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tv   Bloomberg Markets European Open  Bloomberg  June 22, 2017 2:30am-4:01am EDT

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one that keeps you connected to what matters most. >> good morning. you are watching" bloomberg markets." openingng you the trade. i am guy johnson. matt miller. what are we watching? what is on the menu? theresa may meets with eu leaders tonight. it looks like it is ex-pats for starters. the brits be picking up the bill ?
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the fed is at risk of making a substantial mistake according to one person. has deflation been defeated? and trump, the peso, and the future of nafta. matt: just a half hour to go until the european open. take a look at the european futures market. after we have had a couple up seedown days, you can equity index futures, right now, are indicating we should see little change at the open depending on which index you look at. a little bit of a loss on u.k. futures. again on some continental futures. not a lot of direction. as people sit on their hands and wait to see how these brexit negotiations go.
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let's take a look and see what is going on around the world. arabia, an interesting story surrounding it. argentina, down, too. saudi arabia, the mood music was more positive. .rgentina excluded needs to do more in the short term. peso initially weekend to its weakest level. that is something to pay attention to. hearing from mexico later in the program. interesting stuff this morning. talking about the setup this morning. silver spot, up i 1.1 percent.
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let's go to the first word news update. has said donald trump he will propose legislation that would and immigrants from receiving any welfare benefits for five years. he was addressing a rally in cedar rapids, iowa. on a promise of cracking down on immigrants. top banking regulators are sprinting to ease the volcker rule and other constraints. the federal reserve governor and acting controller tell -- plan to tell lawmakers they support revamping key structures. the trump administration unveiled a list of proposals last week. senate gop leaders well release a discussion draft of repeal and set to
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replace obamacare. meanwhile, the white house has created a website urging the repeal and replacement of possible ahead of a senate vote. global news, 24 hours a day, powered by for he 700 journalists and analysts. this is bloomberg. matt: theresa may comes to brussels to join a leader summit. the prime minister will outline the principles of her approach toward eu nationals living in the u.k.. then she will be asked promptly to leave that dinner, while the remaining 27 leaders will debate what she has said. she is going to publish her detailed plan monday. brexit dominates the program for
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the next two years. eight new laws easing the withdrawal from the european union. a lot going on. the brexit packed week. is going to be interesting to see how she makes this pitch. without allowing free movement of people, which is one of the things britain wanted to exactly not do during brexit, she is not going to be allowed access, at least according to leaders, to the single market. be a ways not seem to around this. all the other solutions would be so complicated. the negotiation will take so long, nothing can be solved by the deadline. guide: are these leaders in a place where they believe theresa may is in for the long-term, or
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whether or not they will be negotiating with somebody else? given where she currently sits i simply don't know. i feel, while talks are underway at the moment, we are kind of in stasis. understanding exactly what is going to happen. reality, there is such a turbulent debate at the moment. we don't know, and that is one of the problems. matt: important to remember, this does not just have -- failure to come to an agreement does not just have downsides for the u.k. economy. the eu also is very dependent on trade with the u.k., especially when it comes to finance. many people are determined to becauseinancial center
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they do not want to rock that boat. that the to both size negotiations go as well as they can. let's cross over to wes goodman. what is the outlook for the pound now? theresa may has laid out her plans and is coming to brussels to give us a look at how she plans to do with immigration. >> i think the local british politics is negative for the pound. we have the prime minister having difficulties putting a government together. we have the bank of england. two-year british yields are rising. draw people to
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sterling assets. we survey economists and asked them where we think the pound will be. 127.umber is higher than where it is now. guy: how seriously should we take any holidaying? >> these comments seem to grow. we have more people from the bank of england talking about a rate increase. we still put the odds at not much more than half. imminent issue about a rate increase. for sure, the voices calling for it are starting to grow.
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guy: thank you very much indeed. that ofy a smart analysis that works throughout the day. feed it in and work your way through it. the other thing is what is happening with tv . there is the tv feed. you get this good sidebar here. you can get all the charts. charts,ave got any good send them in. we will be delighted to get them. matt: we want to stress we will keep your confidence. just messaging us means we are going to expose you on air. we will not use your full name. next, the mexican finance minister on trump and trade. that exclusive interview. this is bloomberg.
