tv Bloomberg Markets European Open Bloomberg October 24, 2016 2:30am-4:01am EDT
♪ >> welcome to "bloomberg markets: european open," will bring the first trade of the day. what we watching this morning? mobilizing capital, at&t agrees for $85.4e warner billion. what is the biggest threat to this deal? is it the regulators are the politicians? germany reconsiders a chinese takeover in a tech firm this is the eu and canada great deal
appears to be on the verge of collapse. how much will rising protectionism hurt kuroda? the euro grinds lower. december pmi data dropped during this program. do come at the moment they visit appetite eight of the pmi data. zone as anthe euro aggregate that is coming to look at in less than half an hour. up about 3/10 of a percentage of the net the euro stoxx 50. they had the best weekend a month and who live the charge? it was the banks. corporate,ul lot of let's check out the gmn entry would is going on around the world. the dollar was strengthening the summit against the euro. these have met against the british pound. there are still some evidence of that. aswill see if that changes
he gets handed over. we get a bit more liquidity into the market over the next 40 minutes. we're still seeing this dollar strength story one of the dominant themes out there. interesting to see how some of the stocks traded it. we'll watch carefully to see what the reporting season looks like. let's get everything us need to know from the bloomberg first world news with juliette. bankste: wall street writing some of the biggest at&t's takeover of time warner. there was some concern the $40 billion pledge make it caught up in a regulatory impasse. jpmorgan has pledged $25 billion of the financing with bank of america providing the risk. but is according to someone with knowledge of the matter. they didn't immediately reply to an e-mail about it. yuanustralian -- chinese is heading towards a low amid an
advance in the dollar first of think the p boc has reduced riverthe yuan entered the -- reserve currency status. this signals the end of the nation's 10 month political impasse. the parties federal committee agreed yesterday that the 85 socialist lawmakers should let them for my government to let the euro region's fourth-largest economy following a confidence vote. may prime minister theresa will hold her first joint ministerial committee later with the latest in scotland wales and northern ireland to discuss the car together. it will be the committee's first meeting since monday 14. she said i want monday's meeting to be the son of a grown-up up
relation between the default administration and the u.k. government. news 24 hours a day powered by more than 2600 journalists in more than hundred 20 countries. this is bloomberg. thank you, pmi monday we could plenty of data coming out over the next couple of sessions. we will get some figures from france and germany. the euro has been grinding lower. see i trading as you can 108.81 that is also around the best conference we stayed down. will the data change that? will give us further impetus to buy the euro, or to sell it? john oversees 2 billion pounds in assets, good morning. is it about the dollar? is the trend at the moment and we are approaching the upper end of the range of the dollar. it looks like he good so get a
bit further. we have the fed inching towards type thing may be in december. with the ecb continuing to ease. much -- there is not much that will stop the dollar in the short-term. guy: what are the reasons to think positively about europe at the moment? the result political risk over the next 12 months when does that could fully priced and? the euro has been in a tight range. john: most of it stems from a fairly active policy from the ecb. mario draghi remains committed to keeping the show on the road. that is helpful. we have the ratings announcement on portugal last week. they are still in the basket of bonds. it is been a powerful force in terms of lowering borrowing costs across europe, making sure the recovery can come through. a weaker euro is actually quite helpful, as well.
we are relatively positive on european growth in the short term because we look at suggestions that the could accelerate over the next three to six months. part of that was a weaker currency helping to support growth. caroline: john, supporting growth, supporting the dax, a great one. we're seeing that the showing the dax in the blue line really ramping up. we sit make up most of its losses we saw at the beginning of the year. on the flipside, getting cheaper and cheaper. now, the lowest we see the cheapest cents april. is it time to get into these european stocks? will the dax it going higher? john: we take a view that the environment is to recently constructed for equities globally. market to benefit from a supportive growth environment and the continuation of these policies.
