tv Bloomberg Markets European Open Bloomberg March 16, 2017 3:30am-5:01am EDT
♪ guy: welcome to "bloomberg markets: the european open." your first trading half an hour. we talk about bonds in a moment. i am guy johnson along that miller in france for today. we have great guests coming up. march. takes the hike in global stocks rally, but dollar drops. yellen points to three hikes this year. does donald trump's skinny budget mean the fed can take its time question mark populism
pushback. the dutch liberal beats the freedom party. we will speak to the head of the dutch banking association and we will speak to axle labor -- axel weber. that interview up next. matt miller? matt: 30 minutes until the cash trade opens up. have futures up across the board after a positive finish for equities in the u.s. and around the world yesterday. the markets seemed pleased with janet yellen's handling of the rate hike yesterday, as well as the dutch election outcomes. very interesting loops. in other asset classes as well, you may not have expected a divergence in monetary policy getting stronger. guy: fascinating to see what will happen here. it was a dovish hike. that is why the market is doing what it is doing. snp uptick -- 8/10 of 1%.
equity markets a big winner in this trade. the hong kong dollar, we got the smb, japanese yen up 3/10 of 1%. that is a problem for haruhiko kuroda as we watched to see exactly how the japanese deal with a fed's tightening on a gradual basis. to commodity story, we have some metals trading a little higher. gold will bid overnight. up 6/10 of 1%. let's talk about europe and -- in a little more detail. this is the trade i was watching. the only people and spread -- bund spread. thead goes wider we've got spread tightening up as people price out the risk of marine le pen doing well in the french presidential election. that is what we are seeing in markets and the reaction to the dutch story. a similar story in btp's this
morning as well. let's get the first word news update with juliette saly. juliette: dutch prime minister mark rutte are has beaten a challenge by the anti-islam freedom party. forecast to take 33 of the 150 seats in the lower house of parliament against 20 seats for the freedom party. the result draws a line in the sand on the spread of populism in europe. a coalition could take months. donald trump has proposed historically deep budget cuts that would dutch almost every federal agency and program. under the 2018 budget request, it would be a reduction below 2016 levels. the epa would face a 30% reduction. it would free up extra money for the department of homeland security. president trump has promised to
take his new travel ban all the way to the supreme court after the order was blocked by a judge in hawaii. the judge said there was clearly a religious basis to the order, which affected people from six muslim-majority countries. a president slammed the ruling is terrible and said it makes america look weak. global news 24 hours a day, powered by more than 2600 journalists and analysts in more .han 120 countries this is bloomberg. guy? guy: thank you, julia. the fed has raised its benchmark and continues to project two more increases this year, signaling more vigilant as inflation approaches target. here are the highlights of janet yellen's news conference. today's committee decided to raise the target range for the federal funds rate by one quarter percentage point, bringing it to three quarters to 1%. it also reflects our view that waiting too long to scale back
some accommodation could be required to raise rates rapidly sometime down the road, which in turn could risk disrupting financial markets and pushing the economy into recession. the basis for today's decision is simply our assessment of the progress of the economy against our long-established goals of maximum employment and price ability -- price stability. the data from quarter to quarter, we haven't changed our view of the outlook. ,e think we're on the same path we haven't boosted the outlook, projected faster growth. we think we are moving along the same course we have been on. we are getting closer to reaching our objectives, the policy is accommodative but also the level of the neutral federal funds rate is probably quite low. have antheless
accommodative stance of policy and it will be appropriate to gradually move towards a neutral stance. we've got a special guest here to discuss that as well as all of the other exciting news. the european elections, what is going on with exit, the g-20 meeting in baden-baden followed by regulatory talks in basel and what is going on. weber is the incoming chairman of the international institute of finance, which holds its meeting before the g-20 in frankfurt. as well as the former president of indus bank. he knows a thing or two about monetary policy. thank you for joining us. let me ask you if you think janet yellen executed the perfect dovish hike yesterday question -- yesterday? a height itecuted was priced in for weeks. the economy is moving along the
trajectory that it has all along. they haven't changed their outlook. they are basically on that path and we expect another two rate hikes this year. this is priced in as well and the fed has indicated we will see something like three rate hikes again next year. there is some expectation whether they will accelerate that, but i don't think that is likely at this point in time because i think we will see a more movement by the fed. they will continue to be accommodative. they have no reason to be in a hurry. the reason was largely produced by rebounded in oil. it really hasn't affected core numbers. that will basically taper off towards the end of this year because it has peaked in february-march, we have seen a sideways movement of inflation as opposed to a continuous rise globally. a path andearly on
find their projections justified by the data. the: what does this do to dollar? how closely do they watch that? as a former central banker, how closely do you watch the currency your moves effect? axel: central banks really take the exchange rate as a data point in their decisions. it is not a decision variable. neither the fed nor the ecb are small economy central banks. they focus on domestic performance. the exchange rate plays a role in that. if you look at the u.s., a degree of openness dependent on trade in the oil in the last decade has moved from 8% to 12%. it is more important to the fed decision making because it is more important to the u.s. economy. they are going to focus on the economy and what is happening there. in that park, they will look at the exchange rate where there is some benign neglect. but they can't afford exchange rate to a rail the u.s. recovery and in that sense, they will have one eye on the exchange rate as the data points,
guy: good morning from london. looking at the discretionary budget the trump administration produced. the implication seems to be it is more neutral than the markets have priced at this stage. you think we going to see a fiscal expansion that many hope for. and if we don't, what are the implications? i think we will definitely see a tax program which has been announced by the administration early on. the question always was, how is that financed? , or atcing expenditure the going to issue more debt and therefore, will it be accepted in the conservative quarters of the republican party? they have always had issues with the debt ceiling. the indication we get from here is that a large part of the counter financing of those tax reductions is going to happen by
