>> good morning from bloomberg's new european headquarters in the city of london. i'm anna edwards. matt: and i'm matt miller. this is "bloomberg daybreak: europe," and these are today's top stories. anna: trump bump. asian equities rise after your stocks hit records. the tax bill moves closer to completion. brexit.ge to the u.k. prime minister set to deliver her transition plan, row with the e.u. and her own party. christmas deal bonanza. a surprise for .8 billion euro offer for jamal to. unilever sells its reds business -- spreads business for 8

billion. good morning, everybody. happy monday. this is "bloomberg daybreak: europe." risk have a look at the radar. the tax story is very much epicenter of things for markets in the asian session and the united states on friday and of course, in the united states later on today. let's have a look at the msci asia-pacific, up by .8% right now. the markets are factoring in something more positive on a tax run. the republicans agreeing to their version of the tax plan that this is the penultimate trading week of 2017, reflecting what we saw on friday on wall street. i wanted to highlight what is happening in india. earlierhe sensex down on in today's session. it looks as if,

he has come out victorious. we saw the sensex down by 2.6%, up by .7% in the indian session. by .2%. further to go on the tax bump story. we hit records on friday. could we see further gains in today's session in the middle of week? a vote in the house and senate, and all of this to do with reduced rates of corporation tax and all of the other changes that are encapsulating this tax legislation. how material is this for corporate in the profit? how material is this for the u.s. growth story? we will ask this to our guest. trump's want to sign the tax bill into law before christmas. we will see if he manages to achieve that. we pulled out the south african rand, .2%. the dollar down against the south african rand, fluctuating ahead of the leadership vote. still underway in south africa. it has been 14.5, a few weeks

ago in the middle of november, and now, it is around the 13 mark. we are around the three-month high for the south african urine see -- south african currency. matt: i want to point out a chart. if you look at the turkish lira versus the rand, it is fascinating. one currency is going in one direction. one up, the other down. be able was expected to to see some gains after the central bank raised rates, but the central bank actually did not raise rates as much as the market was expecting. as a result, the lira really plunged. this chart goes back 20 years. if you look at a more narrow or focused chart, you will see the lira really plunged. result, that just shows you the optimism coming out of south africa and the pessimism coming out of istanbul. bloomberg first

word news. for that, we go to juliette saly. juliette. juliette: vladimir putin has spoken to donald trump for the second time in four days per the latest call was to think the president for eight -- thank the president. therding to kremlin's statements, there was going to be a series of explosions around thing years bird. seven suspected islamic state followers have been arrested. the you k's prime minister will set out her plans for the brexit transition period your theresa may will address parliament at 3:30 p.m. london time, saying that after march 2019, she wants britain to leave the european union union's single market while retaining most of the benefits of membership. the move will spark a potential new row as she tries to keep different factions inside the conservative party on her side.

the inauguration at 11:00 a.m. deanna time comes after the conservative people's party struck a deal with the nationalist freedom party on friday. a demonstration against the freedom party's participation will take place in the morning, but they are not expected to reach that level when the party is teamed up for the first time. hasionaire sebastian panera swept to victory in the second round of chilly's -- chile's presidential election. they have pledged to double economic road, 600,000 jobs, industry regulations, and narrowed the deficit. his pro-business agenda helped push the benchmark it to a record before the first round of voting. film mett star wars the high expectations with an opening weekend of $220 million in the u.s. and canada. that puts it squarely ahead of the last year spinoff movie had 150 $8 million in its

opening weekend. to them to million dollars overseas around the world. it opens in china next month. global news, 24 hours a day, powered by more than 2700 and analysts in more than 120 countries. you can find more stories on the bloomberg at top . the force is with asian markets today, rebounding from the selloff on friday. have a look at the nikkei on the close. the topix set to close at the highest level, but we had to check bloomberg data in a couple of minutes on that. the hang seng up by .7%. we are talking about india as well. we have seen a turnaround coming through in the indian market, but after that big selloff earlier in the session, the sensex looking quite good. market, .7%. in terms of stocks in the region, hong kong exchange, one of the best performance on the hang seng index.

they look like they are going to revamp ipo rules in that market. bid from a takeover oracle. sunny optical down for a fifth session. the company said it is not aware of why there has been such heavy selling. it was one of the picks for morgan stanley in the chinese tech space at the end of last week. anna, matt. very much. you breaking news coming through on the oil sector. let's bring that to you. this involves this in norway. 25% of the field in brazil three they are increasing their partnership with petrobras, the brazilian oil major, to increase recovery of the field. the initial payments of 2.3 5 billion u.s. dollars, and 25% of this field, the transaction nearly triples the companies output in brazil. certainly something to watch on

the back of that news. let's switch gears and talk about the bigger picture for markets, involving attacks story in the united states. -- a tax story. trump has gone as far as suggesting growth could hit 6%. votes planned in the house and senate this week. trump is closing in on his first major policy victory. for more, we are joined by kathleen hunter. also with us, then richie, head -- ben richie. great to have both perspectives. kathleen what the policies and ben, markets. here?s the latest kathleen: you have learned not your chickens before they are hatched. we look at obamacare repeal over the summer, and it looked like it would happen, but it didn't. slightly different circumstances. it does look as if the bill is on track to get the votes it needs to get to the president by wednesday.

