1% despite what we have seen in asia which has been a pretty negative session centered around china. aroundg picture focuses resilient in german politics, all those factors coming together to influence the start of the trading day. bookmaking stocks and gaming companies, money managers as before we went to break. expected seeing moves higher in european equities despite the gloom. it has been a real brutal october in terms of the losses we have seen, $8 trillion lost in the month of october. >> $8 trillion. by the way, it is october 29

today, so none of you are likely old enough to remember, but this is the 89th anniversary of the black tuesday market crash. we are still seeing green across the screen here this morning, in fact there's only a few instances of red and they might be encouraging if you are long on stocks. consumer staples are down but as investors are selling those, financials, that's definitely good news if you are long stocks. we are also seeing gains in i.t. this morning, gains in health care, and an energy. there are a lot of bright spots that last week were fairly dark red. what do you see as far as the mrr? you, becausel another bright spot is in the banking sector.

hsbc is moving as expected, is that taking some of the other banks with it or is it the fact that we see a more positive picture for italy, dodging what could have been worse -- s&p is keeping italy at triple be and we see it a real appetite for italian assets this morning. many of those banks are trading higher. downside, weat the are waiting for a few of those to open up and we will keep an eye on i wg which could move higher as a result of ongoing aluminum.n around producers in sales of personal care products, that company out with an update.

they are talking about pressure from raw materials costs. buto those are the losers in general european markets open higher despite the s&p 500 being set for its worst month since 2009. equities on mainland china also tanked but hong kong was buoyed by results out of hsbc. founder andow, the cio of adp invest. on me first ask your take the game we are seeing in european stocks. i thought it was odd since investors seem to be reaching for treasuries and yen, asia was pretty messy overnight -- have we fallen too far, too fast? there's a little bit of volatility, waiting for steady signs of the u.s. but there won't be anything significant developing in the small term until the u.s. comes through.

just a little bit of noise and nothing more. >> good morning. ofr big picture assessment what made us weaker last week and whether it continues -- there was an opinion piece talking about all the different things you could blame and why some of them don't stand up to scrutiny. >> i think it's complacency by the markets. volatility has been down throughout the summer, there was uncertainty in terms of the broader political developments. the markets are just complacent. >> how far do you think this correction will go or was that ?t do you think we will see in the rearview mirror? this is market

correction, volatility, policies and terms of economic development -- i don't think we are heading to recession. and as we are coming into the midterms there will be a little more volatility coming through but historically the period has had a better impact from the where the house and the senate changed hands from the previous. >> we will talk more about the u.s. political scene in a little while. i have this chart that puts in context the selloff we are seeing. makeslloff we are seeing us go back to 2008 to find comparisons. loss, it's offn any tricky point. what will stop the rock? is it earnings?

>> it is partly earnings. we saw that from a number of markets. however the earnings will be driven predominantly from the u.s.. it will be mostly u.s. earnings that will be driving that, but that's more short-term. what impact would this have on the broader consumer sentiment and the underlying fundamentals, especially in the u.s.? from the u.s. treasury's point of view, it is per value. we will reach close to that and i think this is the range. >> do we see a santa claus rally? the s&p was positive until very recently and now it is kind of treading water, down about .5%.

do we see the u.s. equity markets rally for 2018? it may be a marginal game, i'd expect some recovery after the midterms, but it will not be as anything significant. the market volatility is going to be with us for the next few years, it is going to be a changing regime in terms of the market participants and also policy mistakes. some banks will be over tightening and some not fast enough. the trends we have used over the last year i think will not be with us any longer. >> you will stay with us. founder and cio at adp invest. we are down in premarket trading after the $33 billion purchase -- you often see this after a company spends so much money,

shareholders react by selling the shares. some european stocks that might move today are in relation to this, micro-focused sap software and on the target side because redge jump hat got a 63% premium on friday's closing price. hsbcxt, we will talk about , bringing you the stocks on the move including the london stock that rose 4% after encouraging results from the hong kong shanghai banking corporation. we will discuss it further. this is bloomberg. ♪

♪ good morning, bloomberg markets : european open. france still not open this morning, euronext putting out a statement saying is due to a technical issue. the open for equity derivatives and indices is delayed. we will keep an eye on that. let's get the top stock stories. >> good morning. piggybacking off that

great session it saw in asia, shares up on one of the biggest intraday gains since 2017. the big thing to keep an eye on, when revenue growth outpaces cost spending even though the company has been spending on asian markets and technology, it has brought costs down to see revenue positive draws. shares are up nearly 3% after a report over the weekend that they might be fighting off co-worker space. terra firma earlier this year had probably put a bid in from the entire company looking like they were settling for a spin off of the biz. here's a story, shares taking off to the downside and they have gotten a bid up so far, after news that one of the key investors and ryanair is trying to oust the current chairman.

investors perhaps starting to feel more positive about turnaround. >> thanks very much. the euro is lower against all but one of its g10 peers after coalition took a beating in the state election over the weekend. it suffered its worst showing in frankfurt's home state in more posing a further threat to the government. the founder and cio is still with us. it's not really the loss they suffered that's the problem, it's the loss that her coalition partners suffered that hurt the most. they are now saying maybe it's time to reevaluate their coalition on the national stage. if the german government collapses, how bad would that be for the euro?

>> in my personal view it was a mistake for them to go back into the coalition yet another time. internally they were not comfortable with that and it shows that the people are with the same dynamics. it has been positive on the so clearly there is a significant impact and obviously they had been benefiting broadly. in terms of the impact of the euro i don't think it will be such a big impact in terms of internal german politics, were more worried about the impacts from states and we can talk about that soon. because do that now what is in the driving seat for the euro story? the moment, up by around an eighth of a percent, and this is relief around what s&p had to say on friday -- is that in the

driving seat? what is the upside or downside. it's going to be economic -- irentials and both of would expect it to we get in on the back of the broader interest rate and economic differentials. the news ofat, political uncertainty from italy is not going to help. italy becausebout it is complaining about the constraint of the single currency and yet italy has not restructured in the way portugal and spain and others have done, historically only relying on it -- >> is the consensus that we need to see restrictions on fiscal spending? is that accepted wisdom for you in the only way forward, or is there some argument we need to see fiscal loosening? >> that's a huge point. we will see generally fiscal evening -- we are seeing it in

why one of mye concerns for next year is not trade wars that inflation. france will and break the rules -- you can't really smack it and says italy is breaking the rules. it's about italy trying to find the core restructuring issues, there's been a lagging productivity for 80 years. >> when you say germany is breaking the rules, do you mean because they are holding too much surplus? not because they are spending too much, that would be so on german. >> i was not referring to the current account surplus, but to the deficit. 2004 when both germany and france became a little bit complacent and started breaking some of the rules, and that was one of the concerns at the time.

is it ok for the big countries to do it but not the smaller's? but in terms of current account surplus -- germany needs to address it. >> thank you very much. this week to victory in brazil. mark mobius says the stocks have more upside after the election. we will talk investing in emerging markets next. m later on, we will be speaking to the petroleum minister of nigeria. interview, 9:30 a.m. u.k. time. this is bloomberg. ♪

♪ welcome back to "bloomberg markets." we are 20 minutes into the trading day. take a look at the world map. arrow, thea big red cap huron has not opened. i know they were having difficulty, and as a result i don't think we are getting a true reading from france. spain, gains of half a percent and more in the u.k. i believe that french stocks are still closed. let's take a look at what's going on with the big m&a news.

for $33 red hat billion, a 53% premium over the closing price on friday. can see ibmrket you shares are down more than 5% right now, red hat shares are up 50%. red hat has a little more to go, and ibm, the premarket trade i think has a little more to go until it catches up with what we see. 6% -- are currently down broader, euronext is open for equity derivatives, and we heard from a euronext spokeswoman who says it is not yet known win trading will resume. let's talk about the emerging markets stories.