so, european stocks have languished somewhat over the last 12 or 18 months. we think there was upside from here. earnings are looking encouraging. i think we would expect the market to continue to make gains over the next 6-12 months. caroline: which sectors look attractive? john: we are thinking some of sector should benefit. it is been very much a story and recent times of investors wanted to go to defensive stocks. they're done pretty well relative to more fiscal stocks have become reasonably stretched. we think we are seeing a stabilization in areas like energy, and resources. we think a lot of the bad news is maybe in the market in terms of financials and banks. generally, there were some rotation going on. that doesn't mean that some of the defensive stocks can't continue to do well. i think they may lag behind some
recovery and value orientated sectors. europe the politics and a reason to invest or not to invest right now? we priced in brexit, do we as the polls show that with a knife edge in italy. where the government now in spain, are things changing in a good or a bad way? : politics unfortunately is a overhangs europe and will continue to do so for the foreseeable future. clearly, brexit was a surprise to people but markets have brushed that all. this is one of those things likely to be quite drawn out. we are in a phony war in t moment. the italian referendum could disrupt markets. but it is seen that ramsey is likely to lose. beingre yesterday rajoy able to form a government in spain we mention the potential
downgrade that was avoided in a stable rating in portugal. political noise is just part of the backdrop. guy: you think it is priced and? john: largely, maybe some of the weaknesses people doing that. guy: there is more upside risk the downside risk here, the bad news is priced in. the good news can produce a greater effect, i think so. there is -- people know the negatives about europe. if the political situation bumbles a wrong -- along there was ability for upside. guy: john stopford joining us now. caroline: coming up, we look at going long as investors pile into longer maturity government debt. how vulnerable are we to interest shock? theresa may's brexit headaches are not just on the continent.
check in on the european bond market right now. we are seeing a rally across the board particularly in peripheral europe. portugal doesn't get that downgrade that was potentially looming. s really tightening up right now. it hintseing a rally, we could see a government being formed by spain at last. meanwhile, coming down two basis points for the german 10 year. now. get a business update german economy ministry has reopened a review of its china branch. although exxon did not specify the decision that come to germany seeks control as a foreign investor in europe and companies. euela merkel has called for measures to give government expanded power to block or
impose conditions on shareholdings of non-eu companies. phillips had seen third-quarter since thee 14% personal health and diagnosis treatment businesses improve. the ceo is sharpening its focus on growing in the health care market. this year, the dutch company sold shares of a division in an ipo and will sell its component business in the second half of the year. banks in the u.k. will start relocating operations as -- out of the country by the end of the year as london looks to lose access to the eu single market. that is according to the head the british banking association. hands areown said quivering over the relocate but for studies in many smaller banks plebiscite relocations before christmas, with bigger ones expected to start in the first quarter of next year. reducingpes of
reduction have been hit by the reluctance of a second-largest number to cooperate. iraq said it should be exempt because it is embroiled in a roll again -- war against islamic militants. it currentlys produces less than 4.2 million barrels a day. iraq says it is pumping more than 4.7 million barrels a day and could go higher. that is your bloomberg business flash. guy: thank you very much. what are the most crowded trades in financial markets was a shock. investors seeking relief from ultralow rates have been porting into longer maturity government debts. they have been buying duration. that is in the amount rise by a record $733 billion this year. it means the total is more than doubled since 2009 four $6 trillion according to bloomberg in bank of america data. aside from inflation is starting to return thanks to tolerate an
elevated level of price growth. what are the ramifications? let's get john stoppard's take on the rest of the -- stopford's take on the rest of this. john: this chart is pretty amazing post the duration for trade is on and everybody seems to be in it right now. when you think about the risks in your portfolio and look at how much money have invested into long-duration bonds, whatever they may be what he thinking about at the moment? john: we have been taking a much more cautious stance of late. central banks are beginning to suggest every to the limits of policy they can pursue. which of the change in the bank of japan to targeting a level of yields. see less bond buying as a result of that whether the ecb will taper itself that is likely but it
doesn't look as though it is immediately likely. we had comments from people like janet yellen saying the .ollution run the economy hot there are perhaps a more inflationary pressures of money fiscal policy might be. sks are piling up post-up given where rates and yields are right now yet the ticket pretty big capital loss on a fairly small percentage increase in yields. the potential for book follows be hit aggressively seems to exist. i think that is right. it'll been forced to or alternatively they have used it as a hedge against potential weakness in equities or other risk assets. we are concerned that maybe some of the natural defensive nature in bonds is less obvious when yields of this low.
