tv Bloomberg Markets European Open Bloomberg May 17, 2017 2:30am-4:01am EDT
♪ guy: welcome to bloomberg markets. this is the european open. the first trade of the cash session coming up shortly. i am guy johnson in london. matt miller over in berlin. what are we watching? president trump is said to ask the fbi director to shut down a probe of michael flynn. as the market stating to pay attention? mailing out lloyd's. u.k. government has sold this last year mining shares. what challenges lie ahead for britain's biggest mortgage
lender question mark we speak to or gets?- we speak to the ceo. laptop banlab -- a affect airlines and passengers? we are less than a half-hour away from the european open. the start of cash trading. take a look at how futures are shaping up. i have got it on my terminal. the world equity index. i cleaned -- clicked onto the futures box. red column youst see on your left, my right. the dow, s&p, and nasdaq futures .re showing a weaker open in a few hours when they open, european futures showing a when we get going
and less than 30 minutes time. check out the bund trade. we are seeing yields, they were moving up earlier with investors selling debt, investors are buying it now and yields are coming down. the german ten-year yield at 0.41%. guy: prices going up. let's talk about what is going on in the gmm. the ftse closed a record yesterday. 75.22. the aussie marking -- market trading, the japanese yen bit this morning, the frank is bid and the krone is bed this morning. the dollar index not did this bid this morning. morning at 1243.
the risk story front and center. the market is beginning to pay on inion to what is going washington right now and that is an interesting middle trend. we will talk about that throughout the program. let's get it bloomberg first word update with juliette saly. juliette: the u.s. is considering an expansion of of of the ban on laptops. yesterday, the european union pressed u.s. to refrain from banning laptops and other electronics and cabins on flights to america saying look sides need to work together to curb the threat of terrorism. and the u.k., the liberal democrats will pledge to offer ends final vote on brexit. and unveiling the general manifesto later today. with nine seats in parliament, the party is appealing to the 48% of britons who voted to stay
in the eu. the european union is refusing to allow the upcoming brexit talks to take place in secret. despite u.k. appeals to keep positions confidential. with over a month to go before negotiations start, the block said he would make its negotiating documents public every step of the way. pair ofs has sold a pear-shaped diamond earrings that have a price of $51 million. the diamondsate, are getting across the range of 50 nine dollars to $70 million. it is a record for hearings sold at auction. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy and matt. guy: the white house on the defensive for a second day following a report that president donald trump get -- tried to get the fbi director james carmi -- comey to drop the
investigation into his former national security advisor which democrats call and obstruction of justice. it is true. the white house has denied the allegations. with comes after the revelation that president trump revealed classified data. -- classified data to the russians. where are the details? where are the reports coming from? latest report is that the former fbi director james comey wrote a memo that said that trump had asked him to quit the formergation into national security adviser michael flynn. the white house has denied that the account in the memo is true. so righted that and now, lawmakers are trying to sort through what actually happened between trump and
comey. matt: what are the possible consequences if this report proves to be true? >> one question that people are asking right now is if the allegations are true, does this amount tip section of justice? some legal experts that bloomberg spoke to said they are not sure based on what we know from the memo. if the allegations are true, if a prosecutor tried to try trump and -- for committing a crime, the prosecutor would have to prove that there was corrupt intent in james comey's firing. in terms of any consequences leading to impeachment, there would need to be significant republican support to get that process initiated. right now with a republican president in the white house and republicans controlling both
chambers of congress, you would need significant republican support to even begin that process. right now, it is democrats who have been questioning whether or not trump's words could lead to impeachment. guy: treasuries bit overnight in the session. market seems to be paying attention to all of this. will they carry on trading this one in the way that they have been looking at it? mark: they might be but not necessarily because this is a big game changer. markets have tended to ignore these political developments. the market was right for a correction. this is a catalyst to fit the narrative we want. this is a negative development coming on the back of the news last week with comey and provides another thing that undermines trump's credibility to get other legislation passed, the fiscal stimulus passed. you get assets like dollar-yen, they are ripe for a pullback, same with equities.
