tv Bloomberg Daybreak Europe Bloomberg November 9, 2018 1:00am-2:30am EST
anna: good morning. these are today's top stories. inching forward. the fed holds in november, studying the course for a rate hike next month. the dollar rises as there are forecasts for gradual increase. oil enters the bear market. wti crude heads for its longest losing streak since 2009 after 10 straight days of declines. opec and its allies meet this weekend. the foundations of a scandal. helped form ties with malaysia's former prime minister in 2009, several years
before goldman sachs had its scandal. ♪ anna: there he good morning. is 6:01 here in london. breaking news coming through across the bloomberg this morning. let's get to those numbers. we have a beat for the operating profit level from allianz. of 2.86.te they see therefore your operating profit at 11.6. the outlook for the operating profit, unchanged. they're giving us a combined ratio that looks better than expected at 93.1%. the estimate was 94.4%. that's a good number on that metric. the revenue number looks to be ahead of estimates.
the outlook seems to be unchanged. always the focus is with inflows and outflows. of 50party net inflows billion euros. and outflows into pimco and allianz global investors, always part of what we have to look on. we are looking out for any updates on hurricane michael. m&a very topical. will beof allianz joining us later on in this program at 7:00 a.m. london time. let's get to other breaking news this morning. the swiss luxury sector. regional first-half operating profit, 1.1 3 billion. that's below 1.3 billion that analysts had penciled in for the estimate. they are talking about the sales numbers for the first half. 6.81, a little light.
the operating margin also light. 16.6%. numberst-half sales looks to be in line. we will dig into that more. broadly, the operating profit number a little bit lighter than expected. necklaces, those are the areas of focus for the markets. however they doing selling those? we are watching for the recovery in the timepieces business. that has been a headache for them. to what extent they will be able to rally in that area. they have been making strides. let's have a talk about what's going on in the broader equity markets and other asset classes. this is a victory in asia. msci down by 1.1%. the fed has been the big story overnight. in the face of market turbulence and criticism from president trump, the fed sets a course for
structural -- gradual rate hikes, as we had expected. interesting to see that. asia financials also taking a hit. new surrounding beijing and quotas for the private sector, that's interesting. energy stocks moving lower on the back of nymex, in a bear market. nymex at 63. $60 per barrel level. falling 20% from its highs. , to underline where we might go from here in the aftermath of the fed story. let's check out the broader story around asian markets, juliette saly has that for us from singapore. reporter: it is a day in the red for the regional index, being led by these losses in hong kong and mainland china. mainland chinese equities seems to have missed out.
they have been in the red every day so far this year. it is unprecedented move that we heard from authorities to set limits on what chinese banks can lend to the struggling financial private sector is weighing on investor sentiment. it is off by 2.5% on the trade. 200 also in the red, although not hit as hard as japan and china markets today. in terms of stocks we have been watching, chinese automakers in focus today. car sales slid for the fifth straight month. off by over 2% in hong kong. we are watching a lot of these tech players, especially in taipei. it's after that bendable phone from singsong, who is going to make that technology? they have targeted this country -- company.
in australia, falling the most since 1987. it's given a figure to the market for its engineering provision of $250 million. that is after it saw its -- review of its overall business. investors not liking that. anna? anna: thank you. a bendable phone. thank you very much. let's get bloomberg first word news updates from hong kong. for its: oil is set longest stretch of decline on record after entering a bear market. investors are awaiting a weekend meeting of opec and its allies. new york is slipping for a 10th day. slump has been exacerbated by a u.s. decision to allow eight company -- countries to continue importing from iran.
the owner of ireland's stock exchange euronet favors moving the settlement of irish shares after brexit. ireland currently relies on the u.k.-based firm to settle trade. clear, once euro the u.k. leaves europe's single market, it will not be able to continue providing that service. factory inflation in china slows for a fourth month while consumer prices steady amid sluggish demand. making life easier for the central bank as they work to ease spending conditions. world's second-largest economy and rose 3.3%. the consumer price index rose 2.5%, signaling earlier inflation pressure coming from flooding have now eased.