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let's get a bloomberg business flash. foxconn'scaps on -- german has vowed to was on with
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a deal. he will decide by next month on which u.s. state will be the location for $7 billion display making plant. takata has plummeted in tokyo in the first trading of the stock this week. the move would pave the way for a move. they said no decision has been made on the bankruptcy filing. and boeing has secured twice as much in value as rival airbus at the paris air show. of 229posted a tally airliners. playmaker's u.s. first victory in five years. that is your bloomberg business
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flash. wake of mohammad appointment as crown prince, some have warned energy markets need to press for arabia.ggressive saudi however, the king's changes were positive. according to an analyst. happy for the changes. since king solomon came to the position, there are a lot of positive changes. stability. forthe saudi people and every country. fighting terrorism all over the world. guy: joining us now is the bloomberg executive editor of markets, tracy alloway. what did he have to say about
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the situation and qatar and to what extent is he allowed to be critical of the royal family? tracy: he has been pretty outspoken, at least when it comes to qatar. up its saying qatar is responsible for its own isolation. we asked him specifically what exactly could he done to solve the impasse. theaid he wants to see ruling family leave the country. now that is a big ask if you are the ruler of the country. it is not totally out of line with some of the demands we have seen thrown around by various members. we have heard talk of shutting down al jazeera. outside of the gulf, we are getting comments from the u.s. aree department rain they
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mystified some of the accusations leveled against orar have not been laid out justified in any way. a little bit of a discrepancy. guy: give us a sense of the stability for the changes. the current king is in his 80's. the sun is not. he has a long time ahead of him. in terms of calling the story down, providing a long-term fix on where the region is going to go, how has this changed that? tracy: let me give you the positive. the positive has to be the age. the new crown prince is 31 years old. the concern, however, is mohammad bin salman has been quite hawkish militarily. influential in the
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entanglements in yemen. he has taken a hard line stance against iran. he has been involved in the diplomatic dispute. the concern is this will escalate those tensions rather than wretched them down. it all remains to be seeing at this point. matt: thank you. now let's shift gears. wasmexican finance minister interviewed exclusively i should editor inomberg's chief emeritus, discussing mexican relations and the future of nafta. donald trump said he would rip up the agreement. is the worst already behind us were still to come? >> we are in the process of modernizing.
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if one looks at the north american region, the airports, highways. electricity. when you only look at the infrastructure, it is difficult to identify the borders. whether that came about because of nafta or because nafta came about because there were dynamics that made the region something that made sense, mexico has a lot of the trade agreements. this whole thing, nafta brought it to life. argue it isult to just nafta contingent. economies that can
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make it reasonable for us to trade, integrate, and to participate in the global economy as a block. the largest block will continue conceivable future the north american economic block. we think we can do better. many things are happening today that will be natural to include. or don'tat don't exist have the economic capabilities. i think there are opportunities for canada, the u.s., and mexico to come out with a better integration process. we are coming to a consensus it makes sense for us to find
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--eements on the graces basis of what has already happened. competitiveness and dynamic schism -- dimon the dyanism. and -- of they economy has been reduced. these possible outcomes have been bounded by economic realities behind the integration process. the desire is to reach a constructive and positive agreement. guy: the mexican finance minister. up next, the paris air show. stocks to watch. announcing the building of a
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nice new plane. we will talk about that, plus the market open, next. nine minutes to the cash open here in europe.
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guy: welcome back. minutes away from cash trading here in europe. dividend, mainly in london. a few changes up here.
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land securities, united utilities. another stock is airbus. home turf for airbus. , -- girl playing here airplane here has been selling well. boeing came out with the max 10 which is going to be competing. -- isx 10, which has got the new auction version, sold pretty well. boeing did of which, better than airbus on airbus's turf. announced.just been what has been happening in shanghai? if you look at chinese
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stocks, you see a little bit of a mixed trade. ,he shanghai and the shenzhen trading down. stocks which will be included, we saw that announcement overnight yesterday. those have extended gains. traded in cap stocks the index, understandably, continue to gain as the smaller cap stocks fall. like london is going to slightly outperform but not by much. downtse is going to open 0.2%. forwill see a sideways open european equities. nevertheless, we can monitor
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what is happening with the macro. coming up, the market open. this is bloomberg. ♪
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guy: welcome back. one minute to go until cash opens in europe to read we will market a clear sense of direction from equities today. here is the fair value on your bloomberg. you get the fair value line. helpoks like london will form slightly. a few ex-dividend in the london to the attention to. united utilities is one of those names, but a few others as well. i think the fx story remains interesting and particularly the pound, in my mind. matt: absolutely. yesterday, we hit a 125 and on the pound, so we have seen real gains since then and slight gains since the open.
