tv Bloomberg Markets European Open Bloomberg November 15, 2018 2:30am-4:00am EST
for brexit, but praising the work done by michel barnier. the commission intends to agree on the declaration by tuesday, shareholders will do their work by thursday and the council meeting takes place on sunday the 25th. welcome to the program, everybody. this is "bloomberg markets: the european open." matt miller is with me from berlin. i am and it -- i am anna edwards in london. this has been a tunnel to in european politics over the last 24 hours. with learned a lot about what is on the table, but nowhere the endgame is. -- don't know where the endgame is. bet: it will continue to european politics until 2020 and
possibly beyond because there is a transition period keeping the entirety of the u.k. in the customs union and northern ireland will have to continue to follow certain other european rules and procedures for an draftnite time in the agreement theresa may has shown to cabinet and will take to parliament. the latest that could be extended to is 20xx, possibly another 82 years. we don't see a lot of movement prices related to this directly, so if you look at the pound, a slight gain but above 1.30. maybe optimism from currency traders. we don't see a lot of movement in treasuries, either and gilts aren't open for another 30 minutes. we will wait to see, but it looks like the market response is fairly muted. if we look at the
pound, 1.30 is up by one point 18 of a percent. she secured kavanaugh -- cabinet backing after that marathon. will there be further resignations or a challenge to her leadership? she isn't out of the woods, so we will see if that comes to pass. and then the question of whether we get this through parliament. we would have analysis through the program from both sides of the brexit divide in terms of whether we are going to see this get through parliament and we hope to hear from the labour party as to their assessment. we know jeremy corbyn met with the prime minister last night, as did leaders of the dup. of other plenty stories this morning. let's get a first word news update with desley humphrey. has called au
summit for november 25 to sign off the u.k. divorce plan. after five hours of talks with senior ministers, theresa may described approval for the 585-page draft deal as a collective decision. at least two senior ministers are considering whether to quit while scores of lawmakers from may's conservative party are lining up to vote against the agreement. >> these documents were the result of thousands of hours of hard negotiation by u.k. officials and many meetings, which i and other ministers held with our eu counterparts. i firmly believe that the draft withdrawal agreement is the best that can be negotiated and it is up to the cabinet to decide whether to move forward with the talks. desley: federal reserve chairman jay powell says the u.s. economy is strong but could face headwinds. headwinds next year as
policymakers weigh how far and fast to raise interest rates. challenges include slowing growth abroad, fading fiscal stimulus, and the effect on the economy of the fed's eight raise rises since 2015. the changes on capitol hill after the midterm elections could pose problems for president trump's new north american trade deal. a leading house democrat said the agreement needs changes and must be renegotiated if the administration wants the party's support. china is said to have laid down a series of potential concessions to the u.s. for the first time since the summer ahead of talks between presidents trump and xi at the g20. we are told the ideas fall short of the major structural reforms washington has been demanding. oil snapped its record losing opec and signs independent producers will implement out the curves next year.
all sides ares discussing deeper than anticipated restrictions to balance the market as demand for oil slips. a new report is said to have shown u.s. stockpiles rose 8.8 million barrels last week, more than double the forecast in a bloomberg survey. john bolton's top deputy is to leave the white house a day after the first lady, melania trump, called for her to the ousted. ardel clashed with the first lady's staff on melania trump's africa trip. it follows an unusual public statement from the first lady demanding the official removal. 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. you --this is bloomberg. anna: thanks for that. desley humphrey in dubai. the eu has called for a summit to sign off on the brexit deal.
donald tusk hopes the eu 27 has not too many comments. theresa may got the backing of her cabinet for the brexit deal, but the fight on the homefront is far from over. a roof old within her own party threatens to derail her plans and forced the u.k. out of the eu with no deal. she said the deal was in the best interest of the u.k. >> the choice before us is clear. on theal, which delivers referendum which brings about control of our money, laws, borders, and screen movement, protects jobs, security and our unions, or leave with no deal or no brexit at all. anna: a session for the pound yesterday. we are asking will the next 2% cable move up or down? i have read commentary in both directions. joining us from singapore, mark
cudmore from our mliv team. let's start with that question. some suggest it will head to 1.50 if it does get through the commons. you are saying something different, i understand. i think you are right that if this gets through parliament, there is another large move higher, but that can be far away. more people are watching if there will be resignations from cabinet members. ers it looked like unity coming out and then resignations came later on. that is why people have been hesitant. for the next 24 hours, we are on resignation watch. day,ne come in the next sterling will grind higher and strengthen in the short term. people are expecting resignations. that is why there is nervousness and a chance to sound lower. beyond that, there is the
parliamentary part. i am not clear on the mathematics but the news flow is negative and shows a lot of hurdles to pass. the dup has made clear they are not in favor. it is uncertain if this deal will get through parliament. we arere you surprised seeing the pound trade above 1.30 with the green arrow behind it because here, it seems you've got a deal which doesn't satisfy brexiteers and doesn't look like it is going to pass, and you expect if it doesn't pass, the pound will come down hard, no? it will come down very hard if it doesn't pass but some will go, if it fails, doesn't get through parliament, there is no brexit deal, it might not be a hard brexit.