the brazil presidential election is over. with almost all ballots captain, the former army captain has taken 65% of the vote. during his campaign he promised to open up brazil's economy and .lso drew controversy mark mobius told bloomberg there will be more upside for brazil. althoughry optimistic he can never accomplish anything -- everything he sets out to accomplish, but i think he will be able to do a lot and there will be more upside. i think the trend is very clear. we have the founder and cio of adp investments still with us. also our managing editor justin

carrigan, with us from dubai. of questionslot leading up to the election about his policies. he has been seen as market friendly, hasn't he, this right about his further right policies. what is the market likely to focus on when we see equities open up later on? >> well, he is still seen as market friendly despite all those distractions. the market will be pleased with the fact that there's been a considerable rally across most brazilian assets leading up to the election on the expectation that he would eventually prove victorious. his initial comments in his victory speech suggest in bringing together of brazilian society after a very divisive election in some verbal pledges to address brazil's fiscal

imbalances and at least try to get to grips with this big issue, which is the pension has been ach continued chestnut for brazil for a long time. markets are already showing up we haveitive way -- seen gains for some of the adrs for petrobras and so on, bonds not moving very much but we could see a little bit of a reality -- a rally. the question is how long does it last and how much of the goodwill investors are giving him at this stage will last going forward. how optimisticou you are. i have heard some market participants forecasting further gains, even twice what we have seen. >> well, i have a very similar

view in terms of the honeymoon. we have seen a significant rally dependhe honeymoon will on the uncertainty surrounding financial markets and the volatility we will be seeing more generally. will be looking to increase the gains, otherwise i would expect it to have a negative impact. the broader situation is that we are seeing yet another change, from the liberal to the conservative regime around the world. some will be talking about it in terms of trump later on. >> it takes and others from the philippines and hungary. let's talk about other emerging markets. turkey has been a big focus this year. you remain negative on the turkish lira. why so? >> i do, because although the

political side -- the president has done a great job in reducing u.s.,uge gap with the they have come closer with the the economicbut on side not enough reforms are taking place and i doubt whether the central bank is independent. so i think there is still much more work to be done. >> thanks very much. you will stay with us. our emerging-market managing editor, i appreciate your time. the founder and cio of adp. coming up, we will take a look ahead to next week, midterm elections. polling and in the what does it mean for markets? we will discuss what is to come in the u.s. capital.

this is bloomberg. ♪

matt: hsbc surges. europe's largest bank rises as the ceo is seen to deliver on growth. cloudses amazon into the with a $33 billion purchase of red hatch, the largest acquisition by far. shares sink in the premarket for ibm while red hat sees a big boost. brazil lurches right. what will his victory mean for markets? welcome to bloomberg markets,

the european open. i matt miller alongside emma edwards at our european headquarters in london. anna: let's have a look at where we are. we are a little incomplete because we are seeing delayed trading on euro next. keep an eye for the opening. it was not clear when trading would start. we are pointing out other upgrades and downgrades moving share prices around. this company is an advertising business and they have been upgraded. nemechek also getting an upgrade. hsbc is up 3.7%. the ftse 100 gives london a little bit of an extra boost. in terms of risk on attitudes,

the count and gloom from china and the overnight session in asia, we have better sentiment with regard to italy. we see some italian services company going higher this morning. less to say about the downside for europe today. we do see an upgrade and downgrade or two. we are having a day with upgrades and downgrades having an impact. we will wait for further news on euronext. both tomorrow -- bocenaro has one brazil's election. the former army captain slept a power on a manifesto promising to open up the resort rich economy to private investment, strengthen ties in the u.s. and unleash a crackdown on crimes.

vote to be the former mayor of sao paulo. reduce themised to size and cost of government and reform foreign policy. >> our government will break the paradigm. allowdown bureaucracy and people and entrepreneurs to have more freedom to build the future. we will unite brazil. desley: chancellor philip hammond says britain may need another emergency budget and the event of a no deal brexit. the event comes ahead of his annual statement. his announcement on everything from boosting spending a mental health services have been job at this year by noises around. brexit

he will adjust the u.k. house of commons at 3:30 p.m. london time. >> getting a feel that allows us to continue -- deal that allows us to continue trading with a low friction at the borders and behind the borders will minimize any negative affect on the u.k. it will minimize any negative affect. whether there is overall and negative or positive effect, i cannot say. a ryanair jet carrying 189 people has crashed in the java sea of indonesia. indonesia's national search and rescue operating aflight, brand-new boeing 737 max eight, took off from jakarta at 6:20 a.m. and lost contact 13 minutes later at an out the tooth of about 3000 feet. populareaded for a

tourist destination. you can follow the latest development by going to tliv on your bloomberg. it has been confirmed that the boss of thailand's duty-free conglomerate was one of three people that died in a crash on saturday. helping fund its surprise premier league. the aircraft came down 45 minutes after he had watched his team play and no one on board survived. 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. matt: thanks very much. desley humphrey with your bloomberg first word news. we are eight days away from a midterm elections in the u.s. president trump isn't on the ballot, but it could be a

referendum on his policies and popularity. all of the house and a third of the senate is up for grabs, polling suggests the democrats currently have an edge in the house, but the senate will stay republican. what does this mean for markets and policy? deputy us now is jacob, head of the u.s. and americas program at chatham house. founder of invest is still with us. adhere?emocrats have an it seems -- edge here? it seems they have one main issue, they hate donald trump. if you look at the messaging of democratic candidates, a lot of it is about health care, spending, pocketbook issues. the mediasation in cycle is certainly around trump

and his popularity, that is not the message candidates on the ground are running with. actuallyhe results are viewed for the lens ultimately is another question we don't have the answer to because the week.on is not until next there are a lot of issues on the ground not necessarily getting the same coverage as the 24/7 trump show. be the anti-trump message is the most emotional one for the democrats. how much is that helping? what do the polls look like right now? jacob: the polls show -- when you ask american voters which party they prefer to have in control of congress, generally speaking, they average about 8% more one democratic over republican. that doesn't necessarily translate into a more democratic congress because the way seats are port portions is not proportioned,--

is not proportionate to the american public. it looks promising for them in the house, but we have seen polls be a little bit off.there a more this is still very much anyone's play. anna: picking up what the most likely scenario, the polls suggest that is for the democrats to take the house, it is typical to talk about the legislative agenda grinding to a halt. other periods in history we can compare that -- are there periods in history we can compare that to? isob: the most recent 2013-2014 when republicans -- actually 2010-2014. what happened there was you saw a series of fairly aggressive austerity measures, simply because the democrats and republicans couldn't agree on how to keep the government operating.

there was a general agreement that spending needed to come down, but the way it was managed was the worst case scenario for everyone. i think that is likely a reprise here. also look to instances where congress has investigated the president. you can see this foretold by democrats on the oversight committee in the house. they have the l -- they have a list of investigations they want started. matt: they are doing a lot that doesn't seem to have yielded much so far. what do you expect for the midterms and how do you think that is going to affect the equity markets? midtermsrms of the very much in line with expectations. i expect the democrats to win the house. i think it is a hard struggle for them to win the senate. trumpw is that president is most likely to win 2020 again. my expectation is that the economy will continue to be

doing well. to his car base base, and there doesn't seem to be unifying democrats on either side. simple majority in the house, but it would still -- super majority in the house, but it would still require a super majority in the senate. anna: if you see trump remaining and post, we are asking and our question of the day how much more does it need to fall for us correction?ealthy give us your thoughts on that. in terms of the move toward your end, i would expect as the summer covering rallying on the back of that. the most important thing is going to be volatility. we are going to have it coming through over the next couple of years. the fed will continue to increase interest rates.the treasuries will within 375 and 325%.