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that could prove negative for the ftse. it will be interesting to watch theresa may tonight at the you e.u. summitt -- the dinner. she has got to get independent s for immigration policy. she has got you access the single market. guy: ftse 100 pretty much opening. i think everything will open on either side of the plus or minus this morning. it is unchanged, as you can see. no clear sense of direction. i suspect the cac will look similar. maybe a touch softer than we were anticipating, but we will see. not much to write home about. gilts are opening as well. anna: drifting into the start of thursday trading session seems to be the sentiment in the equity markets this hour. we did not really get a great deal of guidance from asia, did we? there was some risk on an risk off.
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asian equities higher, but money going into the yen and gold. difficult to find a great deal of direction. percent to the downside across the european equity fund equity space when you look at the stoxx 600. have a look at the gilt market. in conjunction with what you said about the pound, we thought reaction in the gilt market, with comments around the housing. the bank of england chief economist -- risks of leaving too late. will we see it? we are seeing a retreat from some of that higher yield play we had seen in yesterday's session. this is topical this week, isn't it? the market on wti is headline here. wti tumbles more than 20% from the february peak. a bear market on brent is the headline across the bloomberg over the last 22 hours.
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the cannot go up and that is one of the reasons we see wti retreating. that dance between opec and the u.s. producers is key to where the market goes from here. one commentator i spoke with was saying that actually, it is this rig count that matters. that is not yet having an impact. i also spoke to a guest on daybreak we said the u.s. producers are managing to make money at much lower levels are low.nterest rates a lot of fascinating conversations about what makes money and what does not in the oil market. guy: thank you so much, indeed, anna. a quick look at the markets right now. just to walk us around what is happening in europe. i have my mov screen set up as a percentage story. ex-dividend. poly metal, no clear theme. it might be a note out on some of these energy stocks, but also
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clearly what is happening with oil probably a factor as well. here are the gainers. again, i am not going to get a clear sense in terms of what is going on, in terms of sector rotation, whether or not there is a clear sense of direction for equities right now. it just seems we have drifted into the start of trade this morning, and there does not seem to be anything you can tease out to get an idea of how the markets deals with the story going forward. matt: definitely, the market needs to find a little bit of direction this morning. we do see red arrows. there do not seem to be any giant seems sticking out yet. maybe traders are waiting to hear more about what goes on here in brussels tonight. transferring e.u. rolls into u.k. law "is not sufficient, especially with the financial services." the german finance ministry made that statement as theresa may announced eight bills for enacting e.u. resolutions in the
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u.k. certified banks will lose the european passport to access to e.u.cial markets in the post-brexit. one us now is your best to event, iteopolitical is hard to see anything happening in a meaningful way in the coming months. it will be a very long and slow process. it is not having a massive impact on the u.k. equity markets. you have the ftse 100 up 6% year to date. the ftse 250 up 10% year-to-date. markets in general have been trading higher, and the whole world up 10% year-to-date has been trading on the back of the currency market. things slowly improving and have been improving. you have such a strong start to the year. i think markets are now looking
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quite tired and need to take a breather. we are coming into the summer months. markets are very distressing of geopolitical events, and the impact they are likely to have, because of the uncertainty. the only market it seems to be having an impact on is the currency markets, as you have highlighted. you started to see a moving cable and sterling weakness going forward. that is the only interesting thing going on apart from the oil story. guy: to come back to this issue of the ftse 100, the ftse year-to-date is up 3.9%, versus 14% on the rest of the continent. you change that to a dollar adjusted story, the ftse is up 6% year-to-date in dollars. cac up 14%. the dax up 17%. the ibex up 21%. the ftse is underperforming. yogesh: the ftse 100 is underperforming. the ftse 250 is doing better. hit.tse 100 has taken a
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and also, the exposure to financials, which obviously struggle in a low interest rate environment and all the uncertainty around brexit and the regulatory environment and future of london as a financial center, with rules on the table being discussed at length at the moment. you understand the ftse 100 storage. forward-looking price-to-earnings ratios are around 15. likewise to europe. valuations at reasonable. helping earnings going forward is a valid point. markets are just tired. it is reflected in the open. everything is focused on geopolitical events as opposed to what is going on in the y markets.iti a low interest rate environment year, but everyone is expecting that to normalize and stocks are discounting mechanisms.
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at the same time, you have deregulation looking to -- looking like it is picking up steam in the u.s., and the fed is obviously raising rates. i mean, shouldn't financials be getting ready for, you know, a ca return? yogesh: while it looks like they may raise rates, in the u.k., the pitch is also clear. we have had hawkish and dovish comments over the period of this last week that have been impacted on sterling. we are in a very low interest rate environment. 0% in europe. it is hard for banks to make money in a low interest rate environment. there are some expectations rates will go up. they still have not happened. if you look at futures in the u.k., 20% probability of a rate hike by the end of the year. 12% by the end of the year. we have lots of quantitative easing in the marketplace as well both of those economies.
