anna: good morning from bloomberg's european headquarters in the city of london. this is "bloomber: daybreak europe" and these are our top stories. the pboc counsel required reserve ratio as string -- trade tensions worsened. equities from sydney to shanghai fall, japan is shut for a and round two for brazil. far right candidate dominates sunday's polls, just shy of winning outright.

good morning, everybody, it's monday morning. it's just gone to 6:00 here in london. let's look at the markets. shanghai, ichinese want to put the worse of the performers over in asia for you. this is one of them, the chinese equity market feeling the pressure but they were on holiday in china last week so so they were-- really playing catch-up after trade tensions. we saw some date and so the disappointing out of china. the pboc trying to take the edge off that, it's the fourth time this unit there cap the reserve requirement ratio for the banking sector, loosening policy a bit. 6.9, weakeningt through the 6.9 level and some say that is a psychological -- cycle logic -- that is

psychologically important. reflecting that news we saw around the trade story and around china and last week's trading. this is aluminum. down 3.5% and this is something to watch from the commodities space. there'll be many in london here in the city visiting with an interest in the metals. aluminum down by 3.5%, this is to do with the story that was moving last week. we heard they were going to shut a facility in brazil and they got somewhere into that process. over the weekend they said they were ready to bring that back online a little bit earlier than had been anticipated and so the ramp of and prices that we had seen are now being unwound to some extent. let's look at u.s. futures and see where they point. it was a fascinating session on friday, capping the worst week in a month for equities. we also saw selling of treasuries.

better u.s. data meant there was a new assessment being done around interest rates and how high they would go. the jobs data incredibly important as well. a 48 year low in the unemployment rate, all of that going into that positive data vibe. even if there were some areas of disappointment in the data. ofms like there's a lot reasons to reassess the trajectory for interest rates. not expected to go anywhere very quickly. and he will week have a pleasure of talking to a host of executives with an interest in the mining sector. mines them is from copper , the ceo is going to join us for an exclusive interview at 6:30 a.m. u.k. time. let's get a check of the asian session. juliette sally has that for us. re: mliv strategist

said watch for a mother of a hangover when chinese markets reopened us with your seeing. down the most since february. the worst start to an october after golden week holiday break since 2008. 10 years. you can see hong kong's market still been sold off but it had friday an action would have big selling their. the offshore currency, your seen it weaker by the dollar -- against the dollar by about 0.4%. we also had the weakest fixed by the pboc since 2017. youing about that they drop seen aluminum, shares have fallen the most in 10 years in hong kong trade. casinos also under pressure, morgan stanley saying that despite the fact there were a lot of chinese tourists over the golden week holiday, they are lowering their forecast for gaming revenue. anz bank has put a figure on some of the scandals.

says it's going to be about 490 $2 million in u.s. terms. -- $492 million in u.s. terms. now heading to first word news. in brazil, the far right candidate has storm to a huge lead in the first round of the country's presidential elections. voters enraged by corruption scandals, rallied around his strongman message. it is this seven-time congressman on track for victory in the decisive second round vote on october 28 when he will face his closest challenger, the workers party candidate. north korean officials have said type terms for the discussions with might bump there. he was told that only three of his team could join him in the meeting with kim jong-un. his visitials said

went better than his previous trip which ended with north korea accusing them of making gangster like demands. hasy's the ouija demaio shrugged off european commission demaio on his -- luigi has shrugged off european commission attacks on his fiscal planet says he will grow stronger. he said next year's eu parliament elections british -- will usher in new lawmakers who ease the restrictions on borrowing. u.k. prime minister theresa may has a pile of work on her desk, having put the party conference behind her and dispelled any imminent threat to her leadership, or main task is happening behind the scenes after brexit blueprint didn't get the positive feedback she hope for. she has very little time to turn things around a deal is to get done by november and she is in a rush to get through parliament. turkey's president has said he is personally involved in the

case of missing saudi journalist -- of a missing saudi journalist. he said he's holding out hope even though another official says the columnist was killed inside the kingdom's consulate in istanbul. fallout may strain further ties between saudi arabia and turkey. global news 24 hours a day and bytictoc on twitter, powered more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. more of ourn find stories at top , juliette saly in singapore. china's central bank has cut the amount of cash lenders must hold for reserve for the fourth time this year. policymakers seek to falter -- shore up the falling domestic economy amid worsening trade war. chinese stocks are slumping on course for their worst performance after a weeklong october holiday. by threeee it's down point -- 3.3%.

