>> advantage brussels. the u.k. concedes on the order of negotiations will step mark carney and philip hammond speak later this morning. >> fourth time lucky. china braces for the decision on the msci benchmark bid. we are live in hong kong. anna: the global equity rally extends to asia after u.s. stocks close at a record high. a very warm welcome to "bloomberg daybreak: europe." i'm anna edwards.

matt: i'm matt miller, in for manus cranny. i'm really excited to see about this china decision, but we have comments from the fed that are moving markets and there is so much turmoil here in europe because of the brexit negotiations in the middle east with qatar. anna: we will get that decision later from the msci as to whether the chinese domestic concluded to the benchmark. could it be fourth unlucky for china? this is the fourth time asking to be included within the benchmark. we have this chart here, showing the china rush. this is one example of the appetite for chinese assets. it shows appetite for a particular asia etf, listed in the united states. investors anticipating perhaps, approval, but how much does this matter? we have seen real divergent performance between the shanghai market and the offshore market, which is trading near two year

highs. the domestic market, really dwarfed by some of the new technology names that trade overseas, outside of the chinese main shares. matt: nonetheless, it is still 9% of global equities traded, a decent chunk. it will be fascinating to see whether the msci takes it or not. they are also looking at other countries, such as saudi arabia. let's take a look at your risk radar here. some comments by evans from the fed, moving markets yesterday, suggesting the fed could wait a little bit and see the for the next rate hike. here you have the dollar index, now moving down, actually. it had been stronger earlier, just a little bit of a turnabout for the dollar index. probably more interesting. investors is looking at nasdaq futures. even as technology shares have power the rally over the last couple of days to new all-time highs for the u.s. indexes, we see still gains for

the tech stocks after the so-called tech wreck of last week. i,d the asian pacific msc interesting to watch because of those decisions. anna: the nasdaq added ties to since november and that is flowing into the asian session with the likes of samsung gaining, a resurgence of that technology trade at the moment. you mentioned some of the long lists of agenda items here in the u.k. it has been a busy week already. the u.k. and eu kicked off the brexit talks yesterday. we will be speaking to the former prime minister of ireland. that comes up a little bit later this hour. matt: right now, let's get to hong kong and juliette saly for your first word news. reporter: thank you. in the u.k., a 47-year-old man named darren osborne is being held on suspicion of attempted murder and a legend terror offenses after a van hit muslims in north london. the vehicle hit people close to

a mosque in north park. the father of four was not known to the security services and was believed to have acted alone. u.s. president donald trump has been announced north korea's "brutal regime" after the death of auto wanotto wambier. he's been more than a year to north korea and died. ofwas sentenced to 15 years hard labor after trying to steal a political banner. the white house is weighing whether to move the secretary sean spicer into a more senior role in brick in a new spokesperson for the president. according to two people familiar with the discussions, plans to reorganize the team are preliminary and no final decision has been made. spicer has served as white house januarycretary since and has been the subject of speculations for months that he

was on the verge of being fired. bank of england policymaker kristin forbes has a message for her colleagues at their term ends, don't leave it too late to reign in consumer prices. she has voted for high interest rates at each of the last policy meetings, even as the british economy shows signs of weakening. her comments come as the inflation forecast was listed at a peak of 3%. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. you can find more stories on the bloomberg at top . a good session once again in asia. the regional index is up for a third session. once again on the nikkei, a little bit of a switch out with the hang seng and the csi 300 as we await whether or not it will be the fourth time lucky for the inclusion in the msci level benchmark indexes.

australia is a little weaker as well and we have seen a downturn coming through in the kospi but there are a lot of support for the tech players. let's have a look at some of those stocks. listing the regional index, up by 3.2% on the back of that tech rally in the u.s. the declinesading in australia. a lot of concerns about mortgage stress in that country. andck hutchinson holdings are up five 0.1%. there has been a wall street journal report that the holdings chairman could be stepping down. we are awaiting the msci decision. how this white line is a number of those potential inclusions, 169 for inclusion this year. it is between the hang seng index in the green and the blue line is the csi 300 index.

as matt mentioned, 9% of global value, in terms of global equity value. we are waiting to see whether it will be the fourth time lucky. only six out of 13 china watchers said the msci would include those stocks this year. anna: thank you, juliette saly with the latest market action overnight in hong kong. the european union has won its first battle of brexit talks as the u.k. retreated on timing. the british government gave in to demands to discuss the terms of the divorce, including the exit fee, before considering a future trade deal. matt: barnier told negotiators he is not enough room from of mind to make concessions, but emphasized the importance of a fair deal. for the u.k. and eu, a fair deal is possible and far bet

ter than no deal. that is what i say today. that is why we will work all the time with the u.k. and never against the u.k. anna: work with the u.k., never again. david davis did say britain had not back down. when the eu decides they have made enough progress, they will be able to move on further dialogue. let's get thoughts with david owen from jeffries international. he joins us on set. you were watching the twists and turns from yesterday, the words used and words that word. >> we knew the u.k. had agreed on the eu secrecy event. we knew roughly how it would play out. david davis did say nothing would be decided until everything was decided, which means in principle, they will decide the divorce bill, but then will able to be move on to discuss the new trading investments.

