tv Bloomberg Markets European Open Bloomberg June 23, 2017 2:30am-4:01am EDT
which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. ♪ guy: friday morning, when you're on. welcome to "bloomberg markets: the european open." your first trade on cash opening. i am guy johnson in london, matt miller in brussels. we are watching bridget. -- brexit. we break out the bloomberg. right to remain. theresa may tells eu leaders those who lived in the u.k. for five years will get the same rights as u.k. citizens at brexit. my question this morning is, is
this the generous officer -- offer we have been hearing about? what is the future for ge? we speak exclusively to one of the company's vice-chairman, john wright joins us on what is next for the business and the outlook for u.s. business under president trump. matt? matt: we are less them one half hour away from the start of cash trading after a mixed close yesterday. we now have futures pointing down across the board. not huge crops, but red arrows on the ftse, cac and dax futures. nowt to talk about right has markets are concerned in the bond market as well. we see the german ten-year yielding 0.25. a very low level as investors by a lot of protection. guy: let's figure out what is
happening. most equity markets are closed. india is open and down by .4%. saudiday, argentina and arabia did well. turkey did well in terms of the currency story. the peso is up, the argentinian australian dollar. some of the metrics we are watching this morning, ramadan. i want to make sure you are fully caffeinated this morning. coffee down 4.5%. i don't drink coffee. i am a key man, myself. guy: yeah, ok. matt: i try and get as much of it as i can. let me get you the breaking news coming out of the summit in brussels. the have got the ecb now throwing its hat in the ring for one of the regulatory bodies that is going to need to move,
the ecb proposing to change a rule, statute 22 and it become the regulator for euro clearing. there has been a lot of talk about where to move these anderent eu authorities donald tusk, the council president, has said they will decide on this in november. they are starting to discuss which authorities they need to move or want to think about summits,d at future they will negotiate those things. right now, the ecb is saying it wants to be the euro clearing regulator. let's get the bloomberg first word news. for that, we go to juliette saly in hong kong. juliet? juliette: senate republican leaders have issued a health care proposal winning over moderate and conservative wings. it was opposed by four gop senators.
their opposition could threaten the passage of the bill. hisident trump offered >> backing. >> obamacare is dead. we are putting in a plan today .hat is going to be negotiated we would love to have democrat support, but they are obstructionist. a will never support. we won't get one, no matter how good it is. namedte: donald trump has new york jets owner woody johnson to serve as ambassador to the u.k.. great-grandson of founder of johnson & johnson. 34 business banks in the u.s. cleared a federal stress tests of their ability to withstand economic shock. every bank subject to the annual test exceeded minimum threshold. morgan stanley trailed.
global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy? guy: into very much. when year ago today, the brexit vote -- vote was happening. the outcome shock a lot of people and shocked the markets. quick reminder of what happened. it is kind of tomorrow, but nevertheless, we will call it today. have madetish people a very clear decision to take a different path. and as such, i think the country requires fresh leadership to take it in this direction. be aevitably, there will period of uncertainty following this result. but as the prime minister said just this morning, there will be no initial change in the way our people can travel, in the way our goods can move or our prepared >> we
need to start thinking globally about our future. tother thing that needs happen is, june 23 needs to become a national bank holiday and we will collect independence day. [cheers] matt, it was an interesting night last night in terms of where we are when you're on, at the level of influence the u.k. has. what happened? we had dinner last night, theresa may unveiled what we were expecting to be a generous plan. doesn't sound that generous. give us the details. eu 27if you are an citizen in the u k and have lived there for five years before the cutoff date, you automatically get settlement rights. you are allowed to have access to health care and pensions and that sort of thing.