with an partly dialing back to ration because we are concerned about the direction of travel will be less supportive stance. also, because maybe the defense nature of bonds is going to be less relevant going forward. we see little to recommend long-duration asset at this point for the same time we don't expect a big bear market. we think yields will be painful for people that have long date of bonds. part of the reason yields are as growth is that even if inflation rises. we are seeing some repricing and expectations as they adjust. we don't think it is the beginning of a whole inflection point. caroline: you come after duration pathways the money go? it's a cash for most people. john: in terms of positioning
were trying to run shorter duration position which obviously you're giving up some yielding. we are looking at other assets looking ahead over there the next six or 12 months. toward to have a bias the more defensive income generators. the problems with bonds is if one assumes they move together for stability shorter maturity in places like canada with a ghostly well supported. guy: more liquid assets right now? john: we try to avoid the could assets. a be a possibility to benefit from the quiddity premiums. we can't afford to have much of that. i think the estimates of the moment the stress test we do
suggest we could liquidate much in a daythe portfolio and the rest in a week. guy: for a more going in the opposite direction from the big howt managers talking about to get involved in more liquid assets. john: you need to look the nature of the investors. if they're who basically need to get hold of that money if they needed on short notice that is probably inappropriate to put them in liquid assets. the propertyith funds recently. there was a huge mismatch between liquidity facility deb daily pricing so we saw suspensions and so on over brexit. i think that is a big problem any regulators are looking at that very hard. we will see more pressure on asset managers to be clear but the liquidity risks they are
running make sure they're properly looked after. us.line: john, staying with across much more the asset classes in a moment we will talk equities. minutes away from the open up next, look the potential corporate movers in today's trading on a bleak u.k. outlook. dark in the city of london. potential highlights from phillips was to maybe some low ights stop ♪
>> 5% revenue growth in the quarter and and the margin expansion we were able to generate a little bit of net income and cash flow. good basis. i can point out we had 8% growth in the quarter that is an indicator for the future. very much supported by the emerging markets and china. also the united states was performing very, very well. that was the of philips speaking a little earlier on. morgan stanley out saying just about good enough. in terms of the numbers this morning for the third quarter. better margins their offsetting the weakness. the stockl give opened just about good enough carolinas with the scorecard is. i matter that is necessarily what they want to hear this morning.
caroline: exactly, it doesn't seem like a thumbs up across the board. axtion 10% lower because the german economy of ministry weighing in. it seemed as though they will now potentially put a roadblock into the deal from china but germany is reviewing the takeover of aixtron by china. a negative surprise. it is unclear whether the german economy ministry has new insight which might've led to the reopening of the review. originally, they give the thumbs up back in september. also for carbon. the manufacturing of equipment could slump 15%. that is coming from -- the fourth quarter will be challenging. numbers will be below expectations. it seems as though is it is good amounts to a 10% cut in estimates.
guy: good morning, you are watching "bloomberg markets: european open," caroline hyde's over in berlin. caroline is your morning brief. capital, mobilizing a at&t agrees to buy time warner, what is the biggest threat to the deal? the regulators of politicians. takeover this as the eu and canada trade deal up here , how much can protectionism hurt growth? the euro influx, it could to
negative again. -- guy? guy: let's find a lipid it is going to deliver. it is stronger than expected, the survey for manufacturing the services number of little bit softer. 53 that expected at number is a little lighter. i just have the manufacturing one which is ahead. a little bit of softness there, there the ftse 100 you can see it is opened up this morning we see a similar story in france and germany this morning. the numbers being posted for your blitz with the details now. manus: it is a big reporting week from barclays.
the banks will be front and center on the reporting trade this week. talk about that in the moment. the stoxx 600 opening little bit higher. third quarter is global stock trillion to the value of their overall programming. will the central banks begin to taper? atccourty to mario draghi the ecb. yet that full stimulus in place. let me just show you where we are for the price of work as we wait to see how it is that opec into the new allocations on the caps. liquiditye $50, this there's a great cap right here. on this u-turn that societies have done over in terms of market share. crude atare pricing
$50, a little too hot a little too cold we talk about a goldilocks price. let me take you into the gilt market -- we're a little bit of yield lower on your screen. if the stoxx 600 let's look at the yield on the u.k. treasuries. when you are seeing here is 1.07, we see these up ever so slightly on the initial opening. also you mention this have a look at the lower part of your screen. again below zero percent on the german market. is coming toros the european market this week. france and italy will also come to the market. french was 6 billion euros. you are -- last week he saw the market rally. will they still be held by foreigners? there's the question i have to put out there. 20% of this market is how it by
international investors. will that continue? let's talk about the stocks we are watching today. personal health we have phillips in focus up 2.1%. third quarter profit up by 14%. concerned about more volatility to compass the morgan stanley, that is a lovely lying down. just about good enough. this is one of those equipment makers for the aerospace and defense industry. it third quarter is challenging full-year will be below expectations. i saw calls of 10% on the table before came over. underperforming in some of the wireless businesses. finally, you have the aixtron as the german economy ministry reopens their review on the chinese takeover by grand chip investors. that stock down caring a little do than the initial openings.