cutting of the expenditure and some other sectors affected most heavily. there are some standard ones like the environmental issue, each will raise concerns in the rest of the world because we just came out of the paris meetings with the clear commitment to reduce carbon emissions. also subsidies to agriculture might have to be seen in the context of the trade policy that would be more inward looking rather than continuing global exchange of goods and services and agricultural goods. -- thele package indication it gets for me is, a lot of it will be financed by reducing expenditure rather than issuing debt. to some degree, that is reassuring because moving into a more indebted situation, given height already, would raise questions. those are becoming more clear. guy: just to stay on this
briefly. you mentioned the two we have priced in, that you are whatting from the fed -- you think the fed has priced in in terms of what will emerge from washington, from the white house in terms of tax policy, in terms of the fiscal policy more broadly? is anything priced in, are they making any assumptions within the dot plot right now? i think janet yellen was pretty good about -- what the fed has repeatedly said is when they are very a comment if and monetary policy was the only game in town, they took that drastic action because other policies were limited in their contribution to stimulating growth. there was a relatively restrictive fiscal policy and no structural reform policies. how that the new administration is talking more about moving from monetary policy
carrying all of the weight of stimulus to fiscal policy stimulus and structural reforms and infrastructure spending are on the policy agenda, that will allow the withdrawal of some of the monetary accommodation in a gradual fashion and take into account that other policies that will stimulate outward will kick in. when she talks about the withdrawal of stimulus, it should be taken into account other policies would provide additional stimulus relative to the past. at this point in time, there is no concrete proposals on the table and that is why the fed has taken notice of the fact that other policies will emerge, but it is too early for them to factor that really into the projection because they are pretty uncertified at this point. i don't think a lot is priced in in the feds curve at this time. what they expect is a gradual ability of the economy to walk on its own. as the economy is stronger and more consumption driven, they
can afford to withdraw some of that stimulus because the u.s. recovery is becoming self sustained. matt: you talk about trump's more inward looking policies -- policy plans, but also the importance of the global economy, open global trade to u.s. growth. that seems to be the message of the german presidency to the g-20 this weekend. ahead of that meeting, a meeting with steve mnuchin in berlin. very i think europeans are dependent on having good international relationships and trade goods and services. it is how the european union has evolved. coals founded as a cold -- and steel unit but has expanded. trade benefits both sides, and will be the message of an inward looking policy, particularly from the largest trading partner
of many countries, the united states, will rock that balance and the international community is looking to signals from the indicated they have they want to renegotiate some of these trade agreements, there reements andag benefit both the united states and the rest of the world. matt: what message does steve mnuchin bring to g-20? axel: they will basically look for a package. there are concerns the u.s. administration has in putting policy priorities on reregulation of the financial industry. many things you hear is we've done enough, we have done a lot already. the system is more stable. let's do an impact study on what happened with financial reregulation and do we need additional measures? on top of that, the u.s. really is the major trading partner of many countries and was there legitimate concern that jobs in
the u.s. are a key priority for the administration, this should not happen at the expense of international trades because even the u.s. is a much more open economy now than it was 15 years ago and a lot of u.s. exports in particular in the tech sector, depend on the global economy consuming and importing these goods. that is why the internationalization of u.s. corporate has happened. of theernational role global economy for the u.s. is as large as it has always been. i don't think globalization is something you can reverse. it is something that has its own forces going forward and standing in the way of that would produce negative spillovers and a break on global growth. at the point when global growth for the first time looks to be brightened and the imf doesn't rip -- revised down, you need a continuation of the global exchange of goods. that is the message from the german president. matt: when you listen to mike or the message
out of steve mnuchin this weekend in bonbon, does the u.s. team bring you a consistent message with donald trump's tweets? you feel they are ready to engage question mark axel: the administration messaging is more nuanced and the international community is looking for a nuanced messaging. mnuchinthe things steve has said about the attitude welcomed bydollar the international community. the dollar is the core currency of international financial system. it has come out stronger than it financialhe last crisis. the international community looks at the u.s. as a partner in international organizations. there is a strong hope that the key to winning -- the process will lead to a commitment of the u.s. to be part of that international process. we need a global level playing field for financial markets.
people are looking for consistency of international engagement by the u.s. and not for inward looking messaging. it needs to be nuanced messages and what we have seen from the administration recently has been more nuanced and we saw. top -- can we talk about strip -- spreads question -btp we see boones -- bumd spread heightening. do you think investors clients have overpriced political risk in europe? axel: i wouldn't say it is overpriced. of oural risk is the top political -- our risk agenda anyway. we have been very clearly saying that the top risk we face is going to be political risk and it has migrated from being an emergent market phenomenon. what you see in the market is a
number of risks. the dutch election was the first that point that markets are gathering on a longer trajectory of european electric -- elections. the next is france, then we have early election in italy. the market is either in a relief rally or more concerned, depending on the results. what we have seen in the dutch election is the center has been holding, the liberal party has not lost as much roads as was a shortnd that leads to relief rally in the market. it won't last because the next elections are in april and may. and there is big concern there as there was in the dutch election, that the center might not hold and the market is going to look at every data point, every speech or political act to anothertter the risk of step back in european integration. european integration is challenged by brexit.
