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tv   Bloomberg Markets European Open  Bloomberg  July 25, 2017 2:30am-4:00am EDT

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♪ guy: welcome to bloomberg markets. the european open. manus: we bring you the first trade of the day. i am manus cranny with matt miller and here is what we're watching. the hiatus is over. greece returns to the bond market after a three-year pause. will investors be interested? the germane camps, lender said to be moving 1/5 of its balance sheet from london to frankfurt. what is john cryan's plan?
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c is for costs. out for that falls on concerns around advertising spending. ads, will they eat into profits? hour less than half an till the european open. let's look at how futures are trading. we have green arrows across the board. the strongest gain on equity index futures is in london. the ftse there am a futures trading up .4%. the frankfurt trade, a point dax futuresain -- .2%. not a lot of movement today as there wasn't yesterday, either. yields hovering around the 0.5 level. right there right now. the question is, will investors really go risk on today? buy stocks, sell the booms and
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try yields up? and dry the yields up? dollar-yen,e got dollar down, yen rising for six days in a row. 110.86 is where we are. one thing that, i cite this morning was the japanese government bond market. the 40-year paper. 2005 forst demand jgb's. that is why yen is a little stronger this one. some oscillation in north korea, south korea and china. europe set to open up 16%. currency is the prism through which we look at risk. the point that the euro is overstretched, he is quoting cable. let's get a play on your gmm. your first with -- for -- first word news. juliette: donald trump's
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son-in-law jared kushner has said he had no improper contact with russian officials during the presidential campaign. the white house senior adviser made the comments after spending two and a half hours anthony -- answering questions examining meddling by moscow in the 2016 election. collude with russia, nor do i know of anyone else in the campaign who did so. i had no improper contacts. i've not relied on russian funds from a businesses. and i have been fully transparent in providing all requested information. greece will return to the bottom market after a three-year hiatus. banking on investor interest in its recovery. the epicenter of the sovereign crisis in 2009, looking to sell five-year bonds. it is also inviting holders for -- 4.75% bonds to tender notes
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to cash. bonds are expected to be priced today. chuck e. cheese president has urged qatar -- turkey's president has urged qatar as he wraps up a gulf tour. madepports efforts being by kuwait and said initiatives underway to resolve the crisis through a dialogue should continue. during his trip, he met leaders and saudi arabia, kuwait and qatar. deutsche bank may shift about 300 million euros from the balance sheet of its u.k. entity to frankfurt. according to a person familiar, the project dubbed, calls for trading in the german city to go live in september of 2018 and the assets to moved by 2019. that is as asset trainings migrate to the climate following brexit. poland's government has vowed to redouble efforts to overhaul the judiciary. this after the president struck would bill yesterday that
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have replaced the country's supreme court judges and revamped the judicial council, which makes key personnel decisions. his decision followed eight days of nationwide protests by tens of thousands of poles. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i've got some breaking news. thanks for that. this is about a german bread -- private drug maker, they have 66.25ed an offer at share. and cinven have been working on this. elliott already owns about 9% of stada's voting rights. they may get in on the deal too. bain and cinven are going to buy
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stada after shareholders except the bid. manus: i didn't get a chance to say good morning. let's talk about u.s. politics. john mccain underwent surgery last week and will return. he will return to washington today. the senate proposed a take-up in embattled health care proposal. his presence would provide a lift to gop lawmakers who were urged by president trump yesterday to seize the moment and move on to move appeal -- repeal obamacare. congress was almost there on getting a replacement through, it was said. >> the senate is very close to the boats it needs, the problem is we have zero help from the democrats.
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their obstructionist, that is all they are. that is all they are good at, obstruction. reporter on the team, good to see you this morning. very symbolic moment seen john mccain, later on today. very symbolic, very powerful message to the gop on this day. >> absolutely. it is not escaping notice in washington and something i have think -- been thinking about, some of the year he parallels between this scenario and back in 2009, 2010 when they were passing obamacare and another person considered a lien of the senate, ted kennedy, was diagnosed with a similar form of bank -- brain cancer and came back for an important vote. these things are already -- always very emotionally charged because senators know each other and someone might john mccain, who has been in the senate for 30 plus years, for him to be
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gone and make the effort to come back when facing such a difficult health issue himself, i think that carries a lot of emotional weight and sway with fellow senators if he is able to make the case for doing something one way or the other. matt: the first thing i thought of, does this change the way john mccain feels about the health care issue or other republican senators? here he is coming back from what must have been an incredibly does hee surgery, really want to put so many americans in a position where they are unable to afford that? kathleen: that is a question that a lot of folks have raised, people up and talking about. take a looking to at the number -- health care congress members receive, members of the senate who are more affluent than the average middle-class american, that has raised a lot of issues and underscores the importance of
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having health care and the difference between the u.s. system and a lot of other countries of the world. manus: and interesting you touch on that, that very ironic disconnect. senators, financially remit cash -- that is the irony. to peopleure, perhaps who need health care. what is the voting look like? kathleen: it will be close. something i was looking at, mike pence's schedule. the vice president is able to vote only to break a tie. renault, the republican majority is 52-48. they can only afford to lose two republicans to advance something. assuming the lost those two republicans, they would need pence to come in and break the tie.
