whole other open question. it in itsacking entirety and someone further scrutiny so they can make changes. thank you so much. maria tadeo and anna edwards. joining us now is a global market strategist at jp morgan. nejra: good morning from great to have you with us. bloomberg's european headquarters. this is "daybreak europe." we saw softness in sterling, taking a pause after a lot of deadline missed. optimism for the deal for brexit isal eventually, even if not this blocked by mp's. week. how much more upside do we have a fresh election could be in the given what we have learned over cards. we are live in westminster and the past 24 hours? >> we had a big move over the brussels. semiconductor stocks tumble on weak forecasts from texas past couple weeks. instruments. we have gone from the bottom end we have key industrial of the range around 120 through indicators in the shape of 1:30 the past couple of days. caterpillar. to the downside, the hang seng it is right that sterling investors are taking it and trying to establish the trades lower as a financial direction of momentum ahead. times report says the chinese government is drafting a plan to if we see sterling move higher replace carrie lam. over the coming weeks, that we are live in hong kong. momentum really has to start to

build again. you want to see noises around the government bringing the deal back to the table with hopes they can pass the bill in a short space of time. as we have heard, if we do look welcome to "daybreak europe. let's get to those akzonobel like we are going into a long numbers. one of the key things to look at is that akzonobel said it is extension, the general election does become more likely. making good progress toward its for sterling investors, that goal for 2020. adds back uncertainty to the to that is a big question for the table. election could perhaps investors, whether that goal can be met. that is something to look into. third-quarter revenue coming in at 2.4 billion euros. mean a pause if not a pullback a beat on the estimate of 2.3 6 in sterling. what would it take sterling to 140? billion. third-quarter adjusted operating >> 140 is the top of the range. income at 300 million euros. you have therio, that is softer than the estimate of 303 .8 million euros. bill passing, you have a general akzonobel reiterating its 20 election allowing the government now to push forward with their adjusted operating margin guidance. significant spending plans, so those are the main numbers since the start of this new coming through from akzonobel government, we have had a series of material spending and of course coming up on bloomberg daybreak: europe, the

ceo joins us for his first announcements that would give a significant boost to the u.k. interview of the day. economy. in a scenario where you have don't miss that conversation just after 7:00 a.m. london brexit uncertainty lifting, time. spending coming back to the u.k. getting to the broader markets, , the bank of england still on taking a look at equities, the u.k. economy is softer in the asian session. futures in the u.s. on the back foot. looking in a reasonable place. below 3000 on the s&p 500 yesterday. came up a little bit. texas instruments causing some there are a lot of if's to that concern over night. scenario. the 10 year yield also slipping what's your outlook for with equities two a 175 handle what the bank of england does? after we dropped from four basis we have had conflicting messages. points in yesterday's session. concern coming from >> they are on hold for some time now. they did open up the path to a the brexit process. cable holding onto losses from potential rate cut. yesterday, 12862. if they feel like uncertainty is let's get to the top story. dragging on the economy for a boris johnson looking set to try decent period of time, so if we for an election after parliament do look like an impasse on the blocks his plan to rush the brexit deal into law. johnson warned defeat on the brexit situation is going to hold, they have opened up a timetable leaves the u.k. in limbo. route to a potential cut in the months ahead. with momentum for the deal at >> the house has again voted to the moment, they are quite happy

delay rather than the timetable to sit on the sidelines. that would have guaranteed that nejra: you would not be the u.k. would be in a condition expecting a rate hike anytime soon? to leave the eu on october 31 with the deal. >> that is very unlikely. there are global factors as euther uncertainty, and the well. you have the fed, the ecb, all must now make up their minds how to answer parliament's request reacting to similar global conditions. the bank would be potentially for a delay. uncomfortable with moving in joining me from brussels such a different direction. nejra: in terms of u.k. is maria tadeo. let's look at the eu side of equities, is it the right time to be making binary calls on this first. we have been looking at the ftse 100 versus ftse 250? prospect of an extension. what have we heard from donald >> it is hard at this stage. tusk? if you were confident we were asng to get the bill passed >> good morning. we had that sweet from donald tusk, the head of the european mr. thompson maybe hoping, there council, saying he will suggest to european leaders agree to an extension going all the way to is more upside. there is lower exposure to january 31. overseas earnings. the thing here is this does not you would not a speck so many headwinds. actually come down to donald stage of theat a tusk. this is a political decision economic cycle that typically that eu 27 leaders have to agree favors large caps over small to unanimously. caps.

we have seen in the u.k., the answer the question, will they ftse 100 tends to be more grant more time, the reality is when you look at the eu, they do resilient in periods of slowing economic momentum. not want to go for no deal brexit. for investors looking to take they do not want to push the prime minister into no deal into smallicant step brexit, especially because he is very close to getting this deal. caps in the u.k., they have to they will most likely give more be confident this bill has legs time. the question, and this is where and has momentum as we can see it gets tricky, is how much overnight, there is some fairly time? do they stick to january 31 or material downside on that front. pushed to a longer extension? from: do you get a sense this is always a tricky question for the eu because they do not global investors that if they want to be seen as interfering were going to start allocating to u.k. equities, they would in the political process. have preference for the large caps? we will get to anna >> it is what global investors are more familiar with, so given edwards in a moment. another question on the length as well the uncertainty around of the extension. you were mentioning the prospect the future relationship, we have to remember what we are of a longer extension beyond disgusting -- discussing is only january 31. the divorce deal. what about a shorter one as well? trying to understand the u.k. that's another possibility, working with the eu over a and that is something that would surely fly with the likes of multiyear horizon, there is emmanuel macron, the french still a huge amount of uncertainty. president who continues to believe there is no need for it international investors were to return to the u.k. market, a