that is the first data point, the market was concerned. there was uncertainty and strong movement in volatility in the market and that will continue. byope will be plagued political uncertainty the entire year. even greece, that is looking for another nation, might come back as a problem over the summer. thaty of political risk might materialize in europe and the market is going to react with volatility and caution as these data points materialize and elections happen. guy: hints of early elections in greece as well. let's talk brexit. you are thinking about 1500 jobs moving from london as a result of brexit. -- you making an exception assumption that we see a hard brexit question -- exit? axel: we need to manage risk. we need to be prepared for every eventuality. we need to look into all of these options. the key for us is not to take a
certain decision. the key is to maintain as much as we can, option maliki. want to make decisions we regret, but cannot afford to wait until all the political dust has settled. for us, a key point will be the triggering of article 50, which at that point makes the exit britain in my view, undone reversible trajectory for the next two years and then we look early on how hopeful we can be that market access from britain to european markets will continue. i think it is not going to continue on the basis of the old arrangement, britain needs to have a new it -- arrangement with the eu. any grandfathering, except for a short transition time is not in my expectation. we need to understand what the new arrangement will be. it will have to be a new service and trade agreement with the eu. those take a long time to
negotiate and the financial sector is looking for the fact that financial services make it to the top of the priority list of theresa may's government. so far from what we read and hear, we don't have that impression that has happened, and that will be an important commitment for the financial industry to be more reassured about london, that they understand financial services and axis of i natural services to the eu is going to be a key priority of the administration. we haven't got that impression yet. optimism she will come back with assurance that financial services are key? axel: we're hoping to see that but haven't yet. the sooner the market and financial institutions get that reassurance the city of london is going to be a core priority theheresa may's government, longer that takes, the more lingering doubt there will be. with theortant decision to trigger article 50 to give that reassurance to financial markets, that they are on top of the priority. matt: are you getting assurances
like that from germany? from madrid? from paris? axel: we get many offers from places like that, where basically they are saying if you decide to take a different trajectory, here is where we could help you set up in europe. at this point, this is merely exploratory talks. for us, london has been the core financial center in europe. we want continuity as far as possible. the scenarios in terms of jobs moving are at this stage only scenarios. looking at which clients are in the eu and where do you need a passport to do that kind of business? if you look at the numbers, that is where you end up. our preference would be to maintain as much access as possible under a new arrangement. i don't have to tell you, we operate out of switzerland under market access too. a has shown us we cannot do everything from switzerland. we have established a european
entity here in frankfurt. for doing business at frankfurt and other locations in europe where we need passport access. as the exit happens, some of the passporting from london will disappear. we need to relocate to be first quarter procedures and that is where the government in the u.k. needs to signal to the financial industry to be as much reassurance to them as they can, he cuts we can't wait for a two your process to be completed. we need to decide early in the process. that is a key transition for us in europe and is unprecedented. people will not wait. matt: let me quickly ask you about ubs. you will stay there to 2021. what are your key objectives for the bank until the? clear fiveve made years ago that the core of ubs is to be the global wealth manager. the number one bank in
switzerland. our strategy has been mapped out five years ago. since then, we are in execution mode. once we treat -- tweak our strategy here and there, we fundamentally haven't questioned our strategy. we review it every year, but we haven't -- still find our strategy is in the place it needs to be. our results have shown we did better than some peers. book.de above that is a hard one to find. we feel our strategy has been validated over the last five years and implemented in a good fashion. i don't have an indication we really need to change it at this point in time. the market has very much evolved as we expected, rather than unexpected things happening. matt: all right, thank you. we appreciate you. axel weber. we're at the event before the g-20. guy: matt, thank you very much.
rate interview coming out of that place today. many more. stocks to watch. four stocks go ex dividend. , theyn eye on lufthansa see pressure on pricing. has been the labor story that has been part and parcel of that story over the last few months and years. that looks to be going into runoff. the other stocks to watch is what is happening with anglo this morning. the mining sector, keep an eye. a two point 4 billion stake in anglo is something we are paying attention to. that could have an impact. keep an eye on that one as well. the other thing to watch is what is happening across the btp said, heas axel doesn't expect this line of politics to last for long. he expects political risk to return shortly. the open his four minutes away. 20 of stocks to watch.
guy: the market open one minute away. equities look good according to fair value calculations on the bloomberg. we saw the s&p up by 0.8% yesterday. london looks like it is going to live a bit. pay attention to that one. worth mentioning this morning is the fact that spreads are tightening across europe, out of germany. pricing out risk. our analyst does not think that is going to last long. watch lufthansa. watch anglo. stocks. of
it is thursday. stocks in the london market, which may be a reason to underperform today. cash, we are expecting to open strongly. we are talking about exactly what we have got in europe. european markets opening up, as you can see. we are up already. i think we will continue to see that trend emerging. the cac is expected to open up quite strongly. settle the market down. up 0.8s the cac, percent. let's find out what is going on below the surface. here is nejra cehic. interesting moves happening in the bond markets and the spreads today. of course, the fed did hike. that was well telegraphed, expected. what caught the market off course a little was the fact it did not signal a faster pace of
tightening. a dovish hike. treasury yields dropped 11 basis points. at the 10-year gilts yield, it is following the 10 year treasury and other european yields lower. 1.19% or thereabouts. we are down to basis points on that 10-year gilts yield. we have seen france fall more significantly than that. talking about the spreads, here is the french-german spread, "le spread." you can see it tightening. the coming up a little bit after the dutch election result, which was seen as a litmus test for the spread of populism in europe. when we look over how this is playing out in the equity markets, the bulls were out in force in asia, as they were in the u.s. overnight. the s&p 500 jumping most in two weeks. we are a little higher on the stoxx 600. we are seeing while extending its games.
