tv On the Move BLOOMBERG September 5, 2016 2:30am-4:01am EDT
>> welcome to "on the move." it is 7:30 here in london. i am guy johnson and here is what we are watching this monday morning. who will succeed vladimir putin? we asked the russian president that question in an exclusive interview. central banks take center stage. mark carney faces british lawmakers and what can mario draghi deliver on thursday? we get pmi data across europe
this morning as the u.k. numbers keep surprising. will the all-important services sector also show post-brexit resilience? good morning and welcome. the united states is of course, in joint labor day in its -- enjoying labor day in its traditional fashion, taking the day off. let me show you what is happening, where futures are pointing us. we saw a very nice rally last week on the payroll. the ftse was up 2.2%. this morning, we are expecting to add to that a little bit. we will be opening up around .3%. let's move over and see what has been happening around the world. i draw your attention to the story in japan. the bond market is going to be fascinating this week. the austrian front end of the curve is moving this morning, a big move there. we will come to that.
but the japanese story, it is not showing up on my gmm because of the volatility. nevertheless, we are seeing the back end of the curve see yields rise quite sharply. in the meantime, let's get you caught up with what you need to know with the bloomberg first word news with christine harvey. christine: good morning. angela merkel's party has been beaten by the populist alternative for the first time in a state election, highlighting the strength of the backlash regarding her open border refugee policy. afd had 22%. theresa may says the british public has rejected the idea of free labor from europe to the u.k. enables us to say, the british people do not want free
movement to continue in the way it has done in the past. movementant coming in from the european union, but people also want to see the job opportunities and the economic opportunities. so, getting a good deal and trading goods and services is important for us. christine: samsung's recall of billions of smartphones is not going to be cheap. the company might spend as much as $1 billion after the setting to replace all of the 2.5 million note 7 phones. samsung would only say that this is an amount that is "heartbreaking." well, north korea has fired three ballistic missiles off of the east coast. korea's jointth chief of staff. this is time to coincide with the g-20 summit.
global news 24 hours a day, powered by 2600 journalists in more than 120 countries around the world. guy: thank you very much. on thursday, investors will future of the ecb. remainsation rate weak. speculation continues over whether the central bank will announce an extension to its qe program. it is supporting nearly one trillion euros of government bonds, and is now engaged within the corporate sector as well. joining us now is jpmorgan's cio. qe 3 from the ecb? >> definitely, but it is a question of the timing. the current programs are ending in march, 2017. ofy have a han a hint
what they want to do. have got to do more accommodative policy to get the inflation rate higher. guy: we could see a change in the rules as well, maybe a dropping of the rules surrounding the bonds that can be bought. are we going to see tinkering around the edges with the rules? >> undoubtedly. think of the history we have seen lately. never doubt the creativity of central bankers. there will be changes on the rules and the amount of bonds they can buy, giving the ecb a lot more flexibility. guy: is it working? >> if they did not do it, would inflation be a lot more negative? but that is the $1 million question. ultimately, that is one side of the equation, isn't it? the ecb is creating a lot of money.
