tv Bloomberg Daybreak Americas Bloomberg November 22, 2018 7:00am-9:00am EST
anna: the top stories we are covering at bloomberg around the world. brexit drafted deal, a draft agreement to keep close economic ties after brexit. , then retreats. investors give a thumbs down to the italian government funding efforts. the bonds head for the lowest level on record. nissan board dismisses carlos ghosn as chairman. tokyo prosecutors say he may face 10 years in prison, if convicted. morning. good afternoon. good evening. 12 noon in london. welcome to our special thanksgiving programming. happy thanksgiving. progress on brexit. , the divorce agreement
the story last week. this week, the focus on the future trading relationship. it pushed the pound higher, then retreated. now it has bounced again. it is a volatile story. you can see the oil price as well, down 1%. the broad story in equities is down .4%. the pound having an outside affect on the ftse 100, down by 1%. italian markets recovering, down .3%. we put in the south african currency as we watch for air rate decision from the central bank. progress is being made on a brexit deal. a draftd rallied on agreement on the future relationship. it has been obtained by bloomberg. it sees a free trade area, deep
regulatory cooperation, and determination to replace the backstop. liveng us now for more is in brussels. good to see you. have busy morning in brussels. , a lot ofadline headlines crossing the bloomberg , stated intentions the theresa may gave us last week. this is the first sign the sides can come to the table on this. >> that's right. it is one reason why the pound moved so high a little over an hour ago. the document talked about a ties,rade agreement, deep something surely investors were like. there was this backstop, which has been such a topic, now both
sides saying they want to find a weighty out of it. -- a way out of it. theresa may we should not focus on the withdrawal agreement. because really matter the future relationship will be very ambitious and trade will look good and we will have a better relationship and break away from the european institutions, which is what we promised. the pound has fallen, but gibraltar has been a big sticking point. the more we read into this document, it is a question whether theresa may will be able to spin this as a win. anna: there are questions still unanswered. the pound has been volatile. fisheries and gibraltar remain areas still to be discussed. u.k. officials say that your
broker issue is closed. where does that leave us then? -- >> they are not willing to attend the summit if they get an indication there will be a long negotiation. we are hearing from the spanish, who argued they don't think it should go ahead. the big question from the do youn perspective is get to call this a success for the european union if you have member states angry about it and speaking publicly against it? anna: interesting to talk about things that did not go theresa
may's way. one thing that did go her way, ,viation safety, chemicals medicine come all these things had been talked about as not doable outside the european arena. >> right. they say we are not exactly the same, but can do business together. there is a line on migration which says the u.k. referendum has to be respected, but it does point out that migration is something the european union will deal with. she could argue this is not a concession to brussels and i did not cave in to pressure from the eu, but a lot of people will say
it is not technically a clean break either. if we stay closely aligned to the eu, what is the point of leaving? anna: there will be some comments around that that will give brexiteers something to think about. the language around the backstop, to leave the backstop and make it irrelevant, that is something the u.k. has been pushing for. theresa may did not want to get all the attention last week. >> you heard from a lot of brexiteers, public opinion in general, questioning whether this was a breakup of the u.k. or an attack on the sovereignty of the u.k.. the language you get here alongside with free trade is that both sides don't want any tension between northern ireland and the republic of ireland.
that is from a u.k. perspective. the eu is well aware this may the seal of approval in brussels. whether it gets approved in parliament, one sticking point is the language and is back up theresa may to a certain extent. anna: thank you very much. the latest from brussels. it has been a busy day. a movement and markets in relation to the brexit story. joining me now is our next guest. very good to have you with us once again. let's get your initial to response to what we see on the brexit agenda. does this sound like it is giving theresa may something easier to pass through the houses of parliament? isthe tone of the language
the most important thing. that is what pushed the currency markets. , if we areippant down to fisheries and gibraltar but we must be close. of them seem to have taken on an iconic stasis. . -- alix: -- anna: how do investors position. the ftse is underperforming because of the strength of the pound. what do you do with u.k. assets from here? >> we were underweight. we are now neutral weight. we think a lot of bad news is currently priced in. the currency can go of pretty quickly.
underweight u.k. assets is probably not the right idea anymore. anna: i'm looking at a chart that tells me there are no more rate hikes priced in from the doe. boe. if we do get close to a deal and markets price in theresa may's version of events come you have to reprice the boe as well. >> i don't think this is pricing in anything more than total uncertainty. if we are kicking the can down the road, then i would put my rate hike from the bank of england on the basis the economy will rebound nicely. transition, soa
there must be some sort of withdrawal agreement. that suggests something will pass through the house of commons. do you think most investors have case?ase one this morning said that is a hard question to answer because there is not this normal distribution of expectations that there are such huge tail risks. >> it is our central expert tatian we will get some sort of kicking the can down the road-type deal. i am probably with theresa may when she says it is either my deal or no brexit. you have to think what is the for mps to decision get reelected. do they want another referendum? probably not. does the deal look so bad? probably not. that onewill see where
goes in the house of commons. thank you for your thoughts. you stay with us on the program. brexit.p, more on we will speak to one guest about what the polls tell us about the latest on brexit. let's check in on first word news. >> the board of nissan has dismissed its chairman carlos ghosn. the directors met today to decide his fate. the vote was said to be unanimous. his departure raises questions about the alliance. china is denying u.s. accusations it conducts a state run campaign of intellectual property and technology theft. it says the trump administration claims are based on hearsay and
ignore reality. thepresentative from trade-off is sent beijing is stepping up cyberattacks on american companies. the trump administration wants to make a change in how immigrants apply for asylum. central americans who arrived at border crossings seeking asylum would have to wait in mexico while their claims are processed. italianming up, the deputy premier says he won't back down on the 2019 budget clash. the societeg you generale chairman next. this is bloomberg. ♪
anna: live from london, this is bloomberg markets. the societe generale chairman speaking to francine lacqua today gave us these thoughts in an exclusive interview. >> how it will end? we will see. it doesn't help the italian economy. these 300 basis point spread is increasing the costs for the costs increasing for companies that needs to issue bonds, increasing the costs for banks, which also have raise funds in the markets.
