♪ anna: spain's constitutional crisis. that charles stanley -- the region plans a vote. we are live in barcelona. manus: germany's biggest bank cuts on concern over revenue growth. anna: may's uncertain future. some of the prime minister out by the next election. manus: argentina's president said single digit inflation is now within sight. we bring you our exclusive interview. ♪

anna: good morning. this is "bloomberg daybreak: europe." i am anna edwards. a very warm open to the show. a little bit later on, we have tony smurfit. anna: a very warm open to the show. in the meantime, let's talk about where the threads of the tax debate have taken us in the -- manus: they have been plunged. they are a strong, hardy bunch. despondent traders say enough is enough. $28 billion of paper was offered. they bought it 2.7 times. is,question you need to ask are we seeing concern?

is that why they want paper? does that offer value for them? harvey and irma and the trump trade is back on. rude we go next in the bond market? that's where do we go next in the bond market? --where do we go next in the bond market? anna: here's the risk radar. let's take a look at where the dollar is. fascinating when you look back at september, not typical. certainly in terms of where we are on the oil and dollars for it. they can and does -- the yen is weaker. the dollar is up again. 65% probability of an interest in the interest rate i the end of the year. in the msci asia-pacific, we are heading towards a holiday.

we have the japanese inflation number out, up the most in more than two years. still, nowhere near where the boj want that. manus: you were looking at an index that is trading 15 at the half times its forward earnings. that is ahead of the average. -- we on track for the biggest monthly gain. we get some back yesterday. the likes ofng at citigroup looking at a possibility of a squeeze in the oil market. they're breaking $50 is a big psychological barrier for that market. a bigm break in $50 is psychological barrier for the markets. anna: clearly there was an upside. it's getting bloomberg first word news update. -- let's get a bloomberg first word news update. juliette: the spanish government

is continuing efforts to stop an independent referendum. pressingistration is ahead with the referendum, even after madrid received 10 million ballots, deployed police, and arrested more than a dozen local officials. catalonia accounts for a fifth of the country's economy. japanese inflation have hit a two-year high admits hardest labor market in decades. industrial production beat forecasts as it increased by 2.1%. household spending this estimates. it rose by .6%. said he stayed at the white house house so he could help pass a tax overhaul. whether he would leave if he gets signed into law, he said

there are many more once-in-a-lifetime opportunities here at the white house. onwill be joining us here bloomberg television at 12:30 p.m. u.k. time. the white house has begun an internal review of its staff the use of private emails for government business. reported that private emails accounts used by about -- byump enter husband even a trump and her husband are of interest. whenrvatives don't agree the prime minister should quit, but they agreed it should be before the election. leave juste should before the next election in 22 -- 2022.

regulators are working to find a solution to asset managers and banks that will be stuck between u.s. and european rulebooks. bloombergley told that he is urging financial institutions to prepare for the new role. -- for the new role. >> that will be pretty for messages going out saying you haven't made any progress. -- onturn up on outdoor outdoor and ask us to solve the problem. -- on our door and ask us to solve the problem. we have been very much focused on what we need to do to make sure the markets are functioning effective. juliette: you can catch the full interview with andrew bailey on bloomberg markets: rules and returns. global news 24 hours a day,

powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . of the week, day month, and quarter. september is looking better than what we've audit was at the start of the trading day. we have seen a turnaround. the new take fairly flat. -- the nikkei fairly flat. the australian market up. if we do see the mse asia-pacific finish in the red, that will be the worst month we have seen set september. overall, it has been a pretty good quarter. toshiba never far from the headlines. think capital saying it could take the unit public. the ipo will depend on financers in market conditions.

