anna: good morning from london. i nejra cehic. this is debris -- daybreak europe and these are the top stories. futures in the u.k. and north america point down. tech gets wrecked, weak outlook from amazon and alpha that. shares -- alphabet. shares plunge. the fed vice president pushes back against president trump's criticism of the bank and backs gradual rate hikes. gdp data is due later this week. ♪

nejra: good morning everyone, just after 6:00 a.m. in london. welcome to daybreak europe. we did see a rally for the first time in seven days in u.s. equities, largely with tech stocks. the markets cheered by microsoft and twitter, than a dampener from amazon and alphabet. join us on the bloomberg saying stop focusing on earnings. we have to work on tightening financial conditions. we talk about everything to do with the equity route. it was a brief reprieve, nasdaq futures lower by more than 1%. let's switch the board and take a look elsewhere in the market. the 10 year treasury yield is something we want to keep an eye on. we are seeing safe havens, which tells you about risk sentiments. we are back here, dollar-yen on the back foot.

overall, looking at a number dollar index stronger in this session. wti heading for a weekly loss. .6%,e showing brent off 76.42, back and forth when it comes to oil and opec and the rhetoric. denver pressure today. a lot of breaking news, deep into earning seasons in europe. just coming through on the bloomberg, first quarter euros,d eps 1.51 estimate 1.44. we've got a beat for bas s. growth for industrial output fell short of forecasts in the third quarter. third-quarter sales coming in at 15.6 one billion euros, estimate 50.61 billion. it's the adjusted number you

want to focus on, 1.4 7 billion euros, estimate 1.5 5 billion euros. adjusted ebit is a miss for bas the expectation was they might disappoint, third-quarter adjusted ebit number is a disappointment. let's move on to cement and talk about lafargeholcim because we have those numbers coming through, as well. basically there is progress for the divestment target of 2 billion swiss francs. 2018 recurring dark growth of 3.25%. if we take a look at for your revenue, lafargeholcim sees revenue up 4-6%. it did see 3-5%, a little bit of an upgrade.

recurring ebit, 1.8 7 billion for us -- swiss francs. later this morning, bloomberg's guy johnson, key interview. we have it all covered for you. let's go to yvonne man who has more on the markets from japan to china to india. are we still deep in that bear market? yvonne: we certainly are seeing those losses today. take a look at how we are set in the price action. it took us a while to catch on to the disappointing tech earnings during the wall street after hours, amazon and alphabet that disappointed the market. we are seeing the lights of the hang seng down 255 points. large cast in china down to 1%. there is mixed confusion on exactly if these funds are liquidating these stocks and bonds they have for the third quarter.

we received multiple reports of multiple funds doing so. whether the national team has exited the market. australia, correction territory, .4%. 1.5%.spi down .1 -- intheast asia also correction territory at the moment. that's how we are seeing things now. dollar has been king throughout the session. -- for going to give bears out there. 697,hecking right now, inching closer to the record high for dollar china right now. this is after we saw a much weaker fix in the pboc. the central bank is getting more tolerant for the weakness. nejra? nejra: yvonne man in hong kong, thank you so much. we are asking the question on mliv , what is on everyone's

mind this week? what is the most to blame for the stock route? you can join us on the mliv team plus tv on your bloomberg. let's get a bloomberg first word news with debra mao. brexit talks are set to be on hold because theresa may's cabinet is not close to agree on a way forward. be put plan is likely to forward before next monday's statement. a report to the national institute of economic and social research says a no deal brexit would shave percentage points off u.k. growth. the trade accord that keeps most of the current arrangement would see gdp growth by 1.9%. the new fed vice chair back to the central banks plan for further gradual interest rate increases and suggest

policymakers won't change course in response to political pressure. the new number two at the federal reserve downplayed the potential impact of recent stock market turbulence, noting the fundamental levels of the economy are very solid. billionaire philip green, owner of the top shop clothing chain, has been named in the u.k. toliament as a businessman use payments to hide allegations of sexual harassment and bullying. he felt it was his duty to reveal the name after being contacted by someone involved in the case. philip green says he categorically and holy denies the allegation of unlawful sexual and racist behavior. china is set to uphold two state held energy companies. we're told the freeze on patch of china and sinopec is temporary and purchases may

resume depending on negotiations with washington. iran loses sales to its top oil customer. -- has battered the islands with 178 mile-per-hour winds, the strongest storms to hit the u.s. territory since 1950. seven super typhoons have rate have it is here. forecasters say it may head towards taiwan, but the forecast is unclear. global news, 24 hours a day on air and at tic-toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. nejra? nejra: debra mao, thank you so much. looks like the stock route is sticking. most asia stocks extended a decline. fallingity futures also after disappointing earnings from tech sector bellwethers. we are asking our mliv question

of the day. what is most to blame for the stock route? who better to answer all the questions on the equity market this week and going better than james bevan, cio? great to have you with us. happy friday. let's talk about the question. let's look back before we look forward. what is to blame? james: it about credit and liquidity. also the u.s. treasury. during the month of october, both called for money. we knew this would happen. we knew october would be a difficult month. once prices begin to fall, people say what is happening here? they look at all the other troubles. liquidity and credit. nejra: and perhaps people point to financial conditions tightening. to you, it's not about earnings? james: quite the reverse. i'm less optimistic, but i'm

