francine: the u.s. market will not open to the iliad in europe, traders gain banks more volatility in riyadh and japan come of our board of nissan deliberates as the three in the balance. plus, theresa may fights to keep her crunch summit on track. ♪ >> good morning, everyone, happy thanksgiving if you are tuning in from the u.s.. markets, look at your markets are closed in the u.s.. euro-dollar,the

1.1403. we are seeing a widening spread between the german and tenure yields for italy. -- the german and italy 10 year yields. we also have the tweets from president trump, and you can see the stoxx 600 down from 0.7%, is a very thin volumes today. we will bring you our weekly brexit show, and we will speak to the chair of the brexit committee in the u.k. parliament . we will also speak to the former director general of the ecb, and also the chairman of the ocd general the best of societe generale. first, let us start with the first word news. >> brexit negotiators worked throughout the night in brussels after theresa may and the european commission director said they had made progress. an accident he

announced she would return for talks on saturday a debut for eu leaders are due to sign up -- sign off on the deal. nissan's board are meeting to decide the future of chairman carlos ghosn. financial misconduct. the german is accused of underreporting compensation and misusing company funds. he has not been seen in public since his arrest. china says it is are concerned about reports by the u.s. trade representative office are them

of intellectual property theft. the ministry of commerce spokesman in beijing spurs united states to take a constructive attitude to create an environment for talks. president trump on president xi jinping are set to meet at the end of the month in argentina. and goldman sachs's malaysia headache intensifies. malaysia claiming that they -- international petroleum investment company and another investment company have filed a suit saying that goldman brand former officials to "many canadian mislead the claimants and misuse information to further the criminal scheme." a goldman spokesman says the company fully expects to contest the claim vigorously. crude, thererican is negative sentiment in the oil market. trump'set, president backed saudi arabia for dropping oil prices, but also said, that is go lower. crude entered a bear market early this month over concerns of a potential supply glut.

on.n's inflation race drags consumer prices excluding fresh foods arose it just 1% in kuroda, and boj governor said this week that he remains confident that downward price pressure is will recede and the banks inflation goals will be met at some point. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am markus karlsson. this is bloomberg. ♪ francine: marcus, thank you so much. european stocks are trading lower today. u.s. equity markets are closed for thanksgiving. the dollar is slipping as investors wait for the federal reserve's next move.

goldman sachs and j.p. morgan are forecasting the fed to hike interest rates five more times by the end of 2019. economists at morgan stanley only see two hikes after when he expected increases in next month. joining us for the hour, trevor greetham, head of multi-asset at royal london asset management. aversa fromefano alixpartners. thank you but from joining us. we'll start off with you, trevor. if you are trying to get something right for you in the market, is it dollar dynamic? trevor: i think it is important to get the direction of the stock market. we have seen severe panic in october and into november, we track for different measures of investor sentiment and make a combined indicator. what we saw in october was the 10th most extreme reading since 1991. there is some panic, and

investors will have to think about what could go right rather than what could go wrong for stocks. we are not sure which way the it reallys, and depends whether the fed blinks in response to their panic. it usually when you get a financial market panic, policy makers respond. we have seen a chinese response from president xi jinping the we have not seen a fed response. a may get one, maybe see recovery with a weak dollar. if they keep increasing interest rates, you will see a recovery with a strong dollar. francine: what do you think they will do? stefan know: i think president trump blamed the fed for the selloff in a number which made them -- which mated hard for them. now that the midterms are out of the way, it is easier for them to be more independent. they may raise rates in

december, but i think they may signal that that is it for the time being. francine: do you need monetary policy to normalize? many have this cheap cash that has been there for about 10 years, being taken out of the equation, does that mean will be left with zombie companies? rateso: with the interest going up, with some of the most leveraged companies facing some difficulties, that is to be expected. going back to a potentially normalized situation especially since we have an all-time low in terms of restructuring. we expect that to pick up in the next month. so you mean you would see companies going bust, that could engender some panic in the market? >> you do have some stress in the markets already. my expectation is that the u.s. economy will stay strong under the three-quarters or so because of the stimulus in the pipeline

already. the chinese are stimulating, as of now, and they always do it. their gdp numbers will not move an inch, but the real economy will recover strongly in china. i don't think the recession risk is with us at the moment, it is what usually brings a lot of corporate failures. if you do get another burst of activity, the fed will raise rates further and we can get to a 2% real interest rate, which will either trigger a recession. then with housing camaraderie could see a recession in 2020. my feeling is that we are right to be thinking about it, but it is a little bit too soon. scale, something could go right instead of something going wrong. the oil price change could take some inflation out of the system. o, when youtefan look at the regions across the world, where do you see the best market right now?

stefano: certainly the united states is on the high side. singlealmost every sector to be doing well. inalso see some softness part of europe including in germany, and we also saw that the u.s. has been acquiring much more from china ahead of the difficulties. so we may see some slow down very early in the months of 2019, but i would agree that if recession, weild see that more in 2020 than in 2019. francine: happy thanksgiving to all of our american viewers to rid we are asking, what traders should be thankful for this thanksgiving. volatility, or something else? trecor: i suppose traders should

be thankful for volatility. we have tested are indicator going all the way back to the should and what traders be doing when markets are stressed, is closing their eyes and buying. close their eyes and sell is what he people usually do. if you look at something very bad like this happening in a bear market, the initial reaction is to overprice it. so, close your eyes and by. [laughter] -- close your eyes and purchase. keep in touch with us bloomberg.com. but the my guests will be staying with surveillance. 20 more to come including d-day for the nissan chairman. will carlos go? the board is divided over his fate. we are live in a japan next. plus, theresa may announces a

next her meeting in brussels this weekend. our changes a foot? we discussed that in the next hour. ♪

♪ economics, finance, politics. this is "bloomberg surveillance," i am francine lacqua here in london. high there, markus karlsson. >> hello, francine. according to the financial times, this company is appearing for a financial buyback and it would depend on the size of any u.s. fines over alleged iran sanction violations.

company hasis slumped as much as 15% after lower than estimated sales for the third quarter. investors fixated on the discounts it is having to offer to attract new subscribers. the world's biggest assembler of iphones has become the latest apple supplier to warn of anemic demand. seen bynal memo bloomberg suggests that forecasts will be cut by half reducing, spending. the manufacturer says it is facing a "very difficult and competitive year in 2019. ." that is a bloomberg business flash. francine: the fate of carlos ghosn will be decided today with of the board set to vote on whether he will be sacked. reports say they are delivering right now, said to be divided on

scandal.al with the we are joined by our chief north asia correspondent. stephen, great to have you on the program is always. what exactly other board members divided over? stephen: well, there are divided over the basic evidence that was uncovered during the several month-long investigation by nissan it self. the seven i am sure, members currently convening in the building behind me are probably pouring over the evidence. over the evidence. the ceo has painted carlos ghosn as a man who gained too much power at the top and had the processes in place to conceal what they claim is financial misconduct, and understatement of his income to the tune of $44

million over the last five years. we are waiting for a vote right theby the seven members of board not including carlos ghosn as others of greg kelly, the representative director. -- the vote by all accounts will go against carlos ghosn and he will likely be removed as chairman of nissan tonight. francine: stephen, from what you're saying, our local media actually against carlos ghosn? will that impact the board? stephen: that yes. if the vote goes against him, he will be removed as chairman. probably the biggest issue for himself is not his corporate career, but maybe his legal proceedings that would go forward. we heard from the tokyo prosecutors office in a press conference this afternoon saying that they will consider it if it is true, a heavy crime. the allegations against him,

more serious than even insider trading. they say, if convicted -- he has not been indicted yet -- but if convicted, if you carry a prison sentence of 10 years. it throws into question the future of the alliance with .enault and mitsubishi francine: a lot of interesting questions. stephen engle, thank you so much, our chief asia correspondent in yokohama, japan. i continue with our guests, stefano aversa and trevor greetham.