forou haven't lived there five years before the cutoff date, we don't yet know what the date is -- sometime between march of this year and march of be a bull stay in the u.k. and clock out those five years before you apply for settlement status. theresa may promises that application process will be easy. it won't be the paper bureaucracy you are used to, but more of a digital light touch application. after the settlement date, but before the brexit, you get a two-year grace. aim to legally stay in the you ok -- u.k. and be able to apply from extended legal status beyond that. that is the offer she has made and there are a lot of sticking points there. a debate this morning in the newsroom about whether this is a significant step
forward in terms of what is on offer. five years was pretty much the gett you could start to your citizenship process underway and as a result of which, this may not be as generous as it seems. let's talk about markets to figure out where we are going. macrobring in mliv strategist richard jones. guy: we are not celebrating independence day. -- we have yet to deal with that particular issue. but let's talk about where the markets are when you're on. we saw the u.k. vote one year marketmorrow massive reaction we both experienced. when you're on, the pressure valve has been sterling. put into perspective sterling relative to history. richard: the immediate move -- i mean immediately after the vote
to the autumn, was a sharp move. that theecame clear prime minister was going for more of a hard brexit approach, no single market access, no customs union, then the pound took another leg lower and we have kind of been in that hard brexit price zone since then. choppy, it has been volatile, but realistically, the way it stands now, the market is still looking at a hard brexit. no customs union, no single market access. until that changes, we are probably going to see a little less volatility than we saw in the tail end of last year. matt: i want to point out that we do see a pretty strong gain in the ftse, at least if you look at it in local currency .erms, the ftse is up 22% if you look at it in dollars, it is still up 12%. equity investors haven't been
scared away from british markets. matt, this is something that tickles me a little because the numbers are interesting. you can do this on your wdi screen and it is over here. let's have a little fun with this because this is worth paying attention to. currency, but the put it in pounds. going, i amng there in the u.k., i made 17%, i am pretty happy. the problem is, you have locked in a huge loss. it is in pounds. youinvested 1000 pounds, have 117 pounds more in the ftse 100, but you have 350 pounds more in the cap, 430 if you invested in the dax. have 390., you would the ftse 100 has massively underperformed in the u.k..
catastrophically in some ways its european peers. that is because of what happened with the currency, matt. matt: absolutely, but there haven't been losses, right? beingnot like people are scared away even in dollar terms, which is interesting. guy: in ftse, they have. matt: on the 250. international investors probably aren't looking at that. i was going to suggest people may not be so concerned about a hard brexit. i want to throw out there the donald tusk comment from yesterday. why don't we play it. i want to get richard to react to it. >> some of my british friends have asked me whether brexit could be reversed. and what i could imagine an outcome where the u.k. stays part of the eu. i told them that, in fact, the has dreams that
are possible to achieve. so, who knows. you may say i am a dreamer, but i am not the only one. matt: channeling a famous britain, he wasn't the only one to quote paul mccartney or jon runyan yesterday -- but the interesting thing is the sheer number of eu 27 leaders who have suggested the possibility of the reversal of brexit. richard, do you see this playing out in the markets at all? it is a relatively recent phenomenon. richard: i think the key is in what you just said, and it is unlikely that this is going to happen. as i said, if you look at the pound as the main pressure valve since the referendum last year, we are still pricing a hard brexit. we are below the levels we were when the whole idea of hard
brexit was introduced. that is not to say things can't change. but it is going to require a massive climb down politically on the u.k. side. that is not likely yet. let's think about it in distribution terms. there -- in some ways, because of the political process, the chaotic brexit, the dropping off a cliff outcome, the left-hand side of that distribution outcome, looks bigger in some ways. on the other hand, as matt says, on the other hand, the opportunity to stay in must be growing as well. how does that shift the center of gravity in the middle, because at the moment, that is the important bid? , an if the central shift
different outcome. richard: the whole idea of the soft brexit, given the way the rhetoric has gone, doesn't seem likely. it is hard brexit are no brexit. where the market pricing is, the left side tail is still fatter. as time goes on, we don't know how these talks are going to evolve. there is a lot of talk now that they want -- maybe brexit can be undone. guy: if i am in the options market, where is the money call right now at how cheap is it relative? the moneyrobably concepts right now is no brexit right now. a hard brexit is still very much priced in and you probably would see the pricing for the tail on the right as being slightly better than that for the tail on the left. guy: rich, always a pleasure. thankyes, i wanted to
richard, as well. he will be joining me in berlin very soon. richard jones, bloomberg mliv macro strategist. you can follow the team's to get onliv that blog. if you are a bloomberg customer, you can watch the show using tv , as well. guy, you typically have to tv function up there so you can explain. yes. go ahead and take it away. guy: it is there. is function, and there the ask a guest a question. what we really want are the smart charts you've got. like you to hear about that. joined bye are general electric vice chairman john rice. ge is a fascinating company right now.