let's talk to mark. good to have you with us. the reserve ratio, is that going to be enough? restore confidence in chinese markets, that's one side of the ledger. a host of negatives on the other side. mark: good morning. probably not enough to keep it going for the long term. it may help for today and for the next couple of days. the chinese market may have been down even further if they had not done these cuts over the weekend. that space to what the hong kong market was telling us, chinese stocks could have lost 425% and four percent to 5% instead of the 3% they did lose. probably onlyut addresses the tax bill which is due for the major banks during october. it doesn't do much more than help them through a short-term bit of pain with their funding

issues. it's not a long-term solution and there may be further reserve cuts down the road. it helps a little bit but not for long. other matters that are topical, looking ahead this week, we are expecting a brexit development on wednesday, we hear from michel barnier. tells about the mliv question of the day. our question of the day is does wednesday set the direction for the pound for the rest of the year? a few different views if you scroll through mliv today. there's quite a lot more going on rather than just wednesday. if you look at the way the european union has negotiated with people in the past, including greece, they tend to wait until the 11th hour before they come up with a decision. that's probably sometime in november. even though wednesday's a big day, it doesn't mean soft brexit is guaranteed and negotiations

would be finished. there will be a lot more headlines back-and-forth over the next few weeks. the pound make it a little bit of help by what seems like a softer deal but it's a long way to go. i think the upside is limited and we have to wait until much later in november until we see clearly where the eu stands and what they will agree to. it's big but it's not the end of the story. anna: we will see how much detail we are actually going to get on the future relationship area thank you very much. -- relationship. thank you very much. the mliv team will be watching. is robert john parker. good to see you. let's start with a china story. we knew there are going to play catch up this morning, we're seeing a great deal of weakness

particularly in equities, and it is broader than that. it really is the chinese market that is the worst performer. i think it goes partly that way. if you look at chinese economic data over the last two months, we have seen a clear deterioration in business confidence if you look at the pmi's, for example. have come off again. consumer spending has eased off. i think the reaction by the chinese authorities of the -- authorities is that they are very concerned about a potential slowdown in the economy due to trade tensions with the united states. currently wet that stand at about 50% of chinese exports to america are subject to tariffs. i think there is real concern about the potential impact if those tariffs are extended or

increased in january which is what the trumpet minister nation has threatened. i think we've got a clear reaction from the chinese authorities to the slowdown. the reaction covers a number of policy areas. we saw today, as is on monetary policy with the easing of the reserve requirement. to furthern has led weakness in the chinese market and one interesting comment is you have to look at the cnhference between cny and and the fact that we have a nyall discount on cnh to c means it could weaken further. anna: talking about the data picture, domestically -- demands are resilient the trade stress may be showing. the of the divergence in data we've seen in recent weeks, china manon monday pack -- nonmanufacturing pmi and the blue. that stable.

-- that is stable. where's the divergence telling us? there are two factors. you have to look at structural change in the chinese economy. old china, it's the steel and coal industry, the engineering. has beenchina economy close to recession or in recession for some time now. in contrast, look at new china, the service that your as demonstrated by your blue line. in addition, it's the high-tech sector. i would say the only linkage between old and new china is the still very high level of investment in infrastructure spending. is still probably growing a close to 10% per year. anna: moving up the value chain, we have this report out last week here at bloomberg at many places with

chips being put into manufactured products in china that were then used for essentially hacking. denied by some of the companies quoted. my colleagues at bloomberg felt confident the story. you think that kind of reporting and story roads -- you roads the des the ability of china to move into more and more high-tech products? bob: it's a challenge in a problem and comes back to the complaints that the company's ration has with china. it's not just the trade deficit in excess of 300 billion with china, it's issues like intellectual property rights, investor protection, operating in the chinese market, and extends further two issues like you have highlighted of whether there is hacking and misbehavior.

frankly, that does not do the chinese story of favor. anna: thank you very much. us on the stays with program. coming up, metals and mining in focus. ceo bob parker will will join arriagada us. and another ceo will be joining an hour after. lots of metals and mining. this is bloomberg. ♪

anna: welcome back, this is "bloomber: daybreak europe."

this from paris. the french prime minister could resign on monday area of the background context of this, we have been reporting over the weekend that macron and edward been reflecting on how to overcome the recent scandal. following that, there have been a lot of reflection on how the cabinet should be revamped and readying acron is cabinet revamp. there is a report that a new cabinet will be announced on tuesday. we will watch this political story in france very closely. here's the business flash with juliette. juliette: lloyds banking group has been talking with schroeder about working together in the

world sector. this is from a report that it is plain to add its wealth management unit into a potential joint venture with schroeder's. the deal would see lloyd's owning 50.1% of the venture. australian business management software company in why of the jumped the most on record after kkr offer to buy the shares they don't own for 1.6 billion u.s. dollars. a 24% premium from the closing price on friday. kkr previously bought 18% of the company. prosecutors have reportedly told standard charter that they are preparing to bring criminal charges against two of the banks former employees over alleged section breaches with iran-linked companies. u.s. authorities declined to designed tohe --

