anna: good morning -- nejra: good morning from london. yousef: these are today's top stories. the u.s. avoids labeling china a currency manipulator. chinese stocks head deeper into a bear market. delaying the divorce. theresa may considering along brexit exit.er fed officials debate hiking into restrictive territory. yields on the 10 year creek near 2011 highs.

manus: warm welcome. earning season, thursdays are busy. third-quarter sales, 3.4 2 billion. that's a nice beef there. the full-year organic growth will be at the top of the range. a proposed merger is progressing satisfactorily. ,he third-quarter intake order up 10%. 3.1 4 billion. you walk away with a very healthy perspective of what's going on, growth is going to be on the up. progress on that deal is critically important.

you have a little bit of nevada's. the red headline coming through here. third quarter core eps, the number you want to look at coming in at one dollar 32. we are beating on the third quarter core eps. seeing 2018 net sales growing in the mid-single digits , before it was seeing the low mid. guidance could be lifted giving the performance in the first half of the year. it looks like he has been approved right here. third-quarter net sales coming in a little bit fast. $12.78 billion. third-quarter net sales, a little soft. third-quarter operating profits, coming in at $3.56 billion. the estimate was $3.51 billion. eps, thed-quarter core

key number we are watching. it seems to be a beat across a number of the spectrum's here for novartis. managementbit of news coming through there. there are also plans to expand expertise in various areas. quite a bit of news flow coming through from novartis. we will speak to their ceo, lots of questions for him, just after it :00 a.m. u.k. time. manus: ibm had a big battering. let's have a look at sap. this is the manual has been trying to transform sap. they are raising their forecast with the crowd. they are raising their view in

terms of the guidance, 25.2 to 25.5 billion. from a level of 24.98 . a new bandwidth to the upside. that is scaling up their overall business growth. it is raising the forecast. mcdermott has made cloud his number one priority, going head-to-head with salesforce. they did their biggest deal this year. new bookings, also rising. their cloud subscriptions, 5.2 5 billion euros, up from a previous maximum expectation of 5.2 billion. bookings, very

important, up 37% in december -- september. sap is now the number one business software cloud company in the world. coming up on the show later, we have the cfo of sap, he will take us through the numbers. he will join the team later on. stay tuned for that. you look at the markets this morning and say, you are not a currency manipulator, china number one. they test the yuan. they are taking it through 2017 lows. mnuchin rebukes the chinese but he does not cast them as a manipulator. the yuan is under pressure. how did you look at the minutes? you should've looked at the agenda. if you are looking for the toughest, you didn't get them.

the debate is about going to a more restrictive territory. how is it looking for you? moved.the 10 year yield so did the dollar. we saw the dollar index moved towards the top of its recent range. we seeing softness and the dollar against the end. this could beg about selling in the euro in the pound against the yen, making the yen big in the session. space, the jobless rate number unexpectedly dropping. that was better than expected. looking at crude. it is holding a one-month low after dropping 3% in yesterday's session. this after is the u.s.. that is dominating the oil market. let's hear more about the markets in asia.

juliette saly is with us in london. we are seeing asian markets coming under pressure. you have quite a bit of weakness coming through in the u.k.. there is also weakness coming through on the offshore chinese market. we have heard that the u.s. administration refrained from calling china a currency manipulator. to have seen the yuan fall its long list -- lowest level since january 2017. some good buying coming through from cba. watching korean stocks. we had the bank of korea holding fire on interest rates. let's have a look at some of the movers. manus was showing us the yuan. ,f we look at the offshore yuan you have it a little bit weaker than it has been.

we are also watching petrochina, oil price falling significantly. petrochina falling the most in eight years in shanghai. a production glitch due to a computer virus could have dented taiwan third-quarter sales and profitability. manus: thank you very much. very latest on the markets. let's get your first word news. president trump and his top diplomat cautioned against putting the u.s.-saudi relationship at risk over the disappearance of a journalist. a ceo says he is torn about whether to go to next week's event in thedesert kingdom. according to bloomberg sources,

deutsche bank hasn't made up its mind either. several companies have pulled out of the future investment initiative event as media partners. the u.s.-china trade war has turned to mail. president trump plans to pull out of a treaty that gives chinese companies discounted shipping rates on small packages sent to american consumers. u.s. officials say the administration sought to renew the treaty but was rebuffed. theresa may is considering a plan to extend the brexit time.tion sources say the u.k. prime minister wants to keep britain bound to ua -- u.k. rules. the move could break the impasse but skeptics are likely to accuse theresa may of delaying brexit. japan's exports unexpectedly fell in september, the first drop in almost two years. that came as natural disasters disrupted economic activity.

