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tv   Bloomberg Markets European Open  Bloomberg  May 26, 2017 2:30am-4:01am EDT

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across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. >> good morning. you're watching "bloomberg markets: european open." it is of course friday. i am guy johnson in london. matt miller is in sicily. what are we watching this morning, matt and i? cut leavesas opec's investors wanting more. could a u.s. shale rebound put the agreement under even more strain? -- how the trail with will british businesses deal with theresa may's policies?
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awkward. trump makes his debut at the g7. it could mean the leaders will not see i die. check out the handshake. matt? the question is, what will the leaders be focused on during the talks today? will it be climate change, immigration, free trade, or will it be dominated this g7 about talks of counterterrorism? donald trump made the call during the nato meeting in brussels for his other european partners to step up their contributions to angela merkel said maybe we will catch up by 2024. of course, you have the u.k. and u.s. breaking their relationship on intelligence sharing, at least when it comes to the manchester attacks. how much can they get done, and when can they start to talk about migration, which is why
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italy located this meeting here in sicily. it is right smack in the middle of the mediterranean sea, where the refugees would normally come across in boats and oftentimes have to be rescued here. what will be the focus of conversation, and what will get done here besides the family photo? guy. guy: we look forward to the coverage throughout the day. matt normally talks about futures, but i will talk about it because he is in sicily. at the moment, the fair value on points us to a largely negative start. a couple things of note. the pound is down. it looks like the ftse will outperform. processes,mechanical imf just it to see how the german carmakers react. the german press seems as if the president of the u.s. has an issue with the number of german cars that americans buy, and he will apparently do something about it.
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let's talk about what is happening on the gmm screen. we can give you heads up on what is happening. itume it will work, which isn't. i will tell you that the pound is down. let's get a news update. in the u.s., the justice department has vowed to challenge an appeals court ruling that slammed the travel ban against six muslim majority nations. the judges said it dripped with intolerance and religious discrimination. thetillerson says administration disagrees of the decision, putting the president firstck with -- for his supreme court showdown. focusing on a series of meetings with jared cushioning -- jared kushner. citing people familiar with the investigation, president trump's son in law and an influential white house advisor are being investigated because of the extent and nature of his
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interactions with russians. the post says they have not been told that kushner is a person of interest, and he has not been accused of wrongdoing. after a pollped showed the conservative party's lead had narrowed after the manchester attacks. a poll shows the tory lead narrowing 25 percentage points. lowest since theresa may became prime minister. investors saw the currency drop. oil have its biggest -- had its biggest lost in nine months. u.s. trade in crude had climbed to $59 a barrel. minister toldy bloomberg that producers have more talks to support prices if needed. >> with disagreements in the gmmc to expand their mandates, it takes a close look at the
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markets and what is happening there. necessary, if adjustments are needed, there can be an extraordinary meeting for a recommendation to adjust actions. consumer japan's core gauge has increased. consumer prices excluding fresh brewed increased -- fresh food increased at the fastest pace in two years. it is still below price targets. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy, matt. matt: juliette, thanks very much. china plans to change the way it calculates the yuan's daily reference rate against the
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dollar, adding a countercyclical adjustment cycle that made blunt the impact of big market swings. that is from people familiar with the matter who declined to be identified. we are joined with mark cudmore at a singapore. what is the significance of this? what will the of xp? -- hat will be fx the effects be? >> it is not been confirmed, but it seems like there is something funny about the fixing. the dollar yuan fixing has come in lower than expected based on the previous day's close. -- it is adding a layer of stability, and stopping capital outflow pressures that seem to be waning anyway. this should fully stem of that pressure from outside. this in the short-term is positive for chinese assets. in the long-term, it is a step backwards form letting the yuan
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be free-floating. matt: why are they doing that now? what is the significance and the timing of this? >> it is curious, the timing. they have in making steps to liberalize the economy. this does seem like a step backwards. now? one thing is the dollar is falling quite bass now, and it does not seem that the -- it seems that the now? dollar trend has turned. it made a turn in january, and the dollar might weaken again. tos is a way for the yuan not follow the trajectory of the dollar beginning so much, and controlling the weakening in the yuan. it is a note that while the yuan has been fixing stronger against the dollar, it has weakened against the basket of currencies slowly. let's turn our attention to
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the british pound. i pulled your chart out and i have it on screen now. it talks about you yelling timber. walk me through what is happening. >> the are seeing quite a few technical breaks in the sterling. we'vet in cable, and -- seen it in cable, and in the bloomberg. we have seen technical breaks. we also see a few negative headlines in terms of the election getting closer in the u.k.. there is a little bit of uncertainty creeping in. to workhis is an excuse the long-term fundamentals. earlier this year, the market got to bearish on that fundamental. the squeeze that is happened narrows the technical turnover, so people can get back to trading the long-term negative story, which is that the u.k. has two big of a negative real yield and no one wants that in
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currency. guy: mark is referencing a poll that came out overnight that points to the tory having a five-point lead, which is the tightest it has been. mark, how low does ago? give me some lines in the sand. where does it take us? at 128.75.ding >> the trade line that comes in at mid-march is at 127.82. i think we could be heading back to the low 20's. we have to see what hell happened postelection. i think the brexit headlines have been negative. there might be more signs of compromise coming through. that is a process which will end and flow over the next few years. in the backtrack -- the background, we will see the fundamentals dominate and cable sink lower.
