nejra: good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe." testing the limits. a proposed 2.4% budget deficit. watch a btp's at the open. the sec accuses elon musk of misleading investors. shares fall as much as 12% this market. showdown on capitol hill. kavanaugh and for offer opposing accounts. president trump stands by his nominee and the judah judiciary -- and the judiciary committee plans to move forward with a vote today.

good morning everyone. just after 6:00 a.m.. let's get a check of the markets. msci asia-pacific index up 0.4% after the u.s. closed higher for the first time in four days. meanwhile, dollar strength is what we have seen post that. the yen hitting its lowest point in 2018 against the dollar. for the quarter, the worst performance in g penn -- g10 have been the kiwi and the aussie. keeping an eye on the euro as well, below the 1.17 handle. we fell yesterday on concerns around italy. something to watch, particularly when the btp markets open. spread widened a little bit, but steady. we saw that yield jumped 10 basis points at one point in the session.

the italian prime minister will stay to avoid chaos. this is a great chart that shows where the line in the sand could be for investors in terms of the budget deficit and what that means for etp yields. -- btp yields. if anything came under 2%, that would make etp's rally. btp's rally.ly -- you can see here, were we to hit 3%, investors were saying the median estimate was we could see the btp bund spread widened out. it is a little while since we have been there. to give us the latest on italy great toudget deal, have you with us. 2.4% of the number we have. is a set in stone? -- is that set in stone?

>> it isn't set in stone for the league and five-star, that got a huge win last night with flags in the wind and big statements from their leaders. it is set in stone, but it will need to be debated by parliament and also it will have to be presented to the european union by october 15. that will also open up a strong debate with the eu as well. >> we have talked a lot about on a headline level the line in the sand for investors. that number what would trigger a selloff in btp's or trigger buying. what are the details around the budget? >> at the moment, the details are only the ones that have been -- by the meyer last night.

we have not yet seen a draft. for more detailed tables. yesterday, tamayo said 10 demaio will have -- said 10n put aside -- billion will have been put aside. the government has agreed about reforms to the retirement age and the job market as well. we are still waiting to hear details about that. >> we are waiting with bated breath. the btp markets open. let's get the bloomberg first word news with juliette saly in singapore. juliette: donald trump is standing by his supreme court nominee brett kavanaugh after a day of emotional testimony on capitol hill. the president tweeted that kavanaugh was powerful, honest, and riveting, accusing democrats

of a total sham. the judiciary committee plans to vote on the nomination today. kavanaugh spoke after one of his accusers, christine blasey ford said she was 100% it was him who attacked her in high school. >> i do not have all the answers. i don't remember as much as i would like to. the details about that night that bring me here today are the ones i will never forget. they have been seared into my memory and have haunted me as an adult. >> this confirmation process has become a national disgrace. the constitution gives the senate the important role in the confirmation process. advise andplaced consent with search and destroy. juliette: japan's industrial production expanded for the first time in four months as retail sales accelerated.

output jumped 0.7% from a month earlier. the first increase since april. retail sales grew 2.7%. the figure suggests the economy remains healthy despite a likely hit in the current quarter from extreme weather and an earthquake. the governor of the bank of canada has said he is confident some kind of trade deal can be reached with the u.s. and mexico. addressing business leaders in new brunswick, he also said the u.s. is a less important market his country than it once was. >> is true that canada's dependence on the united states has been trending down these past 15 years or so. that is because we are developing markets in other places. no doubt the free trade deal with europe is going to add to that momentum. the asian isl for going to help as well.

>> global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . a solid session for markets in asia to round out the month in the quarter. the rally we have seen is actually pairing the msci asia's quarterly loss. the nikkei up by 1.2%. a solid showing from chinese shares listed in hong kong with the hse i erasing its quarterly loss. chinese stocks rising ahead of that weeklong holiday. hong kong will be out of action on monday. south korean stocks underperforming. had a good session yesterday. a little bit of selling. let's have a quick look at stocks watching, surging the most in six months on its new fuel surcharge. that could add 1.4 billion hong kong dollars to its bottom line.

we are seeing the tesla suppliers under pressure in asia. sued by the sec. there was a big deal with boeing beating lockheed martin for $19.2 billion in a deal with 29%. aerospace down by one of the underperformers in the region. nejra: thank you so much. just a note for you out there watching japanese markets. the nikkei is set for a 27 year high as japanese stocks have been gaining this month. let's get back to our top story. the italian government has set next year's deficit target at 2.4% of output. let's turn to our guest, chief economist in managing director at g plus economics. happy friday. let's talk about the line in the sand. i was asking peter dixon of

commerzbank, where is the line of the sand where we get a rally or selloff? we have a number of 2.4%. >> there are three stories here. it is very captivating. the short-term focus is very much on the deficit target. what we have to see is how this budget debate default in beutel in parliament -- t-wolves in the italian parliament -- devolved in the italian parliament. that has created that friction. so long as the economy stays in government, the markets are going to see this as a rite of passage. to fall the markets below the risk pricing of italian btp this year. you,time i was talking to i was happy to say 10 year yields above 3%, there's a lot