that is your opening stock call, i must do a little bit of radio. guy: you are, and this morning you are on bab radio in the london area. if you're driving in and want to catch up on what is happening around the globe that will dominate your day you can now get that. stuff, change my world this morning. the stock about some of the data come back to the pmi data out of france. i bring up this chart, the shows to a sense of context as what is going on was about as the french number coming down, look at the trend line in terms of the french and the eurozone and the german numbers are all slightly softening up a bit. they may tell it more difficult picture for mario draghi going forward. a stock but the banking sector. caroline: there's a flurry of
interest across the world, the most ailing bank this morning is about to unveil the new business plan. targeting more than one billion euros in annual profit by 2019. the billionaire investor george soros and john paulson are interested in investing as well as the kuwaitis according to italian press reports that. reports is it somewhat overly optimistic? montel: we are expecting this planeil some of later today. it will largely be in the details. one of the big questions is are they targeting this on a pretax or after-tax basis? oner-tax it only made billion euros once in their history. certainly, the plan gives them a couple years to get the house in
, and try to get a lot of underperforming assets -- get rid of a lot of underperforming assets. can you do that without shrinking the revenue base too much? if that goes down much further it will be tough to see them get to one billion in profits absent some major cost-cutting. the show you what has been going on this morning, why were these guys be interested in investing every time you invest in an italian bank of this style you have been diluted and i did it again? -- and diluted again? what is soros seeing? michael: perhaps this is the last one. [laughter] people have been wrong before on that front. you know, if you don't think this bank is going under, it is trading incredibly cheap.
with a lot of reason given the capital they have to raise. these are people trying to call the bottom on the stock. if they buy into the credibility of this plan perhaps there is some upside there. guy: great stuff, michael young a lot of banks reporting of the next few days. back.l moore who have him you'll see a lot of this ministry. john stopford joining us, the banks are really hard to call us to take a look at the book values, they are sensationally cheap as we been hearing. that could be a value trap and could be diluted or hit again as they raise more capital. yet, there was a high bit of trade him what happened in europe that it somewhat you can argue you have to have them in your portfolio if you believe your book it better from here. where do you set? it is a really tough one? john: i think it is a tough one.
their challenge and lots of directions in terms of the funding environment for negative interest rates. flat yield curves their challenge in terms of the legacy issues which they are dealing with. the classic example of that regulators are continuing to force them to raise capital. you can see all the negative people trying to work out how much of that as you say it's in the price whatever close to the bottom. we tend to think that incrementally we are to that point it should maybe see some signs of outperformance. particularly if the curves continue to steepen that helps them to make money. pointnse is there any where i'm not sure it is all in at this point. caroline: john, we have seen the retrenchment gathering pace of late. look at my bloomberg, go to the
4435 is what it wanted to plug into that bloomberg this morning. you can see how much banks have finally started to hit the level they were at just before the brexit vote. june the 23rd this is normalized from and they actually managed to pick up the stoxx 600 already at that level. which banks could outperform? is it the german lender's, the worst of the new for the deutsche bank? john: we tend to be fairly conservative we're going for parts of the market area greater companies they can make money and pay dividends. our particular favorite area is probably a bit more conservative. as some scandinavian banks, bank andke skilled those people. we're less in the casino end of the market. clearly, their opportunities if you take your timing. guy: but at the credits -- what about the credits? some of great kick out.
the place toent as be is the senior end of the debt market. you're basically being helped by regulators. high capital ratios are supported with the quality of senior debt. within in the further down the races you go in the further into subordinated debt you must be pretty confident you know what is going on. our problem is banks generically are fairly opaque businesses. if you get close to the wire, your evaluation can be fairly dramatic. they would rather look for high-yield and go into businesses that have more transparent alex sheets. -- a balance sheets. guy: john, stay with us. up next, trouble abroad and at home. after meeting with you had to say the british from minnesota welcome the welsh and northern irish leaders this morning as ae brexit risk for constitutional crisis in the united kingdom. we will discuss the challenges for theresa may.
