the ecb and earnings. no surprises out of the ecb and lots of surprises out of earnings. eyes are going to be on the press conference. here is what we are looking at. you mentioned some of the earnings helping to prop up the market. dayas a brutal yesterday with the s&p losing its earnings for the year. euro-dollar a little stronger. it has been aggressively stronger dollar story over the last week and of the euro getting a little demon to the press conference with mario draghi. it is sell bonds in the u.s. at bidders did not show up all. crude stemming its own selloff. up by about .3%. david: oil is coming back a little. time for the morning brief. in 30 minutes we will have mario draghi holding a news conference explaining the rates decision. data in weekly jobless claims. at 12:15 this afternoon, richard clarity will give us first be just the fed vice chair in washington. we will get earnings from amazon, apple that and snap. returned emma chandra who is here with first word news. york, police new are investigating another suspicious package. the bomb squad removed the

governor ollie raines says he wants to stick to commitments and praise the rules as he looks at the ecb's forward guidance. >>> and danish authorities order danske bank to reassess its capital levels >>> let's look at the european markets. a lot of red on that board the stoxx 600 down almost half of a percent at this stage of the morning. let's hone in on the individual markets. all four of the major indices in europe are in negative territory. the ftse 100 is down more than a half percent the xetra dax is down a third of a percent. the cac 40 is down 0.66% the ftse mib in italy down 0.40%. let's check in on the sectors across the continent oil and gas is up 0.62%. household goods down almost 2% at this stage. utilities down 1.5%. the italian deputy prime minister, mateo salvini, said the ruling coalition will not backtrack on the spending target even if the spread between italian and bond yields hits 400 basis points the ftse mib already down. some of those stocks performing well compared to this stage yesterday. the italian government vowed to reduce deficit targets in the coming years

he leads our ecb coverage out of frankfurt. vonnie: time for the first word news, here is courtney donohoe. >> joe biden and robert de niro were reported to be the latest high-profile figures to receive the suspicious packages. in new york, the bomb squad removed a suspected bomb that was sent to a restaurant of robert de niro and the invest -- is investigating two suspicious packages from a delaware facility address to joe biden, this after bombs were discovered at the homes of former president obama and clinton and the new york offices of cnn. saudi arabia closer to acknowledging the killing of a journalist that was premeditated. turkish investigators have given saudi prosecutors information that suggests the suspect plans to kill him. the announcement came as cia chief gina haspel repairs to brief president trump following her trip to turkey. has as. reportedly nonnegotiable demand when it comes to the trade war with china. the wall street journal says the trump administration were focused on items with that. the u.s. compla

had to reverse when he went to had the ecb as president of the ecb in late 2011.s this well. this is why it has taken the slowest possible way out of extraordinary stimulus for the ecb. he has been slowing down purchases and quantitative easing very slowly, only in the end of december will they completely stopped. he has pledged to keep reinvestment's going and said the rate hike won't come before through the summer -- it is a bit unfair what this means, but it doesn't mean any time before september of next year. that might even change. remember thiswe lesson, he is been extremely prudent not to pre-commit and not to jump the gun on normalizing ecb policy too fast. this would probably be the job of his successor. let's do forget, mario draghi leaves the president of the ecb in late october 2019. guy: certainly chatter about an extension of the program. i think one spanish bank were talking about earlier on today. contribution your to the program and are coverage as well. vonnie: let's check in on the first world news. americans have been given permission to jump t

guy: where does that leave the ecb? does the ecb stop buying them?hink it has to because the ecb finds itself between a rock and a hard place. if it does not do what it has said it will do, the signal it will send to markets is things are a lot worse than they have seen because of things do not start normalizing the policy, they will run out of tools when the cycle changes. additionally on the other side, if they continue to buy, what happens is these countries that are pushing for a more aggressive spending, more deficits, what they are going to end up entering into the same imbalances of 2009. it is a very difficult position for the ecb. they need to do what they say they will do and the governments in those countries need to come back to reform agenda. vonnie: the italian-german spread is closing in on -- basis points. at what point do we need to be concerned? daniel: i think this shows that despite the fact that the ecb has been the only buyer of italian bonds in the last month, andrisk actually happens the risk is very evident in the spreads. we