a transition peiod is still later. i think the u.k. will be moving to a non-eu option. still semi detached, but we don't know how long that transitional phase will be. going tosay ireland is be solvable, and they gave a two year issuance. matt: from an eu perspective, and i am normally based in berlin, it seems like they are holding most of the cards. but they don't want to just block out a deal completely because they are so reliant on the u.k. portrayed as well. david: they are and they know theresa may is in a weakened position. at the end of the day, they are wishing to negotiate with theresa may's government. if there is a major breakdown in negotiations, that will shake the confidence of the house back here in the u.k.

they could be dealing with a completely different embassy, maybe boris johnson as prime minister or maybe jeremy corbyn. at the moment, i think they would rather not take it too far. which again, will lengthen out the whole process. it will be difficult to get everything done by automatic year. if we have another election in the u.k., it will take longer. anna: weigh in on the conversation about how soft the brexit gets from here. these terms have been used for so long that the i'm not sure they make much sense anymore. we heard philip hammond talking over the week and about a slope, not a cliff. is that where there is room for softness or hardness? i it is not about the end destination, but how we get there. david: the u.k. stores assets for the eu, in terms of trade links.

there are very deeply embedded supply links, for example, in the aerospace sector, as well as the services. it remains very important for the rest of the eu. the eu does not want to cut off the u.k. entirely. there has to be a compromise, but there has to be a transitional phase. we are outside the single market for sure. we are probably outside the customers union, probably. in the u.k., we still into forge trade arrangements with countries outside the eu. if that means a move into an aea. anna: all the time we have been talking about not having something off teh shelf. david: it can be tweaked. the u.k. also needs to control movements of people. that is possible. matt: isn't the most likely scenario that we do have a transitional phase? i spoke with wolfgang schaeuble

last week and he seemed determined to keep the financial center in britain. they don't want to rock the boat. at the same time, they don't want to fall back on wto ru les, but it took 18 years to negotiate an agreement with canada. they want do it with the u.k. in 18 months. won't they just say, let's get into a transitional agreement for now? david: i think that is the most likely scenario. the other thing is the timeline, when other people actually leave their jobs. mark carney will leave the bank of england in june of 2019. and of course we have got mario draghi leaving the ecb in october of 2019. he will be looking for further qe and cutting rates in the eurozone. we can't really afford that to be a major cliff. it is not in anyone's interest, where the entire eu goes into a recession.

they want the growth story to continue, which means a transitional phase, the relatively soft brexit. anna: do you predict any political chaos this week, david? we have the queen's speech. that is this week. there will be a focus on space travel, apparently, which will be interesting. nice distraction from what we normally talk about. david: right. with the sticking more brexit conversation, what are you going to be looking for? clues for how hard and soft it will be? david: i think it will be pretty general. i don't know if there will be a formalized arrangement with the indp, whether the tests will be whether there is a vote of confidence initially after the queen's speech. i very much doubt we will get that happening at this point. the rest of theresa may's government is more in a few

months time, where she faces a vote of no-confidence. it will be an interesting week. we do but philip hammond. -- we have got philip hammond, and we have got mark carney. what they say matters, too. anna: david allen, jeffries international chief economist. matt: let me give some of your highlights. at 1:00 p.m., the european union general affairs committee needs to discuss brexit and the relocation of two eu agencies currently based in the u.k. dallas red president -- dallas fed president kaplan executive clock p.m. and then msci is due to announce whether chinese and argentinian stocks will be added to the emerging markets guage. plus, some others. so, if you have made that that, you will want to stay up until at least 9:30 to the if that paid off. anna: coming up, as the brexit talks are kicked off, we will

speak to john bruton. that interview is next. this is bloomberg. ♪ matt: it is 1:17 in hong kong.

usual, barely see it, as but it is definitely there. it is 6:18 in london. let's get to the bloomberg business flash right now with juliette saly. reporter: yes, thank you. the billionaire li ka shing plans to retire by next year as chairman of his flagship holdings. according to the wall street journal reports, li has not specified a day, but is likely to step down by his 90th birthday of july next year. the tycoon plans to remain a senior advisor and keep his offices at ck hutchinson

offices in downtown hong kong. chief officer says the social that mark has a duty to help create businesses create new jobs. sheryl sandberg spoke inclusively to caroline hyde. theechnology is changing economy. technology is certainly replacing jobs and technology can also be used to grow jobs. it is our responsibility to help small businesses and large businesses all around the world use technology to grow their businesses, so they can grow jobs. to beer: tesla is said close to an agreement to create cards in china, allowing it to avoid import taxes and price the vehicles more competitively. the deal with shanghai authorities would lead to a production plant and could be announced this week. tesla representatives did not immediately respond to requestss for comments. that is your bloomberg business