a continued gain in imports was spurred by higher energy prices. nejra: thank you so much. the u.s. treasury has stopped short of calling china eight currency manipulator in a new report. despite the concession, the yuan remains on the administration's watch list. to its lowestell level since january 2017. joining us now is bloomberg's china economics reporter. rate and happy with us. i have to make a correction there. the wand seems to have moved more after the fixing from the pboc. tied together for us what is happened overnight. -- has happened overnight. >> we had the news from the , they didn'trt

name china as a currency manipulator. that is pretty mechanical. they have their own set of criteria to take that decision on china, it only needs one out of the three conditions. there's no evidence that there is persistent intervention to keep the yuan week. all,ey are intervening at it is to keep it from falling faster. account surplus is not there either. it is actually much closer to balanced than it used to be. wanted to name china the currency manipulator, they would've had to have transparently changed the criteria that they set for all of these decisions with u.s. trading partners and that would've been a controversial move. other story is, the

postal treaty. united states pulling out of a 100-year-old treaty about giving chinese companies the of vantage -- the advantage, is that just a number two story? years, whenever we are writing about the history of the trade war between the u.s. and china, i'm not sure that anybody is going to be pointing the decision -- to this decision in -- as something that shifted this way one way -- orfted this one way an or another. youdid -- manus: disappointed me there. jeff black, our bloomberg china economics advisor.

let's talk about the one with our guest. i think this is a red rag. , it was ayuan stinging rebuke by mnuchin. does this provoke the yuan traders to test the boundary? >> good morning. i think that is certainly possible. things that the chinese government could do in response to the tariffs from the united states is to change the value of the currency if this -- that is the direction they want to go down. that has costs for them. they are trying to make the yuan a challenge to the dollar in some parts of the world as a reserve currency. that is why they are doing things like trading oil on the shanghai exchange. we have to be a little bit careful about assuming that a

devaluation is how the chinese are going to respond to the tariff situation. that has longer-term implications that could be quite negative and not consistent with the policy they have had up to now. in the meantime, they want to continue with economic reform and keep their economy stable. a great article says that unless long-term response is not matched with their short-term, china would be better advised to follow the approach of countries like south korea and mexico by making concessions to reach an accommodation with the u.s.. does china put its economy at risk if it doesn't make concessions now >> -- now? >> they are in a bit of a difficult situation.

commentators say they should do things other than putting tariffs on american goods because they don't import very much. people talk about them putting more barriers on american companies doing business. they talk about going to american factory in china and saying, you warrant obeying the rules, we will shut you down. that's anonymously negative to their own economy. that seems to be completely counterproductive when they still have to keep the growth engine going. they're in a difficult situation. whether they are able to come up with some mechanism that would satisfy the trump administration, i'm not sure about. they think tariffs work. manus: the chinese stock market at a four-year low. they have a new strategy for curbing the worst of the stock market lost. not creating an emergency fund like 2015. it is much more strategic.

are you a believer in stimulus in the chinese economy? maybe you want more exposure to domestic china if you have to have a china exposure. i'm not sure about the dynamics of how you would put together a chinese equity portfolio. i think that if there are more visible signs of the economy is slowing down, i think that the haveis out on that, they the possibility still of doing stimulus. i think one of the things that has been interesting, oil has been weak. a lot of the other commodity markets have been holding up pretty well. ultimately, china is a huge demand source for global commodities. of all the things you can look , there are secondary

indicators. i'm not convinced that we have a massive slowdown going on. if there is more evidence of it, they have some policy flexible he. nejra: we are seeing a lot of market reaction today. at waiverf investment to an investment. we want your views on italy, that will seevel the country's wealth. let's talk about headlines that are coming through on italy. solving a considering running for the eu commission chief. he also says the budget plan won't be change. -- changed. just a couple of headlines to update you on there. a big question about how the eu is going to react to the budget. the question is on screen. it is, indeed. that would be surreal, could you

a man -- imagine the campaign? does the debt crisis only blow up if italy is cut to junk? are we trading as if they are -- there already is a downgrade? nestle hasng news, gone red. the biggest food company in the world, organic sales growth of 2.8%. that is a red headline from nestle. asy talk about their sales being 66.42. pricing is up. we will talk more on the nestle story very shortly. ♪