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mark, i have asked every day now and it seems like i am obsessed with it. but it continues to rise. i thought bitcoin would fall today finally, but it is back up again another 3.5% to 25.55, twice the price of gold. is this where the capital outflows are ending up? is this because of china? >> you are obsessed, matt. no, it is a good question. i think this is where some of the outflows are going from china. china has played a big part of the story in the bitcoin situation. it is impossible to collect here. that coin does not have a clear value that you can calculate the some other arbitrary metric. it is a subjective affair. people can pay what they want for bitcoin. it is fashionable, it can keep on going. other stops at 3000, 4000, who knows?
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you do not want to call a top on this. it is looking parabola can -- parabolic. matt: you say it is purely subjective. that reminds me of the value of the dollar or the yuan. isn't it the same with all fiat currencies? >> i think there is an element to that. there are a couple things that differentiate them. first of all, some of them pay interest rates, not all of them. secondly, they are backed by military and police services for them. third, you can pay your taxes in them. you can pay your taxes to get those services. until bitcoin gets backed by governments, it is subjective. it has no concrete value you can rely on. it is true that currencies do not have a concrete value if we get into an armageddon situation, but they can pay for your taxes and services in a world that has not broken down into complete armageddon. think there's a difference
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between fiat currencies and that going. guy: we look forward to it with a key level -- keen level of fascination. throughout the day on what is happening out there in the markets. to keep you abreast of what is going on. we are watching opec celebrating a deal. all markets a little less than impressed. is it better to travel than arrive? we will talk about that view. we will take you to vienna for details. a lovely day there. this is bloomberg. ♪ matt: welcome back to "bloomberg
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markets: european open." about 15 minutes away from the start of cash trade. today i am in sicily italy for the g7 meeting. guy johnson alongside me at in london. i want to go to bloomberg -- to the bloomberg business flash. juliette. juliette: general motors fell last year. the class-action lawsuit brought claims the owner installed devices in two models
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from 2011 to 2016. gm is the fifth carmaker to the accused of vehicle cheating, since volkswagen admitted in 2015 to cheating pollution roles. struggling commodity trader noble has been hit with a second rating cut in 10 days. it is flagging doubts over the company's ability to address $2 billion of debt that matures in the next few months. toy are in talks with banks renew a borrowing facility that expires next month, but they expect the bank to fate -- to use less favorable terms. pay thebeen ordered to state and city of new york. the judge said the company turned a blind eye to shipments of untaxed cigarettes from indian reservations that undermined antismoking efforts. the decision comes two months after it was rolled that ups s failed- ruled that up
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to manage cigarettes. thank you, juliette. opec's attempt to cut rates has failed to impress investors. they are trading sharply lower. in fact, it is looking at its biggest loss in three weeks. this after the cut to nine a they are trading sharplymonth. the deal was made after last year's landmark agreement failed to clear the global price recovery. >> we considered various 9% to 12%,rom 6% to and we even considered options for a higher cut. that aications are solid nine-month extension is optimum.
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>> these adjustment factions can be aimed at reducing the amount of costs. it depends on the market situation and what it's need is. that the oileve is stabilizing too much. guy: manus cranny is indiana for us. -- is in vienna for us. tell us why investors didn't like what they heard yesterday. manus: i think a lot was baked in the cake. this nine-month 1.9 billion barrels was part of it. and the lack of strategy, what do they do?
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that is the other issue that the market was not happy with. protagonistsrket discussed it with me. goldman wrapped it up beautifully. they did not present a strong enough credible threat to shale, to control. that lack of an exit strategy is what unnerved the market for now. matt: at the end of the day, it is a supply demand story. how crucial is that data? works in a variety of ways. the data i am referring to is this. the kuwaiti and saudi ministers talked about it. the russian oil minister talked about it when he sat down with a. that data is the joint monitoring committee. it will be given more power and oversight in terms of looking at the data and being able to review and reflect. if they need to do more, they will. that is the subliminal message sent.