flash. anna: thank you, juliette saly. the two leading brexit negotiators, david davies andmichel barnier have agreed to maintain peace between northern ireland and the irish republic. we are joined now from the area of dublin by the former irish prime minister, john bruton. great to have the on the program, john. give us your latest thoughts as we hear these brexit conversations get underway of how we solve this very difficult issue. the d.u.p. does not want any kind of border between ireland and northern ireland, but at the same time, they don't want any passport checks between northern ireland and the rest of the u.k. but some barrier for immigration purposes might need to go somewhere. where would that go. see where thiso works out and once britain leaves the european union, the european union, for its part,

will be obliged to charge eu goods coming into the european union. that is crossing into ireland from northern ireland. we in the republic will be obliged to collect those tariffs. likewise, if britain, having left the european union, wants to control immigration from the european union into the imposet would have to some form of immigration control at the border in ireland and at ports in britain to which traffic comes from ireland. these are inevitable consequences of the decision that britain took. it is a british decision to leave the european union. there is the immigration issue, and the t ariffs. to collect tariffs, do we need to have a physical border? which would point to the swiss borders?

john: you might not have a physical border at the border, but you will have to have checks and controls and delays somewhere on either side of the border. that's inevitable. goods will have to go somewhere to be checked. people hope of course, the delays in other things will be able to do some of the checking. you willing to investigate the actual containers to see whether they contain people who should not be in containers, whether they contain goods, upon which the appropriate tariff has been paid or not. we can see substantial bureaucracy arising from this british decision. have obviously, the swiss it much easier because they have natural, physical borders in a sense and of course, they don't have the strained relations the ireland and northern ireland have.

will it be difficult to maintain the peace while erecting some kind of border control between the two nations? swiss have 120 separate treaties with the european union. and it is within those treaties that the swiss are able to soften their borders, so to speak. you are right. inre is no political tension switzerland, or in the neighboring eu countries. as far as northern ireland is concerned, the fact is, the economic damage that will arise from the barriers, whatever kind there may be between the republic of ireland and northern ireland, the economic damage will follow both communities of northern ireland. it will not be just the pro-u.k. unionists that suffer, or the pro-united ireland

nationalists. both areas will suffer economically as a result from the extra bureaucracy imposed on them. matt: in that sense, because dublin -- the republic of ireland will be deeply affected economically by hard brexit. how much of an ally can theresa may count on in dublin? john: well, ireland is a member of the european union, and it wants to remain so. ,he benefit is we are in a rule based institution, where we have our courts that make fair decisions between strong countries and weak countries on the basis of uniformly applied rules. that is the attraction for us, and we're not going to leave the european union because we have experience of being in a union where there were not commonly agreed rules, and we suffered from that. we will of course, seek to

mitigate the effect of brexit. we will in that sense, be looking for a soft brexit. but i think there is no such thing as a good brexit. brexit is breaking up something that has existed together for 44 years. there is disruption involved in that change. it is going to be costly. but we will obviously, try to explain british needs to our european colleagues, and we will try to explain to britain some of the preoccupations the european colleagues have. anna: how fearful are you for the peace process? you were involved in the good friday agreement. do we need to revisit the parties involved if we see the conservatives and the d.u.p. sitting down and in some form, forging an agreement? unlikelyhink it is it will have an immediate effect. i think the d.u.p., when they

make a deal with the conservatives, will be making a deal about u.k.-wide matters. i don't think they will be dealing with the issues of the internal government of northern ireland, which is supposed to have power-sharing in the administration where both nationalist and unionist community leaders take part. that has been brought to a temporary end by the nationalist major party to leave because they were not satisfied with certain things. now that the d.u.p. is potentially in government in is to gete advantages the arrangements in belfast working again will be increased, so these decisions will not be taken under the influence of the d.u.p. operations in london. i hope he took the initiative to bring the institutions down will now have a greater incentive to put them back up again. anna: thank you so much for your

time, john bruton, the former prime minister of ireland. coming up on the program, we talk about the fed, the fed policy debate. policymakers need to show a commitment to reaching their goal, said chicago fed president. this is bloomberg. ♪ matt: good morning.

in gorgeous.m., tokyo. clear skies, beautiful palace, 6:30 a.m. in the u.k. here. the new edition of the break is available on your bloomberg and on any mobile device you may have. the function on the terminal is . the cover story, round one goes to the eu, the u.k. lost its first battle over the time

tom -- timetable for brexit talks. the eu chief negotiator was blonde. he said he is not going to -- in frame of mind to make concessions. the two sides did pledge to reach a quick deal over residency rights. we understand more details to come on monday. matt: the ecb meanwhile is in no hurry to talk about tapering its stimulus. --n though it is six-month it has six months left on its current bond buying schedule. no one expected to end at zero. draghi would tell you that much himself. qe plans for 2018 might be disclosed only in late october or in the extreme, a couple of weeks before the end of the year.

