tv Bloomberg Daybreak Europe Bloomberg June 21, 2017 1:00am-2:31am EDT
>> joined the club. china stocks in msci inclusion. early market reaction is muted. testing teresa, the u.k. prime minister presents her legislative program in today's queens speech, but there is still no deal with northern ireland. when will that come, and how much will it cost? plus, royal reshuffle. the new crown prince replacing his uncle in a surprise move as next in line to the throne. it oil pressure, crude holes slide into a bear market amid
rising supplies in the u.s. and libya. ♪ matt: welcome to "bloomberg daybreak: europe." our flagship mornings show here in london. i'm standing in for manus cranny. anna: today's the day of the queens speech. the name is a little misleading, is not written by the queen, but it's delivered by the queen. is the first glimpse of the legislative agenda that is over the-- intended next two years by theresa may and her minority government. how many domestic policies does she need? the voting takes place next week. lots to talk about but more broadly, we need to talk talk about what's been happening in
china. take us through some of the market action. said there was muted reaction in the market today with china's msci inclusion, but of course it's been long suspected, they tried three times already and failed. here you can see over the last year a runoff of investors piling into a share etf's before the decision. we talk a lot about buy the rumor, sell the news. today it was by the rumor and save the news a little bit, so you can see that investors have been waiting, maybe some pulled out and maybe some got in, but there had already been a big position here. also, take a look at the risk radar here, i want to start off with oil because that will be one big market mover. as it was yesterday and overnight, oil coming down. you see crude right now, that
two cents move today not a big deal but obviously we dropped yesterday and that brought down the s&p 500. biggest, but still the slide in the s&p 500 since i believe may 17, so a couple of eggs we've seen a drop this and the index was hovering at an all-time record high. also take a look at what happened in australia overnight. we saw the asx 200 index fall 1.5%, a little more, and it's still trading right now, down 1.4%. gold is interesting as investors are getting into that right now, it still is not broken out of .3%.ange but up about anna: a quick look at the markets there.
let's go to hong kong. crown rate is deputy prince has been promoted to the position of crown prince, replacing his uncle in a surprise announcement that reverberated through the kingdom and put the next in line for the throne. it was a noun it -- announced by the press agency and then on state television. belgian soldiers have shown a .uspected assailant in brussels the station was evacuated after a: 30 p.m. local time and all trains were halted as passengers fled onto the rails with the sound of the detonation and gunshots. had intervened to neutralize an individual. in the u.s., republican karen handel has defeated a well-funded opponent in a special election for a house seat in georgia. the result is a setback for democrats who hoped donald trump
saw approval ratings would help them when congressional races. moneye raising far less than the democrat in the most expensive house race in american history. u.k. prime minister theresa may is to publish a legislative program today happy on brexit and likely to be light on anything controversial. the queen will read out the plan to lawmakers at 11:30 a.m. london time. marking the start of the two your parliamentary session. meanwhile negotiations for the support of northern ireland's the ub would give her sufficient votes to pass legislation in the commons is still ongoing. south africa must protect the independence of its central bank and must evaluate what effect the recommendations of the ombudsman to offer its mandate will have on the institution, according to the countries .inance minister
speaking in an exclusive interview with bloomberg. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. stories on there .loomberg at top it's been all about the msci inclusion today. wishing a little bit of fluctuation coming through. up by .4%. hong kong is weaker and we've seen weakness coming through in a lot of the energy players asx 200, downhe by 1.4%. toshiba coming through in its board meeting today saying it has picked -- preferred bidders for its member chip business. toshiba down by 1.2% in late trade. bhp billiton and rio tinto not only in correlation with the energy space but iron ore and hase has been news that rio
-- we had a little bit of weakness from qbe, falling the most in ten-month. fourth time lucky for the inclusion of a shares. showing that what we've seen in terms of these shenzhen and outperforming the overall dow jones index which is the clean line and the purple line which is the shanghai composite. but a lotbolic move of analysts say it's just the start and were expecting to see more inclusion of the age shares in coming years. thanks very much, juliette saly bear from hong kong on the asian markets. our top story is in china where the msci is designed to take the countries equities global including them in its indexes.