48 hours from now. i think the senate is the x factor that is a little bit out there. we heard that john mccain, who is battling brain cancer, is not going to be able to be there this week to vote, so republicans only have a 52 seat majority. that narrows the margin even further. it could be a nailbiter, but if they get all the republicans on board, they will get the votes they need and pass it to the president. matt: how important is this politically to the republican party, to pass this tax measure this year? ishleen: i think it critical, absolutely essential for them politically heading into the midterms, the big story of 2018. republicans control both chambers of congress, the house and the senate, and there is already a lot of talk about the house majority being vulnerable. there was a story this weekend about voters wanting a , the callscongress

among voters for a democratic congress, the highest level since 2008. thosee years, i think all kinds of stories will be worrisome for republicans. at the point they don't have something like this tax proposal to run on, that will be problematic. on the flipside, the issue they , they made a lot of promises. that is what they will mean for voters. i think the question is whether or not voters feel that impact of the time they go to the polls in november. one interesting aspect of that is the president makes these promises. he keeps upping the level -- the rocking. anna: 6%. kathleen: rocking the 6% instead of the 3%. every time the president ups the ante, it makes it harder for republicans to deliver. [laughter] anna: that's interesting. in terms of the tax question is enough to deal with, isn't it, the week before the holidays?

yet we have the potential for government shutdown. this is a guest that takes a couple of weeks ago. kathleen: nobody politically really wants the prospect of the optics of a government shutdown three days before christmas, not great. i think there is a lot of pressure on congress to get something done. both sides are trying to use that as leverage. republicans in the house put forward a proposal. there is not the support for that in the senate. they are going to be evolving proposals back and forth this week. the danger is they always get to the last minute, not able to get the votes together. we have seen that happen before. we can see this week. anna: kathleen, thank you so much for your kathleen hunter with the latest that has been happening on capitol hill. ben ritchie is with us. let's get your thoughts on the politics. what does this mean for investments?

does this all go into corporate and it increases eps? buybacks?used in does it boost the underlying growth story to the extent president trump thinks it will? ben: on the last one, i don't think we are going to get 6% next year, but it might make a reasonable contribution if it is all passed. our economists are expecting to see an increase. asbably not the full package we currently see it. depending on how that comes through, there could be some upside to expectations at the corporate level. yes, we are going to be seen corporate tax rates come down in other countries, and that has translated into higher profits and potentially more distributions for shareholders in syria and the potential to invest more as well. kathleen: we have seen equities running away so strongly in recent weeks. and yet, inflation expectations have not taken off. some would suggest that means thererket is concluding

will be more buybacks and not necessarily good news for the underlying economy. ben: i am not sure exactly how the economic theory would play into tax cuts or corporate and what that actually means thanks to the wider economy. what we can say with some certainty is lower tax rates means more earnings-per-share. ultimately, more cash flow's to distribute. matt: i have a chart here that just shows the s&p 500 over the last couple of years, and in green, you see the price-earnings ratio. 22.5%. we hit all-time record highs on friday on this index. think the tax reform expectations are already fully priced into equities? ben: mantra they are fully priced in yet. i think you have a number of moving parts in terms of the multiple and discount rates it's slowly moving up as we can see

for expectations. it is all about the delivery of earnings growth. if we see that coming through, can be these levels sustained against that sort of low but rising interest rate environment? matt: how important do you see this for global equities? we have been seeing reaction, you know, in asia and european equities as well. to the u.s. tax reforms really affect the global economy? ben: i think they certainly affect global stocks and companies we invested in europe, significant u.s. operations have been held back to some extent by the level of taxation that they bear in that market. if we see that reduced, something in the low to 20%. that will make a meaningful impact on their earnings per share going forward. .t is not going to fall through there will be assets, and at the end of the day, we'll have to have a look at the details when it is all proposed. a lot of large multinationals

that maybe make one third of their profits in the u.s., that cut in tax rates will make a difference in eps. anna: that is what it does for the u.s. corporate. we had this interesting chart. highve compared tax rates and low tax rates for those with a high tax bills are the ones that are going to gain because of the tax cut. when you look at what has been happening in the most recent period, that does seem to be the case. they had been catching up a little bit. there will be a lot of digging into the details here, for the granularity on just what it means for every individual business. ben: i think companies will be quite reluctant to announce that they are making a lot more money as a result of the tax cuts. firstly, they would only for further credit for the benefits for themselves. i think it is not necessary that the most politically astute way -- i think companies will be cagey. if we are expecting to see