a secondt be referendum and the u.k. staying in the union. some argue the best case and area longer-term for sterling is the deal to fail and that would be the catalyst for a second referendum. that is why people are uncertain how to trade this. initially, a parliament rejection would mean a sharp slump in sterling in the short term. i am not surprised there has been some appreciation. 48 hours ago, we didn't have an agreement. now we have an agreement, sterling should be slightly higher. it is right that it is not too much stronger. the price action makes sense. the greater risks from here are probably on the downside. was interesting that it was said he will wait to see what the prime minister says before deciding whether to send his letter asking for a leadership challenge. there are other things in life and the brexit conversation in the markets. let's talk about what powell said yesterday.
about headwinds, but also didn't seem to be bothered too much by the market volatility in october. not enough to put him off course. mark: absolutely. my job is to carabao where markets will trade and not necessarily whether policymakers are doing the right thing. i have to mention that powell has done a fantastic job of communication. he hasently this year, delivered these messages and allow more flexibility in the market without shocking the market. he has toed the line today of where he has warned of challenges, is aware of them, but made clear the fed want to continue hiking. thehe margin, it made clear fed put is nowhere close to the market and that is why i was marginally hawkish overall. he walks the line very well and i think that is why there has been no big reaction and that is what the fed chair should want. matt: thanks very much for joining us.
mark, bloomberg mliv strategist. you can join our debate on what happens to the pound next. is the next 2% move up or down against the dollar? next, theresa may gets her draft brexit agreement passed the cabinet. now, she faces a revolt from eurosceptic conservative members of parliament. what will be her strategy? ♪
matt: welcome back to "bloomberg markets: the european open." we are 16 minutes from the start of cash trading across the eu let's get the bloomberg business flash with desley humphrey in dubai. competitionswiss authority has started a probe against credit suisse, ubs, and three other companies. the regulator is investigating whether they colluded in boycotting international payment services such as apple pay and samsung pay, preferring swiss payment services. californian utility pg&e plunged the most in 16 years on the possibility equipment sparked the wildfires ravaging the state -- state. shares plummeted after the company admitted it has exhausted its credit line,
a sign of growing financial stress. citigroup says the damage from the northern california fires may total $15 billion. that is more than pg&e has on cap. -- on tap. apple is mired in the longest losing streak for more than six months as investors reassess its growth prospects amid waning sales from iphone. apple's gain is now 10% down from almost 40% in early is now 10%,ate gain down from almost 40% in early october. that is your bloomberg business flash. theresa may is fighting her for her political life -- i'll pick up there. thank you very much. theresa may is fighting for her political life. let's get to breaking lines on that subject. -- says labor is unlikely to
back make's deal. this could be one of the more significant lines of the morning because it adds to the interesting math surrounding any commons vote. bloomberg's london bureau chief joins us in london. for reflections on what we have heard and what comes next, good morning to you. let's deal with the immediate aftermath. we saw a's -- a resignation, but nobody from the cabinet yet. we remember it took a few days for things to settle and one resigned.mber >> we had the duty minister resign. there are still two or three ministers that seem to be wavering. he came out today and said doesn't expect any, but you never know what will happen in the days ahead.
