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tv   Bloomberg Markets European Open  Bloomberg  March 21, 2017 3:30am-5:01am EDT

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♪ guy: good morning. i'm alongside matt miller in brussels, what are we watching recent history makes investors cautious. in 2% for the first time more than three years.
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talking about raising rates, minneapolis president tells bloomberg there is no need to rush another rate rise. continue to call for 2-3 hikes this year. they all speak late in the day. manus: less than half an hour away from the cash trade. very interesting turnaround we've seen this morning. yesterday the equity down across the board with the exception of the ftse and the u.s. looking at red arrows. today we are looking at futures that were read a half hour ago. after so many issues came up yesterday, brexit, greece, the french elections, i lost to talk lot to talk about.
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is theat we are watching euro well bid on the back of what we saw last night and france. we are looking at a one-week handle. we are trading at the moment. to bid. certainly i just want to mention what is going on right now. with iron ore. look at what is happening. iron or getting back in local that as well. quite a run and and adjusting trade. enough chart that shows what is happening with iron ore. the aussie is lacking. an interesting conversation taking place. juliette: james comey has dealt president donald trump eight review.
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coming confirmed that the fbi is investigating russia's interference in the presidential election. whether any of trumps associates collaborate with putin's government. trumps claims that his predecessor barack obama had wiretapped him were false. the european union has signaled the intention to kick -- keep the u.k. waiting. they indicated that the husband that she will invoke article 50 in march 29 comes to date for that. the summons will not be arranged for the end of april or early may. martin mcguinness has died aged 66. the leader retired from politics in january after being taken ill
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with a heart condition. the 1998 good friday agreement. he became deputy first minister in 2007. standing alongside democratic union party leaders. former leader has pledged to cooperate with investigators while appearing for questioning for the first time over the corruption scandal that ended her presidency. hours of grilling behind close doors, the accusations that she pressure top business executives to donate tens of millions of inlars to foundations run return for government favors. she has denied wrongdoing. economy growing at 6% in 2018 as the government presses ahead with more tax reform. boosting spending on infrastructure progress.
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bloomberg, against protectionist trade policy. >> global economy becoming more inward. also affecting indonesia. reporter: david rockefeller, the presidential advisor and air to one of the most fabled fortunes, has died at the age of 101. of last surviving grandson america's first billionaire. the only one of his five sons to fetch his entire professional career in the corporate world. 35 years at the company. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries.
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matt: the french election got pretty heated in the debate you >> the best way to send an honest a signal that says we cannot welcome you anymore is to cut off all the suction parts of immigration. state medical care, access to social housing, subsidies, and so on. >> the truck you're falling into with your provocations is to divide society. 4 million french people whose religion is islam, not into -- you live in our republic is to make them enemies of the republic. for me it is now. >> i strongly disagree with emmanuel macron who congratulated angela merkel for
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policy that appears to be a bad criticized today by friends in germany because of the simple reason, we are not in the presence of refugees. refugees and in political terms who are fleeing a regime. the poll taken after the bates, emmanuel macron the most convincing. macronket reaction, survive. did he come out in front? >> he did. it seems to be welcoming his performance. he was attacked from all sides for his like experience. was attacked that he was
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supporting angela merkel's all of the of immigration. attack on religion and tackling terrorism. he did manage quite well according to this whole and the political analysts who have been speaking with. matt: how do we judge how well they did less like? how does that mean? >> he is the far left candidates. the opposite of marine le pen. he is the other antiestablishment anti-system candidates might appeal to the french voters. he did much better than the socialist nominee in this debate.
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excuse in the fight against terrorism. he is also very popular among the working class. you want to increase the minimum wage and says this is the reason why france cannot get out of the mess it is in economically at the moment. he wants to invest 100 billion euros in order to boost the french economy. talk to me about where the euro did well. is that the right pair to look at? >> the move was steady and gradual all night.
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waiting to see what the reports are. i think part of the guest: is the least resistance. --dollar-yen though brexit situation. the has its own story going on. the euro-dollar has broken the six week high. the euro-yen, that implies quite a lot as well. matt: i wonder specifically about the pound because it is at its worst month in 30 years as far as absolute levels go. week, wondering about the swiss franc.
