France Budget Crisis Deepens as Investors Head for the Exit

>> LIVE FROM BRUSSELS THIS IS BLOOMBERG "DAYBREAK EUROPE." I’M STEPHEN CARROLL WITH YOUR TOP STORIES. TREASURIES HOLD GAINS AS EUROPE’S FIRST SELLOFF WILL PREVIEW A DOUBLE DOSE OF ECONOMIC INFLATION. THE PENTAGON IS SET TO DEPLOY ANOTHER AIRCRAFT CARRIER AND MORE THAN 10,000 TROOPS TO THE MIDDLE EAST AS PRESIDENT TRUMP WARNS AN ESCALATION IS POSSIBLE AFTER THE MIDTERM ELECTIONS. AND ANTHROPIC IS SET TO GO AHEAD WITH THEIR BLOCKBUSTER I.P.O. BEFORE THE THANKSGIVING HOLIDAY. GOOD MORNING. HANG SENG INDEX BACK OPEN AFTER YESTERDAY’S HOLIDAY ASK SLIDING AS A RESULT. THOSE HIGHER BORROWING COSTS WEIGHING THERE. EUROPEAN STOCK FUTURES AFTER THE SLOUCH WE SAW IN EUROPEAN EQU EQUITIES YESTERDAY AMID THAT BOND SELLOFF. A FAIRLY STABLE OPEN THIS MORNING AND A BIT OF POSITIVITY ON WALL STREET AS WE LOOK AT THE ALL IMPORTANT JOBS DATA LATER. OIL PRICES HOLDING ON TO MUCH OF THEIR TWO DAYS OF GAINS. BRENT CRUDE IS STILL AT OVER $102 A BARREL THIS MORNING. THE EURO DROPPED BY 1% AGAINST THE DOLLAR AMID THE BROADER MARKET SELLOFF. AND 10-YEAR TREASURIES, WHICH SAW A HAVEN HOLIDAY YESTERDAY. WE SEE THE 10-YEAR YIELD IN MORNING HOVERING AROUND 5 AT ANY TIME 25%. EXPECTING AN UPTICK. THE U.S. JOBS REPORT. AND THE HEADS OF THE GERMAN, AFRICAN-AMERICAN, AND FINNISH CENTRAL BANKS. THAT’S ALL TO COME. LET’S GET YOU SET UP FOR THE DAY AHEAD. ♪ ASIAN BONDS ARE TRACKING A RALLY STATESIDE BUT STOCKS ARE STILL UNDER SOME PRESSURE THIS MORNING. LET’S CHECK IN WITH WINNIE HSU IN HONG KONG. WINNIE: GOOD MORNING. WE WERE SEEING ASIA BONDS HERE GAINING ACROSS THE REGION FROM JAPAN TO AUSTRALIA TO NEW ZEALAND, TRACKING THE MOVES WE SAW IN THE U.S. TREASURIES OVERNIGHT. INVESTORS ARE ROTATING INTO THESE SAFE HAVENS GIVEN THE SELLOFF WE SEE IN THE EUROPEAN BONDS AND WE CAN SEE THAT HERE. THE LIKES OF JGB GAINING. WE HAVE HONG KONG COMING BACKDROPLINE AFTER THE HOLIDAY YESTERDAY. THE BENCHMARK HERE DOWN ABOUT 2.5%, HAVING ITS WORST DAY SINCE MARCH. A LOT OF THE FACTOR WEIGHING ON SENTIMENT. HIGHER YIELDS RAISING THE BORROWING COSTS OF TECH COMPANIES PLUS THE UNDERWHELMING RESULT QUILT COMES TO THE NEW STILL LULLS PACKAGE FROM BEIJING BUT WE’RE SEEING FINANCIALS LEADING DECLINES WITH THE LIKES OF HSBC AND CHARTER BOTH DOWN ABOUT 5%. HIKER YIELDS ARE GOOD FOR ASIA FINANCIALS BUT AT THIS POINT INVESTORS SEEM TO BE MORE WORRIED ABOUT THEIR CREDIT RISK AND, THAT PLUS HOW WE’VE LEARNED THAT THERE POTENTIALLY MIGHT BE A TAX HIKE WHEN IT COMES TO BANKS FROM THE U.K. GOVERNMENT SO THAT IS ALSO WEIGHING ON THE SENTIMENT. WE LOOK AT THE BROADER ASIA MARKET. OVERALL THE HIGHER YIELDS, ELEVATED OIL PRICES, GEOPOLITICAL RISK AND A BIT OF A CAUTIOUS MOVE AHEAD OF THE U.S. JOBS DATA ALL WEIGHING ON ASIAN STOCKS. WITH THE ASIA HEADED FOR ITS WORKWEEK SINCE JULY. THE TOKYO C.P.I. NUMBERS SAW A SHARP INCREASE. THIS IS STILL PUTTING THE BANK OF JAPAN ON THE TRACK TO RAISE RATES FURTHER. YEN HOVERING JUST BELOW THAT 158 LEVEL AGAINST THE DOLLAR. BACK TO YOU, STEPHEN. STEPHEN: WINNIE HSU, THANK YOU. TREASURIES ARE HOLDING ON TO GAINS AFTER THEY BOUNCED BACK IN YESTERDAY’S SESSION. WORRY OVER FRANCE’S DEBT. LET’S BRING IN OUR MARKETS EXECUTIVE EDITOR FOR MORE. MARKETS CAME OFF DURING THE PEAK OF THEIR SESSION YESTERDAY BUT IS THAT PRESSURE ON EUROPEAN DEBT AS STRONG GOING INTO TODAY? >> IT’S GOING TO STAY STRONG. WHILE TREASURIES RECOVERED YESTERDAY, FRENCH LONG END BONDS FINISHED NEAR THEIR LOWS AND FUTURES ARE ON THE. SO SIDE STILL TODAY. WE HAVE THE PRESIDENTIAL ELECTION NEXT APRIL AND IT’S HARD TO SEE THE STRESS ALLEVIATING BEFORE THAT. THE FUNDAMENTALS FOR FRANCE ARE VERY BAD. THEY HAVE A GROWING DEBT PILE. THEY’RE TALKING ABOUT CUTTING THE BUDGET DEFICIT. THE E.U. TARGET IS 3% SO THEY STILL HAVE A LARGE DEBT DEFICIT WITH A GROWING DEBT PILE. THE FUNDAMENTALS ARE JUST GETTING WORSE AND WORSE FOR FRANCE. NEVER MIND THE INFLATION PROBLEM. I DO THINK THAT FRANCE WILL STAY UNDER PRESSURE INTO THE WEEKEND. LAST TWO BUDGETS WHICH THEY’RE TRYING TO PASS AT THE MOMENT TOPPLED THE GOVERNMENT ULTIMATELY. SO THAT’S THE RISK FOR THAT BUNT. I THINK WE’VE SEEN MOST OF THE PAIN OVER THE LAST MONTH OR TWO BUT