it gives the market a bigger role in the world stage than it already has. 222 a shares will be included next year comprising .7% of the global emerging markets gauge. fernandez saidy it would be focused on expanding the inclusion of mid-caps. >> the next inclusion is probably going to have a larger inclusion factor. and potentially as well be mid-caps, thehe second category is something we are very focused on. we would like to expand the universe of shares that are available to international investors. brian.or joined from what clinched the inclusion on the fourth try on the msci? >> for time lucky. basically the reason this has
taken so long is that msci's main issue boils down to china and the control that the government has here in the market. obviously regulators and authorities here have an outside level of control in the markets here which was anathema to some msci investors and index compilers. so what has changed? on the access level, china withd up a second link shenzhen and hong kong. reduce the list of stocks included in the end and relegated mostly big cap stops that they focused on. also addressing one big saying for international investors is the trading suspension issue which is quite prevalent here in china. they limited the ones they were
including, the stocks that had not been suspended for more than 50 days to address that concern. lastly, the other issue was china's assistance, another issue to do with control. i've got to pre-approve investment products linked to its stock. some of that process has apparently been loosened and simplified to msci's liking. anna: so that some of the detail of what they changed. what it means for the main and market, the allocation within the msci emerging markets, some say is more symbolic than meaningful. what does it mean for chinese mainland stock? >> you are right, we're seeing that in the reaction today. it's not an open arms sort of rally here that we are seeing. the index is barely up in shanghai and shenzhen. ultimately i think it's a good sign.
china's main and market, while it is the world's second big with $7 trillion of equity value, is still a very closed shop. this opens it up to pension funds, mutual funds, investors that track in index is. i think it will be a professionalizing force. it will give more scrutiny to some of the companies here and obviously it cannot be forgotten that this is a market dominated by we investors, which means it can be quite predictable. there can be heard mentality going on. the introduction of global investors with different perspectives and potentially more sophisticated strategies, so i think it's probably only a good thing. now here in the christophe donay. thanks for coming in. let me ask you, how important is
the msci to institutional investors? creates a: it benchmark of chinese stocks. considering that we could expect probably broader inflows in the chinese stocks. the introduction of chinese stocks in the msci index reflects .7% only. the chinese equities could become more prone to volatility, according to international stocks. and probably more prone to volatility according to the chinese economic cycle,
including the chinese earnings cycle as well. this is one of the reasons why, the introduction of chinese equities in the in this ci is marginal. the chinese authorities want to -- at the end of the 1990's, when we experience growth, creating huge volatilities with a huge inflow and huge outflows creating the crash. the chinese authorities a very the introduction of chinese equities at this stage of this story. ask you,as going to what does this do to risk, because in 2014 we saw the big
boom and bust in chinese markets. as our colleague was saying, we get more institutional investors ,n china, maybe that's a good but maybe crises in china will be transmitted around the world a little more because of this. our does that overstate it? your question is absolutely right. , what the chinese authority want since the beginning of the capitalist story of the chinese economy and chinese markets is exactly to what happened at the end of the 1990's when we experienced a huge inflow going into the country, going into the asian equities, creating a bottle and then a crash. chineseexactly what the authority wants to avoid at the time. the chinese economy is stable
because since 2008, in the wake of the subprime crisis, what we observed is credit growth is running 4%-5% a year faster than the normal gdp growth, meeting we are in excess credits for a long run, creating over the next five years or something like that. the possibility for a sharp correction in the chinese economy and a sharp correction on the chinese equity as well with a consequence of the international equity market as well. new story.a big thank you so much for joining us to discuss that. he will stay with us here on daybreak because there's a lot more to go through. here are some of the highlights of the day ahead. in london, it's the queens speech and 11:30 u.k. time.