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the reality of the situation is, with all the uncertainty around brexit negotiations, it's those over into the regulatory environment, it's those over -- it spills over into the regulatory environment. to uncertainty, which is why banks have not really performed. guy: i guess the other thing we can talk about is the spread. we are going to talk about the fed next. conversation the for then. let us highlight another factor you can use on your bloomberg. that is not this, which is still very good. love weei. tv . see us chatting. it is the sidebar here that you can get all the information on the breaking news. you get all of the flashing, breaking news. you can look at what is happening in terms of the charts. b. us.n i.
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let me make it crystal clear that we take these comments in confidence, don't we, matt? matt: absolutely. we would never double journey name unless we ask permission first. still to come, we will bring you an exclusive interview with blockchain ceo, peter smith, at 8:30 a.m. u.k. time. that is the company, not the underlying technology, although they probably use it. this is bloomberg. ♪
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guy: 11 minutes past the hour and into the catch session, equities is not delivering a great deal. 1%are down less than half of . that is not a particularly big move. a few ex-dividend floating around in london. that is taught about what is happening with the fed because the momentum behind this story is getting. the fed is running "a substantial risk of making a hawkish mistake," according to amanda pimco. there is one major adverse -- according to a man at pimco. yogesh dewan. yogesh: they talk about rate hikes. it looks like we will have a
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third one. gdp growth has slowed. if one is worried about trump, no inflation at all with low figures, and everyone is worried about whether trump will deliver on his tax reforms. i would be more inclined to think rate hikes will spill over into 2018. no one is talking about far ahead, but it does seem like a very delicate time from the u.s. perspective, for a macro economics stance. about theyou worried flattening yield curve or do you think that will sort itself out as it levels off? it is already at the lowest 2009,since, what is it, 2008? guy: i have a long-term chart i have been showing to yoge. this takes us back to the 1970's. when it goes below zero, the curve inverts. we are kind of heading back in that direction. as you say, we are at these levels here. 2007-2008 levels, where we are
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in terms of the yield curve. yield curvest you you -- curve tells there is a lot of uncertainty, which is reflective of the bond market. bonds are incredibly expensive to remainue expensive. it is hard for investors to work out where to allocate capital at the moment, but institutional clients and private clients seem to not want to go to the equity markets in a meaningful way because of where valuations are. expensiveause of how bonds are. tos is waiting for markets sell off, looking for an entry point, which is reflected in the x we see ate vi the moment. markets have been grinding slowly higher, and most investors are very long cash at the moment. not a great environment if you are sitting on high cash levels. e, i keep thinking
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about steven major's forecast for yields to go even lower in the u.s., but i think he has a to one point seven forecast come up lower than everyone else. he has been right for a long time. where do you the bond yields? yogesh: we think they will increase with the interest rate hikes. however, most people have got the 10 year call wrong for the last year or two years. and bond prices have just gotten more and more expensive because of geopolitical uncertainty. we think the 10 year will probably hover around current levels. toare taking a range of two 2.5. we think we will stay there for some time until we get clarity on trump's policy, policies around tax reforms and the likelihood of interest rate hikes in the u.s.. that third one this year will be interesting. if the fed is making a
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mistake, what are the implications? seesh: it is quite hard to it follow-through, but if the fed are making a mistake, you will start to see the u.s. slowdown further. guy: one? yogesh: i do not think we are going into recession territory. we have good gdp growth around the world and laws of quantitative easing in the system, but the u.s. will slowdown. the thing to remember is gdp growth is not necessarily correlated to corporate earnings and share price depreciation. that is often a mistake some investors do make. the world slows down, the u.s. slows down, but corporate earnings increase. i would be more inclined not to focus on whether the world is going to grow faster or slower, and just look at corporate earnings. you have got earnings season soon to kick off. you have got expectations of earnings in the order of 7.5%, and revenue growth just over 2%. you have massive expectations on the tech sector, looking at how
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well they performed year to date. it is earnings that drive share price depreciation and that is investors will focus on. they are looking for an interest point, to make some money. guy: and buybacks. yogesh: of course. guy: is europe really outperforming economically? if it is outperforming, how much of that has already been priced? yogesh: it is outperforming economically when you look at gdp numbers. it is growing ahead of the u.s.. granted, that is off a lower face. the key thing to remember it -- a lower base. the key thing to remember is that it is overvalued. 15% when you look at parity levels. benefit corporate profits going forward. there is an uncertainty because of brexit negotiations, and let us not forget the german elections in september as well, which merkel will likely win. there are things to pay attention to. been veryors have negative for brexit
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negotiations. we cannot help but think that will play out ok. we might see a small relief rally supportive of the economic numbers and earnings. matt: hang on. you think the german election will turn out or k or brexit negotiations will turn out ok? brexitgle to see how negotiations can really be done, especially if you want to include a trade agreement in the next 20 months, let alone the next 20 years. yogesh: i think you make a very valid point about making trade agreements. there is uncertainty around any elections. not many have called the past two or three correctly. it looks pretty clear that merkel will be safe and progress forward in germany. i would not let that be noise that puts you off in the way that you invest. brexit negotiations, the market thinks it is knowing. they are waiting to see the uncertainty impacts on the currency markets, but not on global equities. guy: they think it is noise or there is too much going on and you cannot figure it out?