and, the chinese, his party meet for the start of its sixth in beijing postapproval stability discuss but their gathering for investors. and what it means for politicians. ther, a megamerger facing 85 billion dollar blockbuster deal between at&t and time warner. all of the coming of this is the open. ♪
"bloomberg markets: european tradinge are seeing higher every single industry group is rising particularly the minoers and the banks. centum of the moves that but look at the euro, we are back in the red after that french pmi data missed when it came to growth, but not as much as expected. manufacturing did rather well. we're seeing it at the lowest since january. , some of theatch big movers today as well. guy: let's talk about the stocks, the news over the last couple of minutes is surrounding one that shop like a stone. by stock is now trading down 2.8% as of this may be taken over by china. is that advisedly because the eu has indicated that the
partnership did not make the concessions expected by a deadline that had been imposed. again, where coming back and looking at what is happening with this a deal. this is not the only concern. of this megamerger bg proposed. he tried to huge chemical companies there. now there is a concern with the eu authorities around that deal. morning ithen this would be running my numbers on this one. syngenta is dropping. easyjet popping up this morning, we are expecting and the uk airport story tomorrow. we think tomorrow is probably now the most likely date. easyjet rising my 3% post up interesting stock story to come back to those as we work our way to the program. let's get everybody caught up. he was bloomberg first world
news. juliette: thank you, wall street of theriting some biggest checks ever around at&t's takeover of time warner. there was some concerned the $40 billion loan they get caught up in a regulatory impasse. jpmorgan has pledged the $5 billion with bank of america providing the risk was at that is it according to some of the knowledge of the matter. at&t didn't immediately reply to e-mail. is headed foruan a record low as chinese policymakers signal they're ready to allow declines amid slumping exports. some analysts think the pbo see has reduced after the yuan in the imf currency -- reserve currency basket. opposition leadership will stand aside and let acting prime minister take office for a second term for step is signals
the end of the nation's 10 month political impasse. they agreed yesterday that the 85 socialists lawmakers should let rajoy form a minority government to lead the european union's fourth-largest economy. global news 24 hours a day power by more than 2600 journalists. this is bloomberg. may'shank you, theresa brexit headaches not just on the continent. regular meetings with the default u.k. governments this is the first time we have seen this sense for the 14 foot of the leaders of scotland, wales, northern ireland, will meet later today in london. decision announce the in a statement. we're much more than the sum of our parts i want today's meeting to be the start of a new grown-up relationship between the devolved administrations and the u.k. government. scotland and northern ireland voted to stay in the eu. we will see a grown up this
relationship will be. let's bring in john stopford, how much more do we need to trade?nto the brexit ofn: there has been a wave optimism that things are not collapsed immediately. things happen with a lag. we think growth will slow with rising inflation. the u.k. is very reliant on foreign money to support the balance of pay. we think the pound so remains vulnerable. it is may be oversold in the short-term. we don't think it will go up much. it could go down quite a bit further. guy: is the risk on the downside? john: yes, and the same with the gilt market. still, inflation will rise. cutbank of england may rates for the but the picture does look at attractive as
perhaps it did. there are concerns that the u.k. has a more challenging environment ahead. we are conscious i think on debt in the currency market. guy: what about the equity market? this is priced at the euro. 13.1%, in pounds. people simply focusing on the pounds bit of that. as we discussed, there is liquid deal of money flowing into this country and the ftse is no exception. how much risk is there? risk inequence out the the various asset classes, do you think the ftse is at risk right now? could the weaker pound provide -- john: i think it provides quite a bit of a tailwind. if you're a significant portion coming from overseas, the ftse is not really the u.k. index it is an international index. it is just a translation effect. we are perhaps more concerned about some of the more domestic stocks, the 5250 has done
relatively well. guy: you break up more exposure to the you care their underperforming big-time right now. they also may be outperformed initial expectations and become a little bit more optimistic that the u.k. avoid in immediately session. i think we still remain cautious . generally, high yields i think may be challenging for the property sector and so on. there is a lot of uncertainty still ahead. it is best to take a global view and not too much into either positive or negative expectations of the u.k. and focus on what the opportunities are elsewhere. guy: interesting stuff, great to see this morning bank of her spending so much of your time with us for the john stopford, as a management of multi-acid income. caroline: happy to have him on the show. bet syngenta deal seems to held back by the eu was to maybe
the chinese company does not make concessions by the deadline. worst ak is down the for the stock all the way since august the 26th 2015. this is 2.6 billion swiss francs that of and wiped off of syngenta's market capitalization. saying no to chinese takeover of becoming a bit of a theme. we look into china's takeover of aixtron sending shares sinking as well. ♪
welcome back to the open on bloomberg. slumping after the german economy minister as reopened a review for the offer by china's grand chip investment. they didn't specify a reason for the decision, the move comes as germany seeks tighter control of the foreign investment in the european companies. not to mention the fact that the eu is now weighing in on the syngenta deal as well. let's check in with our german government editor the details, tony? tony: aixtron has been in play for months. now, the government has pulled