protesters plan to march on parliament in the wake of the deadly tower plays and in the early hours of tomorrow morning, donald trump holds a rally in iowa. program,ing up on the a heavy serving of brexit. theresa may is set to publish likely to bes focused on britain's break with the eu. that is next. this is bloomberg. ♪
the blood. the most inping four years while crude stored on takers reached a 2017 height is month. according to the american petroleum institute, u.s. crude inventories drop by 2.70 2 million barrels last week. u.s. government data is forecast to show of 1.2 million barrel decline. toshiba has picked a group led by japanese investors as the preferred bidder for its memory chip business. toshiba said it's an injury to final agreement by shareholders meeting on june 28 to close the transaction by march. the sale or bring much needed cash into the market to make up for losses in its nuclear operation. alibaba chairman has said china's consumption will be the engine of development for the next 30 years. he added his company is not trying to compete with amazon in the u.s.. but amazon is a great company. they did a fantastic job in america and the world, but they
are an e-commerce company. we are not an e-commerce company. we help others to become e-commerce. we believe every company can be amazon. juliette: that is your bloomberg business flash. thanks very much, juliette saly out of hong kong. prime minister theresa may will publish a legislative program heavy on brexit in the queens speech shorn of had entry unlikely to be light on domestic controversy. westminster.is in what will we hear about brexit, and just to clarify for those who are not from the u.k., this is a speech from theresa may at the queen simply reads out. is that the case? yes, that is exactly right. the queen reads it, but the government rights it. that is essentially what we are talking about. theresa may that
she will respond with humility and resolved to the results of the most recent election. it's the first big test of her conservative minority government. there could be clues as to how big is -- how ambitious her plans are. in order to be sure the queens speech will be passed by a vote in the comments next week, that's the timeline here. 11:30 we get the queen delivering the speech, then follows the debate of the next few days and next week, wednesday and thursday we get the vote on what the queens speech contained. interesting to see if we get any conversation.p those conversations are ongoing. we were expecting a week or so ago that we would have the answers to just what they demanded in exchange for their support. we have not got that yet.
no doubt there are questions about the amount of investment and taxation in ireland. it could be the queen's speech will be very general to allow it to be passed. matt: i have a question on the national mood through the actions of the region here. to wear ais not going crown as she normally does. will come in a car instead of horses, which is also different from normal. is this kind of o-matic, the is itf pageantry, implemented of the queens lack of enthusiasm for this upgrade, and the second question, how much would that matter to the british people? it's a doubt very much statement about enthusiasm for the government. the queen has met and worked with many prime minister stating back to winston churchill. she is quite used to governments of all different flavors.
we are told the reason were seeing less pageantry is because of the closeness of this ceremony to other state events that require a lot of pageantry. she will be in a car and will not wear the crown. it's not entirely unprecedented. similar decisions were made at the beginning of world war ii and also a 1974 during labor protests. news,we do have breaking also fascinating. according to the new york times, travis kalanick has resigned as the ceo of uber. we had heard that he would be stepping away from his daily role as ceo. it sounded more like a sabbatical. the new york times is reporting travis kalanick has resigned as the cbo of cooper, obviously a $60 billion company that has been it hard by allegations of sexual harassment as well as
some other issues dealing with the press that have been problematic for investors. we knew that managers, some of the top managers were going to leave and some would be taking a leave of absence. the new york times again reporting that travis kalanick has resigned as the ceo of cooper. we will continue -- the ceo of uber. i want to get back to the european picture. stop -- christophe donay still with us. an election that most people saw as promising in france before that and one that was not disastrous before that. lesson, ortical risk do you see the possibility that it sort of rises up again this year? christophe: terms of the political situation, i would say that hopefully political trouble , maybe except in
the u.k.. i'm not a british strategist, but from abroad, the picture from the political u.k. situation seems something like it's in trouble. the second thing to mention that the the brexit is cost is very painful. the economic cost is very painful. is supposed to continue to slow down. don't forget that the u.k. economy was supposed to be the strongest economy in europe with 3% real gdp growth expected. now we are projecting only 1% for the u.k. economy. matt: economically punishing
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and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. matt: good morning, it's 6:30 in the morning here in london but 1:30 in the afternoon in beautiful downtown singapore. let's talk about saudi arabia. the deputy crown prince has replaced his uncle's crown prince. the groundally prints. the shock announcement puts the 31 euro leader next in line to the throne of the world's biggest oil exporter. joining us is tracy alloway. how much of a surprise was this,
given the power that had been building up? >> it's a good question. the thing that is surprising everyone is the timing. no one was really expecting this to happen so soon. the idea that it would happen eventually, people have been talking about it. we had seen the architect of saudi arabia's economic transformation plan in 2030 and a lot of moves that looked ambitious to a lot of people on the ground in saudi arabia. he was cultivating support among younger saudi arabia and and investing in technology, doing lots on government bonuses, cutting back to facilitate reformation of the saudi economy. that ended up being a little bit controversial among some saudi royals. they did think that he was basically making plans to succeed his father, and today a lot of people woke up and saw that those plans seem to have