theresa may makes a speech today at 10:30 a.m. in the commons. decisions will be made. anna: it will be interesting to see if we get any clarity on what the vote in the commons will be. survives this, we get to the commons and will it be a binary choice between deal or no deal? in which case a different outcome might be seen compared to her outcome? this is noabout how deal or no brexit at all, but i am not sure that was taken as she had intended by the media. neil: but i think that was a key statement last night. she is trying to get the euro skeptics on board by saying there will be no deal at all if they attack against her and the deal in general. more clarity will emerge in the next few days. matt: i wonder if there is
anything in this draft agreement to pacify brexiteers. thatn, is there any clause leads you to believe that the u.k. will eventually be independent of the eu court of justice or is there anything that gives you faith that eventually, the u.k. will be able to make its own trade deals? it didn't seem like there is much of a brexit there. neil: the only side that is happy so far is business. business has more certainty and is able to plan. haveis the best it could happened. a poll and the public is unhappy, labor is unlikely to support the deal. this is going to be a tough sell for theresa may. anna: it will be interesting to see how the remained side
confront this. away from party lines, what is in the national interest? it may be different -- difficult to reach a conclusion. neil: absolutely, and the tory whips are likely to exploit that. labor members seeking their support to get the deal across the line by offering that choice and saying you may get a worse deal if you don't go with what we have agreed. matt: appreciate you jumping in the chair. there are a lot of moving parts. neil callanan is our london euro chief for bloomberg news. we will continue to update you with the details. we are minutes from the open of stock trading. we will see how the markets see it from an equity's perspective. when we come back, the stocks you need to watch at the open, including the german adhesive manufacturer, sticking to its 2018 guidance. news outside the
boss, and puig. what is the story with the thesis maker -- adhesive maker? >> third-quarter earnings were posted this morning and investors will focus in on that laundry division margin story. it came in below consensus. profit warning in august and the pressure is up to deliver to do -- get those results. matt: that is henkel. stock,to another german this time a fashion designer. what is the story with voss? >> it sounds like trendy suits at hugo boss. a retailer saying sales and profits will accelerate as it tries to personalize more offering and speed up its reaction times two trends.
it gave details on how much sales growth will accelerate over the next years and set a target of 15% operating margin by 2022 and like a lot of other luxury retails, it will depend more on asian growth and expansion in e-commerce. it seems investors are liking the news because the stock is up in premarket trading in germany. expect that one to move higher. our other stock to watch? >> this multidimensional company does construction services and mobile, television shows and nine-month sales rose 6% and they confirmed their outlook. a lot of calls saying we could see 2% higher for the paris-based company. matt: those are some of the stocks you want to watch and you will want to watch what happens open.ilts at the
we haven't had a lot of moving in the pound, but it is going theer and that is amid resignations that are starting, the skepticism theresa may's cabinet can get this brexit deal through parliament, so you will want to watch the continued trade in fx, but also the gilt trade and how it moves at the open will be fascinating in five minutes' time. thank you to the equities team for joining us and get the stock stories by typing first go on your bloomberg. you can get first go on the mobile app if you look under the news tagged. -- tag. coming up, the market open in just about four and half minutes' time. we will see how the equity market team sees this deal. everything else seems hunky-dory across europe now. maybe italy is in the rearview mirror to some extent, though it is something to look out for.
anna: welcome back. less than a minute to go until cash equities trading. let's look at the markets positioning. the pound against the dollar. see the pound dropping. leader party has said labour party will not vote in favor of theresa may's brexit deal. we still have a little bit of time until we get to any kind of common vote. that's of the labour party is saying at this point in time. as a binaryee it choice between her deal and no deal. what will they have to vote on? will there be any other option?