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also, they were very clear. we talked about saudi aramco. exports to the united states are critical for saudi aramco. analyst was here, we were chatting it through. he said we will get the data in the next six weeks. exports to the united states from aramco are going to be what are held back, and that am a gentleman, are what i suppose the nigerian minister who also caught up with us hopes to create and get us back to that $50 level. data for the export side. have not only been speaking to the people making these decisions, you have been speaking to the analysts, of which there are many anin vienna to cover the event. what are they saying? what one person said, for
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her, this is a temporary moment. she labored more on the options that expired yesterday, and that there was disappointment. but she made it clear, the need to move the curve. you either need to get that forward, front end of the curve $55, andhich is $50, get it above $55, or change the view of the market. this is concurrent with goldman sachs, and that is show that they are a credible threat to shale and can still win a market sell -- market share. that is what they want to achieve. is a question if they kansas state met that. it does not look that great this morning. the sun is shining. i have more chasing to do. matt. matt: thanks very much. the science -- the sun is shining in sicily as well.
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when we come back, we will talk about donald trump. he reportedly called the germans very, very bad. maybe for a different reason than you might think. we will discuss the merits of that report, and tile you what he was talking about. -- and tell you what he was talking about. this is bloomberg. ♪ guy: five minutes until the cash
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president trump described germans as that, very bad. this during a conversation about german trade surplus, according to german newspapers who interviewed people who were in the room with a meeting that donald trump with eu leaders. he took to kill her issues with the auto industry and the number of cars in the united states. matt, what do you make of this? how big of a problem with this be? donald trump seems to be confusing the issue of the way the trade agreements with germany. matt: i think most importantly, this is an optics problem, especially for angela merkel. this comes from der spiegel. they did not cite sources, but it is highly respected and has been picked up from other -- to the from
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deutsche zeitung. trumps favorite cars, rolls-royce, made in england are made by germany. the market open in two minutes. this is bloomberg. ♪ >> welcome back, a minute away
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from the opening in your vivid we're going to see a mildly negative start for most of the european forces. with one exception, the london market will open positively. the reason that will happen is because, limit but a strap on the bottom of the screen and i will tell you why. it's a mechanical process. the pound goes down, the ftse goes up. the revenue translation and that's what we're going to see this morning. matt is in sicily. matt, what have you got? >> we are here for the g-7 meeting and we have just learned from canadian trust conference at there will be a separate statement from the g7 on
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combating terrorism. it's obviously a huge issue moved to the four of this conference because of what happened in manchester. aside from that, they will talk nout trade, but likely results there. as well as climate change, and people are equally dubious about the results on that. >> let's look at where we are. we expect london to outperform a little bit. but the market makers sort that out. elsewhere, we are expecting softness. i've stocks go dividends. is where the ftse is as you can see barely budging. is moving a little more softly in just a moment's time. we will see what happened -- what happens there. but no sense of direction in european stocks today. let's what happens in the elsewhere. a steady.t not see
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up 1.0t market opening 3% on that 10-year gilts yield, so we are down one basis point. a little bit of a move there, the big focus is sterling back below 1.29. when you take a look at the stoxx 600 we will see how it is shaking out with the industry groups as we look at the open here. we are seeing energy stocks underperforming again as they work at the end of yesterday's session, down 9/10 of a percent. last i checked the crude price was stabilizing after the biggest lost in three weeks yesterday, but still the energy stocks underperforming. health care on the upside and overall the stoxx 600 much unchanged get back to sterling, the fact we have seen drop on the latest poll ahead of the u.k. election, i wanted to show the correlation between the ftse 100 and the pound because this
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has actually turned positive. what interesting is that apart from this week, the sterling strength has not hit the ftse 100 off from being closer to the record high that it hit earlier this month. no that we are seeing the correlation turn positive, what will this mean if we see further sterling weakness? then i will take a look at the shanghai comp is it. we saw this drop earlier in the week on moody's downgraded of china debt. guess what? it has rebounded on the week. we are up some 6/10 of a percent. we have been watching the u n on the potential of the pboc changing the way it calculates it. 10 sponsor.t 31 >> let's turn our attention to what is happening. we have got it set up with index points. the ex dividend this morning,
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don't be alarmed when you sit down. monday is also the down dividend. basically, that's a fact there. there are a bunch of other stocks in the mix here. at the positive end of the the biggestirit is move we have seen since august 2016. a fairly decent sized move. leading the story, some details later on. ex dividend stocks in the morning. let's turn our attention to the markets and their relationship with all takes. u.k. politics resumed their campaign today after the manchester terror attacks. theresa may's policies have been criticized as antibusiness. with us now is the chairman and cio of terror firmer capital partners. it's a great pleasure to see
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you. what do you make of theresa may's business policies? >> not a lot. >>it's like being back in the 70's. i just hope we don't find ourselves back in the 70's. i think most of the campaigning isn't addressing the real issues. the issues the british public seems to be concerned about. they are not things they will discuss like immigration they talk about it in a very high level basis, but they don't actually want to say what they actually do because they actually don't know what they will do. when it comes to the economy, they don't know what to do there either. they play around on the fringes. it's like watching a business which has a fundamental problem and the ceo is saying, what kind of packaging should we use? >> how does that end, though? what next for the economy?
