tv Bloomberg Markets European Open Bloomberg March 31, 2017 2:30am-4:01am EDT
guy: good morning. welcome. this is "bloomberg markets." your first trade coming up shortly. i am guy johnson. matt miller, off today. what are we watching? the south african currency takes a hit after president zuma versus finance minister. is it done great inevitable? we take you live to johannesburg. to e.u.'s donald tusk is set distribute negotiation
guidelines to other members today. how much will he share in his news conference, which we think will happen around 8:45 london time? we will take you to that when it happens. and down with dollar. the first quarter of the year was tough for the greenback. what is in store for q2? . about where we stand, what is ahead of us. we start with the fair value calculation on her bloomberg. mildlyts us to a negative start. the dax in positive territory. i think that is too close to call. basically, we are going to have a flat open. let's talk about what is happening with the bund. has already been open. the european bond market on the move. yields are down. they track sideways. again, that is indicative of the market holding his breath, waiting to get some clear sense of direction. that is what we are seeing with
equities. to a certain extent in fixed income as well. we will talk about the rand in a moment. there is no sense of direction there at the moment. i want to take you to the gmm. the south african rand, down by 1.23%. the rent had already fallen. there was speculation that zuma was going to be firing gordon price a few days back. let's take that off. i have just that is something we need to pay attention to as well, which is what is happening in the south african 10 year, a big move we are pricing now. some people are looking forward to what happens next with this movie's story, what happens with the racing story. is the bloomberg first word news with juliette saly. e: south korea's former president has been arrested barely three weeks after she was ousted for alleged corruption.
the strict court cited that she could destroy evidence. oul was taken to the se detention center, where her friend is being held. she has denied wrongdoing. glaser laser has released the body of kim jong-nam back to for nineea in return of its citizens being held in pyongyang. the half-brother of kim jong-un was murdered a month ago. -- women are expected suspected of wiping a nerve agent on his face. the incident sparked a diplomatic standoff between the two countries. national security adviser mike flynn is willing to be interviewed as part of the inquiries into alleged contacts between the trump administration and russia, in return for immunity from prosecution. a congressional official confirmed that flynn made the offer. down was asked to stand
after it was revealed he had misled vice president pence about contacts with russia's ambassador to the u.s. u.s. government policy may further boost the economy and eventually add fuel to an inflation rate that is already approaching the central bank's official target. that is according to fed president dudley. this marks a shift from last year, when most officials on the fomc generally agreed risks were to the downside amid tepid global growth and sliding inflation expectations. >> there is still considerable uncertainty about fiscal policy and its potential contribution to economic activity. it also seems like there has been a shift over time to a more stimulative setting. it appears the risk for both economic growth and inflation over the medium to longer term may be gradually shifting to the upside. juliette: and a reminder that we have two exclusive fed interviews today. william dudley at 2:00 p.m. u.k.
time, and an hour and a half later, the st. louis fed president. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you very much. the big news overnight is that president zuma has fired his , following ater power struggle at the heart of south african government. he is to be replaced by a lawmaker with little financial experience. it is one of 20 overnight changes to the administration, part of a sweeping reshuffle that has taken place in pretoria. colin coleman is the head of goldman sachs's south african office. he is not speaking to anyone else today. he is coming to us. thank you for joining us. first, let's deal with the reaction. what is yours? lin: i warned some months ago on your program that there was a sharpening of the knives in the national congress, and last
night was effectively the night of the long knives in south africa. a quite shocking and stunning sweep of the cabinet, removing some of the cabinet ministers, in particular the finance minister and that pretty finance minister, and removing the belt and removing the belts embraces over fiscal discipline that has been one of the hallmarks of the last 22 years of democracy in south africa, creating a huge amount of anxiety and a very dark mood in the country. guy: what are the applications for the south african economy? we await a weightings review. is a downgrade now inevitable? colin: you know, it would feel to me like president zuma has been playing russian roulette with investment-grade ratings through his actions last night. it would be surprising to me if in the next six months i come on this program and we have not had
a rating downgrade. , believe the rating agencies as i have mentioned, have institutional stability is one of the key pillars, alongside growth. and the function between political stability, fiscal discipline, and our ability to undertake structural reforms is what the rating agencies were looking for. and this reaction function has obviously been disrupted by these activities. we have to give the new minister of finance a chance to get himself out of the seats, but i think the expectation is the lineup of the ministers, who is being moved in and who is being moved out, it's more a reflection of president zuma wanting to get his way with his economic program. a change really about of economic policies. the african national congress has its policy conference in june.