more time because there is a deal on the table. more defensive large-cap would it is a question of whether the u.k. parliament can agree on make sense. something. the prime minister yesterday got let's get the bloomberg very close. he did win a vote. it does show he has momentum for first word news in hong kong. his deal. a short extension, if that was finally the choice, then >> the top u.s. envoy to ukraine european leaders would see the eu leave earlier or be given the has directly contradicted president trump's assertion possibility to leave before that there was no quid pro quo behind january 31 news headline if that his july 25 phone conversation with the ukraine president. deal -- new deadline if that william taylor made the claim in a detailed statement to house deal is passed. we have talked many times about investigators. how the europeans want to move the president meanwhile has tweeted that the impeachment forward. they want to focus on other things. inquiry is, quote, a lynching, they have come to terms with the but added, we will win. idea brexit will happen. assia and turkey have struck deal to create a buffer zone in northern syria. president erdogan talked with they do not want this vladimir putin for more than six uncertainty to drag on and on. anna edwards is joining hours before announcing their agreement. it includes joint patrols and coordinated action with forces us from westminster. to remove kurdish fighters from have the last 24 hours made a border areas. labeledish ypg

u.k. election more likely? boris johnson has his eye on one. separatists and terrors. if we are seem as heading towards an election. of financial aid it does just depend on when, packages in a bid to calm mass doesn't it? protests. the measures include a supplement for lower earning he threatened the general workers and 20% increase in election yesterday. andions for the poor, or, whether he tries to work on a new timetable to get his withdrawal agreement through parliament. higher taxes for the rich. decide see why he might people have been killed in violent rioting. to go for a general election. he is ahead in the polls. global news, 24 hours a day on the polls have been very wrong air and @tictoc on twitter powered by more than 2700 journalists and analysts in more in the past. than 120 countries. he might be able to craft a strong pitch against parliament. he has a deal in the bag, hasn't this is bloomberg. he? is just the parliament will let him get it through, is the coming up tomorrow in narrative he would run with. the labour party would be ok with going for a general bloomberg big decisions, sitting election now, which has been the problem in the past. down with robin hood ceo. either way, he is going to need some sort of delay. next, the end of the road for carrie lam. the chinese government is

drafting a plan to replace hong kong's chief executive. we will have the latest. hearing from maria, we wait for when you are traveling to work, the eu side. tune into blue radio on your mobile device or dab digital radio. that could have an impact. ♪ how does the rest of the week look in terms of the third reading? one mp said, our votes are not guaranteed for that even though we voted in favor of the second reading. the withdrawal bill is now on hold, so it moves no further forward and we do not make any progress. we do not have further readings as it stands. it could be taken off hold at any point and a new timetable could be crafted. the support of labor mps who backed a deal last night, some of whom definitely would leave a

nejra: this is "bloomberg daybreak: europe." an update on akzonobel. it has announced a new 500 million euros share buyback program. it has also reiterated the 2020 adjusted operating margin guidance. this is key for investors so that the ceo can prove he was twot to spurn the takeover years ago. coming up on bloomberg daybreak europe, the ceo of akzo nobel will join us for his first interview of the day. don't miss that conversation just after 7:00 a.m. london time. now to check on the markets of

asia. juliette saly has more. japan back online. we are seeing the yen gaining some strength. we have tokyo funds returning, but also brexit uncertainty seeing money going into safe havens. asian stocks are lower for the first time in three sessions area we could see a bit of upside in hong kong. we had government measures announced to boost tourism and also a report that china is considering replacing carrie lam. we are seeing hong kong stocks under pressure like the rest of the region. new zealand the worst performer today, down the most in six weeks with rio tinto looking at a strategic review of its new aluminum smelter. watching the chipmakers after we had texas instruments disappoint in the u.s. session. the taiex is down 0.5%. yesterday it hit its highest level since 1990. at the overallok

bloomberg semiconductor index. the purple line, texas instruments, up 36% on the year. tsmc has also done well. both of them outperforming the semiconductor index. a question whether industry fundamentals are supporting valuations, they are at the nearest high in six years on a pt basis. we are also watching out for sk hynix in sold tomorrow to give us a -- seoul tomorrow to give us a better overview on the industry. had better than expected numbers from asml in europe. thank you so much. let's get the bloomberg business flash. >> wework has accepted a rescue package from softbank. the deal gives the

conglomerate an 80% stake in wework. the rescue values wework's parent company at less than $8 billion. it also sees the founder give away his board seat and walk away with $1.2 billion in stock. saudierg has been told aramco will push to complete its initial public offering this year by relying more on local investors. sources say the state owned oil producer is considering a formal announcement as soon as the next few weeks. it was originally slated for october 20. overseas investors pushed back at aramco's to trillion dollar valuation. boeing says kevin mccalla cook -- kevin mcallister is stepping down amid the crisis engulfing the 737 max 8 and production problems with other planes. he is the highest ranking

