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tv   Bloomberg Markets European Open  Bloomberg  May 16, 2017 2:30am-4:00am EDT

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of the billboard music awards just by using your voice. the billboard music awards. sunday, may 21st eight seven central only on abc. guy: good morning, welcome. you are watching "bloomberg markets," the european open. first-rate rate of the cash session coming shortly. i'm guy johnson in london, matt miller is in berlin. what are we watching? the big question, were state secrets shared? reports suggest president trump released classified information to the russian foreign minister. the muted market reaction, warranted? the european court of justice will today decide if the eu
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national regional parliament needs to approve a trade deal with singapore. will it make brexit harder or easier?easyjet first-quarter numbers , worse than expected. is this as bad as it gets? this is the question we will put to the ceo, carolyn mccall. she joins us at 8:30. matt: less than a half hour away from the open. take a look at where futures are pointing for european equity indexes. we have a next trade, but almost no movement on futures. it almost feels like we have crested and are just hanging at the top. global stocks yesterday rose to a record high on the promise of more spending out of china to boost global infrastructure. we saw at one point s&p rising to its highest level. we saw at one point asian stocks, the nikkei touching
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20,000. things are coming off from their, but still relatively high levels, and we see futures hanging right now in the air. take a look at the bund trade. let me zoom in so you can get a sense of what's happened just in the past 10 minutes. investors selling off the debt, pushing up the yield. 0.421 is the interest rate you get when you loan the german government money for 10 years, but that has been incredibly volatile over the last month. we have gone from half a percent to .1%, back to 0.421. guy: it's amazing how calm these markets are. levels keep being taken -- you mentioned what happened to the s&p yesterday. 24 --en't been north of
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that a significant. that tells you a lot about where risk is right now. in terms of the markets, dollar index down. dollar-yen. 1.13 on considering what's happening in washington, it is sensational that the markets are as calm as they are. less get the first word news with juliette saly. juliette: guy, thank you. holdings increased its of u.s. treasuries by the most in two years. the nation raised his ownership of u.s. government bonds, notes, and bills to $1.09 trillion in march. it is a sign that the world's second-biggest economy is stabilizing and stricter capital controls has help extend capital flight. dutch lawmakers are deciding how to move ahead with forming a new multiparty government after coalition talks unexpectedly collapsed late yesterday over disagreements on immigration.
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the breakdown of the negotiations between the prime minister's liberals, the christian democrats, the centrists, and the greens came exactly two months after the general election. european union governments have tightened their brexit negotiation position as they compare for talks with the u.k. over its departure from the bloc. the latest draft negotiation directives obtained by bloomberg news shows the bloc has toughened its language on future transitional arrangements that would help companies adapt to britain's new figures, meet citizens rights, and clarify the role of european court. angela merkel and emmanuel macron has vowed to work together to strengthen the european union and economy as the german chancellor hosted the newly elected french president on his first full day on the job. we each represent the interests of our own countries, but the interests of germany's
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are naturally closely tied to the interest of france. germany will only do well if europe will do well, and europe will only do well if there is a strong bond. i am committed to that. u.k., thein the labour party will offer voters a "radical and responsible program" ahead of next month's general election. in a speech marking the publication of its manifesto, jeremy corbyn will accuse the prime minister of favoring the rich over those in need. he will also lay out plans to reverse the priorities of government and put the preservation of jobs first as britain leads the european union. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg. matt, guy. guy: thank you, julia. -- juliette. the dollar is trading lower.
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this may or may not be related to reports that president trump classified information to russia's top diplomats last week. said hehington post" revealed closely held information about an islamic state plot to the foreign minister and ambassador. treasury yields declined, and the yen in particular did a little bit up. let's take a look at what's going on. joining us is our mliv macro strategist mark cudmore, who joins us from seoul. mark, no market reaction. the markets are absolutely calm. explain. >> i think -- there have been no reaction last week, i thought they would react to comey, and i thought that was a bigger market event, with the timing of the russian investigation. i thought that might be a bigger negative for trump and his credibility in terms of passing his legislation, which is what the global reflation trade wanted. this time, i think it is less of
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an issue. it doesn't sound great but i'm sure he's got the mandate to discuss these issues that are of national importance. i think this is slightly being hyped up, but either way, markets have learned to move beyond the political noise and focus on what's happening. until we see clear signs that he is definitely overstepping the mark and is at risk of impeachment, we will ignore these moves, and there will probably be more noise. we have to keep looking beyond them until it goes too far. matt: the question is, even if we do get to that point, if we did, what the markets care? what they even shrug off that kind of impeachment threat, as i think is the interesting question? let's switch gears, though, and talk about the fed. this is something the market does pay attention to, does react to, globally. you have been writing that it's nonsense that fed hikes are bad
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for emerging-market. >> yeah. i think, historically, emerging markets have tended to rally during fed hikes. the largest we know in the last multiple decades is in the mid to thousands, which came with the last fed hiking cycle. boomed. markets it is normally hiking rates when the u.s. economy is strong, which implies the consumer is strong, which is vital for the strength of the economy. so historically, fed hikes have been good for emerging markets. they have been saying it's amazing how they are trading so resilient, but that is what you should expect. there are reasons to argue that the emerging markets scenario is bearish, but you could argue now that china deleveraging is a big issue, especially since china is the marginal demand for emerging market good.