plans will be controlled by k unlun. manus: they give her much. that's thank you very much. the bond market is sold off. as the markets continued, president trump's tax proposals. anna: steve mnuchin claims the plan would cut the u.s. deficit by $1 trillion. the majority of economists predicted the plan would widen the deficit over the next 10 years. manus: let's bring in tony smurfit --david owen. welcome to the show. david: hello. manus: it is all down two

dollars in tax. we have done a survey. 26 economists say over the next 10 years he want to do this tax plan, you are going to add $10 trillion. it is not even cap an inch. -- it is not even cast in ink. if you have a situation where they cut taxes, the deficit will widen. who knows. at the moment, what people want to see is a stronger u.s. economy and people buying the trade you have lots. people buying the trade you have got. anna: you can make this great a deficit, it depends on how much growth you have decided it is going to create. at the end of the day, if you have leverage coming back into the system and you have

fiscal policy returning, you can generate stroman of growth numbers. -- strong enough growth numbers. the fed response by more -- by normalizing the balance sheet came: the one thing that to line, the japanese numbers were strong. you have the chinese inflation numbers come out. it is a brief burst of inflation. we talked about steve mnuchin talking about 3% growth rate i'm a bit tax or form. are you a believer in the reflation trade? annual global cpi. we have come off the lows. we are on the turn. you buy into this reflation trade? david: i buy into the view of deflation, which was a worry in many of the major markets. that is now off the table. inflationckets of

coming back into the data. this is a different world than what we had precrisis. things like the growing use of the internet price. i think there is a major move here. u.s., disinflation is very -- you had asia china generating deflation in some areas. inflation is very low. anna: more transparency is changing the debate. in terms of the dollar, has it really turned? is the downtrend still intact? september has looked a little different, partly because of expectation around tax and these

changing -- and the changing dance -- and the changing stance of the fed. david: janet yellen continues to push for higher interest rates. you want to argue that donald trump once a growth friendly fed alongside new fiscal policy, which will generate overtime a weaker dollar. at the end of the day, so much depends on the fed. we don't quite know where that is going. at the moment, the timeline is clear. the fed is on course to raise rates again, shaking the balance sheet, and the data, if it holds out well, they will -- you are still going to be easing policy next year. manus: we started the show with this chart. it was very strong demand. i am trying to square that away.

let me check how enthusiastic i have got this. billion, 2.7 times. if the inflation trade is back on, why would i want to lock in a load of bonds? what do you think the motivation is for von participants? -- for bond purchases its? -- for von participants? david: i haven't seen the breakdown. at the end of the day, you have the eurozone throwing off huge current account surplus. what we are seeing is this recycling of money from the eurozone, japan. environment where the u.s. curb is a steepening, going forward, how much are we going

to see going forward? anna: even if the fed isn't quite buying at the pace it once was -- david: right. anna: thank you very much. have gary--manus: we cohn, joining the bloomberg team at all: 30 u.k. time. -- at 12:30 u.k. time. anna: we will be speaking to jacqueline. may go away?hould we will have the latest on the crisis in catalonia. could vote on independence from spain on sunday. this is bloomberg. ♪ ♪

anna: open to "bloomberg

daybreak: europe." to "bloomberg daybreak: europe." .2%..s. dollar down the dollar is generally stronger across the board. this is what we are watching for. european leaders gather. we have had a little bit about -- we have heard a little bit about the macron-merkel relationship. manus: there is the eurozone inflation, and after the close of things, it could heat up a little bit. a reading update for spain. anna: let's get a bloomberg business flash. deutsche bank has had its long-term credit rating cut one level as it struggles through another strategic overhaul. the german banks grade was reduced to triple b plus from a

minus while it's outlook was set at stable. it now expects the lender will take some time to reach its earnings target. u.s. regulators are said to be planning aig from the special government oversight. the financial stability oversight council has called an unusual last-minute meeting today to reevaluate the company's designation. while the company isn't named in those coming your safety council has been looking to release it. tim griffin citadel is returning capital to two's -- to some of its -- investors will receive their money back from the strategies find by the end of the year. madekesman said we have

distributions across a number of our funds over the last two years. that is your bloomberg business flash. manus: members of theresa may's conservative party don't agree about the exact timing of when the prime minister should quit. i think she should, and at some point before the next election. anna: a poll of conservative members suggests they have not forgiven her. that is the conclusion you can drop in those numbers. let's talk all things brexit with david owen. i was in florence listening to her speak. you have been pouring over the details. did you hear anything new, different that would enable betray conversation to start in october? enable the trade conversation to start in october? david: not really.