executive to depart in the wake of crashes in a worldwide grounding. the head of boeing's global services business will replace him. that is your bloomberg business flash. the chinese government is drafting a plan to replace hong kong's carrie lam with a, quote, interim chief executive, according to a report in the financial times citing unidentified people briefed on deliberations. the plan but see lam's successor install by march, though xi jinping is yet to decide on the proposal. us.more stephen engle joins great to have you with us. take us through the report. tell us what implications this might have for protesters. >> this should not be too much of a surprise. i would guarantee you beijing leadership has been drafting a plan for succession in hong kong, whether they carry that out or not, but more than four

and a half months now of unrest on the streets, 20 straight weekends of violence, pretty much something has to be done. the financial times is basically citing unnamed sources and saying a plan is in the works, or at least being drafted, that would put in a new ceo as early as march. chief executive, not ceo, of hong kong, by march. march is key. that is when china holds its annual session of parliament, the national people's congress. plan wouldn on that the situationtil in hong kong has been stabilized. the beijing leadership obviously does not want to give the impression they are backing down from the violence here. thank you for that update from hong kong. trade, while tensions between china and the u.s. remain high over hong kong, elsewhere there are positive

signs of the trade front. soybeans.e market for they were allowed to buy 10 metric tons of u.s. supplies without retaliatory duties, the third and largest round. we are heading to the apec summit in november. there is a fair amount of positivity. is there too much positivity in risk assets around u.s.-china trade? >> there might be in the market. if you look at what is in that phase one agreement, it is low hanging fruit between both sides being targeted. the increase of agricultural purchases, the u.s. has said they will step away from some, but not all, of the future tariff increases they had planned. this is sort of a tentative step toward a better relationship, but for phase two or phase three, that's really where you are getting the meat in this

discussion around intellectual property transfer, for example. really this battle for leadership across the globe. those are the really substantial issues that, for me, are much harder to find common ground on. we get signals from the semiconductor industry, it was looking positive from tsmc and asml, but then we get texas instruments painting a different picture. what is your reading? that is one area where you have the u.s. and china going head-to-head. take cloud computing, for example. chinese companies are not focused on that. there is not such a battle. the semiconductor industry is one place this is playing out. noises cominge out of the u.s. administration, and whilst their de-escalation on trade has been quite clear to see, it is also clear to see they have not stepped away from trying to support their tech

giants and their place in the tech infrastructure. >> if we get a pause by the end of the year, how much more of a lift can risk assets get from that? not a rollback, just a pause. --it would help, but it is a the damage is already in place. that uncertainty that has been hampering business investment in particular and harming the manufacturing sector has already had its impact. a pause on further tariff escalations would be helpful, but it would not do much to boost the growth outlook. it is more about removing downside risk. softbank tog up, the rescue. wework's biggest investors swoops in with a cash injection. what does the future look like? this is bloomberg. ♪

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this is "bloomberg daybreak: europe." london is bloomberg's dani burger. equities started today by outperforming asian peers, in part thanks to tech stocks recovering after yesterday's fall. is that the assessment? >> you. good morning to you. there point 25% higher in trade, unlike yesterday because one of the large indian i.t. companies is facing decoupling. and came to light yesterday yesterday, the stock react down

15%, to highest fall in the stock in a long time. it had a telling impact on the market. indian markets were down yesterday in trade but rebounded after the 15% correction yesterday, up marginally today. poorly in the rest of the i.t. pack. we need to see if this lasts during the day because it is a telling time for tech leaders. nejra: huge week for company earnings. we've got something like 20% of the s&p 500 reporting. what reaction are we seeing in equity market so far? dani: the earning story that has captured the imagination of markets has been texas instruments, and concern we are seeing trade bite on chipmakers. we see it is china falling today. some other equity markets are moving lower.

mostly because, they are coming back online but it has been a mix because we have seen more optimistic earnings from chipmakers in the saying tradepe, hasn't affected them but otherwise, that is the main and the story. the other main story is brexit. that's dominating markets. stalling after the gains we have seen that some games have mean short inflation bets in the u.k. are working out. is two-yearr inflation swaps. perhaps if we are starting to see some gains in the pound, that means perhaps inflation isn't going to be as severe as some analysts predicted given all the drama coming on. is a shortare seeing covering, the next few days will play out, especially as the timeline, the shape of this next brexit.

-- deal. we will find that out. . nejra: thank you both so much. let's get the numbers crossing the bloomberg now. revenue, 15 point 6 billion euros, estimate 15.5. a little beat on revenue. concerning its 2019 its1 -- confirming 2019-2021 goal. in some of the detail, if we look at that, it still sees the china market down 7%. russialso lowering its output. it sees an automotive decline in europe. tom out of the woods, even though the third-quarter revenue number comes in at a beat and in the past few days, we did see a little selloff in some carmakers after the profit warning from renault. third-quarter revenue for

peugeot coming in better than expected and considering its 2019-2021 target. let's get the first word news in hong kong. looks like ason push for an election after the u.k. parliament blocked plans to rush the brexit into law. the u.k. prime minister won the vote on his eu agreement but mps agree -- refuse the timetable. donald tusk signaled the eu will likely agree to another delay to brexit. johnson warned the defeat you -- leave the u.k. in limbo. >> this is a disappointment that the house has quite again voted to delay rather than a timetable that would have guaranteed that the u.k. would be in a position to leave the eu on october 31 with a deal. face further uncertainty and the eu must now make up as to how to answer