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however you shouldn't focus on the fed hikes in isolation. manus: what about when the dollar really starts to catch on, and catch up? >> again, in the 2000s, that was the start of a period of the dollar falling. cap fell in 2008, the end of the dollar rally was around 2005. the dollar appreciated on the homeland investment act. the dollar weakened on this emerging market rally, in the wake of that fed hiking cycle. normally what happens is when the fed is hiking, it's a strong signal from the u.s. economy, it's a strong message to the global economy that means we leveraging, selling the world's reserve currency. thanks very much. mark cudmore, bloomberg mliv macro strategist. mlivan follow his work at
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go. posted a greatas piece on this, i recommend people check it out. let's keep it on geopolitics. president trump is expected to make his first overseas visit this week, and will meet with the saudi royal family. for more, tracy alloway joins us from abu dhabi.what's on the agenda at this meeting ? tracy: there's really a laundry list of issues that we expect to be discussed. they range from the war in syria to the conflict in yemen to ongoing concerns about regional and global terrorism. we also have some potential business dealings in the form of the u.s. saudi arms deal, and the potential $40 billion investment from saudi arabia into u.s. infrastructure. supposedly that deal was put together by trumpson-in-law's, eric kushner, who was also charged with finding a solution to peace in the middle east.
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meanwhile, you have to figure that high up on the list will be iran, saudi arabia's traditional geopolitical rival in the region. if you think about it, trumps relationship with iran is the linchpin, allowing this new relationship between the u.s. and saudis to be formed. the is very critical of iran and the nuclear deal, and the hope from the saudi side is that there is a common ground on which they can come together. different is the relationship between washington and ryad under a trump administration than previous ones? tracy:, vastly vastly different. you only have to look at the media coverage, the official statements that have come out from leaders in the middle east. we have the saudi arabian king issuing a statement yesterday
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saying he thought that concerns over global security could form the basis of a new relationship between the u.s. and the entire muslim world. we have also see the abu dhabi crown prince, who met with trump earlier this week and said similar things. there's a lot of hope and optimism, and i know you have been talking about potential leaks that we just saw in washington -- to some extent that could even play into saudi arabia's agenda because the leak is supposed to have concerns security threats posed by the islamic state, and saudi arabia is just as concerned with those as the u.s. is. matt: so that's the classified spill ipo "washington post" has reported, to the russian dignitary? yeah, that's exactly right. the information that was supposedly leaked was supposed
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to be a threat posed by the islamic state, a potential plan involving laptops on commercial aircraft. i know you will remember that they banned bringing laptops on originating from certain places in the middle east going to the u.s. and u.k. we haven't seen a lot of uproar about that, at least from the government side here in the region, and one potential reason behind that is because there's this concern about the terrorism threat, and we haven't seen a lot of criticism of trump's so-called muslim ban, either, and it is because the hope on the ground is that the u.s. and saudi arabia in particular can form this new relationship that will be vastly improved when compared to the obama administration. matt: tracy, thanks very much. tracy alloway in abu dhabi. we should point out that the trump administration, through h.r. mcmaster, denies the "washington post" report is
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true. we will be speaking to mitch mcconnell at 2:00 p.m. u.k. time. no doubt, that's a subject we will broach with the senator as well. coming up, we break down easyjet earnings after the budget airline's first half earnings and revenue miss. plus, we will be speaking to the company's ceo, carolyn mccall, at 8:30 london time. this is bloomberg. the open is 15 minutes away. ♪
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matt: welcome back to the european market open. 13 minutes until the start of cash trade. let's get the business flash. juliette: thank you. for the reportedly plans to cut about 10% of staff worldwide as the ceo faces escalating pressure to boost profit and a lagging stock price. according to "the wall street journal," the job cuts are expected to be outlined as early as this week. for says "we have not announced any new efficiency actions, nor do we comment on speculation." billionaire paul singer's elliott management has set out new demands to change at bhp billiton. it called on the world's largest miner to conduct a review of its oil unit and downgrade the
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producers in australia. bhp said it will review and reply to the letter as appropriate. disney ceo bob iger says hackers claim to have stolen and unreleased film and are threatening to distribute it online if they aren't paid ransom. the company is declining to do so. the alleged extortion to attempt is part of a string of cyber crimes after more than 200,000 computers were infected with ransomware. and that's your bloomberg business flash. guy: thank you very much. easyjet posted a loss this profit coming in at 236 million pounds in the red. katz. joined by theben in some ways, there is something for everyone in this report. that loss is vague, but the outlook statement is better. >> yeah. we are looking at a record loss for easyjet, over 200 million in
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this period, which is clearly the worst they have ever done in the first half. a lot of that has to do with the timing of easter, which last year was in the first half. always cautious on the comp are at it numbers -- the comparative numbers. they declinedalf, it toward the lower end of guidance, almost 10% decline compared to last year. what's really interesting is looking into the third quarter, which is really corporate, and all the open carriers, where they are seeing figures declined by low single digits, which is a much better number. we will see what the shares will do. on the low side, yes, they missed estimates. less.ame 211 million
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i should point out that even the analysts know when easter is. they miss the estimate, that's the important point.the biggest release was for the airbuses. how does that play into their strategy? >> is an interesting move. -- it's an interesting move. this is confirmation of what we expected to come later in the move.it's an exciting is a bigger plane with more declinellows for a 9% in cost proceed for people that travel on it. they are taking the first a320, the more fuel-efficient version, next month. they are basically upgrades to a bigger version of that plane.