clearly, mario draghi feels his monetary stimulus is working and is keen to carry on with it. anna: we will discuss that further shortly. i do not know why we were showing pictures of fed officials. that was not mario draghi. and the biggest winner in shallow water of oil prospects. taking three of the 10 areas awarded. government better result than he had hoped for -- it had hoped for for the blocks that were offered. reachxpect output to 177,000 barrels a day. presidentago fed charles evans said the central banks officials need to show the commitment that they will reach their goal line inflation, that has been running below 2%. evans added to current environment supports very gradual rate hikes but the eight

year low core inflation is a serious policy outcome miss. core inflation is under run 2%. and often by substantial amounts. this is eight full years below target. this is a serious policy outcome miss. with us, david owens, jefferies international chief economist. we heard from evans last night. slowal rate hikes and preset decreases in the balance sheet. we heard from william dudley. cycleting the tightening would imperil the economy. what are your expectations since you heard from yellen last week? our focus is on balance sheet reduction as we go into december. my colleagues in the u.s. expect another rate rise from the fed in september which will set the mark for this balance sheet

shrinkage. janet yellen leaves the fed infirmary. if you could engineer back from when she leaves and she will -- her legacy will want to put into play. but it will be an interesting issue for markets as we go through next year. the markets have to absorb a lot more treasury issuance. up till now, they had a lot of issuance sucked up by the u.s. fed itself and that is going to change going forward. all central banks face a major issue. some core inflation remains low. the: although even with implied dovishness of charles evans since yesterday, it is surprising the hawkishness with which the fed is able to operate, meanings they are on track to raise interest rates as much as they have recently forecast, and they are talking about reducing the balance sheet and yet, this chart that anna

has up is fairly surprising. yields, i is 10-year miss that one. matt: it is amazing they are able to be so hawkish and yet have yields so low. there are some innate different charts we can pull up. ecb doing qeve the and there is a massive current account surplus. we are getting more data from the ecb. obviously skewed toward germany. what we see through qe is this massive recycling of this current account surplus in the eurozone into u.s. fixed income and the figures confirm in the last 12 months eurozone investors have been net buying fixed incomes at 200 billion euros. that is keeping u.s. yields anchored area japanese investors dumped u.s. treasuries and we

are back in two that sort of -- back into that sort of asset classes well. you have the spread between u.s. treasury yields and german bund way back to all the the early 1990's. for a lot of investors in europe, u.s. assets look very attractive. anna: is it conceptually difficult that we have moves and interest rates that are for good , there are suggestions about what the fed intends to do but they are not set in stone. the way that the fed is approaching the balance sheet is more about preset moves, is balance sheet reduction tightening, is it conceptually odd that we have a commitment to , a lot more flexible in the around interest? david: all the balance sheets -- the reductions, they will get their eventually. rate to aget a policy

level. with the shrinkage we do not know what impact that will have on the wider economy. the shrieking of the balance sheet is a former -- a form of tightening. once they get the policy rate to a little before they start thinking. you could argue the fed should be getting the funds rate over 2%. starts shrinking the balance sheet. it will start -- stop doing this sooner because if janet yellen is leaving she will want to get her legacy in, she is about tricking the balance sheet first. matt: you do not think that janet yellen is that concerned with her legacy. david: most central bankers will think about what they have done. you have tapered and raised rates and started shrinking the balance sheet, you have done everything almost you can do and you leave it to the other, your legacy is you leave it to the next people. seems to berket allowing her to do whatever she wants. you look at rates and stocks,

.veryone is bullish what about the u.s. economy? we have seen the hard data soften, we have seen growth disappoint, inflation as we were talking about. can't economy continue to allow caucus legacyer plan? david: it is semi-hawkish. they want to get their things back to normal at some point. the u.s. is recovering and in terms of where we were, it has gone an awful long way along that way to recovery. the issue for these central banks is can you generate higher core inflation. the ecb faces a bigger issue. much furtherfrom a -- higher [inaudible] there is exceptions. we cannot get core inflation

back to where it was. maybe the new numeral is much lower for core inflation but we want to raise interest rates and get rates back toward the new terminal rate and that is also low. anna: and that is what the ecb wants to do. david: eventually. anna: this is in the context of howstory which is about draghi's taboo on qe and game keeps investors guessing. this is a fascinating chart that puts together what the ecb is doing around its policy rate and also the unemployment figures and you might have been forgiven for suggesting that the ecb interest rates should be higher. is this because the implement rate, it is it structurally different from previously? david: yes. you have german unemployment at 4%. what mario draghi highlights at the press conference recently is

