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a little bit of upside from the csi 304 yesterday. the shanghai composite in that four year low. the msci asia-pacific being sold off for a second session down by 0.6% headed for its worst three --ks lied to january 26 in january 2016. a little more stability coming through in the chinese currency today after we had that coordinated verbal support from chinese officials. routt's get more on the joining us from hong kong is the bloomberg china markets editor. good to have you with us this morning.

how unusual was this coordinated response by senior regulators to support the chinese market? it looks like it has been affected in the chinese equity market. >> the keyword is verbal support. looking for actual financial support. the threesual to have most senior figures of a crime china's financial regulators to come out within about a 10 minute period this morning as the market was opening. traders initially did not take it that positively. the market fell 1.5%. it has been a brutal month for investors. they did seem to take some heart in what they were saying, not so much what they were offering, but hoping this is going to lead to some actual financial assist -- assistance.

>> you know we have seen this bear market territory continuing to chinese equity markets. what do you think is the mood going forward? are we likely to see a rebound? >> it sets a foul mood. one trader told us the head of the securities regulator on the weekend said, don't worry, spring is coming soon. one trader told us, we are going to freeze to death before that happens. they are concerned about what's happening this month. we have had the stock market fall to four-year lows from where it was in january. the government is reluctant to really throw all its financial resources into the stock market. bubblethat when the burst. what people do think is that the state ultimately will be forced to step in unless we see some kind of sustainable rebound.

what we are hearing is not a very upbeat tell -- tone. >> thank you so much. richard frost in hong kong joining us from their. saying this china stock market is affected by external factors. we know these trade tensions have weighed on the equity market in china for a lot of this year. also saying the china stock market valuation is at a historical low level. toare going to be speaking the moller-maersk ceo. that will be after 11:30 a.m. u.k. time. >> president trump has said it is likely jamal khashoggi is

dead. that comes after steven mnuchin called out of next week's davos in the desert event in riyadh. consequences of the killing would be severe. pres. trump: we are waiting for some investigations and waiting for the results. we will have them very soon and i think we will be making a strong statement. we are waiting for the results. about three different investigations. >> the st. louis fed president opposed a replacement to the taylor rule that concludes there is no reason to raise interest rates further. the new benchmark accounts for faster steps -- the link between unemployment, the aging u.s. population, and inflation expectations. hike withoutcould going beyond the neutral rate. we will benk that

able to follow a gradually increasing path for a period of time without moving into territory. what the practical implications of that are -- restrictive, not restrictive, that is the assumption of the economy. >> the gloves are off in italy's fight with the eu. attacked rome's spending plans as unprecedented and said the budget deficit cannot stay. italy'se given government until monday to explain the deviation from the rule. the eu commissioner said he could not envision europe without italy. >> i personally feel great affection and love for this .eautiful country

i cannot imagine europe can remain without italy. >> the nba's developmental league is raising the salaries available to elite high school basketball players. the g leak announced a new kind of contract that would award players $25,000 for the season, more than triple the current minimum pay for newcomers the leak. the move could challenge the ncaa monopoly on talent. 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. much.nk you so chinanancial officials in has moved to shore up investor confidence in a show of coordinated verbal support. the head of the banking and insurance regulator and the

securities regulator have issued statements voicing support for the market. china's economic growth slowed to 6.5% in the third quarter, more than economists expected. joining us now is the chief currency strategist at bny mellon and the chief economist at berenberg. good to have you with us, as well as juliette. at the top of this hour we have breaking headlines from the vice premier saying the stock market valuations at a historic level and the adjustment presents a good opportunity. how much ofwonder the level of the stock market is now actually for the real economy. >> it is a question of whether or not our liabilities are at risk when the asset side of the economy comes down. in the western world i do not see the signs of excess that would worry me if we had a 15 or 20% --