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large extent,a britain has lost control of its economy for it to vote for brexit was practically a vote to get control. but we have are not in control of our own destiny at all. we are waiting to see how hard the europeans want to be with us and how they respond to our ideas. at the moment, there is lots' by .oth sides, which one hopes it'll be distracting for the u.k. economy and won't be positive before the european economy. >> representation from the workers. there talking about scrutinizing and the name. issues, willose either of those factors make a difference in the way you think about investing? putting workers on board
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makes no difference at all. i've operated in germany and goodly, it's in some ways theuse you actually do have union and the workers have to take more response ability for what they say and how they do things. we found it to be a positive experience. in some ways, it's a non-express because what you find is that you have an informal board happening over lunch and then the board gets back together and you invite the union members and you made all the decisions anyway. so frankly, it's either a positive or a waste of time. my guess in the u.k., it will be largely a waste of time. , the rules will be what the rules are. if they make this change essence more, it reduces the price. it will be cosseted in. in some ways, the worst the business environment is in the u.k.. and the more politicians mess it up, the more opportunities there is. it's an awful thing, but when
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investor, as as a opposed to someone who is actually working in the system, you benefit from all editions messing things up. , i think brexit was a disastrous decision, but for my business, it gives us opportunities. i've rather not be making money from his opportunities. matt miller here in sicily. can you tell us about some of those opportunities? what specifically have you changed in your investment strategy? where be made money or where these invest opportunities because of the leak referendum? yes, what is largely happening is because our investors are not in the u.k.. they are foreign currencies. things got substantially cheaper for them. in terms of opportunities, it's the the world's prior to
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government's back to the late 90's. there were lots of opportunities because people didn't want to take the risk of buying things because they were scared of the political environment. we are seeing businesses out there which found the businesses which people have been going to a very long time and they are scared of what's going to happen for the next four years. do they really want to take a 10-year view? they don't and therefore they are looking to sell and they want to do so quietly. i don't want a lot of publicity. [no audio] little bit down from when they were a year ago. when he translated into front currencies, it's a long way down. effectively, it's like to the chinese buying london property. the u.k. is a lot cheaper. that hasn't been translated yet to the average person in the u.k.. they don't realize just how much value the u.k. has lost since the brexit vote or -- brexit
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vote. expect theou financial side of your business to change? it's based in london, a lot of the counterparties you work with are based in london. do you expect that to look similar in two years time? >> i think it's not going to look similar. most of the senior bankers i talked to are making plans to move abroad. them will start to execute the plans in the next 12 months. to determinecult is what happens to the senior people. so they will move a lot of the back office jobs from a political point of view. they will try and -- the banking community is effectively moving toward doing its own separate deals and has to some extent lost patience with government. separate them at all the senior bankers i talked to are saying, what can we do to placate europe? how many jobs do we have
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to move out of london and what sort of jobs to we have to move out of london? do we have to move hold trading areas out or tamme just move back offices out? my guess is that europe will demand more than back office. from my point of view, it's a concern with what will happen to senior bankers. the head office of goldman sachs moves to frankfurt, that has a big effect. >> let's speculate for a moment. the polling has tightened the labour party is improving its position. the moment the polls suggest we will still end up with theresa may as the next prime minister, how would you view the u.k.? a moment ago you said you loved the fact that politicians make a mess of things because it creates opportunities. from a bottom-line point of view, give me a sense of what a by jerry corbyn would
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look like. >> he says pretty clearly he wants to go back to the 70's. i remember the 70's as does germany. it was a time where investors did very well, the general public did terribly. they had hyperinflation. we had complete discussion of his business. we had a situation we couldn't keep our lights on. we had a three day week. as a person doing a level status, there were no lights at 8:00 at night for three days a week. one used torches and candles. but it did get a lot of businesses in almost opportunity. course, it developed the punk movement, great music, so we had great music, terrible food, and appalling business. if you want to see what german foreign labor would look like, just look at the 70's. he wants to nationalize things. like the lecturers
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i spoke to at the university in the 70's. same mindset. he has been consistent about that through his entire camp -- career. if nothing else, you have to listen to what he says and smell the coffee. he is not making it up. >> do have coffee at that point? >> only instant coffee. it's pretty disgusting stuff. basically you see what starbucks provides, we will not quite go there. he's going to stick around. we are going to be speaking to diane abbott later on from the labour party. we will get her take. we are also going to hear from this man. he is the deputy german finance minister. he believes there is cause for concern among the voting public when it comes to what is happening to ecb policy. he is campaigning there. on the doorstep of the germans
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are talking about what is happening with their savings. diane abbott will be joining us later. she'll be joining us on bloomberg television. she will be listening to annan and i on the u.k. radio. 9:30 a.m. on bloomberg of them. this is bloomberg. ♪
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>> let's talk about what is
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happening here in europe. let's find out what's happening in the midtown space more specifically. >> imacs a starting with more of a cop -- small-cap. almost 10% there. this offer cap it's for your profit view but also jpmorgan upgrading it to overnight from neutral. another game i am looking at is spew >> sarco engineering. it's hit a record high, the most since august 2016, after it said it will drive, locks at $450 million from the private equity firm. the shares getting on that. this produces boiler and pressure controls. on the downside, i am looking at britvic, got the most since september last year, down 2.7% right now. this falling on the the news that pepsico is selling shares in the company.