comment. standard chartered says it continues to cooperate with the investigation. that is your bloomberg business flash. brazil's presidential race goes to the far right candidate who that 46.3% of the vote in yesterday's election, short of majority needed to win outright. the currency continued its climb on the news. willormer army captain face the candidate from the workers party in round two october 28. , who is justin carrigan an expert on this type of subject. howell markets take the results of the first round? we have seen some brazilian assets -- assets rallying. the market choosing to focus on

the more market friendly of his policies. justin: that's right. in the run-up to the we can vote, we saw his lead increasing thehe polls and in fact currency has been the weathervane for brazilian markets and was one of the best performers in emerging markets last week. in what was a bad week for emerging markets generally. now that we have this result which shows he has a much better than expected lead over his opponent in this round, we could see a rally in brazilian assets, as much as 7%. rally on thend of currency as well. unknown we are in some territories as we lead to the runoff. we leadat to expect as up to that runoff? what to expect? justin: that's a very

interesting question because now we are in this period where the two conduits -- candidates have to carve out their identities. yellow polarized picture here thee the workers party, inheritor of the workers party mantle, talking about more control, more privatization and we have the right wing saying some pretty controversial things ,bout brazil's autocratic past homosexuality and so forth. it's upset a lot of people in brazil. now you will have to see how these two carve out their identities. they haven't been entirely clear. they may have to turn those down and capture the center ground. we will see how the vote goes at the end of october.

the market is hoping that bolsonaro edges it because he seems the most market from the of the two options. what what does it say with is going on with the rest of the emerging market world? astin: it's very much brazilian story, i don't think this is going to deliver any kind of positive turn to emerging markets generally. most markets won't be driven particularly -- will be given particularly by whatsapp in china. we see sharp declines in shanghai and that talks about where to where -- talks about to where we are going in terms of rising u.s. yields of the dollar strength. that applies to brazil as it does in any other emerging market. a contain story and will deliver a bit of optimism into the brazilian market but all those other dynamics still prevail elsewhere in the emerging market universe. thank you very much.

join us there from dubai. still with us. all these campaigns are different, one country to another. but it's shades of the philippines in brazil. the significance does portugal scenario victory have for markets? assuming that bolsonaro wins the second round in the opinion polls being published at the moment suggest that's the central case outcome. i think whoever wins the brazilian president election faces some extreme challenges. the first challenges growth. number was 1%h year on year and that's an economy which just of two years ago was growing at 8%. there is stagnant growth of the economy and it needs rebooting. association -- associated

major challenge is the fiscal deficit and that is running between seven to eight -- 7% to 8% of gdp. that is why the brazilian ray and the market has been vulnerable. the problem with pension reform, the need to sort that out. if they do go through a program of privatization, of rebooting the economy, dealing with that fiscal deficit, then perhaps they get back to what would be deemed a more reasonable rate of growth. you cannot run the resilient economy on only 1% growth. anna: thank you ray much. could a brexit announcement this week set the tone for sterling for the rest of the year? that's our mliv question of the day. the team asking this question today.

particular asking this as a good up to the announcement on wednesday. barnier will give some kind of where we go later on this month the negotiations. more on that. ♪

anna: good morning, we are asking about the pound. the mliv question of the day. in relation to some in that happened wednesday, michel barnier will draft the declaration on the future of the eu and u.k.'s relationship. willuestion of the day's sterling c here and trend be decided this wednesday. the function on your bloomberg, and you can answer the question. that's the way to send a message. is still with us and

can give us his opinion on the question. would set the tone for sterling trading for the rest of the year? bob: simple answer, no. we have three processes to go through. had we agreed to the terms of eu, we haveving the another question still need to be resolved. thetion two is what will be agreement during the transition. -- transition which takes us to the end of 2020. and question three, what will be the terms of the future relationship tween the u.k. and the eu? most of the leaving agreement has argument settled. exception is northern ireland. answer willnk the be my central case scenario is unchanged, there be an agreement that the u.k. stays in the customs union and you can use the race kicked the can down the road because that way you don't have to deal with it. the probably we

could end up with a situation where the transition is extended beyond 2020. may end up going into 2021. in terms of a future relationship with the eu, the picture is reasonably clear which is there will be no passporting rights for the financial sector. there will be no free trade deal. there may be some equipments on services but there will be a big push to try and get a free trade deal on goods. to pull acrossed the i also maybe that's what we saw her doing that. bob: this has to be approved by the u.k. parliament. anna: let's leave the brexit conversation for the moment and check out the markets. anne murray has that for us. ie has that for us. andhina down more than 3%,