still looking for $162 on the s&p 500. this year. $173 next year. on that basis, the fair value of the s&p 500 is about 3100 points, 18 times, consistent with the fed continuing to tighten. i'm not one of the naysayers. i think they should and they will but stock markets should be higher. nejra: the s&p 500 firmly below its 200 day moving average. you say that actually represents a long-term buying opportunity. why long-term and not short-term tactical buying option? james: because adverse sentiment will take prices to lower levels, better buying opportunities. i suspect we've not seeing the current route. this is a correction, not the answer to the bear market. it's important to distinguish between the two. 62 corrections since the bull

market began in 2009. we're going through another generation rather than the start of something more sinister. nejra: in terms of market cap, it looks like the selloff is looking worse than what happens in february. i've got a chart here showing valuations. we've got the price in white, then forward 12 month p, the close -- lowest since 2016. james: great long-term buying opportunity. participation in the future. no immediate sign of recession. the new york fed's recession model, they have the probability of recession. i didn't see a recession until 2020. i didn't think 2019 was the barrier. 2020 is the trick year. that's when the fiscal policy has to retightened in the state and at the same time, we're

going to have the rollover in earnings numbers. nejra: if you're concerned about the equity market and you got endeavors folio, is there anywhere -- got a diverse portfolio, is there anywhere you can hide? james: there are plenty of assets showing strong cash flow yields. three to 6%, plus attached to inflation, i think that's important. inflation is on a rising trend. inflation imported from north asia. they worry more about profitability rather than market share. i think the global inflation is going to continue to move upward and revenue streams will be valuable. nejra: you'd think yields are close to their peak. think i do because i federal reserve will ease

tightening when it gets to 3% or 4%. we could see the 10 year yield get to 4% as a top-level. maintaining a positive shape long rate higher than short rate. buy rather than sell. nejra: you talk about tightening liquidity. how much does a stronger dollar you?we're asking concern james: it doesn't concern me directly. it worries me more a strong dollar means the people who borrowed and dollars, namely french banks with the light -- rising strength of the dollar and rising interest rates, those could still go back to america indirectly rather than directly. nejra: james stays with us. coming up, big tex disappoints amazon -- tech disappoints

amazon and alphabet. we'll get the latest. guy will be speaking exclusively to the president of south africa. this is bloomberg. ♪

nejra: let's get a look at the bloomberg radio studio. remember, when you're traveling to work, bloomberg radio is live on your mobile device or dab digital radio in the london area. many fun hours and that radio studio. let's take a look at the markets as well. we had the first gain in seven days yesterday. it looks like the rally didn't last long, nasdaq futures down. all the futures pointing lower. is it about earnings or is about something like liquidity? the fixed-rate at 24.

that's where it closed yesterday. asian equities still in a bear market. 3.10 onsafe havens bid, the yield. let's get a bloomberg is as flash with debra mao in hong kong. recorded aa, amazon second consecutive quarter of sales that fell short of estimates, the first back-to-back revenue miss in almost four years. they slumped in extended trading after the third quarter resolved, which is so disappointing revenue and profit forecast during the busy holiday period. alphabet and snap posted below. goldman sachs leading talks as potential investors. they are hoping to take advantage of a borrower's market in leverage finance. been earninga has through cash.

it routinely launches and lands rockets for reuse. the brothers responsible for grant that auto are likely to get most of $538 million in royalties this year, according to gary johnson of the mo capital markets. the release of red dead redemption 2 well cash in on a compensation deal unique to a gaming system. that's your bloomberg business flash. nejra: debra mao, thank you. aftertocks have fallen amazon and alphabet missed estimates. second consecutive quarter of sales fell short of expectations, sending shares down 9.4%. alphabet also sank as its third-quarter sales missed analysts estimates. joining us from taipei is bloomberg's opinion columnist covering tech. take us through your earnings

that rattled markets after hours. to ishat it comes down weakness. the one commonality between amazon and alphabet is the cloud side of the business. google relies more on advertising, the bread and butter of their business. what we're seeing right now is these other companies that were doing so well for so long. there's a lot of expectation that they have to keep hitting those numbers and when you do come out with numbers short of expectations, at least and amazon's case, the outlook is also short and they get hammered really hard. there's no room for companies to make a mistake because people expect so much of them. we have a lot of jitters in the global equities market right

now, a lot of focus on tech on the hardware side. the chip industry is feeling quite tough right now. they come out with these companies. they thought of them as the bastion of light in the industry and it's not turning out that way. nejra: you make a good point about investors being ready to punish those companies that miss on the earnings, particularly with the broader equity market seems. let's talk about chipmakers. this has been a bad week for chipmakers. why is intel bucking the trend? tim: intel is the surprising one. the world's biggest chip company, almost boring because it's so big and well-known that people don't think it's exciting anymore. they came out with really good numbers and raised therefore your forecast. they're going to spend $1.5 billion more on this year than they previously planned.