the issue is very difficult. -- e.u. still wants the u.k. doesn't want to that. you have these issues. michel barnier isn't mandated at this point. the clock is ticking. of heads of state at the end october. we know we need transitional arrangements. otherwise, more companies may have to think about migrating. the pressure is on. manus: there has been a shift. i watched the news conference yesterday. jided in.ist said it the phrase that was used is a new dynamic.

we get this uptick in the brexit barometer, but there is still an inherent risk that these negotiations them apart, because they still are sticking over the money. when you look at brexit, what do to aeed to see to shift softer, perhaps more market friendly delivery? david: i think the story, in mpss of members of the around them, they have to be clear on this, that u.k. will be paying for access. there is still going to be money, and they have to move on, accepted, and we have to have situation where the transitional phase makes sense, and we can then see where we go. at the moment, it is unclear. some from the labor policy want a second referendum after the terms are known.

physically, the whole thing is a mess. to mark earlier this week. he was talking about establishing a free-trade agreement just for financial sectors. that would be new, wouldn't it? david: no doubt. anna: is that something you think could fly? it is fascinating his body works for the city of london and they are out there doing these deals, having these conversations in brussels at the same time as the negotiations. after we always thought that the u.k. would end up paying for access for certain sectors. being one --vices -- being one. they would pay in some way for

access. we have the meetings in estonia today. soft diplomacy is going on here as well. you have this whole thing about trying to put pressure to come up with a deal that works for everyone. is going to be difficult, as we know. -- it is going to be difficult, as we know. whos: there is one man obviously really is in the business of chastising. the chief brexit negotiator for parliament. with have a look at his quote. she chose florence because of the 15th century politics. fighting for power was the driver of florence.

the majority of tories seem to how negotiation negative might it be if they go to throw the baby out with the bathwater? 7 it wouldn't --david: it would be considered very good news. this whole issue about whether at that point we get a vote of no-confidence, which causes another -- it is something we are thinking about. i'm sure this is one of the things that will be discussed. anna: they will be asking you, is there going to be a flight on the pound, a run on the pound? is that something investors are talking about? david: they are. perhaps this notion of, will they impose capital controls, there were papers written about this. when labor came into power in 1997, we saw the operation of

independence, which has been going for 20 years now. -- we didn't see a role in the pound. are you looking for a hike rate? the likelihood is very low. they could easily go into november. anna: thank you very much, david owen. if you are traveling to work, you want to cross over onto radio. we are live, on the present. -- omni present. anna: as the administration of barcelona attempts to head a

referendum, we will focus on europe and political risk. we will be live in barcelona. this is bloomberg. ♪ ♪

a shot of the emperor's palace in tokyo. the data in japan sparked some market moves. japan's inflation is added two-year high. a strong economy with a little bit of inflation. there is one or two comments coming through. there is a new contender in japanese politics. anna: we talked yesterday we -- yesterday about the japanese political thing.

yesterday about the japanese political scene. people have been questioning the extent to which the parties could come together. let's check in on the markets. here's nejra cehic. asian equities gaining on the msci asia-pacific index for the first session in six. if we look at this month, heading for a monthly decline on the msci asia-pacific index. up to eight straight month of gains. the index also on track for its first weekly decline in seven. as he can see, we started seeing these declines after -- is this the start of a downtrend or just a blip? speaking of, the bloomberg

dollar index is headed for its best week since 2017. it is heading for its third quarterly loss though. argument that the dollar downtrend remains intact, and so do the bearish arguments. finally, looking at oil. it is heading for its best month of april 2016, but i am looking at the wti discount to brent crude. the wti brent read that we have seen that widen out over the last few days. u.s. oilhtening as exports rebound following the hurricanes. manus: breaking news coming through.

bayer will revise the fiscal outlook for 2017. 24.6%. the company manufactures coatings and insulating materials. catalonia's campaign for independence comes to a head on sunday. the administration of barcelona will attempt to hold referendum in defiance of the constitutional court and the prime minister. manus: let's get to barcelona where our reporter is standing by. good morning to you. this vote, is it really going to happen? why do they want independence from hundred? -- from madrid? the word here in

barcelona is confusion. i am talking to people in barcelona. they are convinced the vote will happen. i have spoke to officials as they the vote will happen. officials in madrid are telling me this will not happen. there might be minor votes. in terms of how did this happen, a lot had to do with a distinct history, but a lot goes back to 2012 when the crisis started. they feel mistreated by the central government and they don't get enough regional funders. they put in more than they get in return. they will be better off if they go at it alone. anna: our markets being too complacent about the situation -- our markets being too complacent about the situation? there has not been much of a spike up in relation to where we were in the eurocrisis. reporter: definitely.