the ecb has done work on the underutilization of the labor markets, and germany underemployment is 10%. from memory it is almost 30%, almost 20%. these people are doing part-time work who want full-time work. was only 1%.oyment it is not properly just below 4%. notan wages have accelerated either. all these central banks are trying to work out where unemployment is and it is lower than they thought. mario draghi highlighted in the press conference a few days ago. matt: you say that central bankers want to get back to normal, draghi seems to be one that almost doesn't. he is pushing back against any need for numeral is a show in and it was said he is following a scorched-earth policy to get

inflation to his target. it is difficult for him. will the ever back off qe if they cannot get to 1%? david: they will try and take the next, that is almost a given and they will start slowing down the bond purchases for next anyway. the issue is will they have to speed up bond buying again? spreads as they start whitening to 200 and go back 300 over germany and they start whitening further, that is a huge issue in itself. havelegoir said they to mention some markets. he wants them to buy greek

bonds which would make sense. would make sense. there is this issue that unlike ,he fed, the ecb is dealing there are 19 separate sovereigns, 19 banks, banking sectors all with a lot of sovereigns on the balance sheet. the eurozone recovery is still early days and the surveys are overstating how strongly the eurozone economy is. data, itok at the pmi is doing well. time thank you for your this morning. david owen from jeffries, staying with us and we will be speaking to the u.s. treasury secretary old and new starting a.m.steve mnuchin at 12:50 -- told 50 p.m. london time and we are joined by larry summers. matt: as technology replaces facebook's chief

operating officer said here company has a responsibility to lose jobs area and an exclusive interview ahead of her trip to the advertising festival she spoke about the importance of small businesses to facebook and the global economy. we are seeing is more adoption of the mobile platforms, there are 70 million small businesses that are using facebook on a monthly basis. that is our free product and 5 million advertisers. on insta graham we have 8 million business profiles on a histogram. and from the smallest company to the largest they are investing in mobile because that is where people are spending their time. >> do you feel optimistic about what these undercurrents show you about the u.s. economy, but the global economy in general, are we seeing jobs being created him a are we seeing brands money, but do you see

out there? >> our goal is to make sure businesses spend money and get a return. what matters for marketers is money on spend marketing it rings the cash register online and off and that is something we are working on. we see small businesses play an important role in the global economy. the geordie of job creation is small businesses. even the most off-line small business can use the power of technology. when i was last in europe i went to berlin, i got to visit the company, they are a furniture manufacturer in the land, they manufacture wooden furniture so that is a traditional business. came into the family business and did not change anything about manufacturing and went to facebook. they have opened five more locations including outside of germany, creating jobs and growing their business. technology can power

innovation both in the core of a business but can support any business out there. techen people worry about eroding jobs, are you seeing the other point of view? extent technology is changing the economy. technology is replacing jobs and technology can be used to grow jobs and it is our response ability to help small businesses and large businesses all around the world use technology to grow their businesses so that he can grow jobs. seeing a drive , we are seeingth valuations, for example, technology companies go through volatile times. does that ever affect you, does that affect the way in which you look at the world question mark work job every day is to ongoing facebook, helping more people use facebook and insta graham and messenger and whatsapp. more people get value from the products and more services.

business modelur that is where my focus needs to stay. sandbergt was sheryl seeking to caroline hyde. if you're interested, it was a wide-ranging conversation. you can find the whole thing online, they talked about the challenges posed by terrorism. matt: very interesting stuff. the behemoth that they spoke is in my life and i assume in all of our lives. could it be fourth time lucky for china as it tries to break ito the msci share indexes, would be a huge move if you are long mainland shares. this is bloomberg. ♪

matt: the tuesday morning. -- good tuesday morning. it looks like it is 1:49 p.m. in singapore. anna: are you sure?r

beautiful asust as it is there. a gorgeous shot of the massive financial landscape of singapore. let's get over to hong kong and for that we go to juliette saly with the bloomberg business flash. juliette: thank you. it does not look like that in kim shing is li retiring. he has not specified date but is likely to step down by his 90th birthday in july. the tycoon plans to remain a singer -- a senior advisor and keep his office in downtown hong kong. facebook's chief operating officer has said the social network has a duty to help businesses create new jobs. the sheryl sandberg was speaking

exclusively to bloomberg's caroline hyde. changing the is economy, technology is replacing jobs. and technology can also be used to grow jobs. it is our responsibility to help small businesses and large businesses all around the world. use technology to grow their businesses so they can grow jobs. juliette: in tesla is close to an agreement to make cars in china which would allow it to avoid import taxes and price their vehicles more competitively. the deal would lead to the production plant in the development zone and could be announced this week. tesla representatives did not respond immediately to requests for comment. a spokesman did not answer calls. that is your bloomberg business flash. for a much.you good time to talk about china. china's fourth attempt of getting into the msci benchmark

share of indexes comes with its best chance of success and the least. msci will announce whether china's to mystic stocks have one inclusion. wonomestic stocks have inclusion. us from hong kong, richard ross. this is a decision that a lot of the bladder waiting on with ba ted breath. contents is ofs getting in the msci with its mainland shares? >> this is the fourth year running that investors have been waiting to find out whether chinese shares will be included in msci's benchmarks. there is an improved chance from previous years rightly because in order to overcome certain obstacles that included it on previous occasions, msci has