nejra: a day after a crucial meeting with eu leaders, we will

talk about brexit in just a second. let's get to breaking news. , organic sales growth at 2.8%. bang in line with the estimate. sees 2018 organic sales growth at about 3%. nine-month sales coming in at 66.4 2 billion swiss francs. beat in lineight with those nine-month sales. we have nine-month organic revenue coming in bang in line with estimates. changes in the executive board, that their head of zone a away will be leaving. manus: thank you. ,t is all about the ice cream that is what we have keep our eyes on. let's reset the agenda because

it is a day after the crucial meeting with the eu leaders. theresa may is believed to have considered the idea that the uk's transition out of the block could be extended for another year. it's a radical move designed to buy more time to sort the irish border issue and it has left no one in different. -- in different. the stake a look at what is making the front pages today. limbo from in brexit the daily mail. it is trying to avoid in no deal scenario i staying in the eu for longer and keep paying billions to brussels. nejra: go for it manus. manus: daily telegraph, there you go.

courage andd show break negotiation deadlocks. time, brextra time. they are worried it could infuriate the hardline brexitiereres. for the u.s. to pursue a trade deal with britain as soon as the eu withdrawal is completed. the guardian says theresa may failed to unblock the talks that left the eu officials irritated. why don't you have a go at the financial times? no one wants to listen to me. nejra: we are giving our guest host a complete rundown of the morning paper, saving him some pennies. the financial times running a photo of european commission president greeting theresa may

upon arrival at the summit yesterday. there we go. we have given you a rundown of the papers. let's get back to bill and focus on the fed. officials in a debate over how high to raise interest rates. a majority favored a temporary move up above the level deemed neutral for the economy in the long run. officials said the estimate for that rate was 3%. is still with us. we have seen the 10 year yield, the dollar move on this. i love that the crucial bit came in the addendum to economic forecast. i read a column this morning saying what was more notable was what was not in the minutes. the wasn't any kind of push back on the fact that they could move into restricted policy. should the market actually be more aggressively pricing the

possibility of restrictive policy? >> there's not much evidence in the economic data to suggest that interest rates can go higher from here. if you look at where short rates are relative to the rate of inflation, it's about at the level of inflation. historically, there has always been a real interest rate at the short end. think that the pressure on interest rates to rise from here is probably still on. the big question, they are withdrawing stimulus. they're getting away from doing quantitative easing. they are selling $50 billion a month of holdings they bought during qe in the next year. how the market reacts to that will also influence how they run interest-rate policy. manus: thank you so much. that is the head of investments. we will continue that

conversation about the fed and markets with bill very shortly. customer, a bloomberg tv is your destination. you can join in the mliv question of the day. this is bloomberg. ♪

nejra: today, we want your views on italy. yields at a level that will see the debt pile snowball. our mliv question of the day, does the italy debt crisis only bro what -- blowup if the credit -- countries credit rating is downgraded? you can read the latest from the team and join the conversation. we have breaking news to get to. i'm having a few technical problems here with my system. we will have to read it straight off of bloomberg. i have a small bloomberg manual moment. this is the biggest chipmaker in the world.

$89.1 billion, below the market 88.75.e of 89.1 in terms of net income. that's certainly something that is going to drive the market, the world's biggest contract chip maker, sole supplier of the iphone. we will wait for a few more of those numbers to come in. upbeat for them on the taiwan semi conductor. ex-mlb yesterday. it all adds into the tech earnings versus the tech battery that we've had. you have a little bit of ericsson come i believe. nejra: i do. what bloomberg was expecting before these numbers was an improvement in revenue likely to be continued in the third-quarter, supported by a weaker swedish krona and a bullish sentiment. what the numbers are showing is

third-quarter net sales coming in at 53.8 billion swedish krona. that is a beat on the estimate. third-quarter adjusted operating point 8 billion swedish krona. upbeat on the estimate of 2.7 7 billion. the ceo saying that they expect a 5g trial cost to remain on high levels. a lower fourth-quarter seasonal affect though. it is a beat on the third-quarter adjusted operating profit. the sec probe will likely result in monetary measures, coming from the ceo. manus: onto global advertising. this is incredibly important if we are looking for concerns under trade and spending. growth,arter organic 1.5%. missess. the analyst --

the analysis. they will sell their health unit , they say that has held back sales. they are planning to sell their health unit after a strategic review. you saw advertising slow down dramatically in the u k. that was one of the themes we picked on -- picked up on yesterday. their health business, they say, has held back revenue. it is supposed to free up money to spend on developing the tech side of the business. those are results coming in hard and fast. taiwan semi conductor is a beat. publicist is selling business. let's get a market wrap. >> look at this map.