some of the car turnaround. you actually know carlos ghosn, you have known him for many years and he also knew star jim and --sergio mangione, another leader. these leaders who were at called status in the company -- and in the car industry. stefano: they were definitely permanent personalities in the auto industry. it does not mean the auto industry is changing, but it certainly looks like they are losing two of the most vocal and to some extent controversial personalities. the senior personalities to some extent. both are big travelers, citizens of the world -- one of them was traveling between paris and tokyo, carlos ghosn, and not sergio wasand traveling from detroit and italy. they were both confident and heavy opinionated and they also tended to concentrate a lot of power on themselves. this may be what is it a here with carlos ghosn. francine: we have a great read, which i urge everyone to read out. it currently argues that carlos ghosn was a global man.

renault-mitsubishi alliance are good one? stefano: it was. , in 1999 when mitsubishi was rescued -- let us not forget that -- and in 2016, mitts of issue basel was wrecked -- mitsubishi was also rescued, you know have a group of 10.6 of toyota,s just shy but much bigger than both sides -- bigger than volkswagen. but up there. it was an alliance, but it was not integrated. the rumor for many years was that they integration could become a true single company. right now it seems like that was what was happening. by the alliance per se has been a success in terms of savings. last year, 5.7 billion in synergies.

have 10 the plan was to billion of savings, sharing purchasing, sharing platforms, these were all going to be good for the company. i don't think the potential loss of carlos ghosn as the leader would stop that. francine: does it change your view of the current industry, trevor? trevor: no, i do think it does. the big issue for the car industry is transition from diesel technology to electric cars, potential tariffs coming into play, brexit committees these are big issues for car companies. also, the strength of consumer demand globally is in question. i don't think the leadership change changes those fundamental dynamics. but it will be one of those things -- whatever the outcome of the investigation, it will be lifted up as an example of power being concentrated in one place. absolute power corrupts

absolutely. it's a will look at it and say, this was one of the reasons for corporate governance and first was about investing. francine: thank you both. royal greetham from london as it management, and stefano aversa from alixpartners. they will both be staying with us. to a polite dialogue with the european commission. what exactly is "polite dialogue?" we discuss that next. this is bloomberg. ♪

♪ this is ""bloomberg surveillance." investors have decided to give a thumbs down to the popular government in italy's funding efforts. we have another session later on today. trevor greetham from royal london asset management and stefano aversa from alixpartners are still with us. what is the level of stress right now amongst italian companies? stefano: relatively low. exceptions are the construction sector. we had the issue here in the u.k. k and the same issue in assize companies, such bori.i la in general, they were doing well in terms of export. many sectors actually growing in

double digits, but you can see some slow down. i think it also depends on our financial and political gridlock? trevor: do you buy italian bonds? trevor: i if the world economy strengthens, it would take the pressure off if we had a downturn. think you would see more stress around italy in the downturn. it depends on the policy but also on the world economy, too. francine: up next, it is the brexit show. we talk brexit. this is bloomberg. ♪ this is bloomberg. ♪ [ phone rings ] what?!

ready for christmas? no, it's way too early to be annoyed by christmas. you just need some holiday spirit! that's it! this feud just went mobile. with xfinity xfi you get the best wifi experience at home. and with xfinity mobile, you get the best wireless coverage for your phone. ...you're about to find out! you don't even know where i live... hello!

see the grinch in theaters by saying "get grinch tickets" into your xfinity x1 voice remote. a guy just dropped this off. he-he-he-he. francine: economics, finance, politics. "his is "bloomberg surveillance and this is a brexit show.

u.k. negotiators are working to secure a brexit deal in the next 24 hours. they say progress has been made. may has announced that she will be returning to brussels on saturday. earlier, the prime minister warned the u.k. parliament that voting against her could mean brexit doesn't happen at all. >> the point that has been made colleaguesr of my is very simple. if you look at the alternative to having that deal with the european union, it will either be more uncertainty, more division or it could risk no brexit at all. markus: speaking to bloomberg television, eu economic and

monetary commissioner said the deal is the best one possible. far, because we believe in the highest interest of the u.k. and europe that there is a deal and that we also believe the deal on the table is the best possible. we are dedicating all our strakes and forces to that -- strengths and forces to that. the anticipated tory uprising against theresa may seems to be running out of steam. more than tory leaders have expressed that they want her to go. the bank of england governor has a there is more downside to investment in a no deal scenario

. volatility in sterling is very high right now. there will be events that move sterling up and others that move it down. that will be likely to continue to happen. : in an exclusive interview with bloomberg, the labour party leader was asked if the chairman was right to explain a corbyn government and brexit as armageddon. >> he has got a pretty vivid sense of imagination. he should read something a bit more positive in the future. deal.t want a no i want a deal and i want a society that works for all. i'm notm

there are 14 million people living in serious poverty in britain. markus: higher and properties in the u.k. are seeing more weakness. the property market in britain is weakening after a three decade boom. uncertainty is also making buyers marcotte says. -- more cautious. 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. -- i'm markusson karlsson, this is bloomberg. when you look at political,his is there are still three outcomes. binary, wet like a get a deal or no deal, and that will be either pound weakness or

strength. trevor: it's interesting that theresa may is actually talking about three options because he spent most of the last three years saying that the article was irreversible. to says we are leaving mncs as we may have no brexit at all. next is a court case month. if that comes through saying the u.k. can withdraw, remaining on current terms is definitely open. you may find that because there is no majority for theresa may's deal in parliament and no majority for no deal, the only way to unblock things may be to have a referendum. francine: is that what you think will happen? trevor: i think it will. the other alternative view here is that may's deal fails the first vote and passes on a

second attempt. people are invoking the legislation. i don't think the financial market responds would necessarily get people to pass the deal in the u.k. because i think the financial market response would be a sterling response. the pound would go down, the ftse 100 would go up because it is all overseas companies. it is binary. the more likely no deal is more likely know brexiters. francine: what are the chances of actually the u.k. crashing out and what are the chances of mark carney having to raise interest rates because of pound weakness? i think if the u.k. does crash out with no deal, and if we have no deal, we have no

.ransition period down.und will go i don't to the bank of england raising interest rates. i think they have to bite there live and allow inflation to come through. it would be another hit to real incomes. the bank of england would have to raise interest rates a long time later. francine: what does it mean for a lot of the u.k. companies? if you are involved in going toring, are we see companies needing to restructure once there is a deal or even more no deal, or will it be pretty similar to what we have now? >> the main activity at company side is preparation. everybody has a plan b. francine: everybody? >> everybody has a plan b, some better than others. that includes creating stock at the border

. the majority of the components are coming from a continent. typically, bailey have a stock of a few days. if you have a no deal, that could be very disruptive. there is some stock in some emergency. it is more secure in the supply chain, this is the main concern. francine: it must be expensive. if you are securing the supply chain and getting auto parts and costce, how much does that if we do get a deal? stefano: it is a waste of money. so far, it has been preparation. there has also been some action. you start spending money to store and working capital to do it. there is already some impact in

some of the large companies. as an investor, the need politicians on both sides of the aisle? trevor: i think what most investors and business people would say is, can you find a way of ruling out the no deal exit? it is not in anyone's interest. no politician wants to be responsible for it. is there a way of getting it off the table so we are comparing two viable deals? i think that is what we need to do, get no deal off the table. francine: thank you both for joining us. plenty coming up. the prime minister is set to return to brussels this weekend to finish hammering out her deal with the eu.