, like 2011, the rise in spreads will lead to a credit crunch and accelerate a slowdown in the economy. that theu worried italian-eu standoff could impact the ecb's ability to exit from qe? >> i think it is too late. the ecb has to devise its policy based on the performance of the whole area. it cannot change his policy just for one country. the expectation of exiting cute he has in there for some time and has not affected the other thinkst rates, so i don't they can change policy at this stage. ofa: that was part bloomberg's exclusive interview with the chairman of society chanterelle. -- societe generale.
still with me is our guest. referencethe referre to the spread. it has widened through 2018. is this putting pressure on the government to change course or not? we hear conflicting comments daily from the italian government, but generally they seem unmoved. morethink there is pressure on the government then you would think. while the spread in this country would not be anything the public talks about much, in italy, they have and attain word that escapes me. how it affectsnd their lives, so yes, that does have a public impact and a stress factor on the government. this government in italy will
sit this out a little longer. i am convinced we will see some sort of agreement with the eu before christmas. this is italy. anna: what could an agreement look like? >> it puts a framework around it. seen then offer to sell some state owned assets to the tune of 1%. these things seem to be floated and denied. they can do,ngs will do, and eventually this will not end us a car crash. -- as a car crash. anna: there is a lengthy process if it were put into play. backfiringrisk of for the 2019 european parliamentary elections.
it, it in the bears the brunt of the emigration pressure from africa, so you could make the argument that italy is under particular strain because of this heard and they are undertaking for the eu, and for that reason there is a certain exception granted temporarily. anna: the eu could find some language that would allow deviation? it has happened before. >> germany, france, they breached the limits. it did not in the -- into the nd the world. they are not even going beyond the 3% limit. it is because of legacy debt from the 1990's. it really had gdp growth for a decade? anna: thank you for your
grace. he built it into a global powerhouse alliance. step inht be the first his career beginning to unravel. he was voted out unanimously by the board. couldld not vote, nor greg kelly, also said to be in detention under the same sort of microscope by prosecutors. we will get a final statement in to next two or three minutes the tokyo stock exchange on this move that now nissan is saying has happened.
they have not removed him from the board outright. thatdicates, this boat, there might not be more resistance from renault. crossing.w more lines if they don't name an interim chairman, they are not decided net. men saying the two masterminded the conduct. remind us what is alleged to have happened here. >> they put together an investigation that lasted , basicallyths allegations that he misrepresented or underreported his income over the last five years to the tune of some $44 million, according to prosecutors.
pressutors held a conference saying if the allegations are true and they and died carlos ghosn and convict him, that could carry a prison sentence under japanese law of 10 years. they are calling these allegations heavy crimes, more serious than insider trading, so he faces a very uncertain future in the corporate world. perhaps even a more dire future in the legal system of japan, --re it is proven guilty assume guilty until proven innocent. anna: does the alliance live on? >> that is an interesting question. glue that held this alliance together and wanted to further cement that by pushing for a merger between renault and nissan.
something we are hearing that the ceo who push for carlos ghosn's ouster that culminated mergerhe is against a and wants a more equitable partnership between renault, which owns 43% of nissan, and nissan, which owns just 15% of her know. anna: thank you very much. nissan confirms carlos ghosn dismissed as chairman. still ahead, we take a look at public opinion as the brexit deal nears. this is bloomberg. ♪
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the ftse 100 under considerable pressure because of the pound. we are down 1% on the ftse. the dax is down 6/10 of 1%. the other data that we have got for you and show you what we have on the currency market. the italian 10 year, 3.43%. we have retreated a little bit on the pound after the early optimism of a deal in brussels. --aking news around the ecb trade tensions may be offset by higher u.s. imports. the ecb acknowledged uncertainties and fragility is at their meeting. this is a publication of those accounts, the meeting we are talking about. the incoming data was consistent with the broad-based growth they expect to see and they plan for
a more in-depth assessment on december 13. the mention of this liquidity tool had been made by mario draghi. he said in october the governing council had mentioned it without going into details. if there was any clues, it would became a washed -- watched, or comments on italian banks. we will keep an eye out in case we get more details. let's get an update on the bloomberg first word news. sebastian: the board of me saw -- nissan has made it official, they terminated carlos ghosn. greg kelly was also indicted. department does departure raises questions about the future. another sign of rising tensions between iran and the u.s. over
renewed sanctions. iran is warning that aircraft carriers are within range of their missiles. they told the state-run news agency -- "if they make a move, we will target them." the european union and u.k. have agreed what their relationship will be like after brexit, largely braced on a test based on a free trade area. both sides will work to replace the so-called backstop solution to keep the irish border open. opponents have said the backstop would keep the u.k. trapped in the e.u. 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. i'm sebastian salek and this is bloomberg. anna: thank you very much. let's get more of the brexit conversation, just hearing the latest on the developments in brussels. founder is deltapoll
with us. good to have you with us. in your new outfit, deltapoll. what does the polling tell us what the public thinks about the brexit options? joe: it is a mixed picture. when you ask people, should brexit take place, the majority of people think it should because they voted for it, or the referendum should be upheld. the difficulty for the prime minister is when you deal -- drill down to the deal she has negotiated, support falls away. fewer than one in five people supports the deal and one in 20 supports it strongly. anna: that is not the same as asking whether they would vote for remain or leave in a second referendum. if that was the question, maybe