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does it take pressure off the swiss franc that mccrone does well and le pen does not? >> a great question but i think euro-swiss can be dark force. it will never have the volatility of the others. risk-reward races -- basis, they feel rushed to. a lot of people thought that it may break in the downside. i think it absolutely has potential here today. guy: think you very much. joining us now in paris following the debate of last night. nice boxes. similar to what we saw in the debate. .ollow the market like blog smart analysis some was going on. coming up on the show we're
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joined exclusively by the ceo of the oil company. scotland the big part of that debate. we're going to get to what we're talking about. the frontrunner, sending the euro higher. the boe have its hands over the lesson today. or at least more people will be talking about that. 9:30 london time. forgive conversation still to come. market opens 17 minutes away.
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guy: 40 minutes until the equity market open. his juliette starling. --oftbank investing softbank investing in it we work. increasingve money, to $18 billion.
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wework and softbank declined to comment. debate about the rate rises continues with chicago president charles evans seeing three up to -- up to three hikes this year. his calling so there's no need to rush. >> i look at us as repeating the same things over and over again because we are behaving as if though 2% is the feeling rather than the target. i'm hoping to remind my target that lets take a step back. when the data calls for the we should remove accommodations. >> i would say it increased ever since the increase of 2015. this is an important fact that helps explain why the dual mandate outlook kent allow me to
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support two or three rate increase in 2017. juliette: that is your bloomberg business flash. matt: we are minutes away from the open. let's get to our stocks to watch. a stock that he wants to keep your eye on as people familiar with the fit situation tell bloomberg that pbg is preparing another bid. 20.9 billion euros. 83, 83 euros per share. they may be looking to sweeten the pot. guy: we saw softness of the open yesterday. ironwork chart here. this is the moving average.
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it may have caused some of the money to come out. there is a been a market very solid. and adjusting turkey can find on the log right now. maybe the aussie is liking this morning because iron ore and the aussie have been correlated. that correlation beginning to break down a little bit. a patch of coming through. we're going to speak with the ceo. he will company revenue beating expectations. we will talk about stop and coming up next. this is bloomberg.
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♪ guy: inquest reporting revenue of more than $845 million. that tops estimates with us now for an exclusive interview. the ceo. good morning. nice to see you. thank is a much for being with us today. those itoil industry, have a future if the oil table >> absolutely.? the whole industry has restructured for a longer time.
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we are taking over assets. we will continue to grow so there's a space for companies and oil business will be around for a long time. >> i assume this is a movable story but where are we? >> we've reduced operating costs inm $40 a barrel to 29 .7 2016 and in 2007 -- into the 16 we are 24.6. that the operating side of the cost. matt: is that a moving target?
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do you expect the cost to get that oil out of the ground to rise? pressureill be some from the service industries. structurally we have a lower cost on the service side. are you looking to boost anytime soon or do think the industry will look to invest more money? >> we will continue to look to invest. we have our largest projects coming in the second quarter. that's will give us a boost of production. , we finish theed
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project last year. industry starting to see investments all around. we are seeing an increase in investments. the spy looks healthy. side,onal on the demand also increasing. guy: you say q2, again give me a month? beginning or end? >> we have always been consistent. we say q2. it will be in a q2. >> back up and take a look at the north sea. companies that invest their, what are the main challenges for growth in that basin?
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>> i think we have a harsh environment. a high cost environment. the highest cost basins used to be in the u.s., those of both come down significantly. times are still much longer. we have done a stellar job. like a mentioned earlier, there is a future. we are here to stay in the industry. guy: i only have 10 seconds. >> we're always looking at assets. we are always talking to each other. there is nothing there. guy: good to see her this morning.
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coming up, the market open. european start for equities this morning. we continue to keep an eye on what is happening with the euro post the french presidential debate last night. ♪
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guy: welcome back. we are a minute away from the market open. cash opening shortly. the fair value pointing toward a positive start. the euro stocks 50 calls up. the dax looks like it will outperform a little bit, as will the ibex. go'll find this on your wbi screen. greek cds? matt: it is interesting. greek cds may be volatile, but it has come down substantially. you have to pay less to ensure against a default in greek debt.