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the fuel efficiency is what we are after. what's interesting is them pushing in more capacity from their city routes, were constrained is always a big theme. guy: are they going to be using these in italy, to fight alitalia's backyard? >> i think so. it will be a good question to ask carolyn mccall today, whether they are looking at not just italy, but germany, as well has been where iag reducing capacity. there are at least three markets they are vying for, and the new planes make it a more interesting game. guy: thank you very much. interesting analysis. this is a heavily short stock. you can see it on your bloomberg, and that tells you something about how the market will trade surrounding this.
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carolyn mccall will join us to talk through the earnings. don't miss that conversation. minutes away from the market open. we will take a look at the stock moves, bhp is one to watch, elliott management stalling out new demands to change. it was interesting that it was the mining stocks and metal stocks that drove the s&p up yesterday. the open is seven minutes away. ♪
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guy: five minutes until the market open. let's talk about the stocks we are watching. bhp in focus, elliott doing the rounds. it is changing its tack -- what it is saying to the company is that it needs to focus on the petroleum division, it needs to look at what it will do. a way of releasing value. ist it is backing off on that they need to downgrade the australian listing, a more focused approach relating to bhp billiton. what about vodafone? watch, stock you want to with full-year earnings coming out that missed analyst estimates. a forecast that is in line with the analyst outlook, also saying it will increase free cash flow 23% to about 5 billion euros in the coming financial years,
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after splitting off its money-losing indian operation to a joint venture. analysts say it will help cover its dividends. keep your eye on those stocks. coming up, it's the market open. futures not moving. this is bloomberg. ♪
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guy: the me take you to the screen. giving the fair value regulations. you get down to the granularity of whether london is up .2% and the cap down when 2%. that remains to be seen. a bunch of spot -- stocks you need to be being attention to. what do you think? matt: i think you want to continue to keep your eye on oil. we will discuss this throughout the program. the russia-saudi cooperation has led to higher prices.
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one thing i find interesting is for the longest time -- do yellow line is opec oil production -- this was hitting new high after new high, now we see it has finally turned over at the end of last year beginning of this year. but u.s. inventories continue to rise, offputting that drop in production. guy: the talk a little bit about how this one goes. it won't go very far to be honest. you it makers are going to have a long brexit -- breakfast this morning. london up .1 per -- .1%. we were bid towards the end of the session yesterday around the snp -- s&p taken out. cac. you have the be a tellingld sign of what comes next. financials lower, down .1%. the debate with ubs is whether
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the singapore are headed to the gates of ubs. the financial story in europe is changing. a contingent convertible coming out this morning. capital is still a key issue in the european financial story. it is a fairly flat opening. crude up, dollar down for the fifth day in a row. numbers on the gdp europe and inflation data in europe will show the squeeze. it makes for a nice chart. down nearly 20%. what you are seeing their is a shift overall in europe. shell -- sales down by 6.8%. two fewer selling days in the period of april and a shift. you have the technicality in the u.k. for the excise goes into effect. have a look at this. and merkel macron
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are dealing with. power,them exceeding the street closures of expansion. hence why we need to shift figures perhaps on our perception of what comes next from the european central bank. flash, gdp rating today, expect that to come in at .5%. shanghai composite finishing up the day up, a night shift higher. jinping'sef that xi verbal commitment of $75 billion to the world economy in terms of the belt one road. tonefinishing on a firmer relative to the opening we see in the european market. the nikkei up a tip or two away from the 20,000 level to ring the bell. i am off to digital radio. guy: you enjoy that.