anna: thank you both. we covered a lot of ground. one of the stock stories we need to return to is hsbc because we see a trending higher this morning. it is our stock of the hour. and now trades higher in london giving the ftse 100 a bit of a boost. hsbc shares jumping 5% in london and what has been described as encouraging results. a lot of focus on these positive jaws. playing out very nicely for this business. blog,oking at the tliv the conference call with analysts is coming to an end. the ceo saying the bank is making good progress as he signs

off. it does seem to be the jargon of the day in the banking sector. up next, we will bring you some of the stock movers this morning. this is bloomberg. ♪

anna: good morning. we are 44 minutes into your trading day. european equity markets pretty positive this morning. reports and the banking sector, let's talk about some of that monday merging activity. ibm has agreed to acquire red hat and a $33 billion bet on the cloud. this confirms an earlier bloomberg report. ibm's ceo called it a game changer for the cloud business. joining us now from our deals team is erin. give us the details behind this. hefty premium. aaron: i think this is a deal ibm needed to do because the fact is, the big players like

google and amazon have been so big and expensive in cloud that ibm trying to do it internally, finally decided to bite the bullet spend $34 billion on a big deal. this makes them a very pivotal player in the cloud. matt: why has ibm avoided big acquisitions in the past? this is one of the biggest, most famous blue chip stocks on dow jones industrial average. ibm -- aaron: i think ibm thought they could do it from the inside out. the reality is, the market in cloud is already so competitive, that finally the ceo decided to go the inorganic route. it wasn't working internally. anna: on other sector that is topical is takeda,

pharmaceuticals business considering a sale of assets in its over counter business in europe. what is the driving force? hand, it ise one trying to get final approval from the eu, that is the one big reason they still need antitrust approval. they offer to sell a certain type line drug. they need to pay down a lot of debt. this was a huge acquisition for them. the idea of the otc asset is to get a little money and help you down the debt. -- paydown the debt. down the debt. matt: if you are a terminal subscriber, you can check out the newest and biggest m&a news at m&a go. let's take a look at your mid-cap movers. : had talked getting

more full control of the company. the offer for those shares or a 10% premium from yesterday's close at 1270. we are almost getting to that offer price.on the other side, one of the worst performance today is bankia, reporting earnings which at first glance looked positive, but it is all about net interest income which was a miss. that continues to weigh on shares. also to the downside, just eat. this is after a downgrade. this all has to do with uber and a possible merger between the two. this could cause the demise of just eat as they are unable to keep up with the cost from the merger. anna: did forget terminal users

can interact with all of the charts. browse all the charts and catch up on analysis. we will show you more charts after a short break. up next, ad load the charts. this is bloomberg -- battle of the charts. this is bloomberg. ♪

anna: good morning.

this is bloomberg markets, the european open. a little insight into the bloomberg european headquarters in london. let's talk a little bit about european equity markets. pictures of our offices here in london. equity markets, we have seen a delayed open or not yet seen an open. there will be a delayed open due to a technical glitch. we have not gotten an opening. that is france, portugal, amsterdam. interesting the futures markets are trading at normal. indexes,of the equity we are seeing a delayed open due to technical issues. we will keep an eye on the. matt: don't forget that turkey is also closed for a holiday. basically half the continent

right now is in the red or looks to be in the red because it hasn't opened for trading yet since friday. let's get back to another emerging-market, that is brazil and what the election there means for markets. there is likely more upside in brazilian stocks after the election of boconero. >> we still have a long way to go. i think he is going to be relatively successful in making the reforms. the main thing is the pension reform. if he is able to get that going, you can to the brazilian budget in better shape and financial markets and better shape going forward. i'm very optimistic. he is never going to be able to accomplish everything he sets out to accomplish in view of the chaotic situation in the brazilian congress, but i think he is going to be able to do a lot, and it will be more upside for brazil.

there will be corrections along the way, but i think the trend is very clear. have been pretty focused on how he is going to form his economic team. i think the reason why markets heavily backed him is because of his economic advisor. there is a list of names of who they are going to be forming, a we heard from an interview from naro over the weekend that it will come down to the chief of staff. do you think that matters? >> i don't think so. i think the direction is the most important thing. how he gets there, who he appoints. that is another factor that will not be very important. the key is to look at the direction he is moving and what he is talking about. the first thing he talks about his pension reform. he realizes that is key to adding the financial markets in order -- having the financial markets in order. that was market speaking

to our colleagues in asia earlier on. mark speaking to our colleagues in asia earlier on. let's go to the battle of the charts. matt against dani burger. thought it was odd that we saw futures pointing up this morning. then came out of the gates pretty strong, maybe because of the depth yesterday. yesterday. it seems to me a lot of momentum is being lost in gdp growth. in terms of confidence, what you see here in this white line. gdp is a quarterly look at and confidence going back to 2012. tomorrow, we will get a third quarter for the european union. it is expected to be right in line with the first and second quarter, well below what we saw in 2017. if that is the case, we may see a continued dip in confidence.

we are to continue confidence tomorrow as well. as these columns get smaller and smaller as this white line comes down, that means investors are going to be worried more about gdp that is declining and confidence coming off. anna: matt miller is all about the data. dani: i'm taking us to the world of em. when it comes to stocks and currencies, they are of two different mines. we have seen stock -- minds. highest.y is about its on the other hand, we have seen fx volatility seem pretty subdued. that is in the blue. the trend has been downward over the past month. the question is, which will be the other. analysts say it will be fx volatility having a calming force. anna: thanks so much. i'm going to go with matt.

i like the data reference.it is going to be a week where we have to reference data. today on this program. this is bloomberg. ♪

francine: looking for direction. there is more weakness in global equities.

tightrope, the u.k. deliv --or will will deliver a final budget. his executive makes good on promise to bring back growth. shares jump. this is "bloomberg surveillance ." i'm francine lacqua in london with tom keene in new york. it is that corgi time of year we change our clocks in new york but not in london. tom: really, an extraordinary weekend. this ibm transaction with red hat is absolutely extraordinary. the exposure it places on ibm. quite a: we have lot of corporate together.

-- to get through. osonero has wone brazil's elections. promise to strengthen times of the u.s. and unleash a crackdown on epidemic crimes. beat thef the vote to mayor of sao paulo. costomised to reduce the and size of government and reform foreign policy. >> our government will break the paradigm. we will trust in people.we will cut down bureaucracy , simplify things and allow people and entrepreneurs to have more freedom to build the future. we will unite brazil. jet carrying 189 jet carryingionair

189 people has crashed in indonesia. capital at from the 6:20 a.m. and lost contact 30 minutes later. the aircraft is heading for a popular tourist destination. you can follow these developments by going to tliv on your bloomberg. chancellor philip hammond says britain may need another emergency budget and prolonged austerity in the event of a note yield budget. brexit.al the chancellor will address the u.k. house of commons at 3:30 p.m. london time. >> getting a deal that allows us

to continue trading with our european neighbors, with low friction at the borders and low friction behind the borders will minimize any negative affect on the u.k.. it will minimize any negative affect. whether there is a negative or positive affect, i can't say. kailey: 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. leinz this is bloomberg. tom: thanks so much. after a sprightly week to say let's agree position where we are with futures at negative seven, dell futures at -79 right now. futures bit of -- dow at -79 right now. the vix at 24.47. much worse in the gloom of

thursday and friday. the dow settling 24,688. is a little ahead of the doubt in terms of gloom. renminbi ever closer to seven yuan. this is what i am looking at overall. european stocks started to weaken, largely ignoring some of the mixed picture across asia and slightly weaker u.s. futures. some traders raining and expectations for tighter fed policy. what i am looking at is euro after germany's governing parties fall of the lowest result in decades. delivering another blow to chancellor angela merkel. back to european stocks brushing of a mixed a session in asia. a slightly bigger picture. the stoxx 600 has risen for the

second time in three days. joining us now is rupert harrison. as always, thank you so much. what a day to come and because we are also expecting the budget from the u.k. markets,omes to the what is giving them their cues? elections, the, repricing of assets? pert: the selloff was a momentum unwind. i think when you look at the internals of this, we have seen growth outside the u.s. slowing for some time now basically all year particularly in china. i still think the market is under appreciating the extent to which china has slowed.

i think the concerns are now being thrown forward to the effect that the u.s. has been the main driver of global growth all year driven by a strong the impulse. capex impulse. francine: does that mean we see -- think it is difficult to continue rising when you have global growth falling. i think we also had the first hint last week in the speech about the fed starting to think andt testing neutral starting to toy with some communication around a slightly less aggressive hike. i think the global growth concern should support treasuries. tom: i sort of feel like the week after brexit where i believe it was ubs decided to buy instead of lease in london. i thought that was a great sign for the future of london. we have had market turmoil and today, we have this historic tech transaction by ibm.