it would be different? joe: in principle, people support leaving the european union. in practice with regard to the deal, they are not happy. what if therek, is a replay on the referendum? yes, there has been a slight movement towards remain consistent in the polling, so remain maybe a little bit ahead. that is not indicative of where we would be if a referendum were held and if the campaign took place. we do not know what the second referendum question would even be. anna: or how many options would be listed on the ballot. so many possibilities. we have heard about the future trading relationship and a lot of the headlines are fascinating coming out of brussels, speaking of free trade agreement to replace the backstop. talking about their determination to replace the backstop, because the backstop was obsessed over last week and
theresa may and the comments kept trying to bring people back to the other part she had been doing, even though she was the minority. this is about the future trading agreement. she will want the conversation to move to this. will it be a game changer? joe: she has to convince her cabinet, her party, the majority in the house of commons, and ultimately the british people. intended toement is do is convince her party and perhaps the commons. streetrage person in the , they are really not particularly interested in the details. they want to cut through all the flannel and concentrate on exiting if they supported
to sway things? in the public's mind or not, if you look at the polling of her herself against her rival, that plays in her favor? joe: she has been the least worst person to deal with brexit , but that is by no means a ringing endorsement. the public generally are sympathetic to her, even if they think the government is doing a bad job. anna: does sympathy a good thing? joe: better to have sympathy than not, but she needs some form of momentum behind her. she needs to make it clear that this is the deal, and we are going with this and the people should support it. it is like moving a supertanker. it is very difficult in much the same way negotiating with the european union is. anna: if she wants to set this supertanker out to see and had it towards march of next year -- head it toward march of next there seems to be increasingly talk of not just one vote in the commons.
maybe it comes back for another. is that the kind of process we might follow? joe: it is difficult to say exactly what will happen. i imagine one likely option is that we fail on the first hurdle in the country does not vote to support the deal in the first instance. then, some form of concession is made. whether that is real concession or effectively for show remains to be seen. the second or third vote convinces the commons to come around and that may lead to public opinion. anna: deltapoll measuring emotional resonance about certain issues. what is it that our emotions tell you we think about brexit? joe: emotional resonance is an important idea, because just agreeing with something is one thing. whether it really connects in your heart is important. when it comes to brexit, what connects to people is this idea
of control, taking back control. the key question will be -- will theresa may's deal and the public around it, will she be able to convince people this deal gives them control? anna: that is that would draw all agreements you have stumbled around. joe: that is where the difficulty would arrive. -- arise. the ecb published accounts of its october policy meeting a few minutes ago, acknowledging " uncertainties and fragility's," but saying incoming data is still consistent with broad-based growth. theresa may is speaking. may: the terms for our orderly exit from the e.u. a political declaration setting out the framework for our future relationship. last night in brussels i had a
good detailed discussion with president juncker, in which i set out what we needed to deliver for the united kingdom. re-tasked our negotiating teams -- we tasked our negotiating ands are working all night that has been agreed between the european union and united kingdom. i just updated the cabinet on progress and will be making a statement to the house of commons later this afternoon. this is the right deal for the u.k. and delivers on the vote of the referendum. it brings back control of our borders, money, and laws, while protecting jobs, our security, in the integrity of the united kingdom. the agreement is between the u.k. and european commission. it is now up to the 27 leaders of the other e.u. member states to examine this agreement in the days leading up to the special e.u. council meeting sunday. i will be speaking to my
counterparts over that time, including meeting the chancellor of austria at downing street later today. last night, i spoke to the spanish prime minister pedro sanchez and i'm confident on sunday we will be able to agree a deal that delivers for the whole u.k. family, including gibraltar. on saturday, i will return to brussels for further meetings with president juncker what we will discuss how to bring this process to a conclusion in the interest of our people. the british people want this to be settled. they want a good deal that sets us on course for a brighter future. that deal is within our grasp, and i am determined to deliver it. theresa may speaking outside number 10 downing street , ending with the same line she used earlier on this week, "i am determined to deliver it."
maybe that is supposed to resonate with the brexiteers in her party who failed to get the requisite number of votes to unseat her. she used the word "control." said thishts, as she is an agreement between the commission and u.k.. it now has to be ratified in brussels. i do not know what the emotional resonance he will be in that you 27. -- that e.u. 27. joe: everyone wants to make it -- theyficult, as if it fought for every last thing they do not want it to appear it will be an easy process that any country can go through, and britain fought tooth and nail for every possible thing. anna: joe twyman from deltapoll. gabbanap on -- dolce &
acknowledging uncertainty and fragility, but data is still consistent with broad-based growth. bloomberg is our european economy reporter. what are your big conclusions from this account of their october meeting? , what wenclusions are have heard from the ecb is fairly in-line with what they have been saying publicly over the last few weeks. if we were having the fragility, the uncertainty, but the broader picture and underlying strength of the economy is doing ok, obviously, it is hard not to agree with the ecb. the third quarter was affected by a number of temporary factors. in germany, car production has been pulled back because of the switch to new emissions
standards. that affected production but they were expecting the recovery in growth in the fourth quarter. the recommendation from the chief economist has been, we need to look through the noise of the data. obviously, they will be able to sit through that noise when we meet on december 13 -- when they meet on december 13, and they have their own projections that will give them more clarity and a broader view of where the economy is going. they will also have a projection for growth and inflation in 2021 that should allow them to make a more informed decision. at this stage it seems to be purchasesend qe net but qa will stay in place. anna: let me ask you about tltro 's, liquidity and cements. they got up -- instruments.
