♪ nejra: good morning. i am nejra. manus: this is "bloomberg daybreak: europe" and these are today's top stories. , the mostna rallies in two years. sure of the private sector and futures reversed earlier losses. the relation. steven mnuchin, the importance of saudi relations even as a chorus of leaders press the key them -- the kingdom. outlook is stable. italian bonds may get a boost. budget response will be sent

to the eu this morning. ♪ manus: the budget airlines, ryan delivers the first half drop in profit in five years, sticking to the diamonds they took us to a couple of weeks ago billion. it shocked the market and they talk to buy the impact of strikes and the impacts of fuel charges on their business. the numbers, net margin it dives. they have been cutting prices to get people on board. sales are up 8%. the shares are dropping.

of course, michael o'leary can put of those strike at ryan air in context later. what does michael have to say about his relationship with the union? his relationship in terms of negotiating. how do you get the customers back on the plane and confident they will fly? o'leary will deliver the answers. nejra, a little bit of breaking news. we have a deal in making. good morning. bloomberg was reported earlier and is combing through that fee chryslerat is -- fi is to merge. they agreed it to sell the high end car parts. the number bloomberg put on it was 4.2 billion euros.

fiat chrysler to sell to mare lli. lead the new company. marelli will keep the headquarters in italy. the merge is committed to a taliban operations and this merger would create -- is committed to keeping the operations and is merger would create 60,000 workers from tokyo to milan. truly global. couldt consider rewarding shareholders with fiat it and could give is earning seasons. i will talk about phillips. third quarter at adjusted. the company compiled estimate

with 580 4 million euros, a bit of a miss. the third quarter is down and up 13.2%. let us look at revenue. revenue at 4.3% and that's a on 4.3 6 billion euros. sales from the third quarter's is up. on 5.4%.ain phillips is reiterating the 2020 target. later, we will speak to phillips ceo and that's after 6:30 a.m. u.k. time. a lot going on in the market. manus: let us take you to a quick perspective and i put brent in in here. and saudi production arabia. let me give you the numbers. it will boost profit to buy 11 billion american -- barrels a

day according to news agencies. this is a direct response to any construction in the market from iran falling out of the market. to boost output to 11 million barrels a day very, very soon. he goes on to talk about the new opec packed. tos is what the market wants know. will it are the an extension of the agreed cuts? we are trying to get opec and none opec to increase overachieving and to produce more russia and saudi arabia with supply when i ran drops out -- he run drops out. -- iran drops up. plans new deals. a huge deal for the saudi

arabian at the moment. the yuan, the question is this -- the national team is buying stocks and we understand. the huge tax relief for the individuals. does it mean they are not weaponizing the yuan? the 10 year bonds are going down and a rollcall. what will it to do in terms of talking about restrictive policy in the bond market? never been absolutely. absolutely. chinese font you want to look at. 4.8% and the shanghai index up years. most in two you mentioned the national key is part of that but it seems to s&peeding in the global the is the lowest on average on friday. we saw you as futures drop

earlier -- u.s. futures drop. a little firmer. a story of flat, but what we have seen with the italian yields. the bnp yield dropping 20 basis on friday. will we continue to see a rally after moody's left it unstable? could we see downside from the ecb this week? a broader check and asia. yvonne has more for us. >> good morning. the euphoria we see is lifting the rest of the region. the party is centered here. we get the u.s. futures that erase their losses. sydney, we are seeing pressure for stocks on the asx, down 0.5%. it has been the price action after we heard from top dogs over the weekend talking about

how to calm the markets and reduce risk. look at the price action on china. the large cap up more than 4.5%. a shares, only a few stocks are falling. basically flashing a buy signal. what really changed, president xi jinping talking about this unwavering support for the private sector and talks of an income tax cut. it is flying here this morning because we were expecting something like this but not as broad-based. might get a tax reduction on your mortgage, rent, health care and even child's tuition, like some of these education stocks. one is flight 11%. and brokerages doing the very good after concerns seem to be

tapered off a little bit today. how sustainable is this really is? another guest we talked about see we did not see beijing deliver on concrete policy measures. citigroup is focusing on terms of the infrastructure coming through beautifully. the very latest on the asian markets. let us get you first word news. good day. >> good day. progress on brexit in the parliament. , after organizers estimated 700,000 people attended a weekend demonstration demanding a set the vote on any final don't. -- demanding a second vote on any final exit.