also coming up, the chair of the u.k. parliament's brexit committee. here atust joined us bloomberg headquarters to talk brexit. that conversation next. this is bloomberg. ♪

francine: this is bloomberg. we need to talk about brexit now. if you look at the conversation and what exactly we are looking at, let me bring you on to a pound is doing.this is the one we need to figure out what happens, depending on where the conversation goes. 1.2785.rrently at

ifs is extremely important you are watching from a trading side.nd market u.k. and european negotiators are working to clench a brexit deal in the next 48 hours. joining us now to dig into the is david merritt. what are the areas of disagreement that remain between the u.k. and eu? david: we all know the main with trawl agreement has been finalized between negotiators. what they are arguing about is some details in what has been called the framework of the negotiation. commentsy, there are of fishing rights, access to waters, also spain is objecting to some of the details around gibraltar. hearing on both

sides is that it is possible to bridge these gaps. it is nothing that is why to torpedo. mrs. may is making a journey on saturday to finalize that. while we are hearing is that this summit is happening on saturday. they are hoping to cover those final details. the rest of the eu 27 will be there to formally agree to the whole package on sunday. francine: what happens if they cancel the summit? does it mean it is going really badly? david: yes, it wouldn't be a good sign, but we have another european capital summit coming later in the summer. december. -- presumably if they are not able to get this, they will pencil another date in. the timetable becomes very short and it does start to get a

little bit tighter and dip into next year, but there is still a little bit of wiggle room. we cannot rule out there being any last-minute hitches. this sewn up.et much, arethank you so european news director. a --ing us now is hillar hilary benn. are you worried that at parliament votes down the plan, there may be leaving the eu without a deal? hilary: that is not going to happen because there is no majority in the house of commons for leaving with no deal. the government knows very well that no deal would be disastrous for business. therefore, if the deal is voted down, the government would have

to pursue a different plan because it would recognize that what -- francine: let's take a step back. what are the chances it doesn't geither? hi -- get through? brexiteers think it is too close to the european union. think it offers no clarity to what our relationship is going to be. createdcause mrs. may the problem in northern ireland in the first place, led to her trying to create a proposal to maintain friction. francine: if the deal gets that it down in parliament, had is parliament regroup? a second referendum? does she get -- hilary: i don't think the europe

-- deal is going to be amended. i am arguing the government should say, we are going to seek ownership of the economic area and to remain in the customs union. it would really come as a great reassurance to business. francine: is that really brexit? hilary: it is. francine: but you are still bound by the rol -- rules. hilary: we have a choice. the problem is that the government hasn't been honest about the choices we face. we have had two years of government ministers are doing against themselves. we have had all the promises we can take. moment for looking the nation in the eye and saying, we have a choice now.

terms, butve on wto the damage to the economy will be considerable. or, using our sovereignty, we can choose to have an economic relationship. francine: does that lead to a referendum? people who voted for brexit will feel cheated. that is fair. hilary: i don't agree with that. the argument is, what does the referendum result mean? determine, was there a question on the ballot about the nature of our future economic relationship? no. francine: that boris johnson and many other people would disagree with you. did, but then you go back in time.

no one is suggesting to leave the single market. as we honor the result of the referendum? we need clarity uncertainty about the future. the withdrawal agreement is very complicated. the government has not been willing to face up to the hard choices that we need to make as a nation about what kind of economic future we want. francine: if it gets voted down in parliament, what happens next? is there a financial meltdown? hilary: that is for the markets to determine, but i don't think it will go down terribly well. the choices are, either the government changes its policy, the prime minister might go, but there is no point having a different prime minister if the government is not going to have a different policy.

she could theoretically late unt -- wait until later and say, that is all there is on the table. election, but an i don't think she will. francine: what are the chances of fresh elections? hilary: i think very small. she could, theoretically call her own referendum. where the chances of that? -- what are the chances of that? hilary: i think it might increase if the government doesn't change of policy. if there are differences in the conservative party, one way of resolving it is to take it back to the people. there would then be a debate in parliament. should the question be, leave

with her withdrawal agreement or remain. francine: does labour support a referendum? said if a they have general election doesn't happen, we are leaving all the options on the table. take this inve to sequence because what may seem impossible today, the government it mayg its policy, become possible tomorrow because of the extent of the crisis we may be facing. francine: are you frustrated that the labour party doesn't seem to have a united front? we hear one thing from your leader, it seems that you don't have one united voice. hilary: there are different views. there is no pretending that there are different views and the labour party as there are in the conservative party. we want to remain in a customs union with the european union.

we want access to a single market, and how that would work needs to be spelled out. there are a group of people who argue passionately for a people's vote. i think it is not straightforward because you would be voting on it withdrawal agreement, not our future relationship. result of honor the the referendum to get the right deal for the economic result for our country? i think we have a long way to go, but an increasingly short amount of time. francine: we will get back to that. hilary stays with us and we will continue the conversation on brexit. this is bloomberg. ♪

francine: this is "bloomberg surveillance." still with us, hilary benn.

approves thesion referendum. what does business want right now? --there any absolutelyiness is want certainty. i think the biggest problem for business is the lack of certainty about our long-term economic relationship. the first question would be, how is this is some going to work after the transition and backstop run out? readve no idea because you the seven pages of the political declaration and we are waiting to see if there is going to be a longer version.

it is kind of like a menu with something for everyone, but there is no clarity on which of the options is going to transpire. the reason i shall be voting against it is that the government has failed to make the choice is necessary about what road we are going to pursue. michel barnier said at the beginning, we have canada over here and they have rolled it out. francine: we will come back. european stocks declining. it is thanksgiving, so we have very thin volume. this is bloomberg. ♪

francine: thanksgiving. u.s. cash markets will not open today.

traders gives banks more volatility. last dash. the eu commission approves a draft of post-brexit. this is "bloomberg surveillance ." tom keene is off for the thanksgiving holiday. picture tom actually roasting a big turkey. offices areate closed. let's quickly check in on what data is telling us. first, let's get straight to the bloomberg first word news. here is kailey leinz in new york city. the eu commission has endorsed the political declaration on the future relationship between the eu and u.k.

now, it is subject to the endorsement of eu leaders at the summit on sunday. theresa may plans and last-minute dash to brussels to save the brexit deal. japan, nissan is a meeting to -- bloomberg has learned that the board is divided with some directors saying they don't have enough information about the alleged crimes. the decision could affect the future of the alliance. in south africa, the central bank is likely to raise rates today. the currency has gained 6% against the dollar this month. meanwhile, south africa's president will announce some changes to his cabinet today. the home affairs minister has minister of the

environmental affairs has died. according to the washington post, central americans would arrive at the border crossing seeking asylum would have to wait in mexico while their claims are processed. allows those who established a fear of returning to their home countries to remain in the u.s. 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. i'm kailey leinz, this is bloomberg. francine: thank you so much. overall, very thin volume. europe in the red. there is a holiday hit. trading move u.s. equity futures turning be a, but it is set to subdued day of trading thanks to the thanksgiving holiday. happy thanksgiving. edgingn sovereign debt

higher. if you look at wti, which is my chart of the day. as ang below $55 a barrel increase in american crude between wti and brent. that spread has been widening quite significantly. gold is holding an advanced debate over whether the federal reserve will hold its stance on increasing interest rates. joining us now for the hour, the chief investment officer -- miles and james. thank you so much for working and coming on tv.

