tv Bloomberg Daybreak Europe Bloomberg October 24, 2017 1:00am-2:30am EDT
♪ china's president consolidates his power. what does this mean for the world's second-largest economy? >> speaking at saudi arabia's future investment initiative on the disposal of nonperforming loans feare. >> if we do it too fast, we could derail the whole system which is now gaining speed. place down the chances of a swift transition deal with the eu. they meet today to discuss what
britain wants from a future trade pact. ♪ >> a warm welcome. this is "bloomberg daybreak: europe." i am anna edwards. novartis.will talk to some news breaking. in.rtis numbers coming core earnings per share for the beat, quarter is a $1.29. 3.3 $8 billion third-quarter operating profit. this would be the first quarterly profit increase in three years. helping them.
the core earnings per share is a nice beat, third-quarter profit $3.3 billion. novartis sees significant in the 2017 outlook is reconfirmed. anna: some hoping there might be a decision on that. basf, how about strong is the chemicals story for this company? third-quarter revenue ahead of vestments. adjusted eve also in line.
of the portfolio is in that area. are they going to fix the guidance? germany on at of $1.5 billion share buyback program plan to start in the fourth quarter. -- i won'tumber at give you that. that looks to be inconsistent. is 491 income number million euros. numberction on the sales , 3.5 billion euros. both those numbers coming in ahead. eaten thehave
headlines on novartis -- and be 10 the headlines on novartis. the market had penciled in 21 ahead of the requirement of 21.6. the swedish housing market showed signs of further slow down. third-quarter net interest million lending volumes supported the net interest income and commission generation, $2.92 billion. well positioned to meet the future changes in capital. considerable different two significant? they previously set a considerable increase.
now they are saying significantly out. let's get into the heart of the earnings season. when it comes to who will run bond traders are not waiting for verification from the president of the united states. yields a multi-color flattening for you. theof these bond markets flattest since 2007. no one on trump's short list will change the momentum and the bottom line is these curves will continue to flatten. waiting.yellethe bond market it
he says he is close to deciding who will lead the fed. u.s. equity the markets coming off, but a climb in volatility. shrugging off monday's tech line in asia. the asian equities markets up 5.4%. fairly steady in and amongst all that. story, wef the euro are waiting for the response by catalonian separatists. manus: ge got battered yesterday. new zealand dollar had a frisky session, whip saw is the word we use.
there was a reference to reforming the central bank of new zealand. let's get an update on bloomberg first word news. china's communist party has approved the revised charter that enshrines president xi jinping's under his guiding principles. confirms the rapid consolidation of power and reinforces speculation he might seek to stay on after his second term ends. no chinese leader sense mao zedong has managed to put his stamp on party ideology before stepping down. drawing up plans that include removing the catalonian president. spain's chief prosecutor said any declaration of independence good lead to a possible prison sentence of 30 years. separatists activists are
fine-tuning plans for a human shield to stop authorities from gaining access to regional government buildings. theresa may's cabinet meets as pressure mounts to define the trade pact written ones from the european union. they are calling for urgent agreement that would allow them to trade as usual for two years after leaving the blog. such a deal is not expected to be finalized until march 2019. president trump has said he is "very, very close" to announce his choice of fed chairman. john taylorering and jerome powell, while praising janet yellen. according to people familiar, the president's closest aides are steering him towards john taylor or jerome powell. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
manus: let's get a little bit more. david is standing by. asia seems to be on the upside. how do markets look for you this morning? >> 16 days now. to 89 on the rsi. chips on the blue way up. the gains you see come down to property developers in hong kong and in china. .5% gains there. we had the home price data out monday showing moderation, so the narrative right now, you can see it play out. every single developer is up.
the biggest developers are leading gains across msci. garden up 9% in today's trade. anna: thanks, david. excessive speed and the disposable of nonperforming loans could derail the recovery in italy's financial system. that is according to the finance minister. he discussed challenges for europe and the ecb before attending the future investment initiative conference and saudi arabia. >> this is certainly a challenge. we and europe must find ways to combine the overall european dimension with the national and local dimension. we need all these dimensions in a harmonious way and reshape our instruments to make that happen. >> what else can europe due to
mitigate the risks or address them properly? >> europe must recognize european challenges which require european responses, migration, security, growth in jobs. aree are responses which insufficient and we need to integrate them with higher-level policy. >> there is more work needed to be done to slow down that trend we are seeing for further autonomy? >> these are structural problems. there is a window of opportunity to deal with them because the european economy is growing at a healthy rate and there is job creation. we must reform our institutions and make it more flexible. the italiank about economy. growth projections 1.5% any chanc we. could see upside to that growth
-- growth projections 1.5%. any chance we could see upside to that growth? by how much more do you think the economy could grow? reforms were implemented and resources mobilized for public investment were spent, we could go up to 2%. >> how would that translate into the countries debt and debt to gdp ratio, falling despite the likely rise in debt financing? >> it will accelerate because of real growth going up and nominal growth coming up a little bit. inflation is much too low still. >> you have spoken about the ecb reform efforts. perplexities your when it comes to supervision, the ecb going beyond its boundaries. could you clarify your position
on those perplexities? >> this was specific to the recent communication put out about the speed and timing and features of the program that needs to be implemented to get rid of nonperforming loans. this is absolutely vital for all economies, including the italian economy. we must be careful in getting the speed and timing right. too fast, we could derail the whole system which is now gaining speed. >> there is the ongoing issue about the job opening up at the bank of italy. if it was offered, which you take it? >> the minister cannot take that job for at least a year, so this is out of the question. joining us now on set is , head of fxch
strategy at canadian imperial bank. kerry bullish in terms of the growth story. you have written that europe is potentially on the precipice of a major shift. that chimes with his message. it is a bullish outlook. that would be the consensus view. >> yes, indeed. the growth story is looking better in europe. or twoot just one countries doing well. we are seeing a broader based recovery story. i can't say there aren't risks, and italian banks being one of bute alongside catalonia, the story from a macro economic perspective is looking encouraging. that is the message the ecb will debate when it considers its policy outlook. there is this improve and wherel backdrop
inflation is too low, and that is the crux of the debate the ecb will wrestle with. manus: we will talk more about the ecb and what you are expecting. anna: you still expecting the euro only gets to 125. >> if you think about where people in the market were six months ago, people were talking about the risks of parity in the third quarter of this year, so we have seen a structural change and the market adding too long positions in the euro. the kicker will be how quickly the ecb rolls back on that negative deposit rate. it is removed in the second half of next year, that 125 upsidestarts to have because we see flows coming back into sovereign institutions. manus: hold those thoughts. we will dig deeper.
let's head out to the future investment initiative in saudi arabia. yousef gamal el-din is standing by with the guest. good morning. >> good morning. , thef the core themes here sovereign wealth fund, $160 billion in assets under management. investment fund is here and we are joined by the ceo. thank you for coming on the program. the deals you have been doing with saudi arabia has been a source of capital inflows for issia, but how much appetite therefore investment into the saudi story? >> ever since the crown prince ago,ith putin a few years
when billion dollars has been invested to russian projects, including petrochemicals and other sectors, but now we are starting to invest in saudi arabia as well. chemicalst petrol company is interested in having , one of the first investments by russian companies in saudi arabia. >> would you be open to cooperation and deals? is this an inflection point? >> we believe the visit by the king two weeks ago opened saudi arabia to russian businesses, and there is lots of interest to invest. a lot of people believe in vision 2030 by the crown prince and see excitement. on november 2, we will have 50 top russian companies coming to explore it investing opportunities and saudi arabia. >> president putin has
criticized the west. how long until the u.s. restores economic ties with russia? starthink it will happening soon. i think business wants to work with russia. partners are u.s. based investors, so we believe reason will prevail and business ties will continue. russia is open and only by working with russia can problems be solved. >> the impact the sanctions are having? is 2% this year. we expect to have major growth next year. our partnership with saudi arabia will stabilize oil prices has been key to cement growth of the saudi economy and the russian economy. >> we hear you might be participating in an ipo. would you consider investment? one of theconsider key investors in the ipo with some of our partners. the company is well positioned
and some of our middle eastern and asian partners will participate, and we believe it will be a successful ipo. >> talk to me about why you are so interested in this? >> just by combining energy with aluminum, and they have a robust business model, which win the aluminum cycle is a low allows the ability to recover at some point. it is a business with good synergy between energy and aluminum. >> how would partners advise you to your plans? and someill invest have a number of alumina projects over the world and we believe we can work efficiently to invest together and jointly in different alumina projects all over the world. ft andt about transne
investment, can you tell us any more detail? >> it is a great company. it has increased its dividend payment six times since last year, and we believe it will become more efficient and create more value going forward, so foreign investors are interested and we would welcome your participation. toi want to bring it back the region to close our discussion. your next trip, you are going to uae. will you be discussing new deals there with your partners? a great partner with uae, and uae has invested in russia and more than 30 transactions, so we believe russia has a solid partnership with the region and are excited about the transformation of the great, so a transformation inside arabia and we want to be partners. >> was that a yes or no? >>, yes we would do more deals. >> thank you.
back to you in the studio. anna: thank you very much. joining us in saudi arabia, plenty more coverage from that event. all this week live coverage from that event here at 8:30 london to euronext ceo. a deal coming through in the oil space. a cast consideration of $2 billion, making an investment. that is the state of play in saudi arabia. let's return to our conversation bank. european central
here is the survey that we were looking at. this is the economist, an important distinction between ,he economists in the middle but today a slightly different tale. anna: we have a survey asking not what will happen, but the range of scenarios from the hawkish to the dovish. how much will they keep buying bonds in the eurozone. germany, what is your expectation from the ecb -- jeremy, what is your expectation from the ecb? we have a range of scenario by strategist. what is your thinking? >> one hesitates to agree with economists. from 60 it will be cut 230.
we think were talking about a six-month extension, perhaps a bit more aggressive. there is certainly a move towards a nine-month view. half, extending for six months, then coming back to adjusted. the other variable is the sequencing. i think it will be relevant. we talked about the removal of positiveing implications as well. thes: you wrote a piece language mario draghi used, that rates will remain low well past the horizon of bond buying. window toave this take the deposit rate back to zero? could it be that aggressive? how aggressive do you think it will be? >> it will be interesting in terms of the language mario draghi uses in that removal.
buying,y reduced bond he did not talk about that as tapering. anna: it was not a taper? >> it is semantics. he will use that same argument when it comes to the reverse in the negative deposit rate. it was a strategy to facilitate inflation by creating a cheaper currency to trade. i think the ecb will mobilize are reversingy we excessive policy stimulus by taking the rate act zero in the second half of next year. that will have implications for sovereign wealth funds that have unwound euro holdings because of negative rates. anna: the mobilization of language, that could be relevant. dateended or within into end, what is your
expectation? >> i believe open-ended. with all central banks, they want as great a flexibility as they can come so will be a mix and match process. i think we will be shorter in terms of the time duration, open-ended, and still give them flexibility. this is the european .entral banks balance sheet they bought seven times more than the net government issue more than the fed, more than the boj. everything the ecb does has a more dramatic impact on the currency. you think 120.
a movement on the deposit rate, 127. when could we break that 130 level? the growth and the numbers? >> it is probably a combination of both. we argue it is around 129. are we in a scenario where we should see the euro appreciably above that level? if are going to see a more aggressive reaction from the ecb than we are assuming and we get a positive tailwind for the euro , but of course we are talking yout high laterals, so cannot ignore the u.s. debate and who will be the fed chair. those variables are also in play. it is a combination of factors. if the ecb were to be more aggressive come that will be the conditions. anna: thank you. jeremy stays with us on the
equities are shrugging off the weakness in the u.s., particularly asia. the nikkei extending gains. of gains, 15reak straight sessions. the record rally has narrowed the gap to the msci asia-pacific index. japanesehe rally and stocks have hit highs, still lagging the msci asia index, but it is catching up now. softness and the dollar, snapping two days of gains. dollars doublehe top may be repeated in october. we can't talk about the dollar without talking about treasuries. shorts innet five-year futures hit a record. true of two-year
futures as well. finally taking a look at copper. we're seeing at spike, up more than 1%. this is a chart normalized from year ago. it is a standout performer against other metals in the london metals exchange in the past year. manus: investors are looking ahead to thursday stimulus update from the ecb, a decision from donald on the next fed chief, and that impacts the dollar. the 100 day moving average. anna: on the move. jeremy stretch is still with us. let's get his lots on where we go. where is the dollar heading? it is weaker. as we wait for news, president trump is very am a very close to deciding -- very, very close to deciding. on that timetable, we have a
week the have to wait. markets are speculating, but we should not forget it is not just the fed chair. stanley fischer now left. the vice chair and a couple of other seats available as well, so there is an enormous opportunity to reframe the federal reserve. he often puts people who compete with each other in various positions of authority. one interesting scenario could be he puts people with different and the verge and views at the top two positions in the fed. anna: and watch the sparks fly. a reality tvis show called the apprentice that sometimes reflects that. these are the bond markets we started the day with. net short position set a record. question is simple, are the
, is the bond market more prepared for an aggressive fed than the fx market? that is possibly true. the fx market is assuming that the trajectory of the fed will be similar in 2018 to the presumptions in 2017. as we stand at the moment, and the fed has a number of dots for nobody believes those scenarios will be playing out. more activist a fed in 2018, those curves will continue to flatten. that has implications for how the dollar will trade.