sayseo of bank of america brexit is not good for europe. he also estimated what the lender had spent preparing for the change. proposing barring immigrants who illegally cross the border from mexico from being granted asylum. the acting attorney general and homeland security secretary say the current system is overwhelmed. the president has blamed u.s. asylum rules for luring thousands of migrants per year from central american countries. official says trump plans to issue a proclamation later today. face strict new limits in the u.s., restricting sales of many popular fruit flavors among an epidemic of youth use. according to a senior official at the fda, sales of flavored e-cigarettes will be limited to adults only establishments, such
as vaping stores. the regulation could be announced next week and would take effect in the coming up. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists in more than 120 countries. anna? anna: thank you very much. story, the fed has left rates unchanged at its latest meeting. price has priced in a 74% chance of a hike in december. the central bank said economic activity has been rising at a strong rate and job gains have been strong. the foc stated that it's outlook remains one of gradual rate hikes. the dollar gained after the decision. at kevins now, the cio stock investments. europeanropean head of
research at mufg. good morning to both of you. as i make of -- a mess of reading the introduction. the message is an interesting one. very little changed yesterday. that itself is quite interesting. the things the fed chose not to talk about. very interesting. we showed some comments by one of our colleagues who writes for bloomberg, talking about all the things that the fed did not mention. october market turmoil. weakness in u.s. housing. oil prices going lower. where the dollar has been. did mention any of that. perhaps this looks farther away than what we expected. >> i think it was too early to expect. the list you have shown, most of that is market conditions. october was a pretty bad month for the financial market conditions. the key macro drivers in terms of the fed's mandates, those
elements were still pretty strong. at this point in time, there wasn't must -- much justification for a signal to the market that they were unsure of the direction. nest --ed some unnecessary volatility. view, there are some elements on the macro side that are beginning to show the potential signs of some slowdowns. going forward from here, the , weth we have had in q2, q3 are going to get slow down from there. obviously, things did continue. december might be the time, or next year, for a change in direction. anna: do you think we are looking for hints in the months that come from the fed as to the future? anything changed in your mind to
influence the feds trajectory? >> probably yes. the data is getting stronger, not weaker. the latest set of employment numbers were seller. -- stellar. the earnings that have been reported are still coming in above consensus forecast. i don't see any evidence so far of any perceived slowdown. the fed communication yesterday was consistent with powell's signature of saying less but giving clear guidance to where the fed is leaning. the fed is leaning towards gradual rate increases and there's no change to that. the underlying fundamentals are getting stronger. economists are saying, it will change. inevitably, there will be a recession. there's no sign in the data that i see of a recession. anna: do we have a different view than?
this is the u.s. quick rate. does to wagey inflation. schwab putting this together and suggesting, we have seen the jolt rate running ahead of the wage growth numbers. that suggests that these wages, already 3.1%, go higher from here. how does that fit with you if you are also seeing weakness? >> let's not to base the labor market. the labor market is booming. anna: we are on the same page on that one. >> absolutely. isne are elements like the new orders index, that is at the weakest level since late 2015. that was the last soft patch in real gdp that we had where growth was 0.4%. i'm not suggesting we are going down to those levels. i'm suggesting we are going into a time of slower growth than where we were over the last two quarters.
in terms of interest rates going higher, where is the traction going to be first seen in the macroeconomic data? it's not going to be in interest-rate sensitive sectors. one sector where there is weakness relative to the rest of the economy, the housing market. in the key housing data most recent series of economic data is were all on the weaker side of the spectrum. that shows a deceleration from recent rates. anna: is it the housing data world you would look to see any signs of rudeness -- weakness, chris? or is it corporate debt? size the bond market, the of the u.s. treasury deficit is a concern. that is exaggerated by the size of the corporate bond market, which has ballooned since 2008. it stepped in to provide the financing but the banks were previously providing. when i look at the u.s., the biggest danger is the unwinding
of qe and what that does to the clearing market yield for government security. the fact is, the treasury is going to be issuing over $1 trillion, that will be a concern if the demand for u.s. investment in fixed income starts to diminish. anna: we will see if the midterms have any impact on the amount of funding needed. thank you both very much. both staying with us this morning. for a recordl set losing streak after it enters a bear market. opec and allies meet on sunday to discuss output strategy. minutes will be speaking to the uae energy mr. -- minister and russia's energy minister. that is all to come early next week on bloomberg tv. if you're traveling to work and need to catch up on bloomberg tv, put on bloomberg radio.
anna: good morning. 6:19 this friday morning. let's have a look at how we are this morning. this is the asia-pacific equity session. it is negative. down by over 1%. asia financials taking a hit. beijing setting quotas, shaking things up there. energy stocks weaker. the csi 300 down by 1.4%. the yuan holding on to weakness amid this post midterm concern around trade tensions. let's have a look at where we are on the wheel price. unchanged this morning.
6067 is the wti price right now. the u.s. dollar is stronger this morning. in the wake of the fed's meeting and setting a course of city rate hikes ahead, as it suggest a little bit sluggish. nothing huge at the start of the u.s. trading day. let's get a bloomberg business flash from hong kong. board of telecom's directors is set to of approved a nonbinding offer for nextel of brazil. a bit could help shore up the italian companies position in the brazilian market. competition has kept prices low. telecom italia says it has abandoned a debt target. it comes to terms with growing competitive threats. jumped in late trade after fourth-quarter sales and earnings beat analyst projections.