what should investors be thankful for? >> investors should be thankful we still have decent global think will justify a rally in equity markets and 2019. francine: overall, is a volatility that is back or an overheating economy? >> i think there is opportunity. broadly speaking, i would agree that the outlook is for stable growth. i think it is a valuation adjustment rather than a shift in cash flow earnings. amazed at the fed having a very strident through october, to then come back and say, actually, we are going to consult widely.that means to me there will be a hike in december. that to me is also bullish. francine: why is this?

because they have to revise their inflation forecast for next year? james: i look at global growth and i see numbers rising. icy credit being strictly rationed on a global basis. that to me means global growth has a capacity to disappoint. i think that if you said to me, what are my most pessimistic moments? you might get no higher than a percent and a half. francine: i'm a little more optimistic about the fed. james: two hikes as been the view for quite a while. i think with the volatility, the fed our job owning to support

markets. i think if we get stability, we get back to growth, employment and inflation. the outlook is a u.s. economy that is quite tight. i think the fed will continually gradual rates. francine: you actually have a good call on that. the fact that fed officials now increasingly talk about had wings, what is that? james: i think it is the global economy. stock market i think there are more worried about the selloff in u.s. credit. that is tightening financial conditions and ultimately what they are doing by raising rates. the market is not doing it and dodge in a sleigh. if you look at the macro data, you don't to those signs of

concern. we need to see more signs of concern for the fed to confirm that they are not continuing their gradual path. i think december will be a bit early for them to reflect that in forecasts. francine: the u.s. economy is strong and stable. is there any doubt about that? james: there's plenty of doubt. cleanment was very to point out that the tariff regime is beginning to cause distress. there is a scenario where we have a major blowup between the u.s. and china. china has provided two thirds of global credit over the last decade. it is no small lunch. francine: where do you see treasuries, and can a change from where they are now significantly? james: i think treasuries are higher in yield, but i think we

have had most of the big moves. i think to get a significant rally, your got to have recession risks becoming much more prominent. at the moment, the slowdown we are seeing is a slowdown and not about cutting rates. personally, we will have that confirmed in the data that growth is slowing. let's not forget that this is already reflected in expectations and we are seeing a pullback in risk appetite. francine: when can we actually see a recession? i hear 2020 as the year because of the end of the tax cuts. myles: a recession is not priced in. yield curve is very flat. if you think about 1.5 rate hikes, that is the main distribution, that we are not pricing the recession.i don't think we should be . james: i'm expecting a good year

next year. i think there is a greater chance of recession and 2020, not least because the fiscal stimulus is operates in 2020 a must there is a change in the law. that will be an an environment where i suspect everybody will be dependent on the u.s. and the u.s. or not have that fiscal drive. francine: let's bring my chart up. cable has been rising after this report about eu and u.k. post-brexit ties. theyding to the document, are committed to deep customs cooperation. i'm not sure i know what that means because it does not see micah future relationship. we will delve deeper into that draft document and what it means for the future relationship of the u.k. and eu. james and myles both stay with

us. coming up, the former director general of market operations at the european central bank. we will talk to him about italy. this is bloomberg. ♪

francine: this is "bloomberg surveillance. tom keene off for thanksgiving. there are no thanksgiving holidays when it comes to brussels. bloomberg has received a draft of the documentation that would lay out the relationship between the eu and u.k. we understand it states determination to replace the backstop. we understand that the eu, ,ccording to the draft document

they are cooperating for customs of negotiation. we have quite a lot of breaking news coming in thick and fast. we will continue updating you on what we saw in this draft document. at the same time, we are looking to angela merkel, saying she will do everything to ensure the exit treaty is completed. yesterday, we had an auction that the not go so great. today, we had another big one. i think we are just starting to get the end of that. set atlian bond sale is 1.3 billion euros. the italian deputy premier says he will not back down on the 2019 budget clash with the european union.

the italian prime minister speaks at 4:00 p.m. london time. his expected to explain the country's budget plans to the european commission. i'm very pleased to welcome francesco poppadio. thank you so much for joining us today from brussels. what is the mood like? of a more worried about brexit or italy? i think italy is a more direct issue for brussels. brexit is important, of course, but italy also because of the attitude of the italian government.

francine: how will it end? we are hearing from the deputy prime minister saying he will not back down on the 2019 budget. does brussels need to back down? francesco: this seems to be a chicken game. two stupid young men are driving their car one into the other. you don't know who will blink first. if you look at the relative drivers, youhe two think it europe is in a much stronger position than italy. i do think it has the support of all governments except italy. i think there on the right side of economics. i think the economics of the italian government is wrong. deal may strong point is the domestic support. you can wonder how long this

will last, especially if the recipe that they are using for the italian economy is wrong and will not produce all of the good things they are promising. francine: we are also hearing , saying he is concerned about the spread of german bunds, but also added that the government cannot control the spread. how should the ecb view all of this? the ecb is completely out of the question. they cannot do anything for italy, specifically for italy. neither politically or economically. never will the council agreed to do something specific for a country that is challenging europe. the central bank has limited power to counteract the policy of a government.

i don't think the ecb can do anything. if you look at what is happened with the spread, you find that the contention of mr. salvini that they cannot control the spread is wrong. whenever they say something against europe, something that will increase the fiscal deficit, the spike goes up -- spread goes up. clearly what they should do is take a less synchronistic view to europe and carry out a more sensible policy. francine: talk to us about the relationship between btp's and the italian economy. the link is almost impossible to sever. another headline this morning was that the spread does not responded to the real life of the country. is that wrong? francesco: it is right and wrong at the same time.

it is right in the sense that there is nothing fundamental with the italian economy that would ask for such a high spread. it is wrong and that the spread is justified on the basis of intentions of the current government. they have done everything needed, everything you find in textbook to increase the spread. that is affecting the confidence of investors and the safety of their investment. we saw that yesterday as

large amount of btp's. francine: i also want to talk to you about brexit. bloomberg news just saw this draft document. do you think this is the future of the relationship between the u.k. and the eu, do they stay in the customs union? francesco: yes. the entire issue started from mission impossible because the idea was to have brexit, but not to carry too much damage to the u.k. economy and not to do too much damage to the eu economy as well. this has proved impossible to do in a proper way. we are at what is damage limitation. the closer the u.k. and europe are, not only on trade, but all possible relationships, the smaller is the damage. there will be damage, but the exercise is in limiting the damage. find that some of the accusations tour the prime minister of not having conducted this well are a bit overdone

once you start from the premise that this was mission impossible. thecine: thank you so much, former director general for market operations at the european central bank. , we will ask -- about italy. at 6:30erview coming up a.m. in new york. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom keenene lacqua, is off for thanksgiving. u.s. equity markets shocked, that there is room to trade on u.s. bonds. a lot of breaking news out of brussels this morning. bloomberg has seen the eu-ek declaration on the future declaration. highlights that the u.k. and eu stated determination will discuss a backstop. we also understand it confirms the equivalent for u.k. banks. what does this mean?

james: i think the intentions are deeply important. i fascinated by this idea that there will be free trade that underpins deep, regulatory agreement. brexiters say they want a full independence. myles: for me, it is about a curve steepen are. francine: look at that pound. pound has risen quite significantly. likely --w make it less likely that parliament will vote for it? james: in terms of the withdrawal bill, which is a parliament has at the moment, i think as each day goes by, the probability that mrs. may is

able to push this through rises. francine: do you agree? myulles: no. i think we need to have more political pressure first to get their. -- there. francine: they are actually talking quite a bit about tarmp. -- tarp. us.s and myles stay with this is bloomberg. ♪