NOT THE EXTREME JUST YET. I EXPECT IN BUDGET TO ULTIMATELY MASS BUT I EXPECT IT TO PASS VIA MORE STRESS ON THE FRENCH BOND MARKET TODAY INTO NEXT WEEK. >> MEANWHILE, WE’VE HAD SOME MIXED ESTIMATES OUT OF THE FED. LORI LOGAN CALLING FOR AT LEAST TWO MORE RATE HIKES BUT TWO OTHERS SAYING POLICYMAKERS NEED MORE TIME BEFORE MOVING. HOW IMPORTANT IS TODAY’S JOB PRINT GOING TO BE FOR THE OUTLOOK FOR THE FED? >> IT’S A BIG DAY AHEAD OF US. OBVIOUSLY WE CARE BUT IT’S NOT GOING TO BE THE ONE THAT REALLY DISEASE THE FED. IT MATTERS VERY MUCH FOR TODAY’S SESSION. JOBS AREN’T THE BIG STRESS IN THE U.S. IT’S INFLATION SO THEREFORE IT WOULD TAKE A REAL SHOCK TODAY FOR US STILL TO BE TALKING ABOUT IT BY THE MIDDLE OF NEXT WEEK. IN THE VERY NEAR SHORT TERM, THE BIGGER MOVE IN THE MARKET WILL BE IF IT IS A STRONG PRINT TODAY. THAT’S BECAUSE OF WHAT’S HAPPENED IN BOND MARKETS. BOND MARKETS REALLY DON’T WANT TO SEE MORE HOT DATA. MORE SUGGESTIONS THAT THE U.S. ECONOMY IS HOLDING UP WONDERFULLY WITH THESE HIGH YIELDS AND NEEDS EVEN HIGHER YIELDS. BLOOMBERG ECONOMICS ANNA WONG IS ARCING FAR SOFTER PRINT SO I DON’T THINK THERE’S MUCH HEDGE AHEAD OF THE NUMBER. STEPHEN: THANK YOU VERY MUCH FOR JOINING US. A U.S. OFFICIAL SAYS THAT THE PENTAGON IS DEPLOYING AN ADDITIONAL AIRCRAFT CARRIER AND 10,000 SAILORS AND MARINE TONIGHT GULF. THE U.S. IS THEODORE ROOSEVELT IS SAID TO HAVE LEFT ITS SAN DIEGO HOME IMPORTANT TO TRAVEL TO THE MIDDLE EAST. AFTER PRESIDENT TRUMP AGAIN SAID A RAMP-UP IN MILITARY ACTION IS POSSIBLE AFTER NEXT MONTH’S MIDTERMS. LET’S BRING IN JOHN FOR MORE ON THIS STORY. HOW SIGNIFICANT ARE THESE MOVES FROM THE U.S.? JOHN: THE IDEA IS TO GIVE TRUMP MORE FIREPOWER AND FLEXIBILITY IN THE REGION. THREE CARRIER GROUPS IS WHAT THE U.S. HAD AT THE START OF THE CAMPAIGN AGAINST IRAN. TRUMP IS TRYING TO SHOW THAT POST ELECTION THINGS COULD CHANGE AND THE THREE WOULDN’T BE THERE IF THEY DO ALL APPEAR AT THE SAME TIME, IT WOULDN’T BE THERE UNTIL NOVEMBER. THE WORRIES ARE THAT THIS WOULD CREATE MORE STRAINS ON THE U.S. NAVY WHICH IS BEING DEPLOYED FOR A LONG TIME IN THIS REGION. ALSO, THE MORE NAVAL ASSETS IN THE REGION, THE MORE CHANCES THEY WILL BE CONSIDERED TARGETS. IN PLACES LIKE JAPAN WHERE I AM NOW YOU HAVE A DRAWDOWN OF ASSETS. ONE OF THE CARRIER GROUPS, THE WASHINGTON, IS BASED IN JAPAN AND OFTEN MONITORS THE INDO-PACIFIC REGION SO IT’S A SIGNIFICANT INCREASE AND THE IDEA IS FLEXIBILITY MOST MIDTERM ELECTIONS. STEPHEN: THE IRAN WAR, THOUGH, AND HIGH ENERGY PRICES ARE HANGING OVER THE REPUBLICAN PARTY AHEAD OF THOSE LOUISIANA TECH. WE’VE SEEN PRESIDENT TRUMP BEGINNING TO HIT THE CAMPAIGN TRAIL. WHAT IS HIS PITCH TO VOTERS AMID ALL OF THIS? JOHN: TRUMP WAS OUT DOING HIS TRADE NARC RALLIES FOR THE FIRST TIME IN A LONG TIME. HE WAS IN NORTH TEXAS AND OKLAHOMA. HE TRIED TO SAY THAT THE PROBLEM IS THE MESSAGING, THAT THE ECONOMY IS DOING MUCH BETTER THAN IT’S BEING PERCEIVED TO BE DOING. THE PROBLEMS, HE’S REPEATED BEFORE, THE PROBLEMS STEM FROM THE BIDEN ADMINISTRATION AND IF THE DEMOCRATS RETURN TO POWER, THEY’RE GOING TO SPEND ALL THEIR TIME IMPEACHING HIM AND NOT MAKING THINGS BETTER BUT DIESEL BRYCE ARE UP ABOUT 70% SINCE THE START OF THE WAR IN THESE NORTH TEXAS AND OKLAHOMA LOCATIONS. PEOPLE TRAVEL GREAT DISTANCES. HOW MUCH THEY SPEND PUTTING GAS IN THEIR CAR WEIGHS ON VOTERS AND TRUMP WASN’T IN SOUTH TEXAS TODAY WHERE THERE ARE COMPETITIVE DISTRICTS. HE WAS INSTEAD? VERY REPUBLICAN-HEAVY AREAS IN NORTH TEXAS AND OKLAHOMA CAMPAIGNING WITH THE REPUBLICAN GOVERNOR CANDIDATE MAZY. TRUMP WON ALL OF OKLAHOMA’S COUNTIES IN THE 2024 ELECTION BUT SOUTH TEXAS, A LOT OF SWING VOTERS AND HISPANIC POPULATION. THE AREA NEAR BROWNSVILLE IS A TOSSUP. C.D. VANCE WAS FROM A FEW WEEKS AGO. IT COULD BE IMPLICATION FOR THE STATEWIDE RAILSES IN TEXAS. STEPHEN: HOW ABOUT THE BATTLE FOR CONTROL OF THE HOUSE AND THE SENATE? JOHN: THE HISTORIC MEASURE IS THAT THE PARTY INSPECT WHITE HOUSE LOSES IN THE MIDTERM ELECTIONS. WHAT’S HAPPENED WITH TRUMP IS SOMETHING THAT’S HAPPENED WITH OTHER PRESIDENTS. WHAT WE’RE LIKELY TO SEE IS THE HOUSE SHIFTING FROM REPUBLICAN TO DEMOCRAT. SOME OF THE SENATE RACES, WHICH ARE IN STRONG REPUBLICAN AREAS, LIKE