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i talked to the european commissioner as well as the german finance minister, and the greek finance minister. optimistic onemed what looks like a difficult situation. the greeks had to pay 7 billion euros, coming up in july, and may not have the money. guy: we are going to wait and watch. will greece be a thing this year? the market open this morning, we are expecting a warm performance out of the gate. london already beginning to take higher. 7434 is where we are training on the cash contract. the cac following suit. we are expecting germany to see positive yields as well. european equities bouncing back from a disappointing yesterday, if you are long the market. by 0.4%.s up let's find out what is going on elsewhere. nejra: starting with the gilt
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market open, the 10 year treasury yield edges higher after dropping yesterday, after hearing from yet more fed members with diverting views. the 10-year gilts yields look to be edging higher as well. at 1.24% on that 10-year gilts yield. closely watching the french-german spread as well. we are spent -- seeing the spread tightening after the debate on tv with the candidates last night. emmanuel macron seen as the winner according to polls. looking at the stoxx 600, we are a little higher on europe's equity benchmark. in terms of distribution between industry groups, financials leading, followed by utilities and energy. we are seeing oil rebounding today. on the downside, materials and health care lagging. looking at eurozone versus u.s. equities, this is a great chart, inspired by dan morris at bnp paribas, who came on "daybreak" earlier this morning.
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they are bracing for donald care to deliver on health momentum. perhaps a swing to european and em equities. after the french presidential debate, we have seen the euro poll higher, heading for a six-week high. this chart is showing the risk reversals as well. one month risk reversal, which was negative earlier, has gone above the zero line. is that a bullish to you? -- bullish skew? guy: positioning is going to be important surrounding the single currency at the moment. -- axo on600, ask so the back of reports that pbg could be coming back. a bit of a story there on the m&a front. bunzl bid as well.
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it is the financials that are really well bid. ,antander, bnp paribas, hsbc all rising. from an index point of view, that is where the money is flowing right now. the banks index up by around 0.5%. let's look to the losers and see the weight of money. the miners coming off, the money flowing out of the miners -- rio and bhp off. on the board as well. you see the money coming out there. it is a bit of a different story -- lufthansa. then, you get into the miners. lindor core losses are coming through, matt. -- glencore losses are coming through. matt: one reason we are seeing gains in the euro is because of the french debate last night and how that turned out. emmanuel macron past his biggest test yet in the race to be the
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french president. let's listen. to send at way signal, and honest signal that says we can't welcome you anymore, is to cancel all the suction pumps of immigration -- state medical care, access to social help, various subsidies, and so on. >> the trap you are falling your mrs. le pen, with provocations, is to divide society, to make the more than 4 million french people whose religion is islam, the majority are not totalitarian, but live in our republic, is to make them enemies of the republic. emmanuel macron, who congratulated german chancellor angela merkel for a policy which appears to be a bad policy,
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which is by the way criticized today by friends in germany because of a simple reason -- and that is that we are not in the presence of refugees. refugees, in political terms, who are fleeing a regime. snap poll taken straight after the debate saw emmanuel macron -- as the most convincing candidate. andrew sheets, cross asset strategist at morgan stanley, good morning. do you think macron is going to win? andrew: i think europe does have some advantages relative to other regions, especially the u.s. we have strong, hard data in europe. we have a central bank we think is going to stay dovish. i think you have almost the opposite of the political backdrop you have with regard to expectations. i think people entered this year with high expectations the u.s. would deliver a lot on policy. they entered with a lot of concern around the european election cycle. that gives europe a lower bar to clear. guy: you are short europe. we are trading 1.67 at the
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moment, i think. you do not expect we get to target. andrew: this is what is interesting. the way we tried to set up our recommendations is that we are constructive on the banks and broader value within europe, that we are positioned for inflation in europe to fall. you might think that is inconsistent. but i think that are pricing very different things. if we think about what inflation is pricing, it is saying that in five years time, five-year inflation will be 1.7 in europe, close to the ecb target -- a very normal environment over those five years. and yet we don't think the banks are priced for anything close to a normal environment. the way we would justify that is i think they are pricing in different environments, and cover each other quite well. i have read in your notes that i wait to play reflation is to stay out of the u.s., touch on the u.s. later on.