>> we closed the resolution of almost all issues. the main issue is the bridge between the future relationship. if you listen to the music that came out of brussels, there is good on all sides. we need to see it through. >> angela merkel has joined a chorus of leaders asking saudi wasia to see how khashoggi killed. she said she would suspend exports to the country. saudi arabian prime minister said the killing was carried out by a rogue operation and those responsible will be punished. a new poll in italy shows 59% of respondents support the popular party's controversial budget. it was caught on friday.

-- it was cut on friday. brussels says the budget breaches eu rules. in a move to boost the chance of majority,ngressional president trump has from a new .iddle income however, republican party leaders were caught offguard by the surprise comments. treasuries secretary mnuchin unable to offer further details when asked about it. global news 20 grams a day on 24 hours a day on air. this is bloomberg. you so much. chinese stocks have rallied the most since mid-2016 extending friday's games. quote -- gains. -- over the weekend, president committed tos

unwavering support. larry kudlow accused china of refusal to engage on trade issues. is a strategist at jpmorgan. david, great to have you with us. the second day we have seen a rally. we have more support today, is it enough to get foreign investors on one of the worst-performing equity markets this year? david: i think so because of the major valuation and energy you where rick, some of the indices were almost 15 times and now they are down 11 after the big rally. very encouraging signs of stimulus from all the different parts of the landscape. infrastructure and xi jinping at the central bank and

the stock exchange and everybody is on the board to slow down worsening from here. we like the competition. bit oflittle old-fashioned china with the infrastructure spending. now, talking about cutting income taxes and trying to line a short-term stability or demand with longform -- long-term transformation goals to move toward consumption retail sales. it is a new china. morning and welcome back. i am glad we encouraged you to get of this early again. 5%. the policy back to mix you do i then interpret this is china's way of saying, stop getting fixated on dollar-yuan and we have a multitude of letters? you have to stop getting upset about the line of singing of the

yuan? david stubbs: i think a little bit. i do not think china wants to be seen as using the currency as a clear and present weapon against the rest of the world and they would love to be seen as an international community and utilizing the kind of stimulus measures. manu it will be harder to stop people focusing on the exchange rates, especially if they push it through any it will be major news globally. that is why they are reluctant to go to it. nejra: what does it mean for markets? we saw you as futures in negative territory earlier and now they are in positive territory. and your global allocation advice to your clients, how much does what china does here in the equity market uptake how you position in the u.s. and europe? david stubbs: it is always important.

spend it in order that amount of time to see what is going on in the u.s. and china. you have to think about this. we have seen parts of the u.s. market that can rally independently of what is going on in the world. ..s. health care is a sector and lots of the technology sector is not overly exposed on that part. understands,one but what china doing ok, it is hard. manus: they have that ability. david, stay with us. chief client investment strategist. from china to saudi arabia, they say the journals and credit -- journalists and critics khashoggi was murdered and blame a rogue group on it.

that --on told foxnews it was not behind the killing. madeviously, a mistake was and compounded that it was tried to be covered up and that is unfortunate. i unfortunately happened that want to make sure those responsible are punished. manus: that was at the latest from saudi arabia. reporter and our listening to those lines "these things happen," and "they have assessences," how do you the escalation risk right now? >> very likely it will be ofalated because of members

congress from lindsey graham tell bob corker are taking a hard-line and saying count -- saudi is not credible. lindsey graham said he does not personally believe that the crown princes behind it and he cannot do anything about it. we are hearing harsh rhetoric saying on arabia and tuesday he will reveal a lot of details and tuesday is the day the summit and saudi arabia will start pretty it will be interesting to watch how the saudis and turks deal with this event. nejra: good morning. what is at the play for the investment conference, who is in and who is out? zainab fattah so farzainab fattah,: most of the big names that were supposed to be there have pulled out from branson to mnuchin to you name them, they are out. a lot of companies have sent

staff to goe junior to the conference because they do not want to show they are giving up on saudi arabia and they are worried about the after effects. we will see how many attendance will be there on tuesday. there are no indication that the big names that were there last year will be there this year. thank you,ab fattah, our economy reporter on the latest between the united states and saudi arabia, the very latest statements. a couple of lines coming through. we will be talking to italian prime minister as he dismisses a rating downgrade. two.e give you one or he says the italian budget's itn is not a reckless and

the higher dialogue interest cost will leave the italian economy boosted. as some is saying it is the solstice possible -- softest possible move and we will discuss it. this is bloomberg. ♪

nejra: it is all about china in these equity markets in terms of the bullish sentiment. shanghai up 4.5%, jumping the most italy's to two years. the agent -- a jump in the most in two years. reversing losses in the yuan is fairly stable. us, we have the verbal support from a number of officials on friday and

continuing from xi jinping that with unwavering support for nonstate firms and we heard from the pboc. lots of verbal support. manus: there is rhetoric and policy leaders in terms of tax cuts. the oil market which is stronger for brent. there is no intention for repetition of the 1973 oil crisis, weaponizing oil in the markets. arabia is indeed needs to is awith a crisis at this news acg -- agency. a nice impact on a london markets. rising losses. will donald do another tax cuts for the middle classes? that is a question for the equity markets.