of risk. now that the issue of italian membership in the euro has been shelved, there is little chance of another early election becoming another referendum of euro membership. that means trading italy like you would trade -- now that we have seen markets come down, those views have been -- , do you thinkmber those yields are going to come down? the markets are somewhere below 2%. we needed to see something more eu friendly for the market to go confidently. i think even if you do not come down now, we do not really have an italy budget serviceability problem at the moment. part of that has got to do with the fact global yield and policy rates are well behind rates of inflation in the high-tech world of today. there is really no issue here of

what sustainability or financial stability -- of budget sustainability or financial stability. nejra: don't they need to service their debt? service its still debt if 10 year yields are below 3%. political risk is coming to a peak. that means markets will settle down before the end of the year. especially since we are in a very reflationary environment. nejra: the managing director at g plus economics stays with us. tesla has plunged in extended trading after the securities and exchange commission accused elon musk of the seating investors with his go private we. the sec is asking a federal court to bar musk from serving for that -- as officer as a company because he is guilty of fraud. tesla's board released a

statement saying it is confident in its ceo. joining you on the phone is david kirkpatrick. great to have you on the show. thank you for joining us. will shareholders still believe in a tesla without elon musk as ceo? >> know, they -- they might believe as much as they can. they would not have the same enthusiasm. tesla without elon musk would not be the tesla we know. the chances of him leaving are almost nil despite the sec action today. nejra: do you think he will reach a settlement? >> i think the wall street journal reported tonight there was a settlement that had been agreed and that -- on thursday morning, tesla pulled out of it. i am not sure why they would have done that. clearly there stock has paid a terrible price as a result.

a settlement might have hit the stock, too. i cannot imagine it would be as bad as what we have seen since market close yesterday. even if they are a formally -- if they are formally charging him, a settlement can always be arrived at later. i think that is likely to happen. he needs a slap on the wrist. i think they would like to see the board take some kind of formal oversight role even if the company just said, hey, we are not going to let him tweet on his own anymore. we will have that confirmed. something like that with a little bit of apologies would probably satisfy the sec in my opinion. >> we did not get a twitter response from elon musk today. we did hear a statement from him saying it was unjustified and left him saddened. it elon musk were no longer a corporate officer, but still had

a role in the company, you have said very unlikely he would leave, but he had a role as more of a visionary, what kind of impact would that have on the stock? >> it might not have that much of an impact. the key thing that is going to impact the stock is whether they can sell enough model threes and make enough and sell enough. that is their key goal. obviously the stock is down from where it was. it is still a highly valued stock. some ofointed out in the articles tonight in the wake of this that martha stewart, when she came out of jail, was barred from being an officer. she was chief creative officer for a company and client ring that period. -- and during that period. he can play a role without being an official officer. i do not think he is going to leave his baby. you mentioned, what's

going to impact the stock is actually the company's ability to meet sales target. it is a mccrone erased to customers by the end of the third quarter. one investor said it will likely lead to huge sales figures just as some investors flee with the sec suit. is that the dynamic where going to see? >> that would be a good dynamic because that would push the stock back up. if people feel they can produce enough model threes and sell them, but the company is going to be fine. stayi said, elon musk will in some fashion despite the attempt to give him some comeuppance. clearly he has bad judgment very he should not have sent out the tweet. that was a stupid thing to do and he is paying a high price for it.

but is he going to leave the company? absolutely not. whether they will succeed in making enough model threes, that is in question. often seen investors having extraordinary confidence in this company that turned out not to be merited. nonetheless, the people who believe in tesla are hard to dissuade. that is why it continues to have , even now, a high valuation considering it has no profits. nejra: thank you so much for joining me. coming up, turkey in cooperation with germany. can erdogan repair relations with washington? this is bloomberg. ♪

nejra: asian equity markets ending the week on a high. the nikkei heading for a 27 year high of more than 1%. ,ains on the hang seng as well the shanghai composite up 0.8%. let's get the bloomberg business flash. losses more than doubled in the first half. spent heavily on anything from bike rentals to online travel. it posted a $4.2 billion shortfall, sending shares down in hong kong and trading below their ipo price. these are the first results since meituan went public. the governor of the bank of england is heading up a climate change initiative headed up by funds controlling almost $100 trillion. he setrney outlined why up the task force on

disclosures. >> it is tough to run a global financial institution, a business. you have multiple priorities. changing the trading system, offense in technology, climate, the best companies think not just about the headline, but about those bigger trends. they want to be built to last. they want to take advantage of big trends. juliette: jamie dimon has said he does not see the imbalance at the top of corporate america getting fixed soon. jpmorgan's ceo said it will probably take 10% -- 10 or 15 ceos before female increase the ratio. >> i would say that wave would take 10 or 15 more years. they are not there right now. i go around the world and it is amazing, they are melting pots. women, gay, black,