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let's talk about how markets are developing. markets -- pretty short into this -- getting a little reward there, but the outlook of the interesting. a bunch of stocks going ex dividend this morning. sanofi and energy both x dividend. energy is also ex dividend as well. santa fe, ubs trading lower as well. vodafone trading up 2.46% this morning. lloyds banking, the government is going to make an announcement today possibly on its stock. reckitt trading higher. easyjet softer this morning. matt? about thent to talk
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dollar here. in the u.s., president's top foreign-policy advisers are trying to contain political damage from a report in the washington post that says he revealed sensitive classified material to russia during an oval office meeting last week. sharedorter said he closely held information from an intelligence partner about an islamic state plot to russia's foreign minister and its ambassador. dollar realhe u.s. effective exchange rate has fallen back to levels that prevailed before the november 8 election. index measures the currency's trade weighted in value against a basket of other currencies after adjusting for inflation and you can access this cart yourself on the bloomberg. joining us now is the global head of flow strategy at socgen.
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let me just ask you about this report. somehite house has denied of the truth to this report. how is it going to affect markets? it would seem to be a serious accusation. probably but one of the key elements here is the lack of detail. i think markets for now are shrugging off this news. you have to remember that we have been in an environment where there have been a plethora of events from elections and different macro economic data. it is difficult, for now, for investors and asset managers to take this decision based on information that was just published. i think we will have to wait and see what -- whether this gets worse over the next few hours and days. the thinking has been markets shrug off these scandalous accusations in the
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markets areecause more focused on the possibility of tax reform legislation or infrastructure investment, or some kind of stimulus. long inetting a little the tooth they are waiting for those things to come, because we haven't gotten any of them? tom: -- kokou: this is a good point because last year, you had the trump trade. these were long equities come along dollar and short durations. fast-forward a few months and now we are seeing the dollar pretty much unwinding a lot of its rally. equities still holding up there, theit is publicly driven by sheer size of the share buyback program because the biggest buyers of u.s. equities today are companies themselves and the short duration trade has an treading water as well. the latest announcement around the tax failed to address how
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these tax cuts will be financed. adjustment border tax that was not talked about and we know it is supposed to raise over a trillion dollars over 10 years. there is lacking details and markets are probably feeling that these major tax reforms are unlikely to go through congress this year. matt had a great chart that showed the dollar and the round-trip it made during the trump administration. where does the risk lie? we've priced a lot of this stuff out already. here, orworse from that it gets better? i'm trying to understand where the risk reward lies. if trump can deliver anything on any of these processes, we actually get risk on? and if he doesn't deliver anything, do we get risk off because we have are depressed about? how does the symmetry work? kokou: i think when it comes to outcomes, there is the factor of
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time. trump has only been in office for 116 days exactly. the point is there is a lot more time to get things done and the best evidence of that would be the attempt to repeal and replace obamacare. this was priced out earlier and you have a lot of people trying to play the trump trade unwinds and realize he managed to get it through congress. tohink it is very difficult go risk on-risk off too quickly. market is sort of giving the trump administration the benefit of the doubt for now. guy: how long does that last? -- 116 daysays in in, but administrations don't have that long. they don't have four years to do what they want to do. they have a shorter period of time. the 116 think about days, yes they have time, but that time isn't as great as you would initially think judging by the electoral calendar. kokou: absolutely, but markets
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are discounting mechanisms of cash flow into the future. are a widethere variety of factors that drive supply and demand and today, we're in the midst of the great rotation in some ways out of bonds that are very expensive and have benefited from 30 years of bull markets, and then you have the equity markets today that look very cheap compared to bonds. guy: compared to bonds. kokou: absolutely. value -- you have to compare equities to something else because asset managers have to make the decision as to whether to invest in bonds or equities are cash or other asset classes. today, the path of least resistance is rotating to equities. guy: you could relate those prices to profits or something like that. we will have that conversation in a moment. strategies at low
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socgen. he will stick around. later on, this could be a conversation. , mitchr majority leader o'connell is going to be joining us. a little later on. i wonder what we will be talking about. they be something that happened in the white house last week? maybe, i could be wrong. still to come, the open. macron meets merkel in berlin. we assess the new president's first day on the job. plus, easyjet posting a worse than expected loss. the outlook statement looks good, share prices significantly lower this morning. caroline will be joining us live to talk about those numbers. that is coming up. this is bloomberg. ♪
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♪ 30 minutes past the hour, where our markets this morning? going nowhere fast. a few ask dividends, -- ex dividend. london is a little firmer and down toready much vodafone, which is outperforming. the stock is up by nearly 3%. that is probably adding on the upside. the cac a little softer but that going exo santa fe
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dividend. that is probably why it is trading softer. what about the mid-gaps. foods, someer analysts say this is one to watch. it was gaining initially and seems to be a little lower now. this is after second-quarter sales, premier foods saying sales increased relative to the first quarter. four-year to deliver progress weighted to the second half. de-year operating profits also. becauseo show stada, they have hit a record high in the session. advent and shanghai pharmaceuticals are weighing an offer for this german pharmaceutical company. it could upset the bid from being and send in. are reacting to news yesterday up 1.2% at the moment.