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back to brussels with more of a trying them markets were expecting -- triumph than markets were expecting. cooperation and determination to replace the backstop. our reporter joins us from brussels. if we put this into english, this is what the future relationship could look like subject to approval? reporter: right. to clarify, this is an agreement between the u.k. government and the european commission. it needs to get the seal of approval between european heads of state. this document is big, detailed language, but overall what you get is the backstop -- the language on that has softened -- you could argue that is good for theresa may because that is not gone down well in the u.k..

it is ambitious trade. when it comes to financial services, europe says, we are not the same but we will use equivalents. you have different reflection and regulation, but we can do better together. there is a line on fishing. the french have been vocal. any indication will be good. the important thing to look at is the fact that there is no mention of gibraltar. what i hear from spanish government is that they want to get the line included, and the document, they will not vote in favor. that could be a problem. eu wants an agreement everyone is happy with. francine: the prime minister returns to brussels saturday for last-minute talks. is it a done deal? it is difficult to say. is it 80% likely she will get a sign off? reporter: difficult to say.

yesterday we heard from the germans, who were vocal. they did not see a point of holding a summit again if we do not get the deal signed. at this point, the sticking points were fishing, from the french. gibraltar, from the spanish. that could turn into a bigger thing. spanish government has medically or they will not sign this thing if they do not get a special line. -- has made it clear they will not sign. difficult for mr. younger to say this was junckerul -- for to say this was successful. the fact that we do not have a line on gibraltar, we need to keep an eye on. francine: thank you. we are back with james and miles. there was a disagreement.

i don't know how much you disagree on the timeline. do you both think that theresa may cannot pass this through parliament whenever she puts it to a vote? miles: it is about the politics, not the technical details. eu-u.k. politics are complicated. i think you can find technocratic solutions. there is not a majority in u.k. parliament for any deal. the politics of the opposition wanting to create political capsule in the general election because the hard brexiteers, it will not satisfy. they will more likely to be in a customs

long-term basis. francine: she has said in the last 10 days that if this does not get through parliament, there is a chance of no brexit. miles: that is a narrative she will want to spend. -- spin. my deal or no deal. i do not think that is the only options available. things can be revisited. the article 50 deadline can be extended. everything is possible until it is ruled out -- article 50. -- 15. expect it to be voted down in parliament in mid-december. what happens next is not clear. the pound balls. -- false. -- the pound falls. you have financial market volatility, risk of hard brexit. that causes people to put the national interest above their own political interest. you need brexit pressure first. james: i accept it will not be smooth.

i think we fundamentally agree. there will be a deal on the withdrawal agreement because everybody recognizes that is necessary in order to be able to have a conversation of what happens next. francine: what happens next? will or won't it be voted in parliament? financial markets in the second vote? james: i would put a 15% probability of theresa may getting this through the first time. 10% probability on no deal at all. everything else in the middle, a range of choices which include, reemergence of genuine election, ageneral shift to another referendum, low probability on another referendum because the methodology and process having referendum is difficult. the questions you would have to ask her complex. have to likely it is --

ask our complex. -- are complex. she will getse is this through before we get to march. francine: what are the chances of crashing out? james: higher than 10%. what we have to see is that pain. the process of getting there has to be that crashing out goes up to 30%. francine: that is huge. do you accept that? miles: i do not believe there will be a crash out. politicians will recognize it is deeply important for national interests that we do not crash out. we could see extension of the process. me and james differ, -- james differ, markets have to get a distressed shape first.

that is what causes politicians to change. francine: if you get to distressed, are markets to sophisticated -- they will find a solution? >> i'm not sure we get it then. francine: at some point they will be distressed. out.robability of crashing is that when pound touches 1.15? miles: to pick a figure is difficult. 10% plus. i'm looking at trades that can make gains in that environment, whether 1.15 or 1.10. james: i disagree. i think we can test. i do not see 1.10. icy risk for dollar as the year goes on, and as trump goes on with an agenda hostile to global trade. francine: let's recap the

announcements. breaking news on bloomberg. draft agreement on post-brexit agreed that political level according to eu. bloomberg has obtained a copy draft of this deal. it sets out a future relationship based on a free trade area, combined deep regulatory and customs cooperation underpinned by a level playing field for open and fair competition. probabilitiesing of crashing out or what it means for pound with james and miles. miles, if we have a sharp decline in town, what are the chances governor carney has to step in an increase interest rates? miles: i do not think that would happen. i think the focus will be economic stability about jobs, growth. he will prioritize that. tthrough anyard short-term blips. francine: we understand from

labor that the u.k. prime minister will make a statement on brexit at 2:30 p.m. do you expect a rate hike? is, weall the evidence need a better economy. that will drive the pound up. miles, bothmes and stay with us. coming up, the u.k. labour party mp. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance," and i am in london.

tom keene has the day off. happy thanksgiving. pound is rallying off the draft agreement between the future relationship between the eu and the u.k. deep regulatory cooperation to replace the much discussed backstop. a member ofow, pat, the u.k. labour party for southeast and is on the committee for exiting the european union. james and miles still with us. when you look at the conversation surrounding brexit and the second referendum, what will happen? do we have any idea or are all bets off? , witht has become clear the draft withdrawal agreement and this agreement on the political declaration for the future is that the brexit offered to voters two years ago, the vision of a swashbuckling

singapore like, free trade deals, is not on offer. what is on offer is something where we leave political structures of the european union but remain closely in its economic orbit. that raises a new question. what is the point of doing this for a country like the u.k.? the political calculus has changed with emergence of documents today. francine: you want second referendum? will all labor support? will all labor and deals vote down -- labor mps vote down the deal in parliament? pat: in all parties, this cuts across lines. the vast majority of labor mps will do. if i was being asked to predict the result of that parliamentary vote right now, i would say it is to lose. peoplefferent angles,

are standing back and saying -- to be faced with a choice of economic disaster of no deal or a deal like this for a country like the u.k., is ultimately a humiliating choice. i think in those circumstances, the likelihood of another referendum has gone up. it will depend to a degree on what happens. francine: the timeline is important. well second referendum be put in place once it gets voted down or could you see the prime minister going to a vote in parliament and attaching referendum to it? pat: it is possible it could be attached to the main resolution. there is discussion about how this will be taken. the prime minister has so far said she is resolutely opposed to a second referendum. we also heard she was not going to have a general election last year. what happened?

all of this will depend on what happens in parliament. the reason for a second referendum ultimately is to say to the people -- now that we have an existing, real brexit agreement in front of us, not politicians promises, campaign promises, anything like that but an existing brexit agreement, is that what you voted for? is that what was in your mind? if it is not, do you still want to go ahead? and havebetter to stay a say over the rules, that we will continue to have to obey in the future? francine: we were talking about tarp and the possible financial meltdown. are you thinking people are hoping for a meltdown so it forces a referendum? pat: i do not think mps are hoping for this. if there are circles in the government that are hoping for it, it is reckless.

if you're talking about markets, this might seem abstract. this affects the value of things, pension funds, the value of currency. it is cynical if the government's calculation is to go down the first time, let markets tank and that will focus mps. we do not have to be cynical and reckless. miles: question about, what are the conditions that would enable theresa may to open it for referendum? to happenething has on her side for her to be willing to go to second referendum? pat: i am not sure she needs conditions. parliamentary arithmetic might force her to do that. that may be the way for her to get out of this parliamentary deadlock, for her to say, parliament will not pass this. it is the best we can do. i will put it to the people. this will not just be a rerun of 2016.