fueled by movies and theme parks. business has continued to grow as the ceo tries to steer his largest division towards a new future built around streaming. he says they are still waiting on some approvals for the $71 billion purchase of 21 century fox's assets. >> we are still going through the regulatory process. a lot of progress has been made there. we announced a couple of days ago that we got approval in the eu, that was a begin for us. there are still some markets, countries that we are waiting for approval on. we are in the middle of that process. in june, we said it could take as long as 12 months to close. we are increasingly more optimistic that it will occur before that, but we are not saying specifically win. reporter: volvo has been forced to shake up production strategy to sidestep auto tariffs. it has canceled hands -- plans to export vans from america to
china. it will halt imports of an suv from the mainland. shipments of the bigger as 90 sedan from china to the u.s. will be giant -- dramatically reduced. the pivot comes months after volvo opened its first american plant in south carolina. that's your bloomberg business flash. anna: thank you. here's a look at what you need to be looking out for today. the u.k. prime minister is attending world war i commemorations in belgium and france. she is expected to discuss brexit with the french prime minister. euro group president meets with italy's finance minister in rome , that comes ahead of next week's deadline for italy to revise its budget. ongoing questions to how far the european commission will actually go in punishing italy, should it deem it necessary.
sunday, ministers from opec in its ad -- and its allies will meet to discuss scenarios. meeting comes as wti crude officially entered bear market territory as oil looks to break a 10 date losing streak. mliv,asking on our mli -- this is a question. what oil price would hurt credit and equity markets? you can join in the debates by reaching out to us at bloomberg tv and mliv team. cio -- our guests are still with us. what point you see pain inflicted on other asset classes? is this something that will spread? >> the u.s. high-yield market will come under a bit of pressure because it has a large
percentage of issuance in the energy space. , if they wereces to be extended, will hurt that market. that's one of the more talked about or vulnerable parts of the fixed income market. off with aly sold rise in u.s. treasuries. that is where i would be more concerned with the prolonged fall in the price of oil. anna: when does the start to spread? one of our colleagues writing, maybe it is only when oil companies start to cut back on capital expenditure. the new start to see the spreading and other assets. >> back to the last part -- price crash, it was the emerging markets that saw significant hits in those areas, where production is high. it's hard to put a figure on it. being a bear market will catch the attention of the markets.
that would start to filter through into starting to hit emerging markets and become more of an issue for volatility going forward. anna: i will put up a chart that shows what we have seen in oil prices. you mentioned u.s. high-yield. others might suggest, the fed has been hiking interest rates, but rates are still pretty low by historical standards. until they get higher, do we see any pain in that? we spoke to a guest that was suggesting that u.s. high yields , you get quite a good return. >> i think the overall high-yield market does provide a buffer from rising treasury yields. we are looking at a percentage of an industry that has a lot of
issuance. it's the energy sector that stands out. i would be -- it could be the catalyst that takes a high-yield market over the cliff that people have been talking about. anna: derek? >> you have to talk about the level of yields, which is important. when you look back at cycles, historically, it is the rate of change which is important as well. if you look back at every downturn over the last four recessions, on average your 10 year yield jumped by around 250 basis points from the previous cyclical low. that has brought about the next recession time. that's over the last four recessions. 1995, there wasn't a recession. we are at 200 basis points. anna: thank you. both staying with us as we talk stock investments. theresa may repeats no border in
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see the grinch in theaters by saying "get grinch tickets" into your xfinity x1 voice remote. a guy just dropped this off. he-he-he-he. anna: good morning. not quite daybreak here in europe. underway forssion asian equity markets a day after the fed said its course for further interest rate hikes. -- itg changed, the set gave the market something to think about it let's check out these broad market moves across the world. joining us now, our partner in you buy. -- the by. relatively resilient, indian markets. fell, that ise
helping sentiment there. >> in the case of the indian market, crude prices falling down triggers or spite. india is doing better. the bank index doing ok. , the currency has strengthened. the rupee strengthened credit -- quite a bit. if you take a closer look at what is happening, everything that benefits from crude oil price falls. oil marketing companies are doing well for themselves. what are doing well are the ones who don't benefit because of the appreciation of the crude price. the i.t. companies taking a bit of a beating. i think we are doing well for ourselves. anna: thank you very much. danny, when you looking at this morning? >> gains for the asia-pacific interest -- index for the
weekend been undone. the pain in eight shares. china into price index. we have seen this play out before. is yet again this dead cat bounce. these gains are false flags. each low is another lower low. energy leading the way down. we are entering a bear market with oil. check out in blue what energy shares have done. they are leading the market lower. we look at chinese equities today and the bear market, energy is the lowest followed by tech. some concern. it is adding to that 4.3 trillion in market value that has already been wiped out. question,alls into chinese link companies in the u.s. outperforming. they are in the white. s&p 500 and the blue. look at what happened since november. they have taken off versus the s&p 500. this is their biggest rally
since 2011. with chinese equities declining today in the congressional gridlock will not be that safe haven for trade that some have chosen, this might reverse. anna: thank you very much. marketsst on the indian . today, we are asking a question of the day on the mliv blog. we talked about oil prices a little bit with our guest. what oil price would hurt credit and equity markets? you can join the debate and reach out to was on the mliv team and here on bloomberg tv using the function on your bloomberg. we had a question in from a viewer, which i will put to our guests here. pricese u.s. control oil because a control several million ballots -- barrels of swing iran supplies?