on the recommendation. hat,ng its name in the effectively. joining us from frankfurt is bloomberg's paul gordon. appreciate your quickly jumping in on this breaking news story. talk to us first about why this is so important. how big a job is it to be the euro clearing regulator? from the ecp's point of view, it is a question of financial stability. there is concern it doesn't have oversight for the ability to impose adequate regulations on can'tlearing houses, it guarantee the financial stability of the euro area. after brexit. thatlondon outside the eu, means no guarantee it has control. bid topreviously made a bring clearing inside the eu or preferably, inside the euro area. this is before brexit was even voted upon. it lost that case. one reason was it was not seen as having the legal competence to require that step be taken.
just in terms of who will benefit from this, and clearing the to some point in european union, which institutions -- i am not talking about the regulatory side -- but from a daily functioning story, who would benefit from this? obviously, the clearing houses themselves have got a lot to think about this. the main debate happening here in the euro area is exactly where the supervision of clearing would go, because the ecb -- one option is for the ecb to take direct oversight. example, national regulators, primarily germany, france and italy, the biggest economies in the area, would like to retain oversight over clearing within their countries. a lot morets
activity would take place in those nations. this is not a debate that has been resolved. it may not be for some time. has takenthe ecb today strengthens its case as an organization and the euro system as a whole for taking this on board. , in: let me just ask you the german newspaper a couple of weeks ago, there was an desbankew with a bun board member, he suggested the possibility this could move not only outside eu, but off the continent to chicago. why would a -- why would that even be a possibility? paul: he was pointing that out as a risk. just because the clearing his pushed out of london doesn't mean it would come to the euro area. a lot of clearing takes place in other jurisdiction and that is -- was fear of that happening. once again, the ecb has the
legal competence to insist on oversight within the euro area, that strength and's the case for bringing it back to this part of the world. guy: paul, can give very much. paul gordon, washington european bank editor, watching this story around euro clearing. gilts starting as well. up next, the movers in today's trading, including aib as it returns to the market. the irish bank is back. this is bloomberg. the openness seven minutes away.
♪ guy: welcome back. five minutes until the european markets open. we are about to witness the largest european ipo of the year. allied irish banks about to return to the market. for 40 the price. waiting for the listing to go through. this is a net go of a distant crisis.he irish aib a victim of all of that. a vote of confidence in the country, the coming back. absolutely, the share sale, 3 billion euros worth a vote of confidence, because that is what they will raise in the 0 are sale, pricing 44 piece. guy: in terms of the wider
♪ welcome. caches going to open in a minutes time. a slightly negative start to the day, but not by much. ftse 100 is flat. we are going to talk more about brexit and how the ftse 100 is doing. it is in some ways derivative of the trades. it is important to look at the currency trade. not only are we one year on from the brexit vote, but we are also talking about that at the youth
summit. i am in russell's to cover this. , theee the cable rate pound dollar at 1.27. also look at euro pound, euro swissie. these could move depending on what comes out of the summit. guy: markets are opening. ftse 100 flat. aex is down .2%. to openxpecting the cac a similar form. the dax will take a bit to get going. you are getting the fence now. the ftse 100 pretty much in line with the rest of europe. most of the major markets in europe softer, but not by much. let's find out what gilts are doing. let's go down memory lane.