2016 was abstract arguments. this will be existing reality of brexit versus option of staying. francine: for a lot of people it is abstract. thank you so much. miles.mes and chairman, we will talk brexit and eu regulation and bank consolidation and italy. 6:30 a.m. and new york, 11:30 a.m. in london and this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance," and i am in london. tom keene with a very well-deserved thanksgiving day off. investors offering little today,ance after sales inflations and bonds, second lowest on record. resolutionting for

between italy and brussels. miles, what happens to these periphery bonds? the spread between german bunds widening. miles: italian btp's have widened and valuations are cheaper. there is other systemic risk. a lot has been priced in. how do we resolve? i do not think we should expect a quick resolution. investor focus is on short-term technical factors. net supply numbers next year and who will buy italian bonds, retail offering we just saw this --k, institutional demand, from my conversations with clients in italy, there will not be a huge appetite to buy high and bonds. end bonds.

the grounds for having big short positions diminish tremendously. valuations have adjusted. it has been more tactical. francine: would you buy italian bonds? james: there are different issues. the case of credit -- there is the risk of failure. credit default swaps around 240 basis points, $1 million to be hedged, you have to put $24,000. that is insurance price, failing to repay capital and coupons. with italy, this is redenomination. this is not what we wanted. i still think that is reasonable risk. years of poor20 growth and improvement. it needs expansion. i understand precisely where the

italian people in government are coming from. they want to spend more money because they need to get the economy going. francine: is this budget the right one? there are handouts. infrastructure or handouts. james: handouts in the past have been successful. francine: you think this is a good budget? james: i'm dealing with the principal. are you allowed to reach and on what terms? that is the big issue for the eu. it has a good case it can make for why in this position, it needs to spend more money. it is not about the substance of the budget. it is about how europe adjusts to rising demands for sovereignty. i would expect, ultimately, a compromise to be found. there is wiggle room for compromise. miles: the logic is that you have a federal europe with a fiscal arrangement, rather than just monetary authority.

francine: we're just getting started and the hour is almost over. james and miles, thank you both for joining us. we're waiting on the verdict of the nissan board member meeting and yoko,. hama. this comes after a key arrest. stephen, why do we not have a decision yet? why is the board split? is three because, it hours since the board convened. we are hearing they will not have a press conference. we do not have confirmation on whether the meeting has ended. we have been seeing cars come out. we have journalists here, dozens, filming every car in and out, mostly out to get any clue on whether it has completed. we're hearing from sources, we will not get a statement tonight. it could be electronic statement

filed to the tokyo stock exchange, which we might get on the system early tomorrow morning. lots of speculation as to why there is the lay. perhaps -- delay. perhaps the ceo needs to explain and go through details of the investigation that led to the arrest of carlos, who is still in detention in tokyo. the external directors, two of which were former executives, they apparently came by videoconference into the boardroom, the headquarters behind me. perhaps they have more questions to report back as well to a big partner in the alliance. lots in the balance. francine: thank you. hama, weus from yoko will go straight to you if we have breaking is. we talked -- breaking news. we talked about pound.

draft brexitff the agreement. it points to close cooperation and free trade and includes key concessions. that was seenment by bloomberg news, the pound was rising on the back of that. regulation, cooperation, preserving regulatory autonomy. that isp, the chairman, coming up at 6:30 a.m. in new york, 11:30 a.m. in london. this is bloomberg. ♪

♪ francine: francine: the own rallies.

and thermination -- pound rallies the determination to replace the back the second lowest order amount on record. markets will not open today. the session goes red in europe. welcome to "bloomberg surveillance." federal, state, local government offices are closed. u.s. is limited trade in bond and equities futures. there are thin volumes across the board. getting news out of brexit and brussels. it has been agreed at a political level.

bloomberg news obtained the draft agreement. it points to close cooperation, free trade, and concessions that could help theresa may sell it at home. the pound rowling on the back of that. let's get to first word news. board is meeting to decide the fate of carlos ghosn. in jail on allegations of financial misconduct. the company says it plans to dismiss him. bloomberg has learned the board is divided. the decision could affect the future of the nissan-renault alliance. in south africa, the central bank is likely to raise interest rates, helping the rand. it has gained 6% against the dollar this month, a top performer. the south african

president will announce changes -- cabinet today. the trump administration wants to make a change in how migrants of life for assignment. would have to wait in mexico while their claims are processed. current policy allows those to remain in the u.s. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. francine: the pound agreementn a draft that sees a free trade area, determinationnd to replace the backstop. theresa may can also sell

it back home with some concessions. language,look at the 26 pages, an agreement between the commission and the u.k. government, still must be ratified, but it looks promising for the u.k., free trade deal, deep ties, autonomy, and when it comes to the backstop, both sides will work to find a way out of it. the language on the backstop is a big concession. it depends on the way she gets to spin this. she focused not so much on the , so thatl agreement will be the key.

from the eu perspective, it will depend on whether member states agree on it. spain at the moment is unhappy with the document we have. francine: we are talking about the political hurdles back home. to this? >> that is the big question. it is not just the germans. it is the french. they say this should be about the optics of the deal, taking a picture, shaking hands, and that is it. they don't want to get to a point where there is an ongoing negotiation. there was the idea theresa may would use this to get more concessions.

the europeans are saying don't try this. sunday will be it. the point is can they rally behind this and then she shall it back home -- sell it back home? weis unhappy. you could argue it would be to say this is a --for jean-claude juncker to say this is a good thing. francine: thank you. now let's bring in our guests. christian, is this a good thing? it is a surprise that we are moving so quickly. it is about permanent relations between the u.k. and eu. leaders will see it and approve

it the deal without any further discussions. this will to see work. i think it will be delayed. we have another summit where they would actually degree. the risk that we would have atcups in the process come the deal and the future relations decorations, we have a fallback option, where frictionless trade for goods is guaranteed. we may get out of this backstop if we find a different way of doing customs checks. francine: if this is delayed, when does theresa may put it to parliament? >> if not before christmas, before january 21 where we have a deadline where she has to go to parliament. there is still time. it may work in favor of the government with less time to

renegotiate it. it may strengthen the position to say this is this deal or no deal. francine: what do you see as a timeframe, peter? >> i would like to think we are 99.9% there. unknowns, but of we have a deal that both sides can agree with. it will make it easier to sell it at home because theresa may can say we got concessions. we are effectively a member of the eu. we have control over our borders. what more do you want? but il be a tricky call, am recently confident we are almost there. francine: what if we are not?

what happens to the pound? ofthere is the possibility negotiations, that we tried to lengthen the article 50 process before we get to the no deal scenario. if we go to the edge of the cliff, you want to sell the pound as soon as possible. ?rancine: what does this mean at what level do you sell pound? can it go to 1.10? >> i tend to look at euro -sterling when it comes to brexit. would fall sterling between 5% to 10% on trade weighted terms. that is against the euro as well, taking as close to parity. francine: what is the crashing out possibility?

is that worst-case scenario for governor carney? will he have to hike rates straight away? >> to get to know deal, you have to get past parliament, so parliament must not agree on any alternative or agreed to no deal. you need to have extra legislation to implement it. if you want to get past parliament, you would need a second referendum where you have only a deal versus no deal option. areink both scenarios possible. what with the boe do? we would have to talk about the economic and financial consequences. a lot would depend on policy responses, the fiscal policy response, what with the u.k. do with its new freedoms and so on,

but i am of the opinion that the boe will be cutting rates and doing more qe. you.ine: thank coming up, we will be joined by the chairman of societe generale. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua in london. tom keene off for thanksgiving. happy thanksgiving.

giving a thumbs-up or thumbs down to the spending plan. tie-in deputythe prime minister says he won't back down on the budget clash with the eu. saying the nation won't breach of the budget deficit in 2018. let's get back to our guests. christian, what do we do? does this go on and on? it doesn't seem like the populist government will give in. will brussels? >> the spread has widened. that is bad for italy. growth has come down, but not had enough to trigger a melt down. it could change in the day.