tell me about the disruption you see out there. as everybody battles for scale. i think that is a big deal and something the market finds hard to price. i think that we still buy into the idea that big destructive business models still have enormous growth potential. i think the ibm transaction is interesting. thing something that will be spreading is this transformation of the u.s. corporate sector has only just begun in terms of cloud.ent in even if they get starting to come off and more traditional cloud c we see this apex. tom: the idea we are seeing massive scale in every industry and transaction, you have a

wonderful hybrid between the politics of the people, representing people within democracy and also business and financial blackrock. is scale good for our viewers? rupert: i think it can be good if it is a way of harnessing the economies, driving down costs and passing those on to consumers. you have to look at some of these business models in tech and other industries. clearly, they have delivered enormous change. the scale brings you up against government. i think we're going to see that today with regards to the u.s.. i think the budget is going to by going ahead with an international sales tax on internet companies. i think that is one front you have got. concerns concerns, around scale and monopoly. buts for consumers, governments now concerned with scale becoming a problem. francine: if you think china

slow down more in markets -- more than markets think it is, what will be repriced? i think chinese assets are have alre -- have already been repriced a lot. i think they have limited amount of control over that. i think the currency has further to go. think we have seen mixed messages from the authorities. i think this is all about choosing the right time to reach the threshold. i'm pretty certain it will happen. the economy definitely needs a weaker currency. the work that we have done suggests the markets that are slowest reprice chinese growth are actually dm equity markets. that is where companies with big exposure to china start to see weakness coming through. markets are generally pretty slow to respond to that.

growthlarly in europe, has been hard to come by in europe. stocks with big chinese exposure have been quick. we now see that continuing to unwind. tom: not that i want to get a single point fx call, but the basic theme is, fx is the solution for a lot of these challenges? it is a basic solution for an economy like china which is slowing down, has limited capacity to stimulate the economy because they are very concerned about leverage, and they clearly need a weaker currency as part of that macro picture. the challenge is that they need to manage a currency without triggering the outflows. they are very dependent on continuing inflows, following index inclusion into equity and markets.

they need to manage a smooth depreciation for the sake of the currency, but they need to do that without triggering volatility. francine: thank you so much. coming up, an exclusive conversation with the nigerian minister of state. that is at 5:30 a.m. in new york. we will be talking to him about oil prices, opec and demand across the world. this is bloomberg. ♪

kailey: this is "bloomberg surveillance." hsbc shares have surged after the bank show progress. 16%,t a pretax profit rose beating analysts estimates.

its jobs reported figure is moving in the right direction, indicating the lender has managed to increase revenue faster than costs in the quarter. the ceo says the results are encouraging and show potential for revenue growth. francine: thank you so much. we are just getting breaking news out of germany. angela merkel will not run for the new head term. this is according to -- she will not be putting herself up for party leadership at the party convention. we are trying to get this confirmed or not. i understand the term to be december. we need to look into it a little bit deeper. this could change the face of politics in germany and europe.

rupert: this is major and historic news. one of the things we were just discussing is we have lost count of the number of times we have said, could this be the end of angela merkel, and she has been the survivor. overstate the role that she has had an being a stabilizing figure and europe. i think markets will be very concerned about the vacuum she could create. we have rbc momentum coming out of this european and eurozone seenm program -- already momentum coming out of this european and eurozone reform program. i think in the absence of a big unifying figure like her, it could be in doubt. francine: i'm looking at euro in longer-term, but it is study even after germany fell to their lowest results. what does this mean? does whoever come after her need to change the germanic stance on

immigration, and who will take over? over the years, she has gotten rid of every viable opposition. rupert: it is a very open field. in the end, longevity catches up with you as a political leader. it is not clear there is an alternative itrategy in german politics. think she has taken the hit for immigration , but there is now a national consensus. i don't see a major direction in the change of policies, it is more the anchoring figure she has been. both of the major policies are getting these polls toward the extreme -- pulls towards the extreme. she has been this figure anchoring it in the census. i think what you could see now is a shift towards more extremes on both sides of german politics. tom: you see that from our reporting out of germany on the election. bring this up.

this shows what mr. harrison was just discussing. this is directly from bloomberg news. -11% change in of the spot in frankfurt for angela merkel's policy. split out here on the barbell strategy of the afd and others. how do you get to a coalition or majority when you see that massive barbell shift? rupert: it is very difficult. i think the key issue is they are clearly suffering the massive losses. youfear for them is that have seen and other european countries the traditional centerleft policies collapsing. in france, almost disappearing. without angela merkel in the cdu, i think you're going to have a big fight between, are we losing because we are not right

wing enough and they to challenge the ft, or do we -- fd . i think there's going to be a lot of soul-searching and instability in elections. tom: i'm sorry. francine: you were looking at geography, right? tom: and this change here. where will this be expressed and a markets -- in the markets? is it expressed in german paper or congenital to the markets? i think the market is weak.y pretty you have a lot of factors for now making investors still reluctant about allocating capital to europe.you have pretty sluggish growth , the italian budget situation and longer-term outlook for how you integrate italy and maintain that. now, the potential of the

departure of angela merkel. i think it is a general dampener on european assets. think the question is now is international allocators think about, why should i be allocating to europe? measures lookany pretty cheap. it makes you think twice. francine: i don't know who they would elect. someone different from angela merkel or just different on immigration. what are the potential fallout? immigration, periphery of europe? rupert: it can't be helpful for eurozone agenda because angela merkel has been a politician able to make the compromises since the beginning of the eurozone crisis. she was the one able to do the painful compromise on the german side and order to keep the show on the road. there is lots of anger on the right of the cdu and in the fd.

this was originally the -- it was originally an anti-bailout policy. going to be harder to reach accommodation with italy and france. i think this puts that whole agenda on the back burner. francine: we now have it by two sources. she apparently told a party committee this morning that she wanted running for that in december. for more on angela merkel, let's bring in chad thomas. this feels he it's because we have been talking about the future of angela merkel and who could take over. i can confirm from our

side that we are also hearing from sources that she will not stand again for the party chairmanship. that party conference taking place in early december. she announced that to the party leadership in the last hour or so. we are expecting to hear from the chancellor later this afternoon. she has a press conference scheduled for 1:00 p.m. to discuss the results of the election yesterday. her party did very poorly and the election. coming with the worst results there and more than 50 years. clearly the chancellor has decided it is time for new leadership for the party. is interesting as she has always said the party leadership and role of chancellor, that they should be together. that was the role of one person. clearly, she has been feeling pressure over the last weeks and months and has now decided she

will not seek reelection as head of the party. the head of the party will be chosen on december 7. who will come forward? ad: that is the million-dollar question here. there are people who have been quite openly critical within the party of the chancellor. we could expect someone like the health minister. he has been one of those critics that could possibly step forward as a candidate. it will remain to be seen who also step forward. there are those people who are close allies of the chancellor who have been quiet on this front and very well may come forward now that she is about to say that she is going to step down. tom: the amateur analysis of this is the death of two parties.

what do the people want? to they want a new established set of parties or a splinter germany? chad: what is interesting is that you are right. what we basically have now is several small parties in germany. for a very long time since basically the end of world war ii. you have the social democrats and christian democrats, who basically were the two main parties. they really ran the country with a couple of smaller countries sometimes joining and coalition. when you look at the results of the most recent state votes, there really are not big parties anymore. the liberal fdp, the green as well, well as social democrats. this splintering makes it difficult to govern in this country because you need several parties in the coalition.