and then the ecb so the thing about the ecb is what they've achieved as they've built up their bond portfolios that they've been pushing european funds away from the european fix t ed income market we estimate a trillion euros they're currently sitting in offshore markets mostly the u.s. dollar in emerging markets and a few other markets and so forth we think there is a significant potential for those funds ultimately to start moving back towards europe and what's interesting right now is that for the first time in maybe two years the euro denominated corporate bond market yields more than the equivalent in u.s. dollar corporate bond markets. >> fx adjusted >> fx adjusted, absolutely >> stay with us. we'll continue the conversation shortly. victor, head of global strategy. >>> in other news, spanish oil and gas company cepsa has postponed the ipo. the firm has cited market conditions as the reason behind the move cepsa's owner says, quote, the company will consider returning to the market when conditions are favorable. >>> and electrolux says it cannot rule out the material impact on the nort

the ecb could be ready to intervene for other countries. so it's really an issue between italy and the eu and i think we all hope that we can find a solution in finding a path of the budget which is sustainable that in italy is high. >> do you think italy is taking the scandal with european officials because italy is not first one to break budget rules? they're not the first one to go down this path of ignoring the budget discipline. do you think they're saying others have not been punished, that perhaps the eu is bluffing and they simply won't be able to punish us because we're too bill to fail? >> that's -- hopefully not there is a limit to -- and it's a risky gamble on top of that, italy has a high debt so i think it will not be good for the markets, for the credibility. there is a tension between the commission, european union and italy. what happened in the past has been excessive and created moral hazard hopefully, you know, we see this with brexit also there is a tendency for the rest of the union when you have somebody that tries to

the last thing the ecb wants is a growing euro. the ecb will struggle.ght get away with one hike before mario draghi leaves. we think they are going to straddle a loss. we might be stuck with negative rates. manus: you say the currency will take the slack there. is it your base case that the dollar's rise continues as a ballast very briefly? wrecks absolutely. -- >> absolutely. that rate differential is so high. we think the dollar rise has got legs. nejra: thank you so much. coming up this afternoon i will speak with sergio ermotti, the ceo of ubs. you can see that interview at 12:30 this afternoon in london. i will be heading over there later. it was a big beat for ubs on the net number. that is it for "daybreak europe." this is bloomberg. ♪ nejra: welcome to bloomberg markets, the european open. stocks slump around the world. let down again by tech stocks. the s&p 500 is now negative for the year with the biggest drop in a month since 2009. the cash trade in europe is 30 minutes away. nejra:

similar story for the euro this morning ahead of the ecb numbers.ns from the ecb later today. the dollar is stronger against the yen. a bit of a reverse from last night when we saw the yen as a safe haven was proving popular with traders the dollar relatively flat against the swiss franc. looking at the u.s. markets a ahead of their open, the s&p 500 looking to open up almost 25 points higher. dow jones almost 200 points higher after a pretty significant slide yesterday afternoon. the nasdaq also looking to open higher by more than 110 points now trade tensions have begun to take a toll on the u.s. economy and manufacturers reported higher prices in the beige book. companies hiked prices on finished goods because of higher costs on raw materials the federal reserve fac facface faced frequent criticism from the president. >> i think it's the fed. >> the fed is not listening. effectively that means they're off the mark again >> going back to the fed >> should the fed continue raising rates? >> the fed is doing what the fed said they would do >> with t

. >> i don't think the ecb can react at all to this.can't comment on and certainly cannot act or punish any particular country. guy: they can at some point. if we see it's a lee being downgraded, the ecb will have to play a part in that as well. if there is a misstep in italy problem,end up with a the ecb will have to play a part in that. >> the ecb would eventually be dragged into it, but do not expect any comments on italy on thursday. they will be asked questions, but they will not comment on it. they will simply say that the budget rules are there for everyone to follow. they don't see any contagion. but they cannot be seen as initiating the process. that is between european financers and italy. you are right, the ecb will be dragged and eventually. vonnie: are they becoming less confident? >> the european central bank? it did appear that more members of the council were concerned about downside risks out there, not just italy, but also trade wars more generally. there will be more concerns voiced at this next ecb conference. at wha