-- change in the day. -- change any day. watching is growth. grows, thement government will be under pressure at home to change course. that is the moment things will go against the current government. i think there are tensions there and we will see early elections. >> six months ago we said we will give the time government a year. it is possible that could have an. , thee immediate short-term eu is ramping up a problem it probably doesn't need to have, making an example of italy. italy does have excessive debt,

but it had debt when it entered the monetary union. it is impossible to apply the same rules to italy as everywhere else. it is the biggest debt market in the eurozone. francine: will the eu do everything it can to save them? if they have save the u.k. or italy, they save italy? >> absolutely. italy is too big to save, too big to fail. you have to find a compromise solution. movement andulist the european commission, and neither side will give in. a compromise is always possible. it is who will offer the first olive branch. ,rancine: do you think

christian, brussels should be softer on italy? if you look at a time growth, it is not really there. you need to spend your way out of it. in on italy, then others may come with the same problem. that may be the line the commission is taking. openlyernment is dismissing the rules, so it is obvious the commission would go against them. we've have a track record, so why stop with italy. italy does not need this budget they have proposed. italy needs structural reforms, not fiscal stimulus, a permanent giveaway to households. it is the wrong policy.

there has to be something from italy to improve things. francine: where do you see euro going? how much is dependent on world growth, and how much on italy? >> a lot depends on what happens in the u.s. our view is u.s. growth is peaking and will come down. the ecb will start hiking interest rates. we have the twin deficit problem in the u.s. everything in the long run speaks against the dollar and in favor of the euro. in the short run, the downside risks seem bigger to me, even the possibility of a recession in italy. francine: where do you see euro? >> heading higher in the short to medium term. thatu said 1.20 in 2019, is broadly in line with our

call. there are huge downside risks. i suspect markets got used to with problems in the eurozone. italy is a major spat with probe eurozone. , but it is not an existential crisis, yet. francine: thank you both. you both stay with us. breaking news out of the u.k. we are hearing from the government spokesperson speaking to reporters at westminster. there is no comment on the draft of the brexit political declaration. this is a bloomberg scoop. we saw the draft. we published it. now by may is briefing teleconference on brexit. we make it a press conference later. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua in london. tom keene with the morning off. happy thanksgiving. we are awaiting the verdict of the nissan emergency board meeting, deciding whether to ghosn asarlos chairman. joining us now is stephen engle. i think a lot of people are leaving. we could have a decision imminently? >> we could have a decision

already. might have already taken place. we have not seen this ceo leave yet. there will not be a statement tonight. they will likely have to wait for a statement that will be filed through the tokyo stock exchange. the journalists are here, dozens of us, waiting to see if there was a vote and the fate of carlos ghosn, whether he has been voted out as chairman of nissan. he might have weaker troubles in the works. the tokyo prosecutors office is building a case. convicted,dicted and the crimes are considered heavy. that could entail a 10-year

prison sentence. this story will unfold over weeks and months. francine: thank you very much. we are back with christian and peter. peter, the implications for the outlines, mitsubishi-renault-nissan? , does the industry take a different shape? >> high am not sure it should. the companiessons have to get together is we have huge overcapacity in the industry. we have to reduce that capacity. one way are mergers. we can share platforms, costs. it would be a mistake if we seized partnerships in an industry grappling with huge

external challenges at a time when we start to think about electronic cars. francine: i note this is not your field. it goes back to the momentum in japan. are investors getting japan wrong, away from nissan? >> we are more optimistic on japan from an economic perspective. the headwinds are there. the domestic support seems to be increasing, some talk of fiscal support next year. we have stimulus in the u.s. , europe,lking the u.k. and now japan joining in. japan isal outlook for mildly positive. francine: thank you both for joining us. it has been a busy day. thin trading volumes.

news out of brussels on brexit. coming up, we talk with the chairman of societe generale. the pound rallying. we saw the draft agreement between the u.k. and eu. the question is whether there are concessions enough that theresa may can come back to her parliament and get it through. she is briefing the at the moment by a teleconference. we are possibly expecting some kind of briefing for reporters later on. the pound rallying. 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. francine: this is "bloomberg surveillance." i am francine lacqua in london. tom keene having the morning off.

some news fake and fast from brussels. the eu setting out deepening ties with concessions to theresa may she can sell to her party. draftund rallied on the seen by bloomberg. it is coming back a little bit. the draft distributed to eu members thursday and obtained by bloomberg sets up for free trade with customs cooperation. willkes clear both sides replace the irish backstop with a better and long-standing pollution. , nowound rallying retracing some gains. let's get straight to bloomberg first word news. liese fate of carlos ghosn

in the hands of the board today. the automaker said it would move to do this miss him -- to dismiss him. bloomberg has learned the board has been divided over concerns they don't know enough about the alleged crimes. firing him would raise questions about the future of the alliance. denying accusations it conducts a state-run campaign of ip and technology theft. the trump administration claims it says are based on hearsay. said beijingreport is stepping up cyberattacks on american companies. justin trudeau is trying to keep up with the u.s. tax cuts. than $10veiled more billion of tax breaks for businesses. go the government -- the government opted for targeted measures. global news 24 hours a day on

air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. francine: thank you so much. the pound has pared gains after an earlier rally. this after the draft agreement eu and the eu and has -- u.k. has been seen by bloomberg. investors have given a thumbs .own to the spending plan premier sayseputy he won't back down on the 2019 budget clash. joining us now is the chairman societe generale of from 2005 two 2011 on the executive board of the european central bank. thank you for coming on. you have this great view of banks, regulation.

this all unfolded in your country of italy. how does the standoff emd? end. will see how it will it doesn't help the italian economy. increasing -- is increasing the costs for taxpayers, companies that needs to issue bonds, increasing the costs for banks, which also have to raise funds in the market. like in 2011,t the rise in the spreads will lead to a credit crunch and accelerate a slow down in the economy. francine: are you worried this italian-eu standoff could impact the ecb's ability to exits from qe? >> i think it is too late.

policy has to devise its raised on the performance of the whole euro area. it cannot change its policy for one country. the expectation of exiting qfii has been there for some time. qe has been there for some time. i don't think they can change policy at this stage. that if: do you worry the standoff becomes uglier, that italian voters will turn eurosceptic? is there a plan to take it out of the currency? so far, the eu has had to gain some popularity. italians are getting worried about the

i don't know when they can stop this strategy, because we have seen this with the tender for an italian bonds for households, dedicated to households. it has not gone that well. it shows italians are careful about where they invest their money and may not fully trust the strategy. although in the short-term, it makes them feel the time government is finally trying to reach, achieve something in favor of italy, but that is political. it is not based on anything concrete. bondsne: one person said are out of the government's control. that can't be right. every time they say something germanthe spread with bunds rises.