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yogesh: the two are the same really. you cannot figure it out because there is so much uncertainty and noise. there not know whether will be or won't be a trade agreement and when that is take it has already been pushed back. everyone focuses on european equity markets, up 10% year-to-date. telling you the market is worried about brexit negotiations. we put too much of this is on brexit negotiations and trade agreements. china has managed to survive for decades. this should not be a problem. you need to go back to fundamentals as long-term investors focus on the earnings number is, look at valuations, understand the consequence of a weaker euro, and understand the consequences of what is happening in markets. guy: thank you, yogesh dewan. up next, who is driving uber? is after the ceo's departure. that is next. this is bloomberg. ♪
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the: welcome back to european open, 23 minutes into the session. we are seeing red arrows across the board, though they are slight and we see no real breakout losers today. let us get the bloomberg business flash. sebastian salek. sebastian: the chairman has two pressure on -- to press on.
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the world's sure largest maker of iphones into the memory chip business. he said he will decide by next month on which u.s. state will be the location for a $7 billion display making plant. oracle's purchase of cloud computing is sparking a fourth straight quarter of revenue gains of the software maker. the company, which saw its shares set a record closing high yesterday, reported total sales that easily talked analyst estimates. its cloud businesses grew 58% in the fourth quarter. software licenses declined 5% compared to the previous period. takata has plummeted in the first trading on the stock this week. the shares have not traded during session hours amid a glut file foras planning to bankruptcy as soon as this week. it would pave the way for a sale of the airbag maker in the biggest -- no move has been made on the
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bankruptcy filing. boeing secured twice as much value at the paris air show as its rival, airbus. an interest for 420 planes, worth -- 229 posted a tally of airlines. it marks the first victory in aviations at the industry's annual showcase. that is your bloomberg business flash. seb thank you very much, . yesterday, we learned travis kalanick is out of uber. that kind of clear the way for a new leader. finding someone of the right caliber, willing to take on what will be quite a difficult job will not be easy. r waswith already -- ube already struggling in its hunt to fill the coo role. when you have got this number of posts that need filling, and there are others, cfo, etc., what do you do?
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joining us on this story is caroline hyde. she is in berlin today. so, you are a headhunter. what kind of person do you talk about? what kind of names are being talked about to replace kalanick ? yogesh: well, -- matt: well, some -- caroline: well, someone of clear standout experience to get rid of the bro culture. this is why the sheryl sandberg keeps on being talked about. i spoke to a key investor in uber yesterday. he told me he is hoping sheryl sandberg would be approached. we understand arrieta huffington, on the board of uber, has been pushing for her to be approached because she was a person -- according to people familiar with the matter, sheryl sandberg is not up for it. her of course, just
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at the end of last week, and she did not say the gender inequality, the harassment -- she said it was super troubling and she is glad the action is being taken to address this, but other names being bandied about, marissa mayer at yahoo!. we are seeing some other names put in the ring, the likes of tim armstrong. many names are coming up. people will experience with caliber and notably, who can change the culture of the business. matt: caroline, you're going to join us later. i look forward to an interview with the ceo of a company that does a lot with blockchain. caroline hyde will come back with us about your it up next, prime minister theresa may had to brussels to meet with e.u. leaders to play what brexit actually means. i am here to meet her. i will see what is on the menu and hear what she has to say. hopefully, at dinner with the 27
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other e.u. leaders. this is bloomberg. ♪
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matt: what is on the menu? theresa may meets with e.u. leaders tonight at dinner from the first time since her disastrous election. is ex-patike it rights for starter. will they be picking up the bill at the end as well? hunting the hawks, pimco's representative says the fed is at risk of making a mistake show -- a substantial mistake. back?ey come we hear exclusively from the mexican finance minister on president donald trump. the peso and the future of the north american free-trade agreement. good morning and welcome to "bloomberg markets: european open."