lan on this. i was going to ask you about the role of the united states of weaker oil prices. the role of the u.s. has changed so much in the oil industry since the last time we saw a selloff in oil prices, hasn't it? any thoughts on the relationship between u.s. foreign-policy and oil. it isterms of a producer, a way bigger player now. that has significant implications. expectationso the of trumps influence on saudi arabia, for example, which seems to have changed expectations in terms of the supply outlook of the short term. the is one of the reasons for the correctional error. yeah. the fact that it is president trump and the market, he will do
whatever it takes kind of thing. he's not afraid to be undiplomatic about getting what he wants. perhaps the markets are more sensitive of his policy influence than previous presidents. anna: the world of trump in oil markets. that's something that helps you describe it is one of your best-performing asset classes over this year. are you remaining coughlan -- confident? >> yes. i see global growth still trending above the 3.5% level. we are still trading at 3.5%. anna: not because president trump controls the iranian supply? >> it depends which way you are on the royal trade. we got oil prices are good for the countries that import oil. it's good for japan and china. there are winners and losers. it's a transfer away from the middle east, away from the u.s.. in terms of the global footprint , weaker oil prices are better
for the global economy. anna: thank you very much for both of you. we will be back with them shortly. let's get the bloomberg first word news update. as predicted by economists, the fed stood still in its meeting of 2018. it remains on course to hike next month. u.s. economic activity rising at a strong rate. as the labor market continues to firm. for furtherlan gradual rate increases in the coming months. say risks to the outlook seem roughly balanced. factory inflation in china slows for a fourth month while consumer prices steady amid sluggish demand, making life easier for the central bank as it works to ease funding conditions. 3.3% in prices rose october from a year earlier. that is matching the forecast.
roseonsumer price index 2.5%, signaling earlier inflation pressure stemming from lyme disease and flooding has now eased. is proposing buying immigrants who illegally cross the border from mexico from being granted asylum. the acting attorney general and homeland security secretary say the current system is overwhelmed. the president has blamed the u.s. asylum rules for luring thousands of migrants a year from central american countries. an official says trump plans to issue at proclamation later today. this is bloomberg. anna: thank you very much. let's talk about brexit now. with the you can ministers on standby for a special cabinet meeting within days, they are expected to meet with the eu council to publish the full
withdrawal agreements on tuesday to get irish border remains a point of contention. expectations, are they no deal? physics expectations are ramping up with bank of america spending $400 million preparing for a hard brexit. cio atith us on set, the an investment form and mufg. i have a chart that shows the pound against the dollar. , theshows euro-dollar pound against the dollar, and euro pound. euro pound in the top in yellow. the divergence happening back in 2016. the pound has been rallying as of late on expectations that a deal will be done. you said something interesting ahead of this conversation. do mean we could see it as early
as today? >> it is looking like next week. there's a deal on the table. in relation to the timing and trigger of the ending of the backstop, it appears that something can be done. in that sense, a cabinet meeting over the weekend is apparently possible. certainly i think, in terms of trading today, market participants will be very mindful of the potential of a development evolving over the weekend. becca be significant in the early part of next week. saying soan stanley the pound. how much upside to the pound against the euro or the dollar? how much upside with their be if we get a deal? at that point, you don't just price in a brexit deal. you brazen what the bank of england has been saying what they will do if there is a smooth brexit.
>> we have been rallying. eurorms of playing this, could be more sensible. the dollar is very strong at the moment. if you are looking at it at a good potential trade with the italian risk hanging over the markets in europe, eurosterling could be the way to play this. in terms of next week, let's say a deal is announced. you are going to get a bounce in the plans. then come parliamentary hurdles be on that. what is important on monday morning, if there's an and,ation of broad support maybe you get one or two resignations. resignations,o that would be a strong indication of parliamentary numbers being there to get it through parliament. would be very significant first thing on monday morning for this to be a good trade.
anna: that's interesting. >> without that, parliamentary will -- uncertainty will linger. anna: there has been a lot of news flow generated around realizations around the reliance links,u.k. on the food which i won't deviate into too much. >> they didn't realize the importance. they don't spend as much time in the supermarket as i do. , itave this great chart shows the political difficulty in getting this through parliament. it adds of the different factions of parliament. that is what will be crucial on monday. if there is some kind of cabinet agreement, translating that into getting it through parliament. >> i think she will get it through parliament because her don'tvative components
fear a bad brexit deal. she will get a deal through the parliament. it may be fraught. she will get something through. sterling versus the dollar goes back to the original brexit vote. it goes back up to the high one 40's. maybe a better way to play it is versus the euro because of the italian situation. fx risk decision in global over the next two weeks is the pound. that's the big risk trade. if you have a big short position versus the euro or dollar, this could go a long way against you. anna: is the market still short on the pound? we see increasing calls about sorting the euro versus the pound on expectation that this is coming. surely the market has been cap -- catching up with his thinking. >> the market looks very well protected in the option space. that is where protection lies.