parliament's request for a delight. >> the envoy to ukraine has contradict president trump's assertion there was no print pro -- behindo quo find his july conversation with the president. he made a detailed statement house investigators. thepresident has tweeted inquiry was "a lynching." the financial times says china is drafting a plan to replace carrie lam with an interim chief executive. it cites unidentified people briefed on deliberations in beijing. it says the successor would be installed by march if she shanking -- xi jinping carries out the plan. the executive may not stay for a full five-year term. russia and turkey have struck a deal to create a buffer zone in northern syria. president erdogan talked with

vladimir putin for more than six hours before announcing the agreement. joint patrol and coordinated action with syrian forces to remove kurdish fighters from border areas. the kurdish ypg fight -- fought ,or years alongside u.s. forces but turkey labels them separatists and terrorists. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. wework has accepted a 9.5 billion dollars rescue package, giving the investor and 80% stake in the company and evaluation of less than $8 billion. its is the founder give up his boards he can't walk away with a package include as much as $1.2 billion in stocks. tim, great have you with us. it seems to be the end of a narrow for wework, but is it the

end of its troubles? tim: it is the end of the adam getting aa at wework, buyout package, more than $1 billion to buy out his shares. it just is the start of the problems, meaning they get handed to softbank. they'll get 80% of the company but on accounting terms, they say they don't control it even though the whole 80% of it, because they don't have control of voting rights for the board, so they will not consolidate the numbers. they will treat it as an associate but either way, they have to clean up the mess that has been left behind and they helped create the mess spending time investing in the company. more than $40 billion of lease obligations over the coming years so there is a lot ahead of them and softbank has to deal

with matt. nejra: what are the broader implications for softbank of the deal? a vcthey gone from being fund to softbank, the company rather than the vision fund, becoming more like a private equity firm. it normally comes in, uses debt to buy out a company and reinvigorates it or renovates it happened hopefully flip it at a profit. that is what softbank is looking like right now. cut definitely need to costs and make sure cash flow keeps coming in so there will be tough decisions to make over the coming weeks, months, and years. which they will hold onto, which they will sell out of, and those are decisions in softbank's hans given the have installed there coo as executive chairman of wework's board. nejra: bloomberg tim --

technology columnist tim culpan. economy'ser of the results, headed for a mild earnings recession according to morgan stanley and analysts expect the equipment maker to post its first year-over-year decline in quarterly profits since 2016. we are looking to other majors reporting including microsoft and boeing. our guest from j.p. morgan is still with us. interesting comment on the mliv blog and a contributor saying caterpillar has been seen as a bellwether but now we are moving into late cycle, perhaps investors should tune in more into companies like amazon, microsoft, and consumer companies like starbucks and mcdonald's to see the state of the consumer. is that what you will be tuning into this earnings season?

>> i think that is right because from the growth perspective in the u.s. and market composition perspective, these consumer and technology stocks are the drivers of growth today. for me, the headlines coming out bethose companies now will significant and more broadly on earning season. it is interesting timing, this one because you have expectations softened quite significantly in the run-up to a usual pattern for quarterly earnings and we are seeing a mixed bag. the bar has been set low for companies to be beating. even though the headline numbers aren't looking stellar for q3, we are seeing average beats looking quite strong, so from a market direction perspective, i don't think there was too much signal at this stage, given the headlines around trade, the headlines around brexit are more important in setting market direction today. nejra: will investors punish companies who miss more than rewarding companies that beat? hugh: there is part of that but more important will be forward

guidance this time around. the cuties on just numbers, particularly given the comparisons for q3 2019 look tough. you had record sales numbers, record margins in the u.s. in 2018 so the fact these numbers don't look spectacular i don't think is too much of a cause for concern. if we did see companies start to put more focus on 2020 guide and trying to drag down those estimates for next year that in my view look too high, that would be more important for market direction. nejra: is there any prospect for the earnings season to bring investors back into europe a little more and perhaps shift the preference from the u.s. to europe, even if a little bit? hugh: i think it is tough to see at this stage at an aggregate level because the financials in europe still look reasonably weightged and given the of european union indices, much

more heavily to financials rather than the tech and consumer name as you mentioned in the u.s., that has been a big drag on european profitability the past few years so that is set to stay. the outlook for that sector still looks fairly challenged. nejra: what would it take? would it have to be a recovery in financial stocks in europe to change -- make european stocks more loved among global investors? is that what it hinges on or is it the global picture, as well? hugh: a boost to the financials outlook would certainly help but that is maybe not the place to be looking at the moment. the more positive factors for europe are partly around the by feelingy, so companies they need to issue debt buyback stocks. if we were to see a cyclical rebound from this point, particularly in the manufacturing sector, i would expect a market like europe to move more quickly than the u.s.,