the people's bank of china loosens monetary policy. be earningooks to more votes in the first round and the brazilian currency trading up. in commodities, aluminum is down 3.5%, some pressure on zinc and nickel as well. back to the big story of the morning. i'm looking as -- at what is happening on the options market. risks are the highest since february. this is based on the traders willingness to bet against the currency. it's the second time in three months are seeing the pboc cut the amount of cash lenders must hold in reserve. it totaled 1.2 trillion yuan and it moved the market over in asia this morning. aluminum is down today and is anding against the metals

it's falling the most since april. that was when the u.s. decided it will give some relief on sanctions to the russian aluminum giant. we are seeing quite a drop in that has to do with the refinery in brazil. richly said it won't be open and now they are saying they can see the refinery coming back on and that has prices really dropping today because last week they thought would be a tighter supply in the market and out looks like it won't be as tight as they were expecting area prices under pressure this morning. we will keep an eye on those markets and the aluminium prices as they fall. on the subject of the breaking news earlier, is get the latest details there from paris. it has been reported that the french prime minister will resign as soon as this morning. let's see to bloomberg's

reported to get the latest here. the story we are hearing this morning, is that in preparation for a reshuffle? it's all just about a reshuffle. it sounds very dramatic but that's how it's done in france. if you're going to change more than a few ministers, generally the whole government resigns and he gets remade with a few changes. maccallum is not in great shape is not in-- macron great shape right now politically. by doing a wider reshuffle he gives a sense of a dynamic of giving a second impulse to his government and getting rid of a few ministers that were little less dynamic they could have been. the newspapers are saying it has to happen pretty soon. isause the cabinet meeting

wednesday and he would like to have a new interior minister in place by then. anna: readying for phase two of his presidency. thank you very much. making sense of the latest headlines. it's a month until the u.s. --term elections in the u.s. elections and all the houses -- all the seats of the house of representatives are up for grabs as is a third of the senate. joins us now. will republicans retain the majority's? big question on your shoulders. >> in the house, the democrats are expected to win enough seats to take of the majority there. the mid 20's to do that on are expected to do that and perhaps more. there have been a number of retirements of republicans in the house that are helping them and they have been running

candidates that are in some cases unseating people in primaries that have done quite well. that's expected. in the senate, it's a hard map for the democrats. seats, democrats have to defend 23 and republicans only 10. 10 of the states were they are whereing are in states president trump won in 2016. 51-49, they would have to pick up seats and not lose any which is not expected. how my judge kavanaugh, as divisive as i was, helped or hurt democrats as they try to take majorities? it may help interns of turnout.

elections in nonpresidential years, turnout tends to be much less. they are saying that the turnout of women in arependence, they frustrated -- women and independence are frustrated by the process but we are seeing some early polling that in some states like tennessee and texas, where they thought the democrat might win, there is always a backlash there and you may see republicans turnout and be emboldened by the process. the senate again is going to be a hard get for the democrats. anna: great analysis. analystor editorial join us there. i'm torn about asking you to policy -- about policy are going straight into markets. i'm going to go into the jobs picture in the united states.

i think this chart is great. wages lagging. we have small businesses with their quality of labor being the biggest issue. finding it difficult to find people. time, the wage growth tracker is not keeping pace. an ongoing story over recent years, when do we see the wage pressures build? there's a clear reason why you have the virgins in your graph. if you look at the surveys of american ceos, there is clearly a labor shortage amongst skilled labor. the's why if you look at index of wages and skilled labor, it's going up quite quickly. however, unemployed people who left the labor market are returning. there is much less pressure on wages for lower skilled jobs. that's why you have this big the

virgins between the aggregate wages and what is happening with wages for skilled labor. that's where the pressure is at the moment. that all side, the u.s. economy in the third-quarter continue to grow at about 4%. if you look at the atlanta fed index, what they call gdp now, the latest reading is the third-quarter growth is 4.1%. i think that's interesting because a contrast with the fed forecast for next year which is growth of only 2.5%. if you look at consensus data, the consensus is that american growth in the fourth quarter will decelerate to less than 3% in the first half of next year and then will decelerate to around 2.6 -- 2.6%. anna: your view that the economy is goldilocks or as some of the research i read described it, is

it overeating? -- overheating? bob: we have shown signs of overheating but the second quarter and third quarter of 2018 with 4% growth probably represented the peak in growth for the u.s. economy. going to the first half of 2019, whether it's lower export growth or a downtrend in investment spending, whether it's some easing often consumption, i think we will probably see growth not decelerating rapidly but just assume that growth is going to be between 2.5% and 3% in the first half of next year. anna: i must get your thoughts on the treasury market. assets many times we saw a rise in treasury yields. context,han contest -- yields jump in the most since february. increasingly raising questions about whether you hold other