eurozone growthe and what, how does that impact the ecb trajectory?here we will see the volatility over the medium term. the short-term will get to see some relief. if the ecb is on course to normalize, higher interest rates and positive interest rates, if you viewed germany of a -- as a spread play, the risk will be in any form of spread products. that is where they will face a lot of challenge but that is a medium to longer term story. the point that this is not greece, we have moved a long way, everything is in better form, better shape than they were in decision-making. not fully prepared. if you look at financials in u.s.,, relative to the how brave you have to be to pick up financials? jeremy: we do have a lot of clients asking why have financials underperformed in italy or why do they outperform on a relative basis in the u.s., does deregulation have anything to do with that? structural reform, banking week, how far along are wethat reducing momentum, do need to see fiscal credibility or do we need the investment from northern countries to -- s

i think the ecb will go carefully. period having said that, once you get into theperiod -- having said that, once you get into the period where you are having rates adjust, the market will be the euro differently. guy: the ecb might start with hiking rates before the end of next year. do you think it will? daniel: yes, probably september next year they will be comfortable making a small change in rates. they want to get out of this deep negative rate, but very carefully. itnie: we have to leave there, but do come back soon. we want to follow up on those calls. that was daniel katzive of cmp parabas. forme -- and notice time bloomberg's business flash. barnes and over sales -- barnes & noble sales are expanding for the first time in many years. -- recommended by a special committee of independent directors. and toyota arek teaming up to start on-demand transportation services. offer a ride hailing service for japanese public agencies and private companies. that will be followed by a rollout of self driving vehicles in 2

will the euro catch a bid before the ecb meeting?e up 0.2% right now, 1.14, not expecting much from the ecb, but still in focus. a little dollar weakness in the session, although it is near the highest since may 2017. oil resuming a slide, down 0.6%. risk off sentiment perhaps in this session. futures point lower in europe. the s&p and dow wiped out there gains for the year in terms of stocks. the nasdaq in correction yesterday with tech stocks leading the losses. will we see the same in europe? the ftse 100 opens without a lot of momentum, but starting to pick up losses, down 0.3%. picking up that negative momentum. we will wait for others benchmarks to come through. we see losses on the stoxx 600 today, if we do, that would be the seventh day of losses for european equities. for u.s. equities, october the worst months since 2009 so far. ibex opening down 0.4%, cac 40 -- 0.4%,own percent but nothing so far compared to what we saw in the asian session. technology is in focus. matt: tech is definitely in focus. we don't have such a he

my question also relates to the ecb. what level of downgrade of economic activity do you think it would take for the ecb to change course at the moment? cameron mentioned the september forecast. draghi seemed a little concerned about that, but how big of a downdraft would you need to see for draghi to change tack? sarah: it looks like we would have to see a lot more. when we speak to investors, many agree we are not at the current place where they maybe would step back a bit. interesting, because draghi did say that risks are broadly balanced, but it also seems like he is trying to do a bit of a balancing act there as well, because he is talking about the fact that they slowly addedging growth, but when asked what would it take for you guys to discuss extending qe, he says the ecb has not discussed it. he is a technology the fact that growth is slowing down and there are many risks out there. italy,ed about brexit, and slowing growth as a whole across europe, but it seems like they are going to stand tight on ending qe w

on they enough to weigh ecb?ge you will get from the ecb and coming months is this is their plan. they set monetary policy for the whole of the region and there is reason enough to end those bond purchases. you might get that concern at the margins, but mario draghi, italian though he is, has been pretty level with the investment community in laying out how he sets monetary policy and the pressure is on the italian government to kind of control its deficit spending. we are seeing signs of that overnight. anna: another chart that illustrates the fed in the lead in guessing to higher interest rates, this is balance divergence. the fed dipping and the ecb in the white, still at the very high levels. nandini, your thoughts on whether the italian story delays the ecb in its exit from the policy. nandini: possibly. after the summer of 2019 is when they will start raising interest rates, they said. it will be a slow increase and depends on where we are with the u.s. economic cycle because we do go into a global slowdown

he is an economist who heads the budget committee in the senate, he said it was improper for the ecbt to issue a warning about italian banks. giovanni tria has insisted rome's budget does not threaten europe >> we need to be clear on what this represents. it represents a possibility to explain further and in more detail that what italy intends to do is not a threat to the eurozone or the stability of european partners. if italy grows, europe as a whole gains stability and it can profit from it from the italian point of view this doesn't mean a disrespect of the treaties, nor are we to leave a room empty in the european house we italians also built this house. there is no way we want to leave it >> someone who is here to explain why this is a difficult job is the head of european fixed income, david zahn what did you think of mario draghi's comments? >> he said we will continue ending qe, start raising rates, albeit far out that's the mantra they've been on for a while the change in data that's been softer, that doesn't change that that's within the scope. the comments on italy, they

