft, or

the u.k. supreme court begins the seeing of the government's case of holding a vote in parliament on the country's you exit. we will talk brexit options. this is bloomberg. ♪

manus: 6:30 a.m. in london, 1:30 in new york. euro-dollar, the dollar is stronger, so if you are getting ready for your holidays in europe, good luck to you. euro is down by nearly 1%. daybreak is available on your bloomberg, on your mobile. let's take a look at the top stories make today's vision. the top story is about matteo renzi, who resigned this as the italian prime minister, standing down after losing the referendum for a constitutional change. the vote threatened renewed political and financial turmoil for europe, and that certainly

seems to be the sentiment. we see how the bond markets and the banks reacted, with the first flush of trade today at 8:00 a.m. in london for the cash equity market. next up is the rising dollar, where the money flows on the back of this. it's a political shakedown, whatever you want to call it. the greenback benefited, euro selling off all of the wake of the referendum. the currency had a 20 month low. other european currencies -- sorry, other currencies against the euro are also under pressure as well. focuses on the latest twist in the brexit battle, the u.k. supreme court. begins hearing theresa may today. she is contesting the high court ruling that parliament must approve any triggering of article 50. the hearing will last for four days and the decision is expected in january.

oil is coming off the highest level in 16 months, had a cracking rally as opec and non-opec agreed to do a deal late last week. we have our middle east anchor back. the swap is over. youself is back near a barrel of oil, i am back here to chilly winter. good morning. yousef: good morning. left to the weather here, the fog disrupted the flight activity out of dubai. the main story is oil barrels, coming off these shale returns, the return of the system in the u.s. that lays it out for you. i have laid out for you. what you are looking at here is another bill. that is the fifth straight week, the most since january. christmas for early u.s. shale is the key question. bloomberg intelligence pointing

out that a visible reduction in global inventory will also remain key for oil prices. b.n.p. paribas weighing in, saying that oil extraction is particularly flexible in response to price fluctuation. the other parts of the story revolve around a charge relating to how a lot of these hedge funds place their bets as the opec meeting came out. they actually reduced their bets by about 5%, both on oil price gains and oil price declines, which is interesting, because you had the biggest moneymaking opportunity here in terms of a long flight. andmissed out on that, looking ahead to the december 10 meeting in vienna, between opec and non-opec. plenty of time to get it through, and i will stay on this story with you. manus: thank you very much. yousef gamal el-din.

hunkering in for a beautiful september into by. let's turn our attention back to the united kingdom and to brexit. the u.k. supreme court is beginning the process of deciding whether prime minister theresa may needs to hold a vote in parliament before formally triggering article 50. supreme court officials are expecting unprecedented numbers of spectators, with video links to deal with the demand. with regards to the uk's access to the single market, the foreign secretary boris johnson discussed the possibility of back paying for market access after brexit. >> that is obviously something that david davis is considering. it doesn't mean a decision has -- i'm not going to get involved in the minutia of our negotiating position. manus: daniel morris from b.n.p. paribas, joining us on set,

along with our eagle team leader. tony, let me come to you. the government lost their first round, as it were, in front of the judges, to huge press coverage. what do we expect? >> it will be that different. both sides have laid out their arguments and they are going to argue the exact same thing they did six weeks ago. what do wethe government will st it's the royal prerogative or executive privilege, while others say it has to be the prime minister, because she has complete power over foreign policy. the claimants who won the first time around say this will change laws throughout the country, throughout europe, and changing laws needs parliament. it will be four days, with more than a half-dozen groups getting a chance to talk to the court. parties,ave the main

and the scottish government, northern irish, welsh government, ex-pats who live abroad, and people who live in the u k where other citizens will all have a chance to talk to the court. manus: and it's a much broader group of judges this time. it's 11 judges in total? >> the 11 supreme court justices sitting on one case, which shows how important they feel it is. manus: dan, let me bring you in on the conversation. i have been away for six weeks, traveling along the gulf. i come back and looks at brexit, and every time the government seems to travel a road, it is more likely that parliament will debate. every time we see these moments of parliament will get a say in what happens, sterling assets get relief. the markets want a parliamentary debate? >> we think so, because the

expectation means it will get something. softer what the markets care about is that u.k. companies can sell goods for financial sectors to have access to the eurozone, of the things that were there before, and they more or less still want to be there afterwards. it seems more likely to get the debates. manus: talk me through the significance -- when will we get a hearing result? what are the consequences of that? this is the highest court in the land, nowhere else to go. if this goes against the government -- give me the timeline. >> everything -- we should know what's going on by the middle of january. the court comes back from its christmas break on january 11. it traditionally gives rulings on wednesday. that could be the red letter day. it could be a week later, or in a case like this, they could break the rule of wednesday ruling. but sometime by mid-january. could go somewhere else?