>> but in china? >> china's potential growth is slowing down, which means it is difficult to capture that in stock market valuations. that has not been an economic correction in a long time. the has been capital buildup, misallocation. -- overfor at least here, a title wave we can see. there will have to be a corrective recession. i think china has enough policy weavers to pump the risk on. we will see lots of significant policy moves over the next few months and by this time next year, -- but in the meantime it will come back around. going to think we are see proper intervention? our reporter was saying what we saw was verbal intervention. it gave support, but it is not the directive we were looking for. i think there will be support in the stock market. there will be support in the

foreign exchange markets. china has made it absolutely clear it's not just trying to provide support in the equity market. it has the steps for concern about trying to keep the yuan -- to the dollar. there have been through this before. whether it is going to be effective is another definition. china got up to spending a hundred billion dollars a month to stop the you want depreciating. it proved to be a futile exercise. the fed came to the rescue which does not seem to be a chance this time around. investorss is give and artificially expensive level .to get out >> all the action seems to be in the chinese equity market. yuan barely budging. our markets just not pricing it

correctly? >> i do not think they are pricing it correctly. if you look at what's happening, what you are seeing is actually a relatively small spread. if you look at where the one-year is trading, that seems surprisingly modest given the amount of risk there is in that system. i get absolutely they want to prevent volatility. ultimately, something has got to give. monetaryve easier conditions you have got to expect the currency to take some of the strain. >> in terms of debt, we heard yesterday when we saw that big drop coming through in the yuan to the lowest levels january 2017, some markets saying the pboc is ok with a weaker currency so long as it is driven by things with -- like a stronger dollar and not internal factors. did you think we are paying too much attention to that line in the sand? >> from a market point of view you find it -- these thresholds

can be significant for sentiment. from the macro economic conditions, what is happening is the currency is falling to a level which matches chinese fundamentals. that is a good buffer mechanism. whenever an economy softens, if the currency goes with it, you see an improvement in the trade balance. these things, if you prevent them from happening, our undoing the correction which would get you to where you would like to be. it does not make much sense to keep at seven if that prevents that recovery. mellon, derrick at bny and the senior economist at berenberg, good to have you with us. let us bring you our mliv question of the day. libor is at its highest rate, signs of funding stress across

the globe. what will surging libor due to markets? let us know your thoughts on the bloomberg terminal, where you can read the latest from the team and join the conversation. ♪

>> there are a few considerable issues in relation to the northern ireland backstop. i'm committed to working with eu leaders to resolve these as quickly as possible. there is a lot of hard work ahead. there will be more difficult moments as we enter the final stage in the talks. i am convinced we will secure a good deal in the interest of the u.k. and the european union. >> leaders express a full trust in michel barnier and ask our membership to continue to

achieve an agreement. convene they to european council on brexit if negotiator reports signs of progress have been made. >> time is of the essence. we do not have the solution on all fronts. we still have to deal with the ireland situation. there is no answer to this. it cannot be completely ofarated from the question what our relationship is going to look like in the future. >> this prolongation of the not theon period is best idea we had. but i think this is giving us the futureo prepare relation in the best way possible. some of the eu leaders speaking in brussels after talks fell short of the breakthrough that it was touted to be.

we've still got simon derrick, -- i strategist at cmy wanted to ask you, because you were saying the markets are less stressed than they were in the summer. theresa may saying there is still some difficult days ahead. how difficult are those days going to be up until march 2019? >> very difficult. yes, yourket less -- can see that in several ways. it is clear there has been a pullback in sterling. in terms of broader strategy, look where the market is now and in 2016. are there difficult days ahead? yes, simple as that. we have yet to get to anything that looks like a deal we can bring before parliament they can vote on. date not have any clear

when things are going to happen other than march 29. the problem is, and maybe the reason why the market is in the state it is in is there are so many potential outcomes. if we have no deal being brought back, does that mean parliament says no? we're going to send you back to negotiate? do we have a second referendum? i think there is a huge amount of uncertainty. is a big question over whether investors are fully pricing in some of the worst case scenarios at this point. to the point that simon was just making, berenberg, you think a deal is more likely than not. i deal with the eu is the easiest bit, right? >> exactly. is feeding into the negotiating process. negotiators do not need more time. what needs to happen is a political decision needs to take place in the u k. the problem is for theresa may. what can she get through

parliament that keeps her in power? there are several options. she can go for hard brexit, a canada style deal. if she wanted to she could extend the transition. there are choices there. it is this balancing act. my guess would be the pressure would build up so much that eventually she will get the nod from the extreme positions on both sides of her government. the jeremy corbyn risk is bigger than having a second-best brexit that will get them through negotiations, but you need a lot of pressure for that to happen. i think a 20% chance of a hard brexit, but an 80% chance of something going through. u.k. assets in particular seem to be pricing in more downside risk than upside. >> breaking news. earnings -- volvo earnings. adjusted operating profit coming in as a comfortable be of the