IN TEXAS, ARE CONSIDERED MORE OF A TOSSUP. KEN PAXTON, REPUBLICAN CANDIDATE IN TEXAS IS HAVING A DIFFICULT TIME AGAINST THE DEMOCRAT TALARICO, WHO IS AHEAD IN MANY POLLS. WITH TRUMP NOT GOING TO THESE CRUCIAL PLACE WHERE IS THE SWING VOTERS ARE, LIKE IN SOUTH TEXAS, THIS COULD HURT CANDIDATES IN THESE RACES. ALSO, THERE ARE SOME REPUBLICANS WHO ARE KIND OF KEEPING THEIR DISTANCE FROM TRUMP IN PLACES LIKE MAINE WITH SUSAN COLLINS. SUNUNU IN NEW HAMPSHIRE, HAVING A TRUMP UP VISIT MAY NOT BE THE BEST FOR THEM BECAUSE TRUMP IS UNDERWATER IN TERMS OF SUPPORT. HIS POLL RATINGS ARE NOT VERY STRONG AND HAVING HIM THERE IS NOT FOR THE BEST. IT DOESN’T APPLY TO TRUMP. IN OVER MIDTERM ELECTIONS, THE PERSON IN THE WHITE HOUSE IS NOT WELCOMED IN SOME DISTRICTS WITH THE CANDIDATE FROM THE SAME PARTY BUT YEAH, THIS IS SOMETHING THAT IS A FACTOR IN THIS ELECTION AND IN SOME OF THESE CRUCIAL RACES AS WELL. STEPHEN: THANK YOU VERY MUCH FOR UPDATING US ON WHERE WE ARE AS WE COUNT DOWN TO THOSE ELECTIONS NEXT MONTH. STILL AHEAD, HOW FANS PLANS TO TACKLE ITS PERSISTENT BUDGET DEFICIT. BUT FIRST, EMERGENCY TALKS IN FRANCE TO TRY TO HEAD OFF A POSSIBLE DIESEL BAN BY WASHINGTON. WE’LL DISCUSS NEXT. THIS IS BLOOMBERG. >> WE KNOW THE PRICES ON DIESEL ARE HIGH. I HEARD THE PRESIDENT TALK ABOUT IT A LITTLE BIT. OUR SENSE IS IT IS A ONE-TIME SPIKE. REMEMBER THE EUROPEANS ARE SITTING ON RESERVES OF DIESEL. MY SENSE WOULD BE THEY SHOULD PROBABLY RELEASE SOME OF THESE IF THEY FEEL THEY ARE HAVING A SPIKE IN EUROPE. THE PRICE IS HIGHER IN EUROPE THAN IT IS IN THE U.S. STEPHEN: JAMISON GREER SPEAKING AS THE TRUMP ADMINISTRATION RAMPS UP PRESSURE ON THE EUROPEAN UNION TO RELEASE DIESEL STOCKPILES. THE E.U. COMMISSION AND MEMBER COUNTRIES ARE MEETING LATER THIS MORNING TO DISCUSS THOSE EMERGENCY RESERVES AS THE BLOC TRIES TO HEAD OFF A U.S. EXPORT BAN. LET’S BRING IN OLIVER CROOK FOR MORE ON THIS STORY. THE U.S. HAS SPOKEN TO A NUMBER OF ME MEMBERS ON THIS ISSUE. WHAT DO WE KNOW HOW ABOUT WHERE THE E.U. STANDS ON THIS? >> THERE IS NO COLLECTIVE VIEW FROM THE EUROPEAN UNION. THEY ARE GOING TO TRY TO ESTABLISH THAT OVER THE NEXT COUPLE OF DAYS. IT COMES AS YOU MENTIONED THERE, THE TRUMP ADMINISTRATION TRYING TO EXERT SOME PRESSURE. THEY ARE FEELING THE PRESSURE ON DIESEL PRICES AHEAD OF THE MID-TERM ELECTIONS. THEY ARE TRYING TO FIND WHAT LEVERS THEY HAVE TO GET MORE SUPPLY INTO THE MARKET. THEY HAVE GOT ON THE THE LIMIT WHAT THEY CAN DO AND ARE NOW PUTTING PRESSURE ON THE EUROPEANS WHO COMMITTED AT SOME POINT TO RELEASE SOME RESERVES AT THE VERY BEGINNING. THERE WERE MEETINGS AT THE G-7 AND THEY SAID THEY WOULD LEASE 400 MILLION BARRELS. THE EUROPEANS HAVE NOT LIVED UP TO THEIR COMMITMENT. YOU HEARD IT FROM JAMISON GREER AND SCOTT BESSENT. IS THIS RISING TO A POINT OF AN EMERGENCY? YES, PRICES ARE HIGH. YES, IT IS A PROBLEM FOR EUROPE AND FOR THE UNITED STATES. WE HAVE NOT NECESSARILY CROSSED THE THRESHOLD OF AN EMERGENCY. THIS IS NOT A RESERVE THAT IS DESIGNED TO DEAL WITH SUPPLY ISSUES. FROM ONE GERMAN OFFICIAL SAYING THE CRITERIA IS SECURITY AND PUBLIC ORDER TO HAVE FEDERAL REP OF GERMANY. THE RELEASE IS NOT TO STABILIZE PRICES. IT IS REALLY FOR SUPPLY. STEPHEN: THAT IS HOW SOME OF THE COUNTRIES ARE THINKING ABOUT IN THE BROADER DIESEL ENERGY PRICE, KEY TO INFLATION. WE GOT THE INFLATION PRINT THIS MORNING. WHAT DO WE EXPECT? >> IT IS A REALLY FASCINATING WEEK FOR WHAT’S HAPPENING BETWEEN THE BOND MARKET AND INFLATION AND WHERE THAT LEAVES THE ECB. I DON’T HAVE A PROPRIETARY MODEL FOR EUROZONE INFLATION FLATION. IF YOUR FOUR BIGGEST ECONOMIES HAVE CRUSHED THE ESTIMATE ON INFLATION, CAME IN HOTTER IN SPAIN, GERMANY, ITALY. IT IS EXPECTED TO COME IN AT 3.7%. OBVIOUSLY THIS IS A MUCH HIGHER RATE THAN THEY WOULD LIKE. IT IS RELEGATED TO THE ENERGY SECTOR. THEY ARE NOT CORRESPOND ABOUT IT JUMPING INTO WAGES AND SECONDARY EFFECTS. YOU GET HOT INFLATION PRINTS ACROSS THE BOARD, IT HAS DIMINISHED MONDAY VERSUS FRIDAY. THE BOND MARKET IS DOING SOME OF THE TIGHTENING FOR THE ECB FOR THEM. THOSE RATES ARE GOING HIGHER AND HIGHER AND HIGHER AND GOING BACK TO WHEN THE WE HAD CHRISTINEING LAGGARD HERE IN BRUSSELS. THE ECB IS EFFECTIVELY LEAVING