treasury yields have pulled back. all these assets can have a theection but be in longer-term positive trend. we do not need to read too much into it. withif this continues risk. matt: well this -- will this continue is a question or will these moves turnaround? mark: i think they will feed through. and dollar-yen, the and has sold and a can rally. the dollar is definitely still looking potable. we have seen those big long positions that were there star to get cleaned out. there is that shift in the general story. it was the trade of 17. shattered and people are realizing we may not get fiscal stimulus anytime soon. it is looking farther away by the day. even the global reflation trade may be alive and the u.s. reflation trade is a dead theory at the moment. it may be refined but it may be
months away. the dollar can weaken further and u.s. equities can pull back a bit. the broader picture is there is a lot of cash on the sidelines, global growth is good and the dip will be bought. where is the question, why percent lower, .5 of 1% or 5% lower question mark this is not a fundamental shift in trend or not likely to be so. jackiehank you to edwards in sydney and mark cudmore. you can follow life market insights in the -- live market insights in the mliv blog. mliv go is the function. the u.s. pursues an expanded laptop ban. we are joined by the director general of the international air transport association to assess what the ban means for the sector and for you, the
returned to full private ownership almost a decade after it was bailed out during the financial crisis. the treasury confirmed that it has sold the remainder of the original 20.3 billion pound investment in britain's biggest mortgage lender. we will be speaking to lloyd's ceo and 8:25 a.m. u.k. time. the flagship hedge fund suffered a billion dollars in uploads as investors continued to pull money. according to a bloomberg news calculation based on the letter to investors. the letters show assets managed by the fund which lost .7% drop to $8.7 billion at the end of april. sign dealso plans to with at least 10 u.s. companies when president trump visits the kingdom this weekend. according to two people familiar, they include how he burton. jay declined comment while
and schaumburg did not immediately return a male or messages seeking content. apple is announcing an update to in aaptop lineup conference wrap developers. according to people familiar with the matter, that anthony is planning three new laptops in a move that could these come position from microsoft as well as i -- to cleaning ipad sales. apple is declining to comment. that is your bloomberg business flash. matt: thanks three much. let's talk air travel and aviation. the u.s. is considering expanding a ban on laptops and airliner -- in airliner cabin to not only from europe and other regions. to a spokesmanng for the department of homeland security. the european union has pressed a u.s. to refrain from the band saying both sides need to work in tandem to curb the threat of terrorism. talks are ongoing. right now here to discuss this with us is the director general
and ceo of the international air transport association. thank you so much for joining us . director, let me first ask about this laptop ban. what is the intelligence behind this, how did the u.s. come to the idea this is necessary? guest: we are not sure that this ban is a -- is adapted to the threat. we're trying to protect our passengers and airline and cruise against. we do not know what are the basis of the intelligence that justifies this measure. so what we say to u.s. authorities and u.k. authorities and europeans and we have written a letter to the authorities, please, if you want to take the appropriate measure, worked very closely with the to take, to be able
into account the right measure and not to dismantle or disrupt business,he airline the passengers lives and additional costs. like theyn't look will act unilaterally right now question mark they -- right now question mark they are not sending the director to the meeting in brussels. bant: compared to the first that was put in place one month ago, they are discussing with the other governments and with the industry. first of all. it is not unilateral. it gave us the opportunity to sayess our concerns and to please, take the appropriate measure, explain the threat for theo be able to estimate right measure. we transport 10 million people every day. we transport 50 million tons of goods every year. buto not claim to be genius we claim to be the specialist of
transporting people and goods. we can provide, we think, the appropriate and right advice when it comes to security and protection measures for passengers and guy: trade. -- and trade. we have written to the european authorities, namely the eu commissioner and the ministry of transport of european countries to say that we were concerned about this u.s. ban on electronic devices. -- it couldcan't impose an additional cost of $1 billion in passengers. we say it will disrupt business between the u.s. and europe. we do not see that is a good measure.
urge european governments not to take any comparable measure for the flights coming to europe. we hope that we will be able to find the appropriate measure to face the threat. there is a technological system that works. that traces electronic -- it is, it can already in place in many airports. people, random controls on electronic devices, the same measures that have been in australia, for instance. there are measures that are efficient and not too disruptive. talked to tim clark at emirates, what would he tell you about the economic impact, you just laid out some numbers
but give me a sense of if this were to affect european carriers, they make a lot of money on the transatlantic routes. give me a sense of what it would mean for the european carriers and their bottom line. it is difficult to make a financial estimation. you are right to say that the traffic has been very good both for european carriers and u.s. carriers. may i remind you that usually, european and u.s. carriers have joint ventures over the atlantic. they share revenues and the profit. and the traffic has been very dynamic, the growth has been the fastest growth in the first month of twice 17. the atlantic is a big source of revenues and profits. both were u.s. and european carriers. the effect could be significant. init leads to a reduction business travel because people
do not want to travel without their device or they are afraid of a control of a check of the information, it could lead to a decrease in revenue. matt: what about brexit? what we talk about the possibility of a decrease in revenues, are you concerned that could be thrown away here or are you negotiating with people in brussels to hold on to certain agreements like a single european sky air-traffic control initiative question mark thet: what we say is that most likely outcome for the negotiation would be to maintain connectivity between the u.k. and europe as it is today. fantastically a -- fantastically boosted the traffic. we have created a lot of opportunities, business, leisure
, for european passengers, u.k. and europe. we say maintain connectivity, that should be the outcome but we are not part of it. guy: do you think the airline sector is consolidating and a way that it should be at the moment question mark some would argue that there are many carriers and this tends to be the more short fall aspect. they are being supported by low oil prices and that is not capacityg a long-term story that is legitimate for the amount of demand that there is out there. are you saying that and do you worry about that? guest: you are right to say that the economic environment is positive for the airline sector. you have a low price and strong demand. things are moving in the right direction from an economic standpoint. should the sector consolidate further, it has been the case in
the u.s., has been the case partially in europe around the three big carriers, and in asia, things are still as they are. the main obstacles to consolidation in europe it also in -- everywhere in the world is that preventsle foreign carriers to take generally more than 29% or 49% of international carriers and the rules apply in almost every country on this planet and it prevents consolidation from going further. from going out of -- the rules be changed, do they need to be? guest: they can be changed by government, it is government policy. if government thinks consolidation is good for the airlines and air transport, they could lift these.