on this review they're doing. it is the latest sign in a series of moves by the german onernment to get a grip these chinese influx of which has reached a record this year globally. europe's biggest economy is a good target. and thevice chancellor economy minister and a social democrat has been gunning for this. he is also been leaning to tip the u.s. trade deal in the german government. there is this whole ball of wool of backlash that has also come to germany. this feel slightly protection us. and what of the cases could this potentially involve? involve the case
of osram, an old traditional household name in europe. in germany, it is associated with light bulbs. this companies been in talks to take over the investors up in the air. is not goingeneral against these deals but it is more toward imposing limits. that is what gabriel, who here told is doing this pretty much --h america's tacit blessing we don't know yet. it is too early to tell. in brussels, and this point in 28 countries you need allies to get someone like that through. what we heard from you commission is that if you want to pursue this go-ahead. caroline: great to have your
caroline: welcome back. half past the hour, and that means it is german pmi data time. breaking the beat when it comes to manufacturing, germany coming with 55.1, well into positive expansion territory. we're seeing also a big expansion in terms of services, a beat versus the october survey. therefore we are dragging the german compass it up 55.1. you have to check in on the euro to see how it's performing on the back of this data, at the moment holding steady, slightly lower versus the u.s. dollar. we will see how the market reacts, but elsewhere, stock markets are doing great. we're seeing miners outperform
banks 1.25% at the moment. every single industry group is higher, all bar one. guy, its chemicals. guy: unsurprising giving what has happened with syngenta. eu authorities as a the company has missed the deadline in terms of providing opportunity to change the deal to allow regulators to give his clearances. syngenta is trading down, a lot of profit warning. this is a supplier in arrow space, -- in aerospace. we'll get details at the full meeting taking place today in terms of new targets. that stock is rising quite nicely. an interesting stock story this morning. this theme of, protectionism in the eu.
but now, let's get to asia. the chinese communist party gathers today to soften in beijing. party elites are meeting behind closed doors to discuss policy ahead of the twice a decade party congress. we have details from hong kong. give us a sense, even behind closed doors, what is on the agenda? official agenda will be improving party discipline. party has more than 204 members, and almost 170 alternate members. this is the most important political event in the chinese year. this year we will see xi jingping adopt his anticorruption campaign with two documents, one about a new code of conduct, another a revision of the party's rules.
caroline: we know that this has been something xi jingping has been banging the drum on, trying to hit back on any corruption. but why does this particular plan matter? >> yes, this party plan is very important for xi jingping, because this is one of the major platforms to consolidate his power, and also because the communist party is hitting its midterm power transfer next year, so when that happens, 11 out of 25 members will be stepping down, including 5 out of 7 top numbers. xi jingping will seize this opportunity to try to place a lieutenant in key positions so he can have an upended next year's party congress. guy: thank you very much.
let's carry on the conversation with the cohead of asian economics research at hsbc. good morning. i want to start off -- let's talk about the currency. it's moving down to a near record against the u.s. dollar. we can talk about the dollar and the basket, but it is a nice headline. the previous low was 6.785 in 2010. should we care about it? should the chinese care? >> it's partly the u.s. dollar strength against other currencies, but on the chinese side, exports are not doing well. september exports were down 10% year-over-year, so this is partly about protecting exporter profits as well. we are gaining a little bit of competitiveness here in an environment where an economy is still slowing.
broadly speaking, private sector is slow, helping to cushion it. guy: more to come? >> perhaps a little bit, nothing to dramatic. if it's too dramatic they trigger capital outflow, so they have to strike a happy medium. so far, so good. we haven't seen an acceleration capital outflow, but nothing too dramatic. guy: how much of this is about positioning for who is the next guy to run china? how much of it is about internal pol party politics? >> it's really starting to change, and a lot of political tussles are going on behind the scenes. there is something else, which is that beijing is frustrated. its directors policy decisions aren't always implement it. when it comes to economic reforms to shuttering of capacity -- some of the provincial governments haven't
really played ball here, so they want to consolidate party discipline, and this is what this is about as well. caroline: will it work? will they set themselves up for the next -- when they see a changing in the hands of power? change inext year's the handover of power toward the end of next year, this is certainly in the lead up to this. i think there are a lot more decisions to come over the first half of next year. we are going to see more by way of official change in the provinces, for example, and over the course of the next year we will get more close to who will take over and what the agenda will be for the next five years. caroline: i'm fascinated in terms of the potential for capital outflow that you mentioned. screen with hong kong -- ma will feel if there
is capital outflow it will go from the mainland to hong kong, and it certainly wasn't september. 8 billion or so was flowing in, and suddenly it has turned off. see the inflows are really shrinking. the hang seng could be at the end of its upward trajectory. where is the money potentially going when we see outflows, if it's not into hong kong? >> well, it is still going into m&a, for example. we see a lot going into overseas property, for example. that reasons it flows and hong kong stock is because there was great anticipation for the shenzhen-hong kong connect. a lot of investors in equities -- that flow has started to dry up a little bit, partly off fears of a fed rate hike. but there is still plenty of money going out of china into global property, into global equities. europe m&a, for example.