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i am matt miller here in brussels for the e.u. summit alongside guy johnson and bloomberg's european headquarters in london. cache0 minutes into the trade on equities. let us take a look at where we sit right now. no clear sense of direction. if you did further into the markets, take a look at what is happening with the sector and individual names. you are not getting any clear sense of direction. that looks like the kind of trade we will have. the cac 40 down a little bit more than most for the other story i want to mention is what is happening with the energy names. that is what is happening with brent at the moment. take a look at my chart on the screen. there is a flash on my bloomberg talking about the fact that one of the key committees at opec is focusing on what is happening in terms of the output, particularly coming out of libya. they try to rebalance around that. the real issue is the fantastic terminal. andcan find it on tv
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the fact that that keeps going up tells you exactly what is happening in terms of the output expectations. that is in the united states. let us flip it over and talk about what is happening with the sterling story. i'm trying to get a sense of direction as to where the boe is going right now. it remains interesting. the bank of england's chief economist is andy, leading towards the hawks on the monetary policy committee. there were a few surprised people who decided to vote for a rate hike last time around. that sent the pound a little higher. as with the statement from him. provided the data, i do not think the beginning of the process of withdrawing some of the incremental stimulus provided last august would be prudent. sorry, i do think. the boe rate hike is at the highs level since february. maybe sort of talking about the charts we need to show you around all of this. you can see this on this chart here. purity canthe boe
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see the possibility of a rate hike going up, the probability of a rate increase rising. given the fact that the government has come out and said a rate hike would not be appropriate at this point in time, who should we be listening to? we should listen to the head of rate strategies at ubs. that morning. what did you make of it? >> we were surprised and slightly puzzled, truth be told. i think there is a consistency in what he said, but the key here is what you read out, provided the data stays on track, provided that things unfold with regard to brexit in is the bank ofat england's central ascension. our concern is that that is not going to happen. it is already going off track. it was a slightly odd -- we thought it was on timing to be moving in that direction, but the market has to be paying attention when it is the chief economist of the bank of england and we have seen a reaction. matt: john, what is the best case scenario concerning brexit
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negotiations and the data that is incoming? they arel i think clearly connected. that is the first thing i would say. our worries about the data stem from the idea that the longer we in a whole range of areas, particularly trade with the e.u., but many others as well -- the worst investment is likely to suffer consumer spending and confidence is likely to slow down. the best case scenario is an howy and clear agreement on things are going to evolve when the u.k. leaves the european union. in our opinion, it is exacerbated by the increase in fragility in the u.k. political situation, with what happened in the election earlier this month. the prospects of that sort of early resolution are pretty slim, and that is why we are negative on the outlook here. stagflation? that is a bit of a policy problem for the bank of england.
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john: it is also right that be more hawkish members are drying attention to the fact that cpi is above target and has been accelerated. but when you look at, for example, the oil prices, as you have been showing, what sterling lows,ne since it hit the it is not too much to worry about. we would also differ slightly with the idea that domestically generated inflation pressures are becoming more of a problem, not least because real earnings are getting squeezed hard. it is hard to see how consumers can pay higher prices, even if they are put under pressure to do so. so yes, inflation is elevated up a headline level, but if you look at market inflation expectations, they have come off significantly over the last few months and are continuing to decline, which is interesting. i am in brussels, waiting to hear what theresa may has to say on the immigration -- on her immigration policy suggestion. is there any way that you see the u.k. coming up with a
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solution to the e.u.'s demand in remaining a member of the single market post 2019? caveatith a proviso, the of domestic politics, if we controlhey managed to the course through the entire brexit process, the process of staying in the single market is slim. the reason is simple. becameng, theresa may prime minister ever since the referendum result is old and the manifesto on which -- albeit there was a minority -- it has been made critically clear that leaving the single market is absolutely something that the u.k. intends to do because it understands that is the only way of gaining control over immigration, and that seems to be a redline, if there are any for the u.k. guy: let me take you back to wrapping that all up and look at kind of the key numbers in this
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negative kind of rate we have got in the u.k. right now. breakevens are up here. they are rolling over. they may rollover even more if what you are saying is going to come to bear. what about the bottom line? this is 10-year gilts. we have traded around this one person area for a while now. any sense that there is a directional change coming up? john: not really. when i would say, on a relative basis, we think things are going to go on shifting. we think yields in the eurozone in particular, but in the u.s., rise somewhat from their low levels. in the u.k. come on this negative outlook, and the probability that safe haven demand stays strong, and the sort of medium-term growth expectations remain impacted by concerns about what lies beyond the next couple of years as well as over the brexit process itself, it is hard for us to build up a sort of fundamentally bearish view on gilts. even in light of this hawkish swing on the mpc, the second
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half last year that we have been expecting -- you are not seeing any sign in these gilt yield of what is effectively a more optimistic outlook, which would drive the yield higher. we think the market agrees with us that there is a discrepancy between the data and what the hawks are now starting to say, and ultimately, we hope and expect that the data will win out and that this will not result in any action. matt: why is there's a much demand for bonds -- so much demand for bunds. well, thereically, is obviously a global element to these markets. they do not always trade in exactly the same direction, but they tend to generally move together. they are commoditized markets and yields have been coming off everywhere, led by the u.s., since january. it has been a b calibration of expectations about fiscal reflation and the growth outlook for the u.s. as well.