a lot of moves into risk assets today. we are seeing material setting higher as well, of 1%, with metals gaining. financials following up 0.7%. i want to show you the april-may spread. the europe stock volatility futures climbed on a list of risks. test election risks. steady,etty study, -- but something to watch. we saw the vix come down in yesterday's trade. let's run through some of the movers. i have the gain or set up on index points. commodity stocks are any into the mix. we have royal dutch shell in there as well. given what we are seeing in the ined income trade, btp particular tightening up on germany this morning, you are seeing it on the oed market as
well. not a dissimilar story. let's move it over to where we are. -- to where we are seeing some losses this morning. vat -- b.a.t., a stock with dividends in london. posting earnings. that is going to continue to be a future for a few weeks yet. let's talk about some of the big stories we have been watching, what is happening in terms of the fixed income trade in europe. that is being affected by the dutch vote. fixed income is being affected by the federal reserve. anding rate, quarter of point. signaling were vigilance as inflation approaches the target. grosserg spoke to bill following the decision. is a we learn janet yellen perpetual doubt and even when conditions are hawkish in terms of full employment and
employment growth, and stock market at all-time peaks, she proceeds in a gradual way. i do not think that is appropriate. i think the high leverage in the u.s. economy and the global economy means central banks have to proceed in a gradual way, but she is a doubt, and that is why the markets reacted as they did. of thell gross, ceo world. let's get marilyn watson, fixed income strategist at blackrock. do you agree with that? marilyn: obviously, the rate hike was very clearly signaled. i think it is quite an achievement. ago,hink about three weeks nobody thought the fed would raise rates in march. they managed smoothly to raise rates earlier than the market had been expecting. they are clearly sticking with their mandate. i'm not surprised with the statement, although they did include the statement about targets for inflation.
we have seen the longer run target before, that they specifically said that as well. we are seeing the fed in many ways turning to a more regular pace of normalization. we are expecting two or three more hikes this year. clearly, the market is a little disappointed the dots did not move up a little bit more. but they are still lying. june, we did see more in terms of that. -- but they are still buying. there will be more pressure on each individual meeting, and we will see more normalizing. guy: what does that mean for my investments? marilyn: for your investments, that means that in the u.s. we still have a little bit of a flatten are on the curve at the moment. but it also means we do like the spoke products -- investment grade, particularly industrials, in the u.s. and emerging markets, we might certain high yields. it means we expect to see the yields pick up a little bit more, that we also want to see a bit of cushion.
we expect to see industrials do better. is the risk of the white house in that scenario? marilyn: there is a risk when you look at market somehow bullish they are in terms of school stimulus. -- fiscal stimulus. timing is a key. if you see a dragon terms of in terms of drag perhaps repealing obamacare, the timing is an issue. you could see that being a risk for the market. guy: what does it mean for other central banks, the ecb, the boj? in some way, she has executed something quite surprising, but done in a very calm way, and the markets reacted calmly. the dollar went down. is this a problem for other central banks? you would have thought in a scenario where the fed is tightening, with a structured process of going through the dollar, -- kuroda has a problem,
because it is not reacting like that. marilyn: that is true, but in terms of the jgb curve and what the bank of japan is trying to achieve, they are focusing on yield curve control, targeting 04 the 10 year, with speculation on whether that would be allowed to rise, given the rising treasury yields. if you think they are targeting a real rate, we would expect to see inflation expectations and inflation have to be higher on a sustained basis, and you really want to change that. in japan, some investors -- we see a steepening on the back end of the curve. we think over time, the curve will steepen. for the time being, the make of japan is going to maintain the 10 year curve and be very gradual. guy: the bridges going to widen. somethingike that is we are going to have to deal with over the next three years, maybe more, particularly when it comes to the boj.
at what point does the market go, actually, we have this huge spread across the atlantic? it is already pretty wide, treasuries to bunds. how much more with the market be prepared to tolerate? marilyn: you look at the other side of the coin and you look at the ecb and the euro area, even in the template of the ecb, we have seen draghi clearly made the statement that we do not think we are going to raise rates anytime soon, but they are going to continue tapering the asset purchase program. we think that possibly not enough is priced in, if you look at more going into next year. there is a gravitational effect of the fed. where does that take the bund market? marilyn: it is interesting because it is dominated by political risk. i think over the next few months, particularly the german curve, there is a scarcity issue.