bund,not just the german but what we are seeing is the market things to be not buying this. in previous referendums, nothing happened. i have to say, this is something we have never seen before. the policesterday, for moving ballot boxes. we have never seen anything like it. to say this is the most serious constitutional crisis because -- this country has ever seen is not an understatement. spain has hired fairies off the port of barcelona, thousands of police them which could be deployed at the drop of a hat. they should is called rhapsody. back to markets.

-- the ship is called rhapsody. back to markets. they are expected to improve, the spanish overall rating from triple b plus two at least and -- a. ? it does. they said they considered improving the rating if the fundamentals continue like this. at the time, the situation hadn't started. switchings are positions in thinking that triple b plus going into a minus might not happen. thank you very much. maria from barcelona. she was one of the authors of that story about the cruise ships off the coast of barcelona

with police inside them. we will monitor that story. while the prime minister is focused on catalonia, most of the rest of europe's leaders are in estonia. manus: we have a coalition forming. a german government could take until december. we have macron calling for deeper european ties. we still have to talk about the details. , chief european economist at jefferies. back to the spain story. background,and looking at how i moved the markets are by what could be a begin. i think you have got a situation where we get the votes

in the vote is to separate from the rest of spain and it is a big vote, and then we go into the ecb conference in october and mario draghi doesn't give a clear message and you have a situation where the market fears there is going to be a sharp reduction in bond buying. fromll get more concerns the other elections as well. anna: at the moment, politics in the proofread doesn't matter as much because of the ecb. david: exactly. going to be a major issue that leads spain to separate. we make it positive news today and more people will consider internationally about lying spain. a lot of investors internationally call for papers will, because of the rating and what that -- and what happened

in the eurozone crisis. we are going into situation where there is much more confidence whether or not we have investors deciding whether they can buy these bonds. this is catalonia and spain in terms of the referendum risk. there is a little bit of a blip higher. it is not exploding, and that is the backstop you have from the european central bank. on a broader context, where are we on this catastrophe reduction? you make a point about employment, still spare capacity in these economies. --david:f you look at if you look at underemployment, people may be working but on temporary contracts, which includes germany, but also

part-time working, there is a lot of spare capacity not in cap sold in the employment figures. -- not encapsulated in the employment figures. they are trying to achieve a state philosophy for the eurozone. manus: you say continue to buy bonds throughout next year. ambition is to taper. that sounds like more of the same. what are they trying to achieve? david: they want it back in a towersish way. tot more do we need to do achieve and inflation rate of 1.5%, going towards 2%?

it is interesting, what would be market rather see? people will assume they will still be buying bonds in the second half of next year. anna: how much will be set in stone what they are going to do? how much would they give themselves folks ability? in our previous conversation with these political bands on the horizon -- political events on the horizon, and we could see spreads widen and the fundamentals that certain matter more than they have while the ecb has -- david: they have got to get through the elections. they will not want to pretend it. they have balancing acts. the issue with italy is the banking sector is improving

dramatically. they italian commodity -- the italian economy is improving. manus: this is exactly the point made the other day. there is systemic important companies. at the end of the day, the ecb is going to be in these markets for a very long time. to hold foreign exchange reserves. now, you have -- i do know, can you call them bond reserves? they have a lot of btp's. they are going to be in the market for a long time. david: i think 5 trillion is the figure. manus: thank you for filling the gap. it is probably going to

be almost 5 trillion when it is all said and done. anna: amongst this, we have emmanuel macron calling for more joined up thinking across europe. his idealism is running into german politics right now. they are going to have to pull together. that could take until december or longer. merkel is a little bit weakened by what happened last sunday. david: germany was on the back foot politically for most of the postwar. . -- for most of the postwar period. , germano back reunification, it was paris and brussels meeting political events. we are go back into that face. -- we are going back into that