they're bullish themselves. for the three q, what we just reported, they got accidental bump on the pc side. pc's have been lagging for a decade. laptops and desktop computers did quite well for them, double-digit growth in terms of shipment volume of chips. they didn't expect that and they are seeing strength in the fourth quarter. at the same time, they are doing well from the cloud side, selling to amazon and all those companies building their service to deliver clouds. they are still getting strong and they believe next year will be stronger. they will continue the growth, especially on the cloud side, delivering to data centers and so forth. it was a surprise and it's one of the few bright spots in the tech industry right now. nejra: tim, bloomberg's opinion

columnist, thanks so much. james is still with us. talk us through your ideas around tech. it seems like we have to make distinctions between individual stocks, or at least individual industries. james: we should make a distinction between the price and fundamentals. the story of amazon that began the year, there was good value. the price went up and up. they were cutting positions back because share prices appreciated beyond what was reasonable. expectations forwarded earnings this year and next year, what was reasonably achievable from the u.s. economy. that's why i'm only going to $162. from my point of view, it justifies upward movement when the dust settles and people think about fundamentals. what does my dollar buy me?

nejra: let's look here, tech is still holding onto its premium versus the broader markets. what does that mean to you when you look at the tech center? james: i think the tech center presents long-term value. look at the index relative to its share of earnings. earnings is great, but not an expensive sector. to focus on companies what i can see visibility on growth. i will remain a longtime bull of amazon. they will generate long-term share of the value. i much more nervous of companies at the lower end of the spectrum, still burning cash and yet to achieve profitability. nejra: you're still aboard amazon and alphabet. what about chipmakers? they been punished this week. james: chipmakers have a capacity issue.

we have a global supply glut, and some leviathans. not just intel. enormous entity that is technical of price deflection -- deflation, driving markets down. for me, i want to think about long-term revenue growth. and secondly, how much of that revenue is going to be turned into profit? chipmakers will be pressured by supply competition. people buying the chips are good at negotiating prices. because they are dealing with big volumes. nejra: you like the revenue, but it's got to turn to profit. who would you avoid or where would you avoid because of costs? james: for me, the capacity of controlling cost would be down to labor intensity. we sing unemployment levels shrinking with no wage inflation. see wage we'll

inflation pick up. companies with high workforce refuge -- ratios will be much more troubled. companies with a lean cost structures, low levels of workforce intensity, are well-placed to continue to deliver reasonable profits. nejra: tech regionally, you prefer the u.s. or asia? james: u.s. will do well. they not only make, but also buy. in a world of trump war on trade, staying in the u.s. is a smart maneuver. nejra: james bevan stays with us. remember, when you're traveling to work, bloomberg radio is live on your mobile device or dab digital radio in the london area. come see the studio we've got there. next, a mature -- up more mature relationship. japanese prime minister shinzo abe makes the first visit to the country in seven years.

we'll be live in hong kong with the latest. don't miss guy johnson, speaking exclusively to the president of south africa. this is bloomberg. ♪

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. nejra: let's check in on the markets around the world as we have seen u.s. features move lower and the fell over into asia, another down day. joining us is neurotic child and here in london is an recorder and. -- annmarie hordern. indian equities when performing quite as badly as the rest of asia. right now, they are looking in mind with a selloff elsewhere. >> nejra, i heard you speak about how they were sending up despite the nasdaq. that's notwithstanding the pressure in the indian markets today. we were under pressure of going below the 10,000 mark on the

benchmark index and slipping four digits. there's been a bit of a recovery. there's been recovery in the nasdaq today. the banking space is under a cloud. the premier index that tracks the banking stocks is under a bit of pressure in the session today. currency under pressure today. banks are putting the pressure on indices because yes bank came out with numbers i got fullback and the nonbanking financial sector that has been and a cloud is putting pressure. that's the key today, one we were speaking about yesterday, also under pressure because of the currency. we are not in four digits. that's summer spike -- some rest bite. nejra: -- respite. nejra: and murray, -- annmarie, you're looking at tech, as well.

annmarie: i want to look at this chart. if you look at what has been happening to the market cap late september, we're down $8.3 trillion. for some context, we had to sell off in february for $7.8 trillion, more than we saw a earlier in the year. this is as investors deal with heightened trade war tensions and tightening financial conditions. while we had some earnings that outperformed, many companies are talking about the future of tariffs and rising cost. alphabet,s, amazon, and snap extend declines after they struck sour tones in the earnings report. if you look at perspective against the s&p 500 in the blue, you can see even though they are sliding, tech still holds the premium against the s&p 500. nejra: thank you so much.

annmarie hordern in london and niraj, as well. let's get the bloomberg first word news with debra mao in hong kong. brexit talks are said to be on hold because theresa may's cabinet is not close enough to agreeing on a way forward. no new plan is said to be forward before monday's statement. a report by the national institute of social research says a no deal brexit which shave 1.6 percentage points off u.k. growth next year. by contrast, the trade accord that keeps most of the current arrangement would see gdp grow by 1.9%. the new fed vice chair, richard clarida, backed the central banks plan for central rate increases and suggested policymakers won't change course in response to political pressure. , the new number

two at the federal reserve downplayed market turbulence on fed policy, noting the fundamentals of the economy are very solid. former vice president joe biden and actor robert de niro are the latest targets of a series of a suspected mail bombs. they removed a suspicious package by a restaurant owned by de niro. the fbi said two similar packages were addressed to biden. theyew york times says believe some were mailed from florida. two state owned energy companies were told to stop buying oil from iran. the freeze on petrochina and sinopec is temporary and purchases may resume depending on negotiations with washington. they risk losing sales to its top oil customer after losing other buyers such as japan and south korea.