details, which is the timetable suggested, a lot of companies at this stage will not know exactly how that will play through for them. matt: all right, you're going to stick with us. ben ritchie is head of equities at aberdeen standard investment. we have a lot to go through outside the u.s. tax reform story this morning. brexit strategy, u.k. prime minister theresa may will unveil her plan for a brexit transition period, while facing challenges from within her own party. that sounds familiar. but we will bring you the latest. later, sebastian will formally become the austrian chancellor today. a government backed by nationalists. we will discuss european politics. this is bloomberg. ♪

matt: it has just gone 20 minutes past 7:00 in berlin.

it is 2:20 in singapore. you are looking at the msci asia-pacific index, up .8% on optimism for the u.s. tax reform. that has spread around the world as far as its impact on the equity market is concerned. let's get your bloomberg business flash. for that, we go to juliette saly. julia: -- juliette: they have knocked out the unsolicited attempt to buy some alto. they won the backing of the dutch cybersecurity provider. 51 euros per share comes less than one week after the 46 euro bid by -- they rejected's significantly undervaluing the company. they said they would no longer gemalto. one of the worst performing units as it focuses on faster

growing food and personal care needs. brands include flora and i can't believe it's not butter. completion is expected in the middle of next year. bitcoin futures started trading last night on cme, the world's biggest exchange, and it comes one week after the chicago rival introduced similar derivatives on the volatile cryptocurrency. cme got off to a faster start with more efficient pricing. the most active contract change versus in the first hour 570 during the debut. contracts are five times more valuable. that is your bloomberg business flash. anna, matt. very much, you juliette saly. the ukip prime minister, theresa may, will address parliament today to set up her plans for the brexit transition period.

or "implementation," as she will call it. she wants virgin to leave the e.u. single market while retaining most of the benefits of membership, and she will propose a diverging course on trade and migration. philip hammond and mark carney are in china. catherine mcguinness, the policy chair of the city of london corporation, told bloomberg about exit impact on the u.k.-china relationship. >> i think brexit is a diversion as far as our relationship with china is concerned. of course, we are very focused on this in the u.k., but i was here a couple of weeks ago, talking to some of our major stakeholders, some of the major banks which have branches in london. there is concern about the rate of progress, concern that -- i detect concerned about the rate of progress on negotiations. i was concerned about the short-term uncertainty, but the long-term commitments in london, i was to carry on doing business with them. ritchie, head of

assets, heading out for the -- the details of brexit negotiations. what does this mean for your universe? i have this chart, a btv chart. 6996, shows the performance of the ftse 100. it is a complex picture for u.k. assets. what are you looking for in the negotiations to trigger any increased or reduced interest in you cap that's? ben: one of the primary drivers of the ftse 100 has been sterling. despiteuite a good year aestheticians. it has probably held back the market's performance. in terms of the negotiations themselves, they are looking to see an establishment of some part of transition period, which can allow the facilitation of a negotiation in more detail around a trade deal. it is unrealistic to expect a trade deal to be struck between

now and march of 2019. it will be about what sort of transitional arrangements can be put in place. anna: we will all get more details from theresa may on what she wants. we wait to hear what the reaction from brussels will be. a lot of talk over the weekend about the u.k. not becoming a vassal state, not having too much connection to europe, so it cannot reap the benefits of brexit. of a- i mean, how much story is that for you in terms of where you invest around the u.k.? do you want to see the u.k. stick closely to the e.u.? are you happy to see the u.k. go off and make a trade deal? ben: it is more about certainty and stability tradeking the trade deals we are talking about are things that are so far in the future, they are not particularly relevant to what we're talking about today. it is really about whether or not the government as it stands can maintain the delicate political consensus it has an basically survive through to the

next election. that is the key thing in terms of investor sentiment. anna: certainly very popular in brussels. she got a lot of positive comments. not sure what that means domestically. matt. matt: because she gives them everything they want, right? she said the default position at european regulation continues in the u.k. she's going to pay for everything through 2020 and beyond longer-term investments. european citizens fall under the court of justice jurisdiction. it seems like what the e.u. wants to do is try and make it look good for the may government , but not give the u.k. anything that brexit would have entailed at the time of the campaign then. ben: i think also, there is a practical element to that as well, which is what sort of trade rules are we going to operate under following march 2019? all cut tiese've

