anna: catalonia countdown. rajoy toon to allow seize control of the region. strong earnings from amazon since the s&p 500 higher. australian government thrown into turmoil. the prime minister was declared ineligible to sit in parliament.

welcome to "bloomberg daybreak: our flagship morning show in london. matt miller back in the german capital. great to see a map. let's get some breaking news on ubs. surprised investors with the drop in financial strength. the capital rates rising to 13.7% in the month through september. net income rising 14%. that could come in below estimates. wealth management is the banks core business, contribute 500

million francs, that is up. a little more appetite for risk. we will also hear from the ceo of ubs. matt: we have a couple of headlines. are goingnd clarion to abandon their merger. these headlines are just crossing the bloomberg terminal. it is going to avoid paying, so it will save 300 million. huntsman and clarion mutually come to this decision. speaking of deals, we have a headline crossing the bloomberg lafargeholcim and

talks. they're going to reset their 2017 and 2018 outlooks after third-quarter sales came in at 6.9 billion ahead of estimates. generally in line with estimates as far as earnings are concerned. outlooks reset their as they talk with ppc about a deal in africa. we've got thera: ecb decision yesterday. i dovish taper in the markets. eurozone stocks moved higher.

this is euro-dollar with a hundred dma. the average is moving for the first time since april. we are at 118 before that decision in the conference with mario draghi. the dollar is climbing to a three-month high after the u.s. house passed a budget on tax reform. the euro heading for its biggest weekly drop. i thrown the euro on my risk radar. we will look at that later. check out japanese stocks end of -- check out japanese stocks and the yen. the catalan government was not going to declare independence.

we thought they would call for new elections. they have thrown that into disarray. it looks like chaos there. to hearget to spain more later today. we see that rally that was sparked went around the globe+++ the u.s. rallied, and japan right -- japan rally. a long-term trend. we will be talking about that later as well. you cannot have dual citizenship if you want to be a politician

in australia. nejra: cpi numbers as well. let's get to bloomberg first word news. >> in the u.s. john taylor the stanford professor is the front runner to become the next fed chair. economic growth is possible if policymakers encourage investors and hiring. are likely to find in approving audience in the white house. australia's government has been thrown into crisis after deputy prime minister was declared ineligible to sit in parliament because he was also in the system of new zealand when elected. it wiped out the one seat majority in the lower house. re-contest the seat in a special election. i just put myself forward as a candidate. china's central bank has

injected money into the financial system for the first time. the move will reassure lenders about funding availability while also intensifying a deleveraging drive by driving up costs. japan's key price gauge remained unchanged in september ahead of next week's bank of japan meeting. the sluggish gains will continue well into next year. kenya, the results of the

presidential election are due this morning. uncertainty about the vote unnerved investors. kenya's benchmark share index has fallen 7.6% since the election outcome was declared void on september 1. u.s. president has blocked the release of hundreds of records on the assassination of president john f. kennedy. donald trump said, i have no choice, citing irreversible harm to national security if he were to allow all records to come out now. he put them under a six month review. global news powered by 2700 journalists and analysts across 120 countries. you can find more stories on the bloomberg at top .

thank you. let's check in on the markets in asia. we have a few weeks box. week's box --w we had a few weak spots. we also have a lot of corporate earnings. they have been very good. we have a bunch of earnings coming out in an hour. thechinese financial story, construction bank is out with earnings. australia closing up shop for the week.

because the index and its last 19 minutes were at record highs. kospi index in his last 19 minutes were at record highs. banks are a big mover in india. a private lender in india said a billionported by dollars. a bad day at the office. 14.6% gains for fuji. well above the highest estimates out there.

