tv Bloomberg Daybreak Europe Bloomberg May 25, 2017 1:00am-2:31am EDT
anna: fed minutes signal of june hike. what happens next? >> oil ministers are set to extend opec led cuts for another nine months. and made to call for data partners to step up the fight against terrorism but transatlantic tensions rise over u.s. leaks about the manchester attack. anna: a warm welcome to "bloomberg daybreak: europe."
i'm anna edwards. matt: and i'm matt miller here in berlin. risk let's put up the radar and show everybody where we are on the overnight session, the asian trading day higher on equities. the msci asia-pacific of 5.8%. of by .8% for the price of a barrel of crude. were indiana and will get more from manus shortly on the program indiana. the russians talking about the option for a further extension. so these facts very much in focus and is the move in the dollar, a little weaker on those sentiments. concerns about inflation lead to questions about what happens thereafter. matt: that was interesting to me, we saw treasuries yesterday actually get on up, which at that was fascinating, after the
notes came, the minutes came out , we saw note get off. right now are looking at 2.25% as the yields on the teen your climb back up a little bit today. fallen by 1.3% yesterday. maybe stabilizing today. then you see the renminbi right now down a little, but it had gone up yesterday as well. for is how many you can buy a dollar, more than you could buy a couple of days ago. after the chinese news came out from moody's, we saw the renminbi weaken for couple of days in a row. so that is starting to stabilize now as well. are going to look at all these assets this morning as stocks, we are still a few hours from the opening up but look for more moves in the debt markets.
we're going to get to all of those for you today but first i want to get the first word news and will go to juliette saly. u.k. police calling it underminingtrust their investigation. in yours time -- new york times published photos from the scene that british police were yet to release. seven arrests have been made so far in the u.k. in connection with the attack. meanwhile, promised or theresa may will lead a group of seven gathering in sicily a day early to return to britain as the country races to prevent further terror attacks from the network behind this manchester suicide bombing. she travels to brussels day for a nato summit urging the alliance to fully join in the fight against islamic state. u.s. buys collected information
revealing senior russian intelligence and political officials were discussing how to exert influence over donald trump through his advisers according to those familiar with the intelligence. this have a conversation focused on paul manafort at the time and forced toynn who was stand down as national security adviser. the minutes of the latest that meeting indicator rate hike is still in the cards for next month. toging it's inappropriate tighten monetary policy again. they backed the plan that will gradually shrink the central banks $4.5 trillion balance sheet. the dallas fed president has reiterated that he expects three rate hikes this year. >> the base case for this year increases three rate including what we did in march as a good-faith case for this year.
evolves more slowly, it could be less, if it evolves more strongly, it could be more. mario draghi leading a push to stamp out any speculation that the european central bank might raise interest rates before it ins quantitative easing. he reaffirmed the logic of the current secrecy, saying the unwarranted side effects of negative rates or less -- likely be less of a problem. >> our currenthe reaffirmed thee current assessment of the side effects suggest therefore that there is no reason to deviate from the indications we've been consistently providing in the introductory statement to our press conferences. >> global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. find more stories on the bloomberg at top . seen it a fewve
players ahead of the opec meeting, the nikkei up by point or percent. we're seeing the hang seng index near two-year high. the korean market at a record high look at the tie x, if it holds at this level it will be a 17 year high for the time one index. koran leading interest rates today. a lot of gains in the region are not only from energy players but tech players as well. softbank up quite sharply in tokyo. unit for $600e million in announcing a share buyback. lupin in india falling the most in almost three years saying revenue may spend declines over the coming year. looking at the gains were seeing regionally, this chart shows you
the hang seng index. white line shows you the hang seng index holding at those levels we haven't seen since july 2016. of $.10 pushing the hang seng higher. the blue line is the hang seng financial index and is closely correlated to the overall hang seng. a lot of these games have been driven by financial companies. worth noting this is a stark contrast to what you're seeing on the mainland. 40% from twodown years ago. president trump's demands to step up the fight against terrorism is expected to get a sympathetic hearing from nato when he visits the headquarters for the first time today. the deadly bombing in manchester on monday night is given rush resonant to calls for the organization to become more engaged in the global fight against terror. france and germany have long resisted an upgrade of nato's
role in the -- in the international coalition against islamic state. according to two officials familiar with the preparations, they accepted the move on the eve of the summit. kevin has been following the president and joins us now in brussels. a very good morning to you. this is a president trump who's gone from questioning the point of nato to now calling on it to do more. kevin: president trump arrive here in brussels ahead of the nato summit as part of the first international trip. just like he tried to reset the rhetoric of the muslim, jews, and christian world, were noticing that here as well. the president has advocated that nato pay their their share, but he is also advocated that the increase their presence in combating terrorism. rex tillerson echoed some of the talk following their arrival
here in brussels. listen to what secretary tillerson had to say. it looks like grabbing trouble with that, but i content you that rex tillerson did echo the comments regarding president trump, saying they need to be part of any coalition to fight terrorism. matt: kevin, what we know about the amount of spending that european countries are doing? it seems to have dwindled over the last couple of decades as a percentage of gdp. how is that argument, because i know the u.s. want your pink countries to spend more. how is that argument playing out? kevin: it's something president trump has had repeatedly that he would like to see increased. i can tell you the reaction and response that president trump received in the middle east from was muchbia to israel
more warm than the response and reception he's getting here in europe. clearly the president as he embarks on the nato summit and then italy to the g7 summit, anna: kevin join us there on the road with the president now in brussels. with security in mind, i want to bring you up-to-date with something we're hearing from manchester police in connection with explosion on monday night. manchester police say a further man was arrested there is new information coming to us at bloomberg. there was a series of arrest in the u.k. in connection with monday's explosion. coming yesterday and we saw those moves in libya as well. more on the nato summit and u.s. foreign-policy. by a senior analyst.