they got a lot of talk but i do not see details on the minutes about that. is there not much substance? piotr: that is quite interesting that it actually has not been mentioned, although as you mentioned, draghi actually said it was brought up, maybe not discussed in detail. we have heard from a number of policymakers, who have said this is an instrument that has to be considered or discussed. it is obviously an important instrument, as you mentioned, for italian banks. loans willyear cheap start to mature in 2020. it is more than 700 billion euros that will start gradually maturing, and that is probably the time when we will see rates going up. so for banks, especially italian banks which are facing or maybe
costs,higher refinancing this is a big question for them whether the ecb will decide to offer a new round of cheap loans. for the time being, we cannot really tell when we will get more clarity. anna: there is those cheap loans from the ecb. thank you. joining us from frankfurt with the latest on the ecb. let's talk retail. it is thanksgiving. china has been slapping down dolce & gabbana and pulling thousands of goods from its website after the italian fashion house posted videos the chinese deemed offensive. it is the latest backlash against the western company's marketing in china. consumers spent almost one third luxury in china is important.
they attributed some of the problems to hacked social media accounts. joining us is charged -- charles allen from bloomberg intelligence. they are not the only company to make this kind of cultural missteps. charles: it was a very strange one, suggesting people could not eat spaghetti with chopsticks in a country that has loads of noodles as a pretty obvious faux pas. ,ll of these sort of things they can happen and they cannot happen and everything has been withdrawn. i think the normal pattern is that the stuff will go back on sale sometime next year, and they will have to rebuild slowly. if you have actual physical stores, it can be much worse. market had to effectively close its stores in china because of the boycott. anna: it is not just western
companies, other asian companies as well. charles: when there is an argument between china and korea or china and japan, these things can happen. anna: let me ask you about other retail things because this is a big time of year. black friday looms large on the horizon. how would you assess this against the backdrop? charles: it seems to become more and more important, and it is a pattern that more online shopping seems to be more if ends because of more promotions. online retailers need to give people a reason to go to the website, and the easiest one is to create a money off promotion to try to get you to go to the website. i think what we have seen is the physical retailers have gotten much smarter encountering that. they will not just pretend like online is not there. there are a lot of promotions. the thing that will
differentiate make a profit out of it, and those who are sort of just joining in and discounting for the sake of it. anna: it used to be black friday and the stores and cyber monday was the online version. is that artificial divide gone? charles: i think so. but online retailers basically made the whole thing last about two weeks, because logistically if you have all the orders in 24 or 36 hours, it is just a nightmare in a warehouse. it is bad in stores, but it is much worse logistically. cyber monday was a brief moment in time when people did not have a decent online connection at home, so had to go into the office to buy stuff. anna: sort of quirky and seems strange and old-fashioned. we talk about black friday and should not forget that there are many other retail events.
to what extent is black friday being pushed out by the likes of amazon prime and singles' day in china? charles: black friday never got to china. well, it probably has a little bit. i think what i'm trying to say is that online companies need to create events, so amazon created prime day. in france, french online retailers conspicuously avoiding amazon and creating french days as promotional events. black friday just gets bigger and bigger. if we were to look at the john lewis sales for the department stores come at the black friday week is their biggest single week of all. it is to be the week before christmas. anna: for every one who doubts it, thank you very much. charles allen talking all things retail. let's turn to the oil conversation.
the u.s. justice department is investigating antitrust, aimed at reining in opec's control of the oil market. joining me is julian way. -- julian lee. outline what is the washington angle on oil. julian: this has been sort of a long-running attempt to try to control opec, break opec up, apply antitrust laws to opec. this has been for decades. now we have a situation where there is bipartisan support in both houses for expanding the sherman antitrust act to effectively encompass opec. for the first time, it really president who might actually support this. in the past, presidents have
tended to block this kind of move, and it has never really moved forward. the feeling is that this time around, there might be a president in the white house who will support it. anna: yesterday, president trump tweeting, thinking saudi arabia. he did not seem to find argument with the saudis. julian: this will be the big question mark. we clearly have president trump seeking to report the royal family in saudi arabia, seeking to support mohammad bin salman, even after the fallout from the assassination of jamal khashoggi. the relationship to president trump is much more important than holding mohammad bin salman or anybody else to account for this. ,his does really ways questions will he go ahead and support -- raises questions, will he go ahead and support an act aimed somehow at raking up opec, which
will do -- breaking up opec? anna: why have other presidents decided on a course that has not picked this fight? julian: i think they felt that while opec is clearly acting to keep oil prices at a certain to thethere are benefits group acting the way it does. the way it keeps prices up is by not producing as much as it could do. there is a certain amount of spare capacity in the world that can be used to compensate for any sudden loss of supply. we saw this at the time of the iraqi invasion of kuwait in 1990. overnight, we lost 5 million barrels a day of supply. if opec had not been acting as opec and did not have spare capacity, we would not have been able to cope with that loss of supply. 2003, when u.s. led
forces went into iraq, we lost oil supply then. it was other opec members who had been holding back on supply who were able to step in. and gobreak opec up after them when they are holding supply, there is no cushion. anna: bloomberg's julian lee on this oil related subject. hour, jamesis next will be joining us. we will get his latest on the twists and turns in brexit. this is bloomberg. ♪ [ phone rings ] what?!