THE RATE MAYBE THEY WON’T HAVE TO TIGHTEN QUITE AS MUCH. WHEN YOU LOOK AT THE SPREAD BETWEEN FRANCE AND GERMANY, THIS IS GOING TO BE A PROBLEM FOR THE ECB. CHRISTINE LAGARDE MAY SAY THEY CAN’T REALLY TARGET IT. STEPHEN: THERE IS A POLITICAL IMPLICATION HERE AS WELL. WE’RE HEADING INTO A BIG YEAR OF ELECTIONS IN EUROPE NEXT YEAR. WE HAVE SEEN THE DEBATE ON THE FRENCH BUDGET. HIGHER ENERGY PRICES BECOMES A KEY POLITICAL STORY TOO. >> IT IS GOING TO BE FRONT AND CENTER FOR THE ECONOMIES HEADING TO THE POLL. FRANCE IS THE MOST IMPORTANT FROM THE GEO-POLITICAL PERSPECTIVE WITHIN EUROPE. THERE IS A CHANCE THAT LE PEN COULD WIN AND YOU HAVE ONE OF THE CANDIDATES WANTING TO CANCEL DEBT. IT CREATES A MASSIVE ISSUE FOR THE FRENCH. WITH THE ECB AT THE CENTER OF THIS CONVERSATION PARTICULARLY WITH CHRISTINE LAGARDE POTENTIALLY DEPARTING EARLY TO HAVE A AND IN THE FRENCH ELECTION, THIS IS GOING TO BE REALLY INTERESTING. WE ALSO HAVE TO REPLACE THE PRESIDENT OF THE ECB. THAT IS A DEBATE AT THE NATIONAL LEVEL. STEPHEN: OLIVER CROOK, THANK YOU VERY MUCH FOR JOINING US. COMING, WE WILL BE BRINGING YOU MORE ON THE BIG TECH STORIES MOVING MARKETS. STAY WITH US. THIS IS BLOOMBERG. ♪ STEPHEN: WELCOME BACK TO "DAYBREAK: EUROPE." LET’S LOOK AT SO. STORIES WE’RE FOLLOWING FOR YOU THIS MORNING. WALL STREET BANKS FACED A FLURRY OF ANGRY CALLS FROM MONEY MANAGERS YESTERDAY AS BONDS AND LOANS FELL SHARPLY AFTER THEY OFFERED $52 BILLION OF DEBT TO FUND THE WARNER BROTHERS DISCOVERY BUYOUT. INVESTORS WERE NURSING MORE THAN $100 MILLION OF LOSSES WITHIN HOURS. THE CREDIT SURGED TO A 17-YEAR HIGH. ELON MUSK IS CRITICIZING DELTA AIRLINES FOR CHOOSING AMAZON LI O OVER STAR LINK. THE CEO WILL LOSE HIS JOB OVER ENTHUSIASM SHARING UNVERIFIED COMMENTS ATTRIBUTED TO BASTION ABOUT THE CHOICE. LUFTHANSA AND AIR FRANCE KLM HAVE APPROVED OFFERS PORCH GAL’S TAP. ANNOUNCED A SHARE BUY BACK OF UP TO 600 MILLION SWISS FRANC. THEY ASKED THE REGULATOR TO APPROVE A SHARE BUYBACK AFTER THEY CLOSED A PROCEDURE AGAINST THE BANK. SERIOUS VIOLATIONS INCLUDING PRIVATE DEBT LOANS AND CLIENT LINKED TO TWO RUSSIAN POLITICALLY EXPOSED PERSONS. BLOOMBERGS HA LEARNED THAT ANTHROP SICK SEEKING TO GO PUBLIC AS SOON AS MID NOVEMBER WITH MARKETING FOR ITS IPO KICKING OFF IN THE COMING WEEKS. THAT WOULD PUT IT IN LINE WITH TO TRADE BEFORE THE THANKSGIVING HOLIDAY. FOR MORE ON THIS BLOOMBERG SCOOP, WE’RE JOINED BY OUR MARKETS REPORTER ANTHONY STEVENS. HOW FIRM THIS THIS MID NOVEMBER TIMELINE FOR ANTHROPIC? >> IT HAS BEEN GOING BACK AND FORTH AROUND WHEN THIS TIMELINE IS. IT LOOKS MORE FIRM GIVEN THEY THAT THEY REITERATED THAT THIS IS POSSIBLE. THEY ARE TALKING ABOUT A PREIPO MARKETING AROUND OCTOBER IN THE COMING WEEKS THAT LINES UP WITH THAT THANKSGIVING IPO TIME. IT IS A REALLY INTERESTING TIME BECAUSE IT IS TYPICALLY A QUIET PERIOD FOR IPOS. IT WILL BE INTERESTING TO SEE WHETHER THEY FINALLY DECIDE ON THAT DATE. BUT WHAT IS INTERESTING ABOUT THIS IS THAT THE U.S. HAS SEEN SOME NON-AI NAMES CANCEL THE IPOS. IT WILL BE INTERESTING TO SEE IF THE DEMAND KEEPS UP WITH THE VALUATIONS THAT HAVE BEEN TALKED ABOUT IN THE 2 TRILLION RANGE ABOVE THE SPACEX NUMBER. ANTHROPICS NUMBERS HAVE BEEN OUT THERE FOR A LITTLE WHILE IN TERMS OF REVENUE AND OPERATING LOSSES. IN THE CONTEXT, IT IS QUITE INTERESTING TO SEE THIS BROAD COME DEAL FOR BROAD COM CHIPS FOR ANTHROPIC. THE IPO WILL BE IMPORTANT TO LIGHTEN UP THE BALANCE SHEET INTO A POTENTIAL IPO. STEPHEN: OK. TWO OTHER SIGNIFICANT AI FINANCING STORIES THAT WE ARE FOLLOWING THIS MORNING. BROADCOM LANDING ANTHROPIC LENDING AS MUCH AS $60 BILLION TO SEEK ITS CHIPS. DO THESE STORIES BRING BACK CONCERNS ABOUT CIRCULAR DEAL MAKING? >> IT REALLY DOES CENTER THE DEBATE AROUND WHAT PART OF THAT SUPPLY CHAIN YOU ARE. IF YOU HAVE THE CASHED UP RECIPIENTS OF ALL OF THIS HYPER SCALER MONEY ON THE CHIP MAKING SIDE, IS IT CIRCULAR TO DEPLOY THAT CAPITAL BACK TO YOUR CUSTOMERS TO HELP THEM GROW GOING FORWARD? HAS THE CENTRAL DEBATE AROUND THIS KIND OF MEASURE. ARE WE MOVING BALANCE SHEET STRENGTH LEGITIMATELY FROM THESE CHIP MAKERS ON TO THE STRUGGLING NEW STARTUPS THAT HAVE TO LIST. IN AMAZON’S DAYS, THEY HAVE HEARD THE MARKETS COMPLAIN ABOUT