india's shrinking foreign exchange reserves may hamper the central banks ability to defend the rupee. april.d tumbled from the erosion would leave india with only enough to cover eight months of imports, flows, and short-term debt. global news, 24 hours a day on air and at tic-toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: debra mao, thanks so much. abe to buildshinzo a steady relationship as the two largest economies try to put a spat behind them. the first official visit to the country in seven years. joining me is bloomberg's asia government managing editor. dan, great to have you with us.

good day to you. could we see anything tangible achieved from this mission? dan: well, the biggest tangible thing is the warming itself. relations between china and japan have been terrible for years. we've seen a steady warming of ties that really accelerated under president trump. trump's been hitting both countries on trade, in particular. that has brought them both together. very warm words, first time i japanese leader has been to beijing with this kind of reception in seven years. it's very significant in that sense. they both pledged support for free trade and managed to accelerate talks on the free-trade deal that doesn't include the united states. nejra: a very significant meeting. talk us through the agreements. 50 businessre about

deals signed, most of them mou's, very small kinds of things that may take a while to materialize. one of the most significant was back by financial institutions on both sides, calling for investment funds to invest in industrial cooperation and facilitate trade between the two countries. they also revised and currency swap agreement for $30 billion that was shelved in 2013. there was progress on that front. mean: so, what does this for where we go from here, not just in terms of relations between china and japan, but also for the global geopolitical scene? of course i'm talking about the u.s., as well. dan: yeah, a lot depends. geopolitically, japan is still a united states ally.

on geopolitical issues on north korea, for instance, territorial disputes, japan is still friendly with the u.s. on that front. those are the issues that weren't talked about today. there is no agreement and any of these territorial disputes between japan and china. that said, the economic cooperation is very interesting. it's showing abe is doing everything he can tos hore -- to shore up japan's interests right now. they're looking to mitigate the damage and japan is open to that. kate, thank you so much. abemeeting between xi and takes place as they are under pressure from donald trump after what he called unfair trade practices. what are the downside risks that threaten the bull market?

james is still with us. we know you'll be a long-term buyer of u.s. equities. we see a great chart showing how much has been wiped off global equity markets in terms of market cap, more than the one in february. what are the key downside risks? is geopolitics one of them? james: geopolitics is significant, as is the overall challenge to both euros economy and both japan and china. why is it both european central bank and the bank of japan persist with these extraordinary interest rates? europe has negative interest rates. underlying economies remain very challenged. i didn't think it was easy to construct a bull market for european shares at large. overweighting america despite the fact that's the markets have value.

i think it's a cornerstone in the current market. nejra: let's talk about asia. with them deep in that bear market and is a market has been punished more than the u.s. and the fact we're still seeing declines. we haven't had the same reprise. asia pac shares is what this is showing. the msci pacific index, for the first five-week losing streak in more than three years. do you see no opportunity in asia? james: i see very limited stock specific opportunity. i would be weary of index tracking and the current market. i think that's going to be painful, consistently. china very specifically still has challenges a face with its own credit. -- it faces with its own credit.

look at handbag sales in china. says a lot about the way domestic chinese investors see themselves. we need to diversify our portfolios. controls and restrictions mean they are not able to flow capital. japan is going to report a recession in industrial production and i think the bank of japan will lead rates on hold next week and that's not a great environment. nejra: what about, though, and i know i'm pushing back on your bull case, what about corporate leverage in the u.s.? is that not a reason to be more cautious? james: very selectively, definitely yes. there's a bifurcation between companies with significant net cash and companies in trouble. avoid those in serious trouble because excess cash will be very painful.

the other issue is that the cash flow yield still exceeds the moneys they are using to buy back dividends and. -- in capx. high-yield a place to hide from equities? james: i don't believe it is. i think high-yield breds are still too low. bond yields are going to rise and spreads will rise, too. i worry high-yield will be a casualty. one of the problems is investors look at yield and they forget you are discounting risk. sometimes you wipe out the recovery. and it's less than people expect. nejra: james stays with us. now let's get to a bloomberg scoop. samsung is trotting a challenge to apple's iphone, planning to launch a new phone next year. can it gain dominance and stay

ahead of its chinese rival? let's get to our tech editor insult. -- in seoul. what do we know about the samsung from? sam: as we make clear, samsung's next marquee phone is going to have a fingerprint center on the display, which is quite a marvelous technological feat, considering many companies have been trying to mass-produce that technology and display a fingerprints answer for years. samsung is trying to be the first company to do that in terms of mass production. what samsung wants to do is put a 5g chipset into the galaxy s 10 and right now it's the go shooting with verizon in the u.s. -- it's negotiating with

verizon in the u.s. to get the 5g phone out into the market. we also know samsung is going to release three phones, three versions of the s10, unlike the two previous versions. nejra: talk to me about the foldable screen phone. what is going on with the development here and why is samsung pushing it? sam: it's quite interesting that there seems to be more interest in the foldable phone, which is an experiment the phone, than in the flagship model, the galaxy s10. the foldable phone because it bends, the screen vents. you might think, how can you bend something that's a screen? what samsung is trying to do is basically, it's going to give you as much screen space as possible.