hispanic, it is a beautiful thing. that is a way of coming. -- thatto -- a way of is a wave coming. we have to maintain that. most: germany is turkey's important trading partner and a route,ter a diplomatic president erdogan is seeking to repair relations after talks with angela merkel and a news conference, he will attend a state dinner hosted by germany's president. let's get some analysis from bloomberg's german government corresponded, who joins us by phone from berlin. great to have you with us on the show. what is angela merkel looking to get out of this meeting. >> the german government has been critical of turkey and president aragon -- president .rdog -- erdogon

time, there is an interest to make sure relations are stable. geopolitical issues, turkey's role in the region, the syrian war, holding up the influx of refugees from syria and the middle east. despite everything, angela merkel and the german government are giving him a state visit. they want relations to be on a solid footing. nejra: what our president erdogan's objectives? >> his are more obvious. right now there is the increased u.s. sanctions, he has had a terrible relationship with president trump, quite recently and the turkish economy is in a tailspin. he wants help.

the turkish government has specific things it wants, including repairing -- upgrading their relationship with customs union in the eu. visa waivers. it is a completely different tone than last year. last year he was in campaign mode. germany was a favorite target. the rhetoric was quite strident against germany. now it is much different. he is in berlin and eager to make friends. in a world in which turkey needs friends. nejra: patrick donahue, thank you for joining us. the chief economist and managing director at g plus economics is still with us. i want to pick up on a point that patrick made. given what we have seen in that puteconomy, does president erdogan under more pressure to build relations with the eu?

>> that is a fair point. president erdogan's international rating has plummeted. his diplomatic credentials are deeply tarnished across the eu. his economic management has been deeply destabilizing for the economy. while there are credible issues about short-term debt and the instability that creates in terms of turkish payment crisis, and the stability of the financial system in terms of foreign reserves balance asset liability imbalances, there is that issue that is trust. foreign investors have lost trust in the credibility of economic policy because of president erdogan triggering with the central bank -- interfering with the central bank. he is trying to manage political risk in order to undo the isolationism he has introduced

to turkish politics over the last 12 months in order to stabilize the situation. the respect to the eu, olitic, the, -- realp epicenter of much of the destabilizing migration that has dictated the color of your team -- european politics and populism. nejra: up next, the bank of england governor mark carney spoke candidly on the central bank's role in climate related risk. more of that interview with francine lacqua next. we are seeing asian equities and the week on a high looking at the msci asia-pacific index. you are seeing japan outperform, the nikkei heading for a 27 year high. the dollar stronger against again. that dollar strength has

continued after the fed. ♪

>> at 6:30 a.m. in london. 2:30 p.m. in tokyo. japan leading a lot of the gains in the asian session today. week markets ending the on a high. the yen touched its lowest since 2018 against the dollar. at 1.13.n trading let's check in on the broader markets now. >> good morning. asian stocks ending their volatile month with gains. it's the last day of the third quarter for trading. japan the outperform are there. -- outperformer there.

higher in australia. , theig data out of asia bank of japan around 9:00 will give an update on whether or not they will start to taper purchases of prolonged bonds. futures in new york and london pointing to a higher start. the story that will be dominating europe is the italian bond market opening. i'm looking at the italian yield spread against german booms. this bread remains elevated. their nextent set year's budget deficit target of 2.4% of output. this is after this party had to convince the finance minister to get on board with their plan. in the summer, it was very volatile. bond yields surged when they were populating -- promising these plans when they were campaigning. when these opened, the italian

10 year is what you want to watch. in the commodity space, i'm looking at palladium. it's the only one that is shining. it is outperforming the bloomberg precious metals index. up 10% on the month. it reached a record in january near those record -- levels. there's a shift away from diesel fuels. palladium, one of the bright spots in the metals sector. >> thank you so much. let's get to bloomberg first word news with juliette saly in singapore. u.s., donald trump is standing by his supreme court nominee after a day of emotional testimony on capitol hill. the president tweeted that kavanaugh was powerful, accusing the democrats of a sham. they plan to vote on the nomination today. kavanaugh spoke after one of his accusers said she was 100% sure it was him who attacked her in

high school. have all the answers and i don't remember as much as i would like to. the details about that night that bring me here today are the ones i will never forget. they have been seared into my memory and it haunts me as an adult. >> this confirmation process has become a national disgrace. the constitution gives the senate an important role in the confirmation process. you have replaced advice and consent with search and destroy. government has set next year's budget deficit target at 2.4% of output after the ruling party pressure the finance minister into providing more funds for their election promises. bond yields soared at the beginning of the summer in the initial alarm over the administration spending plan.