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if you think inflation is set to fall in europe, why would you belong europe? why would you think europe is a good place to invest for that trade? andrew: that is a good question. i think it is a question of both what is in the price, and in the path of that inflation. toexpect inflation in europe pick up over the short-term term. economists have that accelerating over the next year. i think it is a question of what is in the price further out. thinkrt of inflation we is already fully pricing that in is what the market is pricing for five-year inflation, five years from now. that number at 1.7%, we think, is already high enough. we think that while near-term the best will pick up way to position on the another asset with european value equities. matt: to bring. go back to the french issue we were talking about at the top,
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so many people have been concerned about the massive asymmetric risk of a le pen campaign. as the chances of her winning , and as a loter of people start to realize that even if she did, she would not be able to pull out of the euro, does that look like a good place to put money? andrew: look, i think it is important to remember that there is still a lot of time left in this campaign, and a lot that can happen. this question of what is in the price is also very important. about a month ago, our economists put the odds of a le pen win and about 15%. at the time, they received criticism that was far too low. now, that seems in line with a lot of market pricing. obviously, markets have gotten more optimistic. you had a good chart earlier, discussing that. with the options few, it obviously increases the risk. i think that one issue, with regards to the euro, which would
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still leave it somewhat exposed, is that is the one instrument european makes would not be in. you can see elements of eurozone stress where the ecb could buy government bonds, but we do not think they would intervene to support the euro. guy: since the drive the press conference, the market has started to talk about the exit for the ecb, how it extract itself from current policies. it is very extreme. are we getting ahead of ourselves in this? while 1.7 is getting close to target, one would argue, with the output gap the size it is in europe, you do not need 1.7. you need something north of that output gap. is not going to be exiting anytime soon? andrew: this goes to our views
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of why we prefer non-us equities over u.s. equities. it is related to the central bank dynamic. case tois a strong tighten policy. that is before considering very large fiscal stimulus, coming down the line. in europe still growth and inflation that have been below target for a long time, policy that is extraordinarily easy in order to support that. you have japan that has to negotiate a very tricky exit from juncker controls. i think the fact these things are so difficult delays them. it means they are pushed back for longer, because the risks of those exits are higher. i think an advantage the x u.s. market.s. part of the will have is, they will be airing on the side of caution, whereas the fed has a path to be more hawkish. it is good to get morgan stanley's take on this. costs that asset
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strategist at morgan stanley. he will stay with us. fueling inflation. u.k. cpi is expected to pass the boe's 2% target, but the mpc is unlikely to bat an eyelid. we were talking about inflation in europe. we focus on the u.k. plus, we wrap up for bmw results in berlin. when the numbers roll in. later, no need to rush. the minneapolis fed president emerges as the opposing central-bank voice. we have more from his interview. ♪
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matt: welcome back to the european open. i am matt miller in brussels for the meeting of finance ministers today, as well as a visit from shinzo abe. guy johnson at european headquarters in london. just about 14 minutes into the trading day, we are looking at gains across the board. futures were down when i came in, and they have turned around, and the castrate is positive. we are looking at a gain on the cac of 0.3%, a game in frankfurt of 0.1%, and a gain on the ftse of just less than 1%. very little change there.
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let's get a look deeper into what is going on in markets, and specifically your mid-cap stocks. for that, we go to nejra cehic. nejra: starting with a stock that has hit a record high -- department group, these swiss market, raising its dividend. ,his was a 41% jump in profits with higher performance fees from maturing portfolios. longman --dr. wohnen dropping. they sell residential properties. investors unhappy at a miss. finally, i am looking at fingerprint cards. this stock tends to move a lot. it is very volatile. still, it has dropped the most since october 2015. hit a july 2015 low. this is a swedish maker of biometric sensors.
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it says it is going to draw its proposal of a dividend for 2016. it sees a revenue decline of more than 60% in the first quarter. it says the trends have worsened in the last few weeks. this for a company that has already hit a number of challenges. guy: thanks very much indeed. gilt yield popping higher over the last few minutes. something to pay attention to. real rates in the u.k. remain incredibly negative area more than three years of past since u.k.'s cpi was above the bank of england 2% target. the inflation data is due. expected to show it crossed that threshold of february. however, the bank is unlikely to bat an eyelid when domestic cost pressures remain muted. is that really the case? andrew sheets joins us now. let's talk a little bit about the u.k. everybody, vote for a rate hike. you read the statement in more
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detail, and others are getting close to that concept as well. threshold, we the are up 2.1%, likely to go further than that. when does the bank of england raise rates? andrew: this is what is fascinating, right? you do not in the u.k. just have a pick up on headline inflation, which is mathematically guaranteed given where we were a year ago. even implied inflation over the next 10 years is near a 10 year high. there is a lot of uncertainty elsewhere. the bank of england has to be considering that. it is not just the headline numbers. it is what the market is implying. a the same time, there is norm is an arm's uncertainty around the brexit process again. brexit is too easily dismissed. we say, it does not matter. the recent data has been strong. people must be overreacting.