estimate. third-quarter net sales meanwhile, $92.3 billion. the estimate was $92.98 billion. a touch of a missed their. -- miss there. although saying there is more to improve profitability and cash flow. volvo saying there is more to be done to improve profitability and cash flow. that is some of the comments coming through. we are still seeing the full-year north american truck market at 300,000 units. some comments coming through on north america. overall, a profit beat. net sales a very slight miss. later in the day we are going to be speaking to the volvo ceo. >> let's get back to the markets. a down day when it comes to the

msci asia-pacific. we have seen a rebound in the equities following that intervention from officials in china. overall the market is lower. dollar-yen up 0.2%. the dollar index overall near its highest level since mid-2017. 1%.csi 300, now up by you get thaternoon speculation of the national team by jumping in. a big pop coming through toward the close in china. >> it looks like we are going to have a higher open in the u.s.. we did see quite severe losses yesterday. the s&p 500 down more than 1%. volatility seems to be the key word here. >> let's get the bloomberg business flash. here is debra mao. aig expects to report third-quarter catastrophe losses and $1.7 billion.

for natural disasters including hurricane florence. for losses tied to hurricane michael r 300 to $500 million. there's a to be included in fourth quarter results. the company at the center of a bloomberg businessweek report about chinese hacking has told u.s. senators it has seen no evidence of tampering. supermicro says no u.s. agency has found any attacked hardware. bloomberg businessweek described how china's intelligence services using subcontractors to plant malicious chips in the companies server motherboards. paypal reported earnings that beat analyst estimates. $.58ted eps came in at compared to forecasts of $.54. revenue rose 14%. paypal said it is making progress toward monetizing then mow, the popular mobile payment service.

new york state officials are considering blocking parts of the $68 billion merger of cvs health and aetna. the companies won approval from the justice department, but the deal needs to pass through state regulatory bodies. obstruction from u.s. officials -- new york officials could jeopardize insurance premiums for aetna. that is your bloomberg business flash. >> thank you. the gloves are off in italy's fight with the eu. european leaders attacked rome spending plan and said the budget deficit cannot stay at 2.4%. spreadyear btp bund reached its highs level since 2013. simon there, chief currency strategist at bny mellon and the senior economist at berenberg still with us.

you say rising rates here are not a great threat to growth in the european area. why do you say that? union, thepean --ozone more broadly, is there are solid employment gains, rising interest rates match the improved growth momentum. the thing that worries me about the eurozone is not rising rates, but a hit from confidence. 2017 was a good year for the eurozone. 2018 is different not because of the economic fundamentals, but because confidence has been knocked out of economic participants. that is linked to trade wars. important thing because of the context. on its own, italy would not be a problem. it has a current account surplus. it is because it is within the eurozone. >> i know simon derrick has thoughts. but we have run out of time. chief currency strategist at bny mellon and senior economist at

berenberg stay with us. coming up we will talk more about the italy and the eu program -- problem. later we will talk to the danish prime minister. ♪

>> still with us, simon derrick, chief currency strategist at bny mellon and senior economist at berenberg. cellini says we will go forward. he also has excellent ties with cabinet ministers. the standoff continues between the eu and italy. have been talking in your research about the correlation between the euro and spread.bund what does that mean for potential downside in the euro if the correlation is as strong as you say? >> i think we are going to see

more euro weakness in the next six weeks or so. it feels very much like political theater we have seen before in europe from 1992 onward. this is hardly fresh territory. do i think we're going to see a further widening of the spread, yes. we were there at this time in 2011. ultimately this will be resolved? despite what mr. draghi had to say over the weekend, i think ultimately there is a -- which is sufficient in the market the ecb would like to be rescued. i do not think it is 350 basis points. >> 400, is that what you would force the as well? what does that mean for the loop between the banks and sovereign debt?

>> 400 is entirely possible so long as italy continues with this nonsense. the key point is italy is a problem in the eurozone and it poses systemic risks for the rest of the eurozone. if an economy the size of italy with its current account balance went ahead with its fiscal plan, markets would not care. it is simply that there are rules you have to stick to. if you break them, it means the german taxpayer may foot the bill. the institutions within europe will trust the bond markets will keep the italian government in check and they will signal that if there is a problem, they will help out any other country that is willing to stick to the rules and hope that gets them along. my guess is it will be the next crisis one italy asks, do we stay inside the euro? >> we have some breaking news. >> it's always 5:00 somewhere.