come to an early fruition. i understand the prince has been crucial in the most recent standoff between saudi and qatar. what does this tell us about where that debate goes, and the reorientation of the saudi economy away from oil is something he has been keenly involved with. for saudi things arabia. he has not made it secret that he's not a fan of iran. you can expect that to continue. the interesting thing is the relationship now with the u.s.. both he and the existing crown prince had both been making overtures to the trump administration, both trying to achieve whole position when it comes to favorable relations with donald trump and his advisers. so that will be interesting, what happens now on that front. when it comes to the economic reform issue, it looks like a
big vote of confidence in those efforts. if anything, he comes in with a little bit extra leverage. at a minimum, he comes in with a longer mandate. he's 31 years old, compared to his uncle who is 57. anything he puts in now, it looks like analysts will begin in a little more comfort that those reform efforts will continue for longer with less risk that they will be pullback eventually. alloway, thank you for the latest on the developing story. let's talk about what's happening in markets and the reaction. >> let's look at european markets. the ftse 100 is doing very little. an interesting move there, you seen the move in the sovereign bonds. the oil story is fascinating,
wti coming down from this -- continuing in the bear market. the other story is what is happening with treasuries. is -- the curve is as flat as it has been since back in 2007. that's a story that the fed will be paying a great deal of attention to. a new edition of daybreak is available on your bloomberg and all of your mobile devices as well. isthe terminal, the function .ayb let's take a look at some of the top stories making miss it edition. the cover story is the queen's speech, queen elizabeth ii will outline the u.k. government's legislative proposal in london and it's set to be heavy on brexit and light on anything controversial.
it's unclear if prime minister theresa may can get it through parliament as power-sharing dragiations with the dup on. the telegraph reports that the norther party threatened to walk away from a deal with conservatives while a bbc report tweeted an agreement could be announced as early as tomorrow. space travel could also be a feature. let's move on and leave the u.k. for one moment to talk about china. chinese a shares will join the msci benchmark index handing the a bigger6.9 trillion, role in everything from etf's to retirement plans. saudi arabia could be next, on the watchlist of a potential classification as an emerging market. matt: we remain in saudi arabia, the countries deputy crown
prince was promoted to the position of crown prince, dropping the deputy part. he will replace his local in a surprise announcement -- he will replace his uncle and will eventually replace the king. pa reports he s restored all canceled benefits so the people should be happier now that they are getting more money. let's talk about the u.k. agenda here. the queen's speech takes place today in the house of lords, one of the houses of parliament behind me over the river. kallum pickering. a beautiful day here in london. are we going to get any granularity, any detail on brexit, or will it be very
general so that theresa may can be sure it will pass the vote? kallum: is going to be like when central banks released minutes. the markets will be splitting will findi think we out during the debates over the next week. interesting the things philip hammond pointed to was a bit more detail on the transition raymond -- transition arrangements that he has in mind. maintaining the current relationships in the about their being no cliff, but a ramp. the conservatives can play full-time. are have gonet ahead and got the brexit that they wanted. the key point is philip hammond is looking at the fiscal numbers
and he realizes it does not look good over the next five or 10 years if you have that cliff edge. he will do everything he can to minimize the damage within the next decade. a -- ofat do you make that target? many on the labor side have drawn the conclusion that the public has turned against austerity. he said we are not death, where listening on that front. fiscal taxe that the will be opening a little more in the u.k. or will he stick to that middle of the next decade target? kallum: if the economy is holding up, there is no reason why he should. i would be concerned if it is a tax-and-spend approach over the next few years. while politically it might be tough, the best thing the chancellor can do is limit the stressed government puts on the
private sector. anna: you talk about number of tail risks we face including the possibility of another election, the u.k. running out of time or even another eu referendum. something seem to be that is right at the front of the agenda right now. about rewriting the referendum. they will get some sort of brexit, it's a question of's -- a question of what sort. i can envision a small tail risk, the government simply and they will say hold on, our major problem here is the exit, the economy is in pretty good shape. again we just ask people if that's what they want to avoid that cliff effect. -- pushingng back
back on market expectations that we will see a rate hike anytime soon. he's had to come out and talk about the 5-3 split. people forget is the balance of demand and supply that causes inflation. supplies slowing a little faster than demand. the signal from mark carney is there is no august rate hike, which is probably sensible. i think the economy will actually do ok. consumer will do a little better than people expect. move you think the next from the bank of england is some sort of tightening move? others say the economy might weaken and the brexit negotiations drag on and the reality of it all hits home.