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and yet the pound is at a 40 year low relative to the dollar, purchasing power adjusted. there is concern in the markets about long-run effects there. the becoming one has to consider. guy: is there a danger the market is wrong when it comes to sterling? we look at the positioning. massively short. it has been massively short for a while. that will continue although sterling is stable, or has been inching up again. at what point do that shorts have to come off? if so, it sees this inflation story out. andrew: we are constructing on sterling. we like it. you can make a short-term case that it is oversold and people are two negative. you can make a longer-term case that it is one of the cheapest currencies in the world, on purchasing power, exchange rate basis. we complain all day there are no cheap assets in the world and everything is overvalued, but the weak sterling, we think, is one of those inexpensive assets.
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it is sitting in an interesting place. if brexit turns out to be quite difficult, and very difficult, sterling is priced for a very difficult outcome. if that difficult outcome ,ecomes politically impalpable it could get something more moderate, in terms of a negotiated outcome. sterling can have upside. matt: look, i know that sterling -- we have got a great chart today, as far as an absolute level. it is the lowest it has been, or had the worst month it has had for 30 years. but is it really pressed for the worst-case scenario outcome in brexit? the singlexits market and is not able to negotiate a new trade relationship with europe or two years, that will be difficult to sell goods, to keep jobs, to keep growth. is sterling really priced for a worst-case scenario? andrew: that is a very good question, and it is not.
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i think as you highlight, there is a lot that can go wrong in these negotiations. our view for some time has been that the negotiation -- that the u.k. is in a difficult negotiating position. in many ways, the clock is running against it. that being said -- this may be goes back to our earlier discussion. i think investors in a lot of different markets are struggling with this question of, where can i find really inexpensive assets? there are a lot of very expensive assets out there. it is where you find something that will be inexpensive with no downside risk. strolling could certainly go lower if negotiations go poorly. but we think the risk-reward as we think about those probabilities is skewed in its favor, both in the short-term and over the longer two-year horizon. matt: this is exactly what makes markets, and makes our job more interesting, and your job as well. is the chief cross
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asset strategist at morgan stanley. up next, we are live in germany, where we get a preview of bmw earnings. what is the outlook for that lost its, after it's first place as the biggest luxury carmaker in the world? ♪
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guy: 23 minutes into the equity session in europe, equities flat. not moving much. here is juliette saly. ppg industries is said to be preparing a renewed takeover bid, according to people familiar with the bed. xo's unsolicited takeover bid earlier this month said the offer undervalued the company. pbg said it would carefully evaluate its position. spokesman for akzo and pbg declined to comment. softbank is said to have invested in color working giant "we work." the investment from softbank is the first in what will probably be a larger stake. with the new money, wework's valuation increases to $18 billion. wework and softbank declined to
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comment. david rockefeller, the u.s. , philanthropists, presidential adviser, and air to one of history's most fabled oftunes has died at the age 101. he was the youngest and last surviving grandson of america's first billionaire. he was the only of john d rockefeller's junior's five sons he spent his entire career in the corporate world, rising to ceo of chase manhattan bank during 35 years of the company. it is your bloomberg business flash. much.thanks very we get full-year earnings from german carmaker bmw at 9:00 a.m. london time, 10:00 a.m. in germany. this after preliminary numbers month showed the weakest profitability since 2010. joining us from berlin is our auto writer. chris, what is the focus today?
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chris: we had the headline numbers a couple weeks ago, and they were not that great. focus today is looking ahead. it is for the outlook for this year. it is looking at what the ceo is going to say, how he is going to try to put a positive spin on 2016, and how he is going to look forward to 2018 and beyond. as you know, bmw has been in a bit of a tough place. his comments on strategy and looking forward be closely watched. matt: they lost the crown on biggest luxury carmaker to mercedes last year. will they get it back? chris: not anytime soon, if those are the expectations. recite his has been doing extremely well. one of the regions where mercedes lacked was in china, and they have been picking up speed the first couple months of the year. mercedeses outsold -- outsold its rivals.
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it is unlikely bmw is going to come back in the next couple years. chris, thanks very much for your time. our head auto replied -- reporter. we speak to the bmw ceo later this afternoon. do not miss it. ♪ . live-stream your favorite sport
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at the airport. binge dvr'd shows while painting your toes. on demand laughs during long bubble baths. tv everywhere is awesome. the all-new xfinity stream app.
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xfinity. the future of awesome. ♪ france fuels the euro as the first presidential debate doing well, should recent history make investors cautious? price pressure u.k. inflation expected to top 2% for the first time in three years, will and overshoot encourage others to talk about raising rates? minneapolis that president neel kashkari tells bloomberg there is no need to rush another rate rise in the u.s. will his colleagues continue to ikes whentwo or three h they speak later today.