the ecb has done all it can. when you look at the economic data, it does not look good.e are not tempted for europe at this point in any significant way. nejra: where and at the market would you hide? clark: basically high-quality companies, companies with very high returns on invested capital. under leverage one's with strong balance sheets getting back with a leverage weakness in the market, absolutely looking at people with strong balance sheet. manus: that is where the core of it lies. clark fenton, cio, agili investment management, thank you for being with us. coming up, we have the executives you want to see. we just had the numbers from volkswagen. an exclusive shortly after that. later on -- one destination, bloomberg. nejra: if you have to be on the move, tune into blumberg radio live on your mobile device or on digital radio in london. more next. this is bloomberg. ♪ manus: good morning from dubai. this is bloomberg daybreak: europe. nejra: kind nejra cehic in the city of london. these are today's top stories. manus: a great deal with china, says president trum

kathleen hays is here, they start with a recap of the ecb.eed ahead for draghi, not concern about a loss of momentum or italy. getting on the path to normalization, get to the point where you can start reducing interest rates. another central banker would like to get past it. that is the subtext. he's saying they are on track number one to wind up their bond purchases by the end of the year. number two, not raise the key .ate until at least the auto so as early as september 2019. he admitted there is risk, like the trade war. but he seemed to downplay them. as you said, full speed ahead. that's here what he said at the press conference after the meeting. >> incoming information, while somewhat weaker than expected, remains overall consistent with an ongoing broad-based expansion of the euro area economy and gradually rising inflation pressures. in a red flag on wednesday. is gdp, are seeing here you can see how it as slowed to 0.4% on a quarterly basis in the past couple of quarters. this is the composite purchasing managers index. it looks a

i expect the ecb will move to zero, maybe sooner.tionedou antibiotics, but they are supposed to stop working after a time. that's one of the reasons why you have diminishing returns. what sort of backdrop will this repurchasing of assets at the end of this mean as a backdrop for financials in 2019? >>>> i think ultimately this is positive for financials. if you think about this, they have been hit i basically both sides of the balance sheet. to be clear. today if you are a bank in europe, you have a branch, you pay your employee, you pay your securities, someone deposits 100 euros, you stick and in the central bank, and you get paid 99.6. you are actually losing money. rishaad: the whole point is to get people to lend as well. >> but on the asset side on the same time, assuming you are and you want to lend to telefonica, but telefonica is below credit cost because the ecb is buying telefonica bonds. suddenly telefonica says i don't need to borrow from santander, i can borrow directly from the bond market. they are paying -- banks are

ecb, what are you looking for? >> not much, don't expect them to do anything.y have pretty much signal but they will do for the next year. the big issue they face with italy is how they address the situation because the bond market is so huge. jonathan: the italian bond market is all over the place. basis points intraday. >> there is some risk of expands more systemically. if we look at what happened in may, june, there was a pretty quick bit once we had about 3.80. it doesn't seem like that is evolving now. tt, what are your thoughts on the italian bond market? would point to is these things are great news, there is a lot of noise, lots of competing political their lives there. it generally takes more time for decisions to be made. i would say we are going through a lot of posturing but the final decisions, which way these things will fall, that is still a couple quarters away. i think we will have more volatility but i think, at the end of the day, seder heads will prevail and we will find a workable solution. jonathan: if we get to around 3.50 at the close o

up next, more on what happened overnight with the ecb.hat could affect the eurozone as global risks are mounting? this is bloomberg. ♪ yvonne: the european central banks confidence in the euro zone economy is about to face a seven-week test. enddata over that time will with updated forecasts for the final policy meeting of the year when mario draghi and his team must judge whether to halt the bond buying program. for the time being, he admits recent weakness is either temporary or remains manageable. information, while somewhat weaker than expected, remains overall consistent with an ongoing broad-based expansion of the euro area economy and gradually rising inflation pressures. rishaad: michael spencer still with us, chief economist at deutsche bank. does it really matter how the data plays out of the next seven weeks, ultimately? the bond buying program suffers from the law of diminishing returns. clearly, you have to stop it at some point, you get less bang for your buck now. michael: i agree. we are on track to end the brawn -- bond p