flight toso seeing a quality because of the french elections that are coming up. looking out beyond that, and if you look beyond all the noise, if we do not have any surprises in the election over the next few months, we would expect you would again start to see, as the market focuses on the ecb potentially tapering more, that you might start to see that spread not really widening. watson from blackrock is when to stay with us. up next, the anti-islamic candidate waved off in the dutch elections. we discussed. as the fed hikes, japan holds. the latest from the boj, which his policy unchanged. hopesy's finance minister to have a positive encounter with the u.s. treasury secretary. how will disagreements over trade and currencies play out tomorrow in washington? all of that is coming up. the market is open 10 minutes.
political risk. tomorrow, we will see exactly what happens. matt: absolutely. it will be interesting to see what happens when we go to the meeting of the g-20 at baden-baden. what we heard from the fed overnight and what we heard from the dutch voters overnight as well, i want to bring in the chief economist at societe generale. start with theo fed. did janet yellen pull off the perfect dovish hike, or did she leave something on the table? >> we can say it was a perfect type. prepared the market. it sent a message, rather dovish . the markets were wondering whether they would accelerate the pace of tightening, and so far, they hinted that there would be two more hikes in 2017, as expected, so, so far, so good.
guy: let's talk about political risk. .'ss morning, we see o.a.t over bunds tightening up a little bit. is that what we should be doing, or do you think we are not done yet? olivier: the dutch elections were rather good news for europe. far, thewing that so polls are not always wrong. it is good for that. ad also, that there will be government that is reducing uncertainty. we know many elections are coming ahead in europe. matt: let me shoot a question back to you in the studio. far as the think as reaction we have seen in the bond market? is this a sigh of relief kind of day? i certainly think we are seeing a bit of relief, obviously, on the results in
holland. but i certainly think that when you try to extrapolate this to france, the two are very different. i think it is a bit of relief today. i think the market will start to focus on france again. certainly, the situations are very different. the situations, in many ways, are very different. say, the pollsou are showing relatively close to what actually happened, in france i think it is still very much risk on the table. guy: the probability is low. the bookies are pricing marine le pen, knocking her down a little bit this morning. the big difference seems to be with geert wilders, the possibility of achieving anything, even if you were to win, was quite low. it isrine le pen, asymmetric -- a low probability event with high impact. marilyn: i think that is right.
certainly, investors have learned from brexit and the u.s. election that the risks are there. we need to focus on the tail risks as well. as you say, the risks are asymmetric. if it were to be a surprise result and marine le pen were to win, we would see a complete change in the demand makes within the you and the eurozone. the probability is quite low, it is still an unknown. we have the first round to go. then, we see the second round. certainly, i think investors really need to be cautious and focus on protecting returns and ensuring they are really factory in the tail risk. you think that european businesses can invest safely? needu think that investors not worry about a le pen victory? or is it something you still have -- because of the asymmetric risk -- to worry about? olivier: especially among businesspeople, when you look at europe, including in france,
there is a positive surprise. business confidence is very high. normally, before elections in the past, you had people waiting and seeing. this time, we do not see that. i think this is rather signtening, but it is a that businesspeople people do not really care about the political risk. the lowey just consider probability, high-impact risk is maybe not that important. that pointlow up on 's i'm fascinated what socgen view is on this. is the view in france increasingly, among financial circles, that even if we were to see marine le pen win, the parliamentary elections would act as such a brake on her ability to enact policy that her impact would be not as great a magnitude as one presumes? olivier: you are right.
do not forget that in france, we have presidential elections and later, we have also the parliamentary elections. and then, even if it is unlikely that le pen will be elected -- but even in that case, it would be even less likely that she would get a majority of the parliament. out, as we have come have before, with a government that is pro-europe. in that case, it would be a kind of wait and see outcome. matt: does the outcome in the netherlands, coupled with the fed decision, make mario draghi's path toward normalization easier? olivier: the dutch election, i am not sure it factors in. but you are right that if you
compare with early last year, when the fed was postponing the china, therelated to ecb had to cut rates further, to take additional measures, and japan also. i think it is more comforting for the ecb as well as for the bank of japan when the fed is gradually tightening. they remove some pressure on the rates.cluding on the for yourier, thank you time. thanks for joining matt. olivier garnier from socgen. ireland will stay with us. let's talk about markets. here is nejra cehic with the movers. this --hen do you think whether you think the risk on attitude is going to continue or not, that is what we are seeing
today, with equities rallying in europe. we are also seeing it in the commodities space, with gains and industrial metals. i want to start with the miners, leading gains in an industry group on the stoxx 600, it also individually. i focused on two mid-cap miners, focused on gold. gold extending its biggest advance in six months. this is about the fed. we keep talking about the dovish hike, the well-telegraphed first hike of 2017. the thing ahead to the path of future tightening, did not get what some in the markets expected, a faster policy tightening, or a signal of that. we're seeing gold rally beyond this rate hike. that is feeding into the miners. finally, i wanted to focus on kns, one of the big losers among the mid caps. this was in the fertilizer space. although we saw full-year revenue beat, the market is focused on operating income, a
number which came in and a miss. guy: i want to come back and look at some of the stocks that are giving out dividends. bass, paraguay, hammerson, and ringgold. next, the boj does not budge. japan central-bank policy is going to be held for now at least. will it raise rates if inflation begins to take hold? the boj next. nothing new in the boj today? we will talk about that. ♪
guy: welcome back. you are watching the european equity market open. we are 23 minutes into training in europe. we are looking at the monetary policy in japan. the boj kept its monetary easing program unchanged, rolling rates at current levels law maintaining the pace of asset purchases. this came hours after a hike from the united states, a well telegraphed one, increasing the policy divergence between the central banks. still with us, marilyn watson, fixed income strategist at like rock. what does the boj do next, other than what it is doing? marilyn: we think the boj does what it is doing for some time to come. they are focusing on the yield curve. they have an enormous asset purchasing program. they are managing to maintain the curve where it is, lower
than in the past. that is how. -- that does help. they want to see sustained inflation and higher inflation expectations for a period of time before they make any changes. basically, keep on this track for some time. what do you think about the strength of the yen, at 1.13? it is not exactly its weakest point in recent memory. do they want to see it weaker? marilyn: we certainly think we could see the yen weaken a little bit. if you look at the policy, where they go from here, we think we will see steeper yield curves. the other side of the coin is, you will potentially see a weaker yen. guy: what is a weaker yen, 120? marilyn: it is hard to say. -- itn an ideal world -- iseaker, but it's it
it an order of magnitude weaker, or a few points? marilyn: i think from here you could see it weaken further from here. it is hard to put a number on it. if you are looking at the u.s. i am wondering how important that exchange rate is, in terms of the way the boj is looking at outcomes. factor: i think it is a and is obviously important to the economy, important for experts, important for inflation as well -- important for exports and inflation, but it is one piece of the whole jigsaw. guy: briefly, the economic policy -- structural reform, fiscal policy -- if any country is crying out for reform on those fronts, it is japan. marilyn: certainly, we need to see more in terms of stimulus, if we are going to get the reflation trade you are seeing elsewhere in the world. japan is going to be a slow grind.