therefore we might need to see more's the. kallum: businesses are investing more than they were two or three orders ago and employment is still at a healthy pace. consumers are suffering a little because prices have gone up but .hey are opening their wallets going through a tough time where consumers are feeling the worst squeeze. if markets really believe the u.k. is heading for a softer brexit, and we see wage growth creeping up, we may look at the economy in a different light. anna: we had a conversation about whether we would see stagflation in the u.k.. is a medium-sized, open, liberal economy. balance sheets have improved over the last eight years. i don't worry about those risks
too much. anna: thank you very much for joining us. byt: we will be joined andrew sentence at 10:00 a.m. u.k. time. that's an interview you don't want to miss. there are some you questions about stagflation. some people think we are screaming stagflation right now and others think it's just the issue of the pound. south africa's finance minister has said the country needs to protect independence of its central bank. interview, exclusive he also said he needs to study recommendations that suggest altering the reserve banks role to focus more on social needs. released whileas i was traveling abroad. extent ofand the full
the remedial action being proposed in the context in which it arises, and therefore what , it seemsed pitfalls to be a conundrum in this regard. in the first instance, the context in which it arises is not quite clear to me. the pitfalls therefore of the amendment is also not quite clear, given the issues that are being investigated. thirdly, the procedure of effecting these remedial actions , the reserve bank is the mandate of the national treasury. portfolio made to the committee and not to the minister of finance, and having said that, i need to understand all this and make a determination on the best way
forward. court isitutional binding unless refuted by a court of law, which means that must review- it we them, we must go to a court and seek review. >> regardless of the context, the central bank is call this unlawful. to you understanding would it be unlawful to change the constitution in this way? thehe manner in which recommendations -- to change the constitution would not be unlawful but the manner in which it's being made would be unlawful. south africa prides itself in its strong institutions, many of which are independent, including the public protector, the south african reserve bank. and that way we take comfort in arefact that our courts
known to be independent themselves and to take rational decisions. therefore that will provide us with the proper way forward. then make the necessary determination. >> will do as finance minister support the reserve bank in opposing the public protector suggestion? moment, i'mesent interacting with the report to understand it in its full extent. once i had done that, i will all a determination whether joined the south african reserve bank. the publict of protector to make whatever recommendation, but i also support fully the independence of the south african reserve
bank and we must not take any measures that will undermine that independence. whatever decision we arrive at must not undermine the independence of the south african investment bank. anna: stilts to come, we'll talk about the u.s. agenda were politics and the fed meat. steve mnuchin speaks to bloomberg on the greenback after long bonds and the new fed chair. that is next. this is bloomberg. ♪
stepped down. earlier the new york times reported this, saying five of uber's major investors demanded that he resign yesterday. he will remain on the board as the founder of uber in 2009 but he has, the company confirms, resigned after coming under pressure from a series of controversies. treasuryhe u.s., secretary steve mnuchin has been speaking to bloomberg on a range of topics, including the possibility of issuing altra long bonds. a new fed chair and the performance of president trump's economic team. he spoken about the need for the u.s. currency to be strong and dependable. we ask him how he defined a dependable dollar. >> the dollar is the reserve currency of the world. it's not our focus where the dollar is in the short term. certainobviously
negative aspects of a strong dollar as it relates to our exports, but on the other hand, a strong dollar is a vote of confidence in the u.s. economy and the trump administration, similar to what's going on with the stock market. this is one of the most important economic investment opportunities the u.s., and were seen a lot of attractions here. >> a few months back you were talking to a colleague of mine and suggested altra long bonds -- are you walking back from that? >> i'm not walking back. it's something we are very seriously considering. i think it is a tool the government should strongly consider and we are reaching out through the drawing committee and investors to see what the demand is. we don't want to create a program that's a completely one of program. we want to see if it would be an important part of our borrowing capabilities. >> in the past, people in your