though, is the demand for that money. actually, that is where governments have got to come in. they have got to do more on the fiscal though, is the demand for that money. side to try to generate a lot more demand for loans. guy: what is priced in to the european market at the moment? > >> an extension of qe is definitely priced in. is, of the reason for this as you lower the deposit rate, you potentially damage the financial system. ecbch is of course, why the try to protect bank margins. guy: let's have a listen to what mr. kuroda said back in japan. here is what he had to say. >> even within the current framework, there is ample room for further monetary easing in quantity, quality, and the interest rate. other new ideas should not be
off the table. but we should bear in mind when conducting monetary policy is not its limit, but a comparison between its benefits and costs, as is the case with any public policy. there is no free lunch for any policy. threeuroda, the dimensions of monetary policy. but we have seen over the last few days has been a significant backing up of yields at the back end of the bond market in japan. let me show you a chart you can find on your bloomberg. the yield is absolutely collapsing in japan, but it is this move here over the last few sessions as the market prices out the possibility that we will be further size in terms of the bond purchases being generated by the boj. maybe we will not see much theessive buying in future. >> we have a tale of two central banks. the bank of japan are expected
to do the opposite of the ecb. they are expected to cut the deposit rate and do less in the way of qe. if you get that deposit rate cut, you get an increase negative interest rate. the theory then is, it creates inflation, hence that yield selloff. will it work? still the $1 million question. guy: the volatility in the bond market is becoming -- japan is a classic case in point. on onrenced this earlier my gmm. signal?s this what is market positioning looking like? give us a sense of what this is telling us about how the market feels about what is going on. >> and tells us a few things. when you look at the percentage moves that are that big, the
basis point moves are pretty small. that is because the level of yields is actually so low. when you look at the and take a step back, the message for investors is that volatility is going to go up. when investors look at the market to market in their portfolios, they will start to generate more wildly, particularly on the bond side. guy: does that signal the back e nd, though? volatility,ck up in from a historical perspective, tell us we are nearing the end? >> know, the reality is we are probably not nearing the end. when you look at global yields in six months time, they are likely to be lower. but the journey then becomes a lot more rocky, a lot more bumpy, because he don't have that yield protection. guy: mr. garside, stay with us. up next, air force, shunned.
here is the bloomberg business flash with christine harvey. christine: barclays is close to the new person to oversee the investment talks. this would fill the vacancy from the top management team. hanjin has had its first day of trading since filing for court receivership last week. this came after they deemed the structuring plant insufficient. is nearing as debt level that could trickle a downgrade -- that could trigger a downgrade. this could mean a downward position of its rating. softbank's $32 billion purchase will add to its debt load.
bloombergur business flash. guy: a tense start to the g-20 summit. we saw officials clash thoroughly after landing. overdent obama pulled called extremely productive talks with his chinese counterpart. we are now joined with a guest from the summit. guy, as you know, this is president obama's last g-20 summit, and his last tour of asia. deputy of now is the national security advisor for international economics. thank you for joining us. i know you have a very busy schedule. not have a great
start. with some rocky confrontations. this affect the talks? >> the president addressed that yesterday with his press conference. but the start of the bilateral what istion symbolized happening in the relationship we build with china, finding a way to work together on big things and to make them happen. this signals the two biggest economies in the world are willing to address a major global challenge. the bilateral meetings where frank indirect. we talked about issues where we have a common interest, and issues where we have differences. but when you look at the outcomes that came out of that, outcomes that cover issues like overcapacity and innovation policies such as nondiscrimination, you can see we have reached a number of important outcomes that will chinese open the
market to competition. reporter: you are also the lead . is the tpp essentially dead? >> the president is committed to getting tpp done this year. the key thing is when we are in asia, our allies look at tpp as a deal good for the united states. like vietnamntries and malaysia to raise their standards in a way that will make them more competitive, and also create a level playing field around the world. give them a sense of, whether the united states is going to walk away from a good deal. the president said he will continue to work with congress to advance the agreement. reporter: what will happen to the u.s.' role in the
asian-pacific if the tpp is no longer? >> we are on the other side of the pacific. people will continue to look to us to see our leadership role. tpp is part of that leadership role. we don't expect tpp to fail. tpp is such a good deal for the american people in terms of economics, but it is also a national security priority for us. reporter: just earlier, you mentioned the glut we are seeing. anything concrete out of the g-20? >> as the know, the leaders are still meeting, but i can tell you a number of the leaders have brought this issue up because it is an important issue, not only to the united states and china, but it is a global issue. our hope is we will come out of the g-20 with a clear process for addressing overcapacity and a timeline. this is one of those issues that needs to be solved. of or capacity is not just a trade issue, but a global issue.