a year since the brexit vote. i pulled up a chart on gilt yields. you can see at the edge of the screen the falling gilt yields we saw as a result of that flex of safety in the wake of the vote. the relation trade being flight -- priced in. this is what we pricing in the market for something more hawkish in the bank of england looks like as of late. numerous saying yesterday they see a rate hike from the bank of england as early as august. pricing in the possibility of a rate hike. who will win out that conversation? let's have a look at the stock market. you talked about the weakness. we have down .2% on the stoxx 600. of theweaker on all sectors. energy bringing up the rear, down .4%. weakness across the board. he bit of a bounce in oil prices this morning.
eight risk ontly story. describes the asian session as boring, but i would not go there. now much momentum behind these guidance -- behind these markets at the moment. we are getting data coming down on the eurozone growth story at the moment. the data has been pretty good at of the eurozone. it has been on a bit of a roll. german data on pmi. the eurozone composite pmi due out at 9:00. we are going to be watching that's -- that. stop or data picture, is that what we're going to see today from europe? --stronger data picture, is that we are going to see today from europe?
guy: we are getting pricing on aib, and we will continue to bring information on that. a little bit of an upside on that. let's turn our attention to what is happening in the markets. gas natural has gone ex dividend this morning. amec trading softer as well. it does look as if we have a fairly positive story emanating out of the aib ipo. i'm going to bring up the weei screen. let's take off the futures and talk about where we sit with the weei screen.
there have been a few changes here. the screen tells a great narrative one year on. ftse 100, how has it done? i set this up in pounds. happy about the ftse 100. it has done 60%, 70% over the last year. -- 16%, 17% over the last year. been 42%.s the dow has done 38%. the s&p 500 has done 34%. that 17% doesn't seem so clever now, does it? --timothy graf joins us now. timothy: if you look at the correlation between the pound
and relative performance of the ftse relative to the msci, it is 89% at times. that has been the case for much of the post-brexit period. it is quite right to look at it, given the large concentration of large cap companies that have international exposure in the index. it goes without saying it will be driven to that extent. matt: my next question is, where do you see the pound going? weaknessi see room for . you had richard jones on talking about how much the hard brexit risk was priced in. i think that is a fair. what i do not think is in the price for sterling is the relative economic performance, particularly relative to europe, where you are seeing the data accelerate. u.k., retail trade figures start to roll over on of growth basis. real wages remain depressed, and that is going to challenge growth. you have productivity challenges. you have the potential for less population growth, which has been a driver of growth.
the relative fundamental story is not necessarily in the price. guy: where does the banks go? what is the bank of england to? we have an extremely monetary story right now. is now the time to be hiking rates? timothy: i don't think so. when you have the property market looking softer. i mentioned the consumer sector drives the u.k. economy read it is going to be squeezed by inflation. guy: what is priced now? it is a -- is a hike priced now? is a cut priced now? after the forbes speech , there is one hike priced in for the next year. i would be surprised if that materializes. outgoing member. it is her story.
that a chance to read it -- reiterates that, but i expect you will not have a dissenting voice replacing her. i think the balance of the mpc is likely to remain tilted, keeping policy where it is. matt: if the uk's hand has been weakened so much and the u.k. negotiating position is a whenger, with that not -- that leave you to believe there is going to be a softer brexit? case, growth comes back . if that scenario wrong? timothy: i don't think it is. their problem with it is, in the meantime, we are going to have a lot of headlines volatility. the concessions the u.k. has made so far are concessions that were likely going to be have to be made anyway. a -- those are concessions that probably would
have had to be made. are left with is the hard negotiating point. from there, that is where i see a lot of uncertainty hitting the headlines, impacting sentiment, potentially impacting investment intentions. long-term, i think it is a case that there is now, especially with the debacle of the election, there is a case for a softer brexit. in the meantime, it is going to be volatile getting to that stage. guy: i don't understand how you price the u.k. right now. in some ways, you want to pricing risk, the worst-case scenario. you talk to people about what they think and how they are positioned, and the two seem to be different in my mind. the market is position for the hard brexit, because you larger glee expect that is what you have got to do. -- you logically expect that is what you have got two. when you discuss it with people, the mood changing is difficult
to pin down and put into pounds. i am struggling with that. what is going on really? classic thing you see of looking at volatility, which is low. different. very you cannot necessarily overlay the two. uncertainty is not knowing whether it is going to bring tomorrow or not. that does not mean you even what -- behave in a volatile russian. -- we not certain that are certain which direction this is going to go. how do you trade off of that? you could be completely wrong within weeks. guy: are there cheap out of the money contracts to the upside? is that where i go now? timothy: i don't think so.
if you look at sq and sterling options against the dollar, it is that it's cheapest in terms of sterling downside. at the cheapest point in the the upsidears, and risks to the u.k. i think is more expensive. that may be my talking my view a little bit, because i have more pessimistic, but i think sterling downside options look relatively decent valued. guy: timothy graf, stick around. i am going to flip this back a little bit. this is a great function. stream, whichideo is fantastic, and then you have this sidebar which provides you with breaking news and the market updates, breaking news i'm a charts, functionality. we want your charts. guest a question is the function down here. we would be delighted to hear from you. matt: send your charts and.
quick look at the markets. across the board, at least as far as the ftse and continental indexes are concerned. usually eight slight gain on the ftse myth. if you look deeper into the periphery, but the main indexes are all seeing losses right now. on the other hand, we have a ofght gain in the yields german boones -- bunds. guy: let's talk about aib. it is up 5.68. this is almost a perfect outcome. seven years after the state bailout, the irish government raised 3 billion euros for a stake in the lender.
ruth david is here. i say that is the perfect outcome. 5% feels about right. what the irish people are going to be saying is, we are not getting screwed here, because it is not up by 20%, because then they priced it wrong. 5% feels like they left a little bit of something on the table. is that what they were hoping for? ruth: this was the new finance ministers big project. everybody remembers what happened. you had all the investment banks called in to testify, and there was so many allegations about, is this price right? i think, by that standard, it has done well. you mentioned the return of the phoenix. european banks have seen a return of the phoenix. thanks -- banks raise billion
amounts of capital. banks are almost seen as a defensive bet. the irish economy is growing at about twice the euro region. matt? i am not sure if the banks are yet arising from the ashes, but let's say they have not died moldering on the pile get, either. what about ipo's? does the market for ipo's in general look in europe this year? ruth: the european market has been busy. billion was raised in europe this year compared to 2 -- compared to 17 billion last year. london has not seen a lot. london's markets are about 3.4 -- it has not is
been that busy. investors are still waiting on the sidelines to see how brexit plays out, to see the outcome of the u.k. election and what that means for them. put money iny to existing stock, but for new companies, there is still hesitancy. you see that in the volume. guy: thank you very much. it is hard to get these things right. maybe they pulled it off. the ipo thisvering morning. from with us, timothy graf state street. european banks are still raising money. some of that has to do with litigation, but it is also to do with the legacy costs of what we are dealing with. have things changed this year for european banks or is this a false dawn? are we getting back on the front foot? timothy: timothy: i think so.
i think there is a lot -- i think there is a long way to go, but credit growth is improving. valuations look attractive relative to the u.s., so i think it is a story that has time to play out, especially the relative story to u.s. banks where valuations are more stretched. matt: i want to quickly bring you breaking news. , speaking of rising from the ashes or not, the tokyo stock exchange is going to devote toshiba to it second section from august 1. there will be a press conference in about 45 minutes to expand on this. we will bring you more news on toshiba. if you think about the banks that have had problems.
it is ok to talk about european banks in general recovering, but individual banks that have had problems, and i won't name names, but a lot of them are in deep trouble still. do you see any value opportunities are? still like the sector probably. where we take some degree of comfort from is the notion of political optimism around europe and what that means for unification, particularly respect to make in unions. -- two banking unions. we have seen some progress made. it does seem as though you are getting more unified of an approach to banking issues, which was may be missing when you were thinking about things like cyprus or greece or the italian banks in years past. for beinghis case more optimistic about the
prospect, given the sense that the political risks in europe have receded. guy: how fine a line in our we are we walking? popular worked as it should, but had to be done. we still have got to do with italy. that is not done yet. i am wondering, what is the margin for error? timothy: it is still fairly high, but at least you have a backdrop that is improved. picking about the pmi surveys we have shown and the unemployment improvements we have seen come office alluded -- all facilitated by a central bank that is not in any rush. there is a lot of room for policy mistake, but at the very least you will have the ecb backing these trends for the next three to six months. that should help. matt: tim, you are going to
guy: 23 minutes past the hour. this is the open. futures trade are skeptical when it comes to janet yellen's plan. a december increase is seen as being even money. you seat in the chart here. various lines coming through here. that is the midpoint. that is the september contract. the market does not really believe -- and i guess when you look at pce, you can understand why. the problem is, the fed tends to look at employment and figures that is the best gauge to set policy. timothy graf of state street is the still with us. -- is still with us.
are we going to have a push were the market is going to have to play catch-up? timothy: i think it will have to play catch-up. it has accounted for the hike. the catch-up may not be so big. i do not think the market impact will be that dramatic. you only have 12.5 basis points more to pricing to get an additional hike this year. that should not be enough to disrupt the applecart. i think they will have to catch up, but i think the december date is the right day. i think something for my tv date used to implement some of the balance sheet -- might be the date used for the balance sheet runoff. matt: do you like the dollar? this is chance to kill the market it is wrong and make some money. timothy: i still do.
i am a persistent dollar bowl. i think it has become oversold in recent months. i think the positioning metrics against the futures position have built to such a degree that i think the dollar down nature has gotten to be too much of a consensus view. given the rate profile, the lack of term premium on long-term u.s. rates priced into the market right now, the dollar has some better days ahead. think this is the start of another secular dollar rally. it is a recovery from oversold conditions. guy: thank you for joining us this morning. tim is going to stick around. he is going to join matt and i on bloomberg radio later. timothy graf joining us from state street. he will join the radio team in the next hour. up next, will be joined by john rice. -- we will be joined by john
brexit, one year on. how have the markets responded in where are they going? leaders -- says e.u. tells e u leaders that those who have lived in the u.k. five years will get the same rights as new case it is an's. is that really a generous offer? what is the future for general electric as the ceo heads for the exit? we will speak to the company's chairman, john rice, on what is next in the outlook for business under president trump. welcome to "bloomberg markets: european open." i am in russell's. -- item in brussels.
in brussels. guy: let me run you through the details of what we are getting the of the data out of germany. line comesturing direct it 59.3. that is a slight slowdown from the prior number. at 59.bout the survey the comp numbers come through it 56.1. a little light on the survey and prime. that is mainly done for services. the manufacturing line out of germany continues to be strong, which is probably great news for our next guest. , theng us now is john rice vice-chairman of general electric. let me ask you that question.
is the global economy where you wanted to be right now? where do you see strength, weakness? we always like a little more growth. the global economy is pretty good. europe is ok. asia is one of our most significant growth regions. we are seeing growth in the middle east. we like the global economy. more,ld grow a little bit but unbalanced, ok. guy: you have a new boss coming in. you know him well. my question more, but unbalanced, ok. is, and i'm sure this is one investors are asking, are we going to see the new boss starting to change the dynamic of the share price performance? you wonder whether or not we are going to pc -- to see the new management team right that.
what can you tell investors on that front? years of just 16 leadership, we created the right portfolio for the 21st century. i think john understands that, because he has been a part of it. he put his fingerprints on a lot of this, but any new ceo is going to take the -- take a price look. john certainly will and the board will encourage them to you that -- encourage him to do that. technology infrastructure businesses, out of the financial services, and a real focus on digital, i expect that to continue. will applyn and he his learnings to the portfolio and put his finger prints on it. willie change the
relationship that the general electric board has with investors? john: i think we have a good relationship with the bonfire -- with a lot of foreign investors. i think we pay close attention to what they say, and we have done that. i don't expect that going forward to be any different. we have heard loud and clear the message from investors about the importance of cash, the thinkance of cost, and i this management team is focused on that. it has been under jeff and it will be under john. you talk about jeff providing the building blocks, but you think that john flattery is going to put his fingerprints on what the portfolio looks like. can we expect changes, significant changes?
talk, do you talk about the fact that the portfolio is in the right place, that maybe you need to tweak, or do you think you will look at the portfolio nsa, i think i can byease value and make it going down the m&a right? if he does go down the m&a right, where does it take you? what does that story look like? john: we go through that process on a regular basis. over the next month, we will be looking at the portfolio, our strategy, different things we might do. in-depthinates in an discussion with our board of directors in late july. we do that every year, and then we update it regularly during the year. i do not expect the process to begin a different this year than
it was in prior years. we always take a critical look at different pieces of our portfolio to determine what is working, how is the world changed in a way it might influence what we do three years ago that led us to the conclusion that we should not be --financial services this is businesses, so we do this on a regular basis and that will continue under john. what is the future for asset sales at ge and how is the process going for ge lighting? the process is going well for ge lighting. we have demonstrated a we have demonstrated a willingness over a long time. you can go back 10 or 15 years when we sold the businesses like plastics.
a willingness to take a critical look at the portfolio and make the right decisions to we think about where we have our capital allocated. the asset sales we have underway are proceeding well. i do not expect anything to change. question to center around where you think the metrics are going to go. eps thatlks about an of twoevable 2018 north dollars. do you think that is achievable? thinkbackup buybacks, you -- do you think numbers are too high in terms of what ge can deliver? i think two dollars is achievable, but obviously, it is a challenge given the fact that
the oil and gas business and the price of oil has been lower for longer than we thought. said, we can work cost ingles as offsets, and we are going to make every attempt to do that. we will look at the right combination of things to deliver the best results. i want to ask about the pension shortfall quickly. $31.1 billion at the end of last year. how important of a problem is this to you, and how do you think ge can tackle it? we pay close attention to it. we review it regularly with our board of directors. downnumber goes up and
based on interest rates and expected returns. interest rates are at a low level. we do not think there is any question about our ability to find our pension obligations overtime. -- find our pension obligations overtime. guy: a quick question. are you disappointed with what the white house does -- white house has delivered thus far? does the u.s. economy need more from washington? i think the new administration is listening. i am encouraged by the fact that the advisors the president has had a number of important council meetings, including one this week on technology. there is a lot of listening and learning going on. things themportant
administration has talked about doing that will help businesses. we encourage that. when i look at what has happened and the possibilities, there is still a lot of upside. guy: john, thank you for your time. john rice, the vice-chairman of general electric. free time.much up next, one year on from britain voting to leave the e.u. the negotiations only just beginning. we will talk about what happens next. this is bloomberg. ♪ ♪
matt: welcome back to the european open. i am in brussels. we are looking at market indexes that are down right now. board,much across the negative. let's get to bloomberg first word news. sebastian: the european central bank has made a play for power. a key issue in brexit talks between the e.u. and u.k. the central bank says it wants to change the strategy to give it clear europe clearing.
in the u.s., senate republican leaders initiated a long-awaited health care proposal. the plan was immediately opposed by a group of conservative gop senators. their opposition could threaten passage of the bill. donald trump offered his strong backing of the proposal. >> obamacare is a disaster. it is dead. totally dead. we are putting in a plan today that is going to be negotiated. without -- would love to have democratic support, but they will never support. we will never get one, no matter how good it is. sebastian: the governor of mexico central bank says it has taken actions to meet its 3% target. the last months have been good months.
we had a rocky year last year. i think that a lot of the correction taking place has been the result of policy actions that we have taken in the monetary side, foreign-exchange side, fiscal side. toically, we're going dynamics that are consistent with a one-off inflation shock. sebastian: global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. thank you very much for that. brussels for the e.u. summit. right now, leaders are coming into the council building. as they pass by, talking to about 200 or 300 reporters. one of those leaders is the
austrian chancellor. he has made a number of comments that are interesting. -- ths not think that you eu realized the cost. he does not think the europe realized the cost. we are hearingng from a lot of people. they are not sure what the u.k. one side of brexit. another thing he is saying is he thinks that the ecb has done a great job. it makes sense to give them that europe clearing they are going to ask the commission and council four. on that point, i want to mention that mario draghi is that to -- set to speak in 15 minutes. we will hear or they will hear from mario draghi in those comments will be got to the market. he also says mario draghi has saved europe. just throwing it out there.
that is one of the lines we got from an austrian chancellor, which is significant in terms of the central gravity around the bank. the pound a big factor in the commentary coming through from mr. kern on what is going to happen next. i think it is important to discuss. now, george saravelos . the pound has been a pressure valve. it has allowed the u.k. economy to transition to a new phase of uncertainty. phase?ppens in the next it looks even more uncertain in many ways. .e have priced a lot in we priced a hard brexit. are we going to see more volatility? george: we think we will. if you look at where the pound is versus eight months ago, it
is still stronger. the debate around the markets focus on the hard versus soft are moreut we concerned about the capacity to deliver on anything. the prime minister lacks is efficient amount of political capital. we are worried negotiations will drag on. wee next year, march, june, could begin the same place. the market will be worried we are running out of time. we are more worried about time. i can see negotiating leaving the e.u. in the remain 21 months, but do you think there is any possible way that a trade deal is negotiated with the e.u. in the next anyone months? george: absolutely not. i don't think there is time to negotiate a complete free trade agreement. it will point boiled down to -- it will boiled down to --
this will be brought -- about the transition. will need tot agree on the brexit bill. we are worried we do not have time, because the government doesn't have enough political capital. guy: where do you think the cheaper options are right now? is it to the downside? think the currency upside stuff is where the value life? -- value lies? george: we still think the risk is due to the downside. it is going to be a drawnout process. the environment is uncertain. you could potentially see
-- aised political event surprise medical event. i am not sure the best way to express this in terms of being negative. it is going to be a long drawn up process. we would recommend short positions on sterling. we are starting to see leaders arrive here. i am hearing this in my ear from producers. that would make sense. people are starting to file into the building to hear mario draghi speak. the expectation is that the ecb is going to start hinting at the discussion of normalizing policy to it at the same time, mario toghi seems set in his ways pull out any stops to bring about inflation. it does not seem like it is going to happen. do you see any way -- the ecb
continues to lower their inflation forecast. why would they taper down to nothing and start to become less if they can't get the core of inflation up to 1%? george: it does boil down to the inflation numbers. we should see some incremental improvement in the inflation outlook by the end of the year. the court numbers are gradually moving higher. the key word is gradual. ann if we do get announcement at of the ecb, which we should, it is going to be incremental. they could lower the amount of buying they are doing next year, but they are not going to signal an autopilot removal of qe. say they will watch the data. it is going to be very slow. guy: george, stick around. i want to dig into the euro stuff somewhere.
welcome back. , some brexit, saying we do not have a clear id -- idea on what the u.k. once. george saravelos still with us. george: i think the market is gravitating to one and the other because the uncertainty is high. the market is trying to price the soft brexit, but it is so sensitive to the headlines. i think this will remain the case for a long time. we will not get clarity on what is happening, at least until the end of the year and most likely until next year. matt: will we have a new u.k. government at that point? george: there is the risk of an
early election, because you do not have agreement within the conservative party about what brexit will look like. at some point, it is likely we do get they -- the new government. the problem is understanding the timing. it could be delayed. guy: george, thank you very much. with deutscheos bank. stay with us. coming up next, "bloomberg surveillance." on bloomberg radio, anna edwards and myself. one year on from brexit. where are we? how much further forward are we? auction on your bloomberg sums it up. these are live pictures from the summit taking place.
francine: brexit vote anniversary. an unclear brexit plant. is uncertainty the new normal? theresa may says e.u. nationals can stay in the u.k. a detailed plan emerges monday. jumping the first hurdle. 34 of the largest banks operating in the u.s. clear the fed's stress test. this is bloomberg "surveillance ." sincexactly one year on voters in the u.k. w