what do you make of the spending debate here? i've heard from german ministers that there just isn't enough to spend on if they wanted to spend more, they couldn't because the u.s. -- as the u.s. swallow that argument? >> i think they will seek to prod their nato allies into spending more, but you are right, angela merkel has increased defense spending a percent year on year. the trend over six or seven itrs on just germany is our quite significant. other parts of the nato alliance including portugal, italy and fiscalon't have the maneuverability to even come close to the 2% target. i think the pushback from a lot of nato ally members will just be saying in 2014 at another major nato summit, we agreed to being thed 2%, toward operative word there. that similar dynamic will play itself out but the u.s. is a
major underwriter of the alliance and president trump has always stated that burden sharing was a major part of what he wanted to see coming out of europe. tension is that twin there and it will be interesting to see what comes out of the summit. chart that puts into context some of what we've the been discussing, percentage of gdp that varies countries pay into nato. how do you interpret president trump's commitment to nato? is he just about people paying their fair share and with that in mind, other still questions underlining his level of commitment to nato? >> reports are suggesting that the americans will reiterate their support for article five being an attack on one member is an attack on all.
they're coming out and saying they will not attach provisions to that, a sign that they are reiterating their support for the alliance. a lot of this nine-day trip has been reassuring allies around the world about the u.s. commitment to global issues, nato being the major security arm for the region. so it is certainly going to be a debate that donald trump will continue to front, but again, the europeans are quite certain they won't be out to meet a lot of that. matt: is he going to be a to form a strong alliance for his kind of upgraded attack on isis? i know that's one of the key teams for donald trump on this trip. >> one of the key goals is to get nato to formally ally with the coalition fighting in mosul and of syria.
a lot of individual members are already allied within nato already. a take away that the trump administration would like to see of it. on another issue as well of concern to the trump administration is the afghanistan war. there was quite a bit of debate within the white house over committing 3000 or 5000 more troops to the mission and i think trump has come out and wanted to see where nato members are on that commitment. of course the u.s. provides three quarters of the troops that are currently in that mission, so that is another area allied to combating international terrorism. his call fors of more commitment from nato on i.s., we've heard that promised her mays is going to make a similar call for a commitment to more formally join in the fight
against i.s. in syria and iraq. so they thing to be on the same page there. how much will that relationship beat tested by the leaks we are seeing coming from the u.s. administration, it seems? how much is that careless or deliberate? the leaks that were made public coming out of the meeting ambassador andn the russian foreign minister were also exacerbating tensions with european capitals around intelligence sharing between the united states ambassador and the russian foreign minister and its allies, so i think clearly it will be an issue of concern, but given the events of the past week being so the more of importance, alliance between the u.k. in the u.s. in terms of intelligence sharing is so robust that clearly they'll be looking to overcome that. statements coming out of both parties are unlikely to raise that as an issue, at least officially. matt: on the one hand we see what looks like, trump says one
thing in the u.s. on the campaign and says a completely opposite thing when he zero his visit, especially with regard to muslims and islam. on the other hand, if things like he is forming a pretty solid foreign policy that is on theni gulf states and containment of iran. how you put those two things together? >> a lot of what we've seen out of the trump administration is that he will make a statement in one direction and a statement in the other. in some areas, as been very welcome. on issues of u.s. engagement with the sunni gulf arab states, the $100 billion weapon sales and $350 billion weapon sales over 10 years is seen as quite a robust demonstration of support. the decisive action to enforce the red line on chemical weapons , the fact that the administration is exceeding to