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anna: hero are the top stories we are covering from the bloomberg and around the world. a brexit draft deal, the u.k. and e.u. are said to have agreed on a deal to keep close economic ties after brexit. south africa's central bank is likely to raise rates in moments. the currency gains ahead of the dollar. nissan's board dismisses carlos ghosn as chairman. he may face 10 years in prison if convicted. a warm welcome to the program. we are just getting breaking news coming through from johannesburg. there is a lot of detail in here. they are giving us a lot of detail about the reserve bank's assessment of the economy. they see the gdp growth outlook staying challenging. they see risks to gdp,
moderately to the downside. solve the economic challenges, according to the mpc, and see the rand as volatile. cpi ccb i upside risks -- risks to the upside. they lowered the 2018 gdp growth forecast and our commenting extensively in this statement. i'm trying to find what they do with interest rates, so we will get to that deal. look at what is happening on the equity markets. if you are long, you might not be thankful, stocks in europe down 4/10 of 1%. a broad-based selling happening across the european equity markets without volume from the united states. without the stateside participation, we cannot keep going higher. the european picture was fairly gloomy. the asian picture was more
mixed. nymex crude down by 1/10 of 1%. twists and turns in brussels and london. we have some sort of free trading agreement between the u.k. and the commission. now is to get the heads of state of the 27 to get on board. let's get to johannesburg, paul and can tell us what the south africans have announced. paul: they have not quite announced their decision yet. the governor is speaking in pretoria at the moment. markets are very much split on what decision the mpc will take today. it is all must a 50/50 split
between those who think the south african reserve bank will who are those forecasting a 25 basis point 6.75%. terminal, notthe making much of a change in the forecast for inflation this year, but next year predicting inflation of about 5.5%, towards the upside of the target range of 3% to 6%. they do not seem to be too worried about inflation in the immediate term. it is in the longer term where they see the most upside risk. anna: talk about inflation, because i had a conversation with one of our colleagues and he was saying he expected a hawkish hold. i'm glad you have told me they have not decided yet, because i was scrambling to find it among the news flow. he said lower oil prices mean
there is less of an inflation problem for south africa. paul: that is something the central bank will probably see is a welcome development, the recent plunge in crude prices. that is something that is going to ease pressure on the rand. that is not a currency targeting the central bank and does not look for value in the rand. it does look at what impact weakening or strengthening of the rand has on inflation. that recent fall in oil prices is going to ease pressure on the currency, that is down more than 10% against the dollar this year. anna: thank you very much for the insight, paul wallace in dubai. i think i said something different earlier. thank you for the insight on south africa. joining me now on set is james aberdeen investments.
thank you for joining the. we are waiting for a decision from south africa as they are juggling with the impact from higher oil prices, juggling a very high unemployment rate, incredibly high unemployment rate over 20% i think. a lot going on in south africa, and they have occurrence -- a current account deficit which means the dollar had been a headache for them. james: a pretty nasty problem they have got. they have got twin deficits, weak and weakening growth. ,hey have had higher oil prices so a stagflation environment with external influences on their future. the central bank and markets believe they are trying to do the right thing, but they have to have options over the short
to medium term. i have been short on the rand this year and i would be on that side of the debate, looking for an opportunity to buy dollars potentially next year when this washes through the system. the market seems to want to run with a u.s. weaker u.s. dollar. anna: you do not believe that catching down to the growth outlook and the dollar weakening. you think the dollar will get strength but the market is overestimating the economic downturn, what happens at the end of fiscal stimulus. james: it is not like it is government spending on infrastructure or something whereby there is a notable impact because we are talking
about something which has a multiplier attached to it. while consumers feel cons the confident, bottom line is on ongoing stimulus. the market somewhat overestimated how it would rolloff in a cliff like way and overestimated the strength of the china and eurozone economy. anna: it is thanksgiving so perhaps we should be giving thanks, but i am drawn to the gloominess in your note with the biggest risk to the economy being debt and more debt. we talk a lot about the credit markets and whether we are seeing in high-yield and investment-grade, anything other than idiosyncratic risks or if it is more of a problem. i am fascinated by this credit spreads chart, which puts in long context the two-year high we have reached in credit spreads. it is nowhere near those elevated rates we saw in 2008 and 2009. how worried are you about corporate debt? james: pretty worried. this does not surprise us. we have been a bit surprised about how late in the year this occurred.