position have been advisers to the president. as the president solicited your advice on who the next chair should be? >> we're working closely together in making recommendations to the president. he and i have interviewed all the people and have made joint recommendations to the president. >> what do you think constitutes a good fed chair? what should the president be looking for? anye have not made decisions yet on the fed chair, whether we will have a new one or not. we will be working closely together with the president as we consider all the issues. >> we were so much about the palace intrigue, discord within the white house. what your sense of how the economic team is working together? >> they could not be working better together. of us.a combination
we meet constantly and we could not -- we are working together. gary and i have known each other and havey long time worked together very closely in the past. a week after the federal reserve's much anticipated interest rate hike, dallas fed president robert kaplan has been laying out his preferred timeline for shrinking the central bank's balance sheet. >> it's my own view that we should begin the process, begin the rolloff sometime later this year. my best expectation is it will be appropriate to begin this process sometime before the end of 2017. christophe is still with us. let me get your take on the fed's move to not only raise rates and stick to its forecast,
but also strike a slightly hawkish tone as far as reduction of the balance sheet. are they getting a little bit ahead of themselves? christophe: what we expect is both, the fed to continue to hike interest rates at a very slow pace compatible with the strengthening of the u.s. economy on one hand. what we expect is an announcement by the end of this year of the beginning of the reduction of the size of the balance sheets of the fed. and what we expect for next year is something like 400 billion u.s. dollars reduction on the --ance sheet meaning according to academic research, the rise of long-term interest rates because of the balance sheets. anna: how much of a tightening function do you expect that
balance sheet run off to perform? i ask because they are very keen at the fed for this to be very well flagged and preset and set out for the media, for investors, so everybody understands when it's going to happen. is that a risk if this performs a tightening function? christophe: we don't know exactly how the long-term interest rate markets will react to a balance sheet reduction by the fed. research,to academic what we take into consideration ourselves is the increase in the fed balance sheet during the subprime crisis and after that is to being the equivalent of a decreasing of interest rate by 100 basis points. if we assume the impact will be symmetric, in the case of reduction of the size of the
balance sheet, what we could expect over the next years to come is a rise in long-term interest rates, but it would take time to achieve because of course the fed will reduce the size of its balance sheets. and aggressively, step-by-step, over the next six or seven years , especially we don't have any reduction. depends on the economic situation in the u.s. as well. matt: thank you so much, , joining us today. chinese a shares will join the msci benchmark indexes. we will dig into this move next. this is bloomberg. ♪
matt: welcome. i am matt miller. anna: i am anna edwards. deliverye clean disputes. it is written by the government. the government of the day is the conservative minority government. aresupport -- how confident they they can get controversial policies through parliament? we will get clues with the speech. we have to talk about the china story, the saudi story. more conversations to be had around these markets at the moment. the oil story especially hurt stocks. we had the s&p 500 down.
we also saw that carry through into asia. take a look at futures here, after a drops. missan see the percent price, that red column, shows you where stocks are calculated to open. slightly in the negative on the ftse. more negative on the dax. as far as the oil price, take a look at where we are trading. .rude down not a huge drop, but a dollar drop yesterday. s&p, not trading. just want to show you, although it was a decent drop, it is from a record high. not much of a problem if you are long u.s. stocks. take a look at australian stocks.