those are your markets. let us talk about italy and the populist government and they have approved what is seen as a contingent budget. that takes me tell friday. y'sies removed -- mood david stubbs is the chief investment officer at a jpmorgan. some said it was the softest of touches from moody's and it is still above junk and you should see a powerful relief. do you agree? : i think so. we know this is another twist on the very long, winding road of negotiation with one this government and authorities in

brussels and frankfurt. we will see more good days and bad days before it is over. we know the government is focused on the elections in the second quarter of next year as a possible game changer and do not see why they would back down from their philosophy of the budget. they may be forced to back down on specifics, of course. it really gets realm for the markets if you get a discussion of leaving the euro or the jubilee which we do not have. we will have some good days or bad days. drop 20 basisure -- 10 year dropped 20 basis points. said in a very fast case, yields would drop below 300 basis points and removal of the negative outlook and we got that. will we see yields drop in how

fast? david stubbs: i think this week because of the sentiment from china and ecb meeting coming which i think draghi will find a way to make things sound not too bad. it goes on to 300 or not, i do not know. i would not say all believe we will see a sustained reduction under 300 until you get really ball the size sounding more -- both sides sounded more cooperative. life more difficult for the europeans. this kind of spread levels seems to be delivering and does not seem to be a barrier. you have to have the right to risk. david, a little more to get through. david stubbs. up next, we will talk about phillips. they missed on the third

quarter. this is the man with the answers. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "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. nejra: 6:30 a.m. in london. a beautiful, sunny day. the dollar ever so slightly down. session, equities market is telling the bigger story. annamarie can tell us more. we are seeing quite the rally in china. the csi up 5%. the shanghai composite on track for the biggest gain. this on the back of four street weekly losses for china. china is still in a bear market. pop in the cost be

and also -- kospi. let us move on to what we can expect when europe opens. italian stocks and bonds are the ones to watch. highs and 2014 on the white wine and the spread between the 10 year german and the highest and do see how it is playing out like in spain. we may get a rally and some say after moody's removed the immediate threat of a downgraded to junk, they took their credit rating down, but they did set of the assessment as a stable. some say that may give a little bit of a rally. i am looking at precious metals. gold and silver are what we are seeing as they are having the biggest again since mid-2016. this is coming as a safe haven,

geopolitical tensions in the middle east and the slowing and china and a trade wars with the u.s. and a lot of precious metals on the upswing. look at these losses for weeks and months at a time. one analyst said it is a shift in psychology and of the market. manus: well rounded up. is down by 5% in the past a month. the question of the day. this climb in a gold this month for the first time since march, how where should investors be about that? that is the question. how were read should they be -- worried should they be? is there something bigger in play at the market? mliv page.ht to the

nejra and i will be delighted to have your questions. good day. >> good a day. fiat chrysler will sell high-tech auto-parts to kkr in a point 6 billion euros. the merger creates a business with more than $17 billion in combined annual revenue. ryan air said it is putting plans for future share buybacks on hold because of brexit. they completed a buy back of this month but the cfo said exit saidr the uk's it makes sense to hold back on further announcements. they reported first sell -- first half revenue of 8%. said the interim board

chairman is stepping down a month after taking the role. the company said he is leaving for health reasons. he became german following -- he became the chairman following the ousting of les moonves. jra: thank you. phillips have reported and at adjustment that missed estimates. retreated is target. joining us from esther down is frans van houten, the ceo of philips. thank you for joining us. what a mess, a miss on the third quarter comparable sales. how big of a role he did at the weakness in emerging-market currencies play in here? : a little overn

4% growth revenue which is in our guided range to a 40 basis points of profitability improvement could be a little higher if it were not for currency headwinds of 60 basis points. emerging markets were weak a due to global geopolitical situations. something we will compensate for , ite go forward, therefore will not get us off track. we reiterate our guidance and will continue to grow. while we talk about growth, we had a lever percent order growth which -- 11% order growth which has been going on for year end the solutions and diagnosis interconnected care and health schematics. the dallas children's hospital is taking our monitoring solutions to advanced pediatric care.