and overcapacity is not just a trade issue, but a global issue. reporter: wally, thank you for joining us. guy? guy: great stuff. joining us from the g-20 summit. these guys are out there talking about trade. great, fantastic, but the battle is not being fought with trade. it is being fought with monetary policy. everybody is trying to still demand forom one another. is this a sideshow, therefore? it is relevant to the u.k., but elsewhere? >> it is essential. 2.7%ave g-20 growth that this year. it is the lowest in a decade. so, ultimately, what the world needs is a lot more trade. any of a lot more economic growth. then, what you have is a greater amount of economic growth. then, everybody can have an
increased slice. guy: that is globalization. that is great. that is what we should aspire to if we feel globalization is the way forward. the problem is, many countries don't feel globalization is a good idea, as a result of which, we see political backlashes. we can see one in the u.k. we can see one potentially in the united states with donald trump. the will does not believe in globalization anymore. >> it doesn't. but that globalization has been coupled with slowing economic growth. ultimately, you need that globalization powered by increasing economic growth. dealss what these trade are all about, trying to lower trade barriers, encouraging more trade. and from that, more economic growth. guy: you put workers in the northeast of england out of work. it then feeds back into the political system. it is hard to get back to the
kind of situation we have at the moment. >> that is fair. affect comes on back on government. the government has to increase productivity to get out of this malaise. the first way is to invest in education and the second is to invest in infrastructure. right now, governments have this golden opportunity. we have bond yields at generational lows, multi-century lows. they can invest in those very important areas, education and infrastructure. guy: nicholas gartside, thank you. we are minutes away from the european equity market open. we also have gilts opening up in london. nine minutes until the start of trade. we have u.k. services data out today that will be very much in focus. plenty of corporate moves as will we need to be focused on. a very interesting meeting between deutsche bank leaders, a
six minutes to go. let's talk about the stock we should be paying attention to. mr. draghi is basically buying out the bits he does not already own. the stock is called a little bit higher with the consolidation of the telco sector in france. endere focused at the back of last week on the german banking sector. senior management at germany's isgest bank, deutsche, talking about the strategies, what they now need to do. that message is coming from john cryan's office. we do not know if we will have dramatic steps from this man. i expect he is paying attention to what is happening with mr. draghi this week. , and everybody else in the banking sector, must have their fingers crossed this week. >> absolutely.
when you look at the issue of european banks, it is negative rates. there is no doubt that as that rate goes more negative, it is punitive for the financial system. to be fair, the ecb recognize that. when they went more aggressively likelihood is a lot more qe and a lot less in terms of negatives. guy: what is happening in italy i, the banking sector cannot fail. that economy desperately needs a functioning banking system. germany, in many ways, is in the same position. >> it is. you will see a lot of the entire banking system in europe. there is likely to be a lot of consolidation. there are elements of banks in europe that need a little bit more capital, and that is critical for growth.
welcome, i'm guy johnson at bloomberg's european headquarters in london. moments away from the start of european trading, here is your morning brief. who will succeed a lot of your putin? we asked the russian president that question in our exclusive interview. says new ideas are on the table. mark carney faces british lawmakers -- and what will mario draghi say? and we get data from across europe thismark carney faces brh morning as the u.k. numbers keep surprising on the upside. will the all-important services sector also show a post-referendum resilience? we are waiting for european
markets to open in we think it will be a broadly positive story. there was a solid rally at the back end of last week post payrolls with european markets up over 2%. it will be interesting to see act 9:30.oes let's show you the rally -- this was the picture on friday, very nice equity market rally, a mild list as we digest with happening. a bit of the selloff in the few minutes before the ftse but it looks like we are seeing a mildly positive start the in.ion -- let's zoom it's not going to be the riproaring rally we saw at the back end of last in. week, plenty to digest this week that will keep us busy.
let me show you the imap, the national breakdown. a little softer, but nevertheless we are probably positive but only just. let's think about where the market is this week, plenty to morning, a mild dropping yields, but remember that we have sector data out at 9:30 u.k. time this morning. we will break it down for you on bloomberg radio, and all-important number for the brexit debate and also for what happens thursday -- sorry, wednesday with mark carney. let's move on and talk about what's happening in terms of the russia story. we have been focused very much on this over the last few days, a gas giant losing 80% of its value over the past decade of vladimir putin says he is happy to leave the company in longtime help. he spoke to our editor in chief in an exclusive interview. >> let me give you an example.