and make everything up from april 1. i don't think it is a very realistic position. so from that end, we need to achieve some kind of transitional arrangement. it makes sense for the existing regulatory basis we have today to move forward from there. the key thing is the timeframe that is going to be over. that will be the key sort of battleground for the conservatives. seems to be, you know, exactly what brussels really want to view as well, keep the status quo, and if that means a transition period lasting years until it is basically brexit in name only, that seems like it would make everyone happy. do you see that as the case? ben: i think the key thing would be at what point does the cut off come in? i think the conservatives, certainly the right wing, will be looking to make sure that happens for the next general election so they can say not only have we left the european union, but the regulatory framework we were in before. matt: all eight, it will be interesting to see. -- all right, it will be

interesting to see. there is a lot more going on this morning. obviously, we have been mentioning the rand. we will give you the latest on what is going on with the anc party vote. this is bloomberg. ♪

matt: good morning. it's 7:30 in berlin, 6:30 in london, and 3:30 in the afternoon in tokyo. the yen trading relatively unchanged at 112.62. countries to european south of me and talk about what's going on in austria. a 31-year-old sebastian kurtz will formally become the new chancellor today after his conservative people's party struck a coalition deal with the nationalist freedom party on friday, sparking protests across the country. ben ritchie, head of european equities at aberdeen standard investments, is still with us.

this seems to be less of a concern, at least politically, and in markets, because austria's had nationalist right-wing governments before. is: certainly come austria no stranger to having, as you say, fairly right-wing politicians being at the center of power, and i think, again, when you look up a framework been put in place today, not necessarily sure that investors should be particularly worried about in terms of the impact on markets and economies as we and it today. that?how do you see we here in germany have the afd, a right-wing party that has come into parliament. there are a number of challenges that far right parties -- for the most part, they lost. they did fairly well in france, in holland, etc.. do you see that movement as having, kind of, sputtered out? or is it still a concern for

investors? ben: what investors are really concerned about is where we are starting to see elements that can fracture the consensus and put things like the euro, the e.u., under more pressure. i'm not sure the government has been put in place in austria, threatens that kind of change, although certainly, there will be elements in the coalition that will have policies that go along way. that is what we have seen broadly across the board when we do see instances, potentially, reaching a critical mass in some of the larger markets, that can put pressure on some of the structures that europe is dependent on. that has made investors nervous. thisot seeing that necessarily goes to that extent at this point. anna: the leaders in the two parties say they want to stay in the e.u. and are making a great deal about sending kurtz to brussels to make that point, but making noises about negative to be in the e.u. what about italy? does that remain the big risk, the populist threat?

i'm reading various notes that look back on 2017 and say we worried too much about populism in 2017. are we in danger of doing the same? ben: we got to look on a case-by-case basis. it was a political risk, all about holland, about france. one story that did not turn out as people expected was germany. that is how the things play out. in terms of italy, clearly, it is a very large market. people focus on the significant amount of government that that is outstanding -- government debt that is outstanding. are we more likely to end up with something that is manageable? yes, i expect so. will there be plenty of column inches? i expect so as well. anna: do you simply not care a message interferes with the synchronized global growth story, which is in europe? kathleen: it needs to be something that -- ben: in ecb something that can significantly change the potential in the e.u.

you have to see something major that could threaten either of those two things that i think investors will be able to shrug off whatever it is out there. matt: is there anything on the political front that concerns you? i mean, elections in italy at the beginning of next year -- is that something that investors need to be wary of? ben: i certainly think that is something investors will be very focused on as we move through the first quarter of the year. no doubt, there will be a lot of focus on what comes out of italy and the elections. nonetheless, i think it would need something fairly seismic to throw the european recovery as we see it coming through off-track at this point. certainly, probably more concerned about what is going on domestically in the u k rather than what is happening in italy. anna: this decision about growth overruling the political concerns, i suppose, and that is a global story. the european export story

running very strongly. where do you see eurozone growth at the moment? ben: i think it is being driven by a number of things. we are seeing a synchronized global economy that offers opportunities in europe and globally. it is not as simple as to say europe is recovering, therefore look to european domestic circle calls. we have got opportunities -- domestic cyclicals. i think all of that that's a nice global backdrop. investors at this point are seeing the sort of supportive microenvironment and that presents opportunities across the board. matt: what do you think about european stocks? screenoking at the ge with the s&p and here with the stoxx 600. forward earnings expectations, we only see a price equity ratio of 16 right now. do european stocks have longer

runs given the records we are seeing almost everywhere else? ben: i think they do, matt. the one element i would be concerned about is whether we do see some downturn in the u.s. as a move to 2018 with the yield curve inverting and perhaps signaling that we will may be perhaps some economic pressures there. i think otherwise, the outlook for europe should pretty solid. we should see a continuing earnings momentum. we have got an encouraging picture on the domestic economy. the global economy is also supporting that. whether you are doing business can benefit that from emerging trends across the rest of the world through the outlook today looks as good as it has done for a long time. anna: ben ritchie stays with us, head of european equities at aberdeen standard investments. for you commissioner economic and financial affairs will be joining the bloomberg time.t 11:00 a.m. u.k. lots of talk about in the wake