the iran nuclear force, although things have been welcome. on the other hand, there's a great deal of >> ability that still leads to uncertainty. conflict,w years of whether the korean peninsula or issues related to combating russia in europe, there still questions to what the real commitment is from the trump administration. talking about the stumbles on the domestic agenda, there's always somebody at those meetings is not there who dominate certainly's gets into the conversation. thender if this time conversation takes place under the shadow of vladimir putin. how much is trump's relationship with russia going to be a topic of conversation among those gathered for the nato summit? it is dominating news coverage in the united states. clearly his chief of staff and left the foreign
trip to come back to the united states. they had said it was a planned return, but is certainly speaks to the fact that the white house is still very much enmeshed in on theoud of scandal administration. so clearly it pervades the foreign policy arena as well. foreign policy apparatus in the united states, a lot of those positions have yet to be filled. a lot of the reason is because of these same issues at the white house is had to deal with. so it's difficult to separate the probes into the trunk campaign officials in russia with its posture on the foreign stage. anna: especially with european nations concerns about whether trump's support for russia would involve the russians. thank you very much for your time this morning, it's very
early in the morning where you are. joining us there from new york. we will continue the atversation about securities 10:00 a.m. u.k. time. opec optimism., oil heads higher in anticipation of a deal on sanctions. can the cartel overcome the u.s. shale threat or even its own members cheating? we crossed to begin a to find out next. this is bloomberg. ♪
indiana. manus: a very good morning to you. opec is a little bit like the u.s. congress, he's been flubbing his line for a while. it has an anti-critical impetus to stir action. but they start sufficiently to galvanize the oil market? to slightly extend what they darted decided. the last time they had any impetus to do anything was the november meeting. this one, they just want to show the market were willing to do a little bit more, but so far it doesn't look like will see any additional volume from the market. the uae is prepared to do what it takes. it doesn't strike me, 1.8 really barrels, as doing whatever it takes.
>> i think the are recognizing that they don't want to stir up this market too much and make a big jump right now where that the shellup stirring even more work comes back even faster than it already has. it's a delicate balancing act where they want to be up to balance the market, but not just in one day. they want to make it a process that is sustainable. manus: give me the numbers in terms of, everybody talks about shares. -- talks about shale. differentiate what it is. take me behind the word shale. >> everybody talks about u.s. shale but the thing that most matters for shale is the permian. that's where all the growth has been for the last several months. the other is the productivity gains we've seen out of there. you brought on by the full the all crash and bring one on today, that's equivalent of 2.14.
thus a sort of productivity gains we've seen. permian, it's over three weeks. just massive amounts. realize when they go up, it means a whole lot more than it used to, just two years ago. , its: 1.8 million barrels -- what does it do? >> it brings it up a little bit, but everybody in the market has this baked in. longer-term and what will look for over the next couple of months it what does shale into doing? is not just an opec market anymore. while it might look great today, and a couple of weeks when we get some additional data out of shale and demand, you might see it drift back down. manus: it took old bit of time to get up the curve. still exporting, that
the problem opec has. >> that's a huge problem. the wage structure, the decision is always about production. that means they can export as much as they want. you have a huge boom in exports and the divergence between exports and production is still there. while it's starting to close, you can still export like crazy and from the market standpoint, that's what we care about, the barrels that are out there on the market. jamie webster there. it's going to be a long day. we will have facebook live for anyone who gets a little bored later on. thank you very much, manus. you could get some traditional vietnamese clothing over there while you're on the trip. plenty more opec covers
matt: good morning, it's 7:30 here in berlin, 2:30 in the afternoon in tokyo. you're looking at the palace, a lovely shot there. let's check in on the markets and see how they are doing. we are seeing risk back in asian equity markets. snapping a two-day slide, particularly in hong kong. those shares hitting the highest in almost two years and the cost be in south korea hitting a fresh record. were also seeing the korean won as the best-performing major currency against the dollar.