THE BALANCE SHEET RISK THAT IS TAKING ON. IT HAS BEEN A PROBLEM RECENTLY. THEY ARE TAKING A CREATIVE ACCOUNTING STEP BY SETTING UP A MAKER THAT THEY ARE GOING LEASE BACK WITH THE HELP OF FINANCING PARTNERS. IT IS SIMILAR IN A SENSE TO BROADCOM. BOTH OF THESE DEALS SPEAK TO THE APPETITE IN AMERICAN PRIVATE CAPITAL TO FINANCE NEW LEG TO HAVE AI BUILDOUT. AS LONG AS THAT SUPPLY OF CAPITAL IS AVAILABLE IN AMERICA FOR THE AI BUILDOUT AS OPPOSED TO STRUGGLES IN PERHAPS THE JUNK BOND MARKET, YOU SEE HOW PARAMOUNT BONDS ARE STRUGGLING FOR EXAMPLE, AS AS IT IS WHERE CAPITAL WANTS TO GO TO WORK FOR AI, THESE DEALS ARE -- PEOPLE ARE WATCHING THE DETAILS VERY CLOSELY. STEPHEN: OK. THANK YOU VERY MUCH FOR JOINING US. COMING UP, MORE ON FRANCE’S BUDGET DEFICIT AND THE DEBT CHALLENGE. THIS IS BLOOMBERG. ♪ >> LIVE FROM BUFFALOES THIS IS BLOOMBERG "DAYBREAK EUROPE." I’M STEPHEN CARROLL. TREASURIES HOLDS GAINS AS EUROPE’S BOND SELLOFF SPURS DEMAND FOR HAVEN ASSETS. WE’LL PREVIEW ECONOMIC DATA ON AREA INFLATION AND THE U.S. LABOR MARKET. THE PENTAGON IS SET TO DEPLOY ANOTHER AIRCRAFT CARRIER AND MORE THAN 10,000 TROOPS TO THE MIDDLE EAST AS PRESIDENT TRUMP WARNS AN ESCALATION IS POSSIBLE AFTER THE MIDTERM ELECTIONS AND ANTHROPIC IS PANNING TO PUSH AHEAD WITH ITS BLOCKBUSTER I.P.O. NEXT MONTH. LET’S CHECK IN ON MARKETS THIS MORNING. THE HANG SENG BACK OPEN AFTER ITSELF HOLIDAY YESTERDAY BUT DROPPING SHARPLY. EUROPEAN STOCK FUTURES, WE SAW EQUITIES SELL OFF STRONGLY IN EUROPE YESTERDAY. THE S&P IS ALSO POINTING HIGHER AHEAD OF THE U.S. JOBS REPORT LATER TODAY. OIL PRICES ARE HOLDING ON TO MUCH OF THEIR GAINS. TWO DAYS OF BEGINS, OVER $102 IN TRADING. THE EURO, WHICH WEAKENED SHARPLY AMID THE BROAD MARKET SELLOFF STEADY TODAY. AND THE 10-YEAR TREASURY YIELDS BENEFITING TOWARDS THE END OF THE SESSION YESTERDAY WITH THAT MOVE TO HAVEN ASSETS. THE RISK PREMIUM IN EURO AREA GOVERNMENT BONDS HAS SHOT UP OVER THE LAST 24 HOURS. CONCERN T THATFRANCE’S ECONOMIC AND POLITICAL SITUATION IS STARTING TO SPILL OVER INTO OTHER MARKETS. WE’RE LOOKING AT A SPREAD BEFORE FRENCH AND GERMAN BORROWING COSTS GOING INTO TODAY’S SESSION OF 140 BASIS POINTS. IS THIS A CRISIS? >> NO, IT’S NOT A CRISIS BUT IT’S DEFINITELY SOMETHING TO WATCH FOR VERY CAREFULLY BECAUSE IT’S AN HISTORICAL DATA POINT THAT YOU JUST MENTIONED. LET’S MAYBE LOOK INTO THE CAUSE OF THIS. FRANCE HAS INDEED AND IS INDEED TRYING TO STABILIZE ITS DEPARTMENT OF SIT AT 5%. IT’S NOT THE FIRST ATTEMPT. IT, I WOULD SAY IS THE THIRD ATTEMPT TO TRY TO ENRICH THIS DEFICIT TARGET WHICH IS HIGHER THAN THE EUROZONE CRITERIA. I THINK WHAT THE SPREAD ALSO SHOWS IS THAT FRANCE IS LOSING CREDIBILITY IN ORDER TO ACHIEVE THIS PLAN AND WE’RE TALKING ABOUT FISCAL, DEBT AND RIGHTLY SO BUT WE SHOULD ALSO TALK ABOUT GROWTH BECAUSE FRENCH GROWTH IS REALLY, REALLY LOW AND MUCH LOWER THAN ITS EUROPEAN PIERCE. THE PROJECTION IS THAT IT WILL BE 1% NEXT YEAR. I PERSONALLY THINK THAT IS QUITE OPTIMISTIC AND IT’S DEFINITELY BELOW 1% THIS YEAR. A QUESTION MARK AROUND HOW FRANCE WILL SORT IT SITUATION OUT NOT JUST FISCAL BUT GLOBALLY AND OBVIOUSLY AHEAD OF THE FRENCH ELECTION, ALSO GIVING SOME UNCERTAINTY. I THINK THAT’S WHAT EXPLAINS THIS NUMBER. ALREADY BEING ABOVE 100 AS A SPREAD IS SOMETHING PEOPLE SHOULD BE WATCHING FOR. 135, 140, INDEED THE NUMBERS ARE MORNING ARE REALLY SOMETHING TO WATCH FOR AND TODAY IS GOING TO BE AN INTERESTING SESSION TO SEE ARE WE GOING TO BE ABOVE 150 OR NOT. IT’S NOT A CRISIS YET IN THE SENSE OF IT NEEDS TO BE WATCHED VERY CAREFULLY AND TRYING TO WORK MUCH MORE ON THE LONG TERM FOR FRANCE. STEPHEN: 150 BASIS POINTS WOULD BE AROUND THE WILDEST SPREAD WE’D SEEN AT THE HEIGHT OF THE EUROZONE CRISIS. IF WE DO GET TO THOSE LEVELS IS THAT EFFORT C.B. INTERVENTION TERRITORY? >> I DON’T THINK SO. IT STARTS BEING E.C.B. WATCH TERRITORY AND I THINK THE EFFORT C.B. IS ALREADY WATCHING. OBVIOUSLY IT’S A PROBLEM FOR FRANCE BUT THE PROBLEM IS ALSO THE CONTINGENT AROUND ALL EUROPEAN SPREADS. IT’S FRANCE AND ALL THE EURO AREA. I THINK ALREADY THE FACT THAT IT’S 130-PLUS AND ABOVE IS SOMETHING THAT EFFORT C.B. IS WATCHING. 