once the market closes in japan, expect a flurry of earnings coming out. nejra: thank you. .e just got some breaking news we will keep an eye on that and bring you more. legislation is expected to be passed to seize control of catalonia. it would allow centralized power over the regions police force and state media. could mark the end of one of europe's worst constitutional crises in a decade as the separatists run out of options. because this is crunch time, how tough could madrid go on the

catalan government? >> that is a good question. it is not if this will get approved, but how tough they will go. there are hardliners that say -- thathow gone too far say this has gone too far. this has been a political headache for rajoy. if you go to top on the catalan administration, there is a question as to what extent madrid will take control. you could get major push back in the streets of barcelona. they could seize total control, but if they do that, they could get a reaction from the people. the details will be crucial. extentt matters is the of the powers madrid will get. he looks weak and

indecisive, he is not pleasing spain. what is he doing. pushed about -- at one point it seemed he wanted a way out. that also prompted immediate reaction in barcelona. we saw people gathering, saying you are a traitor. he backtracked, and we will get some kind of vote. puigdemont is looking increasingly isolated. he is looking increasingly week.

weak.reasingly this has been dragging on for weeks. matt: maria covering the story for us every day. thank you. nobody can think about anything else. -- mariot having been draghi warned the central bank will remain cautious as he put his stimulus measures on the road toward an exit. downsizing them, as he would say. monthly purchases will be house to 30 billion euros and run until september. even then, draghi said there

will not be a seven and to the buying, and it should not be called tapering. here's his statement. >> measures of underlying sinceion have picked up early 2017. they have yet to show more convincing signs of a sustained upward trend. -- our design is flexible enough to cope with the limits. the decision today is for an open-ended program. it is not going to stop suddenly. it is never been our view that things should stop suddenly. it was not unanimous.

there were different viewpoints. i would characterize the discussion as ranging between consensus on several issues and large majority on our issues. this is not tapering. it is a downsize. nejra: breaking news. we are deep into it earnings season. bba coming in at 1.1 4 billion euros. out headlines out of seven -- sabbadel. coming in that 56.3 million

euros. let's get back to the ecb. we been talking about how the markets read this as a dovish taper even though mario draghi warned against calling it a taper. first test of a hundred day moving average since april. d you see a pause in the 10% euro rally we had at the beginning of this year? were a lot of political pressures to bring it down. the french elections, the german election. now.ee more angst you got a euro that has strengthened, given the

reduction of now. qe, not to use the word taper. it is more dovish than what was expected. we got it might go down to zero. it does seem like the market has taken it a good stride. we expect a similar result from the ecb as of yesterday. matt: does it really make sense, sees that the ecb inflation at 1.5 percent this year going down to 1.2% next year, that they would tighten monetary policy? should they be loosening it at this point? >> that is a key point of the phrasing and understanding draghi's words. he said it should be sustained inflation. it does indicate to us there is an ability for them to extend it after september of next year.

you can't say growth has not come through. at the central bank you want pmi's to be strong. you want the credit lending situation to be better. on those checkmarks, he has the boxes build. it is the inflation numbers that are his focus, and that is why we will watch that closely over the next year. headlines coming qeough saying the draghi decision shows the european economy is robust. there is no doubt on economic dynamism. talk about eurozone equities. we sell them rally following the decision at the press conference yesterday. i have a chart selling your zone stock prices, the correlation have been dropping.

what we're seeing, stocks moving where are we now going forward following this decision and press conference? is it a sweet spot to eurozone equities? >> equities are an area we prefer most. story,he global growth eurozone equities take advantage of that. we are seeing fundamentals come through. expectations are being ratcheted up over the course of the year, but they are being delivered. that is really good for europe. taking advantage of that momentum, we see opportunity in europe. there is opportunity for further gains. we do have quite a ways to go in

our opinion. matt: are you worried about the brexit,lization with with what is going on in catalonia, with the organization of eastern europe. does it concern you? >> of course. politics will be the biggest risk. the stronger euro doesn't see to be heading in the direction it had been previously. the decentralization is a risk. that is why we don't want up by into watching financial struggles. it is a out the stocks that have the better fundamentals to suffer through the political instability without suffering as much as their peers. nejra: we were just talking about catalonia.

spain's 10 year yield dropping 11 basis points yesterday. that was part on the ecb. when do you expect to see the political risk their being priced in if at all? >> already you see the spread over bunds and the german market. have a political unrest. it is not entirely priced into the spanish market. over time you would expect the situation in barcelona and madrid does get further resolved. you would see that matching up with the market. you have to be avoiding these idiosyncratic risks in a region that does have a lot of potential. matt: thank you.