little bit stronger against the dollar, oil price in focus. will opec decide to cut more? futures, big drop on european equity markets are expected to bounce higher. factoring in the oil price, lots more going on other than brexit. let's look at european equity markets this morning. it's not all that evident that we are witnessing the tumultuous time in u.k. politics. the ftse 100 is flat to positive this morning. the ibex up by 0.3%. one of the early ones that gives us some trading action. other things happening, powell has been talking about headwinds in the united states next year but nothing about the market tour model -- turmoil since he putting him off the rate hiking. asian equities are able to make
some headway despite all that. european equity markets making some decent moves to the upside. what do you see in the sector? matt: take a look at the euro 500 index in the breakdown. the sector breakdown you got there. you will see we have most of the fact i.t.aining, in is just barely off. he currently says other on the top of the screen. but it is rising just a little bit. it's the least gaining sector of all. materials, industrials, consumer staples are leading the pack. in general, we see for the most part gains across the industry. gilt. look at just mood opening up a minute
and 30 seconds ago. the yield is moving down right now so investors are investing in u.k. paper. that pushes the yield down. 1.47%. mri --et's look at the mrr function. we have a mixed bag. air france, klm. we talked about the numbers they put out this morning. the downside. there are very interesting tech news going on there. is a supplier to apple and the stock is trading down by 8.8%. this is after the company cut their outlook citing demand. supplierslook dims as worldwide sound the alarm is one of the headlines of one of my colleagues this morning. keep an eye on apple and everything tech this morning. that story we saw in asia starts to take on an european
dimension. cro down as well on that. we continue to focus on the brexit story this morning. theresa may is fighting for her political life despite backing from her cabinet. there is a growing fold -- revolt from her own party. at least two senior ministers are considering whether to quit and schools of conservative mps are planning to vote against the accord. the prime minister said her deal is in the best interest of the u.k.. >> the choice before us is clear. this deal which delivers on the vote of the referendum, which brings back control of our money, law, and order, in's free movement, protects jobs, security, and our union, or
leave with no deal or no brexit at all. let's get to westminster with maria tadeo. that labor is not going .o back theresa may this makes it harder for her to get her plan through parliament. maria: it certainly does. you look at sterling and cable over hours, a wild ride for the u.k. currency and it reflects how uncertainty continues to dominate the story. yesterday, theresa may made it clear at this point it is down to a binary choice. you either back this deal or no brexit at all. she get aon is can clear in parliament? she will make a case today to say this is all we have.
we are not going to get a better deal. papers,ook at the u.k. that's the thrust of it. my deal, no deal, or no brexit. the other headline, there will be very difficult days ahead. that is what reflected today in sterling which is struggling to find direction. matt: theresa may has been fighting for political life since she replaced david cameron. it does look like there could be a no contest vote called soon. what you hearing about that? maria: we have been hearing will beion that it presented today. no clear indication as to what could happen. we also heard ministers could quit. we haven't seen that yet. resignations, when she put the plan on the table
she got high-profile resignations. if they quits, i think she will be in big trouble but for the time being we are not hearing that. at this point it's all she can put on the table. it comes down to you do you do you voted down. confirmed there will be a special brexit summit on november 25. we just got official confirmation. that's when the eu 27 will be able to talk about this. we will see if there is a no-confidence vote. maria.ou, is it a binary choice? will there be another option when it comes to that vote? that will be something to watch. , joins us for a
market perspective. give us that crucial market perspective. we see the pound falling this morning. labor is not going to back theresa may's brexit plan. salman: the first point i will make is that if you zoom out of these interesting times ahead of us, sterling is one of the most undervalued currencies in the g10 world. itsas completely lost anchor with underlying market fundamentals. it we can get a sense of brexit in the coming months, between 19 will be a big winner. but there are a lot of twists and turns before that can happen. do you see for example sterling falling further before that happens? what is your confidence that this deal gets past and if it doesn't, what kind of drop would you see in the pound?
if the possibility of no deal rises significantly, we are at at least a 10% drop in sterling. another point i would notice is that so far the market hasn't put a lot of pressure on the different political considerations. there has been day today volatility but it has mitigated damage on the sterling side. when the market comes into play, that's the kind of drop that can change the clinical side as well. what do you see in gilt market? one person's haven is not another persons haven. how do you see markets playing out? salman: in the markets, there is a huge domestic, especially long-term investors, but for foreign investors he becomes an
fx trade. they want to avoid that kind of volatility if they can't stomach it. for domestic markets it is and will retain a safe haven. let me pin you down here. we have talked about your expectations for the pound but the mliv question of the day is, the next two percent move in sterling, does it come on the upside of the downside? the first move will have to be on the downside. i think the market will have to participate and put pressure on the political establishment. that's why sterling looks to be more viable in the -- more down in the short-term. anna: he stays with us. for that viable market perspective.