if you look at the bloomberg dollar index, at its lowest since november after the fed minutes and the euro has been the biggest g10 beneficiary from the dollar weakness in the session. even with the june hike near, investors seem perhaps less hawkish, the attention turning june. rate hike beyond some showing concern that slowing inflation. solid reaction in the treasury market, the 10-year gilts robbing yield dropping three basis points in yesterday's session but holding steady at 2.25% today. it looked like where many get that runoff later this year, but given the reaction in the market, investors perhaps seeing it being very gradual. you can see it in the curve flattening. not seeing that rise in long-term deals that you might expect had of been many concerns about an aggressive balance
sheet runoff. and we have to talk about oil, resuming its -- resuming its gain. you if youed to show positions, long wti they've backed off, bringing the positioning back down to the long-term average. a lot to digest this morning called -- this morning. a new edition of daybreak is available on the bloomberg. let's look at some of the stories that have made it into today's edition. the cover story is the fed calling for a rate hike in june. a officials that listing rates again within be appropriate with the cap yacht it would be proven to confirm the economic slowdown is temporary according to the
may meeting minutes. lots of detail in their, but concerns about inflation and where we go next on. we will talk more about that in just a moment. matt: we saw treasuries reacting to those concerns. the next story is british police condemning u.s. officials leaking of intelligence related to the manchester bombing, saying it may undermine the investigation. that is as the suspects father and younger brother were arrested in tripoli. focus on oil, climbing to a one-month high ahead of that key meeting in vienna from crude producing countries. it seems they are leaning toward a nine-month extension. that's what the russians are talking about. tot: and can they stick those cuts, it's also good question. let's talk more about the fed
and last night's minutes. they suggested officials are inclined to raise interest rates in june. mike mckee has more from new york. >> the markets are repricing after showing progress on a plan to gradually reduce the size of the fence balance sheet. at the may meeting, nearly all officials express or for a staff develop plan to taper reinvestment of maturing securities. the amount allowed to run off would be cap and the cats would increase every three months. they would eventually be held in size of thethe balance sheet was normalized. policy makers agree they should provide additional details of the plan soon and nearly all said it would be appropriate to start the process late this year, provided there expected plan for rate hike stays on track, and it should. suggesting it june rate hike remains in the cards. was policymakers agree to within be appropriate to tighten
monetary policy again even know the time of their may meeting, growth, jobs, and inflation data had been disappointing. fed officials will update their economic projections and chair janet yellen will hold a press conference to explain the decision. michael mckee, bloomberg, new york. anna: joining us in london is a senior investment manager at aberdeen asset management. let's digest what we heard from the fed yesterday. the first line of one of our stories, the u.s. job market is hot, inflation is not. that's clearly where the confusion lies. about this chart for you on the bloomberg. it shows the clear path we've but for unemployment stalling and deterioration in inflation. >> it's a story partly about participation in the u.s. increasing but there's still a
.ot of room to go and again, productivity, the problem we've had in the u.k. as well as the u.s.. but it's increasing and still going to increase. we could get a different through the summer and the cost push from china starts fading a little. growth globally especially. do you think investors are buying up treasuries yesterday? it seems clear there going to raise in june. is that totally priced in? >> everyone's been expecting june for quite a few months now. i think it possibly just pushes out december for the next one rather than expectations since september. so little bit of a relief or treasuries there. also the details are in the they will cap
monthly and not let it run up to quickly because otherwise there will be redemptions quite early next year. perhaps slightly bit more cautious from the fed reacting to some of the soft data we've seen recently. anna: one my colleagues taking ag the fed as glacial pace for a move from the balance sheet. the way the unemployment rate is been coming down, this employment part-time for economic reasons. this pool of people were only working part-time because they cannot find a job to work a long time. this is coming down. what is your pet theory on why this is not pushing up inflation in the united states? is it due to technology, a lack of unionized labor? what is your theory as to why it's different this time?