asia is clearly in retreat today. a sea of red. japan down. china down. back from hong kong that holiday, under pressure. no bright spots. a little bit in australia. seem to be halting. they are taking in the geopolitical tensions. it's a risk off tone this morning. the big question, i want to talk about the yuan, when it will break through this psychological limit of seven. the u.s. stopped short of calling china a currency manipulator but did warned that further weakening would trade imbalances. in the blue, we have the dollar versus the yuan. you can see this hovering near that seven level. in the white, this is the you oft against a basket currencies. since it started in 2015, it is at its lowest level.

it is not just against the dollar that it is weakening. it is against the slew of currencies. one strategist was saying this has to come down to china's easing measures. i want to talk about iron ore. this relates to the fact that china is pressing home and anti-pollution drive. iron ore prices cracking higher today. these are two different grades but both of them are up. miners, allon top of them will likely advance due to the iron ore's pop tonight. nejra: let's get the bloomberg first word news. >> thank you. cautionedtrump against putting the u.s.-saudi relationship at risk. the ceo of siemens says he is torn about whether to go into next week's devils in the desert event.

according to sources, deutsche bank hasn't made up his mind either. several companies have pulled out of the event as media partners. the u.s.-china trade war has turned to mail. ofsident trump plans to plot a treaty that gives chinese companies discounted shipping rates on small packages sent to american consumers. officials say the administration sought to revise the treaty in september and was rebuffed. the u.s. treasury department has stopped short of declaring china a currency manipulator in its semiannual fx report. it adverts an escalation of the trade war. mnuchin said his department would watch the yuan closely after its recent slide. wendy cutler told bloomberg tensions between the two countries are still high. >> i don't think anyone expected

china to be named, given the strict criteria in the statute for naming any country. that doesn't mean there is no trade tensions between the usa and china. in some ways, china dodged a bullet. global news 24 hours a day on air and on twitter. manus: i will get up. -- pick it up. let's get back to our guest. fed, wetarted on the got interrupted by earnings. i want to take you back to this conversation. bank of america merrill lynch, powelloes i will push -- push?

bed -- best case scenario would be a 50% drop in the s&p 500. is that a reasonable market assessment? >> i suppose it is perfectly reasonable to think if the stock market has a bigger decline, the fed will have to take that into consideration. i think that is reasonable. the fed has to take into account all sorts of things, including what the market is doing. it is reasonable think that a fall in the stock market would make them rethink what they are doing. nejra: if we look at the equity , what is your assessment in terms of the momentum we could see in equities through the end of the year? moment, the earnings season is doing the usual thing. most companies are beating.

are we hearing more companies talking about pressures on their margins from the fact that they are not able to pass on cost increases? we have seen one or two examples of that. i think that is one thing to keep an eye on that would be slightly deflating. generally, the earnings season could be a reminder to the market that fundamental conditions are still pretty buoyant. fallen, market having if earnings continue to surprise positively, the market looks better value. that could be supportive. manus: i was drawn to one of the lines in your report which talks about the price rises in oil. people are beginning to talk about oil prices. you would say, you are not that stressed about the price of oil.

does that not begin to eat into some of the margins and some of the sentiment and a lot of the cost? >> absolutely. we need to take into account what is happening in the oil market. it is the very bottom of the value chain. it is extremely important. it is a big economic variable. all we are trying to point out is that the level at which oil prices rise is important. historically, it may be coincidental, it is true that in the last three recessions, the oil price has gone up over 90% year on year. we are some way short of that. we are not at the point where that spending on energy or oil ticks away from spending and the rest of the economy. at the moment, we are keeping a close eye on it. i don't think it is enough to derail the broader economic outlook. nejra: would you be looking to get your commodity exposure

through the energy producers? >> i think that have some attraction. the other thing is whether or , if theoil market commodity market continues to show strength, which it has, that is good not just for the equities involved but it might question the big selloff in some of the emerging markets. some of the commodity exporters will be beneficiaries. we have seen in a -- a big selloff in oil in em. there might be some value there. manus: from emerging markets to a headline very issue. soft tech on tuesday night. we put the s&p 500 relative to the bank. see, this is a nice

beat, these are the hard tech. to get amid soft tech how do you want to differentiate the tech market? are you worried about this side of the market, from a valuation perspective? >> when we come up with these acronyms, it is easy to lump everything together. the fangs cover a variety of different businesses. one of the fangs is amazon. that's a very different business. you would have to distinguish at the company level and the dynamics of the individual members of the fangs probably should come more to the fore. i'm not sure it is desperately healthy people pile into a neck them. they should be looking at the underlying fundamentals of each of the companies. from there, there is still a lot