we are looking at gains across the board. the skip the injured with -- individual stocks story with anne-marie. annemarie: they confirm their outlook. really multidimensional and doing well. henkel also to the upside. you might notice company off their washing power. their guidance came in line with expectations but many shops are saying they were disappointed because organic growth sales below estimates but it looks like coming in on the earnings is given the stock a bit of a push. to the downside, down nearly 8%. this is another apple supplier
ringing the alarm. they cut their fourth-quarter revenue forecast siding demand changes. their major consumer customers apple. they also make loctite which is a pretty cool product out of henkel. let's talk about oil. an input that many companies paid a lot for into the last couple of weeks. prices have come down substantially. traders are weighing u.s. crude versus opec. oil is flat-ish right now after snapping its record of losing streak. on tuesday.ged 7.1% the biggest drop in three years. here you see west texas intermediate crude trading for
-- trading. let's bring back salman ahmed. what you think about crude after this incredible drop? is there anyway opec and friends can turn around by cutting output? -- i thinkhink there the cost will be critical going forward. has beencause opec increasing oil supply this year. of the iranian sanctions. , this has beenut noticed by several brokers, the latest lag in oil prices has to do with market factors. i think that will have to be washed out before this underlying fundamentals reassert themselves. anna: talking about positioning in oil markets. we had this chart which talks about how net long exposures are being reduced.
that's been going on for a couple of months. we saw that big push up in oil prices and it was as if the market lost confidence in that and was reducing the net longs. how do you see this picture influencing where we had? salman: short-term, this will be the most common factor. we've crossed through some very specific options prices. this is the negative gamma effect. i think this is going to be important in the short term. at the end of next year, we growth but at the same time, so supply coming through. iran will pull out of the picture. arounde normal prices 75. a fascinating chart showing the change in
price due to supply and demand. we hear opec talk about demand, that's just the crude they produce because demand is stronger for the crude now seems produced in the u.s.. where do you see the more general demand picture, even if the economy is growing? is the earth's population reducing its need for oil? the long-term intensity of oil is coming down. we know that. this is a megatrend. at the same time, these wild swings we are getting are i think more did too -- related to more short-term dynamics. of course the opec production increases were critical. it seems like they got it wrong. now becomes a political question where you have to balance u.s. interests versus opec. prices are below the break even
for opec and mel b critical to improve. opec and that will be critical to improve. anna: we spoke to u.s. economist who said because of the amount of shale production we see now the united states, higher oil prices are better for the u.s. economy. maybe not for voters. that's an interesting one. an interesting change in perspective. salman: i think you are right. move from a net importer to an exporter. production is now competing with opec. of the same time, from a macro perspective, the reader has to be whether this oil price fall is due to concerns are not. worth watching,
matt: welcome back to "bloomberg markets: european open." chairmanhe u.s., fed jerome powell says the economy is strong the could face headwinds next year as policymakers way how far and fast to raise interest rates. he spoke yesterday at a q&a in dallas. typicalenges that are of this point in a cycle, we how to be thinking about much further to raise rates and the pace at which people raise rates. the way we are approaching that is looking very carefully at how the markets and the economy and business context are reacting to our policy. is still withhmed
us. we see very slight gains year to date after the big equity tumble that we saw the past month. now the s&p 500 is up about 1% your today. date.r to it doesn't seem the fed is concerned with equity prices. will that be the end of the bull run? will the fed raises bring u.s. equity markets down? salman: i am of the view that for the bull run to end you need increase in the recession possibilities of the u.s. and i don't think that's the greece various that's the case. -- that's the case. for the first time in several months, jerome powell is a knology the headwinds that lie ahead and this was not the case before.
if you look at the market pricing of hikes next year, i , ink for the first time think the focus will start coming into play. is that why you think equity markets have taken this as risk on? he was acknowledging the market volatility in october and said that's one of the things we need to keep an eye on. you could have concluded this was a fed that was going to -- it was still some way off and you could send equity markets lower. salman: it's a balanced commentary. withcus came into being the discussion of the headwinds. i think the u.s. economy is starting to slow. the fiscal stimulus receipts next year, that's an important forced to consider. the reason is done so well this year is the fiscal stimulus. that will have a huge impact on
2019. the euro has its own issues that when i see it at 112 i wonder if it will go up or down versus the dollar. is the fed the one that determines the path of that exchange? are both sides failed to move? in which direction and how far? both sides are active. you have the italian issues in europe. i think the fed policy is going to become more dynamic. i think that you have risk offices every meeting, it also gives additional flex ability. dollar, we see short-term strength one 2019 we do see the dollar topping off. major forces will start to narrow. i put aput it -- anna:
four chances of fed hikes in those have been rising. tothere room for the market price in further fed hikes? did we fully understand the extent of the hiking? in,an: as is hike comes it's a certainty it will happen, the communication jerome powell gives will be important. if the market has recovered by strong, the data remain i think that hawkishness reappears. fed thatis it is the is catching up with the market rather than the other way around. anna: thank you very much. few lines coming out on the brexit from the irish foreign minister. speaking in ireland saying this is the only deal on the table.