150 AGAIN IS AMOUNT PSYCHOLOGICAL BARRIER, I WOULD SAY. I SEE CLOSER TO 175, 180 PROBLEM TERRITORY WHERE THE EFFORT C.B. WILL REALLY KIND OF STOP ACTING. AS YOU HAVE THE PROBABILITY TO REACH THOSE LEVELS, EVERYTHING IS WATCHING AND THINKING ON WHAT TO DO. BUT IT’S MUCH MORE ON CONTINGENT RISK THAN SPECIFICALLY BEING ON FRANCE. STEPHEN: IF WE LOOK IN ISOLATION AT FRENCH YIELDS, WE’RE LOOKING AT A WARNING FROM FIVE STAR THIS MORNING TALKING TO BE 10-YEAR YIELD GOING TOWARDS 7% IF THE CONCERNS WORSEN OVER FRANCE’S DEALT. HOW LIKELY DOES THAT LOOK AT THIS MOMENT TO YOU? >> I THINK YESTERDAY WAS VERY INTERESTING BECAUSE FRANCE ALSO WAS IN THE WRONG MARKET AND THE DEMAND WAS STILL THERE. SO I THINK WE NEED TO DISTINGUISH THE PRICE AND THE COST, WHICH WE ARE DOING AND YES, IT WAS HIGHER, AS WE JUST DESCRIBED, BUT THE DEMAND IS STILL THERE BECAUSE THE OTHER DISCRETION RATES WERE BETWEEN 2% AND 3%. SO I WOULD SAY, AGAIN, FOR SURE, FRANCE NEEDS TO BE VERY CAREFUL LOOKING AT IT BUT THERE IS STILL DEMAND FOR FRENCH DEALT. WHAT IS AT ISSUE IS THE VICIOUS CYCLE IT CAN CREATE. SPECIFICALLY FOR FRANCE BECAUSE IT HAS A LOT OF DEBT IT HAS TO PUT ON THE MARKET IN THE COMING YEARS SO YOU’RE HAVING HIGH MATURITY PEAKS. IF YOU REFINANCE THAT WITH HIGHER DEBT, YOUR INTEREST CHARGE INCREASES. INTERESTING TO SEE IN THE BUDGETS WHAT FRANCE IS PLANNING TO DO ON ITS BUDGET. MAY BE LARGELY EATEN UP BY THE INCREASE OF INTEREST RATES AND THE INTEREST THAT FRANCE HAS TO HAVE TO REPAY ITSELF. THIS IS AN ISSUE DEFINITELY BUT AT SOME POINT IT MAY BECOME SOMETHING THAT CONCERNS THE EUROZONE MORE WIDELY BUT I WOULD ALSO FOCUS ON THE FACT THAT FRANCE HAS A LOT OF DEBT TO REFINANCE. THE DEMAND IS STILL THERE BUT THE COST IS GOING TO BE MORE EXPENSIVE. AS WE’VE SIDE THIS, THE MATURITY OF FRENCH DEALT IS OVER EIGHT YEARS SO IT’S NOT AUTOMATIC THAT FRANCE HAS TO REFINANCE. IT WILL BE PUSHING TOO MUCH THE COST OF THE DEBT BUT STILL THERE ARE BIG MATURITIES COMING THROUGH. STEPHEN: THAT IS A BIG DISCUSSION, THE FUTURE OF FRENCH DEALT AS WELL. DO YOU THINK THAT WASN’T IS GOING TO PASS GIVEN THE SITUATION IN PARLIAMENT CURRENTLY? >> IT’S INDEED PROBABLE THAT THE BUDGET MAY NOT PASS BUT FRANCE HAS WAYS AND MEANS TO STILL CONTINUE TO EXECUTE WHAT NEEDS TO BE EXECUTEDDED IN FINANCES. THERE ARE THINGS YOU CAN DO UNTIL THE ELECTIONS. NOW FRANCE IS CLOSE TO THE ELECTION BUT ACTUALLY IT HAS BEEN SEVERAL YEARS -- BUDGET STILL CARRY ON, I WOULD SAY NO MORE BUSINESS. I’M NOT PUTTING THAT MUCH WEIGHT ON THE FACT THE BUDGET MAY OR MAY NOT BE DROPPED. IT WILL BE FOR A VERY SHORT PERIOD OF TIME ALSO BECAUSE OF THE ELECTIONS COMING SOON. IT’S MUCH MORE ABOUT THE CREDIBILITY OF FRANCE. A COUPLE OF YEARS AGO YOU WERE BASICALLY TRYING TO SAY WE NEED TO REACH 5%. BUT IN FACT YOU’RE NEVER REACHING 50%. AGAIN, IT’S NOT GOING TO BE 5% AGAIN THIS YEAR. THE PEOPLE LOOKING ARE SAYING ARE THEY REALLY GOING TO MANAGE NOW TO REACH THIS 5% AND THEN MANAGE TO DECREASE. SO IT’S A QUESTION OF CREDIBILITY WHICH NEEDS TO BE TAKEN EXTREMELY SERIOUSLY BUT ALSO IT’S A QUESTION OF GROWTH. BUT YOU NEED TO HAVE THE MEANS TO HANDLE OUR YOUR FINANCES. IF YOU HAVE ALSO GROWTH THAT IS VERY WEAK AND MUCH WEAKER THAN OTHER EUROPEAN COUNTRIES. YOU HAVE SPAIN AT 2.5%. GERMANY HAS SOME ISSUES BUT THEY’RE AT 1% AND WE FRANCE A BELOW 1%. WITHOUT GROWTH WHAT CAN YOU DO? IT’S VERY DIFFICULT TO COME BACK TO SOUND FINANCES WITHOUT GROWTH AND THE EFFORT YOU HAVE TO MAKE HAS TO BE MUCH HIGHER. THAT’S THE REASON WHY IN THIS BUDGET WHAT THEY’VE TRIED TO DO IS NOT JUST TRIED TO INCREASE REVENUE BECAUSE PUTTING MORE FISCAL PRESSURE, BOTH ON PRICES AND ON INDIVIDUALS IS VERY U UNHELPFUL TO THE ENTIRE ECONOMY. BUT THEY’RE TRYING TO HANDLE ALSO THE SPENDING BUT ALSO THERE THEY NEED TO BE VERY CAREFUL BECAUSE THERE’S A LOT OF SOCIAL SENSIBILITY IN FRANCE BUT ALSO THEY’VE BEEN TALKLING ABOUT REFORM, REFORM, BUT THE FRENCH PEOPLE ARE VERY WELL AWARE THAT THE FACT THAT THEIR ECONOMY IS NOT GETTING BETTER. THERE MUST BE SOMETHING MORE IF YOU WANT TO PUT THE COUNTRY BACK ON TRACK. STEPHEN: OBVIOUSLY THE ELECTIONS NEXT YEAR ARE HANGING OVER EVERYTHING IN THE BOND MARKETS AT THE MOMENT. HOW MUCH OF THE POLITICAL RISK IN THE BOND MARKET DO YOU FEEL IS ALREADY PRICED INTO MARKETS? >> I THINK