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matt, guy. that's very much. i am here in sicily at the g7 meeting and we are just getting news from a senior canadian government official that the communicate talks as far as what the pledges are going to be made on trade and what the pledges are going to be decided on for climate change haven't been solidified yet. that's no surprise, really. they are going to continue to discuss those things on friday. one possibility is that we will get a communique that says all the nations in the g7 except for the united states are committed to moving ahead on climate change measures because the trump and ministration hasn't decided about what it thinks on the paris accord. the communicate is going to be much shorter according to this source than once we typically see. there is no u.s. sure but in place. each nation has the sherpas that help but the communicate
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together and this canadian official is telling us that it will probably deal with white house officials instead of sherpas. it's unclear which white house official will sit behind trump to discuss these issues. there will be a separate communicate to move to the floor of this conference and that one should be fairly easy to knocked out, considering the other issues that they have to deal with. now, ecb president mario draghi said this week he sees no reason to deviate from the central banks policy guidelines. that was a couple days ago when he was talking in spain. saidn deputy jen spohn there is some cause for concern. >> it's an independent institution and we will choose its decision wisely. i don't need to advise on that, i don't want to advise on that, but i think step-by-step, with the growth coming back, it's
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coming step-by-step worldwide and that might give a chance actually to have a prudent exit. still with us here is guy hands, or rather in the london of terror obviously the g7 is a juicy topic to discuss and the ecb might below the drier, but possibly we will have a definitely more immediate effect on the business climate in europe. what you think about the ecb moving toward normalization? when is that going to happen, how quickly will it, and will mario draghi do the job? >> everything is taking much longer than anybody ever expects. my personal view would be to not expect anything to happen particularly quickly. throughout europe, and extra loans that need
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to be dealt with. i don't see anything happening quickly. it will take time. the good news is, europe does seem to be finally recovering and having a positive step, which logically would mean it would be quicker, but i still think it's a very fragile and i don't expect anything to happen anytime soon. couple days ago, i was in frankfurt for the financial stability review. those ecb council members who were present said they do see this european recovery. they don't deny it. but they're still concerned about certain risks. one of those was an abrupt rise in interest rates that would be very difficult for sustainability. what do you think about that possibility? does it even look like it's on the horizon? >> i don't think it's on the horizon, no. i think interest rates will stay low in europe for the meantime and in reality in business, the
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median term for this foreseeable future. don't see any change happening soon. >> what is that mean for the private equity industry? low interest rates on the side of the atlantic, possibly rising on the other side of the atlantic, there will be some relationship between the two. but private equity is an industry geared toward that an industry cycle. and that mirrors in some ways what happens with what central banks do. you say they are not going to rise very much in europe, what about the united states and will that have an impact? >> i think in the u.s., it could rise. and it could rise quite quickly. that'sld see a situation almost the exact reversal of what we've seen the last seven years. last several years, private equity in u.s. was much better than europe. by extraordinarily better. it's a reverse of that for the next seven years and that's driven by most investors, international big investors, are under weighted in european
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private equity. when i go around to the states a few weeks ago, i thought nine of the largest investors in the states. all but two of them were underweight. i think you are going to see -- >> are they looking to change that? >> wealth, of those 7, 3 are looking to change. that's three out of nine looking to change. but that's a lot of money. i think you could see money coming into europe at a reasonable size. you look in europe, obviously you see the biggest economy currency. the u.k.. londoneen houses up in by foreign investors and we can start seeing bunch of british investors. say,ok at the economy and it's outperforming at the moment this changing most quickly european economy has had a better run of things and there is a reason why sterling is down.
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because he got for quite some time. >> i think what people tend to do is step on a value basis. on a value basis, there are a number. europe is cheaper than the u.s.. u.k., if you, the put it into euros, it's cheaper again. it's really a question of where do you see value? you also have to look at where your investors want you to play. we are seeing a lot of investors who want to invest in europe. they are not at this point in time discrediting between the u.k. and europe. post-brexit, that might happen, but this point in time, the u.k. is still seen as part of your. for the moment. do expect any change in the way debt is treated in the united states anything that will it's been on the agenda, the trump administration talked about it, the company measures has bunny of things on his plate right now, see wonder when it will happen.