you recently made changes on the political side within your administration but if i look at a company like gas problem, in dollar terms, it's worth less than a fifth of what it was 10 years ago and it has fallen from being the top 10 companies to the hundred 98. you have had the same manager running it for 15 years. you have given him another five year contract. what i am saying is that you are not as tough as the business people running the oil side as you might be on other people. why have you put up with this? you are famously efficient man. >> [speaking russian] it is clearly undervalued. yet.ve no plans to sell it
this is because of the peculiarities of the russian economy, in russian energy. it is part of its energy system. one of the functions is to winter, toautumn and supply the big energy companies. today --t's valuations the upset doesn't worry us or bother us. what it will be worth in the coming years this bite shale gas in the united states. i planned gas will always be cheaper and it is increasing to
traditional countries. for the pasteports few months. they are rising. this will be the case in the future. why? because in the new future, despite the development of alternative energy, it will still have an environmentally friendly demand with no other source of primary energy in the world. energy there is other but -- there is a country that is open, and that is our country. we carry out all the functions and of course there are issues and problems, we see that.
we are taking all the steps to resolve it and there are interests on the world market. to do it well or poorly, that's another question. that weticize us -- should have switched to a closing price. but this is very specific. it's not like trading oil. investmentsto big and this means that they can sell at a certain price. guy: don't miss our special program on president vladimir putin, in conversation with bloomberg's editor in chief. that will take place this afternoon at 5:00 p.m. london time. here in the studio, the jpmorgan
cio for fixed income, joining the discussion is ryan chilcote. what do we make of that? richard: it's interesting he defended alexei miller. not surprising, he is loyal to his friends through thick and thin. the market cap has risen twofold but on anot a lot annualized basis that is like 5% or 6%. what's really dramatic is how well it was doing and how extraordinary it has been. the market cap rose when miller took over, 20 twofold. aey were talking about having market cap of trillions of dollars in 2007 and now they have -- elevatedrice was quite and they have really stuck to this idea of long-term
contracts, perhaps longer than was tenable. now people are into paying hub prices. . was interesting is that they are finally moving into this space and they recognize that but they completely missed the shale evolution. they didn't see it coming and they decimated companies like gas from. guy: talk to me about where you see energy prices going. at some point we will create back through to the inflationary numbers and the market will probably look through. what is the long-term view? will inflation be kept incredibly low? when you pump numbers into your models -- thereabouts, you have roughly got supply and demand in balance. when you look at inflation, the key determinant will be wage
inflation. headline rates will move up and down as commodity prices shift, but ultimately in the big western economies to get in during inflation we need to see wage growth and we aren't seeing that at the moment. wage growth is still pretty well at a little over 2%. guy: when you think about what that means for russia, you kind of extrapolate, where does the president get the economic outlook? wages are being crushed in russia, energy prices have come down. the pressure on the economy is mounting. richard: but of the decisions he has already made, which is going to assure that russia has some kind of stable transition into this future where you don't see a big uplifting oil price was is that the root -- is the ruble to devalue. prices fall and in places like western europe profits at itpanies like these --
continues to rise, which allows russia to maintain the government coffers, to keep its programs going. it means they get a lot of inflation on the back of imports which are that much more expensive. guy: when you look at what's happening in emerging markets, russia is an interesting case, and it brings us onto the discussion we will have shortly. -- isurrency devaluation a currency devaluation something that should be desired in the current environment? the currency war story is still knocking around and it hasn't achieved what many hoped it would. , with -- it'se desirable, but with hesitation. -- if you areood
facing disinflation or deflation, that's pretty good. but ultimately when you focus back to emerging markets, they need growth. if they can get a little bit of growth going that they can get some structural reforms and that is what makes those places richer as opposed to just devaluing currencies. guy: makes you wonder if they have a job mandate. nick will stay with us. ryan, thank you. ryan chilcote on our exclusive interview. up, next more about the u.k.. theresa may expressing doubts about brexit. more on that from mark carney. bloomberg this is bloomberg. ♪
guy: 3:13 a.m. in new york city. , the united states is celebrating labor day with a day off. let's check in on the markets. we mostly have some comments coming through from shinzo abe, mustn't allow a delay in the tpp at the g-20. , abal trade globalization touchy subject when it comes to the elections. let's talk about the markets and show you what's happening with
equities. 14 minutes and the trading session and we have a mildly positive start, confident following a decent day. the dax is one of the more standout performers. this is my breakdown of what's happening here. in terms of the individual stocks, the zodiac profit warning is down, another profit theing for this space, stock reacting this morning down boy 2.81%. is floating note around which saw a series of downgrades. on some newspaper stories over the last few days as long as there are transfers. that's happening on the mrr and you can break out which stocks are on the move. let's go to the first word with christine.