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even though the outlet has improved for the eurozone, everything is still relative, and the ecb inching towards reducing maximum monetary commendation is welcome, but we are not looking at a sort of surge in growth back to precrisis rates or anything like that. there is a long and potentially hazardous road ahead for the eurozone as for other globe economies. i think that explains why, thus far, yields have been so compressed. we do think, over time, that bund yields head higher. we think that is a healthier historic level. would there be any advantage in the bank of england muddying the waters? is this a deliberate ploy? john: it is interesting you ask that. i think we had to take the hawks at their word. if they are saying they are voting for a hike or minded to do so at expanding the reason, i
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can that is fine. i think there is an element to which the bank of england will be uneasy with the fact that despite some of these brighter the speech,fied in the front end of the yield curve has not responded. we have seen yields effectively edge lower and lower and lower. and i think partly, as you pointed out in his speech, because of a desire not to shocked the market, if and when they finally start moving on rates or become andous about doing so, also, as he pointed out, the data is ok at the moment, and there is a case for fighting the need for higher rates -- but the other part of course is they consumer worried about credit growth. one way of trying to just rain in that in his to remind people that rates may go up. there are various reasons why they are doing this. if you look at the currency, the reaction has been pretty mild. let us put it that way through
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the markets are not convinced either that this is going to lead to action or that, if it does, it is anything more than a one-off height. the data is not really supporting it. is: that means the reaction pretty much ignoring it. john: not far off. guy: it is chat right now. for the time being, we sit and wait and watch, and we checked the 9:30 numbers as they come in. john: if you want to be convincing in moving toward a more hawkish direction, the data has to be the same as the rhetoric. we suggest diverging. the data will be more powerful. hiking in the face of different data will be seen as a policy mistake. us fromn wraith joining cbs. if you are bloomberg customer, you can watch the show using tv . you also get access to all the functionality and the charts we are using. there is the gmm option on the screen. you can i.b. the team directly as well.
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that uses the functionality. we will never put your name out there. we just kind of take your comments on board, unless you want us to. this is in confidence. just between us. matt? matt: we just got your charts. up next, how boeing beat airbus in paris for the first time in five years. we will ask guy if that is really the right way to put it. this is bloomberg. ♪
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>> i think it could get too much very soon, because if you calculate where it could be based on the current market, it could be up to 40% of the index. when you have that kind of waiting on the index, it is really a bit too much because you are ignoring so many other countries. matt: that was mark mobius, giving his reaction to china being included in the msci emerging market index. let us get the bloomberg first word news now. for that, we go to sebastian salek. sebastian? sebastian: the u.k. prime minister's first summit could mark the scene of the first big row over brexit negotiations. plan, it is due on monday. negotiations were seen by both sides to be generally constructed.
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in the u.s., donald trump has said he will propose legislation that would ban immigrants from receiving any welfare benefits for five years. he was addressing a rally in cedar rapids, iowa, campaigning on promises of a crackdown on signedented migrant, and an executive order that according to immigrant advocates, has led to increases in deportation across the country. top u.s. banking regulators are sprinting to ease the volcker rule stress test and other constraints on wall street. presidentl reserve plans to tell lawmakers today that they support revamping key structures. the trump administration issued a long list of proposals for rolling back post prices financial rules -- postcrisis financial rules. senate gop leaders will release a discussion draft of health care legislation meant to repeal and replace obamacare. carolinacan of north
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said the draft bill would effectively delay the repeal obamacare until 2020. meanwhile, the white house has created a website urging repeal and replace obamacare ahead of a possible senate vote next week. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you very much. boeing has secured twice as much in terms of value as its rival, airbus. airbus has -- this is marking the first victory over its rival in five years. it won orders and expressions of interest for 420 planes, worth as much as 58 billion dollars. bloomberg's managing editor, global business, benedict hammel joins us from berlin. benedict, boeing has a new plane called the max 10. there was a lot of orders behind it. is it simply down to that?