six large contracts and of the quarter. the momentum is strong. good ordering at a book. we needed to deal with the headwinds and we will. you've just described the demand curve. how strong is the usa and you mentioned you will deal with the headwinds and how will you deal with the headwinds of trade? frans van houten: let us first talk about the demand side. i spoke about the institutional order growth.% we have an order book that says us up well for the future. quarter, there was concern around the china. we were able to grow our personal held business in the double-digit percentage. also a good recovery of growth. we launched several new products in the quarter of which the high

end shaver, i used its this morning, it is fantastic. our respiratory care products. side, ae innovation really strong portfolio that bodes well for the future. let me refer to something we need to deal with. on currency headwinds and the other, the increasing tariffs and sanctions that will effect our business. the way we will deal with it is multi fold. first, we will redesign some of our supply chains. toare in the good position have factories in the u.s. and europe and china and we can rebalance going forward in order to avoid some of the impact. she size of that, -- beside that, we will have to look at raising prices selectively to offset these currency headwinds.

prices.ll right, rising you mentioned the personal held the division that contributes the most to the profit and disappointed analysts even if you may have been happy in the last quarter. give us a little more detail on how you can reassure analysts and investors on the personal health unit from here. : i would likeen for it to be stronger as well. it is in the right direction. i refer to the utilizations that have come to the market which have traction and we expect that sales growth will further step of going forward and the overall franchise and personal held is intact. i also reiterate the overall growth in of the four percent-6%

range going forward. with strong growth and good innovation, good order book, i think i can underpin that statement. smilesi like a ceo that about his order book. you cannot say you are going to raise prices and not give a parameter. single percentage arises? all of your marketplace is going to bear price rises? no, we areouten: definitely not expecting to be able to do that across the range. emergingntext of markets. it is illogical that park is -- prices will have to rise. think about argentina or other emerging markets and it is a natural response to raise prices. to the united states

and china, that is much more complex because you have to look at what are your competitors doing and where are their factories located. are they affected or is it different? in that context, i look towards rebalancing of manufacturing load. we were already on a path to and whereional hubs we can produce more products and in that context, i think we will see more -- some products affected more in china than the united states. never bank the others -- nejra: improving about productivity. how exactly will you do that? frans van houten: phillips has been on a path for self-help for several years. this year, we are on track to drive more than $400 million in

improvements. likewise, we will do it next year. given the headwinds, we are looking to actually increase that number a bit as i think we all realize and certainly i do that the world has become more volatile and we need to prepare ourselves proactively in order to deal with the consequences. brexit.ne of those is the discussions will go on. let us not discuss at that. what i want to know from a ceo, what are you doing and what measures are you putting in place and are you stop howling -- and are you stock howling -- stockpiling? : a solid houten question. let me express how regretful the whole situation is because i think we need each other between

europe and the united kingdom. preparatory measures, i have said we need to look at our manufacturing facility in the united kingdom and friction. is in any way hampered, the future of the factory may be at risk. : a different topic and to artificial intelligence for health care. do you have if the you needed to make the push or will you need to make acquisitions? frans van houten: the use of ai and health care is very promising. phillips has gone on that path several years ago. our patient monitoring using predictive to see if somebody will get cardiac arrest hours in advance to allow doctors and nurses to apply the care a patient needs.

and support aages diagnosis of better than a human eye. a very promising future, 60% of our research is in software and the dates of science. toare further stepping up data. i am excited about it. a inave done selective m& this area as well. manus: thank you for being with us. frans van houten, ceo of philips. dark clouds on the horizon and friends does not us -- france does not see any. european is kicking off this year. we hear strategy updates from ubs later in the week.

what can we expect from the earnings season? david stubbs is our guest this morning. david, you were listening to frans van houten and i think he is a diversification of opportunity and headwinds for european ceo. do you want to take a little it of -- what you make of frans van houten's comments? : i think we are going to see the same kind of half will seen in the same kind of quarters. unable to push of market high given the worries about political outcomes. we have seen the valuation or ome downdown -- c

with a italy and brexit. we do not believe europe can do more than 5%. we have 3% on the dividends. performanceng for out of europe and we focus on small caps and that's for you have leadership in tech and is enablingd tech the future. : this earnings season, will investors punish companies that underperformed more is in vain reward companies that outperform? : i think we could see that. negative sentiment toward europe's ability to grow as stay together as a political body. you have that even marginal market that runs through the european equity complex. i do think europe is on the