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i am matt miller in brussels alongside guy johnson at bloomberg european headquarters in london. guy: with 30 minutes and, let's look at how european equities are performing, action below the surface. -- welly, reports higher went higher but have retreated, higher in yields and oil is catching a little bit -- brent a little bit and of a firmer story from commodities. interesting to see what is happening in the bond market. firmly on what is happening with the fed. they could raise interest rates two times, three times, or four times according to the chicago fed president, his minneapolis colleagues however said there is no need to rush. >> i look at us as repeating the
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same mistakes over. implicitly, i think we are behaving as though 2% is the ceiling, rather than a target. i am hoping to remind my colleagues to take a step back and not repeat the same mistakes. when the data calls for it, then we should remove accommodation. guy: andrew sheets at morgan stanley joins us. are you with neel kashkari, no need to rush, or with people sit, two or three this year? there are three drivers with why we think that policy will tighten this year. we have been hiking two more times in 2017 and four times in 2018. the first is, yes, inflation remains below target as was just mentioned, policy is still it's ordinarily easy. -- fixed ordinarily easy -- x ordinarily easy -- x ordinarily
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easy. when the fed -- if slows the economy, that is what is. and and financial conditions have gotten easier. willis the reason, the fed have to do more and the third factor is the huge uncertainty over fiscal policy. you have in the norm is -- enormous fixed -- the unemployment is below 5%. the fed has yet to incorporate that to their assumptions. guy: closer to that and it is fairly imminent on the tax front. we now know the fed will not discuss monetary policy in dudley's speech. back to the neel kashkari comment about the balance sheet. what we have seen is that the
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volatility in the bond market has been declining for quite some time and it continues to push lower. we are in a position where we do not know what will happen with the balance sheet and neel kashkari says that is a mistake and the fed needs to outline what it will do with the balance sheet. before we see the next rate hike. if that happens, no evidence yet, how do i get ready for it? andrew: a couple of factors, we think that the balance sheet reduction will start from january of next year. we brought that targeted forward as we have racecar path of rate hikes. in our view, the fed will focus on, not reinvesting in mortgage backed securities, it will retain its treasury portfolio. guy: you will get people hedging on the back of that. andrew: exactly, we think this will lead to underperformance of mortgages versus treasury as mortgages the fed will look to disinvest from first in order to
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change the treasury portfolio. that is the reason our strategists are underway on a treasury basis instead of the mortgage basis. matt: what does that mean for the u.s. economy? that does not sound good. andrew: i think it will be a challenge because you will have tighter policy. u.s.e hand, growth in the in the moment is quite strong, it should be able to handle the tightening policy. that is pretty normal and typical of what we would expect late in the cycle. unemployment is very low, initial jobless claims at a 40 year low. ine of the data looks good, our view, the time when the fed should be looking to normalize those financial conditions. we do not expect the initial tightening to cause a shock, we can consumers in many cases are in pretty good -- a pretty good place in relation to their personal balance sheet. i think it is one reason our growth forecasts for this year in the u.s. is around 2%, a bit below the consensus. everyone has refinanced
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who is in, but what about people who want to get in and new homebuilders? does that in some way direct your investment strategy when it comes to individual industries? andrew: this is something that will be very important, you mentioned to offsetting factors. more expensive mortgage rates which are a function of interest rate heading higher death rates heading higher and the potential egulation in the financial industry, more talk than action but the new u.s. administration has been vocal they would like to roll back many of the financial regulations put in place under the previous administration. those effects added a great level of stability to the housing market and made it more difficult -- but they made it more difficult to put together a down payment, more expensive to do so. if you have easing of the down payment requirements, that could
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add a boost to the housing market that could offset some of the higher rate in fact. guy: thank you. andrew sheets, cheap cross asset strategist at morgan stanley. you are a bloomberg customer, you can watch this and other programs on the tv function and the tv screen, follow the charts and the functions we are using. you can directly message as as well using the ib function or go to bloomberg radio. up next, we are back in brussels where we will preview shinzo abe's meeting with european leaders after he and the german chancellor reiterated their support for free trade. that conversation is next. this is bloomberg. ♪