conceivably this could go to the european court of justice in luxembourg, but everyone has been playing that down. i think all sides don't want to get to be an environment where luxembourg judges decide on what the u.k. can do. everyone has played down that possibility. certainly the government probably wouldn't appeal. when one of the parties, perhaps? unlikely. manus: so there's the landscape. i was looking at the gilt market -- let's have a look at the bart chart, one of the worst performing bond markets in the world. developed markets over the past three months -- how does bnp par abbas look at assets? this is all about reflation, inflation. give me a synopsis of how you look at u.k. sterling risk. >> i think we just have as much uncertainty as we had a month ago. manus: i wait another six weeks? >> it will be different when you come back.

you have a short-term effects toward hard brexit, the weakness in the sterling, which is clearly negative for guilt. -- four gilt. but if that plays out you think there needs to be more issuance, but also more economic growth. on both sides you have forces that are bad -- manus: is that in your base case scenario? >> it is one of them you could see, because the u.k. economy does need, we believe, access to exports to the eu, needs the banks to pass forward to the european union, and if they don't have that it is difficult to see how you can get economic growth. manus: a great debate between passporting and equivalent. thank you,, gentlemen for being with us. tony aaron. dan morse. we have the ecb president mario draghi set to give the euro area economy -- we will hear it on thursday, but it may well be his last. that is the view of economists

in a bloomberg survey who see that the ecb president is announcing an extension of qe on thursday. three quarters of the respondents say that would allow for a tapering to start later in 2017. dan is still with us. the ecb -- if you have any my dell, given the decline and fall about matteo renzi -- renzi is gone. brexit has happened. trump is ascending. what does that do to the ecb's proclivity to extend qe? >> it probably hasn't changed all that much. they have already signaled that they will extend, and certainly this has given them a reason to continue. the real variable is are you likely to see any tapering or is it less likely? pre-trump, people fight you would get 6-9 months, but at a slower pace. that is much less likely.

i think you will get the extension of the same pace because of the uncertainties in the market, giving italy all the more reason. manus: you know, the thing that i did on risk radar, the aspect i showed, was the euro trading at a 21 flow. low. months you have qe, but it may taper. but on the other side, i have deutsche bank, socgen, goldmans, already talking about euro parity. does the currency help -- it helps mario draghi, doesn't it? fundamentally it helps him counterbalance the extension of qe. >> yes. one of the challenges they had was that the fed was so dovish, and the dollar was not all that strong. now with much higher expectations for next year, stake in the pressure from the currency point of view -- weaker

euro is good for exports and growth and helps inflation. manus: does that make european equities any more appealing to you as you look through the prism of the fx? >> one of the factors that does make me feel it -- yes. the problem is where the exports are going to, and always one of the arguments for europe is that they have a bigger exposure to emerging markets. given the dollar strength, though, it helps, but who will be buying? manus: great to have you this morning, as matteo renzi is set to formally resigned. dan morris, senior investment strategist at b.n.p. paribas. our top story -- italian prime minister matteo renzi is set to quit in the early hours of the morning after losing the referendum. he called to push the constitutional changes. the euro dropped to a 21 flow. let's get straight back to our editor at large, francine lacqua

in rome. francine, you have a broad church forming. allow me the irony. you have a broad church of papers from supporters. what are they saying? what is the press talking about? francine: well, first of all, the press is really talking about the fact that he lost by 60%. there was a record turnout, more than 70% of italians went to vote yesterday, and out of the 70%, 60% said they did not want this constitutional reform. it was actually about the government and matteo renzi, but certainly he took it very personally. i have for newspapers, and it shows the spectrum of italian politics. is quite right wing paper, "renzi goes home, no wins big with 60%."

another one i want to show you is a populist one, basically supported by the five-star movement, headed by a former comedian who not only called for elections it straightaway, but he was the one who was pushing matteo renzi to resign. they want italy to leave the euro. it is quite revolutionary. it constitution, the battle, has been revised to 60%. the other more moderate papers, the first one is the wave of no, , similarpublica saying the triumph of the no. i think the problem -- it's not a problem, but the markets will react because we were in a blackout period for two weeks, but the referendum polled three weeks ago gave no the win by 53%.