there's a lot of news here for a friday. let's get some of that in the bloomberg business flash. >> nissan has been conducting its inspection process. according to a person familiar with the situation, the finding will be part of a report of external investigations. the report will be submitted ahead of the company's results scheduled for november 8. amazon has reported third-quarter sales and profit that tops analysts estimates. the results insured investors they can not disrupt their e-commerce with whole foods. the company also said it was not likely to meet its earnings target.

no replacement has been named. that is your bloomberg business flash. nejra: thank you. britain must agree to a method of cap letting what it does the eu. the comments come as the remaining 27 member states formulate a backup plan in case talks break down. we're just talking about eurozone equities. you are positive on them. how are you advising your clients to trade around u.k. equities? that itiggest view is will be hard to predict what comes out of the brexit negotiation.

given that we don't know how go, we don't know don't where the pound is going to be. it is hard to predict. we pulled back in terms of an overweight to either side. that is because there is too much uncertainty. u.k. equities and abroad global basis, they have a lot of dividend yields. in --s one reason we see interest in u.k. equities. matt: how do you view the u.k. domestic economy? wedini: this is the economy are less optimistic about versus the rest of the world. we expect a slowdown to come sooner than the u.s. -- in the

u.s. than the u.k.. real wage growth has yet to have any real growth. retail sales are positive, they are not growing and the pace they had been in the last few years. it is later in the cycle. some of the sensitivities to growth are more amplified even uncertainty around exit. we are seeing investment tensions from services and manufacturing companies in the u.k.. they rebounded post exit, but they are now turning off a bit. up next, amazon shows its against ever acquisition whole foods has paid off as a reports third-quarter sales and profits that top analyst estimates. this is bloomberg. ♪ is this a phone?

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it is 7:30 in the german capital of berlin. you are looking at a picture of the palace in tokyo. the emperor is getting ready for his afternoon tea. the german air company receiving four of 24 approvals for the taxpayer deal. linda lowered the threshold to winning votes from index funds

for the deal. they only 161% rather than 70% to turn in shares. third-quarter adjusted .perating, 1.0 3 billion they're confirming their 2017 forecast revenue that was in line with analysts estimates. this is all about the deal. earnings remain on track. nejra: let's move onto u.s. earnings which pushed the s&p 500 higher. amazon has shown investors they can run grocery stores, expand cloud computing business while selling more products online and managing expenses. there quarter sales and profits topped analysts estimates.

what stood out particularly in amazon's results? on inhink you touched your intro. amazon has demonstrated it can expand to these new businesses, grocery business with whole foods. also into cloud computing and gadgets. it is increasing the core e-commerce business that is essential to growth going forward. and also demonstrated they are able to push up revenue across a variety of businesses. does everybody called google out for that yet? i don't know that has taken off. what are the big takeaways there? >> growth was very strong. that continues to be driven by

their core advertising business , andclick advertising especially youtube advertising coming on strong. they are expanding into cloud computing. that is a big growth area that helped their top line. they are able to operate a couple different businesses. it is a strong result. companies along with microsoft are some of the most valuable companies in the world. it helped a late some of the fears that technology stocks have gotten overvalued. the demonstrated they do have growth to backup the highest evaluations. nejra: microsoft's push and cloud-based software seems to have taken up. what does it take -- what does it say about the rest of the earnings season? >> microsoft has its history in the pc based computing. it has struggled to move beyond that.

some of the years have been rough. this was a quarter where they showed they shifted customers to the cloud-based services. it is a profitable growth driver for them. investors are getting some positive signs just as there were concerns about the valuations for tech companies, they're getting data points that help reassure them that there is still growth to go in these earnings. is of the big questions apple on the horizon. next week we will get a look at how the new iphone is selling, and what is happening on the hardware side of these businesses. matt: thank you. speaking of what is to come, intel's cfo is going to join us time.0 em u.k.