that would be the time to change policy. but there has been no policy change. this is about personnel change, and effectively about moving out people that have been in president zuma's way. guy: let's deal with the internal politics. this is an interesting aspect of this. wanted -- heuma ended up with gigaba. is there a difference in terms of positioning? is -- colin: i think time will tell. certainly, the perception is they belong to broadly the same camp of thinking about what to do with the south african economy. the public finance minister. the issues surrounding
corruption at that state utility would effectively have put these gentlemen in broadly a similar political camp. the questions to watch, i think from a political point of view, is, what is the reaction of the deputy president going to be? what is the reaction of the party going to be in terms of the cabinet ministers from the communist party that have been retained, which were several? and what is the reaction of the trade union alliance and business? i know what business's reaction is. irrationalis as an decision which is effectively shooting the south african economy in its foot, effectively from -- business leadership south africa hope to the understand the rationale and where this is headed.
south african coming this party and union statements over the next couple of days will tell us a lot about where this is going to leave -- lead. a -- ramaposa e --why did he not step down? ravi might have made something missing in terms of the new finance minister, why has he atided to stick with zuma the moment and not put his head above the parapet? colin: to be fair, it has been five hours since the decision. i think we have got to give it a couple of days to see what his decision is, and how he plays this particular thing. that all eyes are going to be on him. i think the reality is going to be, the ruling party is deeply divided. they are going to have a confrontation internally. the next few days, i would expect the national executive committee to be called, and for a discussion to happen around this decision. aat may or may not lead to
vote of no-confidence in the anc , in president zuma. there has been a motion of no-confidence confidence that has been tabled by the opposition parties in parliament. factors around the future of the president is going to be very much in the spotlight. guy: come back to this. this is where i wanted to finish this conversation. is this going to hasten the departure of the president, i guess is the core of my question. you talk about the vote of no-confidence. clearly, as you say, the reaction of serial -- cyril ramaphosa is going to be pivotal. will it speed the process? it willhere is no doubt accelerate the political confrontation. it will deepen the wounds. there will be blood on the floor of the political process in south africa. how it ends, frankly, is too hard to call it this point.
but there is no doubt that president zuma is taking a very, very calculated political gamble , that may or may not work out in his favor. colin, it is a genuine pleasure to get your analysis of the situation unfolding in south africa. ellen kullman, the manager of investment banking for sub-saharan africa for goldman sachs. coming up, the e.u. countries get there is a negotiation guidelines today. we bring you the latest from brussels. plus, it is the last day of the first quarter. owing to break down big currency moves. it is all about the downward dollar. the open, 17 minutes away. ♪
guy: 14 minutes to the cash open. good morning. two years have started. the countdown has begun, the negotiating countdown. brexit, i'm talking about. for now, the initial time he is in the e.u.'s hands. donald tusk will today distribute the draft of negotiating guidelines to the representatives of the block, the remaining 27 states. task will then hold a news conference in malta, we think in about an hour. the timing could be a little flexible. it always is. the guidelines will not be made
public until they have been finalized and approved by e.u. leaders. what are we going to get out of this conference? isning us is john stating -- -- what are we going to learn today? >> we will earn what the tone is going to be like when negotiations eventually start. we are hoping to get the guidelines and to get a lot of detail about exactly what the e.u. 27 governments are going to garnier to push for, when the negotiations start. we will be looking at what task in the press conference, and how he is moving forward. the leverage has moved to the e.u. side of the debating table. they have all the agenda-setting power. one of the things is going to be this sequence. we're not sure it is going to focus on the divorce bill first,
before anything else. guy: the brexit letter delivered by theresa may link to security and trade -- do we get a response on that? jones: i am not sure about that. may talk about security today, but the e.u., after theresa may set that in the letter delivered on wednesday -- the e.u. was adamant that security cooperation should not -- should be a given, especially the european parliament pushed back against that. it seemed like yesterday u.k. officials in london were trying to walk that back as well. if we do hear about security cooperation today from tusk, or otherwise, i think it will not be as contentious as it was a couple days ago. guy: always a pleasure. joining mees hayden out of brussels in advance of the press conference we expect later on. ahead of the announcement in malta, what is driving markets?