phase. manus: david, thank you for chairing your -- for sharing your thoughts with us. we will continue the conversation about the ecb. the argentina present -- president assad of economic reforms have seen the country turn a corner. our exclusive interview. rebel will be catalonia administration be able to press ahead with sunday's ballot? this is bloomberg. ♪ ♪

anna: this is "bloomberg daybreak: europe pickup -- this is "bloomberg daybreak: europe pickup let's get a bloomberg business flash. here is juliette saly. deutsche bank has had

its long-term credit great cut one level as it struggles through another strategic overhaul. the great was reduced to triple b plus from a minus while it's outlook was set at stable. it now expects the lender will take some time to reach its earnings target. u.s. regulators are said to be planning release energy from the special much -- the special government oversight from its role in the 2008 financial crisis. while the company isn't named in the statement, two people familiar with the discussion says they cancel has been working towards releasing it from the label as us dustin mclean important institution. -- as a systemically important institution.

>> this company is supposed to be making money now, and making money by 2020. i am guessing by 2019 we will hear about 2025. this could be structurally not preferable. his capital structure is to have reached. -- is to leveraged. juliette: some of the investors willing -- will receive their money back from citadel by the end of the year. a spokesman said we have routinely made profit distribution across a number of our funds over the past 20 years. that is your bloomberg business flash. after less than two years -- has turned the

corner. an exclusive interview. there is a thing where we never go back to the past. confident we are moving forward and that this final decision of the majority of the society, so it will have to go through a huge internal reform. that is what i am feeling. there is no chance for argentina to go to the past. >> it sounds like you think it is dead already. >> she will be there. she will express an important part of the society, but the majority have understood we cannot grow if we continue being isolated of the world. renewnot grow if we don't

our public system. will start to work and live in the truth. bayous, -- fundamental values, which are expressing and having the last two years. forum,he world economic just this week published its week -- it's a global competitive report. countries and argentina placed 92. it is better than argentina did last year, but it still has to be embarrassing to be behind greece, brazil. what are your top three legislative priorities to fix that competitiveness problem? >> we're working every day on that. we have to renew all the internal processes with customs, , the other national

institutions, offices that allows exports, reduction. -- exports, production. simplifiednced can describe the society in a couple of hours. before that, it took half a year . we are cutting all of those problems every day. creating theis .omentum, entrepreneurship we are feeling that every day. things are starting up. surely there is something at the top of the list. after the election is over and you win the cq hope you will get in both chambers, what do you start doing?

>> first, have to approve the new budget. have to reduce the fiscal doesn't that -- the fiscal deficit. achieving show we are our commitments. the will be the first step. second, we need tax reform, reduce taxes. >> so, there is a tax reform bill. what is in it? what is tax reform going to look like? ,> we need to reduce income tax reinvest part of the profit. there are other ones we should reduce, but there will be a very , educational discussion for

the first time, because this is the first budget, this year's budget we are closing. you have to go behind the find a never government that has -- another government that has achieved something we have proposed. you have taken a flowing deliberate approach to reform. slow andve taken a deliberate approach to reform. is it time to accelerate reform in the second half of your term?

[speakin gitalian] >> that were does not exist. exist. word does not [laughter] i am going as fast as possible in terms of history, we are going really fast. nobody believed we could even win the election unless we changed so many things. that happened because citizens things that can come easily go away easily. society we dream, put in our best effort. that is what we are doing every day. >> not faster. >> as fast as we can.

i think we are going very fast. not analyzing two years. analyzing 100 years. anna: that was our bloomberg reporter talking to the president of argentina. he was a look at some of the stocks we are watching. -- here is a look at some of the stocks bear watching. manus: bayer is going to divest itself. we are keeping an eye on deutsche bank this morning. cut.ating let's have a look at the gmm. this is what it is a showing us. the dollar is stronger. equities are stronger. you have mobile equities --

global equities going for one of their best rallies. anna: up next, we are going to be talking about global trade. who knew that phones would start doing everything?