the difficult challenge the ecb they withdraw policy, what happens to the euro?pe for the -- europe to appreciate as we move out of negative rates particularly with the dynamic round fx reserve managers and how they have had to allocate away from europe as rates went negative. if we see that flow we domiciled that will lead to strengthen the euro. they need to rotate -- maintain a slow start. will stick to the part the marking -- market is assuming. if italy gets resolved, they are on hold until the end of summer next year, if italy is not resolved we will have bigger questions. if italy is resolved there is no reason the ecb could not follow more aggressive hike which is low level coming from low expectations so it does not take a lot to get more optimistic. we are starting to see some early signs of wage growth and inflation come back in the eurozone. anna: thanks for joining us. our questionyou of for the day. has slumped in tandem. the question is if you think china's selloff could upset the relationship in terms of the commodity rally? the team put together

>> i would not be worried about the ecb at the moment. we looking into the situation in italy.ooking at the midterm election. we are not concerned, but watching closely the situation in the emerging markets. at this stage, and the ecb is him a secondary in terms of , it is impact or driver much more important what will happen in italy and emerging markets. emerging markets at the moment is very attractive, especially on the fixed-income side. equity, we can discuss when he the right time to play the rebound. it is probably too early. but at the end of the arab the beginning of next year, there is yen tradeor a longer in equities. guy: one of the more crowded trades is to be long u.s. startingring if we are to see a bit of extortion coming into some of those positions. i throw up this chart. this is the russell versus the s&p. the s&p continues to climb, by small caps are beginning to roll over at the moment. is that a canary in the coal mine that you are paying attention to? andsmall caps are going off the s&p is still strong? could the s&p be primed for a move lower? >> we don

the ecb next week -- what are you looking for? kathy: not much, don't expect them to do anything.y have pretty much already signaled what they will do for the next year. i think the big issue they face with italy is how they address that situation because the bond market is so huge. jonathan: the italian bond market is all over the place. we are talking about 30, 40 basis point intraday swings. yes, a wide range and we are starting to see other peripherals dragged around for the ride. there is some risk it expands more systemically. if we look at what happened in may and early june, there was a pretty quick bid once we hit about that 3.80--ish spread or so. it doesn't seem like that is evolving now. jonathan: matt, what are your thoughts on the italian bond market? matt: what i would point to is these things are great news, there is a lot of noise, lots of competing political narratives there. it generally takes more time for decisions to be made. so i would say we are going through a lot of posturing, but i think the final decisions, which way these things are going to fall, that

and the ecb president, mario draghi, said a continued selloff in italian bonds could hurt the country's banks and impact their ability to lend. >> these bonds are in the bank's portfolios if they lose value they are denting into the capital position of the banks. that's obvious that's what it is. so you have or one may have -- well, i'm still not optimistic, but i'm confident an agreement will be found that basically you have a dent in capital position, then you have a weakening funding condition as well. all of this will translate into different lending terms. >> that's been the response from rome a powerful italian lawmaker has responded to those comments. he is an economist who heads the budget committee in the senate, he said it was improper for the

you are more of a scholar than i am, adam, but as i read statements from the ecb and the boj, they have that flavor as well, given their circumstance. top scholar at this stage, but moving from academics into practice, in the latest round of announcements we heard you will be chairing a new committee of the fomc specifically to look at communications. >> yeah. >> so it is obviously not just forward guidance or not even forward guidance. what can we look forward to you and your colleagues coming out with? >> the committee was just announced at the september meeting, so it is early days. the committee is comprised of myself, eric rosengren, and rod kaplan from the data -- rob kaplan from the dallas fed. so we are really beginning the process now to assess the priorities that the committee should be focused on. i do not have anything for you on that today, but maybe in the future. >> i would love to have a future visit. presumably there is some reason why you have the committee, right? the communications subcommittee has been in place at the fed now for some time. it takes on a range of is

for teh markets, who will be the next president of the ecb?a: we will return to these topics shortly. matt: the president is saying there is no inflation and the fed is saying we can control it. his point is that he is not seeing inflation and that there is no need to raise rates at this pace. headline numbers show there is inflation. americans cannot live without gas. stephen, we have a lot more to talk about. italy is a huge story and we want to get to that. leaders ofel -- asian countries are arriving in brussels and merkel is arriving there as well for tehe asia-europe meeting. she is very likely speaking german. it would not help if i brought brought itf you if i live. up next, volvo. it is forecasting a huge demand for truck sales, but they have a problem to deal with. this is bloomberg. ♪ matt: welcome back. this is the european open. we are 12 minutes into the trading day. rout thata big stock started yesterday in the u.s. and the seems to have been halted by china. let's go to the top stock wstories. -- stories. another like expected