430 -- 4:30 p.m. u.k. time. john taylor has called for reforms to speed up economic growth will stop it echoes trumps thomas to boost gdp. house republicans narrowly adopted a budget resolution speeding up the process of a tax plan by the end of the year. we have seen the bloomberg dollar index moved to a two-month high. it is holding its gains. the 200 day moving average in play, it may test long-term resistance on the upward momentum. u.s. tax reform, even the fed

chair story, is this more of a potential boost for the dollar in 2018 rather than the rest of this year? the dollar story, the strength of the dollar can extend further than just this year. as a longer-term story, it is part of our review. the gdp numbers are looking stronger. we are seeing a positive potential for corporate tax reform, or a stimulus that does come through. all of these boosting the strength of the u.s. economy. as rate increase in the u.s., the dollar will increase as well. the case for the dollar is quite strong. do we expect the magnitude of , the upside potential from here. matt: do you sell the dollar if we get john taylor there?

the fed chair is that binary, but you could say a more hawkish new chair between higher and faster interest rates, and a stronger dollar. there is a lot more nuance in terms of understanding weather comes into the new position is going to have to work with the current framework. interest rate rises and the balance sheet unwind have been slated out for the next half year. we would not expect a sudden change in interest rate expectations based on the replacement of janet yellen. have you been reading the bloomberg terminal this morning? there's a story saying it will be a yellen fed no matter who gets the job.

john taylor said i would go back to the basic principles. you want a supply of the economy increasing more rapidly, and you could do that with new policies. i want to ask you about regulation. this is the other side of the coin. different potential fed chair's have different views on winding back regulations. which would be the best case scenario for you in terms of regulation and a booster banking stocks? nandini: the general sense is that no matter who comes in, a ,ecrease in regulations dismantling of the financial and probability is something that will have to be discussed. in, we do since financials can do well in the u.s. regardless of valuations at

their best levels. higher interest rates mean banks can chert -- banks can charge more. matt: are you worried about the trading slump? the big u.s. banks are down an average of 15%. how does that play out? nandini: there has been a lot of thatssion on revenues financial institutions can get. this is a broader story that works in europe. the bring out how to maximize those profits, a basic principle that has worked for some of the financial institutions across the world since the crisis.

years earnings season have done the best. every word about financials in general? of course. we still see valuation potential in the u.s.. when you're traveling to work, tune into bloomberg radio on your mobile device or digital radio in the london area. coming up, ubs trading revenue falls 50%. that is next. this is bloomberg. ♪

nejra: it is 6:43 in london. 1:43 in new york.

just over an hour until the european open. abandon itsmpany merger with huntsman. ubs trading revenue falling 15% in line with u.s. banks. cranny has satus down, and we will be hearing from him shortly. very interesting considering what we have heard from european banks. ,he new cfo from deutsche bank his efforts to turn around the slump in trading. barclays and deutsche bank had a bigger slump in trading then we saw in u.s. banks. ubs is not as concerned with

trading as those two former banks, or the big wall street banks are either. still, it will be key to see how this bank is doing in the context of european banks coming back to a position ryu us banks already were. listen to this. >> we were never convinced the fast and move too aggressive on that front. they need to see a more concrete sign of recovery and inflation coming back before they can take a more aggressive way. is that what kicks the id of the curve? >> we are prepared to manage any kind of market conditions. nots very important for us

to go into wishful thinking about the environment. this is a challenging environment. growth, the forecast is set to be revised up again. the macroeconomic situation is very complex. it is a challenging quarter in terms of seasonality. i think we state focused on executing our current strategy. the capital buffers are at 13.7%. that is up. do we get a buy from ubs in 2018? in the past, we reached capital levels for regulatory

requirements. looking to continue to implement our dividend policy based on our cash dividend. it withly covenanted by share buyback. it is too early to talk about that. manus: how much are you underpriced by? >> it is going to be a matter of time until it is correct. clear, it's not that we want to be considered i thinksset gatherer,

once the capital requirements for us and industry are clarified, the market will recognize our capabilities and capital returns. what tops your list? we are not going to disclose the results. there is an element we are i think there is , our legalrence entity in frankfurt, and within europe you can branch out into other locations and operate out of a branch within the eurozone. that is what it goes down to.

asking our colleagues is an important element in our decision-making process. crucial, and nothing is decided. we are close to making decisions. italy, wouldnk of co is good if sis reappointed? >> it is up for politicians to make that decision. stability is always good. that is not my task to make a comment on. that was ubs ceo speaking to manus cranny in zurich. headlines, and third-quarter adjusted profit coming in at 947 million euros.