matt: difficult days ahead, theresa may wins cabinet support for her brexit deal but scores of conservative lawmakers threaten to voted down in parliament, as does the labour party. steps up. they are said to consider bigger output cuts than previously planned. wti extends its record losing streak. the powell 2019 plan. the fed chairman says america's economy is strong and could face headwinds next year. good morning and welcome. this is the european open. i'm alongside anna edwards in london. anna: let's talk about what is
going on in these markets. flow, powell's comments, where did it leave us? stocks where the biggest gainers and losers are. e going higher. we see some mining companies hire. there is a mining flavor to the the stoxx 600. let's look at the downside. there's an interesting story playing out. ams is the biggest fallers. now still there but down just 1.3%. the cinema operator is down by 5.9%. down by 5.2%.pita some negative headlines about
their cancer screening. let's get a first word news update. you has called a summit for november 25 to sign up on the u.k. divorce plan. after a marathon five hours of talks, prime minister theresa may described approval for the 585 page draft brexit deal as a collective decision. ae now needs to persuade rebellious parliament to follow suit and back her plan. two senior ministers are said to be considering whether to quit while conservative party members are lining up to vote against the agreement. >> these documents were the result of thousands of hours of hard negotiation the u.k. officials. many meetings i have would argue counterpart. draftly believe that the of the agreement is the best it can be negotiated.
it is up to the cabinet to decide whether to move on with the talks. it's not finished. we still have a long road ahead of us. on both sides. days,side, the next few we will all work on the text of the political declaration for the future relationship with the member states as well as with the european parliament. financial services companies are weighing with the deal will mean for their services. negotiations on a new financial rulebook will continue well into 2020. the proposed setup creates friction with what is in line with what the city of london has been expecting. -- andbanks consent banks continue working on their worst-case contingency plans. jay powell says the u.s. economy is strong but could face headwinds next year as
policymakers way how far and fast to raise interest rates. he listed potential challenges including slowing growth abroad, fading fiscal stimulus, and the lag effect of the economy. he also warned the u.s. trade dispute with china. >> we see a rising force of concern largely through business contacts through the reserve banks but also our own context. it hasn't shown up yet in the data, it will be hard to see in the data because you don't or the data would have been without the trade issues. but in theory, you could see slower growth. to the extent that more and more products are subject to tariffs. you could see higher inflation and lower growth. global news 24 hours a day on air and not -- anna tictoc on twitter. in more than 120 countries, this is bloomberg. theresa may is fighting
for her political life despite getting the backing of a cabinet. there is a growing ripple within her own party that threatens to derail her plants. at least these two senior ministers are said to be considering other to quit. scores of conservative mps are lining up to vote against the accord. labor leaders have said they will vote against the deal. join us now is neil. the dup, northern ireland party, saying they've been betrayed. he says he will vote against the brexit deal. of course they will be very mindful of the consequences. niel: absolutely. theresa may will go in front of parliament and make a speech to rally support. people coming out saying they won't support the deal, it shows how big a hurdle she faces. this ist irony in all
that if you're manufacturing you can get access to the u.k., axis to the eu, you would be fairly happy. it's just politics playing a big role here. anna: that is not escaped attention. matt: i wonder what the newsroom is making of the asset prices. we are still seeing a pound over 130, even though there is so much skepticism that the deal to go through. on the other hand, investors are buying u.k. assets. what you make in the moves in the market? i think will be another day of stalling. expect a huge amount of change and volatility. go talkt to be able to to the media. it's going to be a day of volatility.