a higher beat tonomy would suggest things will react more quickly in europe if we see momentum sta nejra: what sectors would you be looking at in europe to prefer during the spring season with the global backdrop of trade and brexit, and everything we have talked about? hugh: it is less about a sector story and more of a factor story. thinking of quality as a style factor. surely, you always want to buy quality companies. often butrase used to for my definition, that is about stable cash flow, stable earnings, low leverage at this stage, looking for more defensive companies that can outperform in periods of slowing momentum. nejra: nejra cehic from j.p. morgan stays with us -- hugh gimber from j.p. morgan stays with us. boeing could be well-off 2018 around numbers are

questions around the 737 max 8. two crashes led to the grounding of the aircraft around the world. shares saw their biggest one-day slide since 2016 on friday with the losses extending through monday. coming up, the bond market is about to lose its best friend, mario draghi. ken investors expect the same support from christine lagarde? when traveling to work, tune in to bloomberg radio live on your mobile device or dab digital in the london area. this is bloomberg. ♪

nejra: this is matt:." -- this is "bloomberg daybreak: europe." it is a big day for u.s. earnings. microsoft is the largest of four firms reporting. send by numbers for at&t, paypal, ebay. caterpillar will draw scrutiny as an economic bellwether.

boeing reports during market dentednd expects results by low deliveries of the 737 dreamliner. watch for the effect of the u.s.-china trade war. tesla's deliveries will be watched and ford is expected to report third-quarter profit slipped from a year ago. let's get the business flash with oanh ha in hong kong. oanh: wework has accepted a package from its largest investors off in group. the deal gives the conglomerate and 80% stake in we work, marking the end of an era for the giant. the parent company was valued at less than a billion dollar and sees -- adam neumann walk away with a package including as much as $1.2 billion in stocks. told saudias been aramco will push to complete its public offering this year by relying more on investors.

the state-owned oil producer is considering a normal announcement of the listing plan as soon as the next few weeks. slated for october 20 but postponed after overseas investors pushed back at aramco's touted $2 trillion valuation. bloomberg has learned malaysian negotiators have discussed a $3 billion from goldman sachs for its role in the 1mdb scandal. that stands in contrast with public demand for wall street to pay. tesla's futuristic door handles are blamed for a fatal crash according to a wrongful death lawsuit filed in florida. it claims a police officer was unable to pull them into safety from his burning car because the handles of the model s tesla or retracted. the handle sits flush with a car and are designed to pop out when

they detect a key father nearby. -- fob nearby. i'm oanh ha. this is bloomberg. nejra: many bond investors will be sad to say goodbye to mario draghi. europe's sovereign bonds have surged, but can we expect support from his successor christine lagarde? joining us is liz mccormick, hugh gimber is still with us. great have you with us. you've written a piece about mario draghi being a best friend to the bond markets. our investors expecting another best friend? liz: not exactly. mario draghi has done so much. central bank policy to its limits and christine lagarde -- we've heard this even globally from the imf, is wishing for a fiscal policy which if we get growth from that, we may see more bond issuance so it is not the bond issuers less -- best friend.

they don't expect the same returns that they saw under draghi. nejra: mario draghi can't take full credit for what happened to european bond markets. bonds have done well across the world. they have delivered 20% since he got in. bonds have been a winner trade for a while. nejra: you take in terms of where yields go from here globally, do we stay lower longer? hugh: i think we do because we don't see a resurgence in the growth or inflation outlook anytime soon. i would add that what christine lagarde and to the table is the diplomatic skill set. that is why she has been given this role. from my perspective, it could be an overall positive that while you may not see the kind of sharp bond rallies we have had european economy working with monetary policy and fiscal policy more hand in hand rather than leaning on monetary policy to do all the work looks

in a better place to me. you'vethe investors spoken to come are they pricing for fiscal policy to come in soon? everyone is expecting it and want it, but the question is yes, we may want it, but will it come? liz: that is the reality. it may not come. in the u.s., we spend easily in the region of the eurozone, not so much. people think there will be a push. there might be a little bit but it is not coming soon. even though it should work together, it might be slow in coming. christine lagarde is an excellent negotiator. she may come up with things we haven't thought of before, but fiscal policy may be slow moving here. nejra: looking to mario draghi's last meeting, what can we expect? not much more action, but what should we be looking out for? he laid the groundwork for christine lagarde and she has said she will support his policies, so he will probably

communicate similar environment, growth environment is still weak and they will do whatever they can but we don't expect any rate changes or anything they had already planned to restart asset purchases already. the message will be similar to last time. nejra: what is your outlook for the prospect of qe in terms of that aspect of the stimulus the ecb looks at from here? what we will be hoping for this week is more detail around how they plan to put that package to get. we know the overall about the amount but not the composition. it is possible later in the year, we might see that headline increased because we haven't yet seen a big improvement in the growth outlook. that weree forecasts made in september by the ecb staff, they were already baking in a lot of measures mario draghi announced, and yet inflation over the next couple of years by that forecast is still low.