it is all part of central-bank policy. we have not been able to avoid it as a driver markets for two decades. they are pushing asset prices further down. that is definitely the most important factor. when you throw in the fact it have idiosyncratic bonds going on, that makes for a fairly nasty mix. greatn ig credit is not in the market tends to be one way and one way only. there is not really any in between. the psychology of investors changes. i think we are now starting to see that play a part in ig credit. they are obviously does it is a story for active managers to do their research and understand the balance sheets are most strained. broadly speaking, the entire market needs to reprice because the risks that you run by owning
credit are countercyclical. anna: are the risks that we see in the corporate credit sector about companies not being able to repay their debts or not being able to roll over those debts at rates you can afford? james: it is both of those things. it tends to be the case it is not necessarily the weakest credit that goes first. it tends to be where the confluence of not a particularly strong credit and a pinch point in terms of rollover in the market. it is difficult to forecast where that will occur. we are talking about a volatility and trend of widening spreads. one: so you hear idiosyncratic name and it becomes systemic? james: that can be part of the story. we are seeing pe, we are talking about that hitting the high-yield market. it has the potential to be one of these potential flashpoints.
and i wouldhsayer not claim that i know or can forecast what is going to play out. i am looking for vulnerability, not triggers. you have a lot of debt and rising interest rates. you have a much reduced and continually reducing central-bank stimulus. the price of those assets is wrong. put: i hope you have not off everyone their thanksgiving turkey. james athey is sticking with us from aberdeen standard investments. let's check in on the bloomberg first word news. sebastian: the board of nissan made it official, dismissing carlos ghosn. he was arrested in japan on allegations of financial misconduct. the board also dismissed director greg kelly who facilitated the misdirection of income. department causes
questions of the alliance. the e.u. and u.k. have agreed with their relationship will be like after brexit. it is based on a freebase area -- free trade area. they will work on the so-called backstop to keep the irish border open. china is denying the u.s. allegations it conducts state run campaigns of intellectual property and technology theft. they say the trump administration is basing it on hearsay. said beijing is stepping up cyberattacks on american companies. 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. i'm sebastian salek and this is bloomberg. anna: thank you very much. 1:12 in london. we will stick with u.k. themes because we will talk brexit.
♪ anna: welcome back, everybody. this is a special edition of "bloomberg markets." a rate decision has come through central-bank,can raising the interest rate to 6.75%. delaying the interest rate could affect -- this is coming from the governor over there. we continue to watch this. three mpc members favored an
increase, three unchanged. there was some division of opinion. south african rand, a big move coming through on that currency, a 1% move. the u.s. dollar is a little bit weaker and the south african rand gains on that news. if you are interested in what going on -- what is going on in south africa, you can watch the news conference on live go. the u.k. and european union have agreed to the final bit of their brexit deal, setting out a vision for close economic ties in a draft that handed theresa may some key political winds. may, making a statement, had these words for outside 10 downing street. may: i had a detailed discussion with mr. juncker and i laid out what the deal needed to deliver for the united kingdom.
we tasked our teams to continue working overnight, and the text of the declaration has been agreed between the european union and united kingdom. anna: joining us now with more is bloomberg's maria tadeo in brussels. maysa making -- theresa making it clear this is a deal between the u.k. and european commission and we have to hear what the leaders of the 27 will say. maria: we still need to get that approved by 27 member states. this issue over gibraltar has become a major sticking point over the last 24 hours. theresa may has repeated this one line and has essentially been saying it for a week. this is the right deal and she has delivered on what the people voted. on sunday, it will be down to u.k. parliament to get this done. i think she really thinks she
has got a deal. 10 hasnt here at number been the deal does not focus so much on the withdrawal agreement. the backstop has been a toxic issue for a while now, but look at the future, trade, because cooperation -- the close cooperation with the e.u. in the agreement -- which needs to be approved by member states -- it is big enough to allow her to say that. when you look at the tiny details, you see volatility in sterling. some say it may not be enough to get it done in u.k. parliament, but she thinks it is enough. anna: she has something she can sell, including a determination to replace the backstop. it was so talked about last week and dominated the conversation, and she has been keen to move things on about this future trading relationship. she might have moved the
narrative and that helps her try and build some support in the commons. maria: right, because the facts are unchanged and the future relationship is not binding. the withdrawal agreement is binding, and the european union has argued there has got to be a backstop, legal and fully operational by the time we get to brexit day. that has not changed. can you build up a narrative in a ways prop up may that it is her deal or no deal, or as she has been arguing, no brexit? there will be very" operation and a free trade agreement -- very close cooperation and a free trade agreement. there is a realization that there was a vote that has to be respected. the language throughout the document says both parties have to be in agreement. i think it is broad and big enough for her to create an idea that this is the best deal they
will offer, and shoot it pass parliament. that is the key. anna: we will see if it will be enough to change the views in parliament because there were very few voices in her favor. we have also seen how much the issues of gibraltar and fish come back. still with us on set, james f the of aberdeen standard investment. your thoughts on the latest twists and turns of brexit. we saw the pound surges little bit and we have a little more clarity, another step along. enough to get excited about u.k. assets? james: i am not sure "excited" is the word. i still think it will be a typical european fudge and that is what we are seeing. a legally binding document is unacceptable to everyone in the u.k. and a document that has no legal standing. this will need people being