assets. what is the biggest of for u.s. we head towards the end of the -- gear?: the key bob: the key question is the speed. growing in the fourth quarter this year, close to 3%. headline inflation staying around 2.6% or 2.7%. betweenlation staying 2.2% and 2.4%. i think it's inevitable we will see yields rise further. the only question is how fast and where they go. my view is that having a this year we will probably see 10 betweenasury yields three point 25, essentially where we are now, and 3.35. i see the pace and extent of yield increases is not going to slow down in turn, i don't think represents a major threat to global equity markets although i stick with my view that in september i thought the s&p

would underperform other markets. i think that will continue. anna: great to have you with us this morning. bob will be continuing his conversation with bloomberg but on bloomberg radio. now onto a bloomberg exclusive. the saudi arabia and crown prince insisted the sold shares in the oil giant will go ahead. he made these remarks in an interview with bloomberg. he promised initial public offering by 2021 and said the state run company is worth $2 trillion or more. , bloomberg's executive editor for the middle east and africa. very closely involved in this group. scoop. this ipo has been delayed in it on hold. is a different this time?

delayed and on hold. is it different this time? >> the question is is this new realistic that a target or are we going to see again this buildup of questioning whether it should be delayed even further? that didspecific thing come out, although there are lots of individual points, and he seemed very keen to make the point because there were a lot of stories beforehand, including our own, which said this ipo had at the very least been delayed or put on hold. .ome even said canceled i think he wants to come out and set the record straight. the questions won't stop on evaluation. he did say the markets will be the decider at the time but his expectation, he is sticking to the $2 trillion.

this time after the merger. oil prices more generally are reacting to some of his comments with regards to spare capacity, perhaps saudi arabia can tap its spare production as ian crude being sanctioned by the united states. what else is involved? riad: in terms of the crude question, he made the point that saudi arabia and other markets have already reacted to some of the disappearance of iranian oil. he said to barrels for one missing, indicating in a way that he doesn't see a need right now to do more as president trump is asking him to do. at the same time, he repeated the line that if the market requires it, if they see a need in the markets, they are ready to do it. he has some leeway of 1.3 million barrels to do that. that is without extra

investment. in terms of other points, a was pretty broad. one of the most interesting things is he said they are going to double down on their softbank investment. a 100 million dollar fund that they have put in $45 million of. he's going to put another 45 million or -- another $45 million into that fund which are bring the total to around $90 billion. we'll talk about a missing journalist as well. our executive editor join us from dubai. coming up, ivan arriagada, antofagasta ceo, joins us for next visit interview. ♪ -- for an exclusive interview. ♪

anna: good morning, this is

"bloomberg: daybreak europe." couplet have to wait a years before the global market flips to me full -- new mine projects prompted it to boot -- boost its forecast for output. only after 2023 will, quote, severe deficits emerge. stay at about $7,000 a ton for the next few years. join us now for an exclusive interview, ivan arriagada, the ceo of antofagasta. so many of your industry is in town. tell me your thoughts on the price. they say it's good to stay around $7,000 a ton in the shorter term, do you see that? ivan: i think the outlook for is very positive.

on the demand side, emerging markets team -- continue to drive a lot of physical demand. china demand is expected to grow 4% in another part of the world, demand is quite strong. side, copper is an shortage. generally you have declining grades so it's a commodity which is in strength. the outlook and prices positive and favorable. we have seen prices come down but that was largely the result of macroeconomic uncertainty around trade wars. , i thinkat noise midterm the outlook is positive and prices are bound to increase. anna: is it just noise, the trade tensions? or do you see evidence of it in demand? physical demand is quite strong and one of the reasons is that most of the copper that goes into emerging markets, if

you take the case of china, for example, is there. exported toopper china goes into that market, stays there any form of infrastructure and consumer goods and does not get reexported. the direct impact of a potential trade war on copper consumption in emerging markets we see as moderate to limited. in goldman sachs's view, this deficit that could emerge in some years, if that is the backdrop, are you looking to invest more to find more sources of to spend more on him and a? -- on m&a? copper is constrained, there are not a lot of new deposits. we at antofagasta have some important districts that are world class in terms of the mineral reserves they hold. we are looking over time to develop them progressively. one of the projects we have in the short term involves growing moderately in one of those districts.

anna: do you have plans for more m&a, hothough? there are some who are concerned that prices may become elevated because of competition from buyers. ivan: one of the things we have certainly learned over the years is keeping capital discipline is fundamental. we are very keen on developing the copper reserves we have we are going to do that very deliberately over time, sequentially and progressively, keeping capital discipline and the financial strength of the balance sheet. we are not expected to take significant m&a. largely because there are no new deposits in the market. m&a doesn't really sound like part of the story. ivan: i don't tickets a big component in the copper market today. ofthe growth and development

deposits, curried over time, in a market that is essentially supply constrained, it will run to deficits. the deficit in the market will, maybe slightly later than anticipated. i think there is a consensus view that the market is short and more copper will be required. i think it's a good story, a positive story. you arey do you think seeing resilience in china at a time we see equity markets falling because of trade tensions and other evidence in some of the survey data of some weakness? -- is it aon of time question of time until that seeps into demand for copper and other metals? ivan: in the case of copper some national since most of his days in china, that's the key element that moderates the impact.