i think it is still possible you would see qe notched up again and see further rate cuts. nejra: on the rate cuts, you from the september meeting suggest to you the governing council are more comfortable with rate cuts and further qe. the has implications for reversal rate and the financials we were talking about earlier. in terms of financials, if we look at the comparison to the u.s., you were pointing out the price-to-book value, there is a big gap between the u.s. and europe. what would it take to close that gap? hugh: for me, consolidation in the european banking sector. we've had some progress on that's the past few years, particularly in scandinavia, spain, but you still have over 6000 financial organizations in europe vying for business and with competition that high in an environment where the growth isn't particularly strong and low rates and flat yield curves

are pressuring interest margins, that is the reason banks are pricing in this significant discount to the u.s. if we were to see consolidation, reducing competition in proving bank profitability, you could argue for rates going higher but that is a high bar. nejra: this is a question globally, as well. click the fed, there has been in certain low rates are impacting banks but the bank earnings in the u.s. held up pretty well. liz: banks have done pretty well amid all of this. a way, evending though slight yield curves, some parts inverted, net interest margins are not that great, but they are finding ways to continue to make it revenue and are doing all right despite a lot of rebel -- regulations since the crisis. banks have done well. nejra: in terms of europe versus to see anyou say catch up with european stocks to the u.s., investors have got to

focus not on the financials, but also tech. hugh: of course. we've done the work looking at how much of the outperformance over the past decade has come from those sectors. u.s. tech and european financials. from 2010, you are looking at half the gap seeing driven by those two sectors alone and since the start of 2017 where tech has boomed and the european financial stocks have dragged, that is more like three quarters of the outperformance. areeuropean market, there lots of companies doing well within that, but it is more about the competition -- composition of european indices heavily weighted toward the sector looking especially challenged causing the european on performance. nejra: from draghi to banks to tech, great conversations. that was liz mccormick and hugh gimber at jpmorgan asset management. akzonobel joins us for his first interview of the day after announcing a new 500 million share buyback --

euro share buyback. boris johnson threatens to call an election as parliament refuses to let his divorce deal into law. ♪

>> good morning from the city of london, i'm nejra cehic. this is "bloomberg daybreak: europe." the eu is expected to approve a brexit delay as a whirlwind deal is blocked by mp's. a fresh election could be on the cards. we are live in westminster and brussels. tumble astor stocks the trade war bites. in europe, psa group beats on revenue and akzonobel announces a 500 million euro share buyback. we will speak to the ceo. the hang seng trades lower as reports thel times chinese government is drafting a plan to replace carrie lam. we are live in hong kong.

welcome to "bloomberg daybreak: europe." let's look behind the heineken numbers. nine-month net income coming in at 1.60 7 billion euros for heineken. organic beer volume up 2.3%, in line with the estimate of 2.3%. the red headline coming through is that third-quarter organic be volume, up 2.3%. delving into these numbers, some expectations were there could be a weaker quarter likely due to the weather and the u.s. market. heineken expects to grow operating profit organically about 4%. that is the guidance we are getting. also getting headlines through

from another company. guidance for 2019 is maintained. trying to get some more details on this as we go through these numbers coming through. it still sees full-year 790,000 tons. that guidance maintained and the to0 production expected 725 755,000 tons of copper. let's get bonds and futures. not a lot of headline movement on the stoxx 600 yesterday. s&p dropped below 3000. a little softness in u.s. futures. in europe, ftse 100 trading flat. there is a con the fact. dax and cac futures come off a little. in the bond markets, not a lot of risk across assets. the 10 year treasury yields

dropped four basis points yesterday and slides today. , studying ayield bit and we are seeing steadiness reflected in the futures. you are of europe, seeing a little money flowing in to the futures so we could see fields drop a little as the cash market gets going. let's get to our top story. set to tryon looks for an election after parliament blocked his plan to rush the brexit deal into law. he warned the defeat leaves the u.k. in limbo. disappointment the house has once again voted to delay rather than a timetable that would have guaranteed the u.k. would have been in a position to leave the eu on october 31 with a deal. uncertaintyfurther and the eu must make up their minds as to how to answer parliament's request for a delay. me now fromng

westminster is bloomberg's anna edwards and maria tadeo is in brussels. a lot of drama over the past 24 hours. on anjohnson has his eye election. is it more likely now? anna: it seems so. we have been saying it is a question of timing but we seem to be moving toward an election. that was the threat yesterday. he said if he didn't get the backing for his timetable motion, he would move toward an election. a lack of clarity as to whether the threat will be followed on -- followed up on before we get a new timetable for the withdrawal agreement deal. he could choose not to go to the polls right now and instead try to craft a new timetable with perhaps the labor leader jeremy corbyn, to see if they can get the brexit -- boris johnson can get his brexit deal through parliament that way. you can see why he might run to

the polls. he runs ahead of jeremy corbyn by quite some margin. pitchld craft a strong that i've got a deal, but this parliament won't let me get it through. give me a new parliament so i can execute the will of the people. we understand the labour party would be in favor of granting a general election, and that wasn't true when the threat of no guilt and large. whether he changes to general election now or later, he will need a delay from the eu, it seems clear now. nejra: on that delay, let's turn to you in brussels. donald tusk, proposing a written procedure in terms of the extension. what are we looking at in terms of the timing? could we get a shorter one? a longer one beyond january 31? maria: that is the question now. europeans are inclined to provide more time but have made it clear they don't want to go for a no deal brexit and don't want to push

the prime minister into a no deal brexit because he is very close to getting this deal. the question is, is it going to be until january? that is what donald tusk suggested yesterday night. extensiontechnical that is a matter of weeks? that is the debate in brussels, but some like micron believe it is best to get brexit done quickly. they believe this has take into much time off from other issues that matter most. it is a story that has dragged on too long. other voices tell you at this point, let's give a flexible extension where you give more time but an option to pull out if the deal is sealed. european leaders do not agree on those, we are looking at another emergency summit by the end of the week. we are being told a letter will suffice. nejra: what should we look ahead