downside. the one thing i am focused on is less of a valuation issue and a start of the year and it depends on how the sentiment is. manus: thank you. david stubbs, strategist at a jpmorgan. coming up -- a big week for the stock side reported and bank decisions. rate decisions from canada, sweden and turkey. what do they have to say? that will be interesting. and the roll call. a heck of a week. president's out. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." it dead a flat. talking about brexit, theresa may is said to be facing a revolt in her own party after saying the transition period of brexit could be suspended. it has been a busy weekend "the reporting that lawmakers could vote against the prime minister. manus: a rebellion in the house of commons. m,ayter written by ms. where she promises to carry on even if she risks losing her job. the daily telegraph said

the prime minister held a conference call with ministers to shore up support ahead of the 1922 committee. manus: pretty aggressive writing. discussions, let us take a look at the rollcall. things get started on tuesday. and donation expected to leave their rates on hold. canada central bank will hike to fight for 7% on the same day we get to sweden which plans on leaving rates at minus. nejra: the return of the ecb. policymakers will likely say that asset personages -- that asset personages debt purchases will stop. lost through some days

last week. something to watch. let us turn to the u.s. and the fed will be out in force with more clues on one of the rate hike is coming. retta andplan and lo more are expected to speak and coming days. david stubbs is still with us. fridaydiscussion on about the u.k. curve flattening .r rising long end rates you cannot have both at the same time. which are you more worried about? david stubbs: analysts can worry about the boat. .- about both it is not inverted yet. flattening would remain the fed raising short rates. the expansion continuing.

i also do not think a modest steepening the way we saw is particularly bad news if it does not happen to fast. would bease -- pace the main issue. we debate now whether you will see a major change in productivity in the 30 year yield rising and we will probably say not. or if you see a continuation of the flattening trend that we have seen. we think it will be flat next summer. that has got a consequence for our rather earnings. i put in a u.s. and a strict out the u.s.. excluding the united states. my question is, the position for most of our guests are continue

to be long with a u.s. and what you hear donald trump talking about a new middle-class tax cut case?d that bolster that david stubbsdavid stubbs absolutely:. tax cuts are something that earnings and you are linked to it. worse and thisot is something that was released and apparently no knowledge from the party. you would see another boost to earnings. continueast, this will until the debt issues really years -- and we are many from that, unfortunately. these tax cuts may be good for the stock market and could ring forts a buy for the u.s., but they are damaging the balance sheet of the united states and the detriment of the ability to

service. nejra: as we talk about tax cuts, let us talk about the midterms. timeuch could midterm this around give a boost to a rally on your end? everystubbs: an almost midterm action, there is uncertainty and of uncertainty is lifted. regardless of who wins or loses, you see a modest rally. we do not believe this is something that most of our clients should try to trade around and potentially some ideas. and that is not the kind of thing we want to reset around. is thethe more extreme republicans holding both houses and the democrats taking a both houses. it would probably lead to markets that would be very

positive for the republican side. would be athat modest rally but not a huge amount to trade around. david, brexit, we did at the papers and they went after theresa may in terms of negotiated. you have quite a negative view of the three potential issues at play, a deal, brexit and other issues. take us through your 1-3 probabilities. david stubbs: we have been debating the probabilities and no deal brexit, 20%. you have to raise and that every time we have this. vote.ll parliament has to the prime minister has to come up with an agreement with the eu and it is going to be very, very hard. under the pressure is much greater than today. nejra: david stubbs, what a

great hour with you. chief client investment strategist at jpmorgan. more on "bloomberg daybreak: europe," next and we will talk markets. ♪

manus: good morning from dubaimanus:. nejra: live from bloomberg's european headquarters, these are today's top stories. jumps shanghai composite the most in two years. top officials moved to shore up the private sector. asian stocks in u.s. futures revere that reversed earlier losses. the riyadh relationship. theen mnuchin emphasizes importance of u.s.-saudi relations even as a chorus of european leaders threaten the kingdom over the death of a government killing. italian assets may get a boost today.

moody's cuts the nation's credit rating by one notch, but remains investment-grade. nejra: it is seven :00 in london. rally ineen strong chinese equities. we have had verbal support and talks about a tax cut. lots of things driving those chinese equity markets and it is having a global repercussion. s&p futures were negative. they have turned into positive territory. we could see firm gains in the european equity session. the stoxx 600 closed lower by 0.1% friday. the s&p 500 closed below. it looks like it could be risk on. dax futures up 0.5%. cap futures up by the same. ftse futures up as well.