>> on a high-frequency basis the statements of the two vice prime ministers impacts the bond spreads. mario draghi has said this several times, confronting, threatening is damaging the markets. francine: how does italy grow? does it need infrastructure spending? does it need to reach the deficit to grow? experience of the other countries shows what is needed are structural reforms and investment. in both cases, it has been difficult. the previous government adopted basicallywhich is

making it impossible for companies to work. it has been drafted by anticorruption judges. it is very rigid. they are trying to change it. which infrastructure does the government want? ,learly there is a division totally different viewpoints. the five-star movement is against big infrastructure. they have already lost the fight on the gas pipe. may want to fight on other issues. it is building infrastructure. so clearly there are tensions within the government. areother structural reforms totallyisk of

unfolding. is a bitem of growth of illusion that by current spending, that growth will pick up. the markets aren't believing it. it economies are not believing it. all those who have testified in front of parliament, the bank of italy, the statistical institute , they all said the numbers don't match, they don't work. francine: what worries you about europe, italy, the trade war between china and the u.s., lack of reforms, the lack of angela merkel? >> and brexit. there are many issues on the horizon that made the recovery gradually falter. all of these issues are a threat. europe is the

lowering of oil prices. key factor ina the recovery the last five years. over the last 12 months, oil prices have picked up again. now they are going down. , europeanor europe countries are importers of oil -- francine: i'm not so sure they continue lowering. it changes. >> these levels are good. it can help. there are many uncertainties. , the italianed issue, trade war. francine: what do you do with brexit if you are a bank? >> you have to start moving. you cannot wait. hopefully there will be an agreement. hopefully the parliament will accept it in the u.k. hopefully we have a one-year transition.

have the costs any bank.or this will be banks to reconsider strategically. francine: are we underestimating the impact? i have heard it will rank london to its feet, or people want to move here because of the magic of london, so it will find another reiteration, but one of the best cities in europe still. >> it will depend on how the financial institution will react. if the costs of being in london and it does not look as if financial issues have that much importance, and the british government said -- francine: why was it not a priority? >> that is the key issue. in the end, maybe the taxpayers

in the u.k. do not want such a big financial system, financial center, because they are afraid that if there is a crisis, they will have to pay for it. to protect the u.k. economy , thest a crisis authorities and governments would want the banks to hold more capital, more liquidity, which is understandable, but means increasing the costs of being in london and may have u.s. banks bringing business back to the u.s. we will see. we have not seen the details. francine: how many people is societe generale moving back to paris? >> we have not been moving back. we have the flexibility. we have to take. somestrategic decisions at point. banking and europe in general

needs some restructuring in terms of profitability, looking again at the businesses that we conduct to make sure we have our plans well implemented, so this will the an area. will bedo in london something all banks have to do. the smaller ones will be more affected than the large ones. francine: because the market has always been financial services friendly, they negotiated that are deals for banks at the european union level. when brexit happens, our financial services more at risk? >> the principle of equivalence will help guide the relationship. equivalence, but the day after, there will be

divergences inevitably. who says one regulation is equivalent to the other or not? sooner or later there will be sanctions, so i expect instability down the road. authoritiest, the will want to get more of a grip on their own market. thank you. you stay with us. we will ask ourselves if europe is still over-banked. meanwhile, a draft agreement has been agreed of political levels. bloomberg has a draft, 26 pages .ood the pound was rallying it is basically at 1.2869 as we speak. this is bloomberg. ♪

francine: this is "bloomberg surveillance." have been following the nissan story closely. japan,ng to a source in the board has dismissed carlos ghosn. they have declined to comment on this report. stephen engle was outside headquarters through the day. they were deliberating for three hours. andaw the chief executive other nissan executives leave the building. this is the very latest. the nissan board dismissing carlos ghosn as chairman. nissan saying they are not

commenting. we are talking ecb, the banking sector. we are back with the chairman of societe generale. he is a former member of the executive board of the european central bank. less restrictive monetary policy from the ecb in 2019 and the fed to be a really for bank revenue? >> if the ecb gets out of negative interest rates, that would be a big relief. the ecb has the understanding this is a problem. the ecb went into negative largely rates in 2014 hoping not to get into qe, because qe is controversial and europe, buying government bonds of various countries. inflationaryhe pressures were there, so now we

have negative rates and qe. the sooner we get out of negative rates, the better. the distortion oh impact of negative rates -- distortional impact of negative rates are a burden. adjust toyou have to a better environment? does it lead to more consolidation? or something else? >> the world will be living with lower interest rates for some time in general, both the short end and the long end. banks have to change their business model. you can't live on the basic standard. francine: is it everything on mobile? the next frontier? >> the change is selling more

,roducts, not just financial insurance, consumer credit, many others, leveraging the data that banks have. that is a direction you can charge commissions and make it more profitable, but you have to invest in technology, and you have to consolidate. products, itese requires economies of scale. them, so manufacture you have to have that. francine: why have we not seen a large cross-border consolidation yet? >> it is too difficult. first the synergies are not there. the legal systems are different. banks.for online

we have seen cross-border activity expanding there. to act according to what i say. it is saying we would like to have more consolidation, but there are still many restrictions, not so much the ecb, but national regulators who have exceptions, powers. i think we need to move forward. otherwise i'll banks will remain less profitable and more fragile and case of a shock. francine: thank you very much. hold that thought. we have an update on nissan. the board dismissed carlos ghosn as chairman based on a report. nissan declining to comment. let's get straight to our reporter on the ground from yokohama.

update us on the situation. we have this report saying he has been dismissed and nissan saying we don't want to comment yet. they will be making a filing to the tokyo stock exchange. the state broadcaster is announcing that is probably fairly accurate. it would market the stunning and 'sift end to carlos ghosn position as chairman, the turnaround artist who took his company 20 years ago and turned it into one of the largest automobile groups, along with renault and mitsubishi. it is a sudden and dramatic fall , onegrace for carlos ghosn of the icons of the automobile industry. his next challenge could be even greater than his survival in the automobile industry.

we heard from prosecutors in tokyo saying if those actions are true, that would constitute a heavy crime. he has been accused by the of financialive crimes, facing 10 years in prison if he is indicted and convicted of these crimes. how far do the japanese lawmakers want to take ?his >> renault owns 43% of nissan. say.would like to have a

it does raise questions about how the glue will remain with the architect of that alliance out of the picture, at least at nissan. nowult have reconfirmed for carlos ghosn as their chairman, however, they have appointed a ceo given the fact that carlos ghosn is in the tokyo detention center and could be there for another week as prosecutors put together the case and decide whether to indict or not. francine: thank you very much. headlinetting another on brexit. it confirmed that theresa may will make a statement to the house of commons at 3:00 p.m.

back to banking. societe generale has a lot of exposure to emerging markets, including china. what does the volatility in emerging markets mean for your bank? >> emerging markets are more volatile. a share in particular, it has particular has been growing fast, steady. we would like to do more because the opening of markets in china has been slow in the financial sector. comeour perspective, this of the prospects are very good in asia. francine: how do you see china developing? >> china has said it was going to open and has been repeating we have yetractice to see some of the actions be implemented. the economy will slow down,

probably. they have to address certain issues in terms of nonperforming loans. there is a lot of confidence in theleadership, but impression is that they will try to achieve this by centralizing even more power and slowing down the liberalization. this is a concern. francine: what do you worry about the most? trade tensions and a possible recession? is that too pessimistic? at a certain point this cycle will end. it has been the second longest cycle in the u.s., the second in europe. the administration has lengthen the cycle for a couple of years, but it will come down. at that point, the liquidity in the markets and interest rates

going up, there will be a disconnection between prices and the underlying fundamentals. have a realignment of prices, which may create problems in the system. to forecast when this will happen, but i think we are close to a major readjustment of prices. francine: thank you so much, as always. the chairman of societe generale . the board of nissan has ghosn.ed carlos we await more on brexit with theresa may talking at 3:00 p.m. this is bloomberg. ♪

♪ >> it is 7:00 a.m. in new york. welcome to bloomberg markets. ♪

anna: the top stories we are covering at bloomberg around the world. brexit drafted deal, a draft agreement to keep close economic ties after brexit. , then retreats. investors give a thumbs down to the italian government funding efforts. the bonds head for the lowest level on record. nissan board dismisses carlos ghosn as chairman. tokyo prosecutors say he may face 10 years in prison, if convicted. morning. good afternoon. good evening. 12 noon in london. welcome to our special thanksgiving programming. happy thanksgiving.