IT’S PRICED INTO THE MARKETS. IN A WAY, PEOPLE ARE SAYING THAT FRANCE BECOMES AN UNCERTAIN PARTNER AND IT’S NOT CLEAR WHAT THE PROGRAMS OF THE VARIOUS CANDIDATES WOULD BE AND NUMBER TWO, PEOPLE ARE ALSO THINKING EITHER WAY, AND THAT’S A LITTLE BIT SAD IF YOU ASK ME. THEY’RE THINKING OF THE SOLUTION EVEN IRRESPECTIVE OF THE CANDIDATES GIVEN THE NUMBERS WE JUST QUOTED. TO ME IT’S PRICED IN WILDLY ALREADY. AGAIN, IRRESPECTIVE OF WHO IT IS, THESE ARE THE FUNDAMENTAL ISSUES YOU HAVE TO SORT AND DEAL WITH AND OBVIOUSLY IF THERE ARE MUCH MORE TALKS ABOUT DEALT. THERE HAVE BEEN DEBATES IN FRANCE AROUND CANCELLATION OF DEALT AND SO ON. IF THIS ON TOP OF IT BECOMES SOMETHING AS MUCH MORE PROBABLE AS SOMETHING THAT CAN HAPPEN OR SOMETHING THAT CANNOT HAPPEN THAT EASILY, THIS ALSO WILL PUT MORE PRESSURE. BUT IT’S SORT OF EMBEDDED INTO THE SITUATION AND I THINK IT’S AN ISSUE. STEPHEN: C.E.O. OF GLOBAL SOVEREIGN ADVISORY, THANK YOU VERY MUCH FOR JOINING US FROM PARIS THIS MORNING. COMING UP. AFTER A POOR SCORE LINE, A NEW GAME PLAN FOR NIKE. DETAILS NEXT. THIS IS BLOOMBERG. STEPHEN: WELCOME BACK TO "DAYBREAK: EUROPE." SPIKE IN CUTTING JOBS AND EMBARKING ON A SWEEPING OVERHAUL OF ITS BUSINESS, TESTING WALL STREET PATIENCE WITH CHIEF EXECUTIVE OFFICER ELLIOTT HILL. ITS SALES SLUMP IS SET TO GET WORSE. HOW MUCH OF A DRAG THEN IS THE CHINA BUSINESS FOR NIKE? >> HI, GOOD MORNING, STEPHEN. THE CHINA BUSINESS WAS ONE OF THE WORST SPOTS OF THE RELEASE. NORTH AMERICA GROWTH HELD UP OK BUT IN CHINA AND INDIA, THE COMPANY CONTINUES TO STRUGGLE. CHINA IS ABOUT 12% OF GROUP SALES. COMPETITION SEEMS TO BE INTENSIFYING LOCALLY. IT IS A HUGE MARKET. MORE THAN A BILLION PEOPLE. THAT’S BIG GROWTH FOR THE COMPANY. DOESN’T SEEM TO BE IMPROVING IN TERMS OF TREND. BIG DRAG ON THE RESULTS. STEPHEN: LET’S TALK ABOUT SOME OF THE EFFORTS NIKE IS MAKING TO TRY TO ADDRESS THE SLIDES THAT IT IS SEEING. HOW LONG WILL THIS CLEANUP OPERATION TAKE? >> I THINK THAT’S THE BIG QUESTION COMING OUT FROM THE RESULTS. IT DEFINITELY SEEMS LIKE WITH THE GUIDANCE THAT THEY GAVE, REVENUE DECLINES OF HIGH SINGLE DIGITS. THAT WAS ABOVE CONSENSUS. IT SEEMS LIKE THEY ARE TRYING TO RESET MARKET EXPECTATIONS HERE TO GIVE THEM A GOOD FOOTING AND FOUNDATION TO BUILD THE TURNAROUND, BUT INCREASINGLY, THE CEO HAS BEEN IN THE POSITION FOR AROUND TWO YEARS. THE QUESTION IS, IS THE MARKET GOING TO START TO LOSE PATIENCE WITH THE CEO AND HOW QUICK THE TURNAROUND IS TAKING? FROM THIS RESULT, IT SEEMS LIKE THEY ARE TRYING TO -- EXPECTATIONS WITH THAT HEFTY GUIDANCE REVISION DOWN WARDS. IN TERMS OF COSTS, THEY ARE GUIDING FOR 2.45 BILLION DOLLARS OF COST SAVINGS BY 2031. THEY ARE TRYING TO IMPROVE THE TOP LINE AND ALSO TAKE EFFORTS TO STREAMLINE THE BUSINESS, A MULTITHRONGED EFFORT. STEPHEN: ONE THAT MARKETS WILL BE WATCHING CLOSELY. THANK YOU VERY MUCH FOR JOINING US. TURNING TO BRAZIL NOW. A NEW SURVEY PUTS THE PRESIDENT AND CHALLENGER NECK AND NECK AHEAD OF SUNDAY’S PRESIDENTIAL ELECTION. LET’S BRING IN BLOOMBERG EXECUTIVE FLAVIA JACKSON. TALK ABOUT THE DIFFERENCES BETWEEN THESE TWO CANDIDATES. >> THEY ARE A PAIR OF FASCINATING CHARACTERS AND HAVE DOMINATED BRAZILIAN POLITICS FOR A LONG TIME YOU HAVE THE GREAT SURVIVOR KNOWN AS LULA. A FASCINATING PERSONAL STORY. HE HAS BEEN IN PRISON HE HAS COME BACK. THIS LATEST ITERATION OF HIM IS SEEN AS A WEAKER VERSION. THE KIND OF TRANSFORMATIVE POLICIES HE BROUGHT DURING OBAMA ERA, HE BROUGHT MILLIONS OF BRAZILIANS OUT OF POVERTY. HE HAS BEEN A VICTIM OF HIS OWN SUCCESS. THOSE BROUGHT OUT OF POVERTY ARE EXPERIENCING -- THE MIDDLE CLASS AND NOT REALLY WANTING TO VOTE FOR SOMEONE WHO TO REPRESENT THE WORKERS PARTY. HE IS SEEN AS THE OLD GUARD. DOESN’T HAVE A MOBILE PHONE. HE IS SEEN AS A RELIC OF THE PAST BUT HE HAS INCREDIBLE CHARISMA. PEOPLE HAVE WRITTEN HIM OFF A COUPLE OF YEARS AGO BUT HE IS ROARING BACK. BOLSONARO, PEOPLE ARE VOTING FOR THE FATHER. INCREDIBLY CHARISMATIC. KNOWN PRETTY MUCH AS THE TRUMP TO HAVE TROPICS IS WHAT HE IS REFERRED TO WHAT HAS UNDONE HIM IS THE CORRUPTION. THERE HAD BAN MASSIVE CORRUPTION SCANDAL THAT BROUGHT LULA DOWN. THAT SAME SCANDAL HAS A HOLD OF BOLSONARO. THE LONG AND SHORT OF IT REPRESENTS A