if it were used for re-exports that story would be different. china has been applying countermeasures to counter the trade war, they have been stimulating the economy and we're seeing more of that in the way of lowering bank reserve requirements and maybe incentivizing investment in infrastructure. i think that's meant essentially that china's economic growth has not suffered significantly as of now. they are managing through that quite well. bit: talk to me a little about demand in copper in new technologies analytical cars. where are you having the most exciting conversations? ivan: copper will play very strongly in the new economy and more sustainable economy and i think we will get clean transport and clean energy. copper is used wisely, in renewed -- renewable energy for example. it's used much more intensively

-- intensively than conventional generation. the expectation, the assumption is that the copper the goes into electric vehicles will multiply by 10 by 2013 -- by 2030. there is significant growth behind that. today around 200,000 tons of copper go into electric cars and by 2030 it will be closer to 2 million. anna: how big a part of the copper world is that? around 2he gets million tons, it's around 8% of the market. anna: thank you so much for joining us. fascinating. ivan arriagada from antofagasta and don't miss our interview at 7:30 u.k. time, i will be speaking to another ceo and we got the theme of metals and mining den. south african the he's offeredter,

to resign. we see some movement in the rand. to drop against the u.s. dollar. this is bloomberg. ♪

>> good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe." china injects liquidity. the pboc cuts the required reserve ratio again as trade tensions worsened. tips and equities sink. no treasury straight in the united states. round two for brazil. the far right candidate dominates sunday's polls, just shy of winning outright.

good morning, everybody. let's get straight to term and data. -- in german data. industrial output dropping by 0.3%. the estimate was for an increase of 0.3%. the year on year number looks to be in line with the estimate. we will dig deeper into that. this comes as many are concerned about the impact of a trade war on the german exports. a fascinating surly -- story earlier around how the german machine is resilient to pressure. crisis sentancial it into negative territory, but nothing else has back as far as 1999. interesting to see where the weakness comes from when it comes to the germans story. german august industrial output down 0.3% month on month. the estimate was for an increase of 0.3%.

let's have a look at the broader picture across futures. for the equity markets here in london. of europe, i should say. a little bit of downside bias on the ftse, the dax, and the cac. the session in asia has been weak. china leading weakness. the pboc loosening policy. the fourth time this year they have done that. no prize we are seeing weakness we are story -- surprise seeing weakness in that story as they return to the equity markets. that's where we are on the picture for equities. u.s. futures look way down. let's have a look at the bond futures. the bond market, here we go. bunds, btp's, and u.s.. do not pay too much attention to the united states. it is columbus day, which means

there will be no trading in treasuries today. news of what's going on with schroders. some of which we have been talking about in recent days. schroeder's saying this morning baron talks with lloyd's for wealth management collaboration. there is a little more detail. schroders conference it is in discussions with the wealth sector. that will not surprise anybody who has been following the headlines. there has been plenty of reporting of late. let's check out the asian session. look at the csi 300, down 3.7% with just under an hour trade to go. this is the worst start to october for chinese stocks after a holiday since october 2008. japan out of action today.

a little bit of buying in india and other emerging markets. australia hit by the weakness you have seen in commodities, particularly that alumina market. -- aluminum market. let's have a look at what else is moving sentiment. we in the emerging market index in asia, down by seven tenths of 1%. you mentioned the offshore yuan. yuan trading in china back online. we had the weakest fix from the pboc since may 2017. you can see the dollar strengthened their. chinese yuan weakness. the yen being dragged to lower by that move from the pboc and also japanese equity markets out of action. you have seen downward pressure from the japanese yen. turning now to the first word news. brazil, the divisive far

right former army captain has won a huge lead. that is as years of corruption scandals and soaring crime rallied around his message. the result was the seven-time congressman on track for victory in the second round vote on october 28 when he will face his closest challenger, the workers party candidate. ministerican finance -- these south african finance minister has asked cyril ramaphosa to be dismissed from his position according to business day. the request came after political parties rejected his policy -- apology for previously undisclosed meetings during past 10 years as minister of finance tom 20 10th 2014. -- 2010 2014.

a spokesperson declines,. turkey's president has said he is involved in the case of a missing saudi journalist. he also said he is holding out hope even though another official said the washington post columnist was killed inside the kingdom's consulate istanbul. -- in istanbul. interpol has said it is missing -- i missing president has resignedt's. the international policing agency said only that its theral secretary received resignation yesterday, effective immediately. according to the south china morning post, he was taken into custody immediately upon his arrival in china. has musk's rocket company delivered welcome news, launching a commercial satellite for argentina.