a miss.- before we move on, i want to go back to the banks. earlier you were saying you are positive on financials, but you what youe careful pick. which ones are you positive on, and which was not so much? nandini: there are financials in europe that can benefit. there are some specific options not in the peripheral regions that have better profitability outlooks and better r.o.e.. they are on a name by name basis, and i don't covert

specific names. there are specific banks that do well in a time when there is this positive sick rise recovery in europe. those are the ones we like. european banks cannot be thrown into one pot. the peripherals have such big , especially italian banks. are you confident the ecb will issue calmly down to the ground? 350 billion in loans don't get solved overnight. nandini: italy is the real problem in terms of nonperforming loans. we are not necessarily confident. we can hope on that. over the course of the next few years, we would expect some move

toward reducing the number of nonperforming loans as a percentage of gross loans, or even figuring how to recapitalize those areas in italy. metrics,t the ecb's really looking at some of the general sense of credit health and the eurozone has been one of the reasons we do like european financials and european equities as a whole. and thinking about the ability of the ecb to bring down borrowing costs. we've seen massive reductions in german, french, costs. making sure that money is going to the right hands. it is more picking and choosing. how much of a risk is

amazon to banks? at the: when you look big technology companies in the u.s. or across the world, it is about the destruction. if you think about what amazon is doing, they're moving from the original sector to having a lot of exposure and access to part of the consumer spending cycle. risk.novator can become a and the u.s. there is more structural reliance on commercial banks. you might look further to emerging markets. that's where we may see some disrupting technology come through. what about in europe? there is regulation coming

through that means they ask have to share their data with rivals? does that concern you? challenge, is a there will be winners and losers in every situation there is deregulation. in europe, there is a culture of startups, and this technology, there will be interesting .pportunities whichl, it is a factor in we see emerging in europe. this gives you a good breakdown of how earnings season has gone. you can click on the growth cap. to see if we are releasing earnings growth. the company's web reported so far averaged out a drop over the

same quarter as last year. sales are rising as far as stoxx 600 companies. our european companies doing as well in growth as u.s. companies? does not neglect the season has been strong so far for both equity markets. point does or data not constitute a trend. we are positive on eps growth. your season is a little behind, so it is hard to make the some aggregate numbers. we expect europe to do better in terms of equity fundamentals. comparing different sectors, one think the point out is tech in the u.s. is higher than it is in europe. nejra: for your his own equities

going forward, how much weight are you putting on earnings versus the fundamentals of monetary policy? nandini: the biggest thing we recommend is the fundamentals. finding companies with the eps that are getting the surprise, rather than being the ones to drive down the index. having that as your base case or reason for investing, is much better than banking on qe coming in stronger-than-expected, or banking on other macro forces that may support some companies over others. consumers are doing well in europe, you want a consumer focused company. down, butrowth slows a sick rise recovery comes to a close, you have to switch around more and the european index in particular. matt: thank you.

up next, earnings from rbs as european banks continue to roll in with the numbers. ♪

♪ ubs reports, the swiss lenders capital buffers rebound as investment banking income ermotti saysrgio the bank isn't changing strategy. set togrowth forecast is be revised up again, but the geopolitical and and situation is still very complex. we are also entering into a very challenging quarter in terms of seasonality. we stay focus on executing our current strategy. catalonia countdown. senators in madrid are expected

to pass legislation that allows rajoy to seize control of the rebel region. house republicans pass a budget resolution, unlocking a process to cut taxes by year end. plus, strong earnings from amazon to forward send the s&p 500 index higher. turnbull in crisis. he loses his one seat majority after a citizenship ruling pushes his deputy out of parliament. welcome to "bloomberg daybreak: europe." i'm matt miller in the german capital of berlin. nejra: i'm day ready -- che pitch -- nejra cehic in london. we had numbers coming through

from took out a miss on adjusted profit. the third-quarter adjusted net line withcoming in estimates, $2.7 billion. oft is versus the estimate 2.7. total also to pay an interim dividend of 62 euro cents a year -- in april. of $20 a breakeven barrel in 2019. the key number than that adjusted income in line with estimates. also, we have numbers from royal bank of scotland. we had ubs earlier this morning. with rbs iser third-quarter adjusted operating profit, coming in at 1.25 billion pounds, beating the billion pounds. it will be profitable in 2018, that just coming through and