unveiled a less ambitious proposal. as a result we are going to see rating of chinese shares much smaller and future indexes. some of the issues that investors were concerned about have been met, yet investors are is so smalle step this time, whether it is going to such a significant moment. remind us of some of the reasons it has not been included, have any of those gone away? was the last year it tremendous boom and bust we signed 2015 were we had $5 trillion wiped out and incredibly heavy state intervention in the market, or in investors did not want to be that involved in a market at that point grid we saw capital controls some of those remain issues. 169stocks they will allow,

now, you can already buy those through links in hong kong. those are some of the main issues. considerable number of stock suspensions. the liquidity issues that people are worried about, msci have tried to strip out companies that are subject to heavy suspensions. matt: thank you for your time. numbers richard frost covering the msci decision. still with us, david allen's. now if thismatter happens in our next year or two years time. it is going to happen, right? it would it is going to happen. the pivot in terms of global growth has been leading toward the world, china has been the forefront and you have the structural change occurring. it will happen at some point. for investors it does matter when these things come into the benchmarks. matt: timing is key for investors. normalizinghina is

its economy. is it going to open up, they say they want their financial industry to be opened up. are they eventually going to partnerships where foreigners own more than 49% of companies? trade important for china question mark david: it is important for everyone. matt: but they preach it is and then they are opposed -- they are a closed economy. -- what will see if liam fox achieves. beancial services will something that the u.k. will be interested in. in terms of normalizing the economy, chinese workers are saying goodbye to double-digit pay rises. it is not just in the west that we are struggling to work out where wage inflation is. in china they have a slightly different flavor. something that looks a little bit more moderate. they talk or -- tackle mounting debt and industrial capacity.

this is something the chinese people will have to get used to, lower wage growth. david: china will have to change fundamentally going forward. this is a work in progress. the growth rates of the country still remains pretty phenomenal by western standards. we will see if that continues. anna: in the face of all the political conversations, you think they will stick to the growth target they have, six point 5%. david: i think so. matt: they are being upgraded by summit -- some economists. it has been a pleasure having you here. thanks for joining us, david owen, jefferies international chief economist. anna: brexit talks, the eu has won its first battle as the u.k. retreated on timing. what happened during a one of the negotiations in brussels. euwill learn more about citizens in the u.k. and u.k.

citizens in the eu. thursday there is a meeting of eu leaders in brussels. we will talk about what happens in the u.k. story next. this is bloomberg. ♪

matt: advantage brussels. winning the first brexit panel as the u.k. concedes on the order of negotiations. carney and hammond speak later this morning. anna: full time lucky. china braces for the decision on its msci benchmark bid. we are live in hong kong. matt: the global equity rally extends to asia after u.s. stocks close at a record high. anna: welcome to bloomberg daybreak: europe.

matt miller has some breaking news. matt: i want to show you quickly results, q3y revenue of 4.2 7 billion pounds, profit of 254 million pounds and this is the company that --talls bathroom pictures fixtures, obviously. i will tell you what is interesting. and i sent me a bloomberg intelligence piece that is a tremor on the business. a british company but 66 66% of sales come from the u.s. and 81% of profit. infrastructure spending would be great for a company like this. anna: that is there twice 16

numbers. -- they're 2016 numbers. and are growing at america not so much in europe. we are waiting for other news coming out of the u.k., on barclays, and on sky. as soon as we get that we will get that to you. features suggesting we will be stronger at the start of the trading day. we have a strong performance in the u.s. and the technology stocks. seems to be a thing of last week at least for now. wreck would be the word. it did not turn out to be such a wreck in the end. anna: we will see if that resurfaces. it is not resurfacing and the asian session. european equities are higher at the start of trade. matt: not quite the records that you have seen.

the s&p 500 at an all-time record. but not for the european averages, they are almost there. msci asia-pacific, we pulled this one up to show you that the equity march continues through asia overnight and also to keep on your mind that msci later today will decide whether it includes china and the emerging-market indexes and some other countries that may get into the msci indexes. the nasdaq futures him a you can see the tech futures continue to rally. the nasdaq also not quite at an all-time record. but getting ever closer to a record. the dollar index had turned around a little bit right now but there you see it 97.5. it had been stronger on the back slightly dovish comments out of the chicago fed president. ina: what we are seeing

japan and austria. this hour we see a close in the markets, in japan closing up on the topics -- topix. slipping as ares result of moody's downgrading the major banks, we talked about that a little bit yesterday. that is being factored in to the market. matt: let's take a look at bond futures. to startnds are about trading. let's look at the futures, down a little bit so you can expect at the openo pop up and the old futures coming down a little bit as well so watch for those yields to rise this morning and just a couple of minutes. anna: let's get the bloomberg first word news with juliette saly. juliette: thank you. and the u.k., 47-year-old man is being held on suspicion of attempted murder and alleged terror offenses after a fan hit muslims in north london. the vehicle struck pedestrians close to a mosque leaving one person dead and several others