if you look at speculative positioning, it is close to control. because of such a binary situation in terms of the spread speculationte for when you're at this key moment is not particularly high. there's plenty of time to get into the trade once we have the developments. that means the speculative positioning is not specific at the moment. anna: thank you both so much. very interesting conversation. christopher will be continuing his conversation at 7:30 a.m. u.k. time on bloomberg radio. you can switch over to that should you wish. coming up on bloomberg tv, disney's new kingdom is all about streaming. can the ceo untangled it's fox
anna: good morning. 6:47 here in london. let's check out what is trending across the bloomberg universe. record number of women have been elected to the house of representatives with a number of firsts. there are now two muslim women and two native american women in the house for the first time ever. alibaba is looking beyond borders to turn it single day shopping celebration into a global phenomenon. at least to spread it across other parts of asia.
the ceo of bank of america says he has been $400 million preparing for a potential hard brexit. china bank stocks drop after regulators set targets for private loans. that having an impact on equity markets in asia. goldman sachs is said to have attended one and pb meeting back in 2009. us get more on that stories -- story. forge ties with malaysia and its new sovereign wealth fund. whether they spoke is unclear. the new ceo told us on wednesday that he regrets the company's involvement with why am to be. distressing to see two former goldman sachs employees going so bluntly around our policies and breaking the law.
we take the whole matter extremely seriously. we continue to work with the authorities as they investigate. therehe was speaking before this news. he wasn't talking about any one individual in particular. saying that there was a legal process, that they are cooperating with. they say the scandal was the work of a few rogue employees and there's no evidence that he was a high-ranking executive. 2013, named in u.s. court documents. this at the heart of the scandal. this goes all the way back to 2009, today's revelation. let's go to hong kong. how does the news on the bank -- meeting from 2009 impact goldman as it relates to its role? it raises a lot of questions, perhaps.
>> certainly it does. there are few ceos who would not take a meeting with the country leader. this was three years before the bond deals. that is what landed them in the whole soup. that said, the people who were arranging this meeting were central figures in the whole corruption scandal. at the time, they were trying to bring joe low into the forms -- forms -- while there's no indication that he knew about this and would of been focused on the meeting with visuals as pertains to goldman trying to maintain some distance between senior leadership and want -- what went on the ground are not great. not great.ptics
what are the key next steps to watch out for is the doj looks wrap this up? we trying to establish the extent to which they were involved in later meetings, for example. one of the question, who attended? we don't know that yet. there are a couple of other things. the former goldman banker who has been charged by the doj -- we reported yesterday, he has decided to fight extradition to the u.s.. he will be a key witness for the doj as they try to paint the picture of whether or not goldman had more senior involvement in this. anna: thank you very much for the update. asia finance editor, joining us there in hong kong. , beatingme in strong estimates, fueled by movies and
theme parks. the ceo is betting on a feature -- future built on streaming. he outlined his vision in interview. >> the studio and theme parks had record years and quarters. of there a big part success that we had in the fourth quarter. that is true for the year as well. we also had good results at our meeting networks and broadcasting. it ended up being a great quarter for the company across the board. you have till winds as you are going into the big merger. >> where are you on the 21st century fox? when you expected to close -- do you expected to close? >> we are still going through the regulatory process. we announced that we gained approval in the eu, that was a big deal for us. there are still some markets, countries that we are waiting for approval on. we are in the middle of that process.
in june, we said it could take is long as told months to close. we are more optimistic that it will occur meaningfully before that. we are not saying specifically win. as we wait for regulatory approval, we have started to focus on integration. we made some announcements in that regard at television group. when we talk about integration, we're talking about planning and not implementation. even though we have made announcements about people and structure, nothing can be put into place or operated against until the deal is closed. we have gotten a lot done. reporter: you are a planner. i know that. you thought this through. how are you going to justify that price? how much of that is cost savings , how much is revenue growth? >> these are great assets we are buying.