to for the rest of this week in westminster? it is difficult to say at this point because the withdrawal agreement bill is on hold. one way or the other, we will leave the eu with this deal but promptly put it on hold because he doesn't have a timetable agreed to take it forward. whether heing to see is having conversations with other parties are crafting another timetable that gives more time for scrutiny. that is one of the big criticisms the mps in the commons had. we've been given this massive amount of material, a big change with the relationship with ofope, in other periods history, those have taken days or weeks to scrutinize and parliament was given a few days. there is a possibility of some new timetable coming for. we are also looking to the aftermath of these conversations boris johnson has been having with the eu and he said he would talk to eu leaders about the new

possibility of timetabling. we will see what happens. nejra: bloomberg's maria tadeo in brussels and anna edwards in westminster. of assets now, the ceo management. in terms of how the market is positioned, market strategists are saying no guilt risk has reduced significantly. a lot of people have a more positive outlook. do you share the view no deal risk has severely diminished? >> it has significantly diminished. but thet is improved, u.k. wasn't in bad shape for this happened. at 1.4% unemployment at 3.9%, equity markets up 11% year-to-date, and sterling was 18% undervalued and now only 8% under valued. thanks are improving.

all the uncertainty is slowly coming out of the system. we still have a long way to go so let's not jump ahead of ourselves but what it does allow his investors to focus on fundamentals. the shift from sentiment of fundamentals is positive and should lead high markets. nejra: cap that led you to change positioning in u.k. markets, whether in sterling or equities or maybe credit? yogi: we have been neutral the u.k. we have become more positive the u.k. in light of events us last week. the move in sterling is something we are comfortable with that has expected so we are already exposed to the great british pound gain against the dollar. in terms of credit, it is uncertain whether one should take credit risk in this environment. the yield curve has been flat to inverted. we see this is short term in nature but we would like to see a further diminishing before we

see more positive. nejra: he said sterling is 8% undervalued now. where do you see the cap for the gain? could we be -- go beyond one .40 in the medium to long-term? -- 1.40 in the medium to long-term? yogi: absolutely. we would not be surprised to see things move in that direction once we get through the uncertainty. election risk a significant. there is a lot of uncertainty about whether the conservative party will win and that has an effect on investor sentiment. nejra: hugh gimber from hassium asset management stays with us. akzonobel says it has found pockets of growth in aerospace, household, and paint to meet margin goals. also announced a new 500 million euros share buyback program as it reported earnings in line with estimates. joining us now is thierry vanlancker, ceo of akzonobel. thank you for joining. i want to ask about the buyback

program first. a way to appease investors might have been skeptical about your target? thierry: not really. first of all, good morning. the 500 million euros share buyback announced is in line with getting a leverage to get debt ratioveraged between one and two by 2020. we are almost on leveraged this year. this 500 million is one of the first steps to get to that leverage that was inherent in our claim. in appeasing shareholders, we do aat pretty successfully with 23% increase in the quarter year-over-year, the fifth consecutive quarter we have increased through relatively adverse market situation. that appeasement is happening in this category.

this was the announcement last quarter. nejra: in terms of your guidance, you have reiterated the 2020 adjusted operating profit margin guidance. how will you get there? i think we have been getting there methodically. about two years ago, we announced this journey. we were at 10% then, 13.8% business return on sales. the goal was 15%, so we have done it. we will continue to do it by looking at good mark -- margin management. we will do it by looking at cost savings, but there is a lot of work the team has been doing to get into the modern age on computer systems, processes, etc. we have pretty good confidence we will get the very ambitious target we set two years ago. nejra: analysts certainly have called it ambitious.

some of the improvement you were seeing last quarter was mainly due to cost saving and pricing plans. you mentioned cost-saving, which helped buck a weaker trading environment. that was last quarter. this quarter, how is the trading environment? thierry: the trading environment hasn't changed a lot. if you look at our key markets, automotive is one. don't have the biggest exposure, but it doesn't help, it is less than 10% exposure in automotive. those key markets are down for everybody, so we are pretty happy and pretty relieved getting to 15% by 2020 business return on sales, that was based on self-help, getting ourselves in good shape, looking at costs and pricing and that is working. trading continues to be relatively sluggish. buts not exactly bad,

subdued in most key categories with notable exceptions. the positive ones are packaging. increasingng is because plastic packaging is more under pressure. aerospace continues to do well as indicated. significant parts of our business are doing well. we are the global number one and continuing to grow. we definitely benefit from that, but it is largely self-help and what we have to do ourselves. that gives us the confidence that despite the market out there, we are continuing to make excellent progress toward our goal in 2020. nejra: and you've talked about the business areas, some of which are doing better than others. in terms of regions, talk about the performance of regions. how is china doing? regionally, the asian region in general has been the most spotty one.