60% means that matteo renzi is unlikely to stay head of the party, and he has said that it is unlikely he will play any kind of role in the technocratic government. they are expecting him this afternoon to formally resign. he gave the news conference at midnight last night, but he goes to see the president of italy, and it's the head of state coming into play in this kind of scenario. is unlikely at this point that matteo renzi will still be able to win. manus: the other thing is that clear. i want to bring you a couple lines from the eu commissioner. he was speaking to french television, saying that italy is a stable country, it is very engaged in europe, and that the italian vote -- i'm curious to see what you make of this, francine. the italian vote wasn't about populism, according to this.

this is the essence of it, isn't it? change, about trying to structurally change, how italian parliamentary democracy works, and to that end, he is saying that this wasn't about populism. you think that is a fair reflection? when you look at the percentage, that 60% that said no? francine: right, well this is the problem. you may be right, in that i spoke to a lot of people in rome concerned that the constitutional reform would give too much power to the prime minister, however, even if you say that this wasn't a populist vote, it is very clear that the populist party won. they were the ones campaigning for a no. what this means for the future -- it means that matteo renzi, because he always staked his political future on it, always said i will resign if i don't get this through, it feels like this vote was basically a popularity contest for my renzi.

a lot of i would say mainstream politicians, also for brexit and donald trump, tried to make excuses and said this is not a populist vote because people with donald trump they said it's only 600,000 more democrats. at the result -- 60% of people decided for no. was this populism? was it not? it feels like it is. if the government campaigns for a yes, and the populist party campaigning for no and no wins, you have to admit it's a populism vote. coming up, we will ask that very question to a couple ceos. to them and itg will be interesting to see what they think this referendum means for the banks. monte dei paschi opposite about 15 minutes -- opens in about 15 minutes. then later on we will speak to a

former finance minister, accomanni.ock 1/3 of young italians are unemployed -- what does he suggest we do about that? manus: great reporting. again, euro home country waking up to a revocable change, whatever that is. great job. we will see you throughout the day. coming up, has the collapse in the pound led to a brexit boom for u.k. retailers? we ask the ceo of one london department store. wake as europe's investors up to more political uncertainty, we will be live to rome with the very latest on the renzi resignation. the u.k. supreme court begins hearing the government's case against holding a vote in parliament on the country's eu

exit. the will talk about the brexit options. this is bloomberg. ♪

manus: just gone 6:52 in london, 2:452 in hong kong. let's talk retail values. the upmarket u.k. retail department rose 27%, driven by continued growth in online business. the collapse of the pound affected the sales and for more, we have the ceo of -- who joins us now. thank you so much for joining us. a global, iconic brand. you have a cracking set of numbers, profit up, online business growing. is it bumped up by brexit and the drop in the pound? >> well, not really, not in this

set of numbers. we only had a few weeks where we bounceit of a consumer from international customers. 60% of our business is u.k. domestic, and that the number we are very proud of, because people are using it on a more frequent basis for every day purchases and amazing gifts. --us: 60% of th is u.k. average spent customer online versus average spent in store -- and give us a little bit of a hint of where the trend is. the average spent in the store and online, what is the trend? >> the average spend online is three times that of the store. when your business is growing online by 24%, which it did last -- in the united

kingdom. equally, we are seeing lots of great interest across the world. just recently we opened for pop-up stores in hong kong, which are doing wonderfully and driving people online. manus: you mentioned it twice now, sir -- i want to dig deeper. you mentioned the u.k. customer is most prevalent, 60% of your business. is there any slowdown? is there any slowdown in the u.k. customer transaction, or is the profile of your customer a little bit of a higher value? think all of my retailing history tells me that times are tough or in certain and that is when people look to the sure bet. they look to people who can deliver great quality product, a satisfying in-store experience, because they want to be more careful what they spend.

we can prosper enormously during times of economic downfall or uncertain times, because of the strength of our brand and product quality. already we are seeing christmas sales far outpace last year, and i think that's a good indication that people turn to quality retailers when they are feeling nervous. succeednd it is -- to in store and you are globally renowned -- who are your biggest new traffickers? the pound is playing into the london retail story. where you seeing the biggest acceleration? the chinese, japanese, the americans? who is coming? >> the number one international customer is american. we have had a long-term relationship with them, and we continue to see that they fought to be our number one customer. in terms of growth that is the chinese. the chinese are buying into it,

and surprisingly things like biscuits as well, which we didn't expect. they are buying into english tea and biscuits. a real sense of tradition and heritage and product quality that is serving chinese customers. manus: the best selling products so far in the run-up to christmas? >> [laughter] the christmas classic hamper really is absolutely trending, north of 20% sales year on year. great are some of the ofs -- the stilton, and course our closet cream and pistachio biscuits. manus: coffee and pistachio. >> coffee and cream. manus: excuse me. >> [laughter] manus: good luck with the christmas season. i am sure yo they will bust the doors. up next, renzi's resignation.

was the italian prime minister's defeat really means for markets. we begin trading in just under four minutes. what are the ramifications for your trading day? this is bloomberg. ♪

guy: resigned to his fate, matteo renzi will offer his resignation after conceding defeat in a landmark referendum. this would see an anti-euro movement. stocks are trending lower. now the focus turns to the european banking sector and bond markets. the u.s. president-elect donald trump takes a hard line with china on social media, saying he will not be told who to talk to after criticism of his phone call with taiwan's president. plus, the brexit debate moves

to the u.k. supreme court with 11 judges contemplating triggering brexit. welcome to "bloomberg daybreak." good morning. i manus cranny. the result is in. matteo renzi is gone. it is the first political earthquake to hit markets in six months. this is what the futures are doing. the euro stoxx 50 are down. thewill take over next in italian government? the market is down by .3%. paris, down .9%. european equity markets are pick ing up the bat from their asian

counterparts. the immediate equity market more apparent than post brexit and post trump. the euro is down .9%. the calls are mounting for parity, and the probability is rising. the odds jumped about 55%. georgia is calling for --deutsche is calling for this. we do not really know the complexion of the italian political landscape. money is going into the dollar 1.0131. %.ld is coming back 1/3 of 1 the hedge funds are boosting their short positions on gold by

13% last week. oil is down by .9%. let's get to the cross because this is the eye of the market storm. this is the bond markets. a telling government bonds -- italian government bonds are rising by .8%. the differential with germany is how markets perceive risk to italy versus the core of europe. the bond market rallied by 19 basis points on the italian paper. that was the biggest weekly decline since july of this year. that spread 160 basis points. a lot of this is dependent -- and we have the 10 year government bonds at the bottom of your screen, too. this will be dependent on what happens next within the italian political landscape and the ecb this week.

let's get you up to speed with your first word. new zealand's prime minister john p will step down next week. willime minister john key step down next week. he has picked bill english to succeed him. he said he should not convince t commit to serving a full fourth term. new zealand's dollar slipped on the news, down nearly 0.5%. alexander ran as an independent and received almost 52% of the vote. comes in the face of a resurgence of right-wing anti-immigrant parties around the world. minister willme make an announcement at 5:30 p .m. u.k. time.

his office did not say what he would announce, but he is expected to declare his candidacy in the french election. president fracois hollande said let's take he will not seek reelection and that valls previously said he would run if hollande did not. the government's case today against holding a vote in parliament before beginning the exit of the european union. defeat theresa may's -- of theresa may's administration would mean a parliament act. officials are expecting unprecedented numbers of spectators. they have opened two neighboring courtrooms to deal with the demand. president-elect donald trump used twitter to renew criticism of china over his

backlash with his phone call with taiwan's president. he says they did not ask the u.s. permission to devalue its currency or increase military presence in the self china sea. trump flouted decades of political protocol by speaking directly to the time when his president. -- directly to the taiwanese president. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. on can did all yoget all you nd top . matteo renzi says he will quit in the early hours of this morning after losing the election. >> it is clear that my government ends here. i want to thank my ministers for the extraordinary adventure and i will offer my resignation to the president of the republic. skidded to a 20 month low. francine lacqua joins us now.

we just heard that the economy and finance minister has canceled his trip to brussels. of course, where does he stand? who will be the caretaker president at the moment, the caretaker government? >> we heard from a spokesperson earlier this morning and he texted that for the moment, the trip is canceled. we need to be careful at this point when drawing any conclusions. he is one of the names that could be called to form a government. but we also understand that matteo renzi actually asked his cabinet to meet one last time before he tends his resignation. around expected to be 4:00 this evening. he will meet with his ministers before. it might be a simple question of ministermic

addressing him. you are absolutely right. there are basically three or four names from the democratic party. this is matteo renzi's party. they could be asked to play a role in this transition government. and we do understand, at this moment in time, he would be the front runner. ncine, grab a glass of water. the bond markets are moving. the italian yield, rising. we see a significant ratchet higher in terms of yield. but this all ties back to the balance sheets of italian banks. this ties back to the risks associated with holding italy in the interim period.

what is the priority, given this cycling of risk in the market? the bond yields are higher and the euro is under pressure. will we see pretty aggressive ection from th italians? establishings, a stable government is the number one priority. it will be interesting to the president calls on to form a government. stability is key. on the point that the markets are moving, it is interesting because we kept being told last week that everything was priced in. which isnot priced in, why the yields are higher and we have pressure from the banks, is the win by 60%. if you win by 50%, it is unlikely, like matteo renzi

said, he would play any part in the transition team. we also see many popular-year-old skeptics asking for a popular election. much, 60% "no" won by so we might see elections. at the moment, there is an electoral law that was put in place that would give -- you do not need a majority for that rule, and that could play into the hands of the populist party. you have the two biggest parties battling it out, because automatically, the majority from the party that comes up first, they're going to need 40%. reforming the electoral law and stability will be the priority. manus: i like the way that you copcaveated some of our thinking. still, the majority of italians are pro being a part of

europe. they are still pro-eu. let's talk about the banks. the banca monte dei paschi begin to trade. the risk isf this, rising on the banks. reporter: it is rising because if you are looking at a huge capital increase, and remember, monte paschi is trying to almost triple its market cap in raising. it will be difficult for a big bank, going to investors and saying, we will invest this out, invest in our capital enterprise at a time of political turmoil. the first side effect of political turmoil would be monte paschi, possibly another bank, one of those banks looking to

raise capital. and then you have those middle , so investors could shy away. we will try to get answers. italy'sbe joined by second-largest bank. he will be joining me in a couple of hours and i will ask him how he thinks we should deal with the banks. we will also speak to frabizio thinksnni, and what he this means in terms of the reforms. manus: great job. we look forward to pretty good coverage there coming from francine lacqua, our editor at large. we have the investment manager at aberdeen asset management. another political upset for markets to digest. the no vote won 60%. how much does that concern you? are we at the beginning of risk rising in europe again?

>> i don't think we are quite at the beginning. manus: let me rephrase, a new beginning. >> i guess it is another hurdle. the difference with this and what we saw a earlier this year, this was partially expected, this no vote. the markets were a little bit prepared. this is a case of, now we have to wait and see what happens within a new period of uncertainty. the banks and next government are key in terms of what will happen next. it is difficult to price that. manus: it is very difficult to price. the banca monte dei paschi probably has the most difficult job. when you talk about this with your colleagues, you know, as investors, will it be a back track, a backpedaling?

italian assets? >> i think the majority of the italian assets will be fine. having said that, i think if t here is anything we can learn from the past few years, in terms of the various crises since 2007, they're always seems to be a way to get through. i cannot tell you exactly what that will be, but i can tell you this is another hurdle. but i think they will be a way to get through this. let's try to get a mental picture of what this is. you can see a rise here. i was thinking about europe. this is one example. do you think it prudent to buy protection to spend money on political risk protection in

2017? i know it is expensive, but my gosh, 2017 has the propensity to be a volatile year. >> absolutely. i don't think it is necessary. i think if you are very selective in the assets you purchase as an investor, you can make investments whereby you can still the relatively well and manage some of the key risks. manus: how do i do that? [laughter] >> that is really interesting. if you look at the companies, there are a lot of companies still doing well. it is very easy to look at the headlines in terms of political risk, and think, oh my goodness. but think about sectors, such as consumer staples. and these are global companies. people still me to purchase soap and people still want to buy chocolate.