dangled over the cliff and if you are a brexiteer, no brexit or if you are a remainder, the fact of a no deal brexit would be scary enough that enough people will crack and vote for this agreement. broadly speaking, i expect that. it may be that we have to cross the pond for silver. maybe there's something for the dup in terms of money. sounds like they are not popular in northern ireland at the moment, so that is a win for theresa may. there are things she can do politically, but it probably has to fail the first or second time. anna: that plays to the idea that this is not something that is done before christmas in the commons and maybe takes a few goes before it gets the approval. james: david davis a few days ago said as far as he is concerned, the writing would just go to parliament now. i agree with him, because if you
a dench -- if there is no time for, there is no scope going back to the e.u. to get a further win to placate the people in parliament voting against it. all of the pressure is on parliament. that helps it get through but in a way that it is less accessible. anna: talking about the dangers of no deal brexit, this is looming large on radar
james: the island does all of its trade with the u.k. and u.s.. the consensus opinion of how damaging a no deal brexit or brexit in totality would be for the u.k., and how relevant for the e.u. has been overplayed. away from the politics -- anna: away from the politics -- which is impossible, it does seem to be a pragmatist, business friendly brexit. a lack of fraction, i suppose -- friction, i suppose. james: that was necessary. you have a huge number of significant companies that would be adversely affected if we had a disruptive period of trading with the e.u. in germany, a lot of manufacturers sell their goods over here. while i understand the percentage of gdp argument, you have to look at the net number, not the gross number. it is a deficit for us and a surplus for them. what theresa may has done very well and should be commended for his trading the middle path between the -- is dreading the middle path between the extreme argument. anna: you have to scare people on both sides of the base, talking about the dangers of no brexit and the dangers of no
deal. let me just ask you about the bank of england, because this chart shows how the market reassessed its expectations, certainly last week brought down its expectations with the bank of england moving higher on rates. if we get a deal, you have to factor in higher rates expectations. james: the bank of england has become more hawkish of late as they come to realize the supply shock nature of what we have seen in terms of the post-referendum response and inflation is at a much lower rate of growth. now we have fiscal tailwinds or less fiscal headwinds then we have been used to. we have above target inflation. the textbook is screaming hike. those forecasts are based on a nondisruptive brexit. once we get that concern, the banks have to get on board. anna: i do not know they were thinking about brexit when the
down by half a percent with concerns around trade tensions between the u.s. and china. ftse 100 down. part of that is the strength in the pound. driven outat being of the headlines out of brussels. up by .7%.l the crude is up 1% which is a big move compared to recent days. currency african seeing a gain from the central bank. our firstk in with word news. company -- ese for paves the way
consolidated power. they also removed greg kelly. u.k. in the european union have agreed to the final bid of their brexit deal. may and theresa political win to allow for the u.k. to stop free movement of people. theresa may now has to convince parliament. rising tensions between iran and the u.s. over renewed sanctions. --craft carriers [indiscernible] he singled out the uae. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more
than 120 countries. this is bloomberg. anna: let's talk about italian politics. down on thet back budget clash with the european union. in an interview, francine lacqua felt the chairman how he the standoff would end. >> how it will end? we will say. it does not help the economy. it is increasing the cost for taxpayers, for companies that need to issue bonds, increasing the cost for banks, which also -- in the markets. in 2011, the rise in the spread and lead to a credit crunch
will slow down the economy. francine: if it is a real, credit crunch, are you worried that the standoff could impact the ecb's ability to exit from the e.u.? >> frankly, i think it is too late. has -- on the whole euro area. it will not change its policy for one country. ecb has notfrom the affected the other rates. therene: do you worry if is a standoff and it becomes uglier, italian voters will become skeptic -- skeptical? e.u. has hadg the
to gain some popularity. but italians are getting worried about the economic situation. politically, no one can really stop the strategy. with theeen this tender for italian bonds for households. it has not gone that well. in the end, italians, you know, are careful about where they invest their money, and they may not fully trust a strategy. in the short-term, it makes them that they are trying to finally reach and achieve something in favor of italy. but that is very political. says bonds are out
of the government's control. that cannot be right. every time they say something anti-euro, the yield, the spread with the german bunds rise. will the italians take issue with that? in a paperlished showing a high-frequency basis, and how statements are really impacting the bond spreads. mario draghi has said this several times. confronting,ch, threatening, is in fact damaging the markets. needine: does it infrastructure spending? does it need to grip the deficit to grow? experiencemean, the of the other countries shows
italy's reforms and investments. in both cases, it has been buried difficult. -- very difficult. they adopted a new tender law, which is making it possible for companies to work and has been drafted by judges. they are trying to change it, but there is an additional issue on which infrastructure will the government -- ande is clearly a division two different viewpoints. losthave already
northern italy is confronting big infrastructure. clearly, there is potential within the government. the other infrastructure reforms in italy with the government have totally unfolded. growth will -- all those left testified from to bank of italy to sicily the fiscal accounts, say the numbers just don't match, they don't work. bloomberg'sas interview with francine lacqua.
italy-germanye yield spread. over 300 basis points is where we stand right now. exertsexpect that this pressure on the italians to change course or will they have to go higher to do it? james: they have to go higher, and to some degree, the damage has been done. draghi's whatever it takes statement, italian spreads levels,e in in tight and nothing has been done. has been handed down from central europe to all of to put theirrder fiscal house in order. that has not generated growth for obvious reasons. what the italian parliament is trying to do is going back -- is trying to go back to the idea of
austerity. if debt to gdp is what you are trying to stabilize, you cannot slash away fiscal stimulus. anna: they need both. james: the reality of structural reform is it is a short-term cost for a long-term benefit. if we are looking at the u.k. in the early 1980's, dramatic structural reforms paid dividends all the way to tony blair's premonition, but the cost is very high unemployment and inflation. devaluationad a 75% when they were instituting reform. anna: it makes people make conclusions around globalization. james: exactly. there is a political argument.