their assets that are doing well today, they believe they can do incredibly well in the combined entity. particularly as we move in the direction of direct consumer businesses were intellectual property will become critical and brands will become critical. as well as the talent that is required to make the kind of product that we are going to need. all very important. a substantial justification for the price when it comes to strategy, revenue growth, and bottom-line growth. there are opportunities for cost savings. because of the overlap in some of our businesses. this is largely going to be driven by the combined entity having the ability to operate even more successfully going forward. when you think about all the transformation going on in the media landscape, having these kinds of assets and scale is vital to the success of this company and its ability to grow long-term. anna: that was the disney ceo
speaking to bloomberg. our reporter joins us now here on set. very good to have you with us. we just heard from bob iger talking about the direct to consumer plans. what is the strategy there? >> all the focus is on this new streaming service, which he has called disney plus. it is seen as an attempt to beat netflix at what it has been doing with its own entertainment offering. disney is looking to bring together all that it has on this new service, in addition to espn streaming service. it's a three prong strategy. we have more details on what will be on disney plus. new star wars tv shows. lady and the tramp remake. anna: netflix and disney approaching this from oxidants. netflix coming with technology and bringing the content. how -- what is disney going to
do with its acquisition of the bulk of those fox assets? what is the strategy to integrate those? >> that plays nicely into that streaming service, disney wants to make sure it has all the best entertainment video on that service. avatar, thet x-men, simpsons, planet of the apes. that's a key part of making it an attractive operation. dealhope they complete the by june of next year. they got eu approval this week. a big boost to them. conditional on them selling some of the factual channels. progress is going well with the acquisition. it's a case of getting those final regulatory approvals. anna: thank you very much. our media and telecoms reporter. coming up, speaking to allianz.
anna: good morning from the city of london. i am anna edwards. this is bloomberg daybreak: europe. the fed steadies the course for a rate hike next month. the dollar rises as as the fomc sites further rental increases. wti crude heads for its longest losing streak since 2009 after 10 straight days of decline. opec and allies make this weekend. the foundations of a scandal. -- bloombergorces sources says lloyd blankfein -- ties several years before goldman sachs employees became embroiled in the scandal.
good morning, everybody. it has just gone 7:00 in london. 8:00 in paris or berlin this friday morning. looking at the futures picture from paris and london and see us about thels session. it looks negative following the asian session. change in theuch language from the fed and that has been fairly relevant for some. in the face of a turbulent pressuren markets and from president trump, the fed is its course for gradual increased rate -- interest rate increases. and to that flow around financial -- chinese financials and quite a negative session in
asia. we are looking to pick up on that in europe and seeing moves to the downside in european equities. let's have a word about the bond market. italy remains a focus here, selling in italian bond markets, hyder yields. latters the story the part of yesterday as tensions continued to build between brussels and rome with regard to the budget deficit. markets were looking for a more conciliatory tone from the finance minister and they didn't see that. a markets update in asia with juliette saly in singapore. not a great end to the trading week. you can see losses in china, the csi 300 looking like it will close out the session with a near one and half percent loss. we saw losses come through in the japanese equity market, the nikkei down by 1%. indexes are underperforming.
india is outperforming, but fairly fraught -- flat. invousness from investors china markets as we heard new policy coming through that policy makers are trying to stop the amount of money that banks can lend to private sector. in have seen automakers china come in and, as well as we saw car sales fall for a fifth consecutive month. in hong kong, down 2.5% in late trade. looking at the u.s. dollar, retreating against the yen and socgen saying you should use options to bet on gains for japan's currencies. we have the reserve been's quarterly monetary statement come through, close to give urgent between the data on its gradual rate hike and the rba continuing rates at record lows. you have seen aussie dollar lower today and we are watching the indian currency, in particularly rupee bonds, gaining with crude oil down for a fifth straight week.
anna: juliette saly in singapore. let's get a first word news update with debra mao from hong kong. a: oil is set for its longest stretch of declines ever after entering a bear market with investors awaiting a weekend meeting of opec and allies. futures in new york are slipping for a 10th day, extending a dramatic plunge that had prices down over 20% in five weeks. has beenlump exacerbated by a u.s. decision to allow eight countries to continue or -- importing from iran. producer nations will be output when the meeting not to dobby sunday -- abu dhabi sunday. the owner of an irish stock exchange wants to move to brexit -- brussels after brexit. ireland currently relies on u.k.-based firm to settle trade. clear, theng to euro
company that owns it, once the u.k. leaves the single market, it probably won't be able to continue providing that service. the ceo of bank of america says brexit is not good for europe, speaking to bloomberg. what will beimated spent preparing for this change. >> $300 million and we don't know what the rules will be. moving people around and disrupting real people's lives is not good for europe, in your terms and in terms of disruption. pipelineystone xl project has been blocked by a montana federal judge pending further environmental review. the view that ruling is a setback for transcanada's decade-long push to construct a more than 1100 mile-long conduit to deliver crude across the u.s.. a campaign group filed a
parallel suits against the u.s. in march 2017, shortly after donald trump gave his approval for the project. banking could face new limits in the u.s., restricting sales of fruit flavors amid an epidemic of youth use. official, sales of flavored e-cigarettes will be limited to adult only established an's -- establishments. regulations would take effect in the coming months. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much. debra mao joining us from hong kong. has become high is estimates for the third quarter. --ianz, which owns pinko
pimco, assets investment unit climbed by 23 billion euros. allianz joins us from munich to discuss these results. good to have you on the program with us. we talk about inflows. how pleased are you with the performance of your asset management businesses and why did you step -- stand up to stressors in the bond market? >> we are very pleased with the performance of our operation. gi,just pimco, but she i -- 15 billion of inflows. despite challenges in the capital markets, the performance we are bringing. if you look at performance in the pimco funds, over 90% of those funds were over benchmark. that is a strong indicator of the quality of the business. we are pleased with the performance of pimco and mgi.