the last day of the quarter as well. member, tomorrow is april 1. mark, we need to talk about that. let's talk about what is happening in sa overnight. in some ways, we frontline the story. there was a rumor jacob zuma was , and to be firing gordhan the rampant price that in. is this a one-way street for the rand now? street. not a one-way i think the important thing is, the global environment is very positive for emerging markets. the dollar has been weakening in the last couple of months. yields up-and-coming lower. that has provided a tailwind for emerging markets, particularly high yield like south africa. people will look to buy them at some point. however, i do think there is a lot more weakness to come. has beendhan dismissed, and that was the really big danger -- we speculated about it all week but
were not sure whether it would happen. he has done a major cabinet reshuffle. 20 ministers or deputy ministers have been removed. i think the market will be shocked when they look into this and realize what a brave step -- grave in terms of -- a vicious in terms better word, of turning the cabinet to loyalists. it is negative for south africa and institutional integrity, and that makes it vulnerable to credit downgrades. guy: let's explore this a little bit more. we have a one month chart for the rand. what is interesting here is that while, on the short term, if you look through these volatility spikes, that could make you money, because the rand has been in periods of this, quite a positive play. the other thing is as you say the brave move may accelerate the infighting within the anc. it may therefore hasten the
departure of jacob zuma. i guess you do not want to push too far one way, when suddenly it could swing back pretty quickly on the back of that. tok: i think it is very hard place that outcome right now. if that did happen, it will take some time. there will be a lot of negative headlines in the interim. i do not think you can suddenly by the dip on south african assets on the assumption we get a better government afterward. xina has made a step because he believes he can carry it off. this most likely will strengthen his hand, at least in the short term, even if it looks negative for the country. it is a tale risk that will be removed with the outcome. there is not clarity about what even if hefter zuma does get removed. that is a tale risk. it is fun to bear in mind, but that is for a few weeks down the line, if at all. saying to us
earlier, the reaction of serial -- cyril ramaphosa will be pivotal. one reason the rand has done well of late -- it has benefited from the kerry. the 8% yield on the 10 year has been attractive. the downgrade of the dollar in the first quarter has also been a big factor. has that been a takeaway, the fact that the greenback has underperformed so many of its peers during a couple? markets, iterging is a big worry for countries like south africa, that have this large external debt pile. they get worried when the dollar appreciates and when u.s. yields drop. also those things squeeze them directly. this has provided a positive environment for them directly. even indirectly, it enables hedge fund and portfolio managers in the u.s. to leverage of more when yields stay low, but makes the carry trade more attractive when the dollar is depreciating. the big theme of the first
quarter has been the fact that dollar and u.s. yields have underperformed what we saw at the start of the year. partshe pickup in rand that kerry trade. thank you very much. have a great weekend. macro strategist. if you want smart analysis throughout the day, available on go>, thernament, mliv < ongoing markets blog we have available. up next, how will the miners f are today? this is bloomberg. ♪
guy: four minutes to the cash open. let's talk stocks this morning. keep an i on bt. it looks like we could see some fairly big cuts to wholesale pricing as a result of the off, review. people are talking about a 40% area, which could be interesting from a share price performance. other shares include the miners. copper could ripple through into the mining sector. other stocks i would watch include names like old mutual. big exposure into south africa. as we know, there has been a significant political change overnight, which is rippling into the currency market, and
♪ cash open one minute away now. what we can expect. you can see it in the bund future's and open this morning. not a lot going on. just looking for a sense of direction. the fair value on your bloomberg pointing to an absolutely flat open on the euro stocks this morning. ftse looks like it could be lighter. watch the minors this morning and old mutual as well. exposure could be something you don't want to have this morning. if you are investigating into those stocks. there, not aggressively priced in.
watch copper prices as well. oil may be softer as well. nevertheless, it is the end of the quarter. we are getting into the market open. let's find exactly what has happening. we are anticipating a quiet start to the day. this is the picture as you can see, the options recently welded in the last few days. london lighting up the touch. around 1/10 of a percent up. these aren't big gyrations we are seeing within the market. let's find out what the details are looking like. softening up a little bit. what is going on, let's find out. anna: as we head into the final trading day of the quarter, the month, and of the week, let's look at where european equities markets opened up. with a little
downside bias, but not a great deal. looking at what happened in asia over the past quarter, fascinating to see a strong quarter for asian equities. really tiptoeing out of the quarter with a drop of 8/10 of a percent on those asian equities. perhaps something similar in europe. down one quarter of a percent. health care is a sector that is keeping its head above water but a slight weaker picture, but not by much fun european equity markets. this is the year -- european gilt. the action around the brexit story moves from london to brussels. are down in malta to talk about the future and europe there. see? will we see detail of it. you can be sure some of it will get out. let's look at what is happening
on the chinese story. shanghai composite closing at this hour. manufacturing giving a boost to that market. we saw that set of data coming in strongly. manufacturing data at the highest since 2012. how much is that threatened by what we see in ppi? a much is it threatened by what the pboc might be doing to take some of the more risky elements out of the chinese economy? and another word on the quarter, where would you have done best or worse on equity markets over the quarter? venezuela and ukraine were looking pretty good for you. of the major markets, india stands out as a strong performer, a lot of excitement about the story there. markets thatde, reflect oil exposure. russia and nigeria. sectors that did badly around europe in particular for the quarter, the oil and gas sectors at the bottom there.
thanks to about as we close out the quarter. guy: anna, thank you. let's take you back to the markets. break down the stoxx 600, anticipated old mutual under pressure this morning as we press in what is happening in south africa. old mutual, the lead loser this morning, down by nearly 6%. unsurprising. have significant exposure to south africa. it is the biggest representative of the south african story on the london markets. i switched this to index points. under pressure, as well. you have rio, glencore, bhp in there, bt down by 1.62 on the wholesale review. some of the oils in there as well. that is where we are seeing weakness. some of the flipside, some of pharmas.was --
some big returning into that sector. direct line insurance, followed by m&s the main gainers. really is downside that is more interesting, particularly with the old mutual move on the back of south africa. politics never far away and having an impact in south africa. a little later, we get a joint news conference from european council president donald tusk and malta's prime minister. draft linee on the for the brexit talks. these timings are a little flexible, but we think that will take place around 14 minutes time. how much detail will be revealed as those negotiating guidelines -- we will wait and watch. the scottish first minister nicola sturgeon has issued a letter seeking the pound to hold another independence referendum.
brexit as a rationale for the second referendum. theresa may has made it fairly clear at this stage she is not minded to grant that just yet. the senior advisor at credit suisse joins us now. bob, so much to think about. politics dominating. we will talk about south africa, let's talk about what is happening in europe and the u.k.. this week has been pivotal and historic. this week has been enormous for financial markets and for the political story in europe. we watch for european response, how much detail will we get and how critical will that response be? what we are going to get today from president trust -- task is brought guidelines. a number of stumbling blocks. what will happen today is the eu setting out a broad timetable. number one, the policy of the eu and he has been very clear on
this up until now, is to negotiate a divorce settlement. that is in conflict with a british stands, which wants to simultaneously negotiated divorce settlement with starting negotiations of free trade. that is stumbling block number one. stumbling block number two is, if there is going to be a divorce settlement and the eu has released a series of statements saying the statement might want the u.k. to pay up to 60 billion euros as part of the divorce settlement, it is pretty obvious what the british government think about that demand. we have a bit of a spread between zero and 60 billion. that is a huge account to be negotiated. sequence of the negotiations, the extent of the divorce settlement, plus that is before we get into the complexity of negotiating the trade deal. this is going to be the -- difficult in the coming months. guy: i am interested to find out
if the you can hold it together. whether or not they can generate a single voice. not have the best of track records on that front. bob: you are right that we shouldn't ignore the fact that in april and may, we have the french election. the opinion polls show the macron victory. but a marine le pen near victory could be disrupted. guy: what about a fillon victory? bob: i find that unlikely. i would have thought that unlikely. another potential disruption is italy. have a fragile, boulder only the in italy, obviously position of five star in a potential future coalition government could be difficult. and then september and october,
we will have the german elections. it looks likely that mrs. merkel will stay chancellor. trolls -- mr. scholz in charge of the democrats, dogs are reduced of mrs. merkel staying in power. there is a lot of potential in the stability on the european side. compounds -- that compounds my earlier comment that this is going to be difficult read -- difficult. absolutely. a number of things to bring your attention to. we are seeing fairly big moves in the financial sector in south africa. standard bank is under pressure. old mutual also under pressure. around 8% down in johannesburg, specifically. let's talk about what is coming through from the ecb. an interview with the journal
and a number of lines are beginning to flash out of that. that saying it is clear the next qb decision must be to taper. the us saying he sees a certain logic in ending qe before raising rates, not since the ecb had no substance of discussion on an exit plan. matt miller and i debate whether it represents a taper or -- let'sthe extension -- wet a taper or not, will debate that when matt returns. still to come on the show, followed the dollar. as we come to the end of the quarter, we look at how the currency moves. a fundamental driving force in all markets. donald tusk distributes brexit negotiation guidelines in malta later on. we will bring you that conference live alongside and analysis. all of that is still to come. this is bloomberg. ♪
♪ 12 minutes into the cached session. let's look at where european equities are. we anticipated going nowhere in a hurry. that is what we are seeing this morning. the 600 is down by 3/10 of 1%. the miners are soft as are the south africa related financials. the dax is down, the taxes down a little bit more.