of positives behind the technology space. we would still be helpful. nejra: bill, i wanted to point outlook,ur very own while the technology sector has been getting all of the headlines, the energy sector is accounting for one third of this year's global earnings growth. i thought it was interesting. ittech, you find interesting. you have to be discerning. if you are not going to pile into the things, what areas are you looking at? be on focus has tended to some of the larger cap names within technology, including some of the fangs, companies like alphabet. we are still looking constructively in terms of the outlook on those. within the rest of the technology sector, you have to look at the valuation. in some of the areas, the

valuation is stretched. broadly speaking, we think technology is well supported. manus: thank you very much. that is the head of investment strategy at wafer 10. we will be continuing the conversation on bloomberg radio at 7:30 a.m. u.k. time. if you are traveling to work, you can't get away from they ran i. , you cannotdio escape. we will get you. this is bloomberg. ♪

nejra: what is tried across the bloomberg uterus -- universe. up acrosslining

canada to buy weed legally for the first time. i can't even go on that story. europe's luxury brands nervous about china. we are all nervous about china. you have the yuan falling. nejra: are most read stories on the bloomberg terminal, third-place, theresa may to consider a longer transition time to break the dekes -- brexit deadlock. top, the global backlash over suspected murder of a saudi journalist has put the kingdom on a campaign to defend its crown prince. manus: plenty for us to be concerned about. plenty of corporate earnings for today. , the teama breakdown is standing by. is looking atrn nestle.

juliette saly is focusing on taiwan semiconductor. anne-marie, let's get you. nestle and novartis. the ceo was talking about that. growth atganic sales 3%. what stands out to you? >> novartis just kicked off. they are really raising their profile in the competitive industry of oncology, buying the u.s. cancer drug maker for $2.1 billion. that was the standout from their earnings. they saw net sales up in the mid-single-digit percent earlier. nestle, they came in really bang in line. estimates revenue matching estimates. they saw improvement in the u.s. and china. they have a personnel change and that may overshadow the results. the head of its asia unit is resigning. departureirst major

since mark snyder became ceo. it is a crucial industry for them because it is a zone that has been profitable. these personnel changes over at nestle good potential overshadow their strong results. ceo joins usis later after 8:00 a.m. london time. juliet, let's get to you. and taiwann sap semiconductor. wrap things up for us. that as at the forecast, the biggest technology company, that is the key take away here. momentumman time -- coming through on their cloud business. this indicates future revenue. it was up 37% in the september quarter at constant currencies. growing slower than

overall cloud revenue. that might disappoint some analysts. tim and see, you saw net income coming in at a base, rising by 8%. if you look at operating profit, a little bit below what some in the market were looking for. our analysts had already flagged this, saying a glitch could have dented their third-quarter sales. $95.2 billion in taiwan dollars. just below estimates. lading's -- ladies, cracking roundup. thank you very much. stay tuned to bloomberg. us ceo of sap will join after half past seven this morning in london. annmarie hordern and juliette saly, thank you very much for breaking down the numbers. nejra: let's talk europe.

theresa may is considering a plan to extend the brexit transition time. the u.k. prime minister wants to keep britain bound to european union rules for 28 months. the italian prime minister is scheduled to meet the eu commissioner in rome. they will discuss the country's budget calls for 2019. joining us now is chris bailey, european strategist at raymond james. heard that this november summit is unlikely to happen, it may be pushed out to december. yet more delays. we are lower again today. beginning to wake up to the fact that this could be worse than what it has been pricing and so far? >> transition is good in my opinion. transition kicks the can down the road.

that sounds horrible. , wee are such huge issues have avoid that cleavage. -- cliff edge. the pound will stick around where we are at the moment. if we which to it -- moved to a new world there is a transitional agreement that allows both sides to move on and start to change their economies, the pound will go up. i don'tet is in that know mode. i like the tone around more transitional time. that is what i have wanted for a long time. we seem to be moving towards that. thumbs up from me. just brexit that infinity? talking about what we are going to do with the border between where i live in the south of ireland. it strikes me as something that ultimately is unpalatable in the british parliament and will lead to a tell risk coming before an