manus: let's take it to the bond market. the ratings agency moody's left the italian government bonds on stable. one of the most gentle moves they have seen. look at that. absolutely stellar movement. bips. italy is going to hold fast. 2.4%. they are going ahead with say you. yourn would say, this is opportunity to get in and by btp's. it carries through this morning. u.s. treasury bonds remain flat. what are you concerned about now in terms of a tax cut? you have a host of said speakers this week. got a whole host of them out there. to talk they going

about in terms of how restrictive the u.s. rates might become? bunds drop. there is a sense of relief in the italian story. nejra: very exciting what's coming up next. we going to speak to michael o'leary, the ryanair ceo. we saw profit dropping in the first half for the first time in five years. the cfo has talked about holding off on share buybacks. michael o'leary joins us in the studio. >> as you are mentioning, it is about what is happening in the chinese markets. this big piece of green you see here, i will get to that in just a moment. in the asia-pacific, the benchmark is higher. --an is just closing up so closing up shop. , if things stand

the way they are, will be the best day there for chinese equities going back to 2015. lots of things were announced over the weekend. as it pertains to the market, the measures might be helping boost sentiment and also liquidity in the system. as it pertains to the economy, it was really this unveiling of lanes to cut income taxes. definite justen yet, but a plan to cut income taxes. you look across sector groups, everything is up in china. plan, you can actually use your expenses for education. let's have a look across some of these benchmarks. on the chinese mainland, 1500 stocks in shanghai, only two are down at the moment. manus: thank you very much. the latest on the markets in hong kong during the asian session. to ryanair now. putting plans for a future share

buyback on hold due to uncertainties rounding brexit. firstrline reported its decline in first-half profit for five years amid rising fear -- and disruptions from the unions. the ceo, michael o'leary, joins us this morning. headline is not great, but you are sticking to this guidance you have given to the market. what i want to get a sense from you is, has the worst past in terms of financial guidance? you are in a 1.2 billion. is that a conservative number or your worst-case scenario? >> i think it is conservative. we cannot rule out oil may go higher again. some analysts believe oil will hit $100 a barrel. we have set our guidance is based on oil being $85 a barrel to the end of march. we are reasonably well hedged over the next 12 months at $68 a barrel. we are 10% unhedged.

higher, wees go would have to look at the guidance again. we would also start taking a more capacity. we might close one or two more basis or ground some of these. at the moment it looks unlikely but we should not rule it out. this is one of those great. some a chronic our industry in our industry where it will be a matter of who has the best cost wager. we are seeing bankruptcies. some of these smaller guys disappearing. i frankly hope more disappear this winter because they deserve to disappear. nejra: we understand the headwinds, but since you wreck ties the unions, the strike is a big part of the story as well. can you give investors any light at the end of the tunnel? this narrative runs around

out there, strikes, strikes -- >> no impact on the third-quarter? >> we have had eight days of strikes by less than 10% of our people. there is very little impact in our numbers of pilots. we have had so few of them. the has been a huge impact of -- strikes. we have 11 weekends of french air traffic controllers. costs have jumped significantly customers.care of atc strikes are a challenge for the industry. the process of unionization has gone well. we have agreements in the u.k., ireland, italy. we hope to have spanish pilots done in the next couple of weeks . cannot rule out further strikes? no. unlike other airlines we will take some strikes if we have to. this is a well-run airline. we have the lowest cost. we have high pilot pay, high

cabin crew pay. if somebody wants to be unreasonable or some competitor airline employees want to interfere, let them interfere and we will manage around it. we hear what you set about the unions, they are threatening another strike, the consequence of that not great pr in terms of what may happen in -- are you going to have to cut fares further to bolster the numbers against those headlines? so. have some. -- i hope one of the things about bad pr is it sells more seats than good pr. we are releasing a million seats on sale november, december, january, february, just 999. -- if we had lots of pr for being nice to people no one would notice. manus: you have great pr out of

having a kitten in your -- come on, michael, you have great pr being next to the customers. on a serious note, there is this issue. why would i booked the ticket if i run the risk that in spain or the other european centers, your crews or your cruise -- might go on strike? >> you run no risk. we have had eight strikes. i think air france has had 20, lufthansa has had 20. in spain, we have put 70% of our flights -- i do not think that is the issue. the airline industry has had a four or five year bull run. we have been warning about. -- about it. you are starting to see a shakeup. this is going to be a difficult winter.