people in the exit polls that they were very unhappy with how the national government has conducted itself over the last seven months since they came into power. this was in some ways a vote of protest against them. that they question is still, what is going to happen to the social democrats. they had their worst result yesterday in this state vote since world war ii. if they are expected to address those results later this afternoon as well. what is going to happen on the national front with the social democrats, will they consider pulling out of the national government. there is a lot that still remains to be answered. francine: thank you so much. breezyll go through a couple of weeks and hours. what is striking is a

angela merkel is the last of the pre-populism leaders in europe. it is really germany catching up with the rest of europe. , there'st negotiations a lack of focus from germany. the u.k. had been hoping that she would make positive with the irish backstop. if she's sticks around long enough to make concessions and see this process through smoothly, that could be a positive. francine: what are you expecting from the u.k. budget today? rupert: from a markets point of view, it should be relatively quiet. we have rdc numbers in advance --ut an improved finance already seen numbers in advance about an improved finance budget. i think there are two big things

happening in the budget is only a small part of that. the big thing is brexit. philip hammond is trying to use the budget to enhance the case for a smooth brexit. as, as a country with a deficit now closer to 1% of gdp, we are having a debate around the public finances, future of public spending. raising expectations that cannot be met. the budget today, will start to see the government's answer. francine: thank you so much. coming up next, we talk to the head of latin american research. we talk about brazil and bosonero's commanding victory.this is bloomberg . ♪

francine: this is bloomberg surveillance. london andncine from new york. let us go to brazil. bolsonaro wins the elections, marking a hard pivot to the

right. campaign, he promised to open up the economy to private investment and crackdown on crime. of verisknco maplecroft joins us. mr. bolsonaro sweeping into power. trying to open up to private investment. what will he do? going to focus on the first social campaign promises. securitylking about eating a key issue and something he wants to deliver on. -- security being a key issue in something he wants to deliver on. reforms, thereo will need to be negotiation and it moves slowly. we should not be expecting pension reform in the first 100 days. francine: what should the market be focusing on? they are a lot of things

have been wanting for some time, a crackdown on crime. what are they mispricing? this is a former army captain they could hurt social cohesion. jimena: that is one issue. another issue is the lack of executive experience. they promised to change politics is good for the electorate. can you change the way congress works when you have 30 parties and a minority blog? is whetherissue bolsonaro is committed to the liberalism he has promised from a background of corporatism. thisin the american press morning, there is a touch of, he is like the president of the united states and like the leader of the philippines. is he trump or more like duterte? jimena: he is also narrow. no one is like -- he is bolso

naro. no one is like someone else. and one ofifferences those is the maturity of the democracies they operate in. and thea spectrum brazilian institutions are not as strong as u.s. institutions are. we will have to see whether he decides to take a move against the judiciary. tom: how does he do that? what are the first actions you are going to try to glean how this guy will govern? thing to keeprst in mind is whether he tries to go for the leadership of the lower house and whether he succeeds. i would expect him to attack established leaders in the house and instead of building a coalition based on party support, basing it on issue support. in brazil, we talk about the

agrarian block and the evangelical block. that are the areas cross party organizations that he is going to try to court. the issue will be whether he manages to roll based on those or whether he has to start negotiations with the strongmen he has turned his back on. rupert, this is a president that talks tough. will he be able to deliver? rupert: it has rallied on the expectation it was beaten down as a class. we may see a repeat of the emla effect. we get a relief rally m when people start to confront on the different choices, some of that optimism starts to flow away. the limiting factor is the fiscal issue. it is the most important thing. reforms are just the beginning

of this. thats he can demonstrate he can get congress together and address fiscal problems, that is not going to change the underlying investment case. francine: what are the chances he delivers on that? jimena: it is tricky. rightectorate has turned politically but the brazilian electorate is not liberal when it comes to economic policy. when thison is unpopular policies start impacting his support base, whether he is going to decide to move away from his economic team and start making policy on his own. anyone's guess what pension reform would look like. tom: within brazil, the currency is litmus paper. it was theiry greatest miscalculation coming in. a bets being made on

the brazilian economy through the real? jimena: there are questions about recent statements from the campaign whether they would maintain the current orependence of the real whether abandoning would be established. that would create concerns in the markets about greater intervention. that is what has been promised and it is one of the pillars of brazil's fiscal stability in potential to recover from his situation. jimena blanco, thank you so much. a historic election today. your monday briefing, here is kailey leinz. is set togela merkel be planning to quit as head of the christian democratic party after newly two decades. merkelng to the source, told a leadership meeting she will not run again for the chairmanship in december. the move follows a decline for

election over the weekend, with the party suffering its worst showing in more than 50 years. won itsal democrats lowest share of the vote there since the second world war. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thank you. let us get more on angela merkel. matt miller is in berlin. do we have a confirmed she is stepping down from cdu head and does that mean she will also need to step down as chancellor? that is not what it means. we have had chancellors who were not heads of their party. schmidt was not head of the party and schroeder resigned a

year or two before his run as chancellor ended. this means she would no longer be the official head of the party. that is important. if she steps down as the head of the party, whoever takes over will be seen as her successor. they have to wait in till the next election before she would move out of her office -- wait until the next election before she would move out of her office. francine: when are the next elections? it will raise questions about her ability to stay on as chancellor. are not election scheduled until 2021. at any point, there could be a political upheaval to bring elections about. the biggest point in the loss of in the and the spd elections yesterday was the spd

's loss. their coalition partner, the social democrats, have said they the grando rethink coalition. if that happened, this government would collapse. tom: you are a great student of this. perhaps this government would collapse. i get that. this is not hungry, poland, even the struggles italy faces. where is germany going to? parliament orted can these parties, like in america, maintain residence with resonanople -- maintain ce with the people? for: the alternative deutsche lint right wing party has gained a foothold in the state parliament. increased of their

standing in the elections last month, as have the green party and the green party has done well in both of those elections. more power for smaller parties and that is leading to a more fragmented parliament. francine: the move follows this historic decline of the cdu. that is why she is stepping down. why did they do so badly? this is an answer, if i could answer this, angela merkel would hire me on the spot. saying oneople are of the issues is they have not modernized. they have not grown. there is too much old blood in this party. people on the right will tell you angela merkel has held the cdu back from being the party it had been. that is goingtion to be debated across germany.

why are the main parties doing so poorly while the new parties seem to leap up in terms of power. it is not something you see only in germany. it is happening across europe. francine: matt miller there in berlin. we will be back with rupert harrison of blackrock. coming up, and exclusive interview with the minister of state for nigeria. andl be talking opec looking at demand for oil across the world. this is "bloomberg." ♪

tom: this is -- francine: this is bloomberg surveillance. we had big news. bloombergrts by

saying that angela merkel will not look to stay on as the cdu head. we wait to have people put their names in the hat. let us get to rupert harrison. this is the end of an era. we will -- we were hearing she will stay on as chancellor. she has been a powerful chancellor. if you look at european countries, who will lose the most? rupert: almost everyone. she has been such an anchor. the uncertainty is how long she can stay. it is true chancellor's have stayed on in the past. i wonder whether that is realistic in the modern environment. her authority is going to be undermined. be youimistic case would have a chancellor who has got an end and may have an eye to her legacy. macron,re a emmanuel

you say there is a window for germany to make concessions to land reform. that made turn out to be too optimistic. -- that may turn out to be too optimistic. that is a blow for emmanuel macron. salvini, you are not going to find a in the mood for making compromises. the political environment is going to play to who is going to be tell upon italy. no more concessions. francine: thank you. a former member of the democratic party. he was the former deputy leader of the cdu. my german is broken but i'm looking at the websites saying that someone is ready to run.

how many names are you expecting to have from now until december? it is understandable that angela merkel is saying enough is enough. the losses of yesterday have been terrible. there is a reaction on that. you have to see, she will still be the chancellor. she is not resigning. she is resigning as party leader, which is different. it is not necessary to be party leader and chancellor at the same time. forcan run as chancellor even the whole period, another two and a half years. we will see other people coming and joining in on december 5, where we do have the party congress. stepping down as cdu leader a day after she lost badly in elections, does it not

not admitat, does it something is wrong in the cdu? how can she stay on as chancellor for two years? she will stayaid on as chancellor but not as party leader. it is different. sometimes, party leaders are not chancellor. we had this before. look at mr. kohl. ishave to see there uncertainty because angela shocked about the results of yesterday, which is understandable. i will make my job as party leader free. there can be somebody else running the party and let's see what is going on and how we

can arrange it as far as the chancellor is concerned. bavaria and lost in frankfurt. has she lost across all of germany? the outcome of these votes, does that speak for all of germany? michael: i did not get you. she lost the election in bavaria, she lost the election in frankfurt. does that speak of all of germany? michael: i would not say so. because of different the problems with the minister of the interior in bavaria. of cdu.n is a loss i am sorry. i hope that this cannot go on. that is one of the reactions she is giving. i ams saying, if it is me,

stepping down as party leader and we have to see who is coming in. there are a lot of people capable and willing. there is a new name comes to my attention a couple of minutes ago. cduas a good leader of the a couple of years ago. i was astonished he is coming in. there are younger people. old. 62 years it is a question whether he is the one making it or somebody else. tom: in america, we would call it lame duck where you are in power but you are not. could chancellor merkel become a lame-duck this morning? michael: i do nothing so because she has never been and will not be. she is running as she did always the chancellery.