the internal devaluation is functionally unacceptable. the spread has grown wider. there is a subtle distinction and you have to be in the middle somewhere. anna: it depends on where you want to spend the money on. let's move on for a moment. will it be a tough year? james: very. anna: is that because of a big focus on trade? james: the have been tapering over the eurozone with policy. that has given the illusion of economic growth. the reality is the region is very, very weak and far to reliant -- and far too reliant on --
the imbalances across the region have been laid bare here. into a't want to go recession and negative territory on the balance sheet. anna: james athey, thank you very much for joining us on thanksgiving for this special edition. gone with the wind. dismissed carlos ghosn. more on the story next. this is bloomberg. ♪
♪ anna: i am anna edwards. this is a special edition of "bloomberg markets." our friends are stateside. time to look at the biggest stories. >> u.s. consumers will be hit hard to president trump goes ahead with tariffs from china. china has a large market share products. 93% of u.s. imports came from china last year. in california, a group of malibu residents is suing edison over
that wildfire. the fire was ignited -- they claim the fire was ignited by the crew's equipment. fracking drillers -- ,ccording to service providers they could reduce the number of rigs drilling. overwhelmed the region's pipelines. that is your bloomberg business flash. anna: thank you. the board has voted to dismiss on chair of carlos ghosn claims of financial misconduct. of theised the future renault alliance he put together. latest here.
we got these headlines within the last couple of hours that suggest the board has made a decision for the renault board. >> absolutely. true surprises in this decision. we expected carlos ghosn to be outed, but the surprise is that renault board- would vote tosan out him. the chairman of nissan was not replaced. will is a committee that -- by contrast, you have renault that has nodded -- that has not decided to dismiss carlos ghosn. did not havehey
enough information to make a decision, and he is officially working at the complement -- working at the company. anna: we understand the removal pays the way for his protege. tell us more about who will be in power in the future. tell.is hard to all of us expected -- would be named chairman, and that was not the case. the board members of nissan would propose a few names. there is a person who renault will weigh in and decide. and now, the second question is, who will lead the alliance? carlos ghosn was the leader and owner of this complex partnership, so it is an open question. anna: it is interesting how the of what thisful does to the alliance, and they
have been saying the alliance with the largest shareholder renault remains unchanged. they clearly want to make out that the alliance is bigger than one man. >> yeah, absolutely. i think both sides, including the french and japanese governments have repeated they wanted to keep the alliance consolidated. was has changed is laguna pushing for a deeper partnership according to people familiar with the matter. they wanted to unveil this in february. this means this is put on hold for now. although, everything -- everybody is saying, they loved the alliance and it generated synergies and were very intertwined and both companies may car parts for each other.
anna: this is a period with the car industry is under a lot of pressure with trade tensions. theses one of the reasons alliances matter so much. >> absolutely. sales are key right now and then industry and automakers are rushing to make more zero emission, electric cars, investing in autonomous driving, and facing rivals like google and apple where they are investing millions and autonomous driving. and carlos ghosn wanted to save money and grow faster and to maintain huge partnerships like with the alliance. think -- [indiscernible] getting a big agreement with the alliance that turned out tin mining cars last year is really a big deal. anna: thank you very much for
♪ anna: this is "bloomberg markets." a special thanksgiving edition that from london. i'm an edwards. if you are -- i anna edwards. -- i am anna edwards. if you are celebrating thanksgiving, congratulations to you. now singing ag is different tune about consultants that researched the company's opponents. she admits she received information about the social
firmrk from a consulting that investigated george soros. joining me to unpack all of that is alex webb. --x, the global audience what has sheryl sandberg said in that announcement? alex: they really dug into some of the steps that they took from public relations, and there was one element that was controversial that they had hired a firm to dig up dirt on george soros. then the company essentially placed fake news into the system about george soros, saying he was launching a dirty campaign against facebook. the chief at the time said it was not true. they said the report was misleading and now she is saying from it transpired. she said they were doing it, but
we did not ask him to do exactly that thing. frankly, it is the typical facebook playbook where you deny it and say you do not know enough. that is her job and she should know this stuff. anna: this isn't where the problems stop for facebook. an interesting opinion piece this morning, talking about the potential breakup of facebook. what is the latest on this? alex: our colleague did a piece saying a breakup of facebook is something that should absolutely be considered. it is something which, when you look at the documents with a mobile messaging like with facebook messenger, instagram, that is a huge pool of market share they have. i do not think breaking those products up from a consumer perspective will solve the problem. the real issue is with the advertising staff.
that is how they make their money. advertising online is incredibly complex. there is a vastly complex ecosystem with ads and facebook phones, from the moment it pumps that into the system when hitting a consumer, facebook owns a huge amount of that value chain. anna: you think there would be more value for a breakup of people as that of products? alex: yes. algorithms did against each other in order to place their at in front of someone. like coke against pepsi. that stuff is really lucrative because facebook owns the selling and buying process. anna: good to get your thanks -- good to get your thoughts this morning. alex webb joining us with the
latest on facebook. coming up on "bloomberg you -- weweibo take will take you through the next hour of programming. lots to talk about when it comes to the pound. the pound has been on a wild ride this morning, or this afternoon in london time. this is a bloomberg on this thanksgiving. ♪ thanksgiving. ♪
>> here are the top stories we are covering from bloomberg and around the world. the pound is surging as a european commission drafts a new brexit deal. theresa will address the house comments in the next hour. ghosn gone. about carlos ghosn leaving the alliance with renault. there is some flexibility with rome's battle with brussels. despite the fact we have a thanksgiving holiday and light volumes on equity markets, we are seeing action on asset prices. the pound