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keeping an eye on easyjet. record first loss for e.g. jet -- easyjet. this is the winter travel season, weak pound, inflated expenses in europe. res amid a price war. down 5.7%, the most since february. all right, i want to point out that we have seen the euro -- $1.10.ugh a dollar the single look at the euro-dollar. the $1.10 level being pierced and we're holding above that at 1.1021.
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you can see it is a big move there for the euro-dollar. newly elected french president emmanuel macron met with end of the merkel in office. the two vowed to work together to strengthen the european union and the region's economy. >> i am today in front of you, happy to be able to represent france, but with a daunting task to accomplish. am -- it 1 -- and i reminded the chancellor, did implement reforms prance needs. the french agenda will be an agenda of reform the next few months. economic, social and educational reforms, like i said during the and campaign. not because the european union asked for it, but because france needs it. matt: macron also named's prime minister, a center-right mayor and relative unknown, but formerly a republican. for more, caroline joins us from
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paris. macron, marital and presented a united front, but what are the points of contention that we know between these two? >> there are many points of contention. of course, macron wanted to be sensitive because he knows angela merkel also faces elections in september. is opposed to the idea of sharing eurozone debt and instantly killing for now , evenea of a eurobond though emmanuel macron had touched on the subject during his campaign. of course, he had to be careful because angela merkel also needs to keep an open mind because she knows the eu project needs to be revised in order to be elected in france next time. she said she was open to the idea of treaty changes in the
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eu, but of course any major reform of the eurozone they have to wait until the german elections. guy: the body language was pretty positive. fascinating seeing the two of them in front of the crowd. caroline, thank you indeed. we're now joined from socgen. much to be fixed in europe, but risks startinge to fade. flows into european equities have been substantial. the biggest ever in some of the recent weeks. some people are saying this has gone too far too fast. a note said -- be a little careful here, folks. what is your sense? there's a big gap between u.s. equities and european equities. are we feeling it too fast or is it justified? kokou: it is justified for three reasons. valuation in europe is at a discount to that of the u.s..
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14 versus 16 times in the u.s.. number two, the monetary policy in europe has had negative impact on banks and interest margins. this is the negative interest-rate creating collateral damage so to speak. of negativeoing out interest rate and this is going to be very positive for banks with the tapering by the ecb. this suggests that banks, which are roughly 35% of the sector, are likely to lead the outperformance of european equities versus the u.s.. last, we see the real money investors institutional investors starting to rotate out of the u.s. into european equities. this process can take months. our view is that lower greaterty and outperformance will make european equities more attractive because they have higher and better sharpe ratio than other asset classes. guy: back to banks.
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actually, this is the german five-year. market is really struggling to get through some key levels here. keeps banging its head on this level. this is the important bit for the banks in terms of the whitaker operates. -- the curve operates. what is the market signaling about monetary policy, activity going forward from here? do we start to see the link which become more neutral from draghi? i'm fascinated by this chart. you don't often see this kind of resistance holding in the way that it does right now. the market is really nervous about taking the five year yield a little higher, i.e. prices down. isou: but as you can see, it a strong resistance but resistance are designed to be broken and the path of this least resistance is to see the five year yield going through that level. because the expectation is for
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more ecb tapering and you have to think about the k. the ecb is still buying a lot of german bunds as part of its program. this is obviously one of the reasons holding the yields at such depressed levels. matt: i'm glad that you clarified what the ecb is doing in its reduction of bond purchases, tapering. i will go back to this euro-dollar chart -- breaking through a -- $1.10. it has been there before, last monday we briefly went through it, but didn't close above $1.10. and you can see we continue to make headway. is this a problem for european stocks? obviously it makes their exports more expensive. kokou: yes, this is a fair point. a lot of people have made the analogy with japan and begin, given the amount of -- the yen.
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a lot of companies in europe are y gdp exposed. we have seen 16 quarters of expansion and this is driving a lot of the sectors that are domestically exposed. the most exposed to the euro are the german stocks, the car exporters for example. but if you think about germany, the level of the euro is a lot lower than it what it deserves, had they only have the dodge mark as a currency. even if we see the euro drifting higher, the currency is nowhere be to have awould negative impact on the exporters. tom: all right, thank you for staying with us. the global head of flow strategy and solutions at suction. -- stockton. we will discuss oil today. we will talk planes, we will talk or about cars as well.