i guess nobody should think she is gone and we do not need to talk to her anymore. that could be a big mistake if somebody thinks like that. he is also thee: chairman of blackrock germany. if you were in charge of the cdu now, how would you change it? what are the policies that would make them reconnect with voters? michael: one of the problems is the immigration situation. we do have a lot of migrants and the laws are not adjusted. if somebody has to leave, it takes about two or three years, even if he is doing bad things, which has happened in the past. we have to these laws and rapidly. only just us, not but it is the socialist. we are having a grand coalition in berlin.

both parties have to see this is , this the reasons the afd new party, is picking up so much of the votes. it is both parties leading -- losing to afd. that is something we have to look into. tom, it is telling that my tail salvini had just started talking to italian --izens saying votes want show the people want changes. thank you so much, the former deputy leader of the cdu. a will move forward with terrific news flow on monday, including the ibm red hat transaction. joel greenblatt to join later in the 11:00 hour. this is "bloomberg." ♪

francine: this is bloomberg surveillance. we were talking about the u.k. budget.

i had a great chart looking at sterling and a lot of these forecasts have been revised upwards. look at the chart of the day. be lookingne we will at this afternoon when the chancellor unveils his budget. the question is whether mark carney will have to take a more pessimistic view of the economy. let us get insight into all of this with rupert harrison of blackrock. life, he was the chief of staff to the previous chancellor. is this a political message when you give a budget? does it get you or lose votes? isert: if the government working together, budget day is a great opportunity to get your message across. yous one of the days when can guarantee that message is going to be top of the news. i wonder whether the government

is coordinated enough to make use of that today. there is evidence of that around brexit. you were talking about u.k. asset prices and it is about brexit. this budget is awaiting the outcome of the brexit vote. there are up winds ahead. times will be better as long as we get a smooth deal. it is transparent, using the budget as leverage. francine: let me bring you to our sterling forecast chart. where do you see sterling go? rupert: we are positive. it is a bumpy ride. we get a deal in negotiations and i think that gets through the house of commons. tom: thank you for joining us today. is austerity dead in the united kingdom? according to the prime minister, yes. has raisedlanguage

expectations that will be difficult to me. the u.k. has a budget deficit of 1%, not 10%. there is scope for more spending. any government is going to have to make difficult decisions. there are going to be demands that cannot be met. tom: rupert harrison, thank you on this busy news days. -- busy news day. we look forward to the international economy, to germany, the technology transaction.

ibm once morning, puts the company and

search of a golden decade. , can international business regimes compete with amazon and microsoft? there will be an election. can you, can the president trust the polls. trick-or-treat, emerging markets, will they consider a stronger u.s. dollar? this is bloomberg surveillance. incredible news flow. tom keene and francine lacqua. out of germany, a bombshell. discuss the importance of angela merkel's announcement. francine: there are angles to this. we understand angela merkel is weighing her future as the leader of the party. she spoke saying she will not run as cdu head. her this means is whether

chances of staying on as chancellor are reduced because akened ande we this will impact the stability of europe. she has been chancellor for 13 years. it does not mean she goes as chancellor but it means her policies may be put into question. e of europe.he wholl tom: terrific news flow. our first word news in new york city. here is kaylee. kailey: more on that story. angela merkel is said to be planning to quit as head of her christian democratic party. merkel told a leadership meeting that she will not run again for chairmanship. it is reported she wants to continue serving as chancellor. the move follows a decline for the cdu in a state election, the party suffering its worst showing in more than 50 years.

jair bolsonaro has won brazil's presidential election, marking a hard pivot to the right in latin america's biggest economy. the former army captain swept to power on a manifesto promising to open up the resource rich economy to private investments, strengthen ties to the u.s., and unleash an aggressive crackdown on epidemic crime. with almost all ballots counted, bolsonaro won 55% of the vote to beat the former mayor of sao paulo. in his victory speech he promised to reduce the size and cost of government and to reform foreign policy. >> [speaking portuguese] >> our government will break the paradigm, we will trust in people, cut down bureaucracy, simplify things, and allow people and entrepreneurs to have more freedom to build the future. we will unite brazil. kailey: a lion air jet carrying 189 people has crashed off indonesia in what is potentially the worst commercial aviation disaster in three years.

the flight operating a brand-new boeing 737 took off from jakarta at 6:20 a.m. local time and lost contact 13 minutes later at an altitude of about 3000 feet. the aircraft was heading for a popular tourist destination. you can follow the latest developments by going to tliv on bloomberg. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." tom: thank you. toata check before we get ibm. futures reversing, up 11. read on the screen one hour ago. a little weaker off the merkel news. a vix improving. here is the dow close on friday.

ibm looking at 118 opening. francine: this is what i am looking at. on europeanement politics. the euro has turned lower following reports that angela merkel will quit as head of her party after nearly two decades. after the wake of the governing party's worst results in elections. we have the budget unveiled by chancellor philip hammond. european stocks, nothing huge. tom: we are thrilled to have with us neil shearing of capital economics with us. you get lucky with the ibm-red hat transaction. michael shaoul joins us. -- michael, i want to go not to bloomberg

businessweek but to business week of a few years ago, 1979 where the article was on a mature company. ibm has a history back to watson jr. of betting the company of renewing themselves. can that workout in cloud? michael: it feels late to me. you have large players already established in that space. this is not been a great cycle for ibm. it has been technology driven. they have been left behind. tom: let me show you the chart. the idea of a cycle, going back to the 70's and with a decline in the ad then of the ibm pc. pc and then the near failure in 1993. failure here.

the price to sales, and extraordinary valuation. what was your first thought when you saw the? -- when you saw that? michael: we were wondering whether this was like the next ge. what is robert doing? is it the financial share of a buyback? were reminding each other that both stocks had a phenomenal run and neither company had been the same since the market topped out in 2000, 2001. we have seen what happened to ge in the last few months. not a very knowledgeable company -- conversation. ibm has had a lousy cycle. it has had an abused balance sheet.

they're going to have to do something different. francine: how crowded is the crowd -- is the cloud software competitors? theael: it has been epicenter of the way people have made money in technology. amazon would not be anything close to a $1 trillion company if it had not built this cloud business. it has been important for microsoft. francine: what is the end game? what will a company like ibm become question mark michael: -- become? michael: i have no idea. they want to remain relevant. they want to be thought of as one of the great technology companies. shearing, we love your expertise in technology securities analysis. one of the linkages of u.n. michael is the tech -- of you

and michael is the technology overlay. affecting technology our gdp, our economic growth and our ability to see an increased wage? a huge wavee seen of technological development that has yet to show up in statistics. this is the puzzle. fact this is something different about this wave that means we are not going to get a boost to productivity or is it a matter of time. it takes decades for the infrastructure around technology to change and adapt to enable us to get the fruits of those developments in terms of productivity. the short answer is, we do not know. i suspect that in 20 years, it will come to bear. there is nothing different about this technology.

it will do at some point. tom: thank you for joining us this morning. the news flow extraordinary. we are going to talk about the greater market here. i want to shifted to technology, the desperation. michael, what i would find in to who thatmirror one. is the tech boom now -- to 2001. equivalent?boom now march, 2000 is when we peaked. this is a different cycle. these are larger companies, more real companies. the question is whether we are witnessing the peak of u.s. technology as the king of global

equity markets and i suspect we are. outcine: when do you find whether that is true? michael: it takes time. 2000 was not obvious in real-time. this is not the same kind of market where the nasdaq blew off 3000 to 5000. a relativebe performance peak we are witnessing. the way u.s. technology powered ahead of global equity markets over the summer, it is a different way, it is like a relative performance blowoff we witness. we have reached the point at which market cap is problematic in trying to support multiple companies in a tough global equity market. tom: michael shaoul, we will continue.