injured. the father of four who lived in wales was not known to the security services and was believed to have acted alone. u.s. president donald announced north korea's "brutal regime" after the death of otto w armbier. the student spent more than a year in a north korean prison that and died. he was sentenced to 15 months of hard labor for trying to start -- steel eight political banner -- steel a political banner. sean spicer is being moved into a more senior role in bringing in a new spokesman for the president. plans to recognize the administration's medication steam is pulmonary. no final decision has been made. spicer has served as white house press secretary since president trump came to office in january and has been the subject of speculation for months that he was on the verge of being fired. in the u.k., bank of england's

policymaker has a message for her pollack -- her colleagues. do not be too late to rein in consumer prices. she voted for higher interest rates at each of the past three policymakers -- meetings. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more at top . a bit of convergence but worth noting, asian equity markets up to 2017 highs reached last week. the nikkei at a strong level, .8 of 1%, the prater -- broader topix at highs. csi -- a little bit of nervousness and some strong moves coming through in tech

players lifting the taiex .7 of 1%. they laid what we did see in terms of a rally. simpson the best gainer in terms of index points in korea up by 3%. westpac under pressure as we see that impact of the moody's downgraded on a strong as big bank. australia's big banks. we are awaiting whether or not these 169 jobs will be included. this white line is a level of stocks, is major stocks have come in between those two indices. only six out of 13 china watchers say the msci will

include these stocks, we are hoping it will be fourth time lucky but goldman sachs analysts giving it a 60% probability. we will find out overnight our time. much.thanks for a juliette saly in hong kong with your bloomberg business flash. anna: the eu has won its first battle in brexit talks is the u.k. retreated on timing. they gave into demands to discuss the divorce before considering a future trade deal. the chief negotiator told reporters he has not been in the frame of mind to make concessions but emphasized the importance of a fair deal. ,> for those of you in the u.k. a fair deal is possible and far better than no deal. that is why we will work all the and -- with u.k.

the u.k. and never against the u.k. anna: let's bring in our guest. timm haywood. were setting out the story and the order of business. a lot of conversations about whether we get something different from three of the governments now postelection they did not do as well as they hoped. we do get a bit of a change but it is such a long process. many things may be agreed in principle, they could step back to the last moments. i do not see this as europe one, k. nil. there are ramifications to come

through. aboutwe were talking that. how much could we get a compost in 18 months of negotiations? timm: it will be tricky and the likelihood of no deal is quite high. the question is, what does that mean for the u.k. economy? some have estimated the: of a 10% drop in the trade weighted sterling. it would have the same sort of effect. hell of an ask. investt so much how i immediately. the number of unknowns you have in front of you is quite extraordinary. i worry that is going to cause people to invest in businesses or insane bonds.

what do they need to take in all these uncertainties? that is going to cause disruptions. you are seeing the gilt market starting to underperform. anna: well international investors be put off, i am thinking about industrial investors. on the one hand they are thinking about the concept and on the other hand things might look cheaper. timm: it must be more problematic to invest in a business. contemplaten tata selling jaguar land rover. anna: we have people familiar saying that they are considering london or new york for a listing. easier for many people to have many choices to look elsewhere. and that worries me. that, i knows what is going to happen to sterling and interest rates particularly in the u.k.

considering how well ferrari has done and the possibility of aston martin going out there may be a lot of investor demand for luxury car shares right now. withr has done very well their production, that is a different conversation. ton you are looking at areas invest in the u.k., do you look them because of uncertainty at safety first? timm: government bonds and currencies. the government bond market and the u.k. had its low point in yield terms one month after brexit. since that we have seen employment hit a record high in my big concern is there is a creeping trend across the world particularly in the u.s. and the japan, thisy, declining access to cheap labor.

either it is the social concept of minimum wages must rise or if you're going to bring in cheap labor, that does not seem to be a very strong theme, a very positive and popular theme. even if you are importing the goods and services my keeping the goods made by people who have low wages, that is equally rhythm seems to be going. creates aat is -- it symmetry on inflation. commodity prices are moving away from equities. the sense that there is a rising tide of job wages, and that will cause inflation in this country and that is another difficult part of policymaking. anna: how does it weigh in on this chart? this is growth in the white, inflation in the yellow and the bank of england in blue. some would say it is stagflation. others say do not label it that

because it is the weakness in the pound creating this, it should be looked through. matt: some say it is green stagflation. expect thepeople u.k. to collapse after brexit and it did not, it continued over the cliff and kept on going was thee, the hope political election would create the other side of the valley and you could continue without a blip. the election was not helpful for finding the other side. people do expect a drop in activity. we expect a drop in activity but it will be swamped by this. inflation is picking up and british bonds are among the worst. reference tome any the roadrunner. it just keeps on going. is going to stick with us. qe2 boo.ghi's