breaking numbers out of remy cointreau. confirming their guidance for 2018 to 2019. second quarter organic sales growth, 9.1%. that beat estimates. sales coming in at 331.8 million euros. above estimates for 327 million euros. saying they would need consumer habits to reach their target. really trying to get in on that lucrative high-end market. cointreaurating, remy , first half revenue, 571.4 million euros. let's check on the markets with annmarie hordern. >> we have a global rout coming into asia this morning. benchmarks sliding as the dow shed more than 300 points.

msci asia-pacific indexes lower this morning. seeing some softness there. we have consumer discretionary stocks leading the way down. china is reducing -- reversing their trend from this morning on the csi. this after they received verbal intervention from the nation's top financial regulator to keep risk under control. we just heard from matteo salvini talking to an italian newspaper saying the government will continue as planned and there is no government crisis. we have to look at what's going on with italian and german yield spreads. we have not seen these levels since 2013. a note from intellect this morning, something we need to be focused on when the market opens, saying watch carefully these technical levels. they are looking quite vulnerable. theou see here, those are 10-year spread between italian and german bunds. you can see the stabilization

when you look at the spanish tenure as well. in the commodity market, looking at oil. this is interesting. this is the spread between the first and second u.s. month. it flipped into negative territory, the first -- something we have not seen since may. this signals weakness in the market. we had u.s. fresh data out on stockpiles and we know they are searching. rising more than 22 million barrels over the past four weeks of production. this seems to be overshadowing the fact we have geopolitical risks in the market, whether you are looking at saudi arabia and u.s. relations given the disappearance of jamal khashoggi , and iranian sanctions. we have weakness in the market given these u.s. stockpiles. >> let's get the bloomberg first word news. debra mao has that. >> china's economic growth slowed more than expected in the third quarter.

by 6.5% from a year earlier compared to 6.6% in a survey. weak industrial output data and what the government calls a severe international situation challenged efforts to stabilize the economy and reach its growth targets. national bureau of statistics gave an upbeat assessment of the country's economy. >> china's economy has a strong level of resilience and fundamentals. this is a certainty. we will continue to deepen reforms and open up. the dividends will continue to pay off. all regions and departments in china will continue to enforce policies to ensure stability. despite the downward pressure from uncertainties, we continue to have the domestic certainties to offset that and ensure the steady performance of our economy. datesan's key inflation in september bring the bank of japan halfway towards its price target. gains were largely limited to energy.

the deceleration backs up governor kuroda's decision. global news 24 hours a day on twitter powered by more than 2700 journalists and analysts in more than 120 countries. >> thank you. president donald trump said it certainly looks like a missing saudi journalist's debt. the u.s. president -- journalist is dead. u.s. president warned of severe consequences. >> we are waiting for the results of investigations. we will have them very soon. i think we will be making a very strong statement. but we are waiting for the results of about three different investigations. >> that is after u.s. treasury secretary steven mnuchin canceled his trip to the so-called davos in the desert conference.

several companies have pulled out of the event as media partners including bloomberg. bloomberg's asia government managing editor joins us from hong kong. great to have you with us. why is president trump reacting this way only two weeks after the disappearance? >> his tone is changing on this issue. he started out by saying, we really don't know what happened. saudi arabia is denying it. even compared to brett kavanaugh saying we should not rush to a judgment here, now the tone is very different. you have steven mnuchin pull out of this investment conference. it is a big change in tone. to comefor the saudi's up with an investigation, they want to know what happened, who did it, and what the consequences are going to be. this big event coming through on tuesday in saudi arabia.

we now have steven mnuchin's withdrawal. what sort of affect is this change of heart? is -- you know, steve mnuchin's announcement came after the briefing from mike pompeo. it signals that they don't want to be on the wrong side of this. they want to send the saudi's a certain message. whether that will lead to any cancellation of arms sales, there is a $110 billion deal, trump does not want to do that. a choice.ot have if congress is not backing him, he could find himself in a similar situation to rush over congress passed a bunch of sanctions he could not veto. bloomberg's editor in hong kong. thank you. james bullard believes no need

for further increases amid inflation expectations. but governor randall korell took a more hawkish view. >> i think we will follow a gradually increasing path without moving in restricted territory. what the practical implications of that are, are we restrictive, are we not restrictive, that is a function of one's optimism. >> that comes a week after president trump weight in criticizing the fed for going wild over rate increases. we still have the chief currency strategist at bny mellon and the senior economist at berenberg with us. simon, trump really called the fed local. certainly weighing in their. janet yellen was not impressed. do you agree with those commentaries we just heard? might we see more gradual

tightening? >> i would go in gradual tightening. we are a long way. we have thrown some fuel on the fire with the tax breaks at the start of the year. i think what we have seen with regards to the yield curve showed an awful lot about people's expectations. also remember, the u.s. economy has benefited from the fact that everywhere else has somebody problems this year.. he was markets have been that safe haven. can see actually next year being the point where we start to see that slow down start to catch people's attention and the fed will take a more cautious approach. on the back of that, i think the dollar starts weaker. >> you wonder what yields do, too. wild we were worried about flattening u.s. yield curve.