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♪ back, this is the open. let's get to the bloomberg first word news. there is juliet -- juliette: james comey has dealt president donald trump a stinging rebuke. during his opening statement, he confirmed that the fbi is and is getting rashes interfering -- and the interference presidential election and whether any of the trump colleagues talk to the russians. also he could not -- he said that -- european union has signaled its intention to keep the u.k. waking before engaging in brexit
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negotiations. the eu leaders insist that they are fully prepared for the talks but canceled provisional plans to hold a summit on april 6 to agree on the outlines of their negotiating position. they indicated that theresa may's announcement she will invoke article on march 29 comes to late, it will be arranged from the end of april or early may. northern ireland former deputy first minister has died at age archiveformer leader from politics in january after being taken ill with a rare heart condition. workeds t --he -- he with the power-sharing government following the 1998 good friday agreement and became deputy first minister in 2007 alongside a democratic unionists party leaders. hash korea's former leader pledged to cooperate with investigators while appearing
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for questioning for the first time over the corruption scandal that ended her presidency. she faces hours of grilling behind closed doors over accusations she pressure top business executives to donate tens of millions of dollars to foundations run by her friend in return for government favors. she has denied wrongdoing. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. this is bloomberg. guy: thank you. let's talk about the top stock stories. here is nejra cehic. nejra: ask a nobel gaining off some potential movement in a deal with ppg. ppg industries is preparing a renewed takeover bid after a wasious $22.4 billion bid rejected. zovestors have been urging kk
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to carefully -- the stock moving, up 3.3%. partners holding hitting a record high in this session, a .wiss private market investor i had it in my update. company has raised its dividend after it reported a 41% jump in profit on higher performance fees on maturing portfolios. the stock has hit a record high and the shares have climbed about 12% this year. on the downside, for zinnias -- senius is down. matt: shinzo abe meets with the eu today in brussels after his meeting with angela merkel yesterday where they call for a
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concerted effort to defend free trade, expanding the list of economic powers joining together to counter america's shift towards protectionism. still with us as andrew sheets, cheap cross asset strategist at morgan stanley. strategy atss asset morgan stanley. what is your take on britain? the u.s. not the only country starting to look inward. andrew: one of the big challenges the u.k. will face is that it is both very dependent on trade and airy dependent on trade with the rest of the european union. yet it is facing negotiations where, in many ways, it is up against the clock to come to an agreement. that is always difficult in any negotiation. what will be interesting is you have had the u.s. and to some extent the u.k. has pulled back partners.trading yet, as you mentioned, renewed
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efforts by other trade focused entities, germany, japan, china, to make the link stronger. matt: is this one of the reasons you and your investment strategy are focused outside of the u.s. and maybe the u.k. on your reflation trade? you are looking at europe and japan and china, is that because you see a new paradigm in global trade? andrew: that would probably be a step beyond what we are expecting. it has been surprising how strong trade data has been so far to date but i would not say we are expecting an extraordinarily trade environment to continue over the next couple of years. this is an interesting part of the debate. almost presented in some ways as a binary issue in the u.s. either the u.s. will have -- either we will have a trade or
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not. but the world isn't a big place and if the u.s. create a vacuum that others may step into, that was the all the -- always the argument against the transpacific partnership, if the u.s. stepped back from it, it would not stop trade, it would mean others would be more involved in writing those rules and setting the agenda. we may see that. we may see an agenda where the u.s. is setting less of it and other countries, particularly china, are setting more. guy: where is germany? one of the most year places in global trade. is the euro cheap enough? the -- they insulate germany from the process? andrew: the euro helps, it is much cheaper than it would be if germany was sitting significantly cheaper. it is historically very inexpensive and the ecb we think has a strong incentive to sit
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back and be reasonably dovish because of this political uncertainty. germany is being a very powerful voice advocating for trade. it will benefit germany. it supports the already strong data we of that in the german economy. of how it ision recycled and where it is invested. part of this broader debate. germany has run a current account surplus for a long time, nothing new. the debate is -- how does that factor in with the rest of europe? interesting is that you do have a situation where germany is being a strong advocate for the european union, a strong advocate for the advantages of that together. taking an encouraging leadership role in that regard. guy: if you were sitting in italy, the noise coming out of the u.s., why is the noise not coming out of italy or spain?