that is also reflected in our bottom line with asset management contributing 10% growth in operating profit. your outlookfirmed this morning. is there some risk to the upside around that outlook now, given the performance you have delivered? have confirmede the outflow, which is 11.1 billion operating profit. clearly, it looks like we have a very strong performance so we are encouraged by the numbers we are seeing. was up 20%,g profit and were net income was up 20% compared to last year quarter. the numbers are very strong and the underlying improvement in all lines of business is definitely really outstanding. from that point of view, we are looking to the fourth quarter with lots of confidence. anna: we have seen a lot of m&a in the asset management arena.
you have played in that to some extent. orco, announcing some deals at least when i can think of recently. what is your approach to doing m&a in the asset management space at the moment? yes, you saw the acquisition we did with pimco and we are looking at a small acquisition. i think we have a small franchise at pimco and mgi. those we want to add to franchises through small acquisitions, we have an investment strategy. you should not be surprised to see also in the future that we will continue with the strategy of adding different kinds of strategies to our operations at pimco and tgi. anna: what is missing? what boutiques might we be looking at? what is missing from the current portfolio? guilio: we look in general to
alternative assets. you saw the acquisition we did on the municipal strategy. a few years ago, we did an acquisition on real estate. i think it is asset classes which are different from the plain-vanilla equity fixed-income strategies. all these alternative strategies can be very appealing to us. anna: let me ask you about brexit and your planning for it. what have you done so far. what is left to do between now and march, and what are you planning for? guilio: first of all, on brexit, it looks like it is going in a better direction. that is comforting. alleed to be prepared for possibilities, so at the end of the day, there are two aspects associated breakfast -- brexit. one is what can happen to capital markets?
view, we arent of always prepared because we are always stressing our net income, sovereignty position, liquidity position from that point of view. i would say we are totally compared, and then there is the preparation we need to do on the operational side and in our case, we need to look at changing contracts on the property casualty side, but we don't have a lot of work to do on that side. also, on the asset management side, we need to think about possible implications on the distribution of funds outside the u.k. if the funds are produced in the u.k. or into the u.k. if the funds are produced in europe. so we are doing all this operational work to be prepared in the case of a harder brexit and we feel we are well on track. we are also positive that we move to a kind of softer brexit. anna: have you spent a lot
preparing for brexit? we heard from bank of america merrill lynch what they had to spend. has it been a significant cost i do for you? guilio: you see our numbers and on the pnc side, it is going down. on the asset management side, our cost income ratio is going down. clearly, we had to spend some affected the profitability of operations. anna: can i ask you about ifrs 19, a change to the way insurers report. will this provide greater transparency from the insurance industry? guilio: yeah, it will provide more transparency because this will force a convergence to one standard. i think it is going to take a wild, because you have some interpretation around standards.
we will get there, but not at day one. definitely, it is a step in the right direction because in the industry, we need to be able to provide to investors information which is comparable. anna: you are having to spend on digital technology. as we look to your next strategic plan, there is a capital markets day coming up later this month. what kind of spending will you have to do on digital products to keep up or set the pace for what clients expect these days? that is a top priority for allianz group and it is not just about digital lysing. izing thel application, but the business model. for us, it is more than just creating an application. it is about changing the way we interact with our customers and also changing how the interaction between the back office and the front office is
working. from the point of investment, i can tell you our total budget is over 3 billion, of this, one billion is change in the company budget. a lot of this goes into digitalization or initiatives which facilitate digitalization of the business and simplification of the business model. that is where we are putting most of the change of company budget. anna: how will customers notice the difference? what will change? it should be much easier in the future, so for example, if you have damage, an accident, you should be able with your iphone to take a picture of the car and sent to richer -- information directly to the claim center and with a streamlined process to process the claim. the experience for the customer
should be in the future very easy. that is one implication. and we have other implications. the amount of data we will have is going to be more today -- then today and we can use this for price underwriting. this can completely change the way we interact with customers and to pricing. it is really about providing up to the end of the day, better customer service to our customers. anna: into very much for your time this morning. we preach you -- appreciate you of allianz the cfo speaking to us from munich. oil is set for a record losing streak. opec and allies meet hun sen -- meet to discuss strategy. manus cranny will be speaking to russia's energy minister. you are traveling to work now, you need to switch off bloomberg tv, but bloomberg radio is available.
anna: welcome back. this is "bloomberg daybreak: europe." 40 minutes till the start of the european equity trading day. we are looking at this picture across markets right now. let's start with btp's. we have been open for 20 minutes on continental european markets. 3.41 on the 10 year yield over in italy. yesterday, a good deal of focus on the relationship between brussels and rome. that looks to continue into next week. euro stoxx 50 futures pointing downward. euro-dollar on the back foot.