neil shearing with capital economics. we have terrific news flow coming out. out of china, they are playing around with taxes off the trade war. an interview, maybe the interview of the day. she is the chief executive officer of ibm. ginni rometty will join. this is "bloomberg." ♪

tariffs, if you go the other way, things happen. auto complex up

smartly on the idea of chinese regulators having taxes down. news there out of china. on the election, days away. the washington post, i thought eitgeistood on the z coming out of the sunday new cycle. it is a time of uncertainty. many races are in a tossup category. the campaign activity is impressive for its pace. or could wave coming democrats fall short? .he mysteries from mr. balz what to the polls tell you as you go into monday? kevin: the thinking was that democrats were going to have and now iin the house

think the size of that has been changed to smaller. 23 seats need to put to make significant gains. i have got my eye on kentucky. pilot, shea fighter is a democrat, challenging the incumbent. andy barr one that district in the last cycle. he is a three term incumbent. war is where the trade at ground zero, these communities. andhave got a fighter pilot amy mcgrath taking it to him. you are going to see some of those results trickle in early, in just over a week. tom: we have seen the coverage out of pittsburgh, including howard fineman and that it was

his synagogue as a child. do these events impact elections? two parts, first, it has not impacted president trump's schedule. he is aggressively hitting the campaign trail with more than 10 rallies between now and election day. he did faced criticism for not altering his schedule. week in termser a of political discourse, where folks have started to question the state of american discourse following the packages, this incident in pittsburgh. at the end of the day, typically, i do not necessarily see this impacting any significant district. tom: thank you so much.

eight days away from the midterms. let me go to you in london on the divergence of u.s. economic growth from everybody else. youhat the way it is or is is growth coming down to a level where there is less growth? that is what we will see over the next 12 months or so. the u.s. economy is still feeding off the sugar high of tax cuts. strong growth in the second quarter. datau look at the survey from parts of europe, japan, emerging market slowing. china looks like it is slowing. it looks like everywhere is slowing apart from the u.s. senses that will start to change as the effects of the tax cut start to wear off. francine: we had pretty rough

turmoil in u.s. markets, they are showing signs of abating at the moment. they are trying to cover for wide ranging possibilities when it comes to the december fed decision. is the u.s. economy slowing more than we are thinking? neil: it held up better than we had expected. at the underlying data, there are the first signs, there are rate sensitive sectors, sectors that respond first two monetary tightening. a have started to show signs of weakness -- they have started to show signs of weakness. what does that mean for treasuries? neil: yields will come down. we might be close to the peak in

10 years anyway. we have got three more rate hikes in the cycle and they are done because the economy starts to weaken. tom: michael shaoul with us as well. i know you pull away from the day to day hysteria of markets. opportunity ton buy new valuations on equities? i do not think this is finished. you would want to see signs of stabilization in asia. almost to the point where remnimbi is a proxy for that? remnimbi ishink the under the control of the chinese. i think they are showing interest in keeping it below seven and they will be able to do that. the chinese have tightened considerably into this summer

and have been taking a be steps away from that -- taking baby steps away from that. the car text today would be part of that. what we have not seen is local equity markets bottom. it is not just china. there is korea. you want to see a sign of those markets. to the extent you get bad news, we react badly. we are not there yet. francine: we had news that the chinese regulator is said to propose a 50% cut to car purchases, to the car tax purchase. a tradens the impact of war is biting harder than expected. you see china trying to do damage limitation. what if the economy is worse than expected? measureis is the latest in a host of majors we have seen. -- host of measures we have

seen. there was a fiscal stimulus package. the bank is doing its part. at the moment, the sense is that the chinese economy is slowing. it is not collapsing. what happens if that starts to intensify? at that point, we see a ramp-up. francine: how much can regulators and policymakers do? they have a reasonable amount of ammunition. they have fiscal space at the balance sheet. they have got fiscal loosening there. the bank has been easing. the nuclear option is you let the currency take some of the pressure. at the moment, they are trying to defend this line of seven.

the question is, how long this lasts. tom: we need to touch upon germany. ,e do that with matthew miller working with bloomberg daybreak. what is the news flow in the newspapers? source ofbe the domestic analysis of angela merkel's decision to give up leadership of her party? this be enough to quell concerns about the grand coalition? over the weekend, there was an election in a frankfurt state. the cdu did poorly. so did the spd. the spd said maybe we do not need to be in this grand coalition. that is the concern. angela merkel will do anything to keep this government of flow. she sees this as the only step she can take to hold the government together.

francine: what will the policy on immigration -- how will it change? is it about immigration and is that why the parties are doing badly? the policy is unlikely to change soon. that thehe reason right will cite as to the loss of popularity for the main parties, the cdu and spd. it goes back to merkel's decision, people on the right will say to allow so many refugees in the country. ts will tell you a growing inequality in germany has led to the loss of power for these parties. francine: my german is so bad. i know you are up to speed with the names that have come forward. how many do you expect to become cdu head?

matt: those close to angela merkel for example have said they will support her and her leadership -- in her leadership run. they were counted out. akk is one that merkel cited as one of her successors. does the question want one of merkel's successor. if the country wants her out, the country will not want her successor either. you could have someone from the right come back and throw his hat in the ring. he used to be the head of the cdu. tom: matt miller, thank you so much. michael shaoul, neil shearing. when i look at germany, when i look at the e.u., mr. draghi said it was a more challenged economy. what is the vector of growth now ? neil: downward spirit if you

look at data -- downwards. if you look at data, it supports that. the european economy was never going to sustain those rates of growth. to what extent is this a reverse of trend. the emissions testing have affected the german car industry. conditions are starting to tighten, that is the crisis in italy. if markle is stepping back, europe needs a strong leader given what is happening in italy. tom: neil shearing with us. michael shaoul, i will steal from anybody. single best chart from michael shaoul. we will do that in a bit. a brilliant chart on china equities. morning,news flow this

including the ibm transaction, news out of germany. in theup, joel marcus 10:00 hour. this is "bloomberg." ♪

i am a family man. i am a techie dad. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience.

my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. tom: bloomberg surveillance. francine lacqua in london, i'm tom keene in new york. here is kailey leinz. kailey: angela merkel is said to

be planning to quit as head of the christian democratic party after nearly two decades. according to the source, merkel told a leadership meeting she will not run again for the chairmanship in december. it is reported she wants to continue serving as chancellor. the move follows a decline for the cdu in an election over the weekend, with the party suffering its worst showing in more than 50 years. jair bolsonaro has won brazil's presidential election, marking a hard pivot to the right in latin america's biggest economy. the former army captain swept to power on a manifesto promising to open up the resource rich economy to private investments, strengthen ties to the u.s., and unleash an aggressive crackdown on epidemic crime. with almost all ballots counted, bolsonaro won 55% of the vote to beat the former mayor of sao paulo. in his victory speech, bolsonaro promised to reduce the size and cost of government and to reform foreign policy. >> [speaking portuguese]

>> our government will break the paradigm, we will trust in people, cut down bureaucracy, simplify things, and allow people and entrepreneurs to have more freedom to build the future. we will unite brazil. kailey: global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." tom: thank you. appreciate it. with the news flow this morning, neil shearing, michael shaoul with us. by good fortune in new york this of -- the bureau chief out of sao paulo. what will you and the team look for, the action of this new president? >> any cabinet names he announces. tom: will he go after the

judiciary this quickly? >> probably not. this, there are comparisons to president trump. there has got to be comparisons to populism in europe and the philippines? which is the best fit for the new president of brazil? ,> he combines all of those going from his rhetoric, there is donald trump. he likes being compared to donald trump. he does want to fight violence with violence. towants to give bonuses police officers who kill more bad guys and loosen up gun control. we could see some sort of spike. francine: what will he do fiscally? he needs to get the situation under control and that will lift markets. is the market pricing in that news? overe market has rallied

the past few weeks, even on friday. brazil was outperforming. early monday trading gave good signs for brazilian markets again. we will need to see what he does but he has pledged to cut down the size of the state, sell state-run run companies, which is what investors want to hear. francine: how concerning is it for social cohesion in brazil? there is the markets and the economics of it. right-wing army captain they could shake the brazilian institution to the core. he talked a lot about pacifying and unifying the country which is interesting given how divisive his rhetoric has been. he is trying to unify. i was looking at newspaper headlines and it does talk about respecting the constitution,

democracy. he is making a softer tone. francine: is there a danger he will erode the democracy of brazil? brought up byen experts, human rights issued a strongly worded statement on brazil last night. will respect democracy, he will respect institutions. varies depending which side you lean on. tom: let us find out which side michael shaoul leans on right now. some formsignal for of new capitalism and opportunity in brazil and latin america? you have imperfect choices. he reminds me of berlusconi in italy when he was elected. these people come in and promise a lot and they deliver what they say they're going to be able to do.