now we worry whether rates are going to cause a threat to growth. which of those is more of a risk ? or is neither as big of a risk? >> i don't think either is a risk. -- orther worry about the you worry about long-term rates rising. the key point is the u.s. is now nine years into an economic upswing. it is above trend because of the fiscal stimulus. not all excesses show up and prices. it makes sense for the federal reserve to raise nominal boring costs to match the strength of the u.s. upswing. that will have the effect of lengthening the economic expansion and preventing dangerous cyclical dynamics building up to such an extent that we start to worry about the correction. >> what is the biggest risk? is it still the u.s.-china trade for? you are saying there is little sign we're going to see the u.s. back down. do you think they back down after the election? >> that is what everyone is thinking.

maybe we get beyond that and it was simple he politics. but what if it is not about the elections? what if this is a story that's going to continue the next two years? this plays well in the heartland for the united states. why would you back off? i think the trade war story continues in the background. the risk is that starts to feed out into global growth. the slowdown in china not just about trade war, but if china is , that goes into south korea, hong kong, and onwards. if you look at what markets are worried about most, if you look came, it was off the asian session. saudi is the thing that can feed through to broader markets. your research you talk

about the fact that despite the rise, bond yields remain low. for consumers it is still about perception, right? if you have never known beehive on fields of the early 90's, whatever happens from here is going to seem high. the reason i bring this up is because there is a great call on the bloomberg, we have a chart to show it. the potential for rising rates to inflict damage on how finances has grown in the era of extraordinary easy monetary policy. she says a sustained level of higher rates is the second nail in the coffin for housing followed by an upward turn in the unemployment rate and recession. discuss. >> there is always a correction eventually. usually it's the fed that brings it on. but the nominal or real interest rate environment does not tell you where the monetary policy and credit conditions are. what matters is the difference between real rates and equilibrium race. i think equilibrium rates because of the growth are

growing faster than market real rates. the key risk for the u.s. economy is not rising rates, but the falling confidence. at this stage in the cycle, the thing that drives growth above or below trend is simply confidence. if confidence is high, the economy will do well. in europe we have seen the product of week confidence play out in economic data this year. in the u.s. we are seeing the opposite. economy, the confidence affects can do well. if this market downturn played out in terms of the confidence data, that would be a risk to growth. is confidence remains high the fed should hike. >> let's bring back to the markets. you have talked about the correlation between real-life volatility and dollar-yen and s&p 500. >> if you look over the course of the last 20 years, every time you have seen a high correlation between volatility in the s&p 500 and dollar-yen, typically

that is when you have been at market extremes both ways. >> lovely to me about. -- to meet you both. come to singapore anytime you like. with us here on daybreak europe. coming up we are going to recap the stocks to watch. later in the day we are going to be speaking to the moller-maersk ceo. this is bloomberg. ♪

>> let's check in was trending across the bloomberg universe. on tictoc, say goodbye to one dollar yoga pants. pulld trump's decision to out of an international treaty threatens to hit discounts for american choppers. -- shoppers.

are callingakers for a total ban on petrol and diesel cars by 2032 in a shift toward zero emission vehicles. our most read stories on the bloomberg terminal, in third, china's economic growth slowed more than expected. second place, pressure is mounting on italy as the eu commission issues a warning on its budget. donald trump warns of severe consequences for the suspected killing of saudi journalist jamal khashoggi. >> let's get a roundup of your stocks to watch today. kris bryant has the latest on swedish carmaker volvo. in reporter and is looking at remy cointreau. good morning. -- volvo is under pressure with concerns about emissions. the component that handles emissions is perhaps

malfunctioning. that would require recalls. the truck maker issued earnings. those are extremely strong. very strong demand across its key markets in europe and the u.s.. high profitability, good cash flow. there were not many new details about the emissions problems. we do not know how many trucks will need to be recalled, what that will cost. we can say volvo is in a good position to deal with these. there were concerns the truck cycle was coming to an end. volvo did not give any impression that was the case. they think the u.s. market might expand next year. a very good position for dealing with whatever problems volvo might face. >> it is friday, almost drink's time. what do you have on remy cointreau? >> investors want to see demand continuing in china. greater china helped fuel that

growth. in theation in revenue second quarter, sales rose 9.1%. that beat analyst estimates. the companies hire and strategy is working. they are shifting from cheaper brands to focus on luxury products. bottles that cost upwards of 50 u.s. dollars. less so than the ones that used to cost 15 u.s. dollars. still strong demand from china. >> annmarie hordern and kris bryant, great work. go off and have some drinks. later in the day we will speak after 9:00 a.m. ceo after 9:00 a.m. u.k. time. >> third quarter catastrophe losses of twin 1.5 and $1.7

billion from natural disasters including hurricane for its -- hurricane florence. estimates for losses tied hurricane michael r 300 to 500 miles per hour. to $500 million. paypal reported earnings that beat analyst estimates. of 54ersus estimates cents. paypal said it is making progress toward monetizing venmo . new york state officials are considering blocking parts of a $56 billion merger of cvs health and at not. -- and aetna. the deal needs to pass through state regulatory bodies. an obstruction from new york officials could jeopardize insurance premiums. >> debra mao in hong kong. thank you.

last week's market retreat caught investors off guard. watchful eyes are on earnings to provide signals about the direction of stocks. a week into reporting season, how are things looking? what to expect when results ramp-up? how are analysts and investors really feeling about the start of this earnings season in europe? >> the expectations were so low that analysts in investors have been surprised. delivered very good sales that beat estimates. the -- havee been been delivering a boost to stocks battered by the global market selloff we saw last week. rex speaking of specific sectors, you prepared charts. let's go to this one, all eyes on oil. the correlation between oil stocks and brent, at a two-year high. how has this been reflected in earnings?

brent is up 19% year to date. >> we have not seen the oil report yet. that is a really big sector that analysts are looking at. the oil sector is supposed to lead the earnings growth. for example, yesterday morgan stanley said they are expecting european oil earnings to be up 45% year on year. a huge number. so much higher than other european sectors. a switch backt of into valuations. analysts are saying banks could do well. what are we expecting? >> with banks we see a nice start to reporting in the u.s.. that could bode well for european banks. the situation in europe is different. the ecb is very reluctant to hike rates. we might see a rate hike next year. with of financials, it could be more of a mixed picture.

analysts have been raising their outlook for european financial earnings. >> when you talk to investors, they are always like, earnings, all about the earnings. how vulnerable are european stocks to what is happening in the u.s.? >> very vulnerable. if we see a major selloff like we did last week, the entire globe start selling off, including european equities. european stocks have been vulnerable because they have seen about 45 billion outflows year to date. it is the reason from which investors have been fleeing because of political concerns, economic concerns, trade. >> from our stocks team, thanks so much for joining us here on set. let's remind you of our mliv question of the day. with signs of funding stress breaking out across the globe, what will surging libor due to markets? let us know your thoughts by heading to the mliv page on the bloomberg terminal.

much more markets next. globally as well as in europe. investment grade credit. ♪

>> good morning. live from bloomberg's european headquarters. nejra: these are the top stories. urge calm.officials warning italy's budget will not fly. and severe consequences. president trump says missing journalist jamal khashoggi is likely dead. this after steve mnuchin withdrew from a investment conference in riyadh.

we are looking at european futures markets, suggesting an upside. you have the ftse 100 up. they looks like european markets might continue to outperform what we have seen across global markets. asia not having a great day. you have started to see a chinesend on mainland markets. perhaps that positive momentum is going to flow through. futurese have seen u.s. edge higher as well. full it till it he is the keyword of the day. let's take a look at what the bond -- volatility is the

keyword of the day. the bond spread, whiting out, 326 asus points. firmly above 300. it looks judging by the futures, we could continue to see some whitening. closed at 3.69%. we will keep a close eye on that. treasuries not doing a huge amount to read below the 3.2%. that interconnection between equity and bond markets. let's check in on the markets with yvonne mann. good day. yvonne: lows in the session. lifting the rest of the region up. take a look at what we are seeing for chinese stocks. picking up some steam under that rare show of fertile support

show ofulators -- support from regulators. a direct intervention, market analysts saying it may not be enough to turn around the sentiment. csi, of more than 2%. -- up more than 2%. losses.ei a racing its -- a racing its losses. erasing its losses. the fear gauge indicators saying investors the most scared about indian stock since the global financial crisis. a bit of a relief rally, up to 3%. luxury stocks dealing with a double blow after aussie on a --

asiana airlines will stop -- luxuryaggage stocks falling 3%. after an activist investor published a list of 26 stocks to an void. -- to avoid. that stock plunging. back to you. juliette: thank you so much. let's get back to european earnings. intercontinental hotels. basically what we have seen, third quarter year to date up 2.7%. intercontinental confident in the outlook for the remainder of the year, also talking about a $500 million special dividend.

a stock you will want to watch at the open, just under an hour time, european equities cash trading. juliette: let's get more on the asian selloff. down, but nowwere seeing a 2.7% jump in the csi 300. is this on the back of the verbal intervention we had? >> very much so. it has been a very the little session -- volatile session. we have seen this for the past week and a half or so. between gains and losses. certainly at the open, it was a sea of red. the chinese markets opened down 1% within minutes. now we have got significant gains.

as we have been talking about all morning, the slew of chinese regulators came out and pledged they were going to addresses some of these risks tied to stock holdings had been used as collateral for loans. a complex concept. somewhat unique to the chinese market. a representation of the leverage hanging over the chinese market. spooking investors when companies get in trouble. thee are seeing asia-pacific index, unchanged after losses. put this in a global context. we are seeing u.s. and european higher.utures pointing what is going to be driving sentiment for the rest of the trading session through to the u.s.?

a positive session. economicad some weaker data. seniormost chinese economic officials giving reassurances. say,asual observer might looks like china is fine. i don't think you have anything changed with regard to the fundamentals. u.s. benchmark yields, the highest in seven years. it is not a surprise some of the risk assets have been under pressure in recent days. i don't to change. today,looks like for

people are us waged the train is not coming off the rails. that looks like it is going full steam ahead. looks like the national team might be jumping in. joining us from tokyo. let's remind you of the question of the day. will -- due to markets? you can join the conversation on the bloomberg page. let's get the first word news with debra mao. president trump has said it is likely missing journalist juliette: is -- jamal khashoggi is dead.

trump warned the consequences of the killian would be severe. president trump: we will are waiting for investigations and for the results. we will have them soon. we will be making a statement, a strong statement, but we are waiting for the results of three different investigations. italy'sloves are off in fighting with it eu. deficit cannott stay at 2.4%. they have given italy's government until monday to explain the deviation. growth slowedic more than expected. increased 6.5% from the year before. the severeer international situation challenged efforts to grow the

economy. there was an upbeat assessment of the prospects. >> china's economy has a strong level of resilience and fundamentals. we will continue to deepen reforms. to dividends will continue pay off. all regions will continue to ensure stability. we continue to have the certainty to offset that. key inflation gauge edged up in september. gains were still largely limited to energy. it accept governor kuroda -- backs of governor kuroda's guarantee. says there is a

new contract that would award -- would pay young players more than before. it could challenge the ncaa's lock on development. chinese stocks are headed for their steepest gain in a month. that is after the price per topr reported other officials moving to shore up investor confidence. in a rare show of support, the heads of the central bank, banking and insurance regulator, issuedurities regulator statements. joining us today is the head of investment grade credit europe. happy friday. great to have you with us. what a busy they in the markets.

volatility is the name of the game. we are seeing u.s. and european futures pointing higher. what is your take on what is going to drive equity markets? >> we are in for more than a doozy. we are approaching the pale end of the cycle. be it in the u.s.. notthoughts are in europe, quite as close to the end of the cycle as maybe we are in the u.s.. expecting volatility. background as well, you have what the fed is doing. hiking rates. our thoughts are, particularly in the u.s., you have had this big stimulus. the impact should tail off a little bit. you have essentially got a

little bit of wage pressure. it will be interesting to see what that does to margins. you look at the tax implications, that is paying for some of the pain. do you think president trump will continue to be hard against china? >> i think he probably will. it will be interesting to see what he does. tariffs, the next step would be to rise that. that is something he would be considering at the beginning of next year. he has got wiggle room to be tough on china and that is his focus. his focus compared to mexico and canada. and the truce with that you. -- the eu. wasou have some saying it

down to trade concerns. you saw the 10 year yield jump. we are fairly steady when it comes to the 10 year yield. the selloff has caused. is this an entry point? and if so, where along the curve? risk depends on your appetite and your ability to withstand volatility. you are going to get strong rhetoric from the eu. you have also got the rating agencies beginning to express their views. expect the volatility to continue. at these levels, it is starting to get interesting. head of investment grade credit at wells fargo

stays with us. bloomberg users can't interact -- can interact with the charts .the tv -- btv investmentk about grade credit, lots more to discuss. and later, we will speak to a ceo. don't miss that exclusive interview. ♪