-- the cac down a little more. i am a little surprised at what is happening with the miners given the fact we had relatively deep -- decent pmi reading out of china. the ip data out of japan as well was something to not ignore. anyway, that is what it is. what's talk about the last quarter because it has been an interesting quarter and in some ways, a surprising quarter. the surprise has been that the dollar has done what it has done. the fed is on a tightening cycle. looks like a fiscal expansion at some point. but i don't know, nobody really does. the dollar has been the big story of this quarter and has softened up. you can see this on your bloomberg. you can see exactly what has done well. it is fascinating to see what has done well. the wrong data, let me change that back.
the mexican peso has been the big outperforming. that is unsurprising given me -- the swing against it. ruble, the south korea, the aussie has done well as well. only the turkish lira that has generated negative returns against the u.s. dollar. it has been a difficult period for the turkish central bank to manage. the senior advisor with credit suisse is still with us. if you get the dollar right, you get everything right. how many people got the dollar wrong this quarter? bob: a lot of people since we started quarter. there was a clear consensus in foreign exchange markets that the fed would raise rates. that was correct. theconsensus is still that fed will raise rates another two times this year. they may raise rates three times this year. we have the statement from one of the fed governors earlier this week suggesting four rate increases in this year being
appropriate. we shouldn't dismiss that. but it was a clear consensus pro the dollar and that consensus has been unwound. what you have seen particularly some of the emerging currencies performing very well and the theme among the emerging currencies is those which were extremely oversold have recovered. the mexican peso, i would argue, in january was the cheapest currency in the world. -- lestw lest cheap cheap and there is scope for that to recover more. recentlytheme of the stable commodity prices against a of accelerating global economic growth and that has benefited currencies like the russian ruble. you have had currencies were investors have been chasing higher yields, which have recovered.
again, the russian ruble. also, people were betting aggressively that the chinese renminbi would devalue further. it hasn't. linked to that, you see some recovery in the editor -- other asian currencies. guy: 20 think happens next? -- what do you think happens next? bob: we could be in a period of dollar euro trading sideways. guy: i am shocked to hear this. it has been arranged for a while. arranged.obably stays if we get a correction in global equity markets, that benefits the swiss franc and the japanese yen. i think you see investors putting on what i call insurance swiss franc, japanese further upside in gold. i think also conversely, the high-yield trade is sustainable.
although we have come a long way in currencies like the brazilian rao, like the russian ruble, it probably stay firm and one could see the ruble at 55, 1 could see the brazilian right now at 308 310. think about it, the brazilian at the low point was for 40. the ruble at the low point was greater. both are sustainable. tax, hower adjusted much upside could that be in the dollar? bob: it is going to take a long time for investors to an -- digest with a border tax means. on the border adjustment tax, there is a serious risk that all of the discussion about implementation proves just two complex -- too complex. with the complex global supply chains we have at the moment, a border in -- adjustment tax is impossible to implement. guy: we need to talk about what
you are watching "bloomberg markets." here is juliette saly with the bloomberg markets. china's factory gauge has climbed to a highest level in almost five years. manufacturing pmi increased to 51.8 in march beating estimates. latest evidence of increasing momentum in the world's second-largest economy. japan has registered its first back-to-back inflation rise since 2015. cpi rose 0.2% in february from a year earlier. at unemployment rate stood 2.8 percent in february, lower than the 3% forecast. have's top three airlines reported their biggest combined profit in five years despite taking currency losses from the weakening yuan. bloomberg spoke exclusively to air china's cfo about the carriers plan to hedge oil prices. a goodn't think now is time for oil hedging, given the
uncertainty in the market at the moment. it remains unclear whether opec will extend their production cuts. secondly, the u.s. shale gas producers are very perp -- productive. thirdly, we have seen great uncertainty surrounding the new u.s. government. spacex has flown a reused rocket to space and back again for the first time, marking its attempts to reduce costs, allowing people to live on other planets one-day. placed a, a rocket satellite into orbit and landed on a drone ship in the atlantic ocean. it was 15 years in the making for elon musk, who has the eventual goal of colonizing mars. that is your business flash. guy: thank you very much, juliette. a story seems to suggest the
brexit guide seeks progress in terms of the exit negotiations before trade talks start. that means we are neither in a situation where it is parallel or sequential. is happeninghat here. i.e., there will probably be a start on the divorce and if the divorce is going well, we can start talking about trade, i.e. one does not necessarily have to follow on from the other sequentially. there is some fudge halfway in the middle. interesting to see where the bill fits into that process, i.e. if there is sufficient the --, i imagine number needs to be ironed out. interesting to get more finesse on the details surrounding this. its talk about another political story dominating the headlines. president zuma has filed -- fired his finance minister,
sending the rand down overnight. be replaced with a lawmaker with little financial experience. experience, but it is little. one of 20 overnight changes in the administration in the cabinet. both in senior roles and in terms of other roles. the senior adviser at credit suisse. the south african rand has benefited from the carrier. high-yield emerging currencies have strengthened over the last quarter. guy: this political volatility has translated -- volatility in the currency, does the carry work when you have this political environment surrounding it? bob: absolutely not. the market was surprised by this reaction. the market moves in the last few hours have been logical. investors are concerned about
the instability in south africa and downgrading in the south africans credit rating. that is justifiable. selling we have seen on the rand, the selling we have seen equityh africa exposed names is perfectly logical. where do we go from here? after this initial round of selling, positive the next couple of weeks. investors will try to judge if -- 20 cabinet ministers being removed or changed -- try to assess is that sustainable? we might end up with quite a major further change in south african government. that may have an eventual positive outcome. after the selling, investors try to stand back and analyze what is potentially an unstable situation. i don't think people will be buying on weakness.
i think they will just be standing back. he has toll see what say for himself over the next few days. that story over the next few days could be fascinating. i've got one minute. let me ask you about china before we go. a tweet overnight from the president of the united states suggesting the meeting next week with the chinese leadership is potentially a difficult one. how big of a meeting is that, because this would be the big fear. protectionism, the trade, the worry about a trade war. bob: there are some major stumbling blocks and china's trade surplus with america is in excess of 350 billion u.s. dollars per year. that is obviously a problem for the trump government. there are a whole raft of subsidiary problems. the situation with chinese expansion in the south china sea , which we were discussing the key question
guy: the south african currency takes a hit after president fires finance minister gordhan. release brexit guidelines shortly. how much detail will he give at a press conference. we are anticipating in the next half hour. we will bring you that life. down the dollar. the first quarter of the year was tough for the greenback. what is in store for q2. welcome. you are watching "bloomberg markets." i am guy johnson. miller is not here today. let's talk about what is going the exit.
a few weeks in what is in the guidelines that are being circulated to remaining members of the eu. suggestrting seems to nothing is agreed until everything is agreed in the brexit talks. the question surrounds what does that include. is that the divorce story or also the trade talks as well and the final signing on the line of the check? we will see what that number is between zero and 60 billion. the number that has caught my eye is the brexit guidelines and thelateral talks conferences upcoming. good morning. the understanding now is that the guidelines are going to ban bilateral talks. that is understandable at this stage. the europeans,at the 27 remaining countries can keep it together? can they speak with one voice?
>> on the bilateral issue, absolutely. paris, but all of the other countries don't want any labor. division of they don't want any kind of way in which london will try to do any kind of bilateral deals. it is not on the table and under certain aspects of eu law, it shouldn't be allowed. the eu speaks with one voice when it comes to trade. guy: history dictates there will be difficulty in maintaining that, that everybody doesn't already speak with one voice. there are differences between the council and the commission. there are differences between the individual european partners . i come back to this issue of, maybe one voice being the issue. are they going to speak with one voice? we may not get bilateral negotiation's, but what about the one voice? in the eu is voice always difficult to maintain.
the big issue out there, particularly for warsaw, but the polls want is that their rights will be protected from great coming and that means around to the idea of recognizing this. his is going to be a big issue. the other issue is the four freedoms. this is so important at for the moment they are united on this. so much depends on how theresa may is going to deal with the migration issue. this is to be closely watched on we are going to be firm the fact that the poles living in great britain will be protected. guy: more news out of this statement. a transitional brexit arrangement to be limited in time. will he get some sort of transitional period?
? it depends on what the british want. it also depends on the practical arrangements. what is happening at the moment -- this could change over the next months, is the kind of change in tone from prime minister may. not so much conciliatory, but she wasn't that kind of hockey, arrogant manner which was projecting over the past couple of weeks. thehas certainly realized eu is serious about having a ed divorce without a la carte, pick and choose, and now everybody wants to talk if the ball was in berlin's court, merkel would be setting the agenda. but berlin and paris have moved everything to brussels and the negotiations are being conducted in brussels with support from burning. at the moment we have the commission and the council, the
mexican negotiations all working together -- brexit negotiations working together. let's explore that further. there has been some suggestion that mr. garnier deals with the divorce and not issues surrounding trade. its talk about parallel and sequential and how this will work. reporting over the past few minutes suggest that the trade deal could be started earlier than the conclusion of the divorce bill if the divorce bill is proceeding and some key milestones have been met. can we delve into your views on how this will actually work, the sequencing of this whole thing? judy: the sequencing is only beginning to be known now and i saw the report and barney a has set out three stages over the next 18 months.