it depends on which business you look at. consumer confidence continues to be at a level that is probably more cautious than it was before. looking in china where we are a big player, i would say it is see in the to mainstream premium part of our business, that showed growth in the third quarter year-over-year. that is encouraging. ,n the background, volume wise some big volume and low-margin products but it is encouraging to see the first quarter again. spotty probably the most one, i would say because it was so used to the growth, almost automatic growth. brazil, thentina, u.k. pound, we have seen

devaluation of the currency. the foreign exchange rate hasn't helped but despite that, i am confident we can deliver increases despite the microeconomic impact. you certainly do have some control over his m&a. you've completed a few bolt ons. is there appetite for something bigger? there are rumors regarding your competitor's strategic review. is there a part of the akzo portfolio that could you scale? -- used scale? thierry: the rumor you mentioned, the announced it themselves. i think we have been on record pretty clear because there was speculation we are not part of that process. we have a lot of improvement potential in our business. we continue to look at strategic opportunities.

the share buyback is a sign we have the firepower to do what we need to do in a mende. -- m&a. this gives you a hint of our mind for m&a. we continue to give preference liketrong acquisitions, french company aerospace, which is in the middle of where we think is our home field where we are strong. bigger projects like the one you mentioned, we keep looking at it but for this one at this moment in time, we continue not to be part of that process. we have a lot of items to do internally and we want to get ourselves process wise, infrastructure wise, mentality wise, in shape so in 2020, if we do these kinds of eager steps, we can work to derive the value we can hand over to shareholders. nejra: thierry vanlancker, ceo of akzonobel, thank you for joining us.

the third-quarter results continue to come in fast. among the key ones, earnings from caterpillar today. what it could tell us about the world economy. when traveling to work, tune into bloomberg radio live on your mobile device or dab digital in the london area. this is bloomberg. ♪

30ra: 7:21 a.m. in london, minutes from the cash equity market open. i'm nejra cehic in london. and for results from a bellwether of the economy could spell bad news. mildpillar is headed to a earnings recession, expected to post its first year-over-year decline in profits since 2016. we are looking to other companies reporting today including microsoft and boeing. trade troubles have loomed large

for some companies so far. shares in texas instruments slumped after a weaker than expected forecast and warned trade tension is making customers more cautious. it is the first big chipmaker to earnings cycle and spurred a selloff in other stocks. let's get back with hugh gimber from --hassium asset management. what would you be looking for in the guidance because i was reading comments that even though caterpillar has traditionally been a bellwether, it might be more useful to look at consumer-based stocks late cycle. yogi: absolutely right. earnings equals revenues minus costs. do you know the earnings numbers are down quarter on quarter, but the revenue numbers are plus 2% to 6%. still a positive number. absolutely key will be guidance

into 2020. we know things have been bad because of trade wars. we are expecting disappointing numbers. we know earnings numbers have been slashed, but we are getting beats on lower numbers and we see that has positive. the u.s. is growing at 3.9% in gdp growth. the market is up 21% year-to-date. valuations look stretched and share buybacks provide some support to earnings numbers. nejra: in terms of valuations looking stretched, where are you seeing the valuations so stretched you are looking to reduce exposure post the earnings season? yogi: we are very careful about the technology sector. thatave in excess of 24, is the high-end of where you would expect those numbers. we know growth has slowed, but know there has been an impact on what investors are doing and what people are doing in buying equipment, technology,

or manufacturing. nejra: tech, where you are looking to reduce exposure. in my previous hour, a guest was making the point european investors are looking to come back into european equities, it is crucial to look at financials in europe, their performance versus that of tech in the u.s.. if you look at financials in europe, u.s. banks did better than expected. what is your view on banks in europe as we head into the ecb this week? yogi: we are not so positive european banks. the m&a vibrant -- environment is more vibrant in the u.s. banks are not lending the way they need the in europe relative to the u.s., and it is a difficult environment for them to make money with negative rates they are not passing on to the consumer. give got massive margin compression, slashing jobs left, right, and center. this isn't a great environment for european banks. we would rather be u.s. banks.

nejra: what other sectors are you looking to belong on as you reduce the -- be long on as you reduce exposure to tech? yogi: we like any sector that has exposure to china. with all the china trade rhetoric, we see that slowly resolving so we like domestic chinese exposure. chineseanagement with exposure, we are comfortable with. anything that focuses on infrastructure spending in china, we are positive about. we like china. it is still growing at 6.2%, which is where the 2019 numbers will likely come out. it is a $13 trillion economy. did he's domestic story, so don't get caught up in the trade war story. nejra: you expect by the end of this year, something that would make you more convinced about that view on china and the stocks you are exposing you to. are convinced now

is both parties, the u.s. and china come are willing to talk and are willing to negotiate and we see this as a more positive position them where we were three months ago. of course, you do have an election year in the u.s., so the u.s. are very motivated to get a deal taking place. china is a net loser in the import-export talks going on because they import more than they export but they can devalue the currency. no one wants the battle to continue the medium to longer term. we expect it to resolve around q1, q2. nejra: quite a bullish view on the trade war and china, which explains why you are underweight the dollar and durations. yogi dewan, ceo of hassium asset management. that is it for "bloomberg daybreak: europe." the european market open is next. tune in on your mobile device and dab digital in the london area. this is bloomberg. ♪

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anna: good morning. welcome to "the european open." we are live from westminster. matt miller is in the studio in berlin. matt: the markets say time for a health check. asan stocks are mixed investors monitor geopolitical developments and earnings reports. cash trade is less than 30 minutes away. anna: