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tv   Bloomberg Markets European Close  Bloomberg  December 4, 2017 11:00am-12:00pm EST

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and the u.k. want to move forward together and she reiterated what the president juncker said, we will meet before the end of the week. 14th by the eu summit, she says she's positive they will conclude this positively before that summit in 10 days time. let's cross over to nejra cehic. there is no deal today but there still seems to be hope there will be a deal in place by that big summit in 10 days time. : yes. a very short news conference from theresa may and jean-claude juncker. this comes after they had this meeting. lunch. whatever you would like to call it. we understand break was made
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during that lunch for theresa may to actually make a call to arlene foster of the dup. it began more than three hours ago. are.et here we an hour ago theresa may was meant to actually delete eu president donald tusk. we will have to wait and see what happens. of the lines. theresa may saying she's positive the talks will conclude positively. should -- saying she had a constructive meeting and they are confident they can get sufficient progress by the summit on december 14. juncker also saying it's going to require further discussion.
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we don't know what it was exactly was the stumbling block in these talks. my theory it was across two main areas. the irish border definitely been one of them but also possibly to do with the european court of justice. this was emerging as one of the more difficult points in the discussion. fromve a strong statement eileen foster of the dup. we were expecting also to hear irish issue and we haven't heard yet. perhaps it was the irish border that ultimately proved more difficult. mark: thank you, nejra cehic in brussels. the lunch that took place over three and a half hours, we will bring that to you on bloomberg
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television. we saw a big move in the pound on that tpc group toward that talks will not conclude with a positive outcome today. sterling is down by .1%. the mood today has been that tat positive because of the u.s. tax bill progress that we saw over the weekend but also because michel mep earlier. to juncker said and theresa may said there are going to be ongoing discussions this week. so many charts to show you. 6086.s it's a bitcoin chart. there are so many to show you. market making in bitcoin is proving to be no easy task.
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average three dollars 40 during weekday trading in october and november. that's twice the figure for one dollar 70 for gold over the same period. for all the talk of improving u.s. growth tax cuts and rate hikes traders are still reluctant to bet against the metal hedge funds and other a five-year low last week driven in part by looming geopolitical risk from north korea and the u.s. gold prices. they have shown signs of fatigue. is thisl chart today chart. palladium this year of my 50%. platinum of by 4%.
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since 2000 level one. citigroup sees the spread widening further in the first half of next year because of .ustained deficit palladium higher demand from gasoline vehicles where the medical is used in pollution control devices. julie: from precious metals to u.s. equities the divergence has widened. it has opened up for u.s. stocks as we continue to see the dow climbed. at record the s&p 500 gains have moderated and the nasdaq is now lower. this is something we talked about a little while ago that that rotation out of technology is not yet over even with all of the enthusiasm surrounding the tax cuts particularly the corporate tax cuts. take a look at the bloomberg for an even starker illustration of
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this. basically financials have widened their lead on the overall market. they are up as a group by 2%. industrials also gaining quite a bit and tech is this giant red slice of the pie. percent. continued rotation out of technology a really fascinating trend. one of the groups doing well today is retail. up 7.5% since is thanksgiving at a time when the etf that tracks the s&p 500 are up only a little more than 2%. performed really well here in the department stores. some of the initial numbers coming out showing traffic after cyber monday and also during the weekend in the malls have been better than estimated. we are also watching another area of consumer focus and that's restaurant chains. and analyst says we should see a
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sales and earnings per share benefits restaurants from the tax cuts. jack-in-the-box, sonic and wendy's doing well today. some of the changes that appeal to low income individuals in particular could benefit. quick check on the 10 year and the dollar on the bloomberg here. here's the trend. we have been seeing both of them trend higher. the dollar not as much and the 10 year yield certainly getting a lift. it's interesting to look at the longer-term perspective because it's a pretty low level. vonnie: time for the first word news. added anent trump has air of unpredictability to congressional negotiations on the tax cut. the house and senate have agreed to cut the corporate tax rate from 35% to 20% of the president says the rate could end up being
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22% when the final bill emerges a conference committee. ismoscow the kremlin downplaying the importance of talks between president's former national security adviser and the russian ambassador to the u.s.. russian ambassadors is a michael have's talks did not impact on sanctions. flynn has pleaded guilty to lying to the fbi about those discussions. the u.s. and south korea are defined north korea with wargames involving 230 aircraft and 12,000 troops. the five-day exercise began today. north korea is warning it will take merciless revenge. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. we will keep following brexit developments. no deal after the prime minister and jean-claude juncker had the
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big lunch. just made a statement saying no deal today. continue thisill week. we'll continue to tell you about this big day in brussels. this is bloomberg. ♪
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mark: live from bloomberg's european head workers -- headquarters in london, i'm mark barton. vonnie: in new york, i'm vonnie quinn. mark: let's talk about brexit. prime minister theresa may and european commissioner president jean-claude juncker have just said they haven't reached a deal today. progress is possible this month. joining us now to discuss how all of this could affect the kumars is come all three
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-- cobol three kumar -- come all sri-kumar. we have to wait another day. how are you feeling about the possibility of a breakthrough by this big summit on december the 14th? >> in terms of what is happening the path istalks going to be long and winding. earlier today we were talking about march 20 19th coming and going and not having anything decided by then. tohink the pound is going remain volatile. is as we go over
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the next year and a half you're probably going to see the terms more european union to get good terms for britain and they would want to. you are looking at a pound sterling significantly weaker than 89 british sense or looking the dollar.on mark: significantly weaker. to thoseing down october 2016/crash against the euro much lower dollar 118? dollar 15 is my expectation on the dollar pound exchange rate and as far as the pound sterling and euro are concerned
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parity is not too far away from 88 or 89 british pens and so you are looking at that going to -- one to one and beyond. those are some of the things i would look for over the next year-and-a-half and a half the matter what the good news is in the short term. vonnie: let's move to the net states. we have something that looks like it's going to become tax legislation. the things i would look for over the next what does it do to the economy? you have two questions there. on the first part i think the legislation is going to pass. i think it's going to pass because it is now left only with the house to reconcile the terms with the senate and you have a
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predominantly republican house in the speaker would want to make sure that there is the legislative victory clearly before the first year of the trump administration and i think you have some form of tax agreement. obviously many people haven't agreement theyax signed for early saturday morning so doesn't take much to pass tax legislation if you just want to pass something. that's the first part. the second part, what does it do in terms of the economy. i don't have high hopes it is going to stimulate economic growth. i have still been of the 2% level economic growth persisting and nothing makes me change my isd in the reason for that despite the euphoria that you see in the equity market today that two to 10 year yield spread on the treasury side has come down to 58 basis points. it is even lower right now than
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it was when the market began. and the 10 year treasury yield has an increased very much. the bond market is expressing significant skepticism compared with what you see in equity. vonnie: if we do get a tax plan that blows out the deficit what does that do to the bond markets? >> if it does blow it out i think the bond market is still able to take it because where else are you going to get to 30 or 240 return? you are not going to get it out of the eurozone. unless you're talking about competition from emerging-market debt the u.s. will be able to finance it. that's not the question. without a significant increase in yield. the issue really is going to be what does it do to economic growth. in terms of bond yield and deficit higher deficit still is going to be over a 10 year time period and the effect that would have on the bond yield is not going to be as significant as
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not having economic growth pickup or inflation pick up. vonnie: how do you model for the new tax regime we're going to have assuming something does pass? we don't know what the impact of at 22% corporate tax rate will past through new rate will be and the effect that will have on the consumer. how do you model for that? >> it is not going to be an easy model to get the results out. 20% to 22%ng to say corporate tax rate, how much lower is it compared with the effective rate that some of the largest corporations are paid so i think the benefit is going to terms become clearer how much the smaller companies are going to benefit in terms of a tax break. the larger companies are already to shelter income and they are not paid in 35% effective tax rate anyway. details are known we
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will be better able to model it than we would you today. mark: let's talk china. we are all keeping an eye on that 10 year yield in china 4%.h has gone above how closely are you watching this and what does it tell us about the state of the chinese economy and the outlook for chinese markets in 2018? for the tenure has been broken twice in recent weeks. heare same time what you is that the cpi inflation which is going to come out later this week is edging up. producer prices are getting higher and i think there is more short-term confidence on the chinese side note of the national people's congress is over. suggesting ist is that there is a lot of debt in china.
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higher yields are going to be difficult for some companies but i also think the government is going to allow some companies to default and you are going to have some form of shock in the short-term coming from the chinese bond market and that's the signal that you get from the 10 year yield going over 4%. mark: we've had chinese market in recent years. january has been a popular month. august of course a few years ago when we had the devaluation was a possible month. do you see chinese induced volatility in coming months? >> that's a great question. the augustd that 2015 stock market collapsed and the victim flow of capital in december 2015, january 2016 were occasioned by year and phenomena. every chinese
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citizen is allowed to take out 50,000 u.s. dollars per year and when you come to the end of the year you want to get your quota. when you come to the beginning of the new year you want to get first in line to get your money out. what has happened in 2017 is that we have very stringent controls on capital outflows and that is what cost the chinese yuan to actually appreciate in recent months. currently in the last few days according to bloomberg news we have had chinese authorities suggest that the so-called irrational capital outflows will not be so restricted as they were before. so my expectation is that china is becoming more lenient now that the national people's congress is over so that this december and coming january you may indeed see a click of an capital outflows that you didn't see year ago. vonnie: thank you, komal sri-kumar.
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still ahead, we've got the inside scoop on the brexit debate brewing at bank of out aa over building european trading hub in paris. this is bloomberg with nine minutes and two seconds until the european close. ♪
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mark: live from london, i'm mark barton with vonnie quinn in new york. this is the european close. six minutes and 39 seconds. vonnie: prime minister theresa may and jean-claude juncker of europe failed to get a breakthrough on brexit today. uncertainties looming for workers especially in the banking industry. laura keller has the inside
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story on bank of america's brexit planning. what have senior leaders been discussing? >> bank of america executives have an talking about these plans really coming from tom montag subordinates to push into paris really quickly from london. he is the coo has asked his deputies to give some numbers how many people could move from london to paris and some of the things that we found out, some of these plans call for 600 able to be moved to paris and other areas. on clement was floated was a thousand people being moved into paris. mark: why is it breaking with the other big banks choosing paris? the other big three are heading to germany. >> exactly. bank of america has chosen to break from these american rivals. jpmorgan, goldman sachs, citigroup.
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they see paris as a recruiting place. you have people who really want to be living in paris versus frankfurt a lot of the bankers don't find the culture to be as much in frankfurt. that's one area. when you think about it from an operational perspective bank of america wants to get out ahead. we've got this full operation running here so if you are able to figure out how many people you want to send ahead of time if wereally have to wait are going to lose these passporting rights from london eung into the other countries. vonnie: how are you going to deal with uncertainty over rules ? how are even internally that planning? >> bank of america's structure with cities is really unique. you don't see jpmorgan doing this.
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dublin is going to be the legal bank ofn entity for the america. then you've got paris as this trading hub or you will see most of the trading come out of. frankfurt is in the mix. you'll see additional bankers being sent there. maybe traders as well to continue the operations out there. i don't know that they have a country isf which going to accept how many new workers from london but that's really what's happening and they need to understand from the government where things are going in order to finalize those plans. vonnie: laura keller, banking reporter for bloomberg news you check her out. we are four minutes away from the close. this is bloomberg. ♪
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mark: live from london, this is the european close. session, the monday
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just one industry group lower today. it's the year today best performer on the stoxx 600 but it has lagged in the last week. construction, travel and leisure. industrial goods. rose as much as 1.3%. august gains since july. there was optimism we would see some sort of breakthrough in and eu ineen the u.k. brussels. we showed you the joint statement from jean-claude juncker and theresa may. the talks will resume this week in the hope is there will be some sort of compromise and agreement by that big in you summit. this is the intraday sterling chart. todayve up in sterling that of the failed announcement. there was a hope there would be some sort of breakthrough today. the --barnier spoke to
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spoke to mep's earlier suggesting a breakthrough was possible. as soon as we learned no breakthrough would happen today sterling fell. fell as low as .5%. the market is already positioned even if we get some sort of deal in the talks because that's one side of the equation. the other side is the fed will they height rakes in december. he says that's priced in as well. its biggestting gain since mid-october last week amid the falling dollar and expectations we would see some sort of deal. let's talk about china. for bankingcator stress in china falling for a 5th street quarter signaling the leadership's drive to squeeze risks from the financials stem is making progress. china's credit to gdp gap declined to 18.9% in the second quarter from 22.1% in the first
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three months of the year. of 28 .8%. high baltic dry index. ofit's a wonderful gauge of gll trade. moved byodities are seeing and the shipping news shows firm demand out of china. the biggest importer of raw materials. the baltic dry index rising to since januaryvel 2014 after a 12% surge last week. how's it looking over their? vonnie: it could be a choppy week of trading in december. we have the jobs report on friday. economic data coming back into the forefront as well as tax and whatever reconciliation and conference committee language they come up with. a lot of things bouncing in ranges including the 10 year
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back and 210 spread is 58 basis points and dollar-yen is at 112 and 73. i thought i would point out nymex crude seems to be finding a little bit of a breathing point at 57, 61 or thereabouts. let's get to our global macro movers. andt of them are in europe europe is all higher. it looks like europe was betting there would be some kind of breakthrough on brexit. the dup in the south of ireland have a big moral and philosophical difference that they just can't seem to reconcile making this deal with europe and again began moving as well. that -- let's get back to brexit. unexpected breakthrough failing
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to materialize today. jean-claude juncker broke the news to report is a little earlier. efforts andur best the significant progress we and our teams have made over the past days on core issues it was not possible to reach a complete agreement today. joining us now for more details, bloombergs nejra cehic. it seems as if the irish border issue remains the stumbling block. that does seem to be the case. this lunch started around 1:30 p.m. in time. at one point theresa may actually broke away from the lunch to call the dup's arlene foster. seems that it was after that
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call that the talks were supposed to resume but ultimately what happened was we got a news conference from theresa may and jean-claude juncker saying there would be no brexit deal today. he stressed this is not a failure. that this is the start of the last round and that there is expected to be some sufficient progress. is a phrase that comes up a lot in brussels. sufficient progress by the time we get the eu leaders summit on december 14. theresa may and jean-claude juncker will continue talking this week. it does seem that at this point in time it was mostly the issue of the irish border that put an end to any possible breakthrough. vonnie: how do we avoid a rinse and repeat constantly because the dup wants northern ireland to leave with the u.k., leaving europe. same terms.
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happens, that's not acceptable to the rest of ireland because there would have to be some kind of physical border. it's the key question and i'm afraid it's one i don't have a definitive answer to. it seems theresa may and jean-claude juncker don't have an answer right now. borderue off the irish is the republican of ireland under no circumstances wants that hard quarter. that is been avoided with the u.k. being a member of the customs market. there needs to be some sort of physical border between the eu and the u.k. the dup is very focused. they want the same terms as the u.k. and they are less focused on the hard quarter. for them it's much more the issue of being fully integrated with the rest of the u.k.. how you square that circle is the real difficulty here.
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we were getting some hints earlier from the irish foreign that perhaps they were coming close to some sort of progress on the wording of this irish border deal but it seems that more time at the very least is needed. nejra cehic in brussels. let's turn to our guest, senior fellow at the peterson institute for international economics. he joins us from washington. thanks for joining us. ejraprobably heard n speak. how do you square the circle that this is the irish border issue? >> i think there are several opportunities but none of them are politically very easy because clearly what happened today is an indication of the political weakness of theresa may. u.k. prime minister in the middle of an international negotiation having to break off to call the leader
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of an obscure northern irish party in upper government. this is where we are. there are ways to do it because if you take the dup line which is that northern ireland leaves the you can -- the eu on the same terms as the rest of the u.k. been theresa may has only one option which is to acknowledge that a hard brexit ands a hard border therefore the brexiteers have to acknowledge political rust spots ability for potentially destabilizing the good friday peace accord. alternatively if you take the view that you leave the u.k. with regulatory convergence for northern ireland remaining with the eu than the other solution is that the same applies for the rest of the u.k. so that you end up with a very soft brexit that really looks a bit like norway. think it's telling that we've already heard from the
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scottish government, the welsh government and the city of london mayor saying if northern ireland gets a special deal, we want that, too. even have the details. putting the irish border aside we still don't know what the brexit bill is. we still don't know what sort of authority the european court of justice is. theresa may or whoever when they unveiled this we are going to have the domestic reaction and there could be a big backlash couldn't there? >> absolutely. we have seen this time and again. brussels orgoes to other prime ministers before her goes to brussels. try to get a deal with the eu that keeps the u.k. economy on the front burner and then this is really what it's about. as she have the political capital to stare down her own
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tory backbenchers and the dup over this issue? i don't think we know that as of right now but hopefully we'll get some clarity in the next couple of weeks. i don't think we should rule out the possibility that the dup actually walks away from the government which of course could lead to a further political destabilization of the u.k. awaye: the dup can't walk from the government or becomes a lot more likely that northern fromnd doesn't walk away europe along with the u.k. and the dup will never let that happen so this is a real catch-22 situation. of the scenarios that you painted i don't see either of them happening given the history of both countries. do you really see one of those possibilities happening? mean, i fail to see what other alternatives we have. if you have said
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regulatory divergence or continued alignment or whatever wording you choose to call it on northern ireland you're going to create regulatory if not physical borders between northern ireland and the rest of the u.k. and i just don't see the dup accepting that. but maybe they will. maybe they will take a bribe. the leaves basically opportunities that either everybody does hard brexit together which leaves a hard border or everybody in the u.k. does soft brexit together which de facto looks a bit like norway to me. vonnie: the other news that we got today that would be bigger is that mario sent to know is going to take over as euro growth leader.
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over come to take january. this was a particularly important appointment for europe right? -- how europe progresses both politically and philosophically in its mission. >> the issue here is that the euro group is going to be a somewhat different body in operation in the coming years than it was during the crisis is because the of course not the cute anymore. what we are really dealing with here is a man who can oversee what would be very tough negotiations about further integration and institutional reform of the euro group rather than a bailout of individual countries and therefore i think mr. santino who is a committed european integrationist that
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obviously comes from a centerleft or left-wing government is an important signal for europe is heading in this regard and i think from those people like myself who would like to see more reform and integration in the euro area that is really good news about his appointment. given we don't yet have a properly functioning german government are we getting ahead of ourselves talking about reforming the single currency and pushing ahead with these grand reforms of the european project? >> in my opinion, no. if you look at the vast majority irrespective of the final governing constellation, i think the reality is that whether it's a minority government supported d there is a very
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significant majority for more integration. in the euro area. we may have to wait a couple toe months for a government be found in germany. we may even have to have a new election. ultimately is it going to change the bigger picture which is that in germany you have a political for asus for the need constructive response to emmanuel macron's proposals from france? i don't think so and therefore i continue to believe that the are a good window of opportunity for beginning the process of more and deeper reform of the euro area. vonnie: thank you. jacob is senior fellow at the peterson institute for international economics. let's check in on the first word news. republicansl hill
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will try to hash out the differences between the house and senate versions of the text. each bill calls for the corporate tax rate to be slashed. president trump has endorsed republican senate candidate roy moore. he has been accused of raping multiple underage girls. the president tweeted out refusal to lose even one vote for tax cuts. yemen, a new turn it in the civil war. rebels have killed their longtime ally, former yemeni president. more thanemen for three decades before being ousted in 2011 during the arab spring uprising. rebels have been fighting for the past week. hollywood is calling singapore a haven for pirating copyrighted programming. according to the coalition against piracy viewers in
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by boxes that allow unauthorized streaming of movies, tv shows and left for its events. the group wants singapore's government to block the pirating software inside the boxes. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. breaking news. we have the irish prime minister. atis going to make a speech 1215 eastern. it will be a fascinating one to watch out for. we still don't have details on how to move this border issue forward. theresa may and jean-claude juncker giving a joint press conference. a short statement on each side saying they hadn't come to any final arrangement and there would be more talks later on. we know that arlene foster had a hand in it because theresa may made a conversation phone call
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to foster during the meeting. it's quite simple. from his standpoint you have a soft border between northern ireland, republic of ireland. you have some kind of regulatory convergence. convergence means regulatory divergence between northern ireland and the u.k. and you got the other issue. the convergence between northern ireland and the republic means the likes of scotland and even denton -- london are going to be asking for similar arrangements. we already heard from the mayor of london and the leader in scotland calling for such measures. theresa may has a lot on her plate. more from us. this is bloomberg. ♪
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mark: live from bloomberg's european headquarters in london, i mark barton. vonnie quinn i'm vonnie quinn in new york. this is the european close on bloomberg markets. disney leading the charge. abigail doolittle is here to break it all down. obviously this has to do with m&a. abigail: we have a big rally in the media space today. take a look at disney, comcast, verizon. 21st century fox all trading higher. disney really leading the way and there is it renewed discussion between disney and 21st century fox for disney to perhaps by some of those fox assets. under discussion most likely would be sky assets over in london. this would give disney both content and distribution. if the murdochs do sell it could be a seminal moment in the media space fighting against the negative trends we have had.
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it will help fox in terms of underperforming aspects. of course we have that at&t and time warner block from the doj. if there is some dealmaking in that space that could commence apply. there has been banter that they could be interested in some of these. they could make a decision by the end of the year. vonnie: abigail doolittle with our stock of the hour. thank you. mark: coming up, battle of the charts. dethrone momentum stocks daca this is bloomberg. ♪
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vonnie: it is time for our
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global battle of the chart. for investors you can access the charts on the bloomberg by running the function featured at the bottom of your screen. offre kicking things christine. out theoing to bring gifts because it's my first time here and i'm going to be talking about it going. it has had this wild ride this year in my chart explains a little bit wide. i'm looking at the sprints at which people are willing to buy in thel an asset narrower it is the easier it is to make transactions. a more established commodity and as you can see not only is bitcoin spread wider than gold, in october and november during weekday trading days it also exceeded the average a lot more.
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just 10 times for gold. if you want to find out more about this move, keep track of it, make sure you download this chart. i want to see what you've got to be that, mark barton. mark: this is where got to be rude. butll be nice for today next time the gloves are off. i want to talk about momentum. alexanderthis goes to who often appears on botc. momentum stocks have been all the rage in 2017 which this chart shows very clearly. chart momentum index heading for its biggest yearly gain since 1999. the top portion is the european climbing about four times as in percentageear terms. morgan stanley and jpmorgan predicting the trade could be
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stretch and it comes at a time when you will see last week. managersends that fund take a more defensive approach to tax reform by buying near-term for you and -- protection. vonnie: you both performed extraordinarily well. i'm afraid the winner today is the london set. because it was absolutely beautiful and sat there silently and performed better than both. we will hear from larry summers at 1:30 eastern. don't miss it. this is bloomberg. ♪
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>> it's noon in new york. i'm bonnie and. >> welcome to "bloomberg markets."
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>> from bloomberg world headquarters in new york city, here are the top stories on the bloomberg that we are following. anddollar is strengthening most stocks rallying after the progress on the gop tax plan. both chambers will move to reconcile their differences as president trump hints he might be flexible on the corporate rate. a mega deal that might reshape the health industry. cvs is said to be buying aetna for $64 billion. that is in today's deals report. will bitcoin be the next big short? by some investors are saying the crypto currency will be the next great short opportunity. more details this hour. julie hyman

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