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bhanu: constitutional crisis. the catalan region plans a book on sunday. madrid tries to block the referendum. where live in barcelona. anna: -- we are live in barcelona. anna: deutsche's downgrade. manus: mays uncertain future. u.k. conservatives want the prime minister out by the next election. anna: no turning back. argentina's president says saystion is in inflation is in sight. we bring you our interview. ♪

manus: welcome to "bloomberg daybreak: europe." cranny p anna: i am anna edwards -- manus cranny. anna: i am anna edwards. let's get german data. manus: 2.8% in terms of the retail sales year on year. that is a decline, a contraction. on a month on month basis, they declined, dropped by 0.4%. the backdrop for europe is confidence surged yesterday. you're looking at euro area confidence. we had the election so it is about coalition building in germany. anna: we've got numbers coming through on what is happening in the housing sector in the united kingdom. we've got u.k. september house prices rising 0.2% above month on month. the house price number for the year, for the month of september is 2%.

that is numbers coming through. a fairly scathing report about the london house market -- housing market from ubs saying london risk is too high. he was talking about toronto and london, one of the riskiest housing bubble cities. manus: they have been warning for some time. let's talk about the markets. the markets continue to buy into the trump reflation trade. stocks are higher. the msci up for the sixth straight quarter. we have added value since the end of june, up near 15%. the stoxx 600 is up on the quarter and it is basic resources that took is higher by 9%. anna: that means the us economy is a step higher just the u.s. economy is a step higher. -- the u.s. economy is a step higher.

index in its initial response to president trump's tax plan. some of their assumptions around what they are doing for growth rates in the united states. big issues for the bond markets whether they can add to the deficit. the dollar is still going higher and the yen is weakening. the dollar is heading for its best week this year, a 55% for an interest hike by the end of this year. we are seeing that momentum. manus: keep an eye on oil. we've had the biggest monthly gain in u.s. oil since april 2016. we gave a little back yesterday. the debate for the market is this, citigroup saying that you could see a possible squeeze in the market going into 2018. it is down .8% this morning. anna: we put up the bund futures for you.

the german retail sales picture so that is the backstory around the stress of the german economy coming in weaker. the move was seen as an appetite for stocks in the wake of that trump policy tax. that has led people to question what that means for bond markets. manus: they cannot last night, they said the ratio was good. we are backield below. anna: let's get an update on the bloomberg business flash. governmenthe spanish 's continuing efforts to stop an independent referendum -- independence referendum and catalonia this sunday -- and catalonia this sunday. they arrested more than a dozen local officials. catalonia includes spain's second-largest city, barcelona.

70's inflation has hit a two-year high amid its labor market. consumer prices which excludes estimates.matching the same time, industrial production beat forecasts as it increased council spending beat estimates -- household spending beat estimates. steven mnuchin says the republican tax plan unveiled will cut the u.s. deficit by $1 trillion. most economists think otherwise. 21 out of 26 polled predicts desperate dictator will widen the budget deficit -- predict it will widen the budget deficit. supportstruggle to win and only will benefit the wealthy. great tax going to be great

bill for hedge fund managers in florida and the descendents a very wealthy people. this will be great for them. done? >> ig gets don't think this bill is getting done. juliette: the white house has begun a review of its staff use of private email. said thateporter private email accounts used by vaca trump and her husband -- by ivanka trump and her husband -- global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . final trading day of the week, the month has not been great but it is still a -- it is still a solid quarter. the nikkei closing out flat it australia's market closing high by .2% -- closing out flat. australia's market closing high

by .2%. in terms of stocks we are in terms of stocks we are watching, toshiba in focus after reports that they could lift its chip unit for $18 billion as early as 2020. it would depend on finances and market conditions, whether they argue over that unit. gail india is on the rise. petroleum has reposed -- proposed uniform tariffs. or a cut in australia closing down 0.6%. there is now no buys when you look at the anl function. much. thank you very a couple of breaking lines coming through in korea. thatper warning saying

full-year revenue will be between 4.6% and 4.8%. thatanna: they are saying fullr results will be lower than the current estimates. 140 million pounds committed to the banks that are giving us the update on their access at this point. they are in talks to sell canada and u.k.nada and health care operations. restructure isst going to be between 75 million pounds and 100 million pounds. irons -- ireland's foreign minister says the transition could last as long as four years. what will it take for a good deal? what will it look like for the manufacturing sector. , plan for the u.k., tony. -- welcome, you have a manufacturing presence.