takes a hike. global stocks rally and the dollar drops. yellen points to just three in the -- increases this year. does donald trump's skinny budget mean the fed can take its time? a population -- populism pushback by the dutch. we speak with the head of the dutch banking association. axel weber tells us that european uncertainty is set to continue through the year. welcome to bloomberg markets, the european open. i am matt miller in frankfurt, at the iaaf meeting before the by 20 guy johnson alongside me at headquarters in london. guy: let's have a quick look at
where equity markets are. the fed yesterday, the united states s&p, this is where we stand this morning. in london, the 600 is down by around 0.5%. the dax is outperforming this morning. this is the french spread. the is the bund open and oet's open. you just had the snb out as well. unsurprisingly maintaining its deposit rate. again, very much driven by what is happening in european politics at the moment, in terms of policy setting. what do they do next, if anything? there is funny of speculation, but not a lot of action at the moment. matt: that is right. the german finance minister, speaking of action, wolfgang schauble, is going to meet with
u.s. treasury secretary steve mnuchin ahead of the g-20 conference in bonbon, which kicks off tomorrow -- in kicks offn, which tomorrow. and angela merkel meets donald trump on st. patrick's day in washington. there are tensions over trump administration views on global trade, and accusations from the state that germany is exploiting what it calls a grossly undervalued euro. with us,atson is still fixed income products strategist at blackrock. marilyn, how do you think this is going to turn out? what you expect the meeting between shoretel and mnuchin to look like -- what they shoretel between the treasury secretaries going to look like? isolationism seems to be the trump administration plan. marilyn: we expect we will not see too much in terms of glowing lines coming out of this first meeting.
it is a very initial contact, still very early days. i think they are still setting out their standpoints. we would expect at the moment not to see too much in terms of headlines. i think all the focus we are seeing at the moment is either on u.s. domestic politics, particularly in terms of trying to change obamacare and push on -- do you, it you is on the political front. this is more of a sideshow at the moment. guy: what are you hearing? what are the expectations about a border tax? if that were to happen, the europeans would have very little choice but to respond. you feel like we are the foothills at this stage. nevertheless, it could be a high mountain for the europeans. marilyn: where getting a lot of questions about it. it is been widely debated. the fact is that everything is very uncertain at the moment. i would say things are effectively as uncertain now as
it was in november of last year. at the moment, everything is pierced speculation. and at the moment, there is no clarity at all. matt: how do you expect the u.s. treasury market to react if you do get more isolationist, protectionist policies? marilyn: at the moment, we are not expecting to see much more .n terms of policy the treasury market as the moment is focusing on growth, on the labor market in particular, on potential domestic policy such as fiscal stimulus. at the moment, we are not expecting anything in terms of news or an impact on the treasury market. of what has we make been coming out of not necessarily donald trump but his navarro,ers, like ana about the relationship between
germany and the united states? marilyn: there has been a huge talk about the devaluing of the euro and all of that. frankly, germany is one country in the eurozone. and while it plays a large part in the economy, it is not the only one driving the value of the currency. it is a freely floating currency. i think those comments are slightly different, in that germany may have benefited when it joined the euro, with its other members, and joined it at one level, but the value of the euro where it is today, versus the dollar, is a very different thing. a weaker euro does not benefit europe. you do not expect the trump administration to get any traction with this issue? marilyn: we do not expect to see much in terms of changing policy as aance and the euro currency inflator, because that is not what they are doing. i think a lot of it is more rhetoric. guy: with the domestic focus rather than anything else?
marilyn: and they clearly are concerned about the value of the euro, but you could say that about a number of different currencies. the u.s. does not want to continue to stimulate growth. it wants to export more and produce more. a weaker dollar will help more. we could focus more largely. matt: the u.s. administration does have david malpass advising donald trump. he has always been a supporter of a stronger currency. do you think the administration will be able to deal with that, a stronger dollar? or would they push back against it? marilyn: again, on the stronger dollar point, it is very hard to see, because we have heard very confusing communication and rhetoric. on one hand, we have heard from members of donald trump's administration that the dollar is too strong. on the other hand, we have heard they want strong dollar. there is so much uncertainty around what their policy is and what they actually want. i think
at the end of the day, if you look at their policies in terms of wanting to create more jobs within the u.s., of course that naturally leads to them wanting a weaker dollar, rather than a stronger one. it seems that at the moment, there is still a lot of internal conflicts and more uncertainty, confusion around what the administration view really is on the dollar. guy: plenty of political in -- in trade. maryland, thanks for your time. plenty of political intrigue. marilyn watson, thanks for your time. with your terminal, you can follow the functions we are focusing on and message me directly by the ib function. let us know how we are doing. that is a fantastic function. up next, we are live in the netherlands following the dutch election. manus cranny is joining us. manus: a very good day to you.
trump's right-wing populism. how do you spin it when your party gets smashed at the polls? this is the man that will start the process of forming a coalition, right here in the hague. but who will be the kingmaker? who will be the rainmaker in the dutch election? we discuss that and markets. is this the beginning of the end or the end of the beginning? ♪
session, let's talk about the open. here is nejra cehic. nejra: it is difficult not to look at the stock movement today without thinking of the bigger picture. we are seeing risk on in the markets in equities, in commodities. we were not seeing it in fixed income, the last i checked, i saw 10 year treasury and yields higher.und yields had the risk of population spreading -- populism spreading in l europe headed off a bit. i dovish light from the fed, the most dovish hike for a long time. miners outperforming. anglo american up 7.5%. this is also because i'm indian mining billionaire plans to buy 2 billion pounds of anglo shares in the markets. a merger fell last year. that would equate to about 13%
of anglo stocks. the big picture playing in here, and that individual story as well. anglo american is one of the best gainers of the stoxx 600, of the most since summer -- up the most since summer. reports that the economic watchdog found in no had misled had misled owners and the management may have been responsible for the product. says it's cars beat commission's, but shares have hit a low. hexagon, the ceo will continue to lead the company. here is what hexagon said. even after an economic authority indicted him on insider trading charges -- roland was arrested and detained in sweden in october and extradited to norway. exelon says it is business as usual for us. nonetheless, shares down the most since october 2016.
let's get to the first word news with sebastian salek. seb: u.s. president donald trump reposes historically deep budget cuts that would touch on most every federal agency and program. the state department would be hit with a 28% reduction below 2016 levels. the epa would face a 30% reduction. this would free up extra money for the pentagon and department of homeland security. a federal judge in maryland has by aorced a temporary ban judge in hawaii on the travel ban. the judge said it was clearly a religious basis to the executive order, which affected people from six muslim majority countries. trump promised to take the case all the way to the supreme court. in the u.k., the brexit bill is due to become law later. the queen gives her ascent. that is expected to happen today. formality that a allows legislation to go into effect immediately.
by 2600ews powered journalists and analysts in more than 120 countries. this is bloomberg. matt: sebastian, thanks. dutch voters turned out in force to back pro-european party prime minister margaret to -- mark a line liberals, drawing in the sand over the spread of populism. manus cranny is in the hague and joins us now. what is the latest thinking on the numbers and the possible coalition combinations we could see from here should mark -- from here? 'snus: this is a statistician dream. 80% of the dutch people turned out that could turn out. they crushed the right wing liberals, in a sense. what looks at it -- what looks like it will happen today in the parliament building, the labor individual will be appointed, trying to see what is the thinking, to coalesce between
the parliamentarians. the liberals losing three seats. margaret cap will lead -- mark the charge.ead they could be the liberals with the christian democrats. it would still leave mark rutte just short of the absolute majority. 150 seats he+++ you need 75 or upward. will labor regroup? the worst dropping in history. mark rutte with labor in the
previous government. the alliance lasted 20 years. labor had the worst dropping. -- drubbing. geert wilders said, i am here, and i am not going anywhere. you have 13 parties here. this is the reality of populism. this is fractured, fragmented, and a much, much weakened coalition basis. very briefly, any idea who the finance minister could be? they are not coming to have coffee with me at the moment. part of the labor showing. no indication yet. they will get a here at 1:00 p.m. local time. in theory, no questions from the press, but i will try. then, this process begins. we should hear something before the end of the day in that regard. certainly, i will keep you briefed in that line. the playing a key role over last few years, in terms of european politics. talking more about greece. i will be fascinated to see your coverage through the morning. manus cranny joining us from the hague. we're joined by bloomberg's amsterdam chief, and the president of the dutch banking association. chris,alk a little bit,
about -- good morning to you. what do you think of the implications of last night's results? >> i think it is really a great vote. first of all, a great turnout. people came out to vote. was a mistake in the u.k. with brexit or the united states -- millennials turned out in force. they gave us a vote for a society for europe and against populism. what do we look out for in the netherlands, now that geert wilders has been defeated? what of the most important developments to watch for in dutch politics, as they relate to the broader europe? chris: geert wilders made gains, but much less than expected. pro-european center parties made bigger gains. that is also a significant
thing. as your correspondent said in the hague, we go for a coalition of persimmon with central parties. my guess would be it will be a center-right coalition. that is well for sound economic policy with a pro-european stance. matt: what do you expect the netherlands to do as far as towardsthis german move freer trade, open trade, and against protectionism, against isolationism? will they join europe and that? chris: absolutely. this is a vote for an open society, an open economy. the netherlands is stronger in europe, stronger together. the aspect of open markets and
open orientation to the world is something that is widely supported. some people think that europe takes too much on its plate, is too pervasive, but an open market is key, and the parties that are now -- that have gained in the netherlands, and mark rutte's party, are in favor of an open market. guy: chris, can i talk to a little bit about a few other subjects? i want to ask you how you think things are going vis-a-vis grexit -- brexit. we are hearing about companies being pitched to buy the netherlands about the possible prospect of moving there, post-brexit. can you give us a sense of how from those discussions have become? chris: we are first of all in favor of a smart brexit, not a hard brexit. the dutch finance sector and other sectors of the economy are
closely linked to the u.k. i would like to see a situation after brexit that is as close to possible as what we have now. but there it takes two to tango. in the meanwhile, the netherlands is a gateway to europe. a lot of european headquarters in many sectors of the economy. if companies want to get footloose of the u.k. and look at the continent, the netherlands is an interesting place in europe to go to. just another kind of related question. it appears that we are now in a situation where the united states is not going to take any further steps forward in terms of regulation of the financial sector. do you get a sense from your members that they worry that that will put european institutions at a disadvantage? well, if the deregulation that is announced is going to
happen in the united states, it would mean trying to turn to the situation before the crisis. my members said, there is no turning back. we have learned our lesson. we want a solid and sustainable banking sector. in europe, we are well underway, in the european banking union, to also create the environment where the sector can take care of those risks. of course, it is important, internationally, to have a level playing field. is a cloud of the announced the regulation in the united states. my guess would be it will probably be more focused on the smaller banks in the u.s. than on the big banks. guy: just finally, returning to the subject of politics, have you done any modeling -- have your members done any modeling about what could happen over the
border, were france to decide that it wants marine le pen, and marine le pen wants to take france out of the single currency? in terms of the order of magnitude, what are we talking about here is -- about here? chris: if there would be a victory of marine le pen in the french election, that would be very bad for europe and very bad for the european economy, and very bad also for the dutch economy. the good thing is that i am more confident after yesterday's election in the netherlands that also in france, the electorate will go out and vote, and will make a sensible choice. guy: chris, been great speaking to you this morning. thanks for sharing your time and your thoughts with us. the president of the dutch banking association. matt, over to you. matt: thanks very much, guy. we are in here with the ceo of
ceo.hek -- with a let me ask your reaction to the fed decision last night. it is on the tip of everyone's tongue. do you think that is a good move by janet yellen, a dovish hike? how does that move rates here in europe? >> good morning, first of all. i think the move is well anticipated, well anticipated, and well executed. the move was dovish, as you say. u.s.theless, i believe the rate is going to go up this year and in the coming year, maybe five or six times. matt: over this coming year? jordi: the next two years. that is good for the u.s. economy. in europe, i think we are still behind in the recovery, so it is good that mario draghi maintains a light apology -- policy. matt: is he going to be able to
do that or is he going to feel upward pressure? we have seen inflation figures around 2%. jordi: i think he will be able to manage that. the inflation figures we have seen are a reaction to commodity prices. activity -- it is recovering in europe. but we still have some way to go. there is spare capacity. the best would be maintaining rates low now. but we know now they will not be low forever. move we saw an interesting yesterday in the euro, rising thisst the dollar, with monetary policy the virgins that would seem to indicate investors need to buy the greenback -- monetary policy divergence that would make investors need to buy the greenback. jordi: in the coming months, we could see the dollar strengthening significantly. if it hasn't happened so far, it is because investors are not
whether trumpctly will be able to implement fiscal expansion, and because they are a bit annoyed by the position in terms of trade, and protectionism is not good for the world economy. it is not good for the dollar. that is why investors are not betting on the dollar. matt: what response you expect from the u.s. this week at the g-20? the german messages exactly that -- protectionism is not good for the global trade. jordi: i do not know what will be the reaction. at this stage, the american president is still finding his way. what i know is that the direction yesterday in the netherlands was good. i'm sure the french will direct, .ost likely, mr. macron we will get strengthen germany by the end of the year. we will get the pro-market stance. the end of the day, the
americans will continue defending open markets. matt: just finally, on banking, nk asu run the caixaba chairman -- i think i incorrectly labeled you ceo -- what do you expect from basel? at the g-20 meeting, it does not seem they will get an agreement soon. jordi: this is a very complex sets -- subject. we have gone through several years that have been fine. a cycle.e are in the new administration in the u.s. is indicating that. this implies that we pause on the cycle and we take stock. forink this will be good the economy, good for banks, and also good for businesses that demand loans. i think we should reach an agreement, and sort of a
the dollar drops and treasury jumps after janet yellen announces a rate hike. another block. stopping donald trump's revised travel ban as he prepares for budget cuts. the dutch prime minister's liberals hold off a challenge by the anti-islam freedom party. this is bloomberg surveillance. things to getion through in 2 hours of tv china, theng at netherlands, and of course, g-20. tom: chair yellen moved the market yesterday, and they continue to move this morning. francine: let's get to the bloomberg first word news. ra: a judge in hawaii slammed the travel ban for discriminating against muslims