china has shown interest in joining the transpacific partnership trade agreement. that is according to chile's president. themove would help revive trade agreement after the u.s. withdrew from it last year. >> 25% of our trade is with china. that is the largest trading partner. issue, the chinese are very involved in foreign investment. the third one is lending. law, if theyct our fulfill all of the requirements, they are in. >> global news 24 hours a day on air and on twitter. than 2700more journalists in more than 120 countries. this is bloomberg. nejra: juliette saly in singapore. let's get back to the hearing for supreme court nominee brett kavanaugh. joining us now is bloomberg senior international editor in hong kong. it was next ruggeri hearing, it

fired up social media. it fired up the television networks. will a confirmation vote on judge kavanaugh becoming upset? -- be coming up soon? does look like a confirmation vote in the senate judiciary committee will be coming up in the next day in d.c., on capitol hill. the republicans on the committee are likely to approve him. the real question is, does this come to the senate floor? senate majority leader mitch mcconnell has said he will guarantee it comes to the floor, that was before yesterday's extraordinary exchange. now the question is, will they bring it to the floor? do they have the votes? majority of the senate, republicans. they can only afford one republican defection if there is no democratic votes for it. whoe are three republicans

have not said how they will vote. they have not said that they will vote for judge kavanaugh. it's an open question whether he will get confirmed. probably he would. the question is whether the republicans are willing to do that. that some of the questions have been raised after yesterday's extreme area testimony. does: what implications this have for the midterm elections coming up? that's a really interesting question. the democrats are saying that they think that this, if this comes to a vote and it is approved with republican votes, that this would help them. midterm elections tend to have much less voter turnout than presidential election years. also the party that is not empower tends to have gains. democrats who are on the path to take majority in the house of

representatives could have some gains in the senate if this vote goes through, if willie and -- women and millennial voters see this as something they are very concerned about. the way this has been handled with allegations of sexual misconduct. president trump is trying to rile up his base, republican voters with his charges that the democrats have undergone a search and destroy mission and have said out to really do a con job on judge kavanaugh. nejra: thank you so much for joining us. that was jodie snyder. let's move on to brexit. after little progress at the summit, time is running out for britain and the eu to reach a deal. choices could have a big impact on equity markets. our senior european strategist says there are three complexions of u.k. shares. those with the majority of sales abroad, those mostly domestic,

and those that do not report in pounds. all three are performing dramatically differently and will likely continue to do so. stat --ts join us on set. great to have you both here. it's really interesting, your research. we often talk about u.k. companies and focus on what sterling is doing. what you are saying is morning wants to. >> it's an interesting thing. the u.k. is a peculiar beast. comes to stocks, it is easy to say, weak pound, whether it's ironic or not. it's good for the u.k. market. a clear earnings translation mechanism that happens with the currency. it's very important to start digging into what actually is underneath the surface. you have this big group of international brand franchise

companies, you have a core group of domestics. of have an even larger group the commodity companies, oil companies that actually don't report in pounds at all. that confuses the whole analysis. 40%have those groups up since the beginning of january. you have the internationals up 15%. you have the domestics left behind at -14%. in the scenarios of where we go from here. they will very likely spell very different scenarios for those groups. nejra: we just showed the graphic since june 2016. in terms of where we go from here in a hard brexit scenario, does the performance that we have seen to date dictate the same performance in a hard brexit scenario? >> quick answer is, you even

look at what has transpired, you can certainly play that forward. if we have a hard brexit, that ways further on the pound. you way further on the pound, you have domestic stocks that will be left behind. we have international stocks that will move ahead. brexit, into a soft that somehow miraculously comes you end up with these in the reverse. we have seen this type of scenario occur five or six times since brexit, where we have had. havemes were international favored the domestics. our gut favors the international because of these scenarios. nejra: i want to bring you win here. tim was saying that soft brexit is looking unlikely following sulzberger. a lot of people still say that is their base case scenario. is that yours? >> it is.

i've been in the camps where i have felt that markets have been underpricing the risk of about brexit. whether it is hard or just a minimal deal that does very little. i'm in agreement with bloomberg intelligence. look. the policies of brexit have been so captivating. we risk losing sight of the macroeconomic picture. it is that the u.k. is fairly small and fairly open. it depends on capital flows that are dependent on exports that are dependent on the city of financialng the eu's center, which will not be the case. it will not be the premier place for your clearance after brexit. let's not forget that the eu was the world's second-largest economy. china represents 23 trillion of global output. the eu is not far behind at 22%. now that we are getting so late

into the process, so close to the deadline where the eu will legally stop being a member, we are so stuck on first base. over things like the irish border. nejra: how can that be resolved? that really is the sticking point. >> it is quite clear that the u.k. side would like to see concessions on that you side. that means we are going to rubble into november before we have clarity. that creates uncertainty. getakes likely that we will some kind of fudge deal in the last minute. the difference that the deal scenario means in terms of the longevity of prime minister may's government, there is incentive for the government to get into a deal. they know that. that does mean it's very difficult. deal, economics of that if we look at the relationship that ever countries have with the eu, there are three

parameters. one of them is access to the single market. the second one is immigration freedom. the third one is budget is -- budgeted contributions. less than norway but more than switzerland. nejra: a weak economy and a weaker pound. we are trading at 13087. where we trade now, how does that feed into the performance of u.k. equities? do we need to be lowered to get a better performance? >> the quick answer is yes. if we end up seeing the pound retest the spiked drop that we had seen back at the brexit referendum, that will be a good thing for the british benchmark. it will be because you have these international stocks that do well. the other thing that plays into this that is quite critical right now, what happened to oil.