hong kong is not necessarily the best perimeter for outflows out of china. guy: let's talk about that m&a story. this is a german technology company which the german government is having another look at in terms of a takeover by a chinese company, syngenta dropping as well. what will the chinese authorities make a more resistant europe? >> well, they are still very keen on acquiring foreign companies, partly for technology, partly for market access, so they are meeting more and more resistance in many countries, and that's obviously not necessarily welcomed by the chinese government. it, howld anticipate surprised the backlash has been. but we are always focused on where there is backlash. there are still a lot of deals that go through very smoothly. if you look at the numbers, we saw a record m&a out of china in the first half of the year. there are some examples of backlash, but by and large, the
bulk of deals are going through. interesting bit tied up with -- the strategy of bringing juggernauts together, more mega m&as. how much are you seeing changes within china in terms of their own sectors, their own industries? ll, there is certainly consolidation within china as well. think of the state owned enterprise sector. there have been calls to shrink some of the excess capacity in china, and the government has, rather than shutdown individual companies, opted to merge companies into even bigger firms within china. they are creating national champions, and these national champions are looking outside the country. then what is leading to a bit of concern among recipient countries is that we have such a large, powerful state run
assets.from foreign there's a bit of concern to what extent the government is behind some of these deals. guy: how willing are private consumers, the private sector, how willing are they to shoulder more of the burden? they are watching this transition take place, and there is strong evidence of it happening and that it will go further, but there is no social security network. there are none of the things you would expect to allow the consumer to take greater risk. how big a part of this is politics? thet is partly just underlying dynamics that we talked about. no social security, no wage growth. consumer spending isn't accelerating to the extent required to sustain economic growth. it remains tremendously dependent on investment and the government keeps pumping into infrastructure, the housing
market. guy: should we be worried about the housing market? >> we should certainly keep a wary ey eoe on it. guy: the conversation everyone has about china. caroline: a great perspective. up next, we will be dialing a megamerger. we'll analyze the hurdles facing that $85 billion deal between at&t and time warner. this is bloomberg. ♪
caroline: 44 minutes into the european trading 44 minutes inte european trading day, this is the open. a check on the markets, cross assets, euro currently trading flat against the dollar, the lowest we have seen since the start of the year. meanwhile, yields falling for portugal. doesn't get a movement on its credit rating, yields down. agenda, 7.6%n's doesn't get a n lower. almost 3 billion swiss francs knocked off the market cap of this company, as kim china and suggest agenda, 7.6% didn't make concessions by the deadline. therefore they could have to extend the investigation. the eu has until october 28 to approve the deal without commission or open a longer
investigation. now, let's get out for a bloomberg business flash with juliette saly. juliette: caroline, thank you. the german economy ministry has reopened its review of its takeover offer right china's greater chip investment. the move comes as germany seeks tighter control over foreign investments in european companies. has called free you measure's to give government expanded powers to block or impose conditions on shareholding of non-eu companies. phillips has seen third-quarter in theirise 14% diagnosis and treatment businesses improve. the ceo says they are sharpening their focus on growing the health care market. this year, the dutch company sold shares of its lighting division in an ipo and is
planning to sell its limited components business in the second half of the year. thanks and the u.k. will start relocating operations out of the country by the end of the year as london looks set to lose access to the eu single market. this is according to the head of the british bankers association, writing in "the observer," "hands are quivering over the relocate button." he says many smaller banks plan to start relocation before christmas, with bigger once expected to start in the first quarter of next year. and that is your bloomberg business flash. guy: i wonder if he is quivering as well. at&t has agreed to buy time warner in a deal worth $85 billion, which would form a media and telecommunications giant that would rival the takeover of comcast by nbc universal. this deal comes at a time where lawmakers are skeptical of media consolidation.