rick -- retaining its medium out outlook. also its 2017 financial guidance. couple ofve a european heavy hitters coming out with earnings. electrolux is the first one. out of sweden, third-quarter theating off it beating street estimate at 1.90 6 billion krone, compared to 1.90 2 billion and the company also 2, and the company saying the appliances market could rise 1%. checkout iag, as well. the international airlines group, third-quarter adjusted to 1.5 billion euros. that beat the estimates of 1.1 one billion euros. billion euros. we were looking for 6.61,

revenue beating a little bit in terms of the third-quarter. it looks like these earnings, iag and electrolux are generally in line. a lot of stocks to watch at the europe -- european equity open, which comes in just under an hour. it looks like in futures, we will see a slightly higher open. yesterday, the stoxx 600 closed higher by more than 1% following the ecb decision and mario draghi's press conference. the euro stoxx 50 had its best a of an ecb meeting in 2017. euro stoxx 50 futures pointing higher by .3%. dax higher by the same. it looks like we could see a bit of a more muted opening in the ftse 100 as those futures are flat. i want to take a look at the risk radar this morning.

a lot going on, but one of the things we are seeing is a global equity market rally, kicked off in spain yesterday and we really saw european indexes across the board gaining more than 1%. u.s. equities rallied, as well yesterday, carrying around to the gains we saw in asia. percentei to 25 up 1.25 at the close. the yen also losing strength against the dollar after investors went more risk on and no longer see the need for a safe haven currency. on the other hand, there is a bid for bunds, we look at bunds future in a bit. the aussie dollar continuing down. some inflation data out, but really, the scandal involving dual citizenship knocking turnbull's majority out in

parliament, dragging on all sorts of asset classes in the country. then you see the euro weakening a little against to the dollar won't call it a taper yesterday, finally kicked off. there is optimism about tax reform in the u.s.. futures, there is a bid there. the yield dropped to 41 yesterday. we will see where it goes today when the real cash trading starts. futures bide oat for price action in bonds. nejra: let's get the bloomberg first word news with ed ludlow. ubs's capital buffers rebounded after it surprised investors with a drop in the key measure of its financial strength. profits soared. the bank's capital ratio rose to 13.7% in the three months through september. compared to 13.5% in the second

quarter. net income rose 14% to 947 million dollars, below analyst estimates. peninsula, u.s. secretary of defense james mattis has accused pyongyang of building a nuclear arsenal to "threaten others with catastrophe." -- unityedged south with south korea. he promised the trump administration wants to avoid war if possible and remains committed to forcing north korea to disarm. taylor, seenjohn as a front-runner to become the next fed chair, has argued that faster economic growth is possible if policymakers focus on reform, but encourage investment and hiring. his remarks are likely to find an approving audience in the white house. donald trump has promised to stoke the growth rate, which has hovered above 2% since 2010. donald -- australia's government

thrown in crisis after the former deputy prime minister was declared ineligible to sit in parliament because he was also a citizen of new zealand when elected. it wipes out turnbull's one seat majority in the lower house. toce will now have re-contest the seat in a special election that could take months to hold. >> i don't rely on the polling. i just put myself forward as a candidate and work hard and stay humble, and that is what i will concentrate on. haschina's central bank injected money into the financial system for the first time. the pboc offered billions of dollars in contracts at a cost of 2.9 percent, as well as 13.5% through one week and 14 day contracts. it will reassure lenders about end of your funding availability while driving up costs. it also used seven and 14 day repose today, injecting a net

$7.6 billion. japan's key price gauge remains unchanged in september ahead of next week's bank of japan meeting. ansumer prices grew .7% from year earlier, matching the previous months and estimates. the sluggish gains underscore -- boj willthat's remain on its course well into next year, even as peers begin to normalize policy. in kenya, results of the countries presidential election withdrew this morning -- uncertainty about the vote has unnerved investors. kenya is a regional host of companies including oio do. benchmark share index has dropped 7.6% since the election was declared void on september 1 while yield on the government's international bonds has climbed 34 basis points to 6.36%. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.