oil has been back on a tear. the energy companies total, miners that, in have contributed about 70% of the earnings change on the way down and back up over the past five years with the different cycle that have occurred in the commodity complex. you have to that make a very interesting picture. nejra: lovely to have you. keeping it on the u.k., the governor of the bank of england is heading up a climate change initiative backed by some of the world's largest banks and pension funds, controlling over $100 trillion. there was 25 trillion in assets under management. the task force comes out of

it's 100ector, now trillion. quarters ofthree the globally systemic banks, eight of the 10 top asset managers. it ensures looking for the type of information. now what happens is the private sector does what it does best. companies are starting to disclose the providers of capital. they throw away the stuff that is not useful. they focus on what is materially useful. you get that cycle of better and better disclosure, better capital allocation and real progress. >> what are the kinds of frictions that you are seeing people not want to disclose? think the best companies across a range of industries and geographies -- part of what came out today, a survey of 2000 of the top companies around the world. you see that all of those disclosing at

least some aspects of climate related risk in their main reports. this is a process of learning by doing. , with thee back material, was the decision. what does that $100 trillion want in order to make their capital allocation decisions. i think the key thing that we are seeing, on top of just static disclosure, what my carbon footprint is. you are getting management more involved, thinking about how this affects strategy. , strategicdisclosure resilience. how resilient are you to changing climate policies? >> how difficult is it to measure data? >> what is relatively straightforward to measure is the static carbon footprint. youris your footprint in scope one?

if you have a plant, what is the footprint of that? what is the carbon footprint of that? it is tough to look at the whole supply chain. the footprint of the product after it is discarded, for example. you move to the first bit. that tells you an awful lot. the more and more the market is disclosing, you can fit upstream and downstream because you have the information. >> some people in the trump administration have said that -- does that help or hinder your cause? >> i would take a neutral view in terms of exposure around those issues. there will be people who say what you just said. other say this is the absolute top priority and companies need to act now. there will be a lot of people in between. those will react to what happened to climate policy around the world.

are still putting into action paris. need to make a market i and the true believers to have that information. today, 100e seeing trillion of assets looking for that information. we have now got 500 of the world's largest companies providing that information in quite comprehensive senses. once we look more broadly, they are starting to do it. it's a virtuous cycle starting care of learning by doing, providing the information, focusing on what is relevant. what is interesting, japan's g20 senate. there was an op-ed that mentioned disclosure. they are looking for to give a june,et to that summit in where the private sector should be. nejra: that was the bank of england governor speaking to bloomberg.

are a bloomberg customer, you can watch the show and all of our markets using the function tv as well as a video stream, live. you can follow all of our charts and functions. you can message us directly, even asking the guest a question. ask our guest a question. you can access video from previous shows on the tv function. this is bloomberg. ♪

>> the financial crisis brought out the worst in america in terms of greed and the problems in our regulatory systems. at the end, people came together. i would really like to believe, if we had another crisis like this, that the country could

come together. you are right. the things we did were so unpopular that i think it will make it even more difficult for our successors. nejra: that was former u.s. treasury secretary speaking exclusively to bloomberg in chicago. he also said a trade war with china carries dangerous long-term risks because companies may pullback from doing business with the u.s.. >> i think we don't pay enough attention to the dangerous long-term impact. companies and countries want to do business with the united states because we have reliable economic policies. is, is chinareally going to start looking for new markets to buy soybeans? brazil and africa. concernedoing to be that they need to protect themselves if there is another

tour for in the need suppliers -- tariff war in the need suppliers? nejra: our guest is still with us. our markets to think we about the eventual outcome of this trade war? >> yes. nejra: why is that? people say, there has not been a significant impact on global growth. even if we get the worst case scenario of 25% tariffs on all chinese goods, that isn't going to be so bad. >> you raised two great points. i completely agree with the comments on the importance of having that international for shared management and risk that we have in a post-globalization world. thatis extraordinary is 2018 has produced a regime change in international political policy environment. away from the economic orthodoxy

that has prevailed over the last century. towards the new wave of policy populism and trade nationalism that is undoing the benefits of thatlization, group -- will have a long-lasting impact. bolstered,kets have whether the understanding of the risk is growing, people thought this would be an outside risk. the core scenario. it has been normalized. second problem, there has been so much attention given to the downside risks for growth. our understanding of the terror growth is informed by the incoming data which is not really showing any meaningful results. might haveets

normalized this, but will it get that enough to change the course of central bank tightening globally? >> i'm worried that it won't. do, with the fed expecting growth above 3% the next three years, it will create high inflation. the market is not praised for a high inflation environment. withhigh debt world, policy rates falling behind the inflation rate -- the fact that we now in a decade have positive in real terms, it does mean a game change for the next 10 years. nejra: great to have you with us. chief economist and managing director aji plus economics. she will be continuing the conversation at 7:30 a.m. u.k. time on radio. make sure you catch the full conversation later today at

12:30 p.m. london time. it's a wide ranging discussion and lessons learned from the 2008 global financial crisis to foreshadowing the next great global risk. this is bloomberg.