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where you would have thought there would have been a bigger problem with this goes german domestic demand is simply not rising in the way you would have thought to balance things out. german inflation, while picking up, not strong enough to allow others to be able to offset that. andrew: a good question. there are a couple of factors. first, you can say the ecb is running policy more suited for the challenges that are facing italy and spain than the strong growth in germany. it would be one thing if the ecb suddenly shifted to a hawkish message which is one reason we do not expect that to happen. it would exacerbate the risks. that is another reason why we think the ecb has a strong incentive to air on the side of caution and move slowly to shape its policy more towards the laggards in the eurozone which is ultimately a reason why that should keep policy in europe easier for longer in contrast with the u.s.. and going back to the banks
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this policy dynamic that will be in place for quite some time. we will carry on the conversation with anders sheets. of next -- andrew sheets. the longest winning streak since august, we focus on emerging markets story, the continuing rally. numbers in indonesia, that conversation that. this is bloomberg -- that conversation that. this is bloomberg -- that conversation that -- that conversation next. this is bloomberg. ♪
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♪ guy: european equities softening over the last few minutes. we have seen a push fire for euro-dollar. we have broken through the 108 level. a touch of 108. we see euro strength. we will wait and watch to see what happens as we progress towards the french elections. what theng to see shorts now feel about how long it will hold on to these positions. market positioning could be quite interesting. let's talk about other marketing position, emerging-market stocks extending their longest win since august. let's get more with tracy
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alloway. walk us through why this is happening. down to the fed or something going on otherwise? >> there is an annoying tendency in markets to talk about em as a homogenous flaw but i will do it anyway. even though we have idiosyncrasies for specific markets, think the elections we just saw in india. even though we have those particularities, the overall story has to be a macro one. after theain speed dovish hike by the federal reserve last week because the u.s. central bank is perceived to be tightening in a time of economic strength for the u.s. given the u.s. consumer is important for emerging-market economy, that bodes well for them. the other interesting thing is the reaction in the u.s. dollar. normally in a tightening cycle, you may expect the dollar to gain strength but it is weakening which is a clear win
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forem assets -- tailwind for em assets. from currencies to credit, especially in stocks, emergency marketing -- emerging-market index now 14% above its five year average. pretty stunning. there is warnings there is a 50-50 chance of donald trump's administration starting a trade war with emerging markets country, china specifically, is that the biggest risk for this trade? >> yes, there are some significant risks. one of them has to be the fed, if they are more hawkish, that cannot assets. the dollar i mentioned. when it comes to protectionism, we sought relief from emerging-market investors eking the drama we have seen around the republican health care reform, some of the travel bans of muslims may indicate that
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donald trump would have a difficult time getting his protectionist policies through. i have to mention, today we had news out of the middle east, some middle eastern airlines saying that passengers are now going to be banned by the u.s. from caring large electronic devices on airlines. , that think about it cannot bode well for the middle eastern carriers. maybe that is a backdoor protectionism. significant risk you could say. matt: thank you very much. i want to get to andrew sheets. stanley.an i want to ask him about this protectionist issue. i have been in brussels, everyone is talking about it, since robbie will talk about trade with the eu, how worried are you worried about the u.s. turning reductionist and in order to ask that protectionist and a border tax? initialsome of the
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steps seem less consistent with a harder line around trade protectionism that people were initially concerned with. you take that with comments out of wilbur ross, the commerce secretary, regarding mexico. that we are much softer than many people may have initially been worried about. when you combine some of the challenges that the administration has had with other part of its agenda and the explicit rhetoric, i think protectionist risks are lower but have not gone away. i think one thing markets may be underestimating, this is the way our economic forecasts have been structured, you do not get protectionism under the most likely scenario of modest u.s. growth. the risk of protectionism our greatest is if growth unexpectedly weakens. that is where markets may be underestimating the potential that protectionism has been turned to ask to something of a
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scapegoat. something to address that weakness. guy: great to see you, thank you for your comments. andrew sheets at morgan stanley. up next, bloomberg surveillance. francine lacqua and tom keene. ♪
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♪ matt: macron wins the debate and
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the euro rises after a full showing marine le pen losing ground after last night. em stocks extend their winning streak on a weaker u.s. currency, the fed continues with bill dudley in london today. repairing for the divorce, our sources say make of america and barclays -- in the post-brexit world. good morning, this is bloomberg surveillance. i am francine lacqua in london and tom keene is in new york. on the u.s. and donald trump and james comey, the french elections. italy mumbling under with concerns. tom: a lot of speakers with the american fed, mr. dudley in london. am i right in that he and carney are together today? matt: yes, -- francine: yes i think you are. let's get to the bloomberg first word news. >> james comey

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