can find more stories on the bloomberg at top . thanks very much, ed ludlow in london with your first word news. checking on the markets now. in asia, david inglis is standing by for that. david: we are just getting into the close in tokyo. 20 five. 22,000, the first time the index has closed above that level since 1996. a surge pushing that index. it has fallen once this all month. this will give you a sense that this was a slow train moving. hang seng index about two hours gains at ade, .7%, lot of big lenders listed in hong kong. honda is up every single day this week. the asx 200 has been checked for

an hour. we are down on reasons ed mentioned. at one point, we were down as much as 1%. we did manage to clawback both of that -- most of those losses. 2500, but that is fairly academic because that is already a record high for stocks in south korea. we had inflation, there were a lot of earnings coming through. all coming out with earnings at the moment. to give you a sense of stats we followed today, four electric, electric,% up -- fuji roughly 15% up. china telecom corp. out with earnings. nejra: david inglis, in hong kong, thank you so much. for taylor has called reforms that encourage investment and hiring to speed up economic growth. the comments echo president

.rump's pledge to boost gdp house republicans the early adopted a budget resolution speeding up the process of passing a taxcutting plan by the end of the year. us, the global macro strategist at vtb capital. good morning, neil. .et's go to this chart this is based on td securities saying yields will move in opposite ways based on the fed pick on powell and taylor. how the 10 year treasury yield could go in either direction. i am just wondering -- >> why don't i jump in for a second? for a secondump in because the interesting thing about this chart is that td securities says taylor could drive the 10 year yield up 10 basis points while powell to

drive the 10-year yield down five basis points. since she made that prediction, we have seen the 10-year yield really pick up some momentum. is it most likely that john taylor gets this fed seat? obviously over the last week or so, the markets have been trying to figure out who is hawkish, who is dovish. the markets think john taylor, because of his well-known taylor rule is a hawk because of the taylor rule suggests hedge fund rates should be higher than now. as ae powell is seen continuation of the status quo. the yellen fad. -- bottom line is, men in many analysts have overstated the hawkishness of john taylor. we can tie ourselves in knots trying to figure out who is who, hawks or doves, but at the

end of the day, the new fed, including the new fed governors and the rotation of the presidents have to face the economy and financial markets as they find them. comments wehat the have heard from professor taylor on the need for supply-side reforms sends a message to me that he is going to be supportive of president trump's strategy to try and re-energize growth, which means this growth rate of 2%. i don't think he will be as hawkish as many people think. matt: it does seem as though he is almost plugging himself for the job and we have other fed voters who are plugging him for the job. we have the taylor rule here on the bloomberg terminal. tyalt want to point out, go. at five.tes with nehru

if you could see my hand, the blue line right here is showing you that rates would be much higher if we use the taylor rule with the typical 5% nehru. if i plug in a 4% nehru, and even and our star of just 1 -- r see of just one, we still fed rates are too low according to john taylor's own rule. where would he put these variables? neil: i think he is being quite sensible about all this. it is well-known that whatever assumptions you make in the taylor rule and whatever numbers you put in, you will get a different answer. the range of predictions from tar, it isu use an r s what the fed regards as the neutral real rate. janet yellen thinks that is

zero. the bottom line is the range of predictions that extend from slightly a where we are now, if youy as high as 3.7 use the old conventional taylor rule. obviously, the last 10 years since the crisis, we have been in a different situation. if the real rate is zero, you get a lower fed funds rate. the bottom line is even on the the favorable format of taylor rule, you probably end up with a slightly higher fed funds rate. that if johnmean taylor is appointed fed chair, on day one he will raise interest rates because why would he? why would he derail president trump's growth strategy where the president has said he would prefer growth if he could ever get it, up to 3.5, 4%. isther he can magic that another thing. nejra: also, there has been