remember, 15 days until the u.s. election. for more, we are joined by our senior media analyst. good morning. should we be skeptical? >> i think it is pretty clear that you are back in the trend for distribution coming together. whether the regulator says ok, we don't know, but it is vertical consolidation. there's a less obvious reason to block it. guy: politics is going to get involved. this is a high profile deal when politics -- i suspect they would have liked it to come out later. it becomes a political football, these deals take a long time to get through. is it just short-term noise? >> i think it is just short-term noise, from the markets perspective more focused on longer-term. ofoline: give us a sense whether this is going to be a scene on this side of the atlantic, suddenly the likes of vodafone -- how much is this
trend going to go? look at the you european telcos, there's obviously a difference -- they are scared in reach. at&t is a massive company with enormous numbers of customers, and so is time warner, which has international reach. i think if you look at the europeans, we are already seeing distribution coming together. stuff like bt acquiring football rights. do we think we will see european telcos starting to buy large international content companies? we don't. we think the biggest international content companies are hollywood studios, and they are too big for most europeans to buy. guy: is this a netflix reaction? what is the long short of this trading? who gets affected if this goes through? >> i think it depends on what
the outcome of the deal is. toiously, if at&t were able restrict the hbo content just to at&t pipes, then other distributors come off. i suspect they will have to get regulatory clearance and commit to make content available to everybody. i think the consumer comes off a push toward making content available on multiple platforms. i'm not sure there's an obvious short here, unless you think another telco goes for another expensive transaction, but i think one of the things this deal is telling us is enough money makes it possible to do large things. caroline: certainly, sarah, we could see a lot of debt come to the markets with indicated loans. what is the price point, from your perspective? >> the price point, what do you mean? caroline: do you think the
premium of a modern 20% is the right amount being offered? the current amount being offered by at&t to snap up time warner? >> i suppose one of the only ways to think about it is to compare it relative to when fox offered. this is a significantly more expensive deal, but what we have seen over the last couple years is a value of premium content going higher, particularly in the context of things like cord cutting, where the best channels aren't getting cut and people need those best channels to attract customers and distribute smaller channels as well. obviously there has been takeover speculation over time warner for some time, but i wouldn't say 20% is unreasonable. guy: if nbc comcast works is it a good deal,? >> thae jury is still out. it's not obvious that owning
contest gives you an edge with customer acquisition, however, negotiatingove leverage of other people. jury is out. guy: thank you very much. sarah simon. we have got to talk about syngenta next, m&a. it seems as if the regulators are having a big impact on the deal. it seems we have seen a nest in terms of one of the regulatory filings, in terms of the things that need to change. you can see the stock is reacting fairly violently. we'll take you back to this deal and give you the details when we come back. syngenta trading down by 7%. it will issue an update with third-quarter earnings, next. ♪
caroline: welcome back. the big breaking news of the morning has been syngenta shares, dropping after the eu says that can china and syngenta have failed to make early-stage concessions in the takeover deal. they have until october 28 to approve the deal without conditions that could then extended to a deeper investigation. we are joined from brussels. give us the details -- how much of a surprise is it? >> well, the market reaction
shows the market is certainly surprised. if the companies had made concessions by friday night, that would mean that they might have a chance of getting the deal approved fairly quickly, and the fact that it didn't happen makes it look like there's a chance it might go to a longer probe. it is in the end of the world but it adds another four months. it also as a risk factor that regulators want to have a longer look at what's going on. they already have a long probe into a similar deal. they have monsanto coming up, so maybe it's an area they want to scrutinize. for syngenta and can china, maybe it's a surprise. they are still in a very early stage, still waiting for the eu to say what it will do. about 3: the risk is billion, and you are talking about dupont, dow chemical -- what do you mean when you say long? is it months, years? >> it can add about four months,
but the risk is you could ultimately see a deal blocked and that you might have to give up big concessions. so for companies that is more of a risk. obviously like to get a deal done quickly and easily, and that might not be realistic. but we are still waiting for the final decision to come through. but time is money and adding four or five months is an awful lot. guy: we will leave it there. we're about to get eurozone pmi data. that will come out of the top of the hour, 9:00 a.m. u.k. time. the data we have this morning, i want to take you to my bloomberg . the french number beginning to roll over. the german number outperformed, and that spread will be something to pay attention to. we will break this on surveillance, coming up shortly.
>> at&t agrees to buy time warner for $85 billion with both presidential candidates pushing for regulatory scrutiny. can the deal survive washington? promisenister may will a role in shaping brexit strategy. there are concerns a hard exit could spark a constitutional crisis. the french economy slowed in october as germany