think, to me, brazil has been improving economically in the middle of this political season. it's unemployment rate is getting better. there are signs the economy is stabilizing. tom: is it a form of socialism? tooknk of the days of lula over. i got that wrong. what flavor of economics does this leader have? if you look at his both history and his years in congress, he was not liberal. privatizations, against the planned which ended hyperinflation. his economic advisor is liberal. he wants to privatize everything. where heave to see goes and what he can get done in congress. it is hard to pass pension

reform when you consider brazil has 30 parties he has to negotiate with. francine: the markets have priced in positive about mr. bolsonaro. is there anything he can do or needs to do to make sure he keeps markets on his eye? neil: this is the challenge. expectations have been raised. there is a paradox between what has happened in mexico and populists from the right in brazil. thedifference in brazil is economy's balance sheet is in a different position. addressing fiscal challenges means making changes to the pension system, to the constitution, getting this through congress. i have a sense the markets have been complacent on the ability to push through on congress. tom: neil shearing with us.

julia, thank you so much. thrilled to have michael shaoul with us. we talked of ibm before. bloomberg intelligence is expert on this. schatzker -- erik schatzker in conversation. stay with us. this is "bloomberg." ♪

francine: this is bloomberg surveillance. tom and francine. about oil. wti crude oil is trading below $60 per barrel.

this weekend, russia suggested it may keep output at current level. opec ands days after allies signaled they can cut output in 2019. welcome emmanuel ibe kachikwu. he has previously served as executive vice chairman of exxon mobile in africa. you received a number of awards and you have been made an honorary citizen of the united states. when you look at the price of oil, it has been volatile. what has been going on? >> uncertainty is everywhere. onare keeping a tab instability and prices. havenk the problems you

our civil strife all over the being able to reach the typical capacity we have and how much of that it can cover. francine: what are we misreading? what do you see for 2019? are we putting too much emphasis iran and venezuela shortfalls? minster kachikwu: i think so. we have the capacity to fill some of the gaps you see. overestimating a sudden drop in production of supply. you have abovek $77 now. aboutne: we're hearing some kind of green field that

opec would do with non-opec allies. what does that mean and would you support it? minster kachikwu: i would have to know the details. i was not part of that meeting that took lay spirit -- that took place. i know the genesis was to have an agreement for technical corporation with russia. -- technical cooperation with russia. i do not think it is anything different than what we already agreed in terms of trying to stabilize the market. i think suppliers are concerned about the need for stability in this sector. minister, i say this with great respect for your previous tenure. corruption, give

us an update on how you're trying to clean up nigerian oil with the pressure to go from onshore development to offshore? what is the state of sanctity of contract within nigeria? minster kachikwu: contract is something we respect. my background is as a lawyer in somebody who helps the president . corruption, that is the base upon which the president has run and has continued to be one of his achievements. evidence that corruption had taken place. there are litigations going on. we are cooperating as much as we can to make sure the international agencies and countries are doing what they need. have a voice for this,

including your law degree from a small school on the charles river. the boston red sox, within that, , what is is the idea that trend now? our viewers perceive challenges there. where can we be into or five years? -- in two or five years? minster kachikwu: where we are is respect for rule of law. about enforcement and you've got to follow due process. africaingly, as south turns the tide, you are going to see more emphasis on following due process, the law, due compliance in terms of legal

requirements. africa has come a long way. nigeria has had a huge milestone. at oile: looking disruptions and the price of oil in general, do you worry about shale growth? minster kachikwu: that is a factor. do i worry? not really. growology has helped shale more rapidly. what this should do for opec is we should go back to being the producer. we are missing the bone. .- missing the boat keep looking at production and be able to take the shocks when they come in terms of price. francine: what about demand, is , especially inle

emerging markets? minster kachikwu: the growth and demand is not huge. years, thext 10 emphasis will depend on oil basically. there, clean is fuels are there. shows that oil is the one to watch. tom: very good. minister, thank you. francine, a historic headline coming across the bloomberg. this follows on from the merkel cdu announcement. the chancellor to handoff chancellorship after current term. we will continue. for europeanment politics. please stay with us. we will consider ibm.

this is "bloomberg." ♪

tom: bloomberg surveillance. good morning. news flow right now. we will touch on germany. francine lacqua and tom keene on ibm and red hat. alex webb providing value in london. we are thrilled to bring you bloomberg intelligence. bring us up rayna. -- up right now. it is hard to see. hat may see interesting google, oracle and on. you are out of your mind. red hat likely to see -- unlikely to see other bits. which is it? >> it could be both. microsoft has a good on premise

presence. amazon did a partnership there. when you look at the likes of google, they needed to figure it out. tom: the entire bed, i would bet t, i would bet the company, is a persistency of growth. do you have a believe that whatever red hat becomes, they can do the persistency of 20% revenue growth to pay down the debt? : it will be difficult for the company to grow at 20%. , softwareelerate sales have been weak. you look at microsoft, look at amazon, these guys did not have a good product when they were going to customers. they will have a seat at the

table and go out and fight with the others. webb, what i would talk about is the reaction of this transaction by the hipsters in london and san francisco. how will they respond to a broken big blue? alex: i think it is comparable to microsoft. the open source getting sucked up. as long as they keep it independent, they're going to retain the course. they have no reason to be upset. the open source community is peculiar in the way it reacts. ,000 or whatever the headcount is at ibm. red hat has 12,000. they get their start, they walk out the door, right? alex: that would be the concern.

there will be golden handcuffs which will be keeping them in for a time. that is always the case when a big company acquires a younger be suckedat they will into the capital allocation processes these big companies have. mehdi is the g numeral rometty that -- ginni is aware of that. what are you going to write about? what is the thing you're going to study with this huge risk? anurag: a good acquisition for the company. the one thing we talked about could be the execution risk. you have a company which is open. it is acquired by ibm. the culture was not as open before.

if that culture does not change and you are not open to embracing other technologies, that could be an issue. francine: thank you both for joining us. miller.et to matt he is in berlin. we are getting more news on what is going on with angela merkel. we understand angela merkel will hand off the chancellorship after this current term. this is something you almost predicted. she holds onto the chancellorship, gives up the leadership but it is unlikely she can run in the next elections. matt: if anyone thought she was going to run for a fifth term in 2021, she or he might have been the only person on earth who thought that. she was not going to run for another term as chancellor. this move today that she is not going to run for party

leadership in five weeks at the convention is a clear signal that her time is done. that is what schroeder did when he was running to the end of his term. he gave up leadership of the party and lost reelection, did not become chancellor again. all throughout the postwar history, german chancellor's have been the leaders of their parties with one exception, which is schmidt. when they quit, they are done as chancellor spirit that is these -- done as chancellor spirit that is -- as chancellor's. francine: how will the cdu change? el has a few successors she has picked. including akk. will the grassroots of the party

wants a continuation of merkel? will they want something more towards the right, something more conservative? maerz was too far to the right for merkel. they have been outflanked, the cdu has, by these parties. tom: matt miller. thank you. a historic day for the people of germany. angela merkel to handoff chancellorship after her current term. please stay with us throughout the day. worldwide, this is "bloomberg." ♪

>> political surprise, german chancellor angela merkel will quit after newly two decades, catching the market off guard's. ibm, big cloud field, the world's second-biggest tech deal ever. and catalyst for stabilization, investors search for an end to the market selloff with the s&p headed for its worst month since 2009. david: welcome to bloomberg, daybreak, i'm david westin here with alix steel. angela merkel coming out with a really surprising amount -- announcement. delivering a blow to her party. do we make the argument that it's a global shift to the right? the markets don't seem to quite know what to make of that. --david:man stocks