you are around the world. the irish foreign minister said it could take up to four years. you are a manufacturer could we look at all of the hubris, what does it mean for you as a global manufacturer? tony: at the moment, nothing. what we see is good. it represents about 8% of our revenue. brexit are seeing since was a little bit of uncertainty with our customers, but since then, really nothing material has happened. anna: is it around the strength of your customer base. is it around the logistics? tony: we serve local customers so a lot of our customers -- so there for what we try to do is meet their needs. so far we haven't seen anything. the longer-term indications around brexit if it happens in hard way would be very difficult for the u.k. i have seen a little more

realism come through in the whole scenario is so we see some degree of a transition which hopefully from a business happen.ive won't ever manus: you've got to decide where you allocate capital. the question that comes to mind is, the u.k. as a destination for happen. manus: you've got expansion fort take a second seat? do you look more toward the core of europe? u.k. is a very important market, so we have to go where our customers are going so far, we haven't seen anything . we are very comfortable and u.k. saying, all the indications are that it is not the case interest to have a hard brexit. if it is a hard brexit, then what will happen is they will find a way to make this work for

business because when you look at brexit, and you see that the biggest trading block they can deal with and great britain is europe. it is madness to go way and not to have a decent arrangement. anna: we will see what the deal ends up being. you employ a lot of people in these places. there a move is taking place? are people you employ willing to go back home? tony: it is a very good point at what we are seeing in some of the countries where u.k. is relying on some of the workers like poland, we're seeing there is high ways cost increases in those countries. eastern european countries in general. if those workers are not made to feel welcome here, they will not come. that is where part of our issue is going to come. if our customers are not able to

find workers to do their products, they will move out. that is my biggest concern for the u.k., if workers without a -- the goods in the field will not be picked. manus: is that what you are hearing from suppliers? tony: it is a coming issue. it is one of those things we have been hearing more and more as people are looking forward than they are worried whether or not they are going to have the workers. , things are too uncertain to make any kind of contingency plans. you sit and wait for the facts? tony: we are winning for the facts. -- we are waiting for the facts. brexit is going to happen. it is going to be a little softer, and then as you saw last week, even a little more

transitional. week, even a little more transitional. with the party that is not in government, they are talking about an open european market for a long period of time. that is going to be positive for business. manus: there is a direct consulates of brexit, that is the manifestation of the pound. i know you have made statements that we are going to get on the phone and we are going to talk to our customers. are you going to get a percent of the price rate in the first just get 8% of the price rate in the first quarter? tony: in countries where there is bigger inflation, it is easier, so therefore in the u.k. we are passing a little easier than other parts of europe. we are pushing price initiatives all of our -- price initiatives across all of our european markets. certainly customers don't love us but at the end of the day, we

have very high input costs and we have to transfer those. our biggest is wastepaper and that has gone zooming up. through --past that with the past that through -- we have to pass that through. anna: for many years we talked about disinflation and central banks around the world were concerned about that. now they are try to work out where to get inflation from. you're talking about trying to push through some price rises. tony: in our industry, we are seeing inflation. we are seeing wage inflation. eastern european markets, very significant wage european , very significant wage inflation and we are seeing inflation and many of our product areas.

we are seeing inflation. manus: tony, stay there. we have more to discuss. he stays with anna and i. anna: we are going to be speaking with the former prime that is on surveillance at 9:30 a.m. u.k. time. [no audio] onus: could go to the polls sunday for independence vote and where life from barcelona next. -- boat. we are live from barcelona next. this is bloomberg. ♪

anna: this is "bloomberg daybreak: europe." 7:18 here in london. catalonia's campaign comes to a head on sunday. the administration of barcelona will attempt to hold a referendum in defiance of the constitutional court and the prime minister in madrid. let's go to barcelona where the

is.st maria, we have heard a lot of the government -- a lot about the government in madrid. maria: at this point, that is the big question and there is a lot of confusion here in barcelona. people we have been talking to are telling you, i am going to vote on sunday the matter what. officials in catalonia -- a little breaking, they are calling a press conference today how voting is going to go down sunday. officials in madrid saying this is not going to happen. there might be some how voting g to go -- a lot of confusion. the barcelona football players tweeting that he is in favor of the referendum and is calling people to go out and vote. >> maria, we try to transfer politics into the market, have a look at the bond markets.