>> part of it is about expectations. this feeds into people's expectations on what they can get for wage increases as well. even though labor markets are companies are finding it hard to hire people in certain sectors. there's a big push by employed labor to push their way to hire levels. it's difficult for people to push on and get higher wages and get real wage increases. i have a chart as well. we are doing a battle of the charts today. check this out, because it blew me away for a second. i was thinking what the fed is going to do with its balance sheet. fed, we'rere is the looking at only a quarter of gdp compared to blue, the european central bank which is more like a third, and in japan is off the hook. as the centralar
bank is holding. we're not talking about japan right now. it looks like the fed doesn't have to do very much to shrink its balance sheet. >> it's been suppressed a little bit by the size of the japanese one. if the fed just let's these things mature, it cap's interest. in to the early 20 20's before were back to a fairly normal amount of treasuries. frankly, if they did nothing in terms of tapering just let it mature over the next few years, they would get back to a normal state by the middle of 2012. janet yellen has been talking about this prolonged time, they want to be able to react to the next problem. so picking up the pace a little next your. anna: where do you stand on the
whole debate about how much inflation going to see, how much it will push up yields in the united states? one analyst talking about the best argument for buying bonds is as a hedge for your long equity positions that you have but you hate. talk about why you might want to own treasuries at the moment and weighing in on the whole idea of how much further there is to run on treasuries or treasury yields with the trump agenda being delay. how much does the trump agenda matter to you? >> as we go further through time, this early in the presidency unless worried about it. we need to start seeing some fiscal measures come through the u.s. and europe as well. the agenda needs to start taking up the slack a little bit from monetary policy which is easing
off. if you go into next year it does put risk on interest rates going up next year. treasuries, this is a ifsible place for them to be we see inflation recover again in the autumn, we push on to what we were seeing through the end of last year. and really tore 3%, would make a lot of sense if the trump agenda come through next year. were stuck in the 2% area. who knows, but it's not over 3%. matt: luke is going to stick with us. stay here to help us parse through a number of issues. the fed conversation continues throughout the day. we will speak inclusively to the ,anguard group ceo, bill mcnabb
another interview you don't want to miss. is philippg us hildebrand at 9:30 london time. jampacked on the fed, find out everything you need to know about fixed income. remember if you are a bloomberg customer, you can watch the show using tv . go to that function and click into any of the three panels you will see their for radio, television, or live event coverage. click any of those panels at the bottom of the screen and you will see a blue link that enables you to be part of the conversation. anna: coming up, bearish on china. hangups about the world's second-biggest economy. this is bloomberg. ♪
london, 7:45 in berlin and 1:45 in the morning in new york. you're looking at the world trade center, it up scarlet red. that's get the bloomberg business flash. bank maybeeutsche close to settling a u.s. federal reserve in korea into help billions of dollars move through the bank and out of russia. the settlement is being finalizing could be now send coming weeks but the bank is still waiting for u.s. prosecutors to solve a potential more consequential investigation. fined $350 has been million in the u.s. for the foreign manipulation scandal that has an snared more than a dozen global banks in the last five years. york department of financial services said that at least a dozen employees participated in schemes to manipulate the price of various currencies including those of south africa, hungary,
and turkey. carson block says he will continue to bet against chinese companies listed in hong kong, saying a pullback and credit will send shockwaves through the mainland economy. creditcts china's problems to reach a breaking point. >> there's been so much value destroyed that my firm belief is you cannot at some point, your past seasons catch up with you and we don't know when that will be for china. juliette: that is your bloomberg business flash. attacks and arror coup attempt, tourism fell in turkey and hurt the nation's airlines last year. now are seeing signs of a recovery. use of joins us now with a chart of the hour. what have you got? an inflection point for
andturkish airlines pegasus, the two key companies listed on the turkish exchange. we're seeing a shift in investor sentiment as well. we've had for changes in recommendations in terms of rice targets in just the last 10 days. they me show you how these companies have performed in comparison to the benchmark exchange. the yellow line is the reference line. this is the best part if you are long in this market. the yellow line, there's been a 26% rally in turkish equities. it's been a remarkable stretch and a could be more coming in. upgrade changed their for the first quarter of 2018, forecasting 3.75 to the dollar. the problem with the rally is
the relativessed strength index so you might want to be careful going forward. will be joined by egypt's finance minister, that conversation taking place at 9:15 u.k. time, so tune in for that. short seller carson block said he will continue betting against hong kong listed companies on the view that a pullback and credit will send shockwaves through the economy. speaking to bloomberg after moody's downgraded china for the first time since 1989, muddy waters founder said credit problems will reach a breaking point. >> it's actually very difficult for me to be here in mid-2017 and see that this has not actually collapsed yet are that we haven't had a serious unwind in china, because i felt for asset ins that it's
the credit bubble, under the old orthodoxy, that could not be sustained that long. if you look around the world, you see that the ecb and the fed are helping to sustain frothy asset valuations. japan has not made sense in a few decades. the question is how long can china keep it going? i don't have a view on this. i think ultimately there will be a day of reckoning, and i know that, i just cannot tell you two months or two years. >> me do feel certain about the outcome. whenever it happens. it's been destroying capital and value for so many years, and the one cushion that china has, and this is something that there is a lot of debate about how bad and how hard a landing you will
get in china. the one cushion it has is that it owns the banking system. the reaction to the financial crisis was to just cram liquidity into the banking system almost nonexistent controls that went straight into real estate domestically and a lot of it also fled the country and went into real estate on the west coast in canada and australia as well. there has been so much value destroyed that my firm belief is you cannot come at some point, your past sins catch up with you. you just on a when that will be for china. >> so if the timing is impossible to predict, and i don't want to put words in your mouth, but it sounds as though that is what you are saying. what about those people who have chosen to short china, whether through the chinese currency or other instruments?