much lower airfares, which is good for ryanair, heil -- higher oil prices for our competitors. while we are paying for oil at $68 a barrel, they are paying $85 and they do not have the cash to survive. -- don'talysts called expect profits increase, shares down 40%. what can you tell investors about succession planning next year? i know we are talking about -- >> she has an -- she has it in for me. i am too nice to you. firstly, never believe the analysts. i think profits will be down this year. i suspect the next year up to march 20 you will see a recovery. if the fundamentals in this industry tend to lag behind oil, typically 12 months, oil has

been rising the last 12 months, you see fares rise summer 2019 at lufthansa, air france, they will restore fuel surcharge and you will see pricing. on the ground terms of succession, the board will want me to stay on another couple of years. nejra: will you? >> i won't do five, but i will do two or three. we have good management. we have a succession plan internally and to replace me if anything unfortunate happens to me. we have a terrific management team. succession is not an issue at the moment. thebig change is taking first five deliveries of the aircraft and the key for these aircraft is we get more seats, 60% lower fuel consumption per flight that our existing fleet, and we are about to take 210 diesel the next five years. we are sailing into a period of low consumption. if oil prices rise, great.

we are all going to be tied together another couple years. i hope my contract lasts. [laughter] that's a whole other story and we won't go there. there was a bit of a ruckus in regards to the chairman. do you have full institutional support to continue for a couple of years? >> i think so. institutions want to see delivering. we have explained this. , to vote in favor of me was in 95 -- 98.5%. the chairman before me got a majority. that has been an issue over

david, he been on the board for 22 years. he is one of the great aviation leaders. i would like to hang onto him another couple of years. he himself has said he will do another couple of years and we have said we will come back to shareholders prior to next year's agm with a succession plan and more details for me sometime in the next two or three years. nejra: support is waiting for the chairman but it is still there. let's talk about brexit. reciprocals approvals in the case of a no deal brexit. if you get that worst-case scenario, outline what that will mean. >> the worst-case scenario is clear. flights will be grounded from the first of april next year. that is so political undeliverable. the government will fall of the flights are grounded. that, weis any risk to will know around christmas, i

think it lasts a couple of days, a week or two max and the u.k. will simply stumble into more months of transition because that is the only feel that will be on the table. -- deal that will be on the table. the risk is unlikely. what everybody is conscious of his the political situation in the u.k. is so fraught. you have a minority government. whether there is another election will run across that. the most likely outcome is 21 months of transition. it is unlikely there will be out -- a no deal hard brexit. the u.k. has said they will let ,he european airlines lanphier but there may not be reciprocity -- land here, but there may not be reciprocity. but again, only for a period of days.

manus: let's close off this conversation on brexit. in terms ofen said allocating resources to the u.k. -- are you trimming back any further investment in the u.k. because you just want to be hedged? honestly we have been very cautious with our capacity allocation into the u.k. the last two years. we have a great deal at london's southend. we are opening a three aircraft base. most of our capacity the last two or three years of growth has been to germany. we have come to dominate the european market. regulated -- registered airline we are limited. gets prettyat quickly even in the event of a hard brexit. nejra: a real pleasure to have you on set, thank you so much.

let's check, cron btp's after the rating decision by moody's. we saw that 10 year yield dropped. there it is down 11 basis points. btp-bund spread, to 91. --291. let's get the first word news. >> theresa may will outline progress on brexit today claiming a deal is 95% complete. that comes after organizers estimated 700,000 people attended a weekend demonstration demanding a second vote on the terms of any final deal with the eu. meanwhile, flexibility on one of the eu's red lines saying there is negotiation on the so-called irish backstop. >> we are to resolution of almost all the issues. issue remains this

bridge between the end of the implementation period and the future of the relationship. as you listen to the mood out of brussels, there is pragmatism on all sides. >> angela merkel has joined the chorus of european leaders pressing saudi arabia to come clean about how jamal khashoggi was killed. germany's chancellor said she will suspend exports of military equipment to the country. saudi arabia's foreign minister says the killing was carried out by a rogue operation and those responsible will be punished. a mistakebviously was made and what compounded the mistake was trying to cover up. that is unacceptable. we want to make sure those who are responsible are punished. we want to prevent it from happening again. aimed at boosting his party's chances of holding a

congressional majority, donald trump has promised a new middle income tax-cut plan to land just days before the midterm election. public and party leaders were caught off guard by the surprise comment. steven mnuchin unable to offer further details when asked about it in an interview. the u.s. is ramping up the pressure on china and may change the way it determines if a country is manipulating its currency. steven mnuchin said the 1988 act with a wider definition could override the test in a 2015 law. china avoided the label last week as it does not meet the current standard for currency manipulation. 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. you a quick give snapshot of how these markets are setting up. there is lot to contend.