election. >> absolutely. we have to compromise. it is hugely important for the european economy. the eurozone has not been growing fast over the past 10 years or so. the transition gives time for alternative structures in ireland. i'm still thinking the use of technology could be important for the irish border issue. we could work through the nuances of the trade agreement. we have so much trade with that it is going to take time. we need that long transition time. nejra: let's talk about italy. our mliv question of the day is focused on this today. onlythe italy debt crisis

blow up if the country's credit rating is downgraded to junk? >> my answer would be yes. how do you avoid that? that causes new problems. budget negotiations are nothing new. we have seen them for many years among europe. that is where we are at the moment. we are in that debate mode. they are feeling each other out. i think the italians give a bit of ground, they get some concessions from brussels. those are an expansion of central fiscal budget, europe's big problem is a lack of automatic fiscal stabilizers. in a single currency zone, you get those benefits from the center to those areas which are struggling economically. italy fits that bill. that's a quid pro quo. that's why it works out over time. it makes sense for italy. they want to remain in the eurozone.

that's the way we have to go. from the monetary policy side, there seems to be a real driving force to try and get europe on the move to normalization. do you think given that deed for italy might still keep the ecb on track for a slight move towards normalization at the end of next year? is that still the target for you? >> absolutely. the ecb edges up interest rates next year and that's a good thing. they have to avoid being the bank of japan. they have lost credibility. ecb should do that. is that a problem? no. nejra: chris bailey, european atellite -- strategist raymond james. quick reminder of the mliv question.

let us know your thoughts by going to the mliv page on the bloomberg terminal, where you can read all the latest from the team enjoyed the conversation. more markets next. this is bloomberg. ♪

manus: good morning from dubai. live from bloomberg's european headquarters in the city of london. these are today's top stories. short, the u.s. a void labeling china currency manipulator. head deeper into a bear market as the yuan is that a 2017 low. delaying the divorce. theresa may is set to consider a as eu brexit transition leaders in brussels decide not to call the november summit for now. europe's biggest technology company raises its projections

for its cloud business and its operating profit. ♪ nejra: welcome. it is 7:01 a.m. in london. we are under an hour away from the european equity market open. u.s. futures pointing lower after a flat close for the s&p 500 yesterday. in terms of how europe might open, it looks like a little bit of a negative bias. ftse 100 futures dead flat. to be leadingok the losses at this point. we could see a little bit of a weaker opening, which means a second day of losses for european equities. in terms of breaking news, we

are in earnings season. lots of breaking news this hour. unity, third-quarter revenues coming in at 12.5 billion europe's. the estimate was 12.5. that is being in line. we are looking at third-quarter underlying pricing. salesquarter underlying up 3.8%. still sees full-year underlying sales we present to 5%. itss remaining on track for 2020 goals. when we were waiting for these numbers, there were a couple things you are looking at for analysts. it abandoned the effort to consolidate its headquarters in the netherlands. on thelet's check in bond market. you had a quick flash on the

equity markets. if you are looking for a dovish tilt, you would've been mistaken. it was in the addition to the minutes that you got the information. they debated hiking rates into restricted territory. last time, it was around 3%. the market is only pricing in two more rate hikes. is the market behind the fed -- bond futures are little bit lower. bcp's are down. the italian prime minister might want to put himself forward as eu commissioner. italy challenging the european union in regard to their budget. btp's up. boone's down 23. it is the tonality from the fed

minister resetting the agenda in terms of rates from the united states. check, how markets the yuan is playing into markets. the day. -- good day. >> bond markets waking up once again. we still see equities under pressure. china leading the way. large caps down 1.8%. they dodged a bullet being labeled a currency manipulator but the currency is at the lowest levels since january 2017. hats now that they have been spared, they will spend less effort to defend it. the bank of korea leaving rates unchanged. we are down 9/10 of 1%. we did see this income missing

in the third-quarter, the stock down 3%. , their net income was a beat. margins continue to be compressed. we saw the stock down ahead of those results. taiwan semi falling. should stocks rallying from 5% shares today. we heard from president trump say that he plans to retreat from this treaty that gives chinese companies discount shipping rates. thank you so much. let's get bloomberg first word news from the by. -- dubai. >> president trump cautioned against putting the u.s.-saudi relationship at risk over the disappearance of a saudi journalist.

of siemens says he is torn about whether to go to an event in the kingdom. sources, to bloomberg deutsche bank hasn't made up its mind either. several companies including bloomberg have pulled out of the investment initiative event as media partners. hasu.s.-china trade war turned to mail. president trump plans the plot of a treaty that gives chinese companies a discounted shipping rate. u.s. officials said the administration thought to revise the treaty in september and was rebuffed by other nations. department hasry stopped short of declaring china a currency manipulator. adverts ann escalation of the trade war between the two companies. steven mnuchin said his department would watch the currency closely after its recent slide.