what you're going to see is basically double the space you used to have on a smartphone. what i've been hearing from my sources is that there are basically two prototypes under consideration in samsung. the one that's longer vertically is the one that's gaining support from the developers and designers within samsung. they haven't decided on the final pick, but we'll soon be seeing what their choices are going to be. nejra: thank you so much, sam kim, our south korean tech editor in seoul. let's get to some breaking news now, oil heading for a weekly loss. we've been talking about that. on the stoxx 600, oil and gas companies are the only sector posting again, up 4%. any number coming through, 1.3 9 billion euros.

the estimate was 1.40 billion euros. that's the headline you want to be looking at. any third quarter adjustment operating cash flow comes in at 3.4 billion euros. the adjusted net numbers is what you want to watch, a strong beat their, third quarter productions boeng in at 1.8 boe -- and -- mboe/d. later this morning, guy johnson will be speaking to the president of south africa. and when you're traveling to work, tune into to bloomberg radio on your mobile device, perfect on the move. this is bloomberg. ♪

nejra: let's check in on what's trending across the bloomberg universe. on tictoc, bloomberg's global news service made for twitter, revolution is taking india by storm. 11,000 vehicles are being added onto the roads every month. on bloomberg.com, turkish president erdogan is making his biggest move as he attempts to undercut the power of the saudi crown prince. and our stories on the bloomberg terminal, and third-place, brexit talks on hold while the u.k. cabinet can't find an agreement. in second place, china is said to warn state-owned oil companies to buy iranian crude. and the top story, tech stocks have fallen as amazon and alphabet reported lower than expected figures. let's get a bloomberg business flash with debra mao in hong kong. debra: amazon reported a second consecutive quarter of sales that fell short of estimates,

first back-to-back revenue miss in almost four years. it slumped in trading after third order results, which saw disappointing revenue and profit forecast for the busy holiday period. alphabet also posted a revenue myth as advertising prices decline. twitter and microsoft shares gained following their earnings. -- has raised its outlook for the sales growth but lowered forecast for profit. the cement maker sees revenue 6%, downetween 4% and from a previous forecast of 3% to 5%. they were trying to streamline its operations as it battles increasing costs. spacex is pursuing funding worth $500 million. the company is hoping to take advantage of a borrower's market and leverage finance, even as uber and tesla have been burning

through cash. it's climbed to $28 billion as it routinely launches and lands rockets for reuse. the brothers responsible for grand theft auto are likely to get most of $538 million in royalties. according to analysts, gary johnson will see sam and dan houser cash in. that's your bloomberg business flash. nejra? nejra: debra mao in hong kong, thank you so much. let's bring you headlines from the people's bank of china. the pboc saying it's confident to keep the u.n. at -- yuan at a reasonable level. it's moving to its weakest level in more than a decade. 66.9577t on sure there, is where we trade today.

on the pboc headlines, more comments other than yuan. it's as they may consider expanding the tool for bond financing and the pboc has taken active measures to stabilize the expectations being reported. the main comment to focus on is the yuan. sticking with central banks, we moved to the ecb, confident the eurozone economy is going to face a seven-week test before policymakers judge whether to stop their bond buying program. downplayed thean impact of recent stock market turbulence on fed policy, noting the fundamentals of the economy are very solid. >> if the data comes in as i expect, i believe some further gradual adjustment would be appropriate. i believe monetary policy today remains accommodative and with the economy operating at or close to mandate consistent levels, for inflation and

unemployment, the risks of that monetary policy must balance are now more semester and less skewed to the downside. bevan is still with us. let's start with the ecb. is there any risk that what's been outlined could be thrown off course by the recent weakness we've seen in the eurozone pmi data? james: i think mr. draghi will be keen to keep rates low. it's been useful for government fiscal policies because they have a carry trade. they are able to receive money, which they would not otherwise receive. they will also worry about the extent of which, if it reserves quantitative easing, it will drive bond yields up. and then it has gone back to the central banks and let's consider a members of the ecb and falls into real problem areas.

i think the ecb will keep rates at current levels to much longer than the market is prepared to accept. nejra: you are very much overweight the u.s. you don't see opportunity in europe. european banks most oversold since 2008. james: i think for a good reason. i look for the finances of the french bank. there's been a dependency on target to an u.s. dollar funding, meaning france is an economy generating -- at the moment. that puts the banks in a risky situation. nejra: what about banks elsewhere? italian banks, some of the banks recorded -- reported this week? interestingly, i wouldn't go to deutsche bank. germany is lending roughly one trillion euros into the system. when the bundesbank lends money, it has to go to the constituents bank. they have to provide the

capital. then there's a negative interest rate. the more they target to expand and germany provides finance, the more germany has to pay for it. that's a hazardous situation for german banks. i worry about banks in australia and canada because they have borrowed more money since the financial crisis and have loaded housing markets. i endorse the view we need to look at quality banks and the capacity to grow. it has to be jpmorgan still. nejra: back to the u.s. again. euro-dollar traders are pricing in and to of hike in 2020. james: i think the chart this is we will get to 3% or 4% next year is spot on. we could see 10 year yields fall. nejra: wonderful to have you. james bevan, thank you so much. james will continue the conversation with us on bloomberg radio at 7:30 a.m.