commentary that whoever takes over from the fed next year is going to be janet yellen's fed. i wonder if that is feeding into the markets? we keep talking about this 2.4% level about being key. the consensus view that bond yields and major markets have made a secular the -- second year low. 2.9% in 2018, not much higher than we are now, why not? did thishaven't recast year's high, which is six point -- 6.4%. one of the things is where inflation goes in all of this. the next u.s. cpi numbers that 14 will be november important. a lot of the pmi surveys, the regional surveys indicate that cost pressures are going up and escalating. what we have seen are the early signs of inflation we have seen, financial asset prices start to row -- rotate into goods and

labor markets. however it is, they have to make a decision on the economy as they find it. if inflation is going up, and we know the current fed wants to raise rates, it looks as though they want to start the balance sheet unwind, in 2018, the pricing inc is another 2 -- three rate hikes. market dovish is the interest rates expectations, sometime being below the medium interest rates. taxa: there is also u.s. reform to take into account. matt: if it actually happens and i think reform is a word widely defined. macro strategist at vtb capital will stay with us. more from our interview with sergio ermotti next, this is bloomberg. ♪

♪ ubs group's capital buffers rebounded in the third quarter while profit in its investment banking unit sword. speaking to manus cranny, sergio ermotti said they have been impacted by volatility. sergio: i think the volatility a sensitiverly issue for us around the effects on major currencies. we are one of the leaders in the fx markets. matt: manus cranny us now from zurich. perhaps i should have say they -- said they have been impacted by a lack of volatility. what else stood out to you in your interview? manus: i think it is going to be

a hard call him what the market focuses on. he had a message on capital 3.1% , ramifications for dividends. i think the man is tortured by me asking him for a buyback. that he wouldn't commit to that. the capital buffer is going to be a plus for the market. the investment bank getting back to good old investment banking business, advisory and bolstering was there. gold stars for andrea. the fx business is down, but nowhere near as dramatic a fall on the investment bank. their fx and rates business did fall year on year, but if you look at the overall on the investment bank, it is a little better on a beat. $2.4 billion came into the bank. to me, it was steady as she goes. there is good volatility and bad. they are hoping in here that when repression of volatility

on the i.b. side is coiled to take advantage of that. manus cranny in zurich, thank you so much for joining us and great interview with ubs ceo sergio ermotti. still with us, neil mackinnon, global macro strategist at vtb capital. we have a lot of earnings coming through. also, the dovish downsizing from mario draghi. what is the outlook been for european equities based on this according to you? neil: i think it is positive in the near term. earnings begin to look a little better in response to the cyclical economic recovery we have seen in the eurozone. i think the -- that is peeking out yet. -- don't think that is peeking out yet. mario draghi doesn't think the time is yet right for complete of monetary

accommodation. he is still concerned inflation is below target. he is on the dovish side and markets were right to interpret yesterday's press conference as dovish. i think euro will come down further, dollar will get stronger. for european equities, -- my overall comment for the stock markets generally is we are more likely to get a melt up rather than a melt down going into year end. i think we are seeing that. little wobble in u.s. markets on wednesday, but pretty minor in the scheme of things. matt: where are the big risks? neil: we see markets regather equilibrium. matt: what is the biggest risk? neil: i think the biggest risks are upside surprises on inflation, upside surprises on interest rates. i don't think it is going to be a eurozone thing, but a u.s. thing. we take our lead from what is

going on in the states and everything. theh those u.s. cpi numbers 15th of november. if that is unpleasant and bond yields we have been talking about, a key focus the past two weeks where we have come off past lows, that is a key risk for markets. i think we can overcome all of that. we are not at this stage where there is a major inflation problem or there will be severe monetary tightening. for the time be, i am positive on equity markets. this melt up scenario is a key thing. mackinnon, global macro strategist at vtb capital. that is it for "daybreak: europe." we will go out with a little market check for you. you have been keeping an eye on the aussie sterling, weaker in this session, as well. the dollar holding gains from yesterday. up next, "bloomberg markets: the european open." ceo of anspeak to the

electrolux. this is bloomberg. ♪

♪ guy: good morning, you are watching "bloomberg markets: the european open." cash equity trading about to open 30 minutes time. i'm guy johnson in london. matt is in berlin. what are we watching? a dovish draghi bribes the dollar up. tax reform progress in washington and strong tech earnings throwing fuel on the fire. it is -- is the correction in euro-dollar just getting started? spain's senate set to give