bloombergbert told tensions between the two countries are still high. >> i don't think anyone expected china to be named, given the strict criteria in the statute for naming any country. that doesn't mean there is no trade tensions between the u.s. and china. china dodged a bullet with this report. japan's exports unexpectedly fell in september. that came as natural disasters disrupted economic activity. a continued pain in imports was spurred. manus: thank you very much. i will pick it up from here. you are just hearing about the latest about davos in the

desert. minister hasonomy declared he will not be , that is a saudi forum the latest. christine lagarde is canceling her middle east trip. bloomberg, along with another -- a number of other sponsors, are no longer attending. a line for middle east viewers, we are getting banks reporting. saudi arabia coming out with a profit. line for somber. somber. let's talk about one of the drivers of the bank reporting season. interest rates and what the fed does.

officials have stepped deeper into the debate about how to push rates. according to the notes released with the fed's latest minutes, a majority favored a temporary move above the level deemed neutral for the economy in the long run. in the most recent projections, officials median estimate for that rate was 3%. joining us now is the investment director of fixed interest at mnj. great to have you with us. andtight were these minutes this addendum for you? if you were looking for a dovish that, you didn't get it. >> not really. ultimately, not a lot changed saw theen we certainly inclusion of the dollar there. what was encouraging, a lot of aboutas spent on thinking upside and downside risks. that was the bit i was

concentrating on. the growth metrics and the , butgth of domestic demand on the downside you have trade war. nejra: the dollar and the rates market reacted to the absence of a dovish tilt or the fact that they talked about thinking about going to restricted policy, 10 year yields jumping along with the bloomberg dollar index. in your outlook and research that the fed is pretty split. interestingly, you yourself are split and how to actually take risk in rates, credit, or currency. what is your thought? if you run a fully flexible amount, you can go wherever you want. take ratesg paid to risk? is credit the place to be? if you have a fully flexible mandate, maybe that is currency.

at the moment, rates over credit. there are pockets, credit being tight overall. manus: where are those biggest opportunities in credit for you? we have had a number of opinions. the --ying, come out of a higher yield and coming to treasuries. where are the opportunities for you in the credit side? >> it is a relative value trade. you have to look at the curve and where we are. companies, wes offered qe. it was never distorted. you ang and is giving steeper curve. 180ou think you are getting for a company like verizon or at&t on top of your 325 for 30 year, that is giving you quite a nice high percent.

if you compare it to u.s. high-yield, pretty similar. we have seen some movement recently. u.s.s, it is long dated investment grade at the moment. nejra: long dated u.s. investment grade in credit. but on rates you prefer the short end? >> you have more of a buffer. we are in a position where the markets have caught up with the feds dots. there was a dichotomy for quite a long time. aort and stopped selling off while ago. it was back in last summer. our duration risk is at the short and because of that buffer. space isdata credit more appealing to us. manus: dollar libor is at a 10 year high. libor overnight swaps. are you -- can you tell us

anything about dollar tightness in the rates market? >> that's a tough one. it has been a bone of contention for a little while. ultimately, you are looking at your funding rates. whereare instances futures are more appealing. that is switching fairly regularly at the moment. rates, the short rest of the curve is up to the markets to start a price. high-yield being priced off of that libor, that is important to get a handle of. nejra: getting a handle on all of our markets for us in staying with us. bloomberg users can interact with the charts shown using g tv . browse recent charts featured on and save charts for

future reference. this is bloomberg. ♪

manus: it has just gone 7:16 in the city of london. 43 minutes left until the start of your trading day. how are the markets going to react to possibly a longer transition time for brexit? sterling is a little bit weaker. may, this is how the papers are shaping up. theresa may said to be weighing a plan to extend the transition by another year, ending in 2021. daily mail has another year of brexit limbo. brextra time.