open-ended commitment to bolstering china. that is helping the msci asia. look at the csi 300. this is all about this support. you have had four straight weeks of losses in asia. -- csi up there on unwavering support, bouncing up from a four-year low. it is the yield on the tenure government bond in italy that it has notlutely -- gone to junk. it is stable according to moody's. is the softest possible move and a relief for investors. the spread will there. -- the spread will and now row -- will narrow. btp-bund spread below 300 basis points. incould see a positive open

equity markets in 40 minutes time. part of that could be driven with the chinese equity markets. italy playing into that as well. a little lower on friday. a risk on day. u.s. futures have turned positive. we got the news out of china. s&p futures at 0.25%. the benchmark did close be hot -- below its moving average. italian bonds trading lower. removed the immediate moody's- movies -- removed the immediate threat of a downgrade. thank you for your patience as we talked to michael o'leary. i know you love talking italy. spread is below 300

basis points. it might not say below there for long. you are saying it won't either. >> the risk has not changed. -- the fact iss they have -- the spread is down because the italian government -- theying a popular have not read broken that chain. that chain. you had a lovely twelve-month period in europe and we have problems. who cares what moody's says? is trying tont drive through an agenda that says i'm going to spend more money in a come -- a country invested.avily it has not changed that -- the dynamic. we did not get here because of moody's. -- manus: when you see

these significant moves in btp's, are we going to see fools rush in to btp's? is this an opportunity to look at more truck between the two? is this an opportunity to short italian banks? number,ay 2.4% is the things have improved, and i want to take more italian risk on board? >> you hit the point on the head. meet in the middle. i'm not suggesting the lack of fiscal union is going to emerge today. if we except the fact global growth is de-synchronize and and that europe will struggle but not compared to last year, these will continue to merge. it is not going away because someone in germany says don't do

it. i don't see why you would want to be there. it is not obvious you are going to get a naturally beautiful convergence back again. it is the wrong currency price for the spanish-italian, most of that area in comparison to northern europe squirreling away its money. place.th is a different you have got to break that chain somehow. it is not going to being -- there is no long-term plan. that is the fundamental problem. they are not addressing the issue. nejra: it is interesting you talk about opportunities in currencies. for dollar investors there was a nice chart on the terminal last week showing there are opportunities in btp's versus other asset. if you are not interested in italy, what is your focus for europe? if you are looking at earnings, where? >> it is difficult at the moment. the ftse is just over where it was in april 2015. i sound like a broken record,

but nothing has changed. the csi 300. these markets are range bound. what iu do are repeat have continuously said. a challenging environment. with the managers are doing are buying companies who make real things. they are not yet doing staples. you look at interest rates and housing stocks, construction, they are all falling off the cliff in the u.s. as well as anywhere else. someone is saying it's going to get more difficult. the markets are cyclical and that is tied to liquidity. is makingump is doing sure the u.s. economy gets more indebted bypassing more tax cuts. it is very difficult to say to investors -- last week you started something interesting. for the first time, net short since 1999. why don't we start pocketing a little in the corner in case you

are more nervous than you were before? manus: that is our question of the day. what is the move in gold? the best month since january. up 3%. global stocks are down. what is gold telling you? >> i think people are beginning to actually say, all those people who want to say currency is unrelated to the gold price is one it now saying, it of the conduits where i can perhaps pack some money. the truth of the matter is you are running out of places to hide. whatever you had, the saying momentum was broken -- faang momentum was broken. give me 12 months, i am not so convinced. it is still expensive. i'm not saying it is going to halve.

it is not a bull market. it is a very specific bull market which has been broken. nejra: we have this rally today. for you, that is an opportunity to sell? ?> why would you go long this chinese economy has massive declining credit. the world is not going to end but it has very significant problems. i would not be bullish on chinese equities at this point. you, always great to have you with us on the show. we have quite a lot coming up this week. manus: indeed. you've got gdp, earnings from all the banks, and all the interviews. we will be speaking to the ceo,ays ceo, deutsche bank and sergio ermotti, ubs ceo. do.ave a lot of homework to nejra: we do, but that is it for

"daybreak europe." this is bloomberg. ♪

anna: welcome to "bloomberg markets: european open." matt: good morning. chinese stocks soar up the most in two years. u.s. and european equity futures rise as well. can the rally in asia roll around the world as gold and oil rise? the equity markets open in 30 minutes time. anna: btp yields drop after