christine: thanks. the bank of japan governor haruhiko kuroda has declined to rule out new initiatives to stoke inflation as he says there is ample room for further monetary easing. the comments comes as the central bank conduct a comprehensive review of its policies and their effectiveness . corona emphasizes the review will result in any reduction of policy accommodation. >> [speaking japanese] the currentin framework there is ample room for further monetary easing in either of three dimensions -- quantity, quality, and interest rate. other new ideas should not be off the table. what we should bear in mind when conducting monetary policy is not its limit, but a comparison between benefit and cost, as is the case with any public policy. there is no free lunch for anyone. christine: uncle of merkel's policy has -- party has been beaten for the first time in the
state election. it highlights the strength of the backlash against her open border refugee policy. her christian democrats took just 19% of the vote while asc had 22%. samsung's recall of millions of big-screen smartphones isn't going to be cheap. the south korean company may spend over a billion dollars after vowing to replace all the 2.5 million phones according to estimates compiled by bloomberg. they would only say that this was heartbreaking. north korea has filed -- has fired three ballistic missiles. they say it is a show of force by north korea trying to coincide with the g-20 summit in china. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg. you.thank
let me take you to my bloomberg and talk about what's happening with the data that are breaking this morning. we have a series of services actor data coming out of the next couple days. today the spanish number is stronger than anticipated. is a decentth of 50 number, 56 is a good, good number. was 54.2, so a big beat. that takes the composition number to a much stronger than anticipated 54.8 with the survey at 53.8. it's a good number. the spanish economy despite not having a government seems to be taking a long. theresa may has expressed doubts about key promises made by members of her cabinet who campaigned to leave the european union. speaking at the g-20 summit she was dismissive of proposals for a points-based immigration system and cast doubts over
leaving the single market. meanwhile mark carney will face questions over his warnings and whether he acted to quickly in response to the eu referendum results. remember as well that we have services sector data out at 9:30 and that number will be closely watched as they are both better than anticipated. joining us now in the studio, the jpmorgan cio of fixed income . how important is today's number? >> it's pretty cool. you are likely to see it rebound, because we keep talking about post-brexit but it's not really, it's post-referendum. when the previous number was taken they didn't have a government. of course there was a lot more stability, so expect a decent rebound. guy: the town has bounced back and the market is a discounting mechanism.
we should be looking forward to comments from the likes of president obama and the japanese prime minister. he was quite strong in his characterization with japanese firms in the u.k. expecting access to the eu. >> ultimately we are in this phony war and brexit hasn't been decided yet, exactly what it means. is it hard brexit, soft brexit? nobody knows. thel we have more certainty reality is the economy will just keep going, look at spain. it has had pretty epic pmi numbers. guy: what will mark carney say? >> mark carney did absolutely the right. the brexit vote was the biggest shock to the u.k. in something like 100 years so he did exactly the right thing in restoring confidence. will say on an
ongoing basis that we will wait and see. guy: will we see further rate cuts coming through? the market has already priced in the possibility of more. >> and that is right. the bank has been pretty clear giving forward guidance that they are likely to cut rates and they have also kept the option now the open with more qe in terms of corporate purchases. he will probably do all of those things but it's really just a question of timing. guy: how do i position for that? do i buy the corporate market? give me a sense of how i make money out of it. ilt.ertainly buy g there is a big mismatch between supply and demand -- you have this great big are really in the room, the bank of england, who bring up bonds and they are likely to be a lot lower than they are now, particularly at the long end.