u.k. time. today we're asking the question, what is the most to blame for the stock rout? james bevan said tightening liquidity. this is bloomberg. ♪

nejra: good morning from bloomberg's european headquarters in the city of london. i am nejra cehic. this is "bloomberg daybreak: europe," and these are today's top stories. asia slums while futures on the ftse, s&p, and now trade down, down, and down respectively. yuan marches towards the seven mark, the people's bank of china says it will not use the people's money as a trade tool. good morning, everyone.

7:00 a.m. in london, under one hour away from the european equity market open. welcome to "bloomberg daybreak: europe." third-quarter adjusted net income, the red headline on the bloomberg coming in at 3.96 billion dollars. it is a comfortable beat on the third-quarter adjusted net from total. the output target meanwhile it's being raised, so basically, total keeping the leash on its spending as profits are jumping more than i expected. $16 net investment at billion. about the same. ever so slightly lower. target, 8% versus more than 7% before, so that has been raised a little bit. overall, the headline is the third-quarter adjusted net income on a comfortable beat. throughetting orders

from rbs. third-quarter pretax operating profit coming in at 961 million pounds. company compiles estimates of 892 million pounds. that is a beat, third-quarter. pretax operating profit from rbs, a 100 million pound impairment charge. it is retaining its outlook guidance. third-quarter net interest margin coming in at 1.93%. so basically, these are the key numbers we are looking at, and it's also got approval from the dutch regulator. the total income for the third quarter is coming in as well at a beat. 3.6 4 billion pounds. billion pounds. let's get to electrolux. third-quarter operating profit, 1.76 billion swedish krona. the estimate was 1.75 billion

swedish krona, so that is a very slight beat, basically in line with electrolux. it is saying it sees materials and a currency hint. -- hit. that is something to keep an eye on. they could see a similar material terrace hit in -- iff hit in 2019. market demand up about one 1%.ts and -- further price hikes, we have been talking about pricing power for companies, is to mitigate the cost of inflation. interesting from electrolux. we will speak with the ceo, who joins us for his first interview of the day after 9:00 this morning, london time. we have also got some more breaking news. ceo is telling the board of his intent to step down. something to keep an eye on as well.

what we saw is u.s. futures pointing lower after that game yesterday. the asian session getting punished again. same story for europe. yesterday, the stoxx 600 closed higher. ftse futures down .9%. cac 40 futures down lower than my than 1%. lower by more than 1%. the equity markets are stealing the limelight this week, but if we take a look, it looks like we could see bund yields lower. we saw the treasury yield lower this session. down almost to bas -- two basis points. not a lot going on there in terms of the bond futures in italy. italy quiet. at markets very much in focus. there is money moving into treasuries if you look at the futures as well. let's check in on the markets in asia.

man in hong kong has -- yvonne man in hong kong has the details. they cannot get this reprieve even though we had the gain in the u.s. session yesterday. yvonne: that's right. we cannot catch a break. we are wrapping up a sour note as well. take a look at the price action. we were down more than 1%. hong kong is lower by 1%. the kospi is one to watch. we are further into the bear market for the kospi, down one .8%. earnings are still the big concern. the big misses out of the likes of kia motors and hyundai motors. the bank of korea might hike later on this year. that could further weigh on equities. down .4%.ing the day we mentioned about king dollar, the renminbi is the one to watch. the governor of the pboc mentioned about keeping the yuan stable and reasonable at an

equilibrium level. for may expand these tools bond finance. we did see that take the edge off dollar china. hovering around 6.96 at the moment. we have been talking about how capital outflows have been picking up. taking a look at what we are seeing when it comes to movers. earnings, front and center. cnooc, the third quarter looks pretty good. morgan stanley and credit suisse keeping bullish on the stock. china life continuing to get pummeled as we did see a profit plunged of 76%. the stock market declines we have seen in china really dragging when it comes to their investment returns. sunny optical technology down 10%. to jeffries slashing the price target by more than 70%. 60%, excuse me. slower auto sales will hurt its vehicles business. we mentioned the tech sector here today. take a look at tencent, down