that was that if you were long. down 0.5 -- 1.5%. gold has done fairly well. up a quarter percent. let's get the first word news. >> thank you. deputy crown prince has been promoted to the position of crown prince. in aplaces his uncle surprise announcement that reverberated through the kingdom. it puts him next in line for the throne. the announcement was reported by the press agency. shot an soldiers have suspected assailant after a minor explosion. andstation was evacuated all trains were halted as passengers fled onto the rails amid the sound. confirmed military
staff had intervened to quote neutralize an individual. in the u.s., a republican has defeated an opponent for a house seat in georgia. it is a setback for democrats the low approval rating of donald trump would help them win. u.k. prime minister theresa may is to publish a legislative program, heavy on brexit and likely to be light on anything controversial. the queen well read out the plan on occasion stripped of most of its usual pageantry, marking the start of a parliamentary session. negotiations are still ongoing. global news, 24 hours a day,
powered by more than 2700 journalists and analysts. you can find more stories on the bloomberg. the msci inclusion for china ina is front and center market sentiment. we have also had this big rout ing into resource heavy markets. australia, leading the decline. the energy sector off 2%. upside on thesome csi 300. looking at some of the stocks we have been watching, toshiba in focus. rio has picked -- not only the oil story but iron or. or, falling the
most in 10 months. significantsee claims in the emerging market decision. you can have a look at this chart. stocks, the large cap outperforming the dow jones index. a lot of analysts we have had on our show, saying it is a symbolic move. comeuld expect in years to , this could be even bigger for china as they open up their market to foreign investors. matt: thank you very much. theette with the latest on markets. china stocks are to be added to the msci benchmark index. aile the announcement is landmark step in the integration, it will initially
have a small effect on the amount of foreign money flowing giant stock market. $6.9 trillion. global equityk of as well. >> when you do all the computations for the number of shares and the market cap, all of that, you look at what could investors put into the market, through the shanghai program, the ceiling was restrictive. therefore, what we are able to do is spend time with the regulators. they will work together with us to see if we can get it done in one step.
our announcement is two steps. making sure we leave enough flexibility. we are joined by a fixed income products specialist. this is clearly an equities move. it rounds out the story of china make in the wrong moves. >> we welcome their inclusion in the index. china is incredibly important and we definitely welcome this initial step. for a longn working time to get to this point. we encourage seeing either in -- even further integration. think of the medium term this is a great first step. increaseo see that
over time. further down the track, medium-term, i think it is a positive step for all of us. ambitious they have in the bond market that sit alongside this? looking at including china. there are a few factors and hurdles that need to be overcome. which is of the fact the currency is not fully flexible yet. there are hurdles that need to be overcome. china andlong-term, its bond markets,, as they become further integrated, i think it is a positive step. he wants further internationalization. track, it is going to be positive. you expect from the
chinese economy? there is concern about a harder rather than soft landing. now people are raising their growth forecast. >> china has been a risk because it is such a huge player in the global economy. it is a risk that people have cited, what if there is a black swan event. there were discussions about a hard landing in china. they have engineered pretty successfully. taking out a little bit of the shadow banking, the credit. still a huge number of issues, leverage. it is a huge boat. we think so far they are managing to engineer very stable, strong growth. slightly lower than before. we think the risks of a hard landing are reduced. we also saw msci talking
about other emerging markets. promoting some. which markets do you think don't quite get the recognition that maybe they deserve. where should the spotlight be in terms of bringing in other emerging markets? we have seen a huge amount of improvements. some ofen you look at the frontier markets, africa and also south america, when you look at the bond market, you have seen huge inflows. some pretty positive structural reforms. a lot of bond investors are being pushed in today's economies where they are getting decent levels of kerry. seeing very liquid relatively level of kerry.
cuts. and a time when we are seeing perhaps the fed raising rates, we are getting decent sources of income for these markets. when you transpose that to the stock market as well, it is a huge area where investors are looking for incomes, decent returns. we are going to see a push for more markets to be included. we certainly saw saudi markets reacting, didn't we. blackrock fixed income specialist. up next, i met with mr. for the queen's beach. coming up next, joined by a i am at westminster speech.queen's ♪
8:15 in berlin. let's get the bloomberg business flash. ceo has resigned, the company confirmed his departure at the new york times reported major backers demanded his resignation. lanickwspaper also said ka will remain on the board of directors. had losses after tumbling into a bear market. crude stored on tankers reached 2017 hi. set tovernment data is show a decline.