>> good morning from bloomberg's european headquarters. these are today's top stories. proposedhe limits of 2.4% budget deficit for 2019 for italy. this hour.hing bcp's tesla without elon. the sec accuses him of making up valuation. shares fall as much as 12%. showdown on capitol hill. kavanaugh and ford offer opposing accounts. president trump stands by his nominee. the judiciary committee plans to move ahead on -- with a vote today. ♪

nejra: it is just gone 7:00 here in london. we are just under an hour away from the european equity market open. we saw a fairly strong session in asia. japan shares outperforming in terms of different regions. if you look at how europe might open, stocks closed higher by 4/10 of a percent. we were on three days of gains but that might be snapped at the open. dax futures coming a little soft. cac 40 futures down lower. ftse 100 futures struggling for direction at the moment. it can be a mixed session with a bit of a negative bias. the bond markets are going to be really front and center today. we have that 2.4% budget deficit number from italy and various opinions on what the line on the sand was for markets. yesterday, we sell -- saw a

in btp's. it looks from the futures like we could see bcp yields higher and therefore more bund spread wind tunings. that is what the futures are telling us. the 10 year treasury yield fairly steady. all the latest on italy and the budget deal, our guest from rome. 2.4% is the number that we have. is that likely to change at all from here? >> it will probably stay pretty much the same. that to perform percent will actually stay the same for the years 20 and 2021. the italian government is really looking at a fairly wide deficit gap over the next three years. as you mentioned, the markets will be looking closely at that.

they may react negatively. this is below the 3% limit for the eu. will this be enough to satisfy investors? i was reading earlier that you tod a budget deficit of 1.6% bring the debt load down. >> that's exactly correct. and european union say that italy must bring down its huge debt load. hamperingis in fact economic development. that is worrying investors and the eu. >> think -- nejra: thank you so much. let's get the bloomberg first word news with juliette saly in singapore. u.s., donald trump is standing by his supreme court nominee brett kavanaugh after a day of emotional testimony on capitol hill. the president tweeted that he

was powerful, honest, and riveting, accusing the democrats of a total sham. the committee plans to vote on the nomination today. kavanaugh spoke after one of his accusers said she was 100% sure it was him who attacked or in high school. -- her in high school. i don't have all the answers and i don't remember as much as i would like to. the details about that night that bring me here today are the ones i will never forget. seared into my memory and have haunted me episodically as an adult. >> this confirmation process has become a national disgrace. the constitution gives the in thean important role confirmation process. you have replaced advice and consent with search and destroy. production expanded for the first time in four months.

retail sales accelerated at a faster than expected pace. factory output jumped from a month earlier. the first increase since april. retail sales were at 2.7%. the economy remains healthy despite a likely hit in the current quarter from extreme weather and an earthquake. the governor of the bank of canada has said he is confident that some kind of trade deal can be reached with the u.s. and mexico. addressing business leaders, he also said that the business -- u.s. is a less important market to his country than it once was. btp futures have just opened. they are down sharply. the italian government has said point 4% ofto output. bond yields soared at the beginning of the summer over the initial alarm of the administration spending plans.

global news 24 hours a day on air and on twitter, powered by more than 2700 journalists in more than 120 companies. you can find more stories on the bloomberg at top . here in asia, we have been watching very closely because it has been trending towards the seven-year highs. the highest since january 23 of this year. a lot to do with yen weakness. good gains coming through in china. the market will be out of action on the next week for the holidays. hong kong will be closed on monday. you are seeing buying coming through. india looking good in australia closing out the session. south korea underperforming today. it had a good session yesterday. we're watching this yen weakness. we have dollar strength at 113.52. you can see the yen moved to 115. that weak level since december really pushing japanese stocks higher. watching what is happening in

the long-term bond space. there is speculation of more stealth tapering from the boj when they announced their buying of super long maturities later today. the hong kong dollar, what a difference a week makes. jump.eek, it had that big the hong kong dollar has fallen the most this year, tearing that strong surge we have seen which was the biggest jump for the hong kong dollar in 15 years. nejra: thank you so much. let's get back to our top story. the italian government has set next year's budget -- you can see futures moving low. when the cash market gets properly underway, we could see a rise in the tenure btp yield. we saw that rise yesterday. is the statew street global advisor's india head of investment strategy.