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is old economy tuesday here on the market open. ♪
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♪ matt: welcome back to the european open on bloomberg markets. i am matt miller in berlin. guy johnson in london. of flow strategy and solutions at socgen. i am looking at an oil chart that goes back over three months. coming back up towards the $50
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level here. how important is this for markets? russian-saudi of to extend cuts is the driver. kokou: one telling point on your chart is also the fact that it has been range bound for most of that period. it really highlights the two forces at play. on one hand, you have an improving global growth backdrop. -- u.s. eu economy economy doing better and europe having 16 quarters of positive gdp expansion. meant for energy is going to go higher. on the flipside, you have the shale gas industry which is definitely price dependent and is clearly increasing its supply and production. this is evidenced by the stockpile of oil in the u.s.. i suspect, and we are of the view that we should to the oil
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price range bound or drifting gradually higher from here. but it is no major -- >> all right. thank you very much. it has been a pleasure. you will join us on radio.
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♪ shared?crets reports suggest sensitive classified information was revealed to russia's foreign minister. a muted market reaction. the european court of justice will today decide if all 38 eu national and regional parliaments need to approve a trade deal with singapore. will this make brexit harder or easier? and turbulence for easyjet. in the first quarter as the worse than comes in estimated. is this is that is a gets? worstares among the performers on the stoxx 600 this morning. we speak to the ceo next.
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the morning and welcome to "bloomberg markets: the european open." i'm matt miller with guy johnson. 30 minutes into trading, let's look at where we stand right now. this is the picture we find ourselves with. stocks going nowhere in a hurry. the cac down. a few stocks going ex dividend. sanofi going ex dividend. vodafone listed, ftse up. the dax is absolutely unchanged. in stock we are focusing on london is easyjet, posting a record first-half loss this morning that came in worse than expected. easyjet shares trading lower this morning. this is a stock that has a substantial short position on it at the moment. i can show you that on my terminal in a moment. before we do that, let's get to the company's ceo. good morning. >> good morning. focused onrket seems
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the loss, but what is as interesting is your outlook on fares. is this as bad as it gets and what is your expectation for the story going forward? >> can i just correct some of your headlines? -- the market is not surprised. there are no real surprises in the first half loss. years easyjet has lost money in the winter. easter has moved from the first half to the second half. the foreign-exchange headwind against loss is 80 million pounds. before we started the first half, the markets new there was 127 million loss against easyjet. in the first half. phasing, 80 million foreign-exchange hit. because of the weakness of the pound against the dollar, we by
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our fuel in dollars. that leads to a normalized loss in the first half. it is very stable, we are navigating our way through the referendum. we know exactly what we are going to do about that. up, passenger numbers are up, loyalty is high. 75% rebook with us every single year. and actually what we have said, the second half is that we are holding guidance. we haven't changed guidance for this year. actually, i think your headlines were quite exaggerated. we say thee reason market is surprised is the stock is down 5%. the stock should be doing what it is doing. carolyn: and the stock has gone up 30% at 37% in the last three months. there is not always good reason for that. usually when oil goes up, our stock goes down. the fuel price went up, our stock will go down. we prefer a high oil price out of it shakes week
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the market. our share price will always react negatively when fuel goes up. yes, there will be some shorts in that, there will some -- be some shorting of the stock today because we have had a good run over the past three months. but when you look at our share price, it is fine for where it is today. we're not concerned about the share price and i think you have got to see through what is happening and look into the second half. we have announced we are converging three 20's into 320 ones. the market has like that. it means we can up gauge and optimize what we do at airports. we have a formidable network. it is hard to grow when you are in primary airports with peaks opposition. 321's allow us to do that. they should be pleased with us getting our customers back into rebook. families have increased bookings with us 15%.