toshiba said it is aiming to reach a final agreement by the shareholder meeting june 28 and to close the transaction by march. the sale will bring much-needed cash into the japanese company to make up for losses and its nuclear operation. says chineseirman consumption will be the engine of development for the next 30 years. jack ma said he is not trying to compete with amazon in the u.s.. great company. they did a fantastic job in america and the world, but they n e-commerce company. we are not an e-commerce company. we help other companies to be e-commerce. we believe every company can be amazon. theresa may publishes her program today. let's get back to anna edwards inistments were --
westminster. anna: i am joined by joe kleiman. great to have you on the program. the queen's speech, we are looking at a number of levels. the domestic agenda. she is going to have to throw out a number of the more controversial policies. >> that is right. grammar schools are gone. preschool meals. that is gone. and of course social care. a hugely controversial issue that led to a collapse in for conservatives. that has been thrown out. we are here to talk about counterterrorism and infrastructure. brexitn emphasis will be . this is a two-year queen's speech. it is designed to cement the
negotiations that started this week. about the exit, we are going to hear something about that. there are huge variations in the level of granularity with could get in his speech. either we get a lot of detail or very little. we don't know which we will get. queen was to sit there and say brexit means brexit, that would be viewed badly. instead, what the government wants to achieve will be set out to some degree. the granularity remains to be seen. what can be achieved is very different. i imagine it will be more of the ongoing negotiation. what can be achieved is not just dependent on westminster. they have 10 mps, we thought we
would have heard about the details. if this is really going to be the first glimpse of where these conversations have gone. >> there is likely to be some sort of coalition. is what is called a confidence of supply agreement. a deal has not yet been reached. cushioning things until the last minute? we will not know until later. why are they jumping into an agreement with one another? simply because of the numbers. suggesting they want to keep the u.k. in the single market. help us out here. the dnp willf probably fall in line with the
government, if that doesn't happen, labor doesn't really have a way. >> no, they don't. if they could find a way to get everyone as in all the opposition parties together including sinn fein, that would be a way to do it. theoretically possible. but practically impossible, i would say. what lessons do we learn from the election? who turned out and who did not. what have we learned about what went wrong? >> the problem with the they were never able to consistently maintain momentum throughout the campaign. may started out with his position of strong and stable. that bubble, it didn't burst, it certainly started to deflate. jeremy corbyn, for whom
expectations were low, managed to improve his position. we saw a situation where theresa may went from plus 10 in terms -40.vorability to nearly anna: all kinds of getting behind theresa may to prevent any chaos. of what wouldul happen if there was another election? what does the polling tell us? >> the conservatives and labor are neck and neck. party inconservative this country is extremely good at, arguably better than any other, is staying in power. doing what is necessary to stay in power. if the conservatives feel sticking with theresa may is the less chance to hold onto to power, they will do that.
vote last forever. at some point they will flip and get rid of her. criticism thata she comes from another planet. anna: your words, not mine. >> not mine, either. anna: space travel is going to be a theme. not a new target for a trade deal. excellent stuff. thank you very much. i have got to give you a correction on a story we brought you earlier. crownarabia deputy prince, their new deputy crown prince, has actually replaced his cousin. not his uncle, as we said earlier. princehe same new crown but he is replacing his cousin,
not his uncle. blackrocktson, a product specialist, still with us. i have to ask about the queen's speech read for me as an american, this is an all thing. -- odd thing. the government right to a speech and then forces the queen to wherride it. she doesn't seem terribly thrilled about it. how important is this? >> it is very important. she sets out the new agenda for the government, this new government. this one is particularly important. aswill be looking at much -- much as what she does not say as what she does say. given the weakness of the brexitent, in terms of negotiations. time is going to be a critical
factor. i think probably this is going slimline speech. in terms of the pomp and circumstance, it is a very quaint, very british tradition. she isstand the reason not going to have a carriage is because it comes so close after the events we have just had. i thought it was because of all the horses are racing or too tired from the race. still a key issue? what do you think about the tax and spending plans? becausey have changed of the results of the election? >> they are probably going to be in the speech, very light on content. while we do think they will the strength of
the government is so weak, we think they are going to want to shy away from making drastic changes. it will be interesting to see how far they go in trying to garner support. there could also -- it will be interesting to hear some of her other plans. such as grammar school, she will have to script that completely. a lot of the focus will be on brexit. too, whether she is trying build bridges with the other parties as well. she is going to need a letter of support. matt: thank you very much. marilyn watson, for joining us on such a busy morning read that is it. bloomberg markets, the european open, is up next. this is bloomberg. ♪