they have had a smallest weekly moves in over a year because the market believes the european central banks would back stocks, but markets -- are we underpricing politcal risk in catalonia? maria: that is a key impression. they have been barely any moves. -- what we are seeing is a scenario that no one thought we would never get. the vote is on to happen. we don't know what this means four rajoy. he is a very concerned to the point where he is giving a u.s. summit today. madrid is keeping an eye on what this could do. this is already having an impact on politics in madrid. the government doesn't have the votes to pass it.

anna: maria, thank you very much. we will be keeping an eye on the development over the weekend. let's begin our test let's continue our conversation with tony smurfit. we talked earlier about the customer base. this is a sector that has been under a lot of scrutiny because of the changing consumer habits, people moving away from products. trying to demand better returns. how is that translating into your clients back up is a getting tougher for you to supply them? just clients? is it getting tougher for you to step -- clients? is he getting tougher for you to supply them? tony: no. where offering ways to help in their supply chain and when we look at some of the applications that we have and we go through our customers and say, by changing this package, we can "x," weour costs by

can see them problems. anna: these are challenged businesses, aren't they? is that leading them -- do they demand more? tony: that is why companies like us are coming up with innovative solutions to help them reduce their costs. you look at just a corrugated packaging, you got to look at the whole logistical project. you remember, if you look at our product, the ball doesn't exist without a products. i know that sounds grandiose that the reality is without the bookstore get, ship from point a to point b. manus: you got amazon going after whole foods. that is a revolution.

as far as e-commerce is concerned, it is got ramifications for your business. how big is that going to be? what is the biggest cost in getting their? -- and getting there? tony: there is no cost. ups has been shipping by mail order for decades. what we are seeing is an acceleration of that move. there is tremendous amounts of movement in e-commerce which is a good thing for our business. most of it is going in a box. manus: can ask you about the evil lucian? evolution?e you are seeing the acquisition in the states. the valuation that they paid, is it pushing the asset pricing up around the world that you look at?

are you seeing a rise that she might be interested in? tony: we have been around for a long time. we try and do things that are going to make sense for our shareholders for the long-term. i think when you look at smurfit kappa and our record, we tend to do reasonable deals that is going to be good for the long-term. that is our mission. it is right. we are seeing cheap money push up asset prices. we are a little bit concerned about because that is something we cannot change it we look internally and we see two minutes opportunity within our own business -- we cannot change. we look internally and we see many opportunities within our own business. anna: one of my colleagues talking about how china is constraining cyber. is that pushing prices higher?

tony: it is. it is a very good point. the price has gone up very rapidly within china with this kick that they have had on environments, stopping oil inputs of waste paper, so that is going to have a negative short-term ramification. in their own markets, the price doubles internally for collected wastepaper. it is gone from $250 to $550. $250 tos gone from $550. there's going to be a kickback when china starts buying again. they are not buying anything so you can imagine if they don't buy wastepaper at some point, they are not going to the paper which means they are not going to have the boxes and they are not going to be able to export. that is going to create a very big spike in wastepaper in

europe. that price momentum continue? -- a lotould not say will depend on what happens. anna: thank you so much real-time, tony. tony smurfit, ceo of smurfit kappa. manus: stocks are little from this morning. this is gm. let's have a look at the top markets. what you've got is stocks rising but it is the dollar. the dollar is dead on the back of the trump reflation trade. dollar yen on the move and cable. cable down by .25%. manus we've got bayer reducing their stake in the business. gots: the section companies

a look -- construction company got a little lower in terms of the numbers. anna: keep it on deutsche bank rate cuts. that is it for bloomberg daybreak. ♪

guy: good morning. welcome to "bloomberg markets: european open." cash equity about to start trading here in europe. we will bring you the first trade of the day. i am guy johnson. matt miller is in berlin. what we are watching, the downward dollar. bring back rally. and will thening currency resume climbing on tax reform? the catalan question. the vote for the region's independence