, for we see air berlin example, struggling to some extent, lufthansa could get in there and buy it and there is talk about the possibility of lufthansa working with another airline to do that. do you think those kinds of cooperations could lead to consolidation? guest: two systems that have been lamented to go around this, first of all, joint ventures over the atlantic, and asia between asian and european carriers. ,ou have partial measures leasing part of the fleet, buying a part of the company .hat has also been implemented the when you're mentioning is one example. betweenin being split [inaudible] and the other airline.
there could be another solution. final question. some countries, canada is one that has just done this. i would need to double check that but i think i am right. some countries are considering banning bumping passengers or not considering that is a legitimate business tool. do you think they are wrong in that, should airlines be able to do this? guest: i am sure that overbooking is a tool that is the useful first to manage capacity for airlines and to lower the price of passengers. that is a key point that everybody ignores. because airlines are able to manage successfully overbooking, they are able to adjust capacity. to have the right price and the lowest possible price, of course it does not imply that such with onethat we saw
company is acceptable. it is not acceptable. it is not the direst consequences of overbooking. we say to government, please, do not over regulate based on a simple fact it is an acceptable. we recognize that. every day, we safely, securely, nicely, comfortably transport 10 million people so please, do not take a two quick measure that would be inefficient and counterproductive from the passenger point of view. matt: maybe tell them before they get on the plane rather than bumping them physically. have you, great to here. we appreciate your time this morning. c.exander de junia guy: we are a few minutes away from the start of trading in london. lloyds bank is finally back in private hands. it has been a long journey.
guy: welcome back. the cacte to go until opens for equities. we are going to see downside. by around point .5%.nt -- maybe a little bit of negative reaction coming through. cac down around .5%. .6%.own we are paying attention to lloyd's. i also am paying close attention to the dollar. yesterday, we showed a chart demonstrating the round-trip the dollar has taken since donald trump became president.
when he came into office, the dollar started to rise. it has lost value and it is now worth less than when he went into office. this chart shows net long positions investors hold in the dollar. you can see they have fallen to the lowest since are missed. it looks like confidence is fading. just opening up in europe. we will see what the market makers do this morning. 75 .15. the ftse 100 had a record close yesterday. we are backing off that now. 7515. the ftse 100 had a record close yesterday. we are backing off that now. let us show you what is going on , but it does seem as if maybe we are starting to see a little bit of attention with what is happening with washington. as mark cudmore pointed out earlier on, the markets are set up for a little bit of a rollover. let us find out the details in a little bit more detail. manus cranny. .3%.: london is down
european equity markets will be shaken to start the trade. there is a lovely chart at the moment showing traders are building up their positions relative to core positions to the end of the year. they are not altogether convinced about a macron policy victory. .4%.trials off by what is the distance between the call for subpoenas, the call for investigations, and delivery for that piece of paper and an investigation? it is a political gap closing between washington and markets in new york. when it comes to 10 year government bond yields, it will be at the bottom of your screen now. you are seeing money going into bonds, u.s. treasuries, and thish oat's, and bunds morning. they are going into those havens. with the u.s., you have outlook, 1.75%.
stoxx 600 down by .5%. the yield will continue to go lower. i think you might stop off on a bus trip around 2%. data in the united kingdom will be about the squeeze in our pockets. cpi came in at 2.7%. the number we are looking for is 2.4%. we are going for the classic on classic csic wages -- and the cpiwages rising. we are in for the classic crunch in the u.k. our brexit barometer also under pressure this morning, with a six-month low. we have the ceo and he says you have to have the right position and it is going to be a tough time in terms of getting through brexit. shanghai composite, just going for it close. you can ring the bell on that. you are seeing chinese authorities, the pboc, adding or injecting seven-day reverse we both -- reverse repos.
shanghai is going out in sympathy with a little bit of a shakedown that you have gotten the american equities. futures are lower. shanghai down by 0.25%. you are seeing that level of liquidity. the pboc do not want to unseat the chinese equity market more than already. join us there. go to the radio, to an end. -- and tune in. guy: we will take you to the mov screen. dividend this morning. novartis, hsbc, roche, buyer, nestle, siemens. on the upside, the markets will bounce back off an initial drop after a software record. lloyd's up this morning by .2% on the day that it returns to
full private ownership. matt. what let us talk about everyone is talking about in the u.s. right now, really globally. u.s. president donald trump asked fbi director james comey an investigation into former national security adviser michael flynn. that is according to a person who was given a copy of a memo comey wrote following his oval office conversation with the president. it introduces the possibility that the president may have obstructed justice, which is an impeachable offense. the white house has denied the version of the events that are described in comey's memo. the number of tweets containing "trump" "impeach" and has spiked overnight cure you can graph this using the bloomberg by typing nt . you can see what the graph looks like with the number of tweets jumping up over the last year. with us is the other lane -- is
neil dwane. we can see that bloomberg clients are starting to look. people using twitter are talking more and more about the possibility of impeachment. our markets paying attention -- are markets paying attention? neil: it is difficult to work out what we should be paying attention to. which partste sure of the press are telling me the truth. i mean, we seem to have an anti-trump version and a trump version. i am not clever enough to know where the truth lies in all of this. i think trump has been so polarizing that i do not think we have got any better sense in november. i am nervous that i think this does threaten the optimism around deregulation, tax reform, and various other changes, but i suppose we just have to sit and wait to see. it only goes to prove what a
swamp washington is. it is claiming cleaning out. matt: i think you hit the nail on the head in terms of what investors want to pay attention to. that is tax reform, if a structure investment, stimulus measures, fiscal stimulus. are the things going to take longer? is this a 2018 story rather than a 2017 story that the markets seemed to predict at the beginning of the year? almost -- it has almost certainly got to build. when you think about the structure, even if president trump could spend $1 trillion today, it would take americans six months to plan it, environmentally assessed, going to all the states. we would be looking to see anything built in 2018. i think the of the structure story has been well overplayed. i think in terms of the deregulation of the tax reform, that is clearly where a lot of americans have been very excited . you know, the secretary of
state, the treasury secretary mnuchin was very consistent that we would get something in the autumn, but yo even then, there was trouble with health care. i think there will be -- it will take longer. maybe the markets have already fully priced it. guy: do you think the u.s. economy is responding to this in any shape or form, and do you think the fed will respond to this? the interest-rate probabilities on my bloomberg this morning are telling me that the market has priced out a little bit of expectations surrounding the fed from the june meeting. the june meeting look like a done deal, but the market is extrapolating the on that and wondering if we get anything else this year. do you think it is relevant to what is happening in washington, to what is happening with the fed, to what is happening with the u.s. economy? are these separate bucket they need to think about? neil: on one level, yes. the only consideration the fed has is how much trumponomics we were going to get that they cannot see yet. clearly, i would argue that that foroming slightly less
2017, but what we have seen rather perversely this year is that financial conditions -- have easedonditions despite that they wanted it to tighten. that they are in the mindset to raise. so long as the markets are prepared for it, we will see rate rises. i think we will continue to see a two-way pull. to raise, continues it is the only central bank raising rates. that makes u.s. assets look more attractive. you will see global investors thinking that we can get a better yield in the u.s. and maybe the currency will strengthen. maybe there is one more run in the dollar to come. , other of trumpflation options are out. guy: it is amazingly have been so range-bound. we have the fed making it pretty clear that it has a bias to
tightening at the moment and it is looking to the data. the treasury market is still 2, 3, around at the levels. we are not moving significantly upward. it ain't happening. neil: to answer your first question, i believe the treasury market is telling you u.s. growth is not happening. it is coming and maybe between one or two bank or worse. when i look at q1, we have one of the warmest winters in history, and the u.s. managed to grow .7%. that is what happens without a snowstorm. it could have been significantly worse, and with no wage growth kicking in, 70% of the u.s. economy cannot grow much. guy: yeah. matt: you do still think that even if the u.s. market is taking a pause or maybe a reset here, long-term investors need to have some assets there? neil: yes, i mean, i would look
at it around the world. veryinvestors would see attractive returns if you were a japanese or european insurer from the kerry you get in u.s. assets and high yields. when i'm in the u.s., all i hear is this love affair of the u.s. equity market. it is mass -- it has massively outperformed. most of that comes from share buybacks and these huge tech goodnies with quite evaluations. the value is clearly not in the u.s. i think we are beginning to see that post the macron victory. the political risk is lessening in europe. i think you are seeing that in asia with the perfectionist risk -- protectionist risk of trump. guy: we are going to continue on the conversation. we will spend time talking about what is happening both with equities and the currency. ane other lane, -- neil dw
sticking around. the tories leading the polls. a conservative when will soft in the blow for markets. will be joining the program as well after the government confirmed it is under full private ownership nearly 10 years after being bailed out by the government. that is coming up. this is bloomberg. ♪
matt: welcome back to "bloomberg markets: european open." in our berliner bureau alongside guy johnson at our european headquarters in london. quick check on the markets. we can see red arrows across the board. this stoxx 600 down more than .5% right now. the cac down as well. nejra cehic in london for your mid-cap movers. nejra: i am starting with this oil company. butre seeing crude weaken, this oil company is gaining. it gained as much as 3% after an oil discovery at a well in kenya. this is up 1.9% right now. then also, i'm keeping an eye on the gold producers. as you can see across the markets, we have quite a bit of risk-off sentiment. gold rising for a fifth day.