what is it the parliamentarians are actually going to get to vote on? it's wrongarket says to paint this is a binary choice. yesterday she talked about her deal, no deal, or no brexit. what are the latest we are hearing? atman: it simple -- neil: this stage, it looks like no deal is a distinct possibility but also as they get together and discuss, maybe people back down and did concessions. anna: thanks for the update. bloomberg's london bureau chief. with us now here in london, conservative mp daniel ,awczynski and stephen crabb
former work and pensions secretary. owingembers of parliament to have their say on where this deal goes. if i could come to you first, daniel, let's start with the immediate matter. would you be calling for theresa may or a leadership challenge? would you be samiti the letter that calls for a leadership vote? daniel: no i want. i haven't submitted one i don't intend to. changing the team captain at this stage of the negotiations would be highly responsible. however, the deal she has brought back is obviously causing a lot of us genuine brexiteers a great deal of concern area -- concern. we see this is a vet -- battle of wills between a sovereign nationstate of the european union. we have given away too much and caved into the somewhat unreasonable demands of northern ireland which will present us from striking of our own trade
deals. i think getting this through parliament will be a very difficult process for the prime minister. argue thateam would what you are objecting to is the backstop deal at it's not designed to be used. -- deal and it is not designed to be used. daniel: we are still the process of reading the document. the northern ireland backstop is one of many issues we feel the government has caved in on. this is not just for us. there are hundreds of millions of euros skeptics across the continent. even poland, a net recipient of the eu funds, has increasing concerns and problems of the european union. how we extricate ourselves this organization could and will be a prototype for others to follow.
if it is shown a sovereign nation's largest ours, fifth largest economy in the world, permanent member of the security council, has to bow and scrape down to the elites of brussels, it was -- it will set back the eurosceptic calls for generations. stephen, let's come to you. i assume you will say's theresa may will survive this. what do you think you'll be asked to vote on? do you think it will be presented as a binary choice? stephen: i begin will be a clear binary choice that mps have to vote on. that's not to say there won't be the possibility of some other votes that may not be binding but there be a clear binding vote, a clear choice between supporting but many people feel doesn'toptimal deal, deliver the full brexit vision
but protects manufacturing at a large portion of u.k. industry and. relies on easy trade with the eu. anna: you would vote for this? desley: i -- stephen: i haven't read all the details but i'm likely to vote for it because i was one of the ones who urged theresa may to strike a compromise package. what theresa may has been trying to do is try to a course through the middle and speak to both parts of the country. neither extreme. not the hard brexiteers or the people who want to stop it. neither will be happy. is trying to put together that protects our industry and economy. this pleases nobody but only a deal that pleases nobody was ever understand the chance because it's so divided. the party itself is so divided. how many rebels do think there will be? first of all, i take
exception to the term extreme. we are not extreme. 17 point 4 million british citizens voted for leave. the british electorate is far more sophisticated and i think some people give them credit for. they knew exactly what they were doing two years ago when they voted a pastor the european union. it means pulling out of the customs union, the single market . it means taking back control of borders and money and sovereignty. and created a sovereign nation and making politicians directly accountable to you, i would argue, is a moderate and sensible proposal rather than being an extremist one. in terms of rebels, clearly over the next few days, the european research group will be discussing this agreement. i anticipate a large number, maybe as high as 40 or 50 conservative mps, would vote
against this. and otherabour party minority parties going against it, i think the prime minister last have to pull a significant rabbit out of the hat in order to get this to the house of commons. you will be aware of the consequences if you do that against it. what do you think they will be? i had a two-hour discussion with peter lilley yesterday who is a former member of the market thatcher cabinet. -- margaret thatcher cabinet. he was involved in setting up the wto rules. successfully with them, our single largest trading partner is the united states of america and there are many in my constituency who say we trade very successfully with america and others in the wto. of course we will make changes
and adapt ourselves to changing circumstances in terms of trading with the european union if we go to wto terms. it's not something we should be frightened of. there will be changes and uncertainty in the short and medium term. but we are trying to do what the british electorate voted for. regain our sovereignty and start negotiating with the european union to the sort of relationship we want. one based on mutual trust, trying to ensure that there is a free movement of goods and services but there are two separate entities rather than beng shackled as we are to to the eu supranational structure. i had another resignation today from a colleague that both of us respect greatly who was a junior in northern ireland. he himself is somebody who has worked in northern ireland and