it is a milestone to remedy more than 500,000 u.s. vehicles. winning approval from u.s. and california regulators allows volkswagen to avoid dying back the vehicles under the terms of a court settlement reached in may. noble group falling on the back of its sale of its oil business and a profit warning. analysts say it faces the inevitable restructuring of $3 billion of debt. nobles bonds have rallied after it was announced sufficient proceeds would pay down debts. noble group did not respond for comment. global currency traders and compliance officers on high alert after and new york jury convicted a former hsbc executive of fraud for front running a large client order. the verdict is a victory for u.s. prosecutors in their attempt to hold individuals accountable.
faces a maximum sentence of 20 years in prison come although he is likely to get much less. goldmanank has hired sachs rothschild as advisors as it faces possible takeover bids. the financial times citing unidentified people is not necessarily repairing a defense strategy for any acquisition. representatives from commerzbank , goldman sachs, and rothschild declined to comment. anna: thank you very much. apologies earlier for our conversation. we will return to that shortly. let's get to an earnings interview. revenue atd quarter 5.8 7 billion year old's -- 5.8
7 billion euros. thank you for joining us this morning. you are a great canary for the world, so i will test you in the coal mines. are you seeing synchronized levels of growth? how strong is your business? >> if i'm the canary in the coal mine in europe, i'm breathing quite normally. europe is leading the way. i have seen a lot of double digit growth in europe. more than 14%e, growth. spain, 17%, italy 27%, so across-the-board strong numbers in europe, absolutely happy there. the american situation is quite
stable and has been stable throughout the year. we see growth, but not much. , acifically this quarter little under 1% because of the hurricanes. we are quite strong in the southeastern part of the country and we have 180 branches a few days because of that. they will bounce back. quite stable in the u.s.. anna: jeremy stretch sitting next to me describes the eurozone is beginning to percolate. what do you see for the wage picture in the eurozone at the moment? >> wages are not yet taking up. wages are directly connected to of salaries of the employees the companies, based on collective labor agreements. we don't see wages picking up as a result of tightening labor
markets. europe, this is not yet the case. unemployment levels in spain and france are still relatively high , but certainly in germany, northern belgium, netherlands, we do see scarcity not yet translating into wage growth. you said france needs a hero to reform the labor market and an urgency to do so is massive. one further quarter on. do you think emmanuel macron is proving to be the hero? >> that is a good one. a good quote on this one is maybe he is not transforming as much as should be done come up that he is transforming more than ever, so very happy. he does meet some resistance, but not too much.
is this knowledge throughout the country that france needs to move. that is very good to see. there is a level of optimism in the country which is helpful definitely. i think there will be a next wave of reforms coming in, social security. we will see if that pans out, but so far, so good. affect of is the brexit so far on your markets? are you seeing people in the united kingdom and europe starting to go back and that is changing the dynamics in the labor market? wait and see mode. we don't see any fx it in mainland europe because of brexit. affects in mainland europe because of brexit. it is definitely a sign of uncertainty. manus: thank you very much.
the ceo of randstad holdings joining us from amsterdam. he is not the canary in anyone's coal mine. anna: china's ruling come in his party has approved president xi jinping's name. manus: no leader sense mao zedong has managed to put his stamp on ideology before stepping down. tom mackenzie is in beijing. how will the leadership selection process unfold? this is quite a significant moment, isn't it? >> absolutely. chinese archaic part of communist party politicking, but an essential element is the enshrining of president xi socialismthoughts on with chinese characteristics in the new era.
it is significant. it suggests the party and china will go on beyond 2022, decades ahead. this puts them on the same level deng xiaoping and mao zedong. tomorrow willsk be to select the politburo, 25 people. then you get the standing committee, the apex of chinese power. seven men will be taking to the red carpet around 11:45 local time tomorrow. for,ple of things to watch one is the order they turn up on the carpet denoting their ranking. the other is are there any potential successors in the
standing committee. under the current norms of the chinese common his party, elite members are meant to step down when they get to 68. we will see if that changes tomorrow. anna: thank you very much. tom mackenzie in beijing. we will talk more about that heading to that key disclosure. a quick word on china. we have been watching this unfold. signals as to for who will take on leadership roles in the future. the pboc and the leadership this one question. are you expecting change>? does that have a material impact on the yuan? he is entrenched and is positioning himself for an
extension beyond the expected term. it is clearly a centralization process in that regard. we have been constructive on china, even with ongoing uncertainties affect inc. market sentiments -- affecting market sentiments. we are still on a steady growth path. there will be structural changes in the pboc. reorientation of the economy, but nothing that will change the trajectory materially. we see the growth trajectory moderating, but still in the confines of the official targets. manus: a bloomberg view column and refers back to the head of the pboc. the growth numbers are great. all roads lead to this 19th
party congress. his or anything in terms of the yuan, a new contract for energy futures being set out? it has this feeling that the seeing economic and political power growing. >> that is one of the flashpoints going forward. power enshrined in the south china sea, which could create regional flashpoints. we are seeing that reorientation away from manufactured exports trajectory that has driven china now reoriented in terms of the service sector. what are the headwinds? there are demographic issues relevant to china which isn't always reconciled by the market. of course there is this get thisn that we will
smooth, ongoing transition in terms of the political process. is most likely to happen, but there may be uncertainty along the way. anna: there was no labeling of currency manipulation in the chinese story, which is fascinating politically given where we have been over the last couple of years. we were talking about the dollar. there were certain places you were looking for strength, not against the euro,? but where , but where? >> where we are seeing deviations. abenomics will get another term. we see that perpetuation of easy monetary policy. it's a just should be supported. in canada, the market has been whipsawed the last 3-4 months, we get the monetary policy decision tomorrow.
think sterling still has political vulnerabilities. inn if the market is pricing the prospect of a hike from boe week,ly as next conditions are suggesting that is a risk. i think there are a number of jurisdictions where the dollar will make gains. it is not necessarily euro -dollar. it is the dollar against some other crosses. manus: on emerging-market currencies. john taylor selection is fed chair would have a significant market reaction for emerging markets. do you agree with that? is this with the biggest movement could be? fedf you have an aggressive trajectory, those with dollar liabilities will have those funding costs go up and raise the question about capital flows in those markets. looking or investing
in emerging markets, you have to be select the in looking for those that don't have structural impediments, whether political or significant financing requirements. that is the distinction in the emerging market space. if we are going to have an aggressive fed, we need to look specifically at the emerging market portfolio. of thehat reminds me kindness of strangers, what you said about emerging markets. the boe have does to mobilize in november if they want to hike rates, but don't want it to look like a policy misstep? article onading an the way in this morning who is arguing you have to make a judgment. by the time you are certain come you probably missed the moment of changing policy. that is the real problem. that is the problem for the bank of england.
we have political uncertainties, and economy that most likely will continue to be growing at sub-trend levels. we have an inflation issue just about to peak because of the sterling the fallen from last year about to roll out in the data. that is a rather large risk. i'm not sure the bank should be following through that. the associated downside risks are probably greater. i think the bank would be more prudent to say we are still talking about we are aware of the need to raise rates, but to use caution against the consumer sector over leveraging. manus: is he boxed in? has mark carney boxed himself in? >> you can argue yes. on any number of occasions threatened to raise rates only to fail to do so. we had that first iteration of
7%, now nearly 3% and we have not seen a rate hike. phrase seen that famous about being a reliable boyfriend. there is a credibility deficiency. he doesn't follow through in the market. ae question is not just committee of one. some dovish members have also been signing onto the presumption of needing to tighten policy, but there is a question about signaling and whether there is a necessary follow-through. will see what happens then? thank you very much. jeremy stretch with us. just getting these numbers through now. backward looking clues about what has been happening. boj considering
manus: xi elevated. the question is what does it mean for the world's second-largest economy. italy's finance minister warns of disposal of italy's nonperforming loans. gettingst be careful in the speed right and timing right. if we do it too -- [no audio] the swift transition deal with the eu. the cabinet meets today to discuss what britain wants from a future trade pact. getting the speed right and timing♪
manus: you are welcome to "daybreak: europe." it is our flagship morning show in the city of london, i am manus cranny. anna: we are getting some numbers coming through. a little bit of an update. uma saying they are coming in -- puma saying their cells are coming in. they are talking about some part of their business, a partnership with selena gomez. is what wouldon the driver be here?