it was spacex's 17th mission of the year. nine's first stage booster successfully landed 18 minutes later. climbed valuation has after successful launches. 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. this is bloomberg. nejra: -- anna: thank you very much. china's central bank has cut the amount of cash lenders must hold as reserve as policymakers seek to shore up the faltering domestic economy. chinese stocks are slumping today on course for their worst performance after the october holiday in 10 years. discuss, thew to investment director at and angie

-- nsg. triple part,the the first time we have seen that from the pboc this year. >> last week the chinese market was shot. we saw 10 year yields rising, strength in the dollar, we so weaker data out of china. the pboc did look to cut that reserve ratio by 100 basis points, which is a positive announcement. i do not think it is going to do much in the scheme of things. it is a positive direction. they are trying to increase that within the markets and increase lending for banks. >> i have a chart that shows that. this weekend's announcement won't show up, it will take a few days. but that is the history.

suggesting that is the direction of travel. what does this do to your overall view that the selling we are seeing in china today, are we had a point where this is an opportunity because of diversions between china and the united states is incredibly clear this year? >> trade concern is becoming a bigger issue. they are focusing on deleveraging the economy, increasing monetary policy to stem some of the risk coming from that trade war, which seems to be picking up as we head into midterms. china does look quite cheap. we are starting to see reforms. they are also trying to look at credit growth. some slowdown we have seen there as well. it is still 6.6%, a very healthy growth rate. chinak when we look at more broadly, they are looking at government reform. they are trying to deal with shadow banking. i think we have selectively

looked for opportunities. anna: are we seeing inflection points? last week we talked about 10 year treasury yields where they have the extent of expectation around interest-rate hikes and wage growth and inflation. that conversation might be changed. are you seeing an inflection point across a host of assets? or is it too early? >> has very much been the assets, which looks fantastic. but also the diversions in monetary policy. -- divergence in monetary policy. the question is do we see a slowdown in the u.s. or do we see europe and japan improving economic growth and seeing those forecasts coming through? if it is the latter, that would be more market friendly. ae u.s. selling off and slowdown in growth would be more negative for global growth more generally. it is quite early to see where we are. the u.s. economy is in a fantastic place. we have strong economic growth.

a very tight labor market. there is a lot of skepticism for equities. we saw that with 10 year yields rising again. questions were again around, was this in equities? anna: a lot of questions. i saw descriptions of the u.s. economy has really overheating. a lot of views out there. thank you. joining us from m&g, where she is investment director. a month until the u.s. midterm elections. the entire house of representatives and a third of the senate seats are for grabs. let's get a preview of what we can expect from annmarie hordern. dayt is a month until the we have u.s. midterm elections. investors have been so invested in the outcome. this is the house, all 435 seats are up for grabs. a third of the senate as well.

polling shows divided government is the most likely outcome, which means roadblocks for president trump's agenda and little action on the policy front. democrats are up by seven points for the house. the senate saying -- staying republican. in the event of democrats winning, bloomberg intelligence analysts see the budget feuds coming back into focus. this could derail economic confidence and weakening u.s. second -- u.s. equity performance. markets tend to perform well after elections. however, when the president and congress are aligned politically, returns are usually better than when the two branches of government are not. there are also in -- indications for the dollar and treasuries. anna: a lot more complicated then markets like it when policy

stays the same. thank you. annmarie hordern with the latest on what will be happening in the u.s. midterms. today we are asking our mliv question of the day in connection with brexit. will present the declaration on the post-brexit relationship this week. our question for you is, will year and trends be decided this wednesday? some argue it will. involved in the conversation. click on the ask a guest question button. send an instant message to the team. this is bloomberg. ♪

>> when i look at inflation expectations from the tips market, it looks like they are about at 2% on a personal

consumption expenditures inflation basis, or some of below 2% over the next five years. as of right now, the market does not think we are going to hit our inflation target on our preferred measure over that kind of time horizon. that we have to me got about the right level of rates today. >> if the economy continues on the path it is on, a gradual path of rate increases for the next year or so is the right course for us to keep this economy going. >> we are at a good level of rates today for our environment. we do not have to be projecting planned rate hikes at this. we can react to data as it comes in. we can feel our way and see where we want to go. is a situationit where we need to get higher with policy rates in order to contain inflation.

there just is not that much inflation pressure in the u.s. economy. >> when you think about it in terms of inflation, we are not seeing any pressures. this is a bit of a goldilocks economy. low unemployment, strong job growth. stable inflation. anna: before that you had the st. louis fed president in the federal reserve bank of new york president. voices there. let's get a bloomberg business flash. daimler's ceo will leave the maker of mercedes luxury cars marking the first departure since the german manufacturer picked ceo. in 2019.act expires he joined the board in 2003 and took over responsibilities for

finance a year later. the board of airbus will meet today to name the company's next ceo. that is according to the cigarette. --cigarette. he announced in 2017 he would be leaving airbus. a spokesman declined to comment. signaled it is ready to restart the world's biggest aluminum refinery in brazil. that reverses concerns that tightening supply of the key raw material just days after the facility was to be closed. shares in rival producers which rally last week amid prospects for higher prices have longed. that is -- have plunged. that is your bloomberg business flash. anna: time for something different. let's check out what is trending.