that sounds like the kind of trade that has lost people money in the japanese bond market for years. >> there are certainly ways that you can play china that our company specific. there are a lot of chinese companies that are probably traded -- publicly traded, some in the u.s., a lot in hong kong. these are very poor quality. i would not want to take a samly macro these's and going to short china. i would not want to short the hang seng index but if you start with a macro pieces and say there are a lot of credit problems in china and the new start looking at industries that might be canaries in the coal mine, or companies that might be canaries in the coal mine, then you can get it right. anna: let's move on and talk about something closer to home, brexit negotiations are set to start in less than a month and
signs are emerging that there are key areas where the eu and britain might be willing to compromise. that is the word on the street, according to our reporters. while the terror attack in manchester has shifted the attention away from brexit recently, the focus will return when they resume national campaign tomorrow. luke, of course the campaign is on hold. we see a tentative return to local campaigning today. i pulled up the latest polling that we have and we have the conservatives looking at gaining in the polls and labor falling off a little bit here. how much does the size of may's majority matter to you in terms of u.k. growth in assets? >> i think it is quite important. as we get toward higher double-digit numbers, i think it gives the u.k. investor a lot more confidence about potential
outcomes. and certainly toward transition 2022, thinking about the election more than the 2017 election. i think it will give her a lot more power to fight against the very hard brexiters she has in her party. matt: it seems to me that officials in government and people who are deeply involved in financial markets inside the u.k. are not quite as concerned about the financial impact of brexit as people who are involved in financial markets in the eu, and government officials seem to think it's going to be a tremendous effect on the u.k. economy. how do you square those two positions? >> my view on this has changed quite a bit over the last year. if you asked me just before the referendum last year, it was
very much to remain, and i would now be to leave. i believe the economic impact is being pushed further and further out. we've seen very little direct impact think it will be five or six years before we see that direct impact. it's recognizing that trade with europe has been reducing for a number of years anyway. the trade externally to that has always been open to trade and more so in the last year, people have been refueling at thinking about trade opportunities further and further afield. that could easily take over in the next five years. so there are some good things there. the big thing waiting for is what happens to the city, how much the camps to europe and until we see that it will be difficult to judge. anna: the next question goes back to what you said about the size of the majority being important. we've seen other governments that have been in conflict with
substantialt it had domestic mandates that might make it easier to come together on the domestic front but hasn't made that much difference in the ability to persuade brussels are to get more from brussels. why do you think the majority matter so much without about leverage the u.k. has with the eu? with a very hard brexit led branch of the conservative party , or even the small numbers we have at the moment. perhaps you will see a change in the rhetoric from may as we get a bigger majority and a change in the underlying negotiations that will be gone on with russells. stay with us here on "bloomberg daybreak: europe." we're back in vienna for another exclusive conversation with nigeria's oil minister.
bloomberg daybreak europe, our flagship morning show on blue book markets. i am matt miller from our headquarters in berlin. anna: i am and what -- and edwards in london. we see some of the big oil companies. this is a quick look at the futures as they kick off and get earlyay this -- at this stage of the trading day. , they arenister inclined to the rate hike in june but they do not seem to be concerned further out about inflation in particular and how much progress is made on rates and there were a few clues about the balance sheet runoff. absolutely. that may be a key to some of the treasury trades that we saw yesterday. i will talk about that in a second. take a look at asian stocks gaining after u.s. stocks made
new records. a gain of 1% in asia. again of 1% for crude as well. you're looking at the texas texas and in many it west texas gains -- putting out gains. a their solid gain, contract at about 5%. take a look at treasuries. where are we treating right now? yield butwith the you did see the yield come down yesterday as investors bought the junes even though rate rises a lock and investors --d that to begin with you to begin with. the dollar priced in renminbi but it has not gone up so it has been weakening for the
last couple of days after that news from moody's downgrading chinese debt for the first time since 1989. -- go ahead.look look at thehave a markets that are shutting this hour as we get ready to open up european equity fund markets. let's look at the asx in australia. closing on the upside. underlying -- underlining the interest ratehe change coming through. energy stocks getting a boost. that we sawvery weakness around that story. matt: i get excited about bund futures. they are trading up just a tick. you can see the french bond futures trading up there just a tick as well.