of the e.u. leaders gathering at brussels last week. they had a lot of comments about brexit and the eurozone and reform of it. that will be very topical. matt. matt: all right, if you are a bloomberg customer, you can show -- you can do a lot more than just watch the show. you can watch this program using tv . you get the video screen when you click on the interactive tv tab. youcan listen to the radio program if you use tv . it is a lot shorter than typing in radio . as well as watching live events. you see the blue link at the bottom of the screen "ask the question." that is where you can participate in the conversation. bitcoin futures started trading overnight at cme group's venue a week after the chicago rival, cboe global markets, introduce similar but much smaller derivatives on the volatile cryptocurrency. they expect bitcoin to make a bigger splash on the cme, a larger player in the future it for more, we are joined by bloomberg's eric lam.

how have the first few hours of futures trading been on the chicago merc in tow exchange -- mercantile exchange? than it has been more calm the initial debut on cboe. cme contacts are trading more tightly to the actual bitcoin price and we are looking at a spread above 2% between bitcoin price and bitcoin futures. we saw spreads of much wider when cboe futures started trading early last week. the volumes look a little more study than the rush into the futures we first saw the futures last week. anna: in the context, how important is this? is this another step into the realm of accessibility and maturity for this currency, commodity, whatever you want to call it? eric: yeah, i think this whole year has been a theme of really cryptocurrencies led by bitcoin becoming part of the mainstream

conversation. one currency analyst describes the entry, the cme bitcoin futures this week as the cme -- as the bitcoin futures entering the major leagues, so i think, the fact that the cme contracts are five times larger than the other contracts, it is coming from four exchanges instead of one, that makes for a larger, better sense of what futures are doing for bitcoin. and also, just the fact that pme is the largest exchange provider in the world, so it adds another layer of legitimization for cryptocurrencies. matt: talk to me about the specific differences between the cboe contract and the cme contract. eric: the cme contract, if you look at it, it is five bitcoins instead of one, so the cboe contract was for one bitcoin and this was for five. also, the pricing is based on one exchange at the cboe, and in this case, based on four

exchanges. both futures contracts also have haltar called rules -- rules and limiting the price swing, so that is part of the conversation of concerns for the cryptocurrency, is really wild price swings that we have seen so far this year would be actual bitcoin. you very eric, thank much. eric lam in hong kong on the latest stage of the bitcoin story. let's talk about m&a when we come back. a surprise bid to buy the dutch cybersecurity provider. jim alto will have details, next. this is bloomberg. ♪

anna: this is "bloomberg daybreak: europe." 6:43 in london. 1:43 in new york. a nicely illuminated empire

state building. futures higher once again. we hit you records in friday's trading session, didn't we? we have got further to go on the .ax story that remains the market's major pr to patient. bloomberg business flash, juliette saly. aerospaceanna, french specialists have knocked off the unsolicited attempts to buy .emalto as it outbid its rival it won the backing of the dutch cybersecurity provider. he offer for 61 euros per share comes less than one week after the 46 euro -- they responded by saying it will no longer pursue jim alto. unilever has agreed to sell its margarine and spreads business for 6.8 3 billion euros. it rids them a one of the worst performers as it focuses on faster growing food and personal care needs.

the purchase of the division, whose brands include flora and i can't believe it's not butter, the biggest by announced in europe this year. completion expected in the middle of next year. set oil will buy a 25% interest in the offshore brazil from petrobras for as much as $2.9 billion. nowhere -- it says the field, which was the largest discovery offshore brazil in the 1990's, still holds recoverable oil resources of more than one billion barrels. the two companies hope to increase the resources by at least 50%. power has been fully restored to the airport. a major outage at atlanta's airport had forced health and other carriers to cancel over 1000 flights and led to the dive versions of many -- diversions of many others. a fire may have caused extensive damage in an underground facility.