u.s. dollar index stronger, a day after the fed is set course for further rate hikes to come. not disturbed, it would seem, by presidential criticism or the turmoil in markets in october. i see s&p suggesting we will be weaker at the end of the day. -- start of the day. the asian session has been negative. let's get a business flash with debra mao in hong kong. italia board of directors is set to have approved a nonbinding offer for nextel of brazil. italianuld shore up the company's position in the fragmented brazilian market where competition has kept prices low. abandoned aia has debt target and is to write down the value of assets by around 2 billion euros. as it comes to content -- terms competition.
disney jumped in late trade after fourth-quarter sales and earnings beat projections fueled by movies and theme parks. those businesses continue to grow as bob iger tries to steer his largest division, television, toward a new future built around streaming. he says they are still waiting on some approval for the $71 billion purchase of much of 21st century fox's assets. still going to regulatory process. we announced a couple of days ago that we approved -- we received approval in the eu. there are still some countries that we are waiting for approval on and we are in the middle of that process. in june, we said it could take as long as 12 months to close and we are increasingly more optimistic it will occur meaningfully before that, but we are not saying specifically when. debra: has lowered its profit guidance due to legal provisions related to an ongoing investigation into whether its steel division polluted
price-fixing. adjusted 28 earnings before interest and taxes of 1.6 billion euros, down from previous guidance of 1.8 billion euros. that is your bloomberg business flash. anna: debra mao in hong kong. the fed left rates unchanged at its last meaning, meaning a potential rate hike. the central bank said economic activity has been rising at a strong rate and job gains have been strong. the fomc said its outlook remains one of "gradual rate hikes." the dollar extended gains after the decision. joining us, the head of fx strategy at rbc investment management. us. to have you with let's talk about the dollar in the wake of the fomc. at one level, nothing really changed, but as one of my colleagues has been pointing
out, it is what the fed didn't say. it is what didn't put them off course that is significant. the fact they weren't thrown off the rate hiking trajectory by market turmoil or fed criticism. did anything change for you last night? laura: i think the market expected it to be a nonevent and it really was the case that it was a nonevent. atkets, when we look expectations for future hikes, that was relatively unchanged. the fed have 275 for funds rate here, so limited change. were there any surprises of what they are not saying? one thing that did come out was the business investment, not it is slowing from a rapid pace. a positiveually development from a market perspective, because it suggests the economy potentially will not overheat to the extent we could be seeing a more aggressive fed going forward. anna: the with wages going up, they are already at 3.1%, i was
looking at a chart earlier that talked about people leaving their jobs expecting higher wages elsewhere. that perhaps suggests upward pressure on wages. many businesses are spending less because they have to pay staff more? laura: exactly, so look at the dollar specifically. when we look at the fact that wages are get to really feed through to inflation. thates present a risk there could be resumption of the phillips curve. we feel inflation pressures could build further and that does underpin our expectation that the fed is likely to be in a position to raise rates, likely three times next year and potentially four. it is this repricing of the forward curve for markets that is a key factor that is underpinning our expectation that we could see further dollar gains through 2019. anna: what drives the dollar, because we talked about the fed side of things. trump approval versus the u.s. dollar. this we looked at ahead of the midterms but still relevant.
andt going to be the fed interest rate differentials that drives the dollar higher in 2019 or the fiscal policy as set by the u.s. government and the wider house now? what will be in the driving seat for the dollar? laura: given the fact we are seeing this rising rate environment, it will be fed policy that does dominate that dollar strength. when we look at the deepening trade tensions between the u.s. and china, it is spurring capital flows to safe haven assets, which is further underpinning dollar strength. those are really the two key factors. with respect to a fiscal boost in the u.s. economy, we expect the u.s. economy is likely poised to slow a year and gradually to a more sustainable level. we are getting this sugar rush in 2018 from the tax cuts. it is likely to fade next year and especially with a split congress we are seeing, it limits the upside for further
potential stimulus measures to jolt growth. anna: coming off the sugar high. the pound has been gradually building back, hasn't it? looks as if there could be a deal in the offing, but nothing is certain just yet if at all. how high could pound go if we get a budget deal? laura: there are significant tail risks around if we see a withdrawal deal. we could see cable go anywhere from 10 to 15% higher, but this is really on the back of growing optimism for the deal. it really remains the case in our view this could be a relatively short-lived bounce because what markets are dismissing is the fact that the withdrawal agreement would still need to be passed through the u.k. house of parliament. it is not guaranteed that would actually come through, so that is likely to spark a leg lower in the pound. and: thank you very much how much detail will there be about the future trading relationship? laura cooper, head of strategy
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my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. anna: welcome to "bloomberg markets: the european open." i am anna edwards from the european headquarters in the city of london. fed unmoved, policymakers leave rates unchanged but stay on course for a december hike. the dollar holds its gains. wti crudeream fades, heads for its longest losing streak on record after entering a bear market. opec and allies meet this weekend.