7:18 a.m. in london. just over 40 minutes from the european equity market open. m&a, getting a revised offer of 215. pence. it was a consortium bidding.

this is a statement from into intu properties talking about this offer. there. update we will keep an eye on that stock at the let's get to the broader markets. a little bit of momentum. in terms of asian equity markets, we can see the index paring earlier losses. that is thanks to the big rally. as we heard5% jump that verbal intervention. buying inon to see chinese markets. positiveointing to a on theter the -- gain

s&p 500 after the loss. we could see a rebound. meanwhile, bcp yields steadying to the 13 basis points yesterday. through that. you have to consider the dollar in that trade. the bloomberg dollar index steady. it is trading near mid-2017 highs. let's get back to italy, the latest from the situation. kevin costelloe with us. good to see you. tell us what the next step is we are stillven seeing the showdown between italy and the eu. commission says there are big deviations in the italian budget. they would like an answer of some sort by monday. this came in a letter to the italian government. you could see in the letter it was diplomatic. it was very firm.

there is still the standoff between italy and the eu. you think either side is going to back down? nejra: the eu -- made it clear they will not accept with the italians have presented every the italian side -- presented. the italian side has made it clear they will not act down. -- back down. is looking at that yield spread. that is going to have an impact down the road. nejra: thank you so much. kevin costelloe in rome. after a mixed bag of earnings, what can we expect from european banks when they report wednesday? we get numbers. thursday, we see ubs and

lloyd's. fargo asset wells management is still with us. i wanted to ask you on italy. you like the inking sector. which areas specifically in investment grade? have had an interesting year in investment grade. it has been a tough year, given where yields started. we are still in the context in europe where yields are low. yearalked about the ten bund. as the have widened markets have had to deal with italy and the tapering. that has impacted triple b credits quite a bit. we see more what in -- widening.

a couple of reasons we still like financials. it is one of the sectors that is improving in terms of fundamentals. stable. it is one of the areas where the ecb has not been buying so much. nejra: sorry to jump in. of bond fundsent are trading. >> it has been a tough year. traded one month in a particular direction, it has a tendency to reverse. liquidityaccount is tricky. we are working on at the moment, stockpicking. that is going to be key in years to come. as we get more of a tightening environment driven by at the moment the u.s. juliette: if we get back to

italy, it is likely to prompt a raft of downgrades. how manageable are these going to be in terms of selling? >> we have a review of italian debt over the next couple of weeks by s&p and moody's. we are expecting a downgrade. debt to stay in investment grade. that is the important bit. moment,think at this the rating agencies are ready to go any further. yes, you will be on the lower rung. for at least one rating agency, bbb-. it doesn't mean italy is going to drop out. i know you cover investment grade, but are there better opportunities in investment grade or high-yield? the sub investment

grade space, particularly loans. you have a floating rate asset class. much in thehad as u.s. market. in the area to look at. investors are looking at at the moment. juliette: you are talking about brexit. don't forget the irish in terms of the hard brexit. sticking point at the moment in terms of the brexit negotiations. what happens to that border. they want it to be as open as can be. opportunitieshe for the u k to stay may be bit closer to the eu. these are interesting negotiations. nejra: we are seeing lots of

headlines coming through. netflix, just one example. something like five deals pulled in the last few weeks. u.s. a more opportune market at the moment when it comes to credit? >> you have had volatility in the market. even if you look at u.s. issuance, it has called down -- calmed down. is an interesting one. they had results and they were better than expected. it is not your traditional high-yield company r. burning cash like tech stocks do and funding itself. going to have to leave it there. great conversation, thank you so much. let's remind you of the question

of the day. libel due toging markets? let us know your thoughts. the european market open is next. this is bloomberg. ♪

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"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. welcome to bloomberg markets, the european open. alongside mattds miller. >> it looked like a global stock happen.uld again chinese stocks rally hard. can european equities also declines?hird day of trading starts in 13 minutes.