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benedict: that has a lot to do with it. creating bonds and excitement about new products out there. this time, that ball was in boeing's court. version of enlarged the 737. that found a lot of buyers from united, from chinese buyers, asian buyers. that was a strong constituency of buyers. that did not have the sort of product to respond with. they have their meal products, which are doing very well, but it did not create the same rush or examine boeing managed to generate this time around. guy: let us talk about cancellations and deferrals. qatar,d to the ceo of adamant that there will be no cancellations or deferrals, but what of the theories at the show
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was exactly what impact this dispute will have. at the end of the week, did we get any clarity on what the story will look like? airbus and boeing are quite nervous about this. benedikt: absolutely. i mean, the european -- they are usually not a great indicator for sort of the mood in the middle east and the golf in particular. they usually save up their orders. if you think about the interview qatar, with the head of he struck quite a defiant tone. he was saying we are not going to cancel order for. -- cancel or defer. we don't have to flight placest who don't want our business any longer. that was quite interesting. we had a separate interview with tim clark, head of emirates, who was reasonably upbeat and said we are coming out of a low, but
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we are coming back this year. he was more sort of appealing to airbus and saying you have got to do something about the a380, biggest emirates is the buyer, because frankly, we do not want to have a plane that might be obsolete and a couple of years. those are two interesting takeaways from the middle east carriers. guy: yeah, and it is interesting to see what roles ge can squeeze out of the engines, and whether they can deliver anymore on top of what they are getting out of it. thank you very much indeed. benedikt kammel joining us. he is the boss now. he kind of run from operation in terms of what is happening on the engineering side. up next, matt, what are we going to be talking about? your favorite subject? matt: yeah, the ceo and cofounder of blockchain threw that is a company, not the underlying technology, but they do use it. coming to us from berlin amid some volatility for crypto currencies, but the good kind.
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at record highs. this is bloomberg. ♪
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matt: welcome back to "bloomberg markets: european open." caroline hyde joins us from berlin, where she is joined by the founder and ceo of a company called blockchain. caroline? benedikt: thanks very much indeed. yes, peter, cofounder and ceo of blockchain.
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the biggest fundraiser we have seen into simtech since brexit. what are you pushing in your business? >> it is good for the market in europe, the first big venture since the market in europe. for us, it was a bringing in new partners to the company, so the people we had worked with for a long time, and gotten to know really well, it is a bit of -- given we were holding a lot of the cash from the last round. caroline: a good time in the market. fascinating times for crypto currencies. this is almost straining the limits of digital currencies themselves. biggestnd currency after bitcoin. >> we have seen huge growth across the last eight weeks, across from more industry, etherium,t is a theor
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bitcoin. you have seen a lot of the companies are down. today, we have been fortunate to not have any downtime incidents, thewe are seeing strain at protocol level, the application appeared one of the interesting things about this financing is we actually raise the before the run-up, so it was done a few months ago. what is really kind of interesting across the industry as a hurry now is the sort of massive increases. amazing. wehave seen a theory of -- have seen the crypto currency go up. you want to make it radically different. your vision. how is blockchain and the digital wallets you are offering, changing the financial system? benedikt: it is the first time
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in human history that people can with anyone else across the world for very low cost, very fast. if you think about whatsapp and its impact on the world, you're basically free to communicate with anyone around the world instantly. what we are trying to do is make it possible to share that with anyone around the world and give anyone the same digital financial products we have in advanced western markets. caroline: i wish we could go on. traffic is crazy in berlin. let us hand it back to guy johnson in london. that was peter smith, ceo and cofounder of blockchain. guy: thank you very much indeed. is the day in berlin. stay tuned to bloomberg television. of next, it is "surveillance." francine lacqua will be joined by tom keene. we will be tough you about radio as well. anna edwards and i will be taking to the airwaves on bloomberg radio. matt in brussels will have a busy day.
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what are they going to be talking about over dinner tonight? theresa may is going to have an interesting dinner, i think. the question is, at the end of all of this, who pays the bill? this is bloomberg. ♪
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francine: today, prime minister theresa may travels to brussels, where she could face her first brexit row with the leaders. she will outline how she plans -- salman'shammad bin anointment. he answers questions about the country's direction. too much oil. crude holds it slide. good


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