keeping investors guessing until october on the buying -- bond buying plan. this is bloomberg. ♪

anna: welcome back. barclays ing connection with the qatar capital raising, this took place at the height of the financial crisis. they are charging over this capital raising that took place at the heart of the financial crisis, 320 2 million pounds and fees that barclays paid to qatari investors for a loan. barclays did not want to take government money and that was part of this. the charges are for conspiracy to commit fraud and unlawful financial assistance. the sfo charges others in the

case, four of the individuals including the former barclays ceo, defendants will appear before court on july 3. this is thex barclays ceo as one of who has been named in this case. no number yet is being applied. there had been talking head of this that barclays would plead guilty to u.k. charges but it -- that it failed to make proper disclosures and there was talk of 100 to 200 million pounds, we will see of that comes through. matt: 100 to 200 million pounds will make very little difference but if you charge john burley with fraud personally, that is going a step further than oftentimes these regulators do. anna: this is washed by the

regulatory industry. it is possible to charge big companies because they have to be able to show that someone senior enough, the so-called directing mind is involved in the alleged behavior and this has been a long time coming. this us since 2008. as more details break we will bring them to you. bloombergs get the business flash area and -- flash. juliette: billionaire li people heas told plans to retire. i has not specified a date but is likely to step down by his 90th birthday in july next year. he plans to remain a senior advisor and keep his office in downtown hong kong. facebook's chief operating officer said this social network has a duty to help businesses create new jobs. sheryl sandberg spoke to caroline hyde. changing,nology is

the atomic -- economy is and technology can be used to grow jobs and it is our responsibility to help small businesses and large as loses all around the world use technology to grow their businesses so they can create jobs. juliette: tesla is close to an agreement to make cars in china which would allow it to avoid import taxes and process vehicles more competitively. the deal would lead to a production plan in the developer and sound -- development zone and could be announced this week. a spokesman did not answer calls. tata group is considering an offer of jaguar land rover on the international stock exchange. internal have held discussions about the potential

listing. with london and new york being possible venues. representatives denied the report. that is your bloomberg business flash. anna: thank you very much. attention to the ecb and we have six months left on the bond buying schedule. colleaguesi and his are in no hurry to talk about what comes next. euro arearding to officials, the governing council sees no need to make a decision on quantitative easing until september, qe plans for 2018 might he disclosed only in late october or possibly at the extreme, a couple of weeks before the end of the year. what are your expectations around what we hear and when from the ecb? timm: the council is being very clear, the staff is clear that they are going to wait as long as possible. it is a crucial decision and the

timing is important. what i mean by that is as soon , the bondnounce this markets may selloff. it may not until such time. simultaneous. a lot of investors who have enjoyed substantial rallies in the bond market, there is momentum building, credit spreads are driven by quantitative easing and this is my of the most powerful quantitative easing groups left. stop, when they stopped, that is a critical moment. matt: they have ramped up their buying. have ramped up so much over the past 18 months, it is pretty amazing. is it likely that we see an end

to ecb intervention even in 2018? timm: i think it is. i do not think it is working for the purpose. it is managing to crush positivity, it creates very low on what isit depends trying to do. are you trying to achieve a social aim, are you trying to increase growth, it is not entirely obvious that this is the best way to proceed. other central banks have looked into thinking maybe there is a better way to achieve that. matt: they continue to downgrade those forecasts especially since they note the transitory nature of fuel and food and vacation packages. the super court numbers do not get to 1%. timm: the ecb has further to go. the unemployment rate was much higher and it is coming down and behaving as one might expect in

terms of employment versus inflation. it is the other countries where employment seems to be pretty full, inflation might be somewhat asymmetrical. one senses that labor will take it higher. it is not coming through from commodities as you point out. but bonds with negative yield or close to zero, it is not entirely obvious that we are inspired by these markets. anna: our consumers inspired? consumers inspired? germany and the eurozone at the top and italy a bit of a laggard on this front. the italian story fit in? germany you look at with its implement right --

unemployment rate, it is a hot economy that negative interest rates which seem to be inappropriate. it is not interest rates that are causing it, it is animal spirits in germany. france seems to be turning around. with greater confidence with macron and his latest election wins. and italy where growth has stagnated, there are still nonperforming loans, unemployed men is high. that is the one they want to save. with brexit negotiating starting, they have to maintain the european project, italy is key. matt: thanks for joining us. , appreciate your time. greece'sspeak to

economy minister joining the program later on. matt: that is it for bloomberg daybreak europe. we will see you on the other side. ♪

♪ welcome, you are watching "bloomberg markets: the european open." i'm guy johnson in london. as is matt miller. breakfast at the mansion house down the road. mark carney and philip hammond's speak shortly. plenty to come from that event. in september, live from the fed.