a little bit of risk on day here. maybe people prepping for the trade. the cash trade is opening at one hours time. bloomberg first word news crossing over to hong kong and juliette saly. juliette: u.k. police have [inaudible] calling it a breach of trust that risks undermining their investigation. the new york times published photos of the crime scene after u.s. security officials share details with american media that british police are yet to release. may 12sther theresa leave the group gathering a day early to return to britain as the company basis to prevent further terrorist attacks. russia --s to brussels.
manchester united players and management have expressed their sympathies for those killed in the manchester bombing. a moments silence was held before the europa league in stockholm where the british team claimed the title. shares rose following the victory which guarantees the -- united place in the champions league next season. >> it was not easy going into it. it is on everybody's mind. that when itet puts manchester back in there. >> the city of manchester will be happier. we come to do our job. resumee: ukip is to campaigning a day ahead of the other main parties due to a pause from the bombing.
other parties will go back to doorknocking and leafleting. informationollected revealing that senior russian intelligence and political officials were discussing how to exert influence over donald trump's advisers according to three current and former american officials really are with the intelligence. they said the conversation focused on paul manafort and forced toynn who was stand down as national security adviser. let's of the latest fed meeting indicate a rate hike is still in the cards for next month. most officials judged it would be appropriate to tighten monetary policy again. to shrink the balance sheet. robert kaplan has reiterated
that he expects three rate hikes this year. >> the face case for this year is three rate increases including what we did in march is a good base case for this year. evolves more slowly, it could be less or more strongly, it could be more. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . anna and matt. anna: thank you. let's return to the oil same tree as opec are placed to extend production cuts after last year's agreement failed to clear a global supply glut. oil climbed to a one-month high ahead of the meeting. manus is in vienna and joins us now. are -- we have managed
to get one of the ministers to talk to us, the nigerian oil minister joins us now. for having us up there. consensus seems to be a nine-month extension but i am hearing that there is an additional three months. do you support the night months and what is this additional three months? support the nine months because it gives a longer gestation period. the twelve-month agenda, we had a longer-term type extension and is if we know have it time we would three months for the review and look at the behavior of the it gives a long-term predeath -- perspective.
that is the calculation that will happen in terms of what time it will take to balance that market. mass: is anybody on board? >> on the nine months, definitely. manus: i caught up with the minister in the lobby, the iea are telling me there could be at deficit. what to think, could the end of the year rebalance? >> i am not as aggressive as some of my colleagues. that is why i am supportive [indiscernible] >> are you wary of u.s. shares, that is the proposition that some are blinkered, not taking shares seriously. >> it is realistic to take them seriously. it's time we hedge out the is -- thisthink it
is what the behavior is looking like. are they going to be of such an impact? notink they have [indiscernible] but i think the longer-term would be relative to where we are. manus: i have it on good authority that you have a nine-month deal, a movement toward rebalancing, what does it do to the price of oil, where does the agreement take us to? >> i think if we keep to the rules and discipline to the numbers we should have good compliance.
on a positive note and it is 54 inote, branch. let's see what happens by the time we finish and if there is a consensus. last six months it seems to be optimistic. manus: you have an exemption. you have begun loading [indiscernible] nigeria reduce this year and have you had any pressure at this meeting to join [indiscernible] production is at 1.5 million nigeria reduce this barrels. hen you take the average it is 1.5. wastill need to repair what
damaged by militancy. [indiscernible] should get to the figures we had before. now we havet, right on. was going pressure wille get on for us to join the cut. niger is not [inaudible] everybody needs to make the sacrifice to price stability on a worldwide basis. manus: what you make of the proposition that a variety of people have spoken to me and
bout have said this is a opec and non-opec. what is your perspective? you can implement cuts. seell the numbers we [indiscernible] 102% global. are producing, not exporting. the market is on the business of exports. you have individual consumption within countries. of the balancing of this market, there has been a huge amount of capital
oilnditure taken up by producers. have we felt the impact of that in terms of the production side and refining side? >> we have. bond guys are getting ready to move. we are looking [indiscernible] couplelion over the next of months to one year. global this has not done much. it has been fairly slow on average. an update for us? moving quite well, a lot of progress and work to begin to keep it stable. we are making progress on that.