a host of diverse stories for you on tictoc. palm trees are revolutionary and controversial $19 billion palm oil market. they take up less space and provide higher yields, making them more sustainable. had to twitter to find out. luigi demaio has shrugged off european commission attacked on his government's fiscal plan and said his antiauthority view will goes -- grow stronger across the continent. more on that in a moment. our most read story on the bloomberg terminal, in third-place, the u.s. department of home security -- how might security. spacex launched a satellite sunday evening. chinese stocks have tumbled as markets reopened after a week long holiday. more on the out bloomberg. top . let's get a check on the

markets. this is what the equity markets look like in terms of the futures picture. to. futures point flat negative. the slight hangover in asian equities is something that is going to be watched carefully in europe and the united states. btp yields as well for you. we have heard fascinating conversations from the entire government over the weekend. surrounding the italian government spending plan has led to continued nervousness on the financial markets. the government borrowing for italy has been dramatically rising over the past few months. there are now glowing -- growing concerns the populist coalition is headed for a standoff. we are joined by kevin costello. good morning to you. one of the deputy prime minister's, he has had tough course for brussels. talking about the elections in may next year.

for the european parliament. essentially saying he's going to get more support at that point. >> yes, luigi demaio definitely is saying that he is looking forward to those elections and he has struck a very confrontational tone. the italian budget is due in brussels next week. demaio is saying his government is not going to back down on the spending plans. that steve bannon has been one of those active in europe trying to build momentum for the more populist movements around europe heading into those elections in may. with the more immediate future in question, both deputy prime's are having key appointments today. what are they? >> matteo sell beanie is meeting -- salvini isa

meeting with marine le pen. , lot of people looking at especially the markets, which have driven up yields on italian 10 year bonds and widened the spread with german bonds. anna: thanks so much, kevin. the investment director at m&g is still with us in the studio. when you look at political risk see regard to italy, do you the emphasized italian equities on days when italian politics are at the four? >> when you look at the italian issue has been very much contained within italy's borders. the biggest ramifications are the bond market, clearly with those bund yields versus the btp spreads. if you look at two-year treasury swap rates, the german swap

rates, they have not moved much. that is typically your hedge which means not a european issue, but an italian issue. the biggest impact we have seen is on italian banks. that is the biggest risk. if we look at italian banks more broadly, they have improved their balance sheet. i'm skeptical of them more generally. we like certain companies within italy. when you look at european banks more generally, there is significant discount because of the contagion impact. you can buy european banks at 15% discount. there are opportunities in wider euro. anna: that is -- value comes to mind you talk about european banking sector. will value have its day? when we going to start seeing those value stocks have their moment? i think that is the biggest trade of the last 8, 10 years, growth outperforming value.

we have had moments of resurgence is of value coming back. it has not sustained itself. if we look at september, value came back. what is going to drive value is earnings. when we look at the spread between the growth stocks, which is very expensive, what it is priced into that clerk -- that growth level? when you look at values stocks, very cheap, but very good earnings. for that gap to close, it's going to be earnings that come through, but also that momentum play starting to roll over. anna: i want to ask what your thoughts are on u.k. assets. we have the mliv question of the day, which is around sterling, and whether wednesday's going to be decisive in setting the year and trend for sterling. if you want to get involved, go to tv and click on the ask a guess the question button. tell me your thoughts on u.k. assets as we head towards the end of the year. we have crunch time this month, next month, on the brexit talks.

>> a lot of the brexit premium has been priced into you can markets. they look cheap, but there is still uncertainty. i know michelle barnier speaking this week. there are talks of whether selling would recover -- sterling would recover. with many months before we resolve issues like the ireland border, they hope things get a softer brexit. -- we willw what to know when the details come out. anna: we might not know details in the short-term. >> and you still have the transition after that. you will have to see, is it a sharper hard brexit? how long will that take? what does that mean for you ksm prices? -- u.k. asset prices? anna: thank you for joining us. the european open is up next. here are -- here on bloomberg

television. the futures market this morning suggesting flat to negative at the start of trading. this is bloomberg. ♪

anna: good morning, welcome to "bloomberg markets the european open." i'm an edwards matt miller in berlin. stocks tank, but japanese markets are closed. there will be no treasury trading because there is a holiday in america. all eyes will be on commodities and european equities. we opened for trading in 30 minutes time. anna: