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tv   Bloomberg Markets European Open  Bloomberg  June 28, 2017 2:30am-4:01am EDT

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♪ guy: wednesday morning, good morning. markets, this is the european open. cash is opening an half hour. i am guy johnson. matt miller returns to berlin tomorrow. let's talk about what we are talking about. i read somewhere virus spreads across the globe. doing enough to protect investors' money against this routine risk? janet yellen ramps up attention
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on rising asset prices. spurring a little of a stock selloff. well this worry the fed? share buybackhe days after dan lopes hedge fund bought a big stake in the business. will this keep the activist investor at bay or spur him on? hour less than half an away from the start of cash trading. let's take a look at what the bloomberg is telling us about where we sit right now. at the moment and looks like we are starting off on a negative story. feeding off what we saw yesterday. i will show you an interesting [inaudible] is outperforming. .uropean forces are down we will see a continuation of what we saw a little bit of
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yesterday. that was the equity market selloff. let's move to the gmm. here's what we can see happening around the world and dress in lines around some of these asset classes. the s&p 500 down and the dax down .8 of 1%. that is the bank drop to what we are seeing today. interestingg some stories developing particularly in the commodities currencies, what is happening with china as well. liquiditynue to drain out of the system. let's show you what else is happening around the world. allt yellen month draghi, being pulled together. we have seen some big moves and bond markets around the world. 10-yearsee it in the and the japanese tenure. big moves in the bond markets. it makes what happened to treasuries look fairly small. most -- both of those moves i would pay attention to.
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we will get analysis as we work our way through the program. let's get a first word news update. u.s. stocks fell after fed chair janet yellen acknowledged valuations and equity and other asset markets have risen noticeably in recent weeks. the deal was -- that was a code by john lamb's. yellen was speaking during a visit to london. >> asset valuations are somewhat rich if you use some traditional metrics like price-earnings ratios. i would not try to comment on and thosee valuations ratios, what to depend on in long-term interest rates and the sun -- there is uncertainty about that. by standard metrics, some asset valuations look high.
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there is no certainty about that. shery: president trump's agenda hit another speed bump with senate republicans postponing a vote on a new health care bill. members block to the bill. it was drafted in secret. it delays another setback on the seven-year campaign to repeal and replace the 2010 affordable care act or obamacare. >> we're going to talk and see what we can do, we are getting very close but for the country, we have to have health care. and it cannot be obamacare which is melting down. the other side is saying all search of things before they even know what the bill was. this will be great if we get it done and if we do not get it done, it is going to be something that we are not going to like and that is ok. shery: venezuela's president has waned a former ally after
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helicopter flew over and fired shots and dropped grenades. financing the incident as an armed terrorist attack. he blamed the allied turned critic who served as his interior minister. the u.k. prime ministers office has tried to downplay a row between theresa may's most senior officials over whether britain should have a transition as it leaves the european union. david davis accuse the chancellor of the exchequer philip hammond of taking inconsistent positions on aether the u.k. should seek urging deal which could mean remaining in the union for years after britain is due to quit. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. you very much indeed. let's get back to the markets and talk about what is happening. i want to show you what we are
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expecting the european stocks when they open and around twice five minutes time. what we have got is moves in the foreign exchange market and in the bond markets. euro sterling hit a 2017 high. the euro is bid this morning, continuing to play the story we saw yesterday since the draghi comments. i want to mention as well, bringing this chart up as well which is what is happening with the bund trade. that is the bund as you can see, another yield higher in -- another move higher in yields. story, seeing this yields rising and bonds selling off. replicated in a number of different asset classes. you're seeing it in the euro being bid and bunds are selling off and equities look like they are under pressure. number of different
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angles as to what is happening. also there is the cyber attack asia andeaching spreading across the globe. the virus advanced from russia and the ukraine and went through europe and ended up in the u.s. at it has moved on into india. it is moving on to china. the ransom ware is demanding a $300 bitcoin payment to unlock the system. is it tech editor edwin chan is in hong kong. talk to me about how long this is spread. it looks like this is a piece of software that is not specific in what or where it will go. is that the sense you are seeing in asia as well as to mark edwin: -- in asia as well? thathen: there has been widespread and impact. impact thatnificant
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has been reported with -- was asia. largest terminal operation. there is not a stringent disclosure requirement on asian companies is there is in other parts of the world. be a significant story in asia. we simply do not know at this point. and when: yes. dwin: a security form -- firm has said that there are infections in china but we do not know where or how significant. another thing to remember is a lot of companies have hatched up they werenses and relatively better protected this time around. guy: i we hearing from the authorities about what is being
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done to slow it down, stop it, push it back? the previous software kill switch was discovered reasonably quickly. my sense is that is not the case this time. edwin: so far there have not been reports of a kill switch. it is conceivable we will see more and more affected companies, more infections, and the rent somewhere would spread -- ransomware would spread. we do not have enough information right now. is affecting commuters around the world. you can watch the show using tv and the video stream and access the chart functionality which is there as well. showingthe sidebar here the companies that are affected by the cyber attack, the functionality and we have who is on air and some of the chart functionality we are using. you can use this button down
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here, get in touch. ask the guest a question. it opens of so you can axis the team at bloomberg. a fantastic function. you can access all of them. macron government has taken a major step in labor reform. we will talk about that. mr.uestion for europe is, macron is saving europe from the populace. what does he want in return? i will leave you with that thought. this is bloomberg. ♪
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guy: 42 minutes past the hour. let's get the bloomberg business flash. nestle has announced a $21 billion share buyback and says it is looking for acquisitions days after it called for a shakeup. they have not had a repurchase program since 2014 and the new ceo said a buyback was a lower priority than reinvesting and paying dividends. he called on nestle to sell its 23% stake in l'oreal and take more debt. digital and western damages. keeping them from interfering in the sale of its chip unit. toshiba said it needs more time to reach final agreement on the
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sale of the business area but reassured it is on track to complete the deal by next march. it had wanted an agreement with bain capital and other investors by today's annual general meeting. buy speeing to ctronetics. $38dutch company will offer and $.50 a share. that is twice 7% -- 27%. they will buy back as much as $1.7 billion of stock. deutsche bank is said to make a u.s. inflation bit that puts them on course to lose as much as $50 million. the german lender has been examining whether traders reached risk limits on the deal. such a loss would he a setback for the ceo us efforts to overhaul the lenders risk and operational controls. an official for deutsche bank in
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new york declined to comment. that is your bloomberg business flash. guy: thank you very much indeed. u.s. stocks fell after federal reserve chair janet yellen spoke. valuations are somewhat rich if you use some traditional metrics like price-earnings ratios. onould not try to comment valuations and those ratios, what to depend on long-term interest-rate and there is uncertainty about that. valuations and those metrics, somerd asset valuations look high. there is no certainty about that. that is a really big chair. let's talk to mark cudmore.
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was that something of a coordinated shift from central banks yesterday? yellen, draghi, carney, etc. ink: we are considering that theory. that would be a scare for markets if there is this coordinated shift. theare seeing r.b.i., ecb, exception is yellen. she did make a warning about asset price valuations yesterday but she has not change the story. the fed has been more hawkish not the market that recently. i do not think you can get a coordinated pause unless the fed is involved. i do not -- the market is slightly scared about that today and that is affecting asset prices. guy: are we over reading what draghi said yesterday? making the point that it was consistent with what the central banks message has been. mark: we are probably overreacting. possibly because negative real
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yields in europe are large and there is an accelerated program in terms of tapering or even a rate hike. negative real yields will stay large already. we might be slightly would overreacting but there was a shift yesterday by draghi. ,uy: changing policy previously it has been the bumblebee speech, whatever it takes. and the narrative is different, it is looking the other way upside risks. that is a significant point in are to note. mark: we getting these tightening policies for good reasons because growth is taking off which means it will not derail the general global bullish equity story. it might be turmoil in the short-term but it does not mean we will get a big change in trend. this is unlikely to be a big inflection point. guy: in the margin, if the fed sees massive prices being elevated, and irrational springs tois what
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mind, does the fed take action, does the fed take more action to do with that, or does it heightened the possibility of further hikes, does it list the terminal rate just a little bit more and that was not the evidence we see historically but it -- is it possible it could happen this time? mark: he has to focus on its primary mandate which is inflation. done qe.as qe is a game changer. is inflated asset prices, it has done many things but one of the main things is inflated asset rises. mark: we probably will see an asset price impact but it does not mean that we will get accelerated rate hikes. not more than they are planning. i do not think that suddenly yellen's comments applies they will hike even faster than we are thinking. guy: mark carney joining us from our mliv team.
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individual specific events, tliv . let's keep it on central banks. corona --rney, and a panel in portugal. you can watch that unlike go from 2:30 p.m. on your bloomberg as well. the policy decisions continue but let's talk about what is happening on the fiscal front and the french government presents a broad outline of labor lobby forms at a cabinet meeting. the highly anticipated reforms in the first test for macron's government since recent parliamentary elections. we have been hearing the labor saying theeaking focus is not the 35 hour week. what is the focus?
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caroline: the idea that the 35 hour week is a program, the 35 hour week has been loosened many times over the past 15 years. people, companies pay less taxes on the extra hours. this applies to factory workers. the idea this time is to lower the cost of hiring and firing. contributions from the employer and the employee allow companies to negotiate wages at the company level rather than at the industry level. the idea is to decentralize collective-bargaining so the power of the unions and the collective level -- at the collective level and control the cost of firing someone by inping the litigation costs case of unfair dismissals. -- allmeasures that these measures that macron is
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trying to do go further than what has been tried before. you have the unions in france and we're going to face political protests and demonstrations over the next few weeks. guy: normally this kind of thing would not be done over the summer but it looks like it will be this time. how does that change the kind of story around this? caroline: it is a question of timing. macron wants to go fast, he wants to avoid the extensive debates in element for hours and weeks. he wants to use executive decrees. he has the majority and bypass the debate and use executive decrees to do this fast and have the first laws in place by the end of the summer in september. as you were mentioning, because it is summer, many people will be on vacation which limits the
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risk of strikes. it will be anlike interesting day there. thank you very much indeed. we are minutes away from the market open. we will look at the movers. nestle making its first concession to activist investor .an low -- dan loeb we will see what reaction we get in the stock. the market open is seven minutes away. this is bloomberg. ♪
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guy: welcome back. nestle is doing a buy back. it kind of feels like it is a first reaction by dan loeb to take up stake in the business. he has a laundry list of things he wants to change. on this.keep an eye watch some of the stocks that ransomn hit iceland the -- hit by some of the ransomware. shareholders pay attention to this? there is the wider story of what is happening in the text race -- tech space more broadly. the nasdaq broke its trendline, it is an upward trend line,
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something to pay attention to. we will talk about that with our next guest. keep an eye on european tech. the ftse 100 cool down and the rest of europe cool down around white five of 1%. the market open is next. this is bloomberg. ♪
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guy: minutes to go until cash opens. futures pointing to a negative start, which is something you are seeing in other asset classes as well. the euro is trading higher. yields have opened higher. else opening shortly. openingaround -- gilts shortly. upon his weaker, which is why you are seeing an outperformance relative to its peers. down .2%. we will want trade carefully to see how the pound trade through the rest of the session. we are expecting may be some movement of individual names. keep an eye on what is happening with nestle, and some of these tech stocks as well.
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beeneuropean stocks have affected by the latest ransomware as well. let us talk about what is happening. the markets will be opening in a couple of seconds time. coal down this morning. let us talk about whether janet yellen is right or not. are we overvalued in our asset classes? ftse 100 opening reasonably flat. we will see what the stoxx 600 does. they will be down a little bit more than that. the ftse, down .1%. the stoxx 600 down .2%. i expect the cac to be opening down. half a percent. there is the cac 40. here is manus cranny. manus: the question you have got to ask yourselves is was janet itlen's comment about
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?exuberant she said it was not . -- about exuberant? she said it was not. it was not an irrational exuberance moment. if you want to understand the real propensity to shift the dynamic of markets, it came from mario draghi. that trumps kuroda, and yellen. ability to be accommodative, but hinting stance, toifferent adjust quantitative easing earlier than anticipated, or isbe in line with what anticipated. financials should reset the tenor on financials. industrials down .4%. ? how should you look at a june move? we have put it together for you. g #btv 521. we will break our winning streak. we are going to come in on the downside. that breaks the longest winning
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streak on the stoxx 600 since 2013. is the political victory of macron priced in? our people as concerned about italy as they were at the start of the year? maybe not. stocks are getting a little bit of rally here. we had a rally in may. this is something we have seen time and time again going back to 2013. the gilt market, we will get to that. have a look at the sterling market. thisis euro -- and the #on is btvhashtag on this 520. you have a few more comments coming through from the bank of england, the deputy governor saying we have to take our time, more time to assess things in terms of the inflation pressures. when do you hit parity? when and if do you hit parity?
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this is the strongest ever for euro sterling in 2017. i think it is the strongest level since the latter part of november. you can see the momentum. these are the gilt market, and the gilt yield. downside in terms of price. this is the gilt market. staten see metcalf from street. your brexit risk is better played probably where they have been underweight. guy. guy: thank you very much indeed. let us talk about what is happening here. a few upgrades yesterday. 2.58. i need to track whether it is ex-dividend. let us go back today. the 18th was the number in front of me. galapagos, abm, amadeus is
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ex-dividend this morning. it looks like it is a software company that is trading or the tech companies trading software. chipmaker, is trading software this morning. so you are seeing some of the tech stocks coming off. hill, risingiam this morning. that is what you are seeing on the upside. we are seeing feedthrough from the tech story which started stateside, rippling through into the european session this morning. nestle's one company we need to be paying attention to as well. for a announced plans share buyback and it is on the hunt for acquisitions. they will funnel investment into coffee. baby food and bottled water. the company said it will pursue opportunities in consumer health care. this comes after the investor disclosed there are $3.5 billion
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stake in the company. let us go to eric fowler. is nestle buying time? is this nestle pursuing a planet already had in place? dramatic onquite the shores of lake geneva, two after they bought in. it looks like they are moving aggressively to respond. how longhis was -- this was in the works, it is unclear. they are signaling a willingness to engage with other investors. guy: so probably not a coincidence in terms of the timing on this. dan loeb has a shopping list of things he wants this company to do. he said it was rare to find a company of this scale that had so many opportunities to make changes. is that the reason why we are seeing this, m.d. you think some of the other changes being announced addressed some of those concerns as -- and do you
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think some of these other changes being announced address some of the concerns as well? eric: he wants them to do more and otheruybacks steps, and so far, no indication on that on the l'oreal stake. they did hint that there might be m&a on the horizon after this -- as this buyback proceeds. i do not think we have seen the last word from nestle. is: nestle is a company that huge, and therefore kind of move a bit like a supertanker in some ways. clearly, it is a dynamic management team that is running a very successful company. but how does dan loeb fit into a longer-term strategy. do you think he complements it or do you think he feeds against it? eric: there is certainly a view in some parts of the market that is you or buying in kind of orplements -- his view
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the othercomplements view. he has a big agenda he wants to pursue and having an activist does not undermine that agenda, perhaps. i expect a lot of people thinking quite carefully. eric pfanner joining us out of geneva. talking of valuations, of london,and speaking in janet yellen it knowledge to valuations in equity markets has risen noticeably in recent weeks. >> as it valuations are somewhat in traditional metrics like price-earnings ratios, but i would not try to comment on appropriate valuations in those ratios. it would depend on long-term interest rates. and uncertainty about that. guy: janet yellen in a very big
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chair. the chair in the chair. with us now, william hobbs. good morning. are asset values getting a little toppy? the bond market that sticks out in terms of valuation and equities have a good relative valuations were to tell. the way you could easily illustrate this is looking at dividend yields. you have a 2% dividend yield on the s&p 500. that is what it has been since the 1990's. william: from 1960 onwards, you have had a big difference between the dividend yield in the bond yields. say, asked her compensation for that inflation risk you are taking with this fixed coupons. it is not there at the moment with bond yields at 2%. it has been a strong relative argument in our opinion. the other point to make is that this is what she is hinting at, in soft language. there may be some problem, but we cannot say for sure.
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the reality is, you can never tell what kind of earnings paradigm you are in. to illustrate back, we say that if you look at the cyclically adjusted pe in the postwar. in the postwar period, first half of the 20th century, the second half is a little bit above that. since 2000, it has been about 20. some of that is explained by faster earnings growth. some is explained by the fact plunge in and assembling and maintaining a diversified portfolio stocks. it is different market nowadays. it is hard to say with certainty about the valuation metrics, generally. the other point to make is that tactically, it is almost irrelevant anyway. on a one-year horizon, if you look at valuations over the last 100 years, generally, it explains 7% of the moves. if you move out to 10 years, that goes to the 30% in terms of
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our squared -- r squared. guy: keep buying stocks? william: the u.s. economic cycle still seems to be ongoing. tellndicators we look at us there is further to go. not the overheating you would worry about. while the cycle continues, profits and earnings growth will continue, and therefore shareholder compensation should continue to rise. guy: i pull this off the mliv guy:. -- guy: i pull this off the mliv. keep buying stocks, but maybe start thinking about where you rotate? william: yeah. interesting one because there are cyclical reasons to be liking tech in our opinion. the interesting thing i think about now with tech is in the last few years, compared to
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2000, there was a huge disconnect between fundamentals and the market share. so much so that market share in earnings share of the tech sector only reconnected about eight years after the 2000 but bubble burst. they have stayed in lockstep. that has not changed. this is a justifiable demand story. if you look at trade data, the semiconductor details, there is a big chip demand coming through. that being the first port of call for the tech cycle has suggested that there is a decent cycle. that investment story we have been waiting for for a long time is starting to pick up a little bit. that may suggest there is good reason to and tech on a citgo -- end tech on the cyclical story. guy: there is evidence of concern. william is going to stay with us.
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i wanted to highlight some of the flashes we are getting across the bloomberg. is energy/shipping giant coming out with commentary relating to the attack that it has seen from this latest ransomware software. merck is saying the energy units it has are operationally not affected. clear. one area that is the aggregate demand is being assessed. we do not know. they have shut down a number of systems to help contain the issue and it is working on fixes to deal with this right now. you can see the market is down this morning. you have two got that out of what you are seeing in terms of the stories surrounding ap moller-maersk at the moment. this is one stock in need of a fix. in absolutealking terms, when you have a share price on an individual basis not an 12,690,
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insubstantial amount of money. up next, cracks appeared in the cabinet. that story next. this is bloomberg. ♪
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guy: welcome back. 15 minutes into the equity market session. let us check in on the markets to show you what is happening. there you go. down pretty much as anticipated around .5%, maybe more. the dax -- and let me open this
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chart up, get this up on the screen for you. the dax is just moving below the 50 day moving average. that is the pink line. the dax is beginning to get down below the 50 day moving average. are the 800 and 200. something to pay attention to if you are of a technical persuasion this morning. dax down by .7% trading. the ftse 100 a little bit better, down by .4%. let us talk about prime minister theresa may's office, trying to downplay a row between senior officials. they have accused philip hammond of taking an inconsistent position. it could be remaining in the union for years after burton is due to quit. that would limit david davis's ability to do deals on a u.k.-only basis. that is something he is paying
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quite a bit of attention to. surprisingly, speaking in berlin yesterday, the chancellor mentioned boris johnson's reference that britain could have his cake and eat it after brexit. in the end, the question is not whether to have cake or yet or even has the largest slice of the cake. the question that matters, the question that will test us, is whether we can be smart enough to work out how to continue collaborating together to keep the cake growing for the benefit of all. he talked about cake twice. it was a bit of a surprise, him showing up in berlin to speak at -- wasent that mr. sho speaking at. with us, william hobbs. sit down and think about what we are seeing in front of us in the u.k. at the
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moment, are you as confused as the rest of us are? william: i try not to be. what we can say is that the u.k. 's negotiating position is contradictory. setred lines that we have and the government has interpreted the referendum as telling us about, they are totally inconsistent with the idea that you get any kind of access to the e.u., customs union, or anything will market. how they reconcile these differences, i'm not sure. there is not enough time to agree on all of this stuff. the most complex trade agreement ever attempted. if you look at the canadian deal, people talk about that. that took six years from i think it was, to finish. that was only goods. that did not include services. we are trying something extremely complicated, president it. with a negotiating line that looks pretty inconsistent. guy: are we in a position where we are missing the point? the british economy is slowing
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down, and you can see that consistently in the data. the governor is worried about what is happening, in particular in particular pockets. the u.k. consumer is running out of steam if you look at the savings rate. these are the issues the market is dealing with right now and probably is what the market is pricing in. forget brexit. focus on the macro data and you will probably get a good idea of where the u.k. is right now. william: i think that is a good point. i think we can get too caught up in the brexit-side of things. the easiest thing to assume is that you will have something that looks like a hard brexit given the existence these. that is not the -- the brexit given the inconsistencies. anre is extra friction for open economy on trade. that will be a headwind for long-term growth.
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it is a resilient economy. we have very high quality institutions, a well-respected rule of law, reasonably benign democracy, and all these things will be setting us in good stead to attract capital flows into the future. you have this quite interesting split on the nbc, which people -- npc, which people were not expecting. certainly, the currency had factored in. that is because although we see the u.k. consumer suffering a little bit with the real wage cuts coming up, that is transitory. the rest of the economy may will benefit from that increase in the burgeoning economic part that the rest of the world is contending with. i buy the ftse 100 based on the fact that the pound may weaken even further? it seems like the ftse 100 is a
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derivative trade of the pound. a rate increase for the bank of england in 2017. that should be pound-supportive. if that is the case, am i 100?ng the ftse give me the relationship between these two bank. if we are trying to make an asset decision and maybe you are a passive investor, and you have to check it. buy or sell the ftse 100? william: i would be worried. there is a impact in there. it is not a transaction if you think about it. most of these companies are not sterling costthe advantage versus dollar sales or something like that. the thing to think about with regards to the ftse i think simply are commodities and how you feel about global growth, because in reality, the ftse relative to, say, the euro stocks in particular, but also the s&p, is a more defensive index. defensive banks in
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the form of hsbc. if you are less confident on global growth, the ftse tends to do quite well. a huge amount of commodities as well. those are the real things to think about, not really the u.k. economy, and probably steer clear of sterling. it will be a headwind on the medium-term because sterling looks cheap medium-term. will it get back to the fair value? probably not tactically. axe to no real grinds tactically. guy: you can see this on the screen. let us say the cac 40 -- i put this in pounds. the ftse 100 has done 20%. on the upside, in pounds. the cac has done 46%. it is an farmer because of a currency. william: i would put that down
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to the global risk appetite. they have more weight, back weight. are further along the recovery line, a bit more defensive, a bit less of a play on the european story. guy: ok. will, he is going to stick around. a down day for equities in europe. nestle, one of the more interesting stories at the moment. the stoxx 600 down by .6%. nevertheless, we are paying attention to that one. this is bloomberg. ♪
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guy: welcome back. you are watching the open. i want to walk you through the markets. stocks are lower. here are some of the names we are watching. hargraves is down. you are seeing some of the tech stocks, particularly in the semi space, being affected. in sydney and -- another company is down. you are seeing some effects coming through from there. i want to change the next points here. we are seeing the money really flowing out. sanofi, siemens, royal dutch shell. you did see another move lower in oil yesterday following the inventory data we have seen.
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look at sap. it is being affected on the tech selloff. there is definitely a tech story in the european space this morning. up next, we will talk more about what is happening about mr. macron and his labor reforms. this is bloomberg. ♪
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ransomware virus is spreading across the globe through the question is, are companies doing enough to protect investors money against increasingly routine risk? have they done enough. somewhat rich, janet yellen racks up tension on rising as it rises. a stock selloff imitating from this. will this mean higher rates from the fed? nestle takes a hit. they announced a $21 billion share buyback days after -- is this enough to keep the investor at bay? or will you want more? good morning.
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you are watching "bloomberg markets: european open." i am guy johnson. matt miller will be back i think tomorrow. in on the markets to show you what is happening at the moment. we have a fairly negative story around europe. remedy -- energy stocks. tech stocks lower as well. following what we saw stateside yesterday. the dax has broken a 50 day moving average. on the downside. something of note. we are down, not that down. down a little bit. .7%. the ftse performing a little bit because of what is happening with the value of sterling this morning. that is fading. that story being backed into the ftse 100. let us that our attention back to the political story. emmanuel macron will take a major step to freeing up france's market. his cabinet will approve a broad outline of changes to the labor
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for and will also ask parliamentary approval to negotiate deals over the summer. i hear you go. with unions and business groups. mario draghi said he sees room for pairing stimulus -- paring stimulus. he said policy was needed however. degree ofderable monetary accommodation is needed for inflation dynamics to become durable and self-sustaining. theus to be assured about internal inflation to our objective, we need persistence in our monetary policy. guy: mario draghi speaking yesterday. that is the line we are getting this morning. do we now need to start think the about right side tail risks when it comes to europe? time, peoplea long
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have been saying it is enough to muddle through. there is now a plausible upside. on the medium-term, you have got the political forces that have coalesced in a way. starting -- the recovery is taking root. less dispersion between this recovery. you have more participation from the wider eurozone. there is a lot of economic slack. the bond market has got a long way to travel to reflect that incoming economic reality. you look at the post-reunification high. guy: is it real? william: there is some debate about how much that will translate. generally, indicators are showing that there is much less of a gap than in the u.s.. what you are seeing is industrial production and salon follow through the path set out
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by the pmi's in the german iphone since the middle of last year. so it does feel like europe is getting its slack together. you pointed out earlier that macron, his chancellors are getting through labor market reform. it may not be as they are selling it. the discussion so far seem to be -- seems to be reasonably placid. it is much more kind of, let's say, incremental. guy: unions are weaker than they have been, though. this is not a union story in france than it was 10 years ago. william: perhaps not. it is useful, no doubt about that. giving more power to the help facilitate hiring and get rid of that long-term unemployment problem. , the pmi's hopefully tell us france is handily.
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he is a lucky president already to a certain extent. he has a good majority with his national assembly with his own party and the ally, but you have the republicans which have split and you have now got the constructed -- a supply to support agreement as well with regards to macron's party. it is very decent working majority to get these things through. if you can keep the unions reasonably placid, you get reforms by the end of september and that sets a very nice platform for the dialogue between france and germany. guy: he has in some ways theided a platform against populists. he saved europe from the populace. what has he asked for in return? closer integration in europe? william: he wants the euro area finance minister, a fiscal
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budget. germany may feel more able to move down that path once -- and let's assume merkel gets elected -- once you get beyond those elections. it feels like, even if you don't get there. the spd is agitating for much more risk sharing and so on. it may mean merkel feels more able to go a little bit further down that route that she has done so far because to be honest, the european partners have been frustrated with france to date. it is the ability to get its act together. you have one of the most pro-european presidents in a long time in the form of macron, with the ability to enact long-needed structural reforms to the french economy. that doesn't quite an interesting platform for further progress in terms of that painstaking construction of the architecture for europe. guy: great stuff. join us on radio. we are not done with you yet. william hobbs, head of and
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stress -- of investment strategy. 25will join manus and i minutes time on london dab digital radio. the conversation will carry on. what are we doing on bloomberg television? draghi, carney, kuroda, bank of canada governor as well. all of the forms in portugal. you can watch that event, live on bloomberg, 2:30 london time. plenty of live blogging around that as well. you can want all of our shows using the tv function. you not only get the video screen, which you can see here, manus talking earlier on, but you also get this sidebar with breaking news, and you can pop out the charts we are using on air with all the functionality as well. market checks. you can use this button to join the conversation as well. that opens up the function of bloomberg. that is the tv function. plenty of uses for that, i can
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assure you. what are we going to talk about next? cracks in the cabinet. we will get the view from brussels, next. this is bloomberg. ♪
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8:40 in london. let us get a bloomberg first word/with sebastian salek. sebastian: the fed chair janet yellen and knowledge to
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valuations and equity have risen noticeably in recent weeks. that view was echoed at several events by her colleagues and john williams. she was speaking during a visit to london. >> asset valuations are somewhat rich if you use traditional metrics like price-earnings try to but i would not comment on appropriate valuations in those ratios. they depend on long-term , and of course, there is uncertainty about that, metrics,y standard some asset valuations look high, but there is no certainty about that. sebastian: a new cyber attacks similar to wanna cry has spread to the u.s. overnight, hitting businesses and government systems. the attack is being carried out by a virus with users being told
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to pay $300 and bitcoin for each infected computer to unlock their systems. the spread of the attack into asia is showing how ransomware is becoming a routine risk of doing business around the world. president trump's agenda -- least five gop members said they are debate on the bill which was drafted in secret by majority leader mitch mcconnell, that there is another setback on the republican's seven your campaign to repeal and replace the affordable care act, otherwise known as obamacare. wewe are going to see what can do. we are getting very close, but for the country, we have to health care, and it cannot be obamacare, which is melting down through the other side is saying all sorts of things before they even knew what the bill was. this will be great if we get it done, and if you do not get it done, it will be something we are not going to like, and that is ok. 24 hours: global mays,
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a day, powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. guy: theresa may's office is trying to downplay a row between officials. taking inconsistent positions on whether the u.k. should seek a bridging deal. --t would berlin, yesterday in the chancellor philip hammond referenced boris johnson's reference that britain could have it take and eat it after brexit. >> the question is not whether to have cake and eat it or even has the largest sites of the cake. the question that matters, the question that will test us, is whether we can be smart enough to work out how to continue collaborating together to keep the cake growing for the benefit of all. guy: yeah.
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starting to maybe state his case more strongly. interesting that it was done in berlin. joining us now from brussels is carsten nickel, managing director. what is the read from brussels about what is happening in london and the fighting that has started to take place in the cabinet? >> i think there is still a wait and see mode from the brussels side as to the kid positioning. it is not clear what they want when it comes to the future relationship with the e.u. you have people like david davis advocating for the e.u. to kind of move away from its sequence in approach, -- sequencing approach. carsten: if that were to be the case, we would see the u.k. does not know what it wants. that is the perspective from brussels right now. guy: was it a surprise to see mr. hammond in berlin it yesterday, -- berlin yesterday, talking about an internal party event?
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he left.and nevertheless, it does seem as if mr. hammond is taking his message to berlin, not just talking about what he sees as a future for brexit here in london. i think it makes sense for him to look specifically at berlin. that has been the strategy of many in the u.k. over the last couple of months to look at berlin when it comes to finding an ally potentially for a softer brexit. i think the germans are willing to listen to that, to take these voices into consideration. the biggest problem at the end of the day is the conversation of domestic u.k. politics, whether people like hammond can prevail. his definition of a softer brexit merely means to avoid a cliff edge. if you take a look back, it meant continued membership in the government, that seems off the table. i do not think the situation has necessarily improved. guy: can i ask you -- and this
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is all related -- mr. macron is going to unveil his labor market reforms in france. let us deal with those first of all, and talk about the wider picture. how much time do you think he has got in his ability to deliver upon this? i have seen various writeups suggesting this is a major reform about to take place in france. that would cheer up germans and make them feel as if this is the guy they can work with. what are the possibilities in your mind of the big story developing and france behind what mr. macron is going to suggest? carsten: i think the chances are that this is really happening. let us not forget this was the ticket macron campaigned on. this is a very big difference compared to francois hollande. you have the public mandate for this and the majority in the national assembly. he seems determined to push ahead. his bigger bets here is that it
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if he is able to make progress in france, the next step is passed these are my elections as of january next year, to take this to the european level and talk about institutional buildup in the eurozone. guy: and you think angela merkel will be on board with that? we are about to see a major push with european reform and integration. it is almost better that the u.k. is not involved in that process. carsten: yes, absolutely. i think merkel is going to be on board with that as long as we are talking about something like a pragmatic buildup. let us be realistic. the european -- finance minister in terms of the full european eyes asian -- europeanization -- i do not think macron think he can get that. if you look at the european bailout, which operates outside the treaties, there could be something that you could expand
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into some sort of fiscal capacity for the eurozone. be the that will conversation. something like that depending on the coalition she finds itself in. that is something merkel seems to be interested in. guy: to back up to the point of the u.k., that would be easier without the u.k., right? carsten: definitely. it will be easier to move forward on these conversations when it comes to integration on the continent. treaty, theat the chancellor to veto would be -- sends a powerful reminder for france and germany that it is time to step up their game here. guy: we are going to leave it there. carsten, thank you very much indeed. carsten nickel joining us, managing director for europe at that tell you -- at a company.
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we are really happy that we are joined by the south african reserve bank governor three governor, good morning. thank you very much indeed for taking the time to join us here on bloomberg. puking your me. ivernor, there has been -- think you for being here with me. the public prosecutor in south africa suggested we have a new mandate for your institution and that mandate has been socioeconomic well-being of the citizens. fact veryushed strongly against this. have seriously is your independence thing tested? well, there is always contests in society. when things are tough, institutions and decision-makers
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might think about the easiest thing to do is to fiddle with the independence of the central thes, and that is why independence of the central bank is enshrined in the constitution. to trigger with the independence and change the mandate will actually require a high threshold in parliament. you needed two thirds majority to change the mandate of the reserve bank. or any part of the constitution for that matter. having institutions constitutionally independent is one thing. is, dot important thing the people who are entrusted with this institution understand and respect the duties that are put on them by the constitution that they themselves act independently, they act without fear? gov. kganyago: that is what the south african constitution is
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asking of the south african reserve bank. aren tell you that we steadfast to that. we will retain the independence of the reserve banks. publiceve that the protector has gone beyond her mandate. guy: when do you think we will get resolution and clarity on this issue? gov. kganyago: i am not even sure whether this issue is unclear. the thing is very straightforward. we have the speaker of parliament saying she is taking this matter under review because she believes the public protector has gone beyond the power. a cross-section of political way, notre saying "no with our reserve bank." the constitution guaranteeing forindependence is one, but
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us, what this encompasses is a cross-section of south africans to say "not with our institutions." guy: if you were to lose this, if we were to see the inflation mandate disappear, and something were to replace it, would you decide that you could no longer be the governor of the reserve bank? is there something -- is this something you would be prepared to quit your job over? is it that important? gov. kganyago: it is very important, but quitting my job would be a violation of the constitution. notconstitution says i must have prejudiced. it would mean i am a coward and running away, and i am not about to do that. guy: but you would be dealing with a different institution to the one you signed up for. you signed up to do with the mandate that was based on inflation. if that mandate were to change, and you thought that would be an
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inappropriate move, would that be something you could carry on with, or something you cannot carry on with? gov. kganyago: give me one central bank anywhere in the world that would not worry about inflation. a mandate. growth.l go on and add there is no central bank that -- [indiscernible] gov. kganyago: it will not tackle inflation when confronted with it. i will say to you that when i read what was proposed for the well-being of south africans, i said "welcome back." the inflation targeting mandate is meant to improve the welfare of the south african. if you say my responsibility is to improve the health of south africans --
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we have to bring the inflation lower in order to maintain south africans. do you think you're taking so much on your shoulders at the moment that there is political africa?at in south we think that may reach a resolution may be to earth and back end of this year. but at the moment, the responsibility for dealing with all of this and trying to calm the country down is based on his shoulders. is that too much for your institution to bear? know,ganyago: well, you the world over, there has been a placed on central banks. i think that does not get helped by a narrative that says central banks of the only game in town. what happens in society is that are no longer playing that role and are looking at the central banks to play that role. south africa is fortunate. south africa is fortunate the one stance of this
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country is our ability to structure around difficult issues. you have got this conversation taking place now in society between the government, the private sector, and civil society, saying "how do we get out of this economic hard meyer that we are in -- economic quagmire that we are in?" it has to do with restoring consumer confidence. unfortunately, that does not get helped in the current political environment that we are in. what you are seeing is conversations in the south african society which is a very vibrant democracy. guy: one final quick question, governor. do you feel the latest noise around your mandate and your independence may further promote
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the agencies to revisit the idea of further downgrades? gov. kganyago: while, i do -- well, i do not think so. i do not think this is something we are going to lose. there might be questions about our mandate, and i think you have had noise that maybe you should be revising inflation targeting framework. the targeting framework has been revised at least three times before. we used to have an escape clause in the targeting framework. we replaced that with an explanation for when we moved to a flexible inflation target. in 2001, we decided to revise six toget from three to three to five. when we were hit by a currency crisis, we revised it. we would have to go back and restore the three to five
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inflation target range. guy: governor, thank you very much indeed for your time. it has been a great treasure. -- lesetjaat kganyago joining us. "surveillance is next. ♪
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>> eyes on the prize. what yellen calls a somewhat rich asset valuations. another relevant in the rate hike calculus. are companies doing enough to protect against the increasingly routine risk of france of ransomware? theresa may's government faces its

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