the luxury companies, the valuations are extremely low. you don't actually even need a huge uptick to see uplift there. the pharmaceutical sector has seen some rotation out of it more recently. valuations are looking extremely attractive and the growth in the health care sector is still there. i do believe our place is to invest. manus: i like anybody who can help me with banana skins. one banana skin, which is a help and a hindrance, the euro. that course?n do you think the momentum continues with downward pressure ont hn the euro? >> i think that is a credible scenario. i think, you know, it is pretty

likely we will see the ecb continue its quantitative easing into next year, the same time. in the states, we have the prospect of a few hikes next year. i think it is a credible scenario that we see further divergence. yousef: hold -- manus: hold that thought. louise kernohan stays with us, the investment manager at aberdeen asset management. pressures are exposed within the u.k. government. we discussed britain's brexit options. this is bloomberg. ♪

a.m. in london and 8:20 in rome.

italy is waking up to seeing matteo renzi resigned. open just under 20 minutes ago, down by 1%. italy is facing a new political future. it was the size of the no v hee that is interest to t market, at 60%. italian government bonds trading up this morning in terms of terms an yield and down in e of price. europe is facing a new political period of turmoil. the euro dollar, just off a 20 month low at 1.0583. that is the italian political question. let's get to the business flash with christine harvey. reporter: thank you. amundiinvestment from

is the pioneer to purchase asset management from unicredit. the business is valued at 3.5 billion euros and a purchase of pioneer would be the biggest acquisition of amundi. that would grant a most $1.4 trillion in assets. protesters have won a landmark victory with the u.s. denying the permit needed to complete the dakota access pipeline. the army corps of engineers says there is much work to be done and alternative routes must be explored. the pipeline would cross land is sacred to native americans. left after the closure of an asia focused stock pull overseas. according to a person with knowledge of the manner the two hong kong-based managers exited from the glg unit.

a spokeswoman declined to comment. that is your bloomberg business flash. manus: thank you. anna will be back tomorrow morning. intense intention turns to brexit today. begink. supreme court t the process of deciding whether theresa may needs to hold a vote in parliament before triggering article 50. officials are expecting unprecedented numbers of spectators and have opened two neighboring courtrooms with video links. we have boris johnson discussing the possibility of backpaying the market access after brexit. >> that is obviously, something david davis is considering. it does not mean a decision has been made. i'm not going to get involved in

the minutia of our negotiating position. manus: louise kernohan is the investment manager at aberdeen asset management and is still with as. one thing that strikes me when i look at sterling and the gilt markets and the u.k. government assets, i wonder if parliament can get it hands on brexit. how do you look at sterling, in terms of asset allocation? are you stepping back? are you changing structurally how you look at the u.k. in 20 17? >> obviously, the brexit is surrounded by uncertainty still. for us, it is about using the flexible companies. those which have a diversified earnings base is quite key. manus: so, not too much fx risk.

one of my last guests talked about choosing those companies with em exposure. i heard this argument time and time again. i look for things that perhaps do not have sterling exposure, but have em exposure. then, i have the u.s. and the fed decison looming. >> i think the thing to remember is, we really just need a diversified acid-base. -- a diversified asset base. there are many companies out there were actually, ithere aret there were actually, i think, whilst the emerging market outlook is mixed, a structural benefit comes through. it is possible to put a scenario together where these u.k. companies can come out well as well. manus: louise kernohan, thank

you for joining us this morning as we grapple what will happen next. let's check on the futures. you need to choose your words carefully here. what we have got is a reprieve from the initial drop of 1% at the start of trade 26 minutes ago. we have now got the euro stoxx 50 down 0.5%. london, paris, and frankfurt are also trading lower. we are waiting to see how the futures will unfold. all eyes will be on the banca monte dei paschi, the italian banks, as the relationship with the italian government bond market comes into focus. bonds are trading down and yields are tracing above 2%. we have risen by 13 basis points within the italian government bond markets this morning. this will have an impact on what the european central bank will decide on thursday.

we are like tve to rome throughout the day with francine lacqua. the european open is up next. ♪

guy: welcome to bloomberg markets. the first play in the cash session coming up for european equities. i'm guy johnson and matt miller is in berlin. no surprise, renzi to resign. he steps down as the country votes no in the referendum. our elections -- are elections now inevitable? the italian bonds fall. is monte paschi now heading fo