point of runoff into the fourth quarter, and the ecb talking about ending the asset purchase programming. scarlet: the afternoon come back has run its course. the dow closing down, that it had lost as much as 548 points, no losing just 127. volume has been heavier than average. volume in the dow, caroline and joe, up 52% from the 20 day average. joe: important to recognize we were much lower early in the day. early on, we were down over 2%, with dell off 500 points. the nasdaq briefly went green around the 3:00 hour. quite the come back. caroline: interesting to get your take. chris heisey from bank of america, the wealth side of the business, was saying, is it so important to see how the tech players are in the next few days? huge.hose will be we will get texas instruments after the bell. semiconductor focused. that will set the tone as one of the week areas.

let's start with the ecb.e any risk that what's been outlined could be thrown off course by the recent weakness we've seen in the eurozone pmi data? james: i think mr. draghi will be keen to keep rates low. it's been useful for government fiscal policies because they have a carry trade. they are able to receive money, which they would not otherwise receive. they will also worry about the extent of which, if it reserves quantitative easing, it will drive bond yields up. and then it has gone back to the central banks and let's consider a members of the ecb and falls into real problem areas. i think the ecb will keep rates at current levels to much longer than the market is prepared to accept. nejra: you are very much overweight the u.s. you don't see opportunity in europe. european banks most oversold since 2008. james: i think for a good reason. i look for the finances of the french bank. there's been a dependency on target to an u.s. dollar funding, meaning france is an economy generating -- at the moment. tha

manus: does our risk increase with the taper from the ecb?been the backstop in for those peripheral nations. is that the risk we are under assuming as we travel through taper? good point.ly we're in a shift right now whereby the ecb clearly is winding down its net bond purchases. 2015, the ecb has been buying more than the italian government has been issuing on a net basis. that's a pretty powerful backstop. premiersome risk increase, some spread widening across other assets within the euro area, it is warranted as part of preparing for the ecb winding down its qe program. in your conversation with clients and investors, what are they most worried about now with italy? >> there are some concerns about contagion, not only to other broadlys but also speaking italian assets. worried about what this means, does this mean the risk of default has gone up for italy? does the risk of italy leaving the euro area go up? if you look at the market reaction yesterday to the comments from the italian official, he said something like the euro is not italy's

he has a fine line to walk when the ecb meet on thursday. somehow, he has to bear in mind the negotiations of the italian budget are ongoing and they are not finding too much common ground. the italian bond market is still pretty jumpy so they need to keep that in mind. at the same time, he needs to tell investors that the ecb is going to continue with this exit path and is on its way to a tighter exit policy, though it is happening gradually. if he has to give ground on something, he would probably softer euroghtly than reignite problems in the italian bond market. on balance, he'll probably could -- probably be happy if the euro doesn't fall or falls a little bit. fed: worth noting in the conversation, the broader picture around rates and how may they go, trump says he regret taking jay powell to head the federal reserve. talk abouto early to any firing, but given trump poshest are he and that he has received an enough from one investor, they were talking about dollar vulnerability if that becomes the path. mark: any time when the head of

it may also be that they could blame the ecb if the ecb pushes on with stimulus, which could say you are just hurting our economy, the fourth-largest economy in the area. and germany there is sense of that economic woes are temporary. that they are due to new targets, which they are struggling to hit, but inflation -- that is always a hot button issue in germany and him would like to see how the media will react to that first thing tomorrow morning. david: thank you. now to a very special part of the brief, scott wren is a newsmaker today, not just a reporter, a senior strategist at wells fargo and you made news today with the president quoting you -- he said, "if the fed talks more dovish, i think we will see -- we will be right back to our 2800 target range that we have had for the s&p 500." that is what you wrote. how did that feel? scott: i cannot comment specifically on the tweet, but let me say that for us the two biggest risks we have been pointing out to our clients for over a year is the fed making a mistake and global growth slowing down. so for us, the federal reserve is k