seems very short, but he wants to concentrate minds. there is not an appetite among -- all countries for a parallel trade deal. there might be a chance it talks are going well and if they reach a conclusion. bilateral trade right now, it might actually hinder the negotiations, leaving the idea of a trade deal or transitional period to the end would be more appropriate as i don't think there is a mood in brussels to give anything major away at the moment and in such an early stage of negotiations. thate latest reporting is brexit settlement of all u.k.'s liabilities. we have this number of 60 billion floating around. that may just be an opening gambit. but how early do we need to decide on this number? british point of view,
there seems to be decided that we are not signing anything, certainly not the check until everything has been decided and that includes the trade issue. you wonder who sets the agenda here. the british voted to leave the eu, i'm not a huge number. people voted to either -- leave the eu. the negotiations are not about pick and choose. it is a divorce settlement and divorces are costly and highly political but highly and it can be very nasty. at the moment, the 60 billion euros floated out there, britain will have to pay as a settlement fee, and it is quite early perhaps and important to narrow that figure down because remember, the eu budget is going to come -- it expires next year or the year after and there will be huge budget negotiations for the remaining 27 and britain will be part of these
negotiations and britain's contribution to the eu budget will be gone. the eu will be certainly pushing the sixth -- putting the 60 billion on the table in some form or the other. this is a settlement that has to be sorted out. guy: absolutely. the latest we have from bloomberg news reporting from the guidelines, and this points towards what you are saying firmly -- a free-trade agreement after.k. finalized brexit. they are definitely talking about this not happen in parallel. only some blurring of the lines at the end of that. nevertheless, this is a post-brexit arrangement. that circles back to the transition story as well. judy: absolutely. it reminds the a prime minister may's visit to washington. bilateral trade with united states and the united states is calling for it, but that is not how things are done as a member of the eu. you don't die by the -- do
bilateral trade deals. bilateral trade negotiations are off the agenda. for brussels to go down this path would undercut the rules of the commission, is responsible for trade. guy: judy dempsey, a pleasure. senior fellow at carnegie europe. customer, a bloomberg you can watch this show using the tv function. you can pick up on the radio stream as well. you can message the team function.sing the ib later today, i will speak to your bernd schneider -- johann schneider. him some questions and remember, we are awaiting a press conference from the eu council. donald tusk on the brexit guidelines. they are being circulated. a few leaks coming out as to what they may contain. how much detail will he reveal in that press conference.
that is clear on your screen. has changed. what you are seeing is a moved to the downside. the big loser is old mutual. also pressure on mining stocks as well. that could be what is happening with copper. you would have expected the chinese data, the pmi data on manufacturing to ameliorate some of that concern. the anglo is down, rio is trading down as well. ofically an essay affect stocks feeding through off of that. and what is happening with the mining story overnight. that is adding to the downside pressure right now. let's talk about what is happening with malta. obtained a copy of the guidelines of donald tusk. with in the u.k. and eu members will be banned in a free-trade agreement.
-- and a free-trade agreement will be finalized after brexit. tusk will give a press conference which is anticipated to start shortly. these things can be flexible on the timing. theseave we learned from guidelines? the main takeaways is what you just mentioned. there will be no finalization of a free-trade agreement with the ak. until after it becomes so-called third country. after the end of the brexit talks, after the two your period, after the u.k. is out of the eu. the other thing coming through is they are going to insist on a phased approach to the talks. hasidea that the u.k. insisted upon some parallel discussions going on is not what the eu is looking for here. remember, with the clock ticking, the eu has the leverage in this now. they hold the agenda power if you will. in the first phase, they want to talk about the u.k. bill, the
exit bill. they want to talk about the rights and obligations. to talk about guaranteeing the legal status of eu citizens. then they will see about moving on to the other issues very -- issues. guy: the u.k. has made a different view of all of this. you talk to everybody in brussels, you have a sense of what is going on. are we dealing with opening orotiating positions here are these sustainable positions that will last through this process? eu is all about negotiating and i think you certainly are opening negotiating positions. but it is very remarkable the way the eu 27 has maintained its unity over the last nine months over the -- all that has happened since the referendum in june. it looks pretty strong at this point and with the clock ticking, they have the opportunity here to remain
united. now these guidelines are going to go to the national government. they are going to start a month-long discussion of them before they eu leaders have a final decision on april 29. we could see some fishers coming in there. we could see more data. but it looks strong from the eu perspective at this point. guy: finally, talking about the bill. does the bill need to be signed early?agreed there is some sense that nothing is agreed until everything is agreed and i am wondering how those two things that together. i think the eu is insisting on both of those things. at least the outlines of the bel, the exit bill, need to agreed upon from the eu perspective before anything else can be discussed. they candiscuss it and come to an agreement, but i
don't eu is going to move on until the u.k. puts a figure on, agrees to a figure for how much it is going to cost in order for them to leave the eu. jones, thank you very much, indeed. jones hayden joining us out of brussels. the pressis works is conference will be provided for the vbs europe, by satellite. we don't have that yet. we don't even have the room shop. it could be a few minutes time. another flashes coming through. this from the financial sector in the united team to. -- united kingdom. he is indicating the bank's planned for the end of passporting. operate after brexit, but the bank is planning for the end of passporting. the financial sector front and center in all of this. fascinating to see how early we get to that particular issue.
let's turn our attention to what is happening next week. meet theump is set to chinese president at mar-a-lago on thursday. trump tweeted overnight the meeting will be "very difficult." in that we can no longer have trade deficit. sean spicer indicated the importance of the meeting portrayed. opportunity for president trump to develop a relationship in person with the president. he has spoken on the phone a few times, but we have big problems. everything from the south china sea to trade, to north korea, there are big issues of national and economic security that need to get addressed and i think there is a lot on the table when it comes to that over the two days they will talk. guy: sean spicer. daniel, trump -- downplaying the trump tweets. give us the setup from the chinese point of view.
daniel: the chinese basically downplayed it because they have been dealing with trump's uncertainty all along. his tweets and things that are very provocative in a chinese sense. over the past few months, have kind of got in use to hearing this out of trump. it is not a surprise to them. they see this as trump playing to his domestic audience and for xi jinping, the audience wants to see him as everything is in control, he is a global leader. china is a rising power and they don't want to discuss -- embarrassment. they are downplaying this and saying we will keep our strategic composure we have had for months now and everything will be fine. the donald trump-angela merkel meeting did indicate donald trump is prepared to have a bad meeting. the is going to be on agenda here? how do the chinese managing given the context? that will be a huge
question. there is a lot of uncertainty on the chinese side. they don't want this to go wrong. they like to stage manage everything. on top of the meeting, you have .eard -- sock trump's tweet trade and jobs will definitely be there. but if you look at the meeting in the run-up to how we got to this point where trump is actually meeting xi. work witha lot of jared kushner, ivanka trump going to the chinese embassy and the early talks have centered around how do we deal with north korea? there is a growing certain about nuclear-un, another test seems imminent and there is a real need to work on that security wise for both countries. north korea will definitely be there in addition to some of the economic topics. guy: but in terms of prioritization, how do you see it working? is security, north korea towards the top and? his trade towards the bottom end? interesting, sean spicer
talking about the way the trade story is set up from the u.s.'s point of view, his trick number one question mark is it number two for the chinese? i think the prospect of a trade war is there. they might have more to talk about with north korea. the chinese have always been waiting to hear exactly what trump wants on trade. they are waiting for the asked. what does he want. chinese say they are open for a deal. they are ready for retaliation if trump does anything that looks like a trade war. what trumpn't know wants yet so this meeting, they want to hear that. trump is putting out these executive orders on trade, so that is being flushed out a little bit and i think once that happens, then the chinese can respond. whereas north korea, a are more advanced in the discussions between the two countries. i don't necessarily think it is
a priority thing. , on the economic issues, they are waiting for trump to say, this is what we want from you and then they can respond. guy: great stuff. daniel, thank you bloombergs east asia government reporter. still to come. conferenceting the of donald tusk. we will hear about his brexit draft guidelines. this is bloomberg. ♪
♪ life in london. 20 of market action this morning. some of it affecting the ftse. old mutual affected as we discuss what happened in south africa. the firing of goldhan. the latest we have is we are going to have a press conference. we think that is going to be at local time 11:00 a.m. and he is going to brief. that is something to pay attention to later on. .e're going to get some details i will go to my screen because we are getting details coming through from germany. then he bring you the german unemployment number. then we can pop it in the screen for you and show you what is going on. that is a record low. 5.8%. the output gap probably firmly
closed in germany at this point. the inflation for -- story fascinating, we will see how that works its way through. interesting implications on what is happening towards the german election later on. ,ompared with the output elsewhere in europe and something draghi has to manage. he may have to tolerate higher inflation in germany to close out the gaps elsewhere. currencyu and single are going to progress. let's talk about what is happening in south africa. i want to bring you this volatility story because this is part and parcel of an important element of the carry trade which has driven the rand up. this press conference is going to be fascinating in, does this accelerate the departure of his boss or former boss jacob zuma. that is the question many in markets are asking this morning. we are still awaiting the press conference to come out with details of with the