the guardian, what if we got? fail to unblock the talks, leaving eu officials irritated and the s&p runs a photo of jean-claude juncker greeting theresa may yesterday. theresa may is considering a plan to extend the brexit transition time. sources say the u.k. prime minister wants to keep britain bound to eu rules for 21 months after accident. the move could break the impasse but skeptics are likely to accuse her of delaying brexit. let's get the latest from brussels. our reporter is there for us. where do we go from here? >> good morning. this should not be a surprise. we did not get that break through the irish border. it wasn't all bad news. there areeaders said

no details but the tone has improved. , there is anes idea that theresa may might consider extending the transition time another year. the u.k. will stay closely linked to the european union until 2022. this shows that she is willing to take radical steps to get a deal. it will make people angry back in the u.k.. you stay in the european union for longer, paying money and having no say. work intion that might europe but might be costly in the u.k. domestic find -- side. nejra: we see where the sticking points are. what does this mean in terms of deadlines for getting the deal? the november deadline seems to have shifted. >> it seems to have shifted again. it hasn't been completely canceled or called off.

european leaders said yesterday that given the content we got on the dinner, there is no point in setting a fixed date for november. we are hearing multiple voices telling us there is no way we could hit november for final deal. it would have to go all the way to christmas. the deadlines have been stretched. we are looking at a deal that could come towards the end of the year, not november. nejra: let's also talk about italy. the prime minister says the eu won't reject his budget. we are hearing different things from both sides. what is the latest? >> that was a big story in brussels. it has not been just about brexit. people are focused on this budget. we have the commissioner who will be visiting italy. he wants to take a close look at the budget. maybe markets are exaggerating on this.

the 2.4 deficit figure has not gone down well. we have to big decisions coming up. we also got comments from the budget commissioner from the european union, he says the simple truth is that if it stands, they breached the fiscal rules. will they reject this budget? it has never been done before. nejra: bloomberg's reporter in brussels. thank you so much. at mmgestment director is still with us. let me start with italy with you. how is this playing out in the wake that you look it european credit? >> european credit as a whole has suffered from the italian and now you have stress and tension.

that's all in the price. there has been summary pricing. there are still opportunities. one of the sectors that has been financials, whether it is because they have debt with turkey, whether they happen to be italian investors, there are good companies there. they are being punished because of the fiscal risk. manus: they are being punished. to what extent do you want to pick up the credit from the bank side? it is about the bank credit. let's have a quick response from the mliv team. they have their question of the day. does the italian debt crisis only blow up if the country's credit rating is downgraded to junk? ofwill take a cacophony rating agencies to go to junk to make an impact on the ecb. would you agree?

how would you answer that question today? to be honest, italy has been trading with some stress anyway. if we like and italy to spain, there was a time when they were similar, now btp's has blown out and spain is trading like the u.k.. it is going to come down to the whether europe and europe decides to support italy. it has been trading slightly below where its credit rating is at the moment anyway. it is in the price. nejra: you've also talked about this flight quality because of italy. what does that mean? >> i'm in short and italy. there are still opportunities there. movement been some into btp's. spain has run its course.

if you look at the price, it is trading more like the u.k.. in terms of balloons, there is no real reason, they are not at target. there is no pressure on bund deals to go anywhere. they are flat lining up the moment. manus: when you see the potential of an extension onto , whatexit transition time does this do to u.k. risk? does a hard brexit rise? >> that's interesting. dichotomyere is a anyway. if you look at gilt, yields have been rising due to the correlation with u.s. treasuries. that suggests growth and stability and a bit of inflation.

we know inflation has been coming down for various reasons. if you look at sterling, it looks like it is pricing in a hard or a no brexit. think back nine months, a tiny bit of news -- manus: you think that 130 prices in hard brexit? >> look where we've come from. the volatility is picking up. pessimismere is more in sterling than the risen the gilt market. there's a dichotomy between the two. we would love to keep you for longer but we have run out of time. thank you so much. let's get the bloomberg business flash. novartis is buying a cancer drug maker for more than $2 billion. the deal raises novartis says profile in the field of

oncology. drugmakers a swiss announced core earnings that beat the highest analyst estimates. sap has rise -- raised its , based on accelerating momentum for its cloud business. subscriptionsoud revenue, up from a previous expectation. new bookings in the unit grew 37% in the third quarter at constant currencies. that is your bloomberg business flash. let's leave our viewers with a quick snapshot of the market. asia dominated by taiwan semiconductor. they have come out with a be on some of their numbers. you are seeing the asian equity the dollar-you want. it's a red rag to a bear.

a bit of softness coming through in wti. pointing lowers along with u.s. futures. bloomberg markets, the european open is next. ♪

♪ >> good morning and welcome to "bloomberg markets: european open." we are live from our european headquarters in london. i'm anna edwards alongside matt miller in berlin. asian stocks sell across the board and u.s. futures are down with most of europe. a drop in the pound may support ftse stocks at the open. european equities start trading in less than 30 minutes time. ♪