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that will be a second-half spike. we have seen improving trend. if you look at what is happening with other airlines, italian, air berlin, norwegian taking capacity out of gatwick. massive reduction in growth. week airlines are getting airline -- weaker and strong airlines like easyjet are getting stronger. there are good reasons for the loss and they are well understood by the market. guy: the reason i talked about the short interest -- and i can show you the chart to our audience -- it hasn't been this high for some time. that is why we are highlighting the fact that the short interest is what it is and that is an indication of the market's sentiment towards the stock but let's talk about the capacity. you've ordered the neo's. have you had discussion about
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ordering more? of thetake advantage situation in italy, spain, norwegian coming out of gatwick in the way discussed? to do it.e don't need we have a framework agreement with airbus are we have a lot of neos options. we have optionality on future neos and we have our fleet, we have converted some of the 320's, but we have our first neo coming this year. our growth has been anywhere from 5% to 9% over the past four years. it is a .5% right now, that it -- 8.5% right now. that is good gross. it is very strategic and we are taking all of the right decisions for easyjet in the future. we are not taking knee-jerk decisions about strategy. guy: the reason i ask about the
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optionality and your thoughts order,that border -- there has been speculation you were going to make this order. we thought it would come later and it would be bigger. my question is why now and why -- >> please be really clear, we already have a framework agreement with airbus where we have firm orders and options. this is not a new order. all we have done is converted from our current quarter 30 a321's.0 -- a3 it is a conversion, not an incremental order to what we are party got. -- have already got. matt: if i look at easyjet shares, i like to look at a
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five-year period. you have outperformed the ftse all shared travel and leisure index. ryanair over the last five years has done far better, more than tripling a year. what do you need to do to catch up to that share performance? carolyn: just bear in mind that the referendum effect in britain has had disproportionally affected. effect is quite big and also, the uncertainty -- the political uncertainty about 27tain negotiating with eu ways more heavily on easyjet because we are a british airline and ryanair is a irish airline. that is definitely a factor in the underlying share price. ,e are focused on our margins
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very focused on our cost program. the analysts would have been pleased with cost performance over the last half -- we actually beat expectations and we will continue to focus on cost. and we will continue to do what we do well. you can't be driven by the share price. you have to be driven by what is right for the airline and the output of that will be a strong share price. with brexit and the negotiations coming up, it is going to be a bumpy road. shares have been volatile and for many stocks have been volatile, but particularly for sterling denominated stocks and we are one of the few ftse companies that are sterling denominated. most of them are global companies. can i ask you two quick questions? i want to come back to the 320's. are you looking to convert the
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options you have into firm orders? can i get a sense of what you are going to do going forward with your relationship with airbus? carolyn: so we are have a lot of 320's on order which are firm orders. 100 or whatever over a period of time, started in 2004 -- 2014, we have converted. we have taken 30 of that and converted them into 321's. we have a further 100 options, but those are options. we will do what we think is best with those options over the next 10 years. that is where we are at the moment on the deal with airbus. it is a flexible deal, it allows us to defer options, -- we have a lot of flexibility to go up as well as down on the airbus order. just to talk about where the capacity might be used, have
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you see the italian story unfolding? clearly, italy has been an area of competition. what is your strategy for taking advantage of it? i think we already are very active in italy, we have our bases there, three basis. we are number one in venice, number one in naples and number one in mellon -- malan. it is hard to read what will happen with alitalia. every time you read something into it, someone will come and save them. say if scenarios that this happens, what would easyjet? do andknow what we would we would see opportunity in italy because we have always had italy as an important market for us and it remains so. we will take advantage of their opportunities.
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as a result of alitalia taking acid he out. they will inevitably have to reduce capacity and probably focus on long-haul flying. italyking italians out of long-haul. i think it is the short-haul were there will be opportunities. very much for sharing your time with us this morning. the easyjet ceo, after the numbers this morning. the stock trading a little softer. caroline mccaul saying the market expected what it got. this news on singapore is fascinating. matt: that's right. a ruling out of the eu's top court that eu nations and regional parliaments need to sign off on a singapore-eu trade deal. thatsa may has been hoping the eu would be able to ratify the free-trade pact with
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singapore without all of these different parliaments signing off, judges at the eu court of justice have said they do need to undergo -- a torturous --cess what some have called 38 different regional assemblies, in order to an -- indoors this deal. fascinating. in some ways, you could argue this could make the brexit trade deal easier because what you have to do is generate a more slimmed-down process -- slimmed-down structure which may end up being easier to get through. lot in going over a trade legislation. matt, you know about ford than anyone else, what is going on? a lotford is going to cut of its workforce, 10% of its global workforce, this will affect the salaried employees. those getting paid a lot. is it possible this company can make a u-turn because the shares have really stood out as profits
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has come down. compared to gm. we will discuss the job -- wall street journal's report on job cuts. as is bloomberg. ♪
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♪ 46 minutes past the hour, this is the open. let's get your first word update with juliette saly. juliette: china has increased
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holdings of u.s. treasuries by the most in two years. the nation raised its ownership of u.s. government bond notes and bills by $27.9 billion to $1 trillion in march. it is a sign china is stabilizing and stricter capital controls have stemmed glut. asked lawmakers are deciding how to move ahead with forming a new multiparty government. talks unexpectedly collapsed yesterday over disagreements over immigration. the breakdown of negotiations between the prime minister's liberals, the christian democrats, the centrists and the greens came two months after the general election. with theli politician primehance of unseating minister benjamin netanyahu says he is encouraged by donald trump's early efforts to resurrect peace negotiations with the palestinians, even if he is not convinced they will succeed. partyad of the opposition