futures started trading last night on cme, the world biggest exchange. it comes one week after chicago cboe offered similar derivatives. cme got off to a faster start with more efficient pricing. it's most active contract change -- cboe's debut.ng the contracts are five times more valuable. with onlyins compared one on cboe's futures. canadian police continue to weigh whether to open a homicide investigation after the death of bernard sherman and his wife shocks the country's corporate and political world. the bodies of the 75-year-old they were found in their home in the toronto neighborhood of north york on friday under what police called suspicious circumstances. that is your bloomberg business flash. anna, matt. matt: all right, juliette,

thanks very much for that. juliette saly with your bloomberg business flash. south africa's ruling african national congress has started voting for a new leader to replace president jacob zuma. it is a tight race between his former wife and his deputy. the vote at the national conference follows a bitter dispute over the decision to exclude almost 1/10 of delegates because they were not properly accredited. the spirit of this conference as the delegates continue to vote here? --there has been a lot of they have converged to elect their new leadership and discuss policy amendments for the party and for government, but despite the conference going ahead as planned, it does seem there are stark divisions between the two sides. and thety president --

other being with zuma, the former chairwoman as well as president zuma's former wife. anna: when can we expect to get an election result? the timing of this seems to be shifting over the weekend. bring us up-to-date. amo: voting began early hours of monday morning, and at this point in time, they have said that they have passed the halfway mark in terms of number of delegates that will be casting the secret ballot. expectedts are sometime in early afternoon and those will be delivered in an open session. the announcements will be made in a public way where the media will be covering it and the whole world will be able to know who exactly will be leading the african national congress, along with the democrats and -- delegates themselves. matt: how are you seeing the markets reacting to what's going on there? amo: this has been a very closely monitored race. the implications of which are

quite big for the country. we know that the deputy president really put the economy at the center of his campaign, whereas president zuma has said unifying the party is critical to her campaign. just onnth highs traders betting the deputy president will win this race after he gained more branch nominations then zuma -- than zoom or herself. we will see a more profound reaction once the announcement has been made later today. anna: thank you very much for the update. amo mbatha joining us from johannesburg. they seeing at u.k. conferences, too, that i think possibly not quite so much. six years, the stoxx 600's earnings per share should escape the ceiling that has prevailed since the global financial crisis, according to bloomberg intelligence research that also points out risk still remains. joining us now, bloomberg

intelligence's senior equity strategist. ben ritchie, head of european equities at aberdeen investments also. welcome to the program. you have got a positive outlook for 2018. what is the single biggest driver? i have pulled up this chart, btv 7405. explainthis to us and why this gives a positive outlook for the next year? >> this chart essentially is the summary of our outlook. what it shows is, in blue, the trailing 12 month earnings for the stoxx 600, which has bit ofly been stuck in a a trading range for the last five years, as we have suffered through banks and materials and energy, and other issues. what we expect in 2018 and 2019 is the white line, which is a multi variable model that we have that is based on economic indicators and other factors, that is showing an improvement up to words about 26.5, 27 at

the end of next year, and further up towards 28 in the year after. it is all about earnings at this point in the economic cycle, and insee it coming through, part, because of the economy. in part, because of the improvement in profitability for flowing through -- profitability flowing through. in part, because we don't have some of the tracks that have been so hard in europe over the course of the last couple of years. anna: does that time with your analysis of what it may do? does the 2018 -- does it feel like it could be a breakout year for european stocks? certainly for earnings, it could be. we had six or seven years where expectations started out double-digit. it finished at around zero or even negative. 19 would be 18, years we see earnings growth delivered. i think, against the backdrop, it would probably make sense to see stocks make progress. matt: i wonder, what you think

could help or hurt -- i mean, clearly in the u.s., the tax reform is expected to help boost the earnings. what about here in europe? is there a binary event like that that could boost or bring earnings down? anna: ben, you want to give us your thoughts? ben: i don't think it will be a binary event, but if you look at the backdrop for european equities from macroeconomic perspective, it is supportive. we will have dovish monetary policy and a looser fiscal policy. some of the other elements, as tim talked about, materials, energy, being headwinds to earnings, going to fall away. against that, you have a pretty beneficial global environment, which is helping as well. anna: anything to add on that front? tim: specifically, as far as u.s. taxes, we put a note out last week, pretty interesting, that we actually see a little bit of a european benefit.

a couple percent. it is icing on the cake of the economic cycle here. certainly, the biggest risk factors to us our policy issues. whether that be more aggressive ecb tightening, which we don't expect, but it is out there, and the ongoing brexit that, you know, we have climbed that wall of worry, but we have a bigger mountain ahead of us as we look forward when it relates to trade. risk?what is the biggest you highlighted a few of them there. i was going over notes from earlier in the year, and lots of people talked about political risk heading into 2017. and then it seems as if the risks were not in the places we thought they would be. they were present in the netherlands, in france, but possibly more surprising in germany, weren't they? and then there were the others around central-bank policy. tim: indeed. iss always the case where it the one you don't expect that has the most impact, of course.

from our perspective, if you look specifically across europe, the u.k. right now, going into the serious part of brexit negotiations, is the crux of the issue. it is 25% of the stoxx 600, so it really matters. indicatorsnfidence very well withve the stock market, ftse 100. and we have gotten consumer confidence that has rolled over. we have service confidence that has stalled. business confidence has remained relatively robust. if things were to go wrong, we think it's that risk that is the one we have to worry about, it u.k. business confidence, because that could impact the ftse, which could impact european stocks more broadly. matt: what do you think about the animal spirits in europe? ben: i think we are pretty well set. i think, in terms of domestic.