good morning. an interesting day for italy. i was asking this question yesterday about the line in the sand for btb investors. some say it is 2%. you have 2.4. what is the line in the sand for you? >> it feels like we have crossed that line in the sand. it had to be the 2%. that was the eu requirement and they crossed it clearly. i think the question is now whether this is seen as an italy specific moment or a broader existential crisis for the eurozone in general. nejra: which is it? >> for us, we think it is italy specifically. we think, you have this populist movement. you have parties on opposite ends of the political spectrum trying to affect the compromise. trying to deliver on political promises which were made in the election that were at odds with each other. that was never going to be an easy task to achieve. we don't think it spreads to a

broader eurozone affair. nejra: european equities have been relatively unloved versus the u.s. this year. has that been largely to do with italy? or have there been other concerns? >> this morning, we are talking about italy. for the last few weeks we have been talking about brexit. wrecks it as seen as a problem for the u.k. but it is a problem for all of the eu. there are a lot of political headwinds pulling back on the eurozone. there are a lot of, the economy is not firing. the pmi's have started to turnover. there are a lot of reasons why we would be more overweight in the u.s. than europe. with the uris rather than europe. are there any parts of europe where you might selectively be buying? >> unfortunately, it has been a drag on the whole of the eu. and a strong political situation as we

would've hoped at the strong of the -- start of the year. does it feel like macron is getting what he needs to do achieved. with talked about brexit. those are the three big economies in europe. they're not firing. we would rather stay out of the eurozone for now and europe in general. nejra: even the ftse, it was performing start -- strong at the start of the year. wouldn't see an opportunity there given how far it has fallen. >> we don't think it is time to buy the dips. there was some form of denial at the start of the year. it is still definitely a wait and see moment. i get that you are not seeing any particular opportunities on a regional basis. what about interested groups -- industry groups? >> i wouldn't say all of them are off limits. we would stay away from the financials for now. the issues that we still have partitaly, which is a big

of the european financial sector and the exposure that european financials have to the emerging markets. it ise of the financials, still a good time to start looking at energy stocks. a communication stocks as well. there has been a reach in the sectors lately. we think that those are sectors to be a lot more positive on. get $100 oil, and an increasing course, is that going to be different for the oil majors this time around than the last time? >> they are in much better shape. plusook advantage of the $100 oil they had to make good structural changes. improve their business models. tohink that if we do go back $100 oil, it looks like we're moving steadily higher in oil, that majors are now in a better place than they were a few months ago. nejra: you also mention some of the communication stocks.

are you talking tnt? what is it that attracts you about that sector? >> that is how we look at it more broadly. it is the technology stocks, we still see even though europe doesn't have a massive technology sector, we fill that is an area that continues to provide global growth that is more internationally exposed. youelieve that is somewhere can see growth coming from the emerging markets, which is quite hard to find at the moment. for us, that is a bright spot in a dark area at the moment. thank you so much. our guest is with us. let's take a check at the markets that are moving in italy. we got to that number of a 2.4% budget deficit. we just heard that that was probably worse than the markets were expecting. . the five-year yields up by 22 basis points.

we are still waiting for that tenure to get moving in the cash market open. the btp bone spread is shifting 250 basis points. we close from a 236 handle yesterday. europe not reacting so much. at 11639. flat this is bloomberg. ♪

nejra: let's check in on what's trending across the bloomberg universe. it is impossible to imagine tesla without elon musk what a lawsuit has raised questions about his future. the agency accuses him of misleading investors and seeks to invest -- ban him. on capitol hill, brett kavanaugh denies sexual misconduct allegations from christine blasey ford. president trump is set behind

his supreme court pick. place, a dealer sentenced to 18 months for fine art fraud. 2.4% targets a deficit of in a win for populists. treasury yields have just turned negative for european and japanese buyers. you can find out more across all of bloomberg's platforms. let's check on how the cash market is changing -- trading on btp's. five-year yields rocketing higher. up still 20 basis -- 20 basis points. we are approaching 3% on that 10 year yield. the boone spread is on a 249 handle. it closed at 236 yesterday. the two-year yields moving up as well. the euro untouched. a tesla without elon musk may not be such an unthinkable prospect anymore. the sec head and what the

lawsuit raising questions about his future at the company. shares plunged 12% on the news. we have the story. >> the sec filed suit against tesla ceo and founder elon musk, charging him with fraud and alleging that when he issued his tweet on august 7 causing the stock price to rise, it was fabricated. saying that he had secured funding to take the company private at $420 per share. the sec was concerned at the unorthodox manner in which musk set the price. >> while leading tells of investors to believe you a firm offer in hand, we allege that he had arrived at the price of $420 by assuming a 20% premium of what tesla's then existing share price and then rounding up to $420 because of the significance of that number in marijuana culture and his belief that his girlfriend would be amused by it.