KIND OF POLITICS THAT HIS FATHER HELD BUT AGAIN, DOESN’T HAVE THE PERSONALITY. HE IS RIDING ON HIS FATHER’S COAT TAILS. WE’LL HAVE TO SEE. IT IS A REAL NAIL BITER. IT IS DOWN TO WIRE. I DON’T THINK WE HAVE EVER SEEN AN ELECTION THAT HAS BEEN THIS TIGHT AND IT WILL PROBABLY COME DOWN TO A RUNOFF. IT IS UNLIKELY ANY ONE PERSON WILL MERGE FROM THIS FIRST ROUND. STEPHEN: ON THE CAMPAIGN ITSELF, SOME OF THOSE SCANDALS THAT HAVE BESET IT, HOW MUCH OF AN IMPACT ARE THEY LIKELY TO HAVE ON THE OUTCOME? I SUPPOSE THE ISSUES THEMSELVES AND HOW IMPORTANT THEY ARE TO VOTERS? >> YOU MAKE A REALLY VALID POINT STEVE. BRAZILIANS ARE USED TO CORRUPTION. I THINK THERE IS A SORT OF DEGREE OF EYE ROLL TO THIS. PROBABLY THE BEST WAY TO SEE IT IS BRAZIL IS DEEPLY POLARIZED IN THE WAY AMERICANS WOULD RESPOND TO -- THE QUESTION IS WHICH TRIBE WILL PREVAIL. YOU HAVE THE VERY POOR AREA THAT HAS BEEN ESSENTIALLY WHERE LULA’S PARTY HAS DRAWN MOST OF HIS SUPPORT AND THEN YOU HAVE THE BUSINESS CLASS. YOU HAVING A RABIES THAT WILL VOTE FOR BOLSONARO. IT WILL GO DOWN -- DIFFICULT GO DOWN PARTISAN LINES. ONE ELEMENT TO THINK OF -- THESE ARE ALSO WHAT WE CALL AI ELECTIONS, THERE IS A LOT OF FAKE NEWS. YOU’RE SEEING THAT AFFECT SOME SOFT VOTERS INCLUDING THIS BIZARRE AD ABOUT THE NATIONAL SAINT TESTIFY POTENTIAL TRUMP EFFECT. BOLSONARO IS A VERY KEEN ALLY OF TRUMP’S BUT TRUMP HAS NOT OVERPLAYED HIS CARDS IN TERMS OF SUPPORTING THAT CANDIDATE. WHEN HE WAS AT THE U.N., HE WARNED AGAINST ANY FORM OF INTERFERENTIAL. BRAZIL RESPECTED THE FACT THAT LULA STOOD UP TO TRUMP OVER THE TARIFFS AND WAS ABLE TO SEE THOSE DOWN. WE’LL HAVE TO WAIT AND SEE AGAIN. I THINK THIS WILL BE AROUND PARTISAN LINES. PEOPLE GOING FOR WHAT THEY HAVE ALWAYS DONE. STEPHEN: AN ABSOLUTELY FASCINATING ELECTION. THANK YOU VERY MUCH FOR BRIEFING US AHEAD OF SUNDAY’S VOTE. PLENTY MORE COMING UP NEXT ON THE MARKETS. THIS IS BLOOMBERG. ♪ >> THIS IS BIGGEST GAP BETWEEN THE TWO-YEAR YIELD AND THE IMPLIED TWO-YEAR YIELD. >> WE HAVE SEEN INCREASES OVER TIME. YES, WE HAVE SEEN MORE INCREASES RECENTLY IT IS A COMBINATION OF FACTORS SO I DON’T ATTRIBUTE THEM TO ANYONE. >> ACROSS THE TERM STRUCTURE HAVE INCREASED FURTHER, A SIGN THAT INVESTORS ARE REASSESSING THE EVOLVING MACRO ECONOMIC LANDSCAPE. >> I THINK WE CAN RUN A MORE EFFECTIVE BANK IF WE HAD A MORE TRADITIONAL YIELD CURVE. IT IS ALL RELATIVE NOW >> MARKETS ARE PRETTY GOOD WHEN THEY WANT TO SEND A SIGNAL, THEY WILL SEND A SIGNAL REGARDLESS OF WHAT THE FED IS TELLING THEM. JENNIFER: FED POLICY MAKERS WEIGHING IN ON -- STEPHEN: FED POLICY MAKERS WE GO AING IN ON TURBULENCE. LET’S TAKE A LOOK AT HOW THAT AFFECTED RATE HIKES FROM THE FED. JUST THIS WEEK ALONE, WE STARTED WITH A 70% PROBABILITY OF AN OCTOBER RATE HIKE. THAT IS 30. AN INDICATOR OF HOW MUCH HAS MOVED IN THE COURSE OF THIS WEEK. THE MARKETS FULLY PRICING IN A RATE HIKE FROM THE FED IN DECEMBER. PART OF THE INFLATIONARY PICTURE HAS BEEN THE ENERGY PRICES. I WANTED TO SHOW YOU WHAT’S HAPPENING WITH SHIPPING RANKS FOR DIRTY TANK HEARS THE CARRY UNREFINED PETROLEUM PRODUCTS AS WELL. ANOTHER INFLATIONARY EFFECT COMING FROM THE CLOSURE OF THE STRAIT OF HORMUZ EVEN AS WE HAVE STARTED TO SEE FLOWS. SHIP CAPTAINS ARE DEALING WITH NAVIGATING THAT WATER WAY AT THE MOMENT ON THE TERMINAL FOR YOU TO READ TODAY. OF COURSE THE BOND MARKETS AND THE EUROPEAN TRADING SESSION IS GOING TO BE VERY INTERESTING AGAIN TODAY. LET’S TAKE A LOOK AT SOME OF THE MEASURES OF STRESS IN THE BOND MARKET. CREDIT DEFAULTS TICKING UP SHARPLY IN SEPTEMBER. THIS IS THE TALK OF THE DIESEL EXPORT CURVE FROM THE UNITED STATES. SPARKED THAT SHARP MOVE HIGHER IN BOND YIELDS YESTERDAY IN EUROPE. COULD THIS BE THE TRIGGER THAT SEES THE TURMOIL HIT EQUITIES? THIS IS GOING TO BE A KEY POINT TO WATCH. WE WILL BE KEEPING AN EYE PARTICULARLY ON THAT SPREAD SPRED BETWEEN FRENCH AND GERMAN YIELDS, 140 BASIS POINTS GOING INTO TODAY’S SESSION. WE HAVE EUROZONE INFLATION AT 10:00 A.M. IN THE U.K.. 11:00 A.M. IN BRASESES. EXPECT AN UPDICK IN DECEMBER. THE JOBS REPORT 1:30 U.K. TIME. HAND HEADS OF THE FRENCH, GERMAN AND FINNISH CENTRAL BACKES BANKS. ALL OF THAT IS TO COME. UP NEXT, THE OPENING TRADE. THIS IS BLOOMBERG. ♪