i was mentioning canada that i am not -- to anna that i am not worried about the risks we face. the challenge to europe is as the economy is starting to recover. . think that is exogenous one would look to the u.s., and were we to start to see the u.s. economy slowdown for any reason during 2018, the early part of 2019, in my mind, that is the thing that could start to destabilize european equity markets. aside from that, the risks are relatively modest at this point. anna: ben ritchie, head of european equities at aberdeen standard investments. tim thank you very much for coming in this morning. tim craighead. we have european equity is covered from all angles in that conversation. just over one hour to go until the start of european equity trade. a good time to tell you about some of the stocks we are watching. theoil is very much in focus. they have agreed to buy a 25% stake in an oil field from

petrobras in brazil. we will watch that one. matt. eye alsom keeping an on gemalto, the dutch cybersecurity firm which has had a 4.7 6 billion euro bid from -- that beats the altos bid they had before, and the port from gemalto has excepted this. finally, at unilever has agreed to sell its spread business to kkr for 628 billion euros. a number of m&a movers to watch out for in today's trade. anna. anna: fascinating move from unilever. we knew they were going to sell it, but now they have done it. under pressure from activist and thats attempted takeover. activists and that attempted takeover. we will look at how soon the u.s. congress cap could pass a bill for the president to sign.

that is coming up next. this is bloomberg. ♪ is this a phone?

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asian equities rise. the bridge to brexit. risking a row with the eu and

her party. offer while unilever spreads for 6.8 billion euros. >> good morning. we are one hour away from the start of cash trading. let's see how futures are trading and indicating gains across the board and we saw that overnight and here with relatively decent numbers. gaining ae futures third of a percent. andtax reform will pass

goose stocks around the world. andhis is what we picked up it is said to go higher and would pick up. radar this risk evening and this is the pen oakland that -- penultimate trading week of the year. we will see if that comes to pass. story, be aware of that. the turnaround through the day. positive coming through europe and it is not to

say we won't see more coming through later on. a some extent, there is session and we are said to talk about that. the house in the senate are going to be doing this. we have a comprehensive update over in johannesburg and we have the dollar down and we are seeing this vote. >> let's take a look at the bond markets as this is just getting kicking and the bond futures. yielde the gain with the falling down. they are gaining with the u.s. there is the and you could in asia and

see that turnaround as investors look to get some cash in stocks today. let's go to juliet. -- n a response to this vladimir putin has spoken to donald trump. and,led to a breakup according to a kremlin statement, the targeted a group that was serious -- that was a serious of explosions.

state followers have been arrested. addressmay will saysament and 3:30 and she that she wants britain to leave the european market and customs union. billionaireunion. sebastian has swept to victory and wins by a larger than expected margin. it is the first round of voting. there is an opening weekend of

-- that puts it ahead of the spinoff movie, rogue one. the latest installment also did getting 230s, million dollars a run the world and it will open in china next month. 2700l news is par by journalists. you can find more stories. recoupingt leads and with the broader topix. the hang seng is looking good with 7/10 of 1% and anna mentioned the turnaround we saw in indiana. -- in india. we are looking at stocks in the region and we saw the best

performer on the hang seng index . we're talking to the ceo and they were set to revamp. bid is after the takeover and the tech player certainly diversified there. >> thank you. donald trump says that he expects the u.s. economy to rock with the tax cut plan. he has suggested that growth could head 6%. donald trump is closing in on his first major policy victory. also with us this half hour is chris wiley. they come to you for the politics. we have seen what happened.

this bill on track for passage this week? do not count of the chickens before they hatch, but it looks like they will have the votes they need to pass this and we found out that john mccain, who willttling brain cancer, not be in washington and that is one less vote. this brings this down to 51 matters. every seat people will watch how thison this to see pans out. >> the chickens never hatched for this administration. is there anything that could push this back to next year?

not have the votes that they need and republicans have come close in the past. drama onow, there was decided and john mccain not to vote for its. see athink that we could that's thing and i think we just saw a bill unveiled on friday and members of congress are figuring out what is in it and bob corker was made aware of an aspect of this that could benefit the president and himself and he said that he was not aware of that.

we saw this a couple weeks ago with the senate having to put in a bunch of fixes because of the unintended consequences that thisout of this to meet deadline they have put up for themselves. read story on the bloomberg terminal is the real estate clauses that were added to this and real estate investors got a boost. we have a can that was kicked down the road and it has to do with the possibility of government shut down. always a real possibility when it comes down to washington these days. thee is recognition that

optics of this are, to put it mildly, not good. areink that both sides trying to leverage the power they have to make what is the short-term spending bill. they are looking to make that have some the aspects that they have seen in there and you see democrats say that this is not a starter in the senate and they will trade back and forth different proposals. >> thank you very much for joining us here on said. let's go to the chief investment allcer to get the take on of this. from what you have seen and what we know already about what republicans have agreed to moan themselves, are you excited with what you see with the earnings and the u.s. economy? what is the investor take?