the at leisure trend. [no audio] casual casual wear this at the jim, cafe -- at the gym, cafe -- [no audio] at the start of the trading day. manus: the big risk and that market was amazon, the possibility that might get involved in leisure where -- leisure wear. first-half revenue comes in at $6.7 billion. pence. dividend of 31.4 in terms of earnings, we
broke their earnings over the last hour and a reminder that we will speak to joe jimenez. [no audio] driven by the u.s. losing confidence in the strength of the rally we have seen. looking for more confirmation from the earnings story, whether they can fill higher. the asian session higher. manus: we have had a couple of individual names. the ranch that name -- the randstad name, bullish. it is all but the chemicals. that is going to chime in and we got a little bit of the pullback. it is reflected in the risk radar because the s&p had its biggest job -- this is how excited we get -- the biggest drop in seven weeks. we have managed to turn it around. ge has gone flat yesterday, the biggest one-day drop in six years. it is a big week for numbers. mica soft delivers the numbers -- microsoft delivers the
flash with ed ludlow. edward: china's ruling communist party has improved a revised charter that is added xi jinping 's name under its guiding principles. [no audio] stamps on the parties prevailing ideologies. spanish senators are due to drop test draw plans to use constitutional powers that removing carles puigdemont. -- separatist activists are fine-tuning plans for a human shield to stop authorities from gaining access to regional government buildings . in the u.k., theresa may's cabinet meets today as pressure mounts to agree on the kind of trade pact britain wants.
businesses called for an urgent agreement that would allow trade issues two years after leaving the bloc. the prime minister has fallen in line with the eu. such an agreement is an expected to be finalized until shortly before brexit day in march 2019. donald trump said he is very close to announcing his choice of fed chairman. said he is considering john taylor and -- [no audio] on november the third. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . manus: thank you very much. let's check in with markets with david ingles.
david: very good morning. i was about to say when you look xioss the markets with the obsession, it is down to the strong session out of the nikkei. emerged, thet has drop across hong kong. we are trading just below 170 about 10 or 15 minutes back. we are looking at a 100 point drop. and doesn't seem to be down at the moment. looks to be a broad-based selloff, 36 down, 12 up, two unchanged. i will try and figure this out for you and let you guys know later on when we have a better idea. that being said, the normal metrics, little bit higher. money market rates are down. have a look at some of the movers.
yousef gamal el-din. challenge.a we in europe must find new ways to combine the overall systemic a mention -- systemic european dimension with the local dimension. infamouso reshape our news to make that happen. yousef: what else can europe due to mitigate the risks of that? address some property? guest: there are some european challenges which require european responses, like migration, like security, like jobs. there are national jobs that many to integrate at a higher level policy. yousef: there's a lot more work than is to be done in order to slow down that trend?
for further autonomy? for further autonomy? [no audio] former institutions and make the more flexible. yousef: let's talk about the italian economy, growth projections for this year at 1.5%. is there a chance we could see more upside to that growth? guest: it could be stronger. there are outside risks this year and the coming two years. more youo by how much think the economy could grow? if all of the reforms were fully implemented and all of the resources were fully spent, we could go up to 2%. yousef: how would that translate into the country's debt and gdp ratio that has been falling? despite the likely rise in that climate?
guest: it will accelerate because of real growth. also because of phenomenal growth coming up a little bit -- also because of nominal growth coming up a little bit. yousef: the have spoken about some of the -- you have spoken about the ecb's reform. when it comes to supervision, the ecb going beyond its boundaries it could you clarify your position? guest: this was specific for the recent communication about the speed and timing and features of the program that needs to be npl's.nted to get rid of
it is npl's. it is vital, or else -- [no audio] mario draghi is to reduce asset purchases before killing it off in september. they also see draghi hiking for the first time since -- chris ralph. welcome to the show. the debate will be how much they might reduce quantitative easing . i want to understand the risk to markets if european central bank
reduces -- we have this piece this morning talking about global equities could be -- and twice that in 2019. as a result of the ecb reducing their purchases, would you agree with that? is the risk that big to markets? christopher: if they were to quantify that risk. u.s. when stimulus was beginning to be reduced, a friend of mine characterized that easing. if you remove that security blanket, obviously there are .isks to markets market seven very strong since the bottom of the crisis. if you remove stimulants of those markets, that might cause destabilization. months seen over many volatility in markets.