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but what looked tax and in the u.s. look like and will that rebalance the story you are looking at? taxs you bring corporation down, debt becomes less attractive anyway. when's interesting fact you have a very high level of corporation tax, how debt is treated is incredibly important read you bring corporation tax down low enough, it becomes less significant. i think some of this is a bit exaggerated. in people's concerns. we are looking at a deal in europe and frankly, when you look at the tax advantage that the debt provided you, it was ithing like the advantage was 10-15 years ago. >> that's a low tax country. country in theax european union, yes. to follow on to that, i
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wonder about the actual machinations of revit equity business. you know, you want to take a stake in a company, change the way it operates so that it's better, and then you exit 5-7 years later. is it easier to do in europe now that in the u.s. because of the uncertainty there? or do you expect the u.s. demonstration to make that easier for you? try toink what we do is toect five levers to affect five levers to improve businesses. the realities of the five levers, one of which is to strain -- changed strategy, another is changing management. the u.s. has got, and i hate to say this for europeans and the audience, but the u.s. does have a better business strategy for the most part. the businesses are better run than they are in europe. therefore there is more opportunity in europe. the issue europe is that they
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don't have the opportunity to exercise that because it's more difficult. will we are seeing at the moment is a little bit more pragmatism with making changes and moving things forward. also what you have over the last few years is frankly, the inefficiency in some european businesses. it's so large that some of the economic cost is worth the price. that it's actually the fundamental micro business by business analysis that drives the small attractive, less the overall environment. -- a halfour things hour seems to have flown by. german cio of capital partners. matt? >> a real pleasure there>>. when we come back, we're going to focus back in on the g7 meeting in sicily. summit. first
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so how tough will talk to be with president trump? security will be top of the agenda, following the terror attacks in the u.k., and we learned there will be a separate to munich a on that. this is bloomberg. ♪
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>> done deal. a volatile day i should save for oil as opec cut leaves investors wanting more. could u.s. shell rebound put the agreement under even more strain? britain has lost control of its economy. that's the warning from hedge fund billionaire guy hands. u.k. parties resume their election campaigns. awkward. doctrine -- donald trump makes his debut at the g7 as his debate on climate change and free trade could mean the leaders struggle to see eye to eye. don't forget to add refugees to that. good morning, welcome to european open.
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i am at the g7 alongside guy johnson at everett european headquarters in london. guy? >> i'm just monitoring what's coming out of the end. we are getting comments coming through on the uae. saying opec and not opaque deals will balance the market. the market isn't so sure about that, judging about what's going on at the integer in minister. there saying the deal will trim at least 200 million barrels a day from oil stock pile. the market was expecting an awful lot more. was it or should it be? i don't know, but we did see a sharp drop in oil price yesterday. there was discussion about whether or not opec will go above and beyond. it didn't, and that's probably why we saw the crude price leading up yesterday. let's take a look at where they
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are right now and see with the headlines look like. as you can see, we are softer a little bit. down by three, 4/10 of a percent. the obvious exception is the ftse 100 at 7519, what they are trading there. the pound is under pressure thee because one factor is toy poll lead seems to be closing at the moment. labor on something of a run of late. if that continues the collection could get interesting. matt? >> absolutely. speaking of interesting, i believe the bilateral meeting has just started now between theresa may and emmanuel macron, the new president of france. so those two will be discussing, no doubt, the fight against terrorism. the events in manchester just a couple days ago. this is their first bilateral meeting and we expect a press
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10: 15, so you will get headlines in about 45 minutes. very interesting. that has taken over the g-7 meeting, the fight against terrorism. they had planned italy, which has the presidency this year, to talk about immigration. that's what it chose this island in the middle of the mediterranean to host these meetings. this is where refugees would often come ashore. they also wanted to talk about climate change very important to france and germany to discuss whether the trump administration will stick with the paris a court or quit it. the trump administration said they are probably not going to make a decision at this g7 meeting. then of course, trade is typically something that the leaders would talk about at the g7. in fact, when we went to all the financial ministers meetings for the g7 and g-20, they said we are not going to talk about trade. we look to get up to the leaders summit in sicily. now it looks like the leaders
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may leave it off the communique .hat the put off they comes at 10 days before the g7, but now it looks like they will get it finished before tonight or tomorrow morning. a lot of intrigue here at the g7, but of course the fight against terror first and foremost after the manchester attack. let's bring in mohammed security, the chief investment officer. let me first ask you before we get to oil and brexit and everything, does something like the trump administration's relationship with the saudi's come up with the israelis come up with nato and brussels, with the g7 here in sicily? is at the changed way you invest? discussion sixis months ago, it would be a big shock to the financial market. from thewe have seen trump administration is clearly a loss of surprises and now markets are taking them in their