--t is the stated aim of qb you loyal -- you lower the cost of capital. the u.k. corporate market will be a place that will excite. guy: how does the pension fund industry deal with this? >> that is the challenge. there are always unintended consequences of these policies and what it does is lowers the discount rate, increases liability. fulfilling. so you have a bigger gap between assets and liability. they will be buying gilt and other forms of corporate bonds to help bridge that asset liability mismatch. guy: thank you for spending time with us. cio for fixed income at j.p. morgan. up next, saudi arabia and russia committed to the oil market. latest, and more
yousef: this is being watched closely -- the reality is as much as they are trying to diversify, it still depends on the way forward in the meeting between the current prince and the russian president vladimir putin, clearly offering some support that they will look to further cooperate and at the end of the day what the deputy crown prince is saying is that russia and saudi arabia are the biggest oil producers -- they need to cooperate if there's to be stability. this is the reality check, saudi arabia and russia going at record highs and really fighting for that market share -- but what it will come down to is iran because the russian president made it clear that you ran should be exempt from the
agreement until it reaches its three sections level of output. that is what brought the freeze and they say that they will reach an agreement, this time in algiers. they were speaking to the cio and he said that there is an additional incentive to get it right -- there is so much in terms of credibility that is at stake and if you take a look at how crude has been trading since ,alks first began, it is up 6% clearly affecting sentiment, but it will not affect fundamental picture of the oil market. guy: thank you very much. bloomberg markets middle east anchor. the latest when it comes to the oil markets in algiers. we will continue the conversation. up next, who will succeed bloodier putin? we put that question to vladimir putin in our exclusive
president vladimir putin. one of the questions that continues to hang out there is hoodia succeed a man like vladimir putin? everyone has this at the back of their mind it is one that we need to address. our investor put that question to the russian president in hours as interview. >> you just reorganized part of your government, you have promoted some former bodyguards -- do you think that might be the area where the next leader will come? will it come from the younger generation of people beginning to emerge? >> [speaking russian] i think theourse, future leader has to be a young person. >> like an elected leader? >> [speaking russian] >> the members of the various --cial forces and military
this is not the first time we have had members on the defensive being promoted to the administration. be an exception. the most important thing is that the right person is capable of growing it wants to serve the country, to work with other world powers. i can see that the person has work, and it might then representatives will also participate to judge their proposals. there might be a relationship between him and the people who live there and people might have a feel for what kind of person
he would be and if they want him than they would draft him. guy: vladimir putin. don't mess our special program on the russian president in conversation with our editor-in-chief. that airs tonight at 5:00 p.m. london time. ryan chilcote is back. when you have 80% popularity and you are consolidating everything around you and you are the unitary figure on which everything hangs, shifting power becomes incredibly difficult. you struggle to see the forest for the trees. ryan: fairpoint. he is in his 60's, he's thinking -- i could do another term and no one will get in the way. the idea of a successor, which i'm sure he is thinking a lot about, and he was saying the person should be young amateur and did not bat away the idea of
that person coming from the security services -- his thing is i will think about it. maybe he has one or three people in mind but i won't reveal it because that would erode this absolute power i have right now. boris yeltsin when he decided that vladimir putin would be the next prime minister and that acting president, he suggested what bloodier putin suggested -- go for a younger person from the security services that can celebrate power. -- that can consolidate power. guy: how do you replace a strongmen? because he needs to have authority. that soe interesting is much power is already concentrated within the elite security forces, perhaps the fromr question is now -- which branch of the forces will me?t individual co
i think that is the space you have to watch -- it will be difficult but whoever he chooses he wants to make sure that this person can win the fight. this, thementioned fact that he is already replacing people. you have almost got to change the infrastructure before you change the person. guy: in many cases the changes he is making are not changes in terms of the type of people but younger. you mentioned the head of the presidential administration -- is an interesting person to on, he was at one point thought of as a potential successor, he was going to be the prime minister until vladimir putin chose someone else. he is seen as a very capable guy who can do security services and
speak english and watch basketball and can be everybody's man. andputin has demoted him now the question is who is it going to be? guy: great stuff. ryan chilcote, analyzing the events in russia. up next, trying times for ongoing merkel -- for angela merkel. what does it mean the federal ballot box? stay with us. this is bloomberg. ♪
guy: welcome back, you are watching "on the move." let's get you up-to-date with what you need to know. christine: barclays is close to naming -- to run the corporate and international division. that's according to two people with knowledge of the talks. it would fill a final vacancy on the top management team. samsung's recall of millions of big-screen smartphones isn't going to be cheap. the south korean company may spend as much as a billion dollars after deciding to replace all the 2.5 million phones according to estimates compiled by bloomberg. same song only say that the amount was heartbreaking. has went on its first day of trading since filing for
--. the restructuring plans were deemed insufficient. shares in south korea's biggest container lines slumped by the limit at the open before recovering much of that loss. and softbank debt is nearing the level that may trigger a downgrade. moody says it was $115 billion in, five times adjusted earnings. anything past that could mean a downward revision. there are $32 billion arm holding will set to add to a debt level. and that's your bloomberg business flash. guy: thank you. the chancellor of germany, angela merkel, her party has been beaten by the populist alternative. shows the backlash against her open border refugee policy momentum. for more on this, let's go now to bloomberg's reporter in
germany. good morning, tony. should i read too much into this? people are making a big deal out of the fact that the other party did well. >> from angela merkel's point of view, this is an election to check off and move forward from. we talked to several analysts who say exactly that -- that she will have to stay the course because she has no choice. she is locked into this refugee policy and the afd is doing quite well and there is another state election coming up in two but she will want to move on despite the grumblings in her coalition and to party block because that is the only way to move forward. guy: what is clear is that this
is going to be the dominant theme. this is an area that is poor and whirl, an area that hasn't taken that many refugees, but nevertheless while you can't necessarily extrapolate the numbers in terms of people turning up at the ballot box you can increasingly be very clear on the idea that this'll be the dominant. >> yeah. two things. the exit polling in this election yesterday in western pomerania, this eastern germany area where she has her electoral district, showed that the voting did not turn on the economy, which even in this state is doing quite well. so that's clearly a warning sign. the flipside is that she has a year now to turn around her political fortunes and also the conversation in germany and that hopely has to be her
because germany has gotten much more restrictive on refugees in terms of letting them in and the influx has declined. that is what she will be banking on as she moves forward and decides whether to declare her term,acy for her fourth which may happen by december of this year. ,uy: always a pleasure than thank you. joining us now is the codirector europe -- good morning. i'll ask you the same question. i'm am watching european politics in trying to understand. >> it's a bit of a humiliation, europe -- good morning. i'll ask you the same question. but i wouldn't take it too seriously in terms of whether she will maintain power. there is no alternative -- she doesn't have many challenges within her party and the spd is still struggling. if she runs, she will win again, and form a big coalition. but it will also feed the hard-liners in her party, particularly her sister party,
which has seen his popularity rise as a rails against the immigration policy. guy: how will the rest of europe's view it? but i wouldn'tthis morning we hs sarkozy making reference to what's happening in calais. clearly the immigration story with the rest of europe, it's part and parcel of the discussion in every country. the momentum is growing. the asc did better than anticipated and we are a year out from the german election -- why can't that momentum grow? they did more terrorist attacks. there is plenty of fragility out there. but this remains very much a one issue policy and while it is a big issue -- guy: it managed to -- >> it took them a long time to get to where they were and they had to come up with other policies. they have a number of questionable politicians which may erode support.
they can do well in certain areas, particularly poor areas where immigration is a big issue , particularly if they struggle to come up with the rest. that is where we will see the real change -- inputs pressure on her to find a response to the migration crisis and brexit, overcoming these challenges. she has always been the one that can move through crises, the pragmatist who does what's needed. but a she no longer does that that is when she is in trouble . guy: theresa may -- what is becoming increasingly clear is that she understands access to the single market is going to require some sort of immigration deal with the euguy: theresa mas . we can't go hard on this seems message. control but wed
also need access to the single market. >> i think she is keeping you pretty vague and saying she's not ruling anything out and the reports seem to have gone far. i think she will keep some kind of option open in that sense but what's clear is that if she control but we also need access to the single market. >> i think she is keeping you wants access to single market she will have to trade -- whether that means a system that is less restrictive -- she knows there's a trade-off and that is the important point. guy: will the brexiteers allow that to happen? >> it remains to be seen. it wasn't about control or a specific system, not about reducing numbers. over time we will see whether it on whether orient not we will have something suitable to our economy but it could cause a problem and there are rebels looking for something to rebel on. guy: david davis is a parliament later on. we have a debate on the brexit story coming up. first time we will hear from the god who will be negotiating for the u.k. -- what do you think he will say?
will he softened his stance? >> i think you'll taken optimistic -- i think he will take an optimistic tone. open, we want to remain we want to take advantage of these opportunities, we don't want to close out our borders in any sense, trying to say that this is an opportunity. i don't think he will go into huge amount of detail. i think it's still early stages in terms of policy planning. you don't put all your cards on the table straightaway. guy: we have seen some solid u.k. data. we get a big number today. if they continue to be more positive, how does that change the debate? >> i think it makes it easier for the government. they can strike a more positive tone. in terms of negotiation, if you are coming from a weak economic position, that will make it easier. but for now we can't get carried away either way. this is mostly survey data and over the next few months we will get a better picture but it
could be an important point. guy: we will look for that number. talking of pmi, we have some coming in as we state. the italian numbers are out. they look stronger than anticipated. the services number, the actual number came through, the prior was 52. but remember the manufacturing neverthelessker -- we are still north of 50 as we await details. the and data is out, the united states data will be tomorrow. up next, it fits neatly into our next conversation. new ideas on the table, mark carney facing lawmakers. mario draghi -- what will he do on thursday? the weeks to come. this is bloomberg. ♪
that's the pmi data. let me take you to what's happening with the equity markets and break it down. this is what's happening. the large, red swath is uk's contribution to the stoxx 600, and as you can see, it's a little softer this morning. after a big rally friday, portugal, norway, and denmark are the risers, bringing up the rear of the tally. let's get to you some stock stories, ryan chilcote with the details. ryan: we want to get it off with two companies from continental europe leading the market, outperforming the market overall. up after itsis biggest intraday gain in four weeks after they said that the 22% will be purchased for 2.4 moving toros
consolidate control over sfr. another big riser -- this swiss maker of financial software that just got upgraded at credit suisse, the best aces july 20. they say the target price of 71 swiss francs, today trading just above 61. and just because it is fun and interesting, zodiac aerospace. they produce systems for aircrafts and you probably heard about their trouble with the toilets. we heard airbus complaining about that a while back. the issue is they issued a profit warning after the market closed on friday. you can see the shares reacting. one of the worst performers on the stoxx 600 this morning. guy: great stuff, thank you. let's talk about the day ahead.
labor day in the united states and canada, celebrating with a day off. the irony is not lost on any of us. tomorrow, the german finance minister is set to formally deliver his address. wednesday mark carney testifies before the u.k. parliamentary committee. european central bank policy decisions on thursday, the eurozone finance ministers gather. italian banks are the hot topics of discussion. right. take your pick of that smorgasbord. now with our first were strategist richard jones -- which would you highlight? draghi is clearly important/ richard: i think it will be interesting to see what governor carney and some other officials do in testimony on wednesday. we have had a reasonably broad-based package, and there
will be questions about that. -- data has been mixed initially we had this week survey data -- let's see what it does today. i think the bank probably takes a longer-term view -- there will likely be a lot of noise in the immediate aftermath. longer-term i think it will highlight the downside challenges that the u.k. economy faces. guy: a german number out. 51.7. the preliminary number was 53.3. a little softness. 's drug af the ecb, going to change the rules when it comes to qe? it will drop the deposit rate -- will there be a hint that he will extend? richard: i think it's expectations that we will get it sometime this autumn, as early as this week. by christmas time i would say we will probably get something.
it might be too soon but we won't rule it out. i would say it's not fully priced and in terms of actual physical easing beyond just an extension, it will be something that the market will be working for next year. i think it's one of those things that the ecb will always say is in their armory and the expectations are that we could get something next year, but in the immediate future it's not something that's on the table. i would say that given the way the pound has moved, we have had a bit of an upswing against the dollar and euro, and it could be that this number -- it's very difficult to say, but it is very important. guy: richard jones, joining us from the first word.