they have a knee-jerk reaction on the back of that. we are seeing that with sentiment, as -- centamin. it is down 1.3%. i'm looking at you was off--- ubisoft entertainment. what the market seems to be focusing on is the cut to the 2018 to 2019 revenue target, and that seems to be why this stock is declining today, one of the worst performers on the stoxx 600. guy: we have an event taking place in strasburg right now. that is donald tusk, the head of the council in europe. junker, the, commission. the brexit commissioner speaking. if you want to watch this, you can do so on live under bloomberg. the other thing to mention is tusk is repeating the fact that the talks with brexit must be
based on a phased approach. we cannot run simultaneously. the trade deal talks with the exit talks. he is talking about an orderly withdrawal of the u.k. from the you. we will be hearing from all three and if you want to watch that, you can do so on your bloomberg, live . the jury is still out on whether a conservative win was often the brexit -- will soften the brexit blow. we are looking at how the candidates have voted in the past, and their views on brexit. index of u.k. stocks has climbed to fresh records four times in three weeks, given the initial knee-jerk slide. joining us now, bloomberg news reporter justina lee. also still with us, neil dwane. much uncertainty surrounding brexit. there is a lot of noise. the 350 is interesting because
the pound story is very much part and parcel of what we are seeing. how much of what we are seeing is based on kind of the politics, and how much is based on simple kind of arithmetic of what is going on with sterling? justina: in a way, the u.k. has been part of the broader europe equity rally, and that has really helped britain as well. at the same time, we have seen solid earnings across europe. we have had better-than-expected economic data out of the u.k. as well, and that certainly has helped the ftse 350. at the same time, we have a stronger pound ever since the snap election was announced. that tends to help the domestic stocks, which form a big part of the ftse 350, which includes the mid-caps. matt: are investors thinking about the election right now? how much does june 8 play into decisions that investors are making? they are thinking about the elections, but they are not worried about them,
which is the best part. we all know markets do not like uncertainty. we have actually looked at the data, and it shows that the ftse 350 tense again before -- tends to gain before elections. if anything, markets are happy for now that they are not going to have to worry about a hung parliament or that much political uncertainty going into the brexit talks. guy: neil, do you like the 350? neil: we feel like their outperformance post-brexit is over. i would agree that the political risk is less. when one listens to the labour manifesto yesterday evening, one does close one size and -- ones eyes and think it could have been given by another politician in the 1970's. sterling will do its job in terms of protecting the markets from political uncertainty, but the hard yards are ahead of the u.k. economy. the inflation data is showing we
are going to feel the pinch. brexit uncertainty in terms of investment for the rest of this year and maybe through 2018. we are nervous of the domestics here in the u.k. what are people saying about the market going forward? it is meant to be pricing going forward, not what is happening now. some of the political elements have been reduced in some of the concerns surrounding theresa may's ability to get the majority, but nevertheless, there are factors that need to be discounted one to two years ahead. if the bottom line, the 350 going to deliver the records we are sitting here? justina: if you think about it, what markets care about of course is the outcome of the brexit talks, and there is a lot of uncertainty over whether a actuallyy majority is good for that. i think the initial reaction was that, you know, perhaps a more stable government, theresa may
can get a better deal and sidelined some of the hard brexit members of her party. there are a lot of moving parts . we have seen from the headlines coming out of the talks, we have seen from the latest draft of the negotiation directive that, you know, both sides are tone.theg their deal is seen as quite far off from this point that perhaps markets are not too concerned right now. guy: we will leave it there. thank you very much indeed. bloomberg justina lee on the stories surrounding the 350. neil dwane will stick around. up next, time to sell. the upward trend of equity markets. they get more picky about stocks with value to add. this is bloomberg. ♪
guy: 23 minutes past the hour. welcome back. you are watching the open. let us get a business flash with juliette saly. juliette: thank you. lloyds has returned to full private ownership almost a of theafter it was out depths of the financial crisis. it has solved the remainder of its investment in britain's biggest mortgage lender. we will be speaking with lloyd ceo very shortly. suffered about one
billion dollars in outflows in april as investors continue to pour money according to a bloomberg news calculation based on the funds letters to investors. it shows assets managed by brevan howard master fund dropped to $8.7 billion at the end of april. apple plans to announce an update to its laptop lineup at earlyual conference tha next month. the company is planning three new laptops in a move that could help offset new competition for decliningas well as iphone sales. apple the climbed to comment. that is your bloomberg business flash. matt: all right, juliette, thank you very much for that. let us get into how to position for global equities as markets continue to hit new highs. our guest is not buying the current upward trend, but turning to a beta quinn stocks in europe. self-help stocks he sees emerging as global swans.
back with us is neil dwane, global strategist at allianz early investors. what do you think are the best bets for european investors? neil: the reason i call them the ugly buildings is i think europe is way behind the u.s. in terms of industry restructuring. we saw the sector through others trying to consolidate. i think more of that at some point will be promoted. i think, whether it is in the shipping industry, or a knock in the technology industry, these have consolidated and they are not really archetype -- market-reliant. they can grow their synergies and market shares and emerge with strong competition. that strong self-help means you are less volatile in terms of where the economies and politics in the markets are going. guy: what are the yield on the top of growth? but: maybe slightly higher, when i quite like about it is the value creation probably means a loss of about 30% to 50% upside.
manus: this is sort of -- guy: this is sort of a share story through the markets just seem to be obsessed with yields. there is actually significant upside in terms of the share price performance? neil: i do. we feel that two or three years down the line, they are bigger, better businesses, but they go through the grind of the m&a and synergies, which means they have nothing to do with the economy. i still like the income story. i just think you have to go to the energy sector in the u.k. or europe for the income. from the equity market. matt: you have got a couple. royal dutch shell, bp, you like those so-called self-help energy stocks yielding more than 7%. it has been a pleasure having you on the program this morning. thank you so much for your time. neil dwane, global strategist at allianz global investors. he will be joining i and myself on london myself live dab digital radio later on. a little secret tip, if you do
delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. matt: let it go. president trump is said to have asked the former fbi director to shut down a probe into former national security adviser michael flynn. is the market starting to pay attention to washington? and bailing out the weights, the u.k. government -- bailing out lloyds. the u.k. government -- we will speak to the ceo, antonio horta-osorio. what is the threat as the u.s. considers expanding a laptop ban to europe? chief calls for talks on the
nature of the risk. good morning and welcome to "bloomberg markets: european open" i am matt miller alongside guy johnson at bloomberg european 500 is in london. let us take a look first off that what the equity indexes are doing across europe. we see a green arrow in london, although it is very slight. a ftse unchanged, 7523. the dax is gaining a little bit more than .3% in frankfurt at 12,757. and the cac, the biggest loser of the three major indexes, down about .5% right now at 5379, so markets are unchanged to down in europe this morning. guy. guy: let us take you back to strasburg and go to donald tusk, the council president. he is speaking. that is not him. i would like to point that out. he has been speaking over the last few minutes over the details surrounding how he sees brexit proceeding. in very much, the line seems to
be that this is a process and we are not going to see the synchronized conversation between the u.k. anti-e.u. surrounding what is -- the u.k. and e.u. that process will be phased. there are disagreements between london and europe about whether or not the negotiations should be held behind closed doors or in the open. i guess that is important from a negotiating point of view. anyway, we will come back to that and talk about it a little bit later, in a little bit more detail. first of all, let us talk about what is happening in the precious metals markets, imported for those who mine things like gold. gold has been higher for five straight days. this comes among current concern about president trump administration. that has an impact on the asset side for risks. you can see that in a straight line fashion. nazimok.s now is maxim
good morning. nice to see you. gold is volatile. it?tricky is that making maxim:for us as a company , we are used to the volatility. we have been in the market since 2011. the gold price collapse by something like 30% since then and yet we were able to deliver positive returns, simply having lower costs than many of our peers. guy: you have been saying that you are cash positive, north of 1000. is that what you think the center of gravity is for the gold market in terms of kind of where the market is? maxim: you still can think about kind of the bottom got the price ofld get to, and the cost the marginal producer. there is still quite a few of them who would produce at a cost about 1000. but you would not see any meaningful declines in mining
production before the gold hits at 900, which is the average sustaining cash cost for the industry at the moment. guy: let us talk about everybody else in the moment. the rest of the sector, you have een a consolidator, an acquirer. with where the volatility is at the moment, the set up at the moment, do you see options for continuing that process? how do you grow that business? is it by looking for opportunities on the stock market or by looking at opportunities on the ground? maxim: it is mostly in the ground, either in the hands of the private owners or grassroots exploration that we do ourselves a lot. the business is very opportunistic by nature. it is very much centered about individual assets. you have to like the asset. it has to be attractive both financially and geologically, and then you pursue it. it might be available, it might
not be available, so be it. we have never prioritized growth or the quality of the assets. the plans were good for acquisitions since the gold price collapsed. we see the opportunity. if there was no valued opportunities, we would stay where we are. matt: russia has been the biggest gold miner, the third biggest gold miner globally for a couple of years now. do you expect output to continue to rise there, or have you reached full capacity? maxim: the phase of that would be very slow. in our case, most of our production growth going forward comes outside russia, or in kazakhstan. growing gold is production. you have to understand that listed entities, russia's gold-mining sector is very fragmented, so the largest producers give you only like 60%
in russia.l mines it is the marginal producer that will basically drive, the output increases and that has to be very slow, because their access to capital is much more constrained compared to the big players. priced in obviously dollars, what do you expect for the dollar going forward as far as its global level? and what do you expect for dollar ruble? maxim: i would not probably be in a position to predict the dollar ruble level here. we have been talking here about the exposure of the dollar to more political events rather than economic events in many cases the dollar-ruble, i would think of this as more like a ruble-oil correlation rather than ruble-dollar. we had to see how this looks in
the longer term. it looked like it has found it kind of stability level for the moment. and ruble has been consistently stable over the past six months. even more stable than we would like it to be. lated fromwhat decorre oil. i would love to see their correlation returning back. it makes things much more predictable. guy: you talk about the risk. but this is the straight up dollar-ruble chart, and the ruble has been gaining quite significantly. how much pressure does that put on you to look more aggressively at the cost picture? clearly, you gain an advantage when the ruble is weak thomas are you guys are thinking more and more about how you take costs out of the business, drive efficiency into the business? maxim: i cannot think it should be triggered by the market performance. the parts for efficiency has always been there. we tend to think that these are
efficient enough, which is our cost both by levels and our reserves. in the meantime, we do have quite a bit of sensitivity to the current ruble-dollar movement. as a result, our cash movement is slightly higher this year than compared to last year. this is not significant for the business as a whole. it is 5% change, and we still will be generating very meaningful free cash flow in currency exchange rates this year. guy: nice to see you this morning. thank you for coming to see us this morning. nazimok, cio. watch the show with the tv option. this is fully interactive television, as close as you're going to get. not only do you get the video screen, which is great, but you get all the future functions. we are using tv now, but you get the data check.
you can draw in the gop, so that is the session chart. we are up on commodities. you have bios on the guests we are talking to, breaking news, and all the tusk stuff we were talking about a few minutes ago. you can see the charts as well. let me go back and show you some of the charts we have been using as well. there is one we have been using earlier on. it is all there. if you want to put up some of those into your presentation, it is a fantastic way of accessing what we are trying to do here, and really pulling in the full wealth that you can access on the bloomberg. you can also use the i.b. function. ask the guests a question. we will be talking about lloyd's returning to full private ownership. the group's cio, antonio horta-osorio, will be joining us. this is bloomberg. ♪
guy: 8:42 in london. big day for british banking. lloyds banking group, britain's largest mortgage lender, has returned to full private ownership almost one decade after it was bailed out by the u.k. government to the tune of 20.3 billion pounds. the treasury sold the last remaining shares yesterday. stocks higher this morning. box for then the man sitting next to me. here with me is lloyd's ceo, antonio horta-osorio. good morning.
congratulations is in order. you have done so much work out lloyd's to get to this position, but you always talk about the you in i have seen interview talk about the fact that there is more to do to qu ote from you. are there more great things to come? if you are a pragmatic shareholder and you think things are getting better, hold on for a little bit more? antonio: there is a more to do, but a personally do not think governments should be shareholders of banks. there wa -- this was very large and it was required. at the height of the financial crisis, taxpayers' money was used because it was a major crisis. taxpayers money should not be used to bail out banks, and it has many better uses to it. i think the government did well in selling their shares. soy use a good plan and progressively, they dies diversified themselves -- they never survive themselves.
around 900 million pounds more than what was put in the bank. they did the right thing. guy: it must be a day of great pride for you personally. was so much to do at that point, and you cut costs, delivered growth, have taken the bank on the front foot from the back foot. from your point of view personally, it is the job done? antonio: there is always more to do and we have lots of plans for the future, but your question, i would like to put it into perspective. when i arrived to the bank six years ago, the bank had to in a billion pounds of toxic asset from the acquisition. it had 200 billion pounds of net thesehat was funding toxic assets. dangerous, just before the
euro zone crisis. today, six years on, the bank has zero net debt, which sold all the toxic assets. we have a ratio of more than 40%. in thethe safest bank u.k. with the highest capital level, and one of the safest banks in the world. it is a big journey. our purpose now is to get completely with the right financial structure and to help the country prosper. our purpose is helping britain prosper. we are the largest bank in the anded kingdom in retail commercial banking. therefore, what is good for the lloyd's.s good for it is a very easy strategy in that sense. what is good for the country is good for the bank. that is why me and my team's relentlessly pursue what is good for the economy. continue tosly will do this. guy: we? that includes you? antonio: this is all teamwork. guy: we are going to stick
around. this could be job done for you. you have taken the bank back. antonio: this was one of the big maelstroms we- had. big mouth from -- maelstrom. we have to close the transaction. continue we have to digitizing the bank. we were the first of the global banks to implement the digital division at the top of the bank. we had a member of the group executive committee, which functionalized the bank, and digitalized all the customer experiences. we have to digitize the bank internally, where there are significant synergies. we have to start preparing our third strategic plan for the
period 2018 to 2020, which we will start preparing in july and present to the markets at the beginning of next year. guy: you are absolutely committed to this institution? it is in no way in your file process at the moment that you are going to think about doing something else? antonio: i have very happy a lloyd's. we have lots to do. guy: cost income ratio, you have done a tremendous amount of cost. 47% at the moment. where would you like a number to be -- that number to be? antonio: i think cost to income is a key number. these are very competitive markets. we have digitization, so the more efficient we are, the better we serve our customers, and at the same time, the less incentive there is for players to come into the sector. this is a major thing banks should do. it is true, six years ago, lloyd's was number three out of the five u.k. listed banks in terms of cost to income ratio.
now, we have 47% cost to income ratio, the best in the market, and we use that different everyday relentlessly to have the required return for shareholders, which also enabled us to give taxpayers money back and some more. guy: congratulations. thank you very much indeed. we look to what happens next with a great deal of interest. thank you for coming to us this morning, antonio horta-osorio. big day. massive day. let us get the bloomberg first word news update. here is juliette saly. juliette: u.s. president donald trump asked fbi director james comey to drop an investigation into former national security adviser michael flynn. that is according to a person who was given a copy of a memo that.ng
it introduces the possibility that the president may have obstructed justice, an impeachable offense. the white house is considering an expansion of a ban on laptops in airliner cabins. identifyan declined to the other areas. did, the european union pressed the u.s. to refrain from banning laptops and other electronics in cabins of flights to america from the region, saying both sides needed to work together to curb the threat of terrorism. in the u.k., the liberal democrats offer a final vote on brexit. they unveiled the manifesto later today. seats in nine parliament, the party is looking to resurrected political fortune by appealing to the 48% of britons who voted to stay in the e.u.. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more
guy: 52 minutes past the hour. welcome back. you are watching the open. that is get some of the top stock stories with nejra cehic. nejra: we are seeing risk-off across the markets on u.s. political risk. we are seeing commodity producers, the only industry group gaining on the stoxx 600. this is the best performer among them, up 2.3% pure gold producer on pretty well also because we are singled rising for a fifth a on the safe haven day. this company at the highest in almost one month. on the downside, i'm looking at abn amro. first quarter profit rose 30% on increased lending and cut rates for deposit. what the market seems to be moving on is the lighter ct one ratio and no new dividend message. that seems to be throwing the two .5%,ce down dropping the most since november. bloomberg tv spoke to you abn amro's ceo, and he told bloomberg about the dutch government deciding when it will
cut its state. >> that is a decision of the government, not ours, and they still have to sell down 70%. they sold 30, but it is completely up to them, not up to us, when they take a decision on that. nejra: on the downside, looking at british land, a full beat. it is cautious on brexit and the uncertainty ahead. we also spoke to the ceo and he said the average real estate will struggle. british land down 2.2%. that.thanks very much for now, let us get back to our top story. president trump asked fbi director james comey to drop an investigation into the former national security adviser michael flynn. at least, that is according to a person who was given a copy of that memo that comey wrote to bloomberg following his oval office conversation with trump.
the number of tweets containing the word "impeach" and "trump" together has spiked overnight. you can graph these kind of things using the nt function on the bloomberg. just type nt . our markets finally starting to pay attention to this? obviously, the twitter sphere is a place that has long been active for people thinking about the possibility of a trump impeachment. our markets looking at it -- are markets looking at it? >> they are starting to. we have seen the dollar declined steadily against the euro and the peers. a reasonable drop in u.s. futures overnight, at a drop of 0.5% at the open. that is fairly unusual to see that kind of decline overnight. now, whether you can say the market is starting to price in
an impeachment of donald trump, that is going a bit too far. they are looking at the legislative agenda, about which they were so optimistic for so long after he won the election, and they are starting to wonder whether that will come about now. guy: this is different, right? this starts to go back to something -- it is more serious in terms of legal? john: obstruction of justice. that is what it boils down to. a long time, the democrats have fantasized about, you know, speculated about the parallels to richard nixon and donald trump, but of section of justice was a substantial element of watergate, and something that you can sort of get your hands on. it is tangible evidence of wrongdoing. now, this is all just based on what james comey said happened. we do not yet know -- we have not yet heard from president trump, what his side of the story is. certainly, if you look at him you know, trump -- the tweets he
francine: the white house addresses some president trump asked a former fbi director to shut down the probe into michael flynn. politics takes center stage. tighten theins squeeze on the british consumer. u.k. jobs data. an lower for longer. the inflation figures, remaining see it below the target for a while yet. good morning. this is "bloomberg ll