i think if you were to see contagion that would be much more disruptive, require an ecb reaction butt the moment the market perceives the risks as being italian specific i think so long as we have an absence of capital fight from italy, additional banking stress, all you need is for things to stabilize. >> couple of questions around what dimaio and salvini would need to do to try to create a bridge with europe there already have been rumors around the longer term budget numbers, which they want to be higher is that not enough to prove they are trying to mend ways with europe >> the main thing that needs to happen is they need to sit down on the same table and have a discussion there needs to be a perception from the market that there is an engaging discussion taking place rather than the confrontation. domestically you may see there confrontational language in the background you need convergence. the growth forecast is still too optimistic in terms of what can be achieved, and the debt profile is not looking like it's heading downwards. we could be talking about that for the next fiv

prepares tohe ecb stop buying their assets at the end of the year. it is almost like he knows where we are going into this segment. get into how they are going to take into account the growing metrics. growth is the white bars. how does mario draghi make his case for stopping bond buying? what he is going to do is put two spins on it. he is going to talk about the labor market. tightness of the labor market is going to boost demand. he is going to say yes the economy is slowing down, but we are going back to trend. we overshot on the second half of last year. it gave us balls expectations -- it gave us false expectations. will it be sustained or will it slowdown further? i'm betting on a further slowdown. david: what is it saying about low rate hikes? what does it say about when we may see hikes and what they will say about that? >> the ecb has to stick to the current game plan. no rate hikes until next summer. a lot of things can happen before the. -- before then. i think we will have to see what the economy happens -- with economy does. -- what the

. >>> when we come back, former ecb president jean claude trichet will join rick santelli.et's get a quick check on the fang stocks which are bouncing back after a wild week for the group. looks like green across the street, netflix in particular up 5% it was down more than 20% off the his.gh we'll be right back. don't go away. looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪ >>> it's been a wild week for the markets. what are the key levels to watch on the s&p 500 right now find out on tradingnation.cnbc.com more "squawk on the street" is coming up. so they say that some day ai will transform the human race. well, today you're a little busy transforming your call center. dealin

ecb should do that. is that a problem? no.: chris bailey, european atellite -- strategist raymond james. quick reminder of the mliv question. let us know your thoughts by going to the mliv page on the bloomberg terminal, where you can read all the latest from the team enjoyed the conversation. more markets next. this is bloomberg. ♪ manus: good morning from dubai. live from bloomberg's european headquarters in the city of london. these are today's top stories. short, the u.s. a void labeling china currency manipulator. head deeper into a bear market as the yuan is that a 2017 low. delaying the divorce. theresa may is set to consider a as eu brexit transition leaders in brussels decide not to call the november summit for now. europe's biggest technology company raises its projections for its cloud business and its operating profit. ♪ nejra: welcome. it is 7:01 a.m. in london. we are under an hour away from the european equity market open. u.s. futures pointing lower after a flat close for the s&p 500 yesterday. in terms of how

at that point, is the ecb behind the curve? that will feed through the fx markets and a bunch of other markets. the monetary policy can do merge for a long time and it is possible to continue to see the bund treasury spread wide and further. nf u.s. gropes -- wide further. how much will europe backup directly to this u.s. back off in yields? ira: one of the things you have seen that often occurs in the bond market, you have treasuries selloff first and then asia follows and europe is the last leg, and then you recycle back to wherever the kind of focal point of that selloff was. you can maybe get 10 year bunds up to 50 or 60 basis points if the u.s. markets continue to selloff. otherwise, it is likely to see some stabilization gives you have talk about this operation twist potentially going on to buy short-term bonds to buy long-term bonds to keep interest rates low. ,onnie: thank you to ira jersey joining us from our princeton .ureau, and cameron crise let's check in on the bloomberg first word news. courtney: the head of the

primarily, our focus is the implication for that on the ecb.oalition it is acting as a restraint on the ecb. from an equity perspective, the ecb has been impacts for european equities -- big impacts for european equities. across europe as a whole, value is important and value tends to perform best when bond yields are rising. anna: does that leave you with appetite for italian banks or just too early to say? grace: we are avoiding italy broadly and italian banks within that. are preferred region has been france and for much of the last 18 months, because we see it as an area that has got great sector exposure to luxury, to hotels, from an equity perspective. also because it avoids some of these political hotspots that we have in italy as an example. matt: is this the problem with -- when i look at the screen, italy is not much different from germany. i'm looking at stocks that got decimated. they are down 11% year to date on the ftse mib. is it the political uncertainty causing the problem? because it surely is not earnings. grace: i think it's