2.8%. we talked about more government regulation when it comes to these gaining approvals. we are seeing tencent, according to some reports, they might be adding some time limits for gamers in beijing. tencent trying to curry some favor with the government. nejra: thank you. tech.not get away from after-hours earnings from amazon and also that pushing u.s. futures lower, nasdaq futures lower, by more than 1%. bloomberg first word news with debra mao in hong kong. hey. debra: brexit talks are said to be on hold because theresa may's cabinet is not close enough to agreeing on a way forward. according to a source, no new plan is likely to be put forward by the british side before next monday's annual u.k. budget statement. meanwhile, a report by the national institute of economic and social resource says a brexit would shave

off growth next year. the trade accord that keeps most of the current arrangements could see gdp growth by 1.9%. philip green, owner of top shop clothing chain, has been named in the u.k. parliament as the businessman alleged to have used a legal agreements and payments to hide accusations of sexual harassment, racist abuse, and bullying. he told the house of lords that he felt it was his duty to reveal the name under parliamentary privilege after being contacted by someone involved in the case. in a statement, philip green allegationses the of unlawful sexual or racist behavior. niro are and robert de the latest targets of a series of suspected mail bombs sent to opponents of president trump. police removed us it -- a package. the fbi says two similar packages found in delaware were addressed to abide in.

the new york times says investigators believe some were mailed from southern florida. has batteredhoon them ariana islands -- the northern mariana islands. seven super typhoons have wreaked havoc in the western pacific this year. forecasters say it may head west to towards taiwan but the forecast is unclear. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: debra mao in hong kong, thank you so much. the global stock selloff looks set toinue -- looks continue because european futures are pointing down after a rough session in asia. a very brief reprieve. u.s.futures were up -- futures lower as well. we did see the brief reprieve in the u.s. session after we had microsoft and twitter beating.

microsoft and alphabet seem to have soured the sentiment. our guest. but get to our mro -- mliv question of the day. do with the sentiment souring. i have heard other comments from our guest earlier this morning but also elsewhere, so let me ask you, what is to blame for the stock rout? you know, obviously, take a have been next. tech earnings have been mixed. earlier in the year, in february and in october, it was rising treasury yields. i think the leadership in the market now has been taken over by stocks. bonds are no longer the leaders. stocks are the leaders. that maybe earnings you could say people were sort of expecting perfection and if

the earnings do not come in perfect and stocks are falling, but stocks are falling. the secondary factor of course would be the outlook for the fed to keep raising rates. s, as many reasons that have been put forward for the reason for the stock selloff and different views on where we go from here. ,et me take this to your world the world of bonds. the 10 year treasury yield is down more than 1.5 basis points. we are on a 3.10 handle. does the stock selloff put a cap on how high-yield can go from here? because we see the money moving into the safe haven when we see the equity markets suffer. i think there is something to that. i think maybe the way i would look at it is that this year's rising yields has been postponed. there is a flight to quality that has brought yields down off

their highs, so that is the latest development in the markets. is know, the bigger picture the u.s. economy is still doing well and the fed is still on track to raise interest rates. it's probably going to raise in december. we had two fed officials speaking today. today in asia, yesterday in the u.s.. richard clarida and loretta mester, who both raised the idea that the scope of the decline in stocks will not be enough to -- the fed from this gradual pace of rate increases. the fed is on track to send rates higher. short-term yields are going to rise. i think a better way to say it is the rise in yields has been postponed, but maybe not put off altogether. nejra: yes, the rise in yields has been postponed. thank you. citigroup increasing its bullish treasuries call with u.s. growth slowing, and we are looking ahead to u.s. growth as well. wes goodman from our mliv team.

thank you for joining us. you can join the debate on our question of the day. we tell to us and the mliv team. tv on your bloomberg. the question we are asking on mliv is what is most of blame for the stock rout? let's focus on oil. total has reported net income of 3.96 billion dollars, coming in ahead of estimates. it raised its 2018 production growth target from 7% to about 8%. the question for total and big oil in general will be where to spend all this extra cash come on dividends and buybacks, or on new megaprojects? .elly, great to have you that is a question we will put you in just a second. it of us your take away on total to start with. kelly: the premise is pretty simple. to be a big oil company when the price is high low, and the prices

they have fully taken advantage of it. some acquisitions that he did during the downturn would turn out paying off. you're seeing production targets and cost-cutting measures really translating into much higher free cash flow. nejra: what can we expect from the other four measures we are getting next week as well so we can get a bigger picture sense of the sector? kelly: this is sort of a blue pick -- blueprint that all the majors are following where they have pledged to retain this capital discipline, keeping their budgets where they are and coming in at the low sector and advantageenjoying the of the rising oil price. the one anomaly that we may see is exxon. they have raised their so we may see projects they want to spend more on and that could be a little bit different, but for the others, it may be different from what you saw from total today. nejra: does this mean that investors are liking the restraint in capex? if you look at the european

stoxx 600, that is the only industry group in the green year-to-date. investors are liking something. is it to do with the company fundamentals or the broader oil market? kelly: that is such a good question. it is very weird when you see this huge rise in crude and not the same rise in the equity shares. it is primarily because, you know, there is an issue of trust. they said before that we will retain capital discipline. what happened when the oil price rose is they overspend and completely eroded their margins and completely eroded shareholder value. what they are worried about is they are not going to retain this discipline they have pledged, and they would see some sort of i guess, you know, negative effect from that going forward. , thank youy gilblom so much, reporter with us on set. will bep, guy johnson speaking exclusively to the president of south africa, cyril ramaphosa. later, we will be speaking with

robert kaplan at 1:00 p.m. london time. this is bloomberg. ♪

nejra: 7:19 a.m. in london, just over 40 minutes away from the european equity market open. equities, weng of are asking the question on mliv, what is most of blame for the stock rout? you can join the debate. reach out to us. speaking of equity market, asia under pressure still in that bear market, looking at the msci asia-pacific index. coming under pressure, too. bid.uro cannot catch a yesterday, we saw equities close higher by .5%. we got a reprieve in europe like we did in the u.s., but it to continue.