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stride. a great example of couple of years ago was the fbi revelations that markets for only one day, it was based on fundamentals. the markets are not necessarily surprised by what's come out of trump given what we've seen in recent months. >> not surprised and also not getting, it seems, to some extent, what they want. i want to try and remain fair here, but we have not got a lot on tax reform from the trump administration. we haven't gotten a lot from or deregulation. we haven't got a lot yet on stimulus. wase are issues the market so excited about went trump was elected. you expect them to come to fruition anytime soon? >> in financial markets, we expect these things to take a long time. that's a two allowed the reality of being president. you have to work with congress
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and senate and so on. there is still hope that something will be passed. clearly that's still reflected in the price. we saw a huge surge in the tech sector and that's partly on the form that trump has played -- pledged equally financial. the market hasn't reversed that yet. there is still an exit patient something will be delivered down the line. but the reality it's a just-in-time. -- it just takes time. it's a two-way trade. main driver has been the normalization of interest rates in the u.s.. the recent federal reserve made its point to call it a transition tory affect in q1 and expect into two to see growth. treasury and trading bottom of the range. dollars looks like it made a turn in the middle of the year and make nothing. the looks like it's on rails at the moment. >> think perhaps there is an
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anomaly. ae treasury is rising in softer. of economic activity in the u.s., but clearly the federal deserve after q1 readings going into q2, expects a much bigger rebound. blowout of thehe u.s.-german spreads and we also see, as guy mentioned, the dollar after its initial climb coming down a full round-trip since the november 8 election. shouldn't the fed on a hiking seemingly notecb yet ready to normalize, still be driving a diversion's with a stronger dollar and a weaker euro? yeah, and i think this is what the markets are seeing on the treasuries, harshly because of the softer readings from q1. parts of normalization is likely to be slower than initially anticipated. that's part of the reason we
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have seen yields come down a little bit in the u.s.. the issue with europe, and in fact that could be the big market of it this year, is what happens with european central bank. is expecting a continuation of quantitative reasoning, a lot of good reasons for that, but the surprise is that we see inflation tire and an exit from the european central bank. that's the big event that's not currently priced in. >> explain this chart. this is today. does that make sense to you? >> this is one of our favorite charts. the vix on average is about 16, 17. it's currently well below those. that's essentially what we see in a. of economic recovery. we had the vix in the low teens and. of economic recovery, which is where we are right now, and earnings rebound, and which is again what we have seen with the big number. >> you like this?
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>> is not so much we are comfortable, but we are focused on the fundamentals. in the economy and incorporations. from that context, we are comfortable to invest. the other thing we observe about this is that it has a clustering effect. it can remain in a. of low volatility for a long time. a melet spikes up, it is to shots. we are talking about that earlier with trump. if he says something, is that going to surprise markets? six month ago yes, but not anymore. axis vix stocks. cio, then a stick around, debating low rate policies. more with our exclusive interview with warren spohn. this is coming up. this is bloomberg. ♪
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>> welcome back to bloomberg markets, the european open. we are seeing right now a little gain here on the ftse come up losses on the cac and the dax, for more on what's going on with stocks, let's go over to nejra cehic. >> let's start with a record high for engineering on mma news. this company produces or the
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controls, pressure controls, and it's biting, locks, $450 million from the private equity firm, irving place. we are seeing shares rise the most since march 2015, up more than 7% right now. also gaining is to of the best performers at the stock exchange. this is essentially a publishing company providing business intelligence. since november 2016, it's on track for a fourth consecutive year of growth. the german and swiss conference units are well advanced on the sales process underway for the conference unit. positive reaction in that market to all that and on the downside, i am looking at petro pact, is loss of 3.4%, nothing compared to the drop we saw. this stock has been declining for seven straight days. yesterday we heard the coo has been suspended amid the sea of serious forward office program
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in the u.k.. but today, we've had credits basically cutting petrol pack to neutral, previously rated it outperformed and that seems to be white the stock is moving lower. oil and gas lease in general are underperforming. matt, guy? >> right now right, they spray much. let's get out to juliette for this is number. hashe justice department slammed a travel ban against muslim nations. it drips with religious intolerance and discrimination. jeff sessions said the ministration strongly disagrees with the decision, putting president donald trump on track for his first supreme court showdown. focusing on aare series of meetings held by jared kushner as part of their program into russian meddling in the 2016 election and related adders. according to the washington
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post, people familiar with the investigation, president trump's son in white house investor is being investigated for his interactions with the russians. the post has been told that kushner is not a target or a focus of the investigation, and he has not been accused of any wrongdoing. china has confirmed that is considering a change to the way it activates at the un's daily rate against the dollar. it counts as cyclical adjustment factor that impacts the big market swings. people familiar with the matter said it's continually testing its models and will use the new formula soon. of poll afterfter the conservative party lead narrowed after the manchester attack. it lowered five percentage points, the lowest since theresa may became prime minister.