when we reach these turning points, these inflection points, we have to be careful. " abc quantitative cycling, can we see the removal of the sick quantitativee see cycling, can we see the removal? what we are seeing is a european economy that is behind where the u.s. has been in terms its longer-term recovery. [no audio]
in the different risk capital markets across the world. manus: we put this together and it is one of the pieces from blaze. it is about the pricing this of europe, when .6 in terms of pricing. -- 1.6 in terms of pricing. is europe pricey? or is it just in a different moment in time? chris: you've got to look at it in context of where europe has come from it if you go back to 2011 when we were going back -- come from. if you go back to 2011 when we were going through the crisis, we are seeing recovery from that and growth. your correspondent was talking to the finance minister of italy. italy was seeing -- was seen as one of the very weak markets.
what we are seeing is a reflection of a recovering european economy that is going to be good news for those investors. anna: rate the earnings season for us so far. you can go to the u.s. or stick in europe. we saw the u.s. market come up a little bit today and some of the fall behind that is they are waking -- they're waiting for another leg up before we can motor on from these levels. chris: that is always a challenge when markets have done well, you have an earnings season where expectations are high. a few companies start disappointing, you were talking about ge. to upset is going markets. the danger is we get half a dozen companies missing analysts forecasts. our markets have a setback.
mental it is 7:20 a.m. in london. let's give you a quick check on the markets. stoxx 50 around .8%. this is a hangover around from the s&p. the s&p dropped yesterday, general electric brought us back. anna: the market up by .2%. novartis reported earnings per share. the company reconfirmed its outlook for 2017. manus: joining us now is the ceo, joe jimenez. great to have you with us. this is good news as you go toward the end of your tenure, finally profitability has risen for the first time in almost three years. what went right for you in the what went right for you in the
quarter? [no audio] of new drugs that are firing on all sold thence, just on all cylinders -- on also wonders. cylinders. profit rose almost 20%. [no audio] it must be a very set -- uncertain time for people working profit rose almost 20%. there, not knowing where this business is going to hit -- going to head. if it achieves, we keep it. i appreciate it'll be somebody else's decision by 2019 but what is the current thinking? joe: what we announced is the strategic review is underway and progress,de a lot of
recasting the strategic progres, recasting the strategic plan -- [no audio] in the last couple of quarters, the business has turned and generating nice growth. at the same time, in the near term, it will benefit from continuing on that path. when i think about all of our about alcon associates, they're working very hard to return the business to sustaining growth. the review also said that if the business continues to perform well, a capital markets exit of that business where we created a separate standalone company would add considerable shareholder value. we have done things like looked at tax structuring, carbide financials, where we would incorporate -- carve out financials, where we would incorporate, a lot of work has gone into that.
we are on getting multiple quarters of sales growth and operating income growth so if we do decide on a spinoff of this business, alcon come to market from the position -- from a position of strength. manus: if you get a fair wind in the next ceo gets a fair wind, $25et -- the bandwidth is billion, given everything that , what isleveled out to getting it to $35 billion. where do we take that to? joe: a year ago when i talked about the 25 to 35, i was talking about in the medical devices sector, they are very few assets that are in that range. i didn't directly link it to a valuation on alcon.
because of scarcity of assets, it could be that shareholders swarm towards a business like this because of scarcity of assets in that size. if you look historically over medical devices that have been spun out, there has been shareholder value created because of that. as we continue to grow alcon under novartis, that value is only going to increase. that is because we are increasing our sales growth, we are increasing our margin and that is what we need to see. we did see multiple quarters of this business in teaming to perform well for we make a final decision. if we were to decide on capital markets, it would come to market from a position of strength and with a good valuation.
anna: on another subject, you talked about u.s. pricing pressures. [no audio] on our differentiated generics like my assemblers, things that are difficult to make, difficult to replicate that have some level of pressing insulation. you saw on the third quarter that we have been successful. we have only 30% of our business in the u.s., 70 percent is outside of the u.s. and that business is growing strong and doing well. santos was able to show --
guy: good morning. you are watching "bloomberg markets." this is the european open. i am guy johnson in london. matt miller is over in berlin. this is what we are watching, elevation. china's communist party elevates xi jinping to the same level as mao. announces its $1.5 billion by back. we are going to speak to patrick