negotiated. a lot of dramatic movement and the structural aspect [indiscernible] there is still in a big -- a big gap. would lik toing i check ite with you. you spoke to me and said if we youinue to refine products are prepared to resign, is that correct to have you a clarification on that? this is a no-brainer. it is going to depend on a couple of things. [indiscernible] on the asset [indiscernible] i hope they will. it is going to depend on
militants. if we are able to accomplish we will be able to deliver. within the upgrade we are going to remedy that. [indiscernible] of -- talking in terms manus: thank you and good luck in the meeting. butre producing more prepared when the moment comes to stand up and be counted. i am off to the great scrub. anna: you mentioned it a few times. manus cranny joining us from vienna. shale hasout how shield
matt: it is 20 past 8:00. you're looking at a live shot at the brandenburg gate and you can make out the bubble behind the gate. that is enclosing the stage where president obama will soon speak with german chancellor angela merkel at a gathering of german protestant christians today. a massive gathering. there will be hundreds of thousands of people in the listen to the chancellor and former president speak here in berlin. let's go to hong kong for the bloomberg business flash. juliette saly has that.
dr. bank may be close to settling the u.s. federal reserve inquiry into how billions of dollars moved through the bank and out of russia. according to people familiar with the situation that settlement is finalized and could be announced in coming weeks. the bank is still waiting for u.s. prosecutors to resolve the potentially or consequential investigation. b.n.p. paribas has been fined 300 and $50 million in the u.s. for its involvement in the foreign exchange manipulation moreal that has an snared than a dozen global banks. the department of finance or so services said at least a dozen employees have participated in schemes to manipulate the prices of various currencies including the brand, and the turkish lira. will continue to bet against chinese companies listed in hong kong singer -- saying up black and credit will send shockwaves through the economy.
he expects china's credit problems to reach breaking point. grexit has been so much value destroyed that my firm belief is you cannot at some point your past sins catch up with you and you do not know when that will be for china. juliette: that is your bloomberg business flash. anna: with two rate hikes andady under its belt pharmacy minutes suggest fed officials are inclined to raise rates again next month. ecb president mario draghi stepped up his commitment that they european central bank will and asset purchases before increasing interest rates. he spoke in madrid yesterday. >> asset purchases are inevitably more difficult to calibrate, more complex to implement, and are likely to produce side effects than other instruments, including moderately negative rates.
luke, we have talked about this, let's live into the ecb story. i thought the comments were coming through and they all must -- they sound almost hawkish. that got me thinking maybe they are trying to reposition the market and later on we heard from rocky image read and it seems as if he is urging investors to wait for his signal on the path of policy normalization, be patient. baby june is not the time when what arechange in tone your expectations? guest: he may change his tune as he goes through that committee eating and gets a lot of pressure from germany and spain and france where greater
inflation has been picking up and we do get the first signs of how fast the tapering will happen. we are not talking about rate rises, we make it one next year. but how fast the tapering happens. how much of an impact that makes is interesting. even the corporate bond buying program which is bought -- has bought 12.5% of everything they hold, if that went away tomorrow we get a bit of a shock and awe that stopped. that is what he is relying on that all of this giving him some space to get the time he wants to get rather than the markets telling him to do. matt: how fast do you think we will see tapering? assuming you do not think we have had a taper from 80 billion to 60 billion. how quickly does that number drop and when does it stop? a drop in the autumn
this year and stopping by the , admit be summer next year but probably spring next year. if we see the pace of growth and you look at the pmi numbers we have been getting around europe for a while it would suggest that is the right thing to do. he needs to be raising the depot the -40 is ridiculous, rate for how many years. that needs change and reflect those economic conditions you have over in berlin. they are very strong and you are -- you are starting to see the impact of that in inflationary forces as well. matt: yesterday i was talking to the vice president of the ecb and he was saying it would not surprise him to see inflation, the headline number above 2% for quite a few months next year. do you think that we will see that at the ecb will continue to stimulus while we have inflation about the
target level? >> i think they will continue stimulus. core inflation has been hard to get off the ground. spacer, they have got the from the growth. they do not want to get a policy miss and they do not want to move too quickly. the offense and the growth and the general economic stability that we are seeing in europe will take that timing away from them. we will see tapering happen. anna: where does that leave the german-u.s. yield spread? where does that go if we see what you expect from the ecb? guest: it is ridiculous. there is no way we should be seeing the spread where it is. it may not come from the u.s. but it feels it needs to come from germany. endr 80 basis points by the of the year is a sensible level to be heading towards. where we are at the moment is just wrong. anna: we will leave it there. thank you. from aberdeen asset management. we will bring you an interview with germany's deputy finance
guy: good morning and welcome. you are watching bloomberg markets, this is the european open. first cash trade session is coming up. i am guy johnson in london. matt miller is in berlin. what are we watching this thursday? the fed minutes signal the u.s. economy is strong enough to warrant another hike. the big question now, when does the balance sheet reduction begin? slipping on oil. opec and its allies support nine-month extensions but will members adhere to thi