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oil has held its biggest loss in three weeks as opec moved to prolong supply cuts for nine months. disappointed investors. u.s. trade in crude had climbed above $59 a barrel this week and they claimed more would be done to drink the oil glut. russians energy minister told bloomberg that producers have more tools to cut prices if needed. -- the gypsyeement expanded its mandate, so it's also takes at close look at the market and what's happening there. any action is needed, there can be an extra a meeting of the recommendation or even the conference to adjust the actions. 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? president mario
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draghi said he doesn't see any reason to deviate from the guidelines. but the german deputy finance spahn told us yesterday that there is a cause for concern on the doorstep. >> of course there is concern about these low interest rates. while inflation is going up, interest rates are 0% and inflation of zero is something you can expect to people. but if there should be a longer. of higher inflation and still then therest rates, is really concern and you can feel that talking to people. so what is actually what we need and what our minister said, is a pretty start and to exit this red policy and as far as i see it, it's discussed in the financial world anyway. it's an independent institution and we will choose its decisions
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wisely. i don't need to advise and i don't want to advise on that, but i think step-by-step, with the growth coming back, that's the important part. growth is coming back step-by-step, europe-wide and it might give it chance to have a prudent exit. >> just to wrap up the conversation, do you get a sense, when you talk to the people on the doorstep, that that is becoming a lower concern, a bigger concern. and has that changed in the last 12 months? >> of course it is becoming a bigger concern because people realize that it is doing something with their savings. if there is no interest rates, but inflation. people start to run. it's not an academic debate, it's a situation of voters and address it.o it's something we all ask about. as i said, the ecb is an independent visitation and i
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always tell it to my elector as well. but we needed to debate the resolve. >> just fresh back from campaigning. the market expects the ecb will change is language in june. market expects that we will start to see a change in the policy formulation toward the back end of this year. is there a danger that the market could end up being a little disappointed that the ecb caution?on the side of we have seen that on other banks. now? thehe danger market is starting to get comfortable with the idea that the ecb is going to start thinking about and talking about normalizing policy. but you are sitting on the ecb's counsel at the moment. why take the risk of going early? >> mario draghi is not going to be happy about this.
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he in the past few months is on policy ising that ecb working and it's going to remain in place until we see inflation get posted to the target. it's currently around 1%, clearly target is 2%. lower for longer is the mantra. but a couple weeks ago, he alluded to the fact that we could be exiting. foreign guidance is a key tool that the ecb has the on asset purchases and rate settings. it will pass on the way he pointed to the exit. there are a lot of good reasons for the exit, because for the metals are improving in europe and -- europe. mezzo not moving a lot in that shot. met usually moves a little bit. to be honest, he may be a little frozen there. not matt, but the shot maybe frozen.
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the data is certainly improving, but as you point out, we are seeing this in the state as well, the pc ease remaining kind sideways, yet the implement this coming down sharply. certainly the delta on that is picking up. when we think about the danger of the ecb, is there a danger become or remain to focus on inflation? there are a bunch of other factors impacting inflation at the moment about what's going on in terms of other factors. is there a danger we look at the wrong thing? thehe ecb mandate, one of core principles, is to focus on inflation. that's not likely to change soon. let's not forget, policymakers can make changes quickly to policies changing incidence rates, asset purchases, etc.. but the economy is a slow-moving beast. whether it's inflation, growth,
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on appointment, it takes time. so there's an element of patients that's required and that's with the ecb is looking for. the patients from politicians, policymakers, just about policies do their job and will get there in the end. >> stick around, we still have a few minutes of your time. hasou are a bloomberg become a you have got this great function. tv . you get to watch what we do here at bloomberg television, you can also listen to bloomberg radio, as well. that's what you can see on the left-hand side of the screen. but the cool part is what happens over here. you get bios of the people we talked to. you get data checks throughout the morning every you want to pull up some of the charts we are using? scold him a little bit, there will be one just in a moment. there's a function, you can click on some of the charts we are using. all of them should be available.
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it's a really great country, kind of continuous stream of everything you need to know. so tv on your bloomberg. we will be back very shortly. this is bloomberg. ♪
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>> welcome back. quick look at what's going on. some highlights for you, some g7 leaders gathering for you in sicily.
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the national campaigning was used today in the u.k. general election after that pause in the wake of the manchester terror attacks. the pound looks a little softer today, and it looks like the local party is making a bit of a run of it. we expect more pound weakness? >> in referring to the polls here, the surprise is that it's clearly the majority that theresa may was looking to secure what was likely than before. she's still expected to win. it's driven by softer gdp numbers from before. perhaps some consumer confidence on the back of the attacks of manchester, there are a number -- i don't think it is at this stage. >> thank you for coming to see us. chief investment officer. digital, but television up
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next, it's surveillance, talking of the u.k.. francine will be talking to diane abbott, the u.k. shadow secretary. this is bloomberg. ♪
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francine: showdown in sicily. trump and hosts of other leaders prepare to make their g7 debuts after awkward scenes at nato yesterday. fighting terrorism will be the focus following the manchester bombing, but with the u.k. furious at american officials for leaking intelligence to the media, the so-called special relationship faces its greatest test in years. cuts leave theec market guessing about a long-term strategy. good morning. this is "bloomberg surveillance ."


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