>> the sec is speak -- seeking unspecified monetary damages and in order to remove mosque as the ceo and director of tesla or any company. in response, he is you'd a thought theying he action was unjustified and, i have always taken action in the best interest of truth, transparency, and investors. the stock price plunged thursday and is expected to be a key trading point on friday when the u.s. market opens. bloomberg news. let's get the bloomberg business flash with juliette saly in singapore. losses more than doubled in the first half. that is as a tencent backed food at spent heavily on everything from bike rentals to travel. it was a shortfall in the first shares downsending

again in hong kong and trading below their ipo price. these are the first result since they went public last week. governor of the bank of england is heading up a climate change initiative backed by some andhe world's largest banks pension funds. controlling almost $100 trillion. in an exclusive interview, there was an outline for the tax force on climate related financial disclosures. globals tough to run a financial institution, you have multiple priorities. you have changes in the trading system. you have advances in technology. you have climate. the best company thinks not just about the headlines today but about the bigger trend. they want to be built to last. they want to take advantage of those big trends. said he doesn has not see the gender imbalance at the top of corporate america getting fixed soon.

willpmorgan ceo said it take 10 or 15 years before a wave of female ceos improves the ratio. coming but that wave is going to take 10 or 15 more years. if they are not there right now -- i go around the world. it's amazing, these companies are melting pots. wherever we are. women, gay, black, asian, hispanic. it's a beautiful thing. the other ones don't care about all these issues. that is a wave coming. >> that is your bloomberg business flash. nejra: juliette saly in singapore. let's take another quick check on how btp's are moving following that 2.4% budget deficit number from the italian government. the 10 year yield above 3%. up 14 basis points. the two-year yields moving significantly as well. we saw a jump as much as 22 basis points. the euro steady for now.

as the third quarter of 2018 draws to a close, let us walk through some of the big market moves of the last three months. take it away. >> let's start with new money versus old money. why are car was a hot one this quarter. it outperformed deutsche bank this quarter. you can see in terms of market share, it is up there. deutsche bank in the blue. a partnership with visa and a got a boost from the ipo of its dutch. on to what we saw for some of the losers. that was in the commodity sector. that was coffee and sugar. both are dealing with supply glut's around the world. on coffee, dealing with the pressure from emerging-market currencies. especially when you think of countries like brazil. two years ago it cost $.23 for a pound. now it is about $.11 per pound.

they are dealing with the fight on obesity. a lot of these commodities had a tough quarter and tough 2018. we have to and things on a high. this has been one of the most talked about discussed -- talked about sectors this quarter. this was cannabis stocks. 30 day volatility of the nasdaq versus three of the hot cannabis companies. this is their 30 day volatility. the chart really says it all. they are an absolute craze this quarter. nejra: thanks so much. is still with us. i want to get your thoughts on btp's. we are seeing such a reaction at the open. i we going to get buyers coming in -- are we going to get buyers coming in? >> yes. there are insurance companies who need that long duration hedge some of their liabilities. for them, i think this is a

buying opportunity. what we are really seeing is this bear flattening the short and. we are also not seeing the euro move that much. i think that is significant. nejra: the boone spread at 257 basis points now. that is widening out significantly. the euro is not moving much. what does that tell us? >> the market is still seeing this as an is only specific issue. it is not a more existential crisis for the eu. we have to look at the rating agencies. italy,e's a downgrade on at the moment, it is treated as an italy problem. you were telling us earlier that you are underweight europe. for more reasons than just italy. you are overweight on the u.s.. while we have seen 10 year yields rise above 3%, you don't see that being bad for equities? >> the u.s. rate rise cycle

hasn't been as -- has been as interesting as watching paint dry. it has been very well message. it's not denting economic growth which is what you would have to worry about. corporate so labeled the ball or -- borrow. they are able to deploy capital way above their cost. they are able to create earnings growth. for rest, the u.s. economy is still foreign. rise in rates not the immediate threat to the u.s. equity market. are you protecting your holdings of u.s. equities against the potential fall in the face of trade wars? >> absolutely. we have been talking to clients about this. volatility remains low. if you look at something like the vix, it is not near as long-term average despite all the noise out there. areave been encouraging investors to take positions which they can protect their

equities and. using options and other types of derivative structures. nejra: using options to protect against any potential falls. if you are overweight, you believe in the u.s. equity market. how much longer does it have to go? >> it's hard to put an end to it. this has been the longest cycle in history. it has been dragged out by the fact there is so much easy money around. slowed. is being we look to 2020 as a time where the cycle might start to turnover. until then, we are seeing a lastgasp in the equity market. nejra: you are funding your own weight in u.s. equities. thank you so much. advisorseet global india head of investment strategy. the stake a check and italian bond yields again. the two point 4% budget deficit number from the government. you are seeing those bond yields absolutely spike.

the two-year yield leading those gains. seeing a bit of a curve flattening. the euro unchanged. the european open is next. this is bloomberg. ♪

anna: good morning, welcome to "the european open." we are live from our european headquarters. i'm anna edwards. european equity trading set to be dominated by the italian story. mind the gap. italy's government says its budget deficit target at 2.4% of gdp. italian years -- italian yield surge. a tweet about taking tesla private. shares d