knows how damaging this will be to the province. anna: thank you. the imf taking a different view to your own most of each year rules in a hard brexit. stephen, do you think this will pass? she may need three and 20 members of parliament to vote for it. she will have to look whiter than the conservative party. we may even have the democratic unionists from northern ireland to help us. she needs to speak to pragmatic, moderate labor. a labour mpg to late last night and he was annoyed not much hope for the pragmatic pool to come aboard and support this but we have some time to run with it. there's a lot of explained to do in a big challenge for theresa may but she has proved critics and doubters wrong before. anna: thanks for your time. next, the german economy
european open." indexes risingty even though the european economy took a bit of a body blow in the third quarter with its biggest economy germany shrinking. this a setback when the outlook for global growth is already fraying. the 0.2% contraction was worse than expected. the biggest in more than five years. join us now to discuss why this happened and how long it will last, volker wieland. one of these so-called wise men here in germany. thank you for joining us. appreciate you stopping in. what caused the contraction in the quarter or even the worst than expected contraction? volker: all about cars but the main effect was the lack of the industry dealing with the
adjusting to new emissions testing. that's a pretty big mistake. there's two other factors. capacityave been using , overutilization of capacity in germany and that means the economy has to come down and growth has to come down. it's somewhat normally come down in terms of growth towards 1.5%. the third factor is, it shows you how sensitive the german economy is to cars and manufacturing. we have this protectionist wave coming from the u.s. and that has been affecting germany. it is focused more on u.s. chair -- trade with china and it may have some positive effects but in general, it was those two things. matt: are we going to bounce back to a more normalized rate in the coming quarter? 1% as volkswagen and
bmw figure out ways to continue selling their products in germany? the fourth quarter may still be affected but are estimates for next year is about 1.5%. it would be more or less potential. the trade factors. wholeheartedly hitting the german economy directly? we hear the talk about auto tariffs the don't come to fruition, fortunately for now. there are steel and metal tariffs. and there is brexit uncertainty that must cloud business operatives'future forecasts. what you expect? -- what do you expect? volume the overall hasn't changed much so it hasn't been a big effect but the , germannty
manufacturing and the german car industry, these are luxury cars and big manufacturing lines for companies abroad. how much they order depends on the future output and it has an effect on that. it's quite an issue. when you think of brexit, there's a lot of uncertainty. if it comes to a hard brexit which is not at all out of the picture, that would have a big effect on the u.k. but also a significant effect on the german economy. i'm sure you haven't gone through all 580 pages but how do you view the deal that theresa may has put together with the eu now? does it make sense to you to have this customs union arrangement, transitive -- a transition. that cansition period go on indefinitely? the worst scenario is a
hard brexit without any agreement. i'm glad we got agreement that can be put to the. that's good. pagestails, it's a lot of and a lot of special issues such as the backstop in northern ireland. perspective, it's up to britain but i think it's important to avoid a hard brexit or it -- hard brexit. its bad to view is of us. all i wish there would be a way to avoid it. in any case, in terms of extensions, i think it's important to leave enough time and maybe more than is currently planned. if the deals excepted and they go forth, there should be enough time given to negotiate the very expensive free trade agreement.
it's important that the negative impact of all that be minimized. matt: when they bring it back to berlin. if there were a lever you were able to pull to help us economy grow in a sustainable way, what would your top choices be? tax policy? digitalization? migration? what are the main things the government needs to work on? volker: one big thing is the demographic challenge of the country. immigrationssive but it's not likely to continue. we have to prepare germany for this demographic change and that means have a more sensible retirement system and pension system. matt: a lot more old people and not as many young people. more people going into retirement. there's a bit of a break but 2025, he was see the
people working versus the people that ratio will get worse and worse. , suche to adjust for that as work longer and adjust the retirement age to life expectancy. definitely a tax reduction should be on the table. the government has been pushing in a wrong direction. acceptng more ready to advantage is we can get. the new opportunities. there's a lot of readiness and effectiveness in industry in terms of robotics at all that. in the wider population, when you think of new, big companies, amazon, apple, google. and have hard to grow such of the company in germany. matt: appreciate your time this morning. volker wieland stopping by. anna?
minister u.k. brexit has resigned. ifding into this morning, she got a cabinet would there be senior resignation? this is a senior resignation. the very person who worked with prime minister may to push this through with eu 27 now says he cannot in good conscience support the terms proposed. and saysns his reason he has enduring respect for the prime minister. he says, i revert to say it must resign. i understand why you have chosen to proceed on the terms proposed. i respect are differing views held in good faith. i cannot support the deal for two reasons. regime in northern ireland presents a real threat. theresa may always said which maintainedeadership,
>> yesterday, theresa may said she won brexit support, but this morning things are looking different. the next hurdle, eu leaders will meet to sign off on the agreement. chief negotiator warns about a long road ahead. 's 2019 plan, he says that american economy is strong. good morning. welcome to "bloomberg surveillance." i am francine lacqua in london outside parliament after theresa