u.s. futures taking a leg lower. earningsch causing jitters after hours from amazon and alphabet, but is that reason?he that is the question we are asking this week, as to why equities cannot catch a bit. opec produced more. we are going to cut. oil is headed for a weekly loss. bloomberg business flash with debra mao in hong kong. it has raised its outlook for this year's sales growth but lowered its forecast for profit. europe's biggest event maker sees revenue growing between 4% and 6%, down from the previous forecast of 3% to 5%. they have been shutting regional offices. it battles increasing costs. basf has reported profits and missed analysts estimates. they have higher raw material

prices. the company said the trade conflict between the u.s. and china was having an effect on its business. it also flagged the introduction of new emissions standards in europe. and that is your bloomberg business flash. nejra: debra mao in hong kong, thank you. the european central bank's confidence in the euro zone economy is about to face a test before policymakers decide whether to judge the bond program. mario draghi claimed recent weakness is either temporary or remains manageable. joining us now is the senior european economist at the law and general investment management. let us all the turmoil, not forget central banks. mario draghi downplaying the risk in the eurozone. why do you think he did that yesterday? >> in the short-term, he is right to talk about very specific factors. market, for car example. but i think they are quite intent on ending qe, so to acknowledge we have seen it

weakening until now would make it difficult to communicate that they want it in their program and we think they are ending the qe program not because they have hit their inflation target and consistent with their mandate but running out of bonds to buy, so it would not really play to their message to say that we are seeing a loss of momentum and therefore, you know, have those questions about what -- why they are ending the bond buying program. nejra: in terms of the rate hike, i know we are looking at the economists surveyed by bloomberg, looking at september 2019. is that in line with what you expect? hetal: it is. i think they tied their hands in nine months orxt so, even if inflation does they close to the 2% target, headline measure. i do not think that they are likely to move any earlier than that or push it out too much later.

probably want to start normalizing policy subject to what is happening with growth. nejra: what is holding inflation down in the eurozone? hetal: the core inflation numbers have been very weak, and it is a little bit of a puzzle. we have seen a consistently happening -- tightening labor market. we would actually expects core inflation to be stronger. i think it is a little bit of a puzzle for most economists why it has been held back at the moment. nejra: is the euro trading where it should be right now? we are on a 1.13 handle. we have to look at the other side, dollar strength, as well. what should the euro be higher?? -- but should the euro be higher? where if you think of rates are going, maybe you could expect it to be a little bit stronger from here, but by and large, it has come up from where was very high and consistent with the much higher growth

targets earlier in the year. , you know, you talked about the fact that the have their hands tied is its running out of bonds to buy but if we look at economic fundamentals, is the path the ecb said itself on justified? hetal: i think part of a cautious approach -- they will be ending qe but in a very cautious way. it's partly to play to that point about growth slowing down. after next year, growth will only be 1.5%, which having had two years or three years of above 2% feels like a quite significant slowdown that they will be very cautious and slow to normalize policy. nejra: how much of a risk does italy posed to eurozone growth and therefore to ecb policy? mario draghi did not want to drag in too much to that issue yesterday. hetal: italy is a very big risk

point. the expansionary policy of the italian government would help italian growth in the short-term, but in the long term, it is still a big problem, scenario,worst-case if we were to start seeing a standoff between the government and the european commission, and that was to start feeding through into much higher borrowing cost, then we would start to see some sort of spillover, but for us, the base case is that the italian government will have to succumb to market pressure. they realize that borrowing costs increasing actually impinges on their own ability to carry out their program. so actually, from here, we think that they will be the ones to blink. nejra: thank you so much. hetal mehta. get back to markets and earnings. after tech earnings disappointed after the market close in the u.s., has there been a change in investors appetite for the sector?

let's take a look at some of the morning calls. amazon's price targets have been cut. $50 dropped.a it represents a marked increase from the current price. this morning.cut jeffrey skied being it at a hold by lowering the price target by a full three dollars. that is a one dollar and one cent increase from the current price. remember that u.s. futures are pointing lower. we got that reprieve in the u.s. session. nasdaq futures lower by .9%. that is it for "bloomberg daybreak: europe." "bloomberg markets: european open," up next. myself and matt miller, coming up. it will be interesting to see that euro futures are pointing lower. tune in to bloomberg radio. if you have to step away from the tv, go live on your bloomberg device and the dab

radio. this is bloomberg. ♪

nejra: good morning. welcome to "bloomberg markets: european open." we are live from our european headquarters in london. i am nejra cehic alongside not miller in berlin. matt: asian stocks down. u.s. futures falling after disappointing earnings from tech that he then -- behemoths. european equities start trading in just 30 minutes time. ♪ nejra: the route resumes.