i should also warn this month in october the ecb is active in the markets. so italy has been supported by that going forward, there's an issue next year, there's a change in the capital key which will not be helpful for italy so they may be less supportive moreover they alreadyov overbouh italy. so the market may see less support from the ecb and it's key they maintain the foreign investors and they come back and buy. >> i've been looking at the bond market, many people flag up the fact that 20% of the market is owned by the european central bank and they will be stepping away don't you think that's in the price now? don't you think we've been talking about it enough that people have identified the faat fact >> they overbought they couldn't find enough portuguese paper, enough slovakian irish paper to buy, so they overbought. there are fundamental changes happening with the capital key as of january. all we're suggesting is that the ecb action may be less supportive of italy than is currently priced in. if the economy surprises on the upside, yes, things can

in japan has gone from zero to 20 basis points doesn't seem like a lot but 20 basis points matters ecbn to 15. they're threatening to stop which i don't think they'll do pboc, i agree, they've been stimulating but relative to their slowdown probably not enough. >> david, what about the china question 65 65.5% gdp. the bulls say that's great growth the bears say china hasn't seen growth that slow since the financial crisis how do you interpret it? >> i think china borrowed a lot of dollars when we did qe i think they levered themselves up and they're in a tricky position as we tighten because we're tightening up for them they're pegged to the dollar they tried to unpeg in '15 and '16 and it didn't work out so well this is not an easy time for china. add trade negotiations and it gets more complicated so i agree there are international concerns slowing global demand even with the stimulus because there is a marginal bit of tightening and u.s. tightening is feeding overseas markets, particularly em that borrowed dollars but to step it back to the u.s. the u.s. -- the fed has had a really

. >> and the ecb. >> and the ecb, encourage that the second decade was all about divergence all of a sudden people realized they weren't fungible, there was the risk of default and a credit risk premium. >> so i get your point there, but one other interesting phenomena that occurred last week even though italian yield pulled off, we department see barely any move in spain, portug portugal given what you're saying and you're expecting the next decade to be one of divergence rather than convergence, does that make you negative on others here? >> no. the second -- the last decade has been about diverge zblens right. >> the next decade is going to be about diversity this situation in italy is not going away not just from italy and not from several other countries. that's why i think we're going to see a period when we're going to have lots of differen variable and different behavior in different bond markets not just divergence between the four and the periphery. italy is not going to drag up every country. it's going to depend on the politics, policies, economic performance of the diffe

ecb are still in accommodative monetary policy. bank of japan still in accommodative monetary policy. one quarter of global debt is still in negative rates in that environment what will you buy? high-yielding risk-free assets, that's u.s. treasuries and asset allocators are looking at that and saying in this environment of high interest rate yields and perhaps better funding conditioning, the best funding conditions that we've had in a while, it may be time to take some money out of equities and redeploy them back into the bond curve. we've had a big move it's been 50 basis points in the last month or so people are saying it may be time to take some chips off the table. that said, you want to keep a close eye on what happens to those ten-year yields. nancy hungerford spoke to one of the best known bond market participants earlier today, that's mohamed el-erian, who was at the barclays asia forum in singapore. he predicted that u.s. treasury yields will actually continue to rise >> the fed continues to march up the yield curve -- to

we get the ecb decision and mario draghi's press conference tomorrow. manus: indeed.re is more conversations to -- to retirehe ceo next year. also, the governor of the >> welcome to bloomberg markets, the european open. we areleave from your -- live from our european headquarters in london. stocks put an end to the equity rally route that rolled around the world. we now see european futures trading higher, oil bounces as investors by treasuries. the cash trade starts in 30 minutes time. anna: is the selling over or

would there be a point where the ecb steps in? may been if contagion starts to emerge. i do think there will be a rescue. we've got somewhere to go before that. vonnie: at the moment, there is some call him in italy. simon stays with us. let's check in on the first word news. courtney: president trump tweeted today that he will cut aid to three central american countries because of the migrant caravan. they were not able to do the job. he warned that criminals and unknown middle east owners are mixed in the caravan. toldrench president president trump that he is concerned about european security if the u.s. pulls out of a nuclear weapons treaty with russia. the president said russia is breaching the agreement and he intends to pull the u.s. out of it. president trump is promising there will be a new middle tax -- class tax cut before the election. republicans said this would help them be carried to victory in the midterms. the policy has turned out to be not popular. the death of the journalist was a tremendous mistake perpetrated by a rogue operation. the u.s. is skept