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spoke to bloomberg ahead of the u.s. president's visit to israel on monday. >> not doing anything is also a choice and it is usually a bad one. the fact he wants to be not a lotand the fact has happened for a long time, someone is trying to push, is a good sign. juliette: global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. juliette, thanks. ford is planning to cut 10% of its staff worldwide, according to "the wall street journal." the report cites unidentified sources but says job cuts are outlined as early as this week and mostly target salaried employees. for more, chris ryder joins us, the head of our european auto coverage. chris, first of all, why now,
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why this big the move? as we know, fiat has been under a lot of pressure in the last few weeks. the stock price not performing well, so he has to show something deeper, more aggressive than in the last couple of years. ford, given its position in the mass market is under a lot of pressure at the moment. a lot of investment needs to be made in electric cars and mobility services and digitalization. --d has to do that under with a mass-market portfolio. matt: let me bring up this chart. the point is, it shows gm profits have really soared compared to ford's over the last few years, quarters, why is gm
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doing so much better than its rival? chris: for one thing, they are bigger and they have a huge chinese operation. that helps them a lot. if you look at the rival, gm has been aggressive in europe and is restructuring in the sense of cut. ford has been relatively more conservative. it has held onto its european business which isn't doing that at the moment. it has cut losses, but they have been less aggressive where gm has been aggressive and focused on what makes the money. matt: all right, i got this chart up. you can look at their job cuts over the last 10 years. the job cuts in the red bars. at one point, 4300 in 2012 in mullally. as aggressive,en
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i guess this is what needs to turnaround from an investor point of view. chris: they are under the same pressure as any mass-market carmaker. if they cut 10% of the global workforce, and if that is 200,000 people worldwide, about 20,000 job cuts. volkswagen is looking at about 30,000 job cuts with their only for cost cuts. that exist in the mass maker cajamarca today and something they are going to have to respond to. matt: all right, thank you. chris rider from our transport team in berlin. let's get to our top stocks stories around the rest of europe. for that, nejra cehic. telecom is the best performing industry on the stoxx 600. on top, vodafone. fourth quarter organic service record in line with estimates, up 1.5 percent. the market seems to be focused
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on the promise to increase free cash flow this year. and continue growing its dividend. we look at the vodafone reaction, up 3.8% this year -- right now. the highest since november and the end of january. elsewhere in the space, not such sfr, this move for seems to be following a report in the french paper which said sfr had filed a suit at the paris tribunal of commerce. fiber-opticit over coverage, according to the report. btg, thehe downside, pharmaceutical company. this one called higher at the open but is down quite significantly, worst performer on the stoxx 600 and among pharmaceuticals. falling after four-year results, the most since november. all right, thank you for
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that. in about 30 minutes, we will get you into a -- u.k. inflation data. predictions that it surged to the fastest pace since september 2013. here we see a chart of u.k. inflation pressure to the boe policymakers are dealing with at 2.3%. this is the headline here. theing us to discuss is professor of economics at oxford university in berlin today. besser, thank you for joining us. isn't onetion problem that is only recent and it is quite serious. i was looking at research you have done on u.k. housing prices, the ratio to u.k. salaries and maybe not surprising to those in england, but the highest of the g-7 nations. >> true. that would be the surge in inflation in the u.k. as much as the fact that sterling has come down in the last year.
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we are importing inflation and that is cutting peoples real wages and one of the things that will weaken the housing market a bit. matt: how does that look for germany or continental europe? as we approach brexit, how do these two countries square off in their inflation outlook and their central bank outlook? john: germany has a house price boom which is accelerating and i think the germans would very much like to see some normalization of interest rates. it is the low interest rates that are largely responsible for that. the german situation is very positive. germans have a huge trade surplus. is not growingnd fast enough relative to output, which puts a strain on neighbors like france and italy.
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britain has a very different situation. the british face some difficult years. i thing brexit is not doing britain any good at all. can and rathers badly. guy: rather badly. good morning. -- the british housing story draw me a line between british housing and brexit. are the two related? any causality you can see? john: i think there is. a lot of the dissatisfaction that the people who voted for brexit were suffering from has links with the lack of housing in the u.k.. new labour came to power in 1997, they did nothing about tax, they tightened planning restrictions further and in 2004, they allowed unfettered immigration from states compared to germany, which imposed the
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seven-year slowdown on -- britain from the had become a nation of very poor increases in housing supply and a big increase in corporation. the stress ordinary brits feel in terms of housing. we appreciatet, your time today. thank you for joining us. professor of economics at oxford university. here with us in berlin. guy? guy: a couple of things have happened. we have watched what happened with key stocks this morning. easyjet on the downside. upside, vodafone this morning. the other thing is this move on euro-dollar. firmly through $1.10. onare now 1.10 $27
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euro-dollar. i wonder if this is a trump story or something else. we haven't had much reaction in the markets to what has happened at the white house. maybe that is what we are now getting. we will talk about that on bloomberg radio. "surveillance" is next.
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francine: secret scandal reports. president trump leaked reports to russia's foreign minister. easyjet, the budget courier posted signs of a loss. this is "bloomberg surveillance ." i'm francine lacqua in london. we will get into your markets in a couple seconds. first, those reports,

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