>> it is tangible for investors analystsve seen that's are scribbling away and working the earnings and if this gets delivered, the odds look good and it has to be factored rise ine have seen that the last month or two. only 16% of fund managers said they expected tax deal. this is substantial for investors.

>> it has been widely passed in and -- we said the positive readings would get a response from markets. this would truly be the end of back andwe could come it would temper any knee-jerk reactions from markets. through, thereis is more momentum in markets and where does the next piece of

good news come from? i think it is too early to worry about this. let's get this digested and move on to the other side. >> it would be a coup for the administration. for goldmanance sachs, who is talking about what trump.is not down to i am making an obvious point that this rally started before tweeted six has hows about the rally and rich it is making people in the united states. your thought about where we are going for u.s. equities. trumps was not fueled by and we came into this election

with positive momentum in you look at what there is to be cheerful about and it is the same stuff. that difficult to knock right now and we are seeing good momentum in markets. that it is hard to see what will the stabilize that. is fly in the appointment this has been a strong year for u.s. stocks and you get earnings and the dollar andn's of the

that is all good news. we have to keep our eyes on valuation. >> thank you very much. followare on twitter, the first global network built for social media and powered by bloomberg's journalists and analysts worldwide. a new part of the bloomberg story. strategy up, grexit and theresa may reveals her plan for a brexit transition and the challenges from her party. interesting story. we will bring you the latest. this is bloomberg.

>> good morning. it is 20 minutes past 7:00. you are looking at a shot of the brandenburg gate and you are looking at the futures that are up and it could be a strong open for stocks. >> we are looking at the futures and we expected this to go higher and it is the case. we got the yield on the treasury and we see a little more appetite for stocks. the expectations move into this market at about a quarter of 1% and this is an attempt to purchase a dutch security provider that has outbid their

arrival and got backing from the target company. this comes after they rejected the offer for euros. management last week that seems upset about how this deal was announced. decisionvated the here? thisu have to look at story as a shift in technology used to move from hardware to ledware and businesses that to the creation invented this cheap and has created soon cards. many devices are not using , in the soon cards and

banking sector, until a few years ago, they were benefiting from a transition in the united americans were and all ofhe market these challenges have made this an easy target for a hostile takeover. said they undervalued the a supplies they made little choice had but to improve this offer. out onill keep an eye

this. will call this implementation. she wants britain to leave the most of theetain cost. so, i was reading your notes and we are all indians and we are seeing what the government wants. the first is the implementation and the transition. you toortant is that to maintain confidence in the economy? >> this is not a thing on a distant horizon and it is next businesses turning to what happens after march and we

investmentusiness growthd we have seen the go to half and there are indications of a drag. implementation and i don't think it would be transformative, but it would give us some stability. nothe trade talks do reasonably start until march. i have this chart and it shows this underperformed the global benchmark by the most since 2003. ftseve seen the underperformed and investors thought they could make the most , but it has not been

that simple this year. >> that is right. the immediate response felt a little bit like a phony war. it isn't anymore. that is a reason why this has not been an area of preference for us. and itk at this trade isn't attractive. you look at the valuations and the sentiment and hours is very negative and poses a question as to whether this or that is an opportunity. we don't have a stable foundation to price things because you don't know the scenario. government? is the

i assume that holds the pound above 130. do you see a drop in sterling? >> that is the reasonable expectation. the pound has rallied and found a bit of stability and people have got a sense that we are moving to the next phase of this. wouldrst reaction i expect is with currency and we would see weakness. madeere is a speech being and bitcoin is among them. wass in brussels and there a talk with contrasting views that we got from germany and there is a lot to do with

rebuilding the eurozone. >> we are finding ourselves ruminating about what brexit means.nd what europe it is interesting and it does seem to have shifted more to what reform means. >> we will take that up with you next time.

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yes! yes, indeed. amazing speed, coverage and control. all with an xfi gateway. find your awesome, and change the way you wifi. guy: good morning. welcome to bloomberg markets. this is the european open. i am alongside matt miller. he is back in berlin. cash trading less than 30 minutes away. ♪ guy: asian equities rising as republican lawmakers plan to get their tax bill on the president's desk for christmas. we have eight rand rally -- we have a rand rally. it hits a three month high