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he has are ready had to do that as vice president. it is something joe biden never had the opportunity to do. how close a lot of these votes have been so far this year. i looked at his schedule for the day, he plans to go to the hill and have lunch with republican senators. he will be there already. if he is needed, he will be on hand. manus: indeed. thanks to kathleen hunter from our u.s. politics team. let's turn the conversation to markets. mark cudmore joins us from our mliv team out of singapore. mark, let's talk about the of politics on the markets and the stalled trump agenda. we are reminded by this health care discussion that none of the things that donald trump campaigned on have been accomplished yet. what does that mean for markets? we expected so much at the beginning of the term. obviously we expect no
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fiscal stimulus to come through anytime soon. what has been impressed is u.s. assets are still trading well. equities are at a record high and treasuries are still doing very well. we haven't seen that break out in yield we might have got it there was a bailout for the treasury market. the one thing that has suffered as the dollar. there is a little extra risk premium in the dollar because of trump and because of the uncertainty around the administration. overall, the reminder that u.s. assets are doing well, particularly equity markets means the global market is still solid. we are still in the golden hawks environment for equities. a great environment for equities. script, thel go off jgb auction caught my eye. yen is up for seven days zero. -- in a row. an interesting turn of tide.
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a guild auction, 40 year paper went really well. n is telling me something different in these markets, isn't it? is an idiosyncratic story. the offering for the 40 year auction was 50 basis points above where it is in the 20 are part of the curve. a bit of extra pick up and yields. also, you've got the fact that abe is a little under pressure. the view that if abe does go, maybe abenomics ends. a little risk priced into again. i don't think it is proper risk aversion. however, while i think it is great environment for equities, and the overall backdrop is good, that is a longer term story. we are entering into summer markets and we have a few weeks of slight turmoil in trading. we could get dips unexplained in the short term. it is not a super positive environment for the next two days or two weeks, the overall
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backdrop for the next few months is pre-positive. matt: tomorrow should be interesting for you, our viewers, investors. the fed decision coming out. we not expecting an increase, to reducemore details the balance sheet. i have a chart hillary put together. it is a look at the short levels on two-year treasuries. it has come to a record. we haven't seen this big a short position since 2007. what is going on here? mark: i think he might be disappointed because we may not get as much turmoil out of this meeting as people are betting on. a significant chunk of the market, at least the trading part, is betting on the fact we get an early announcement of balance sheet reduction. the base case for economists is that he will be announced in september to start in october. enough people betting the fed want to give market time to adjust.
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enough people betting on the fact they may announce at this week. that is why you are connecting short-term turmoil in the market. this is not a bet on the extra rate hikes, but balance sheet reduction will cause yields to move up and the fed my -- may deliver a message that we still want to do balance sheet reductions and a rate hike. the market doesn't believe them, but that is the message expected to be delivered this week. matt: mark, thank you. mark cudmore from the mliv team. you can check out his blog on the bloomberg. for insights that are worth it, especially in the morning getting ready for markets to open. still to come, oil heats up. as saudi's pledge export cuts. we are live in st. petersburg at the opec and friends meeting. this is bloomberg. ♪
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♪ manus: just gone 7:47 in london let's get a business flash. alphabet shares fell after second-quarter results highlighted the company's cost arising as it spends more to expand googles advertising businesses. the company reported sales minas payouts of 20.9 billion dollars. that was in line with forecast, but below bullish expectations.
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profit was hammered by a record antitrust fine from the eu. akzonobel has reported second-quarter profit that missed analyst estimates. speak --ointed ceo seeks to convince shareholders targets set by the predecessor are achievable. earnings before interest in taxes decreased 6% to 200 -- 461 million euros. the chairman announced he plans to retire in april and the company appointed a new chief operating officer. probe over its a business dealings in guinea. back comes months after australia's federal police started an investigation into payments related to the 20 inlion u.s. dollars project the african nation. the company said it will cooperate. that is your bloomberg business flash. matt: juliette, thanks.
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saudi arabia has promised deep cuts to crude exports next month. the country's oil minister also urged better compliance from other producers. >> we have seen healthier numbers than many have anticipated. in terms of supply, i think the picture is mixed and we acknowledge there have been unexpected developments. matt: joining us now, bloomberg middle east anchor, yousef gamal. what do they accomplish in st. petersburg? quite a few things. even though there was no surprise in terms of policy, they still made it very clear that there will longer be any free writing. the minister is pointing to that. they will crackdown on countries like iraq. they're happy about complaints,
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but could do more on that. the other thing, they could continue to be agile, people to attempt to market positions. everything is on the table going forward depending on the situation. that could include cuts, an extension of the agreement, but also, what do they have to show for the human tories? it is not -- inventories? here is what the russian minister had to say. >> this is a topic we have see the bearay and sentiment in the market. that is something which is happening. if we want to talk about the price, we should start by saying it is incorrect to compare current prices with the price level at which it was before the deal, because obviously, the price before the deal in -- hadr, october, it was a significant premium and was pricing in expectation. not been in those
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negotiations, the market doesn't see all the prior work, the price could have been $10 to $15 lower than it was back then. now, bears are still in control and the ceo did come out and say the physical differentials in those spreads are starting to improve. we will have to see if this turns or not. yousef, from here, it looks as if you have a mighty fine time in st. petersburg. keep up the good work. think it is is in prepared we are minutes away from the trading day. next, one of the big movers in the after-hours trade. out of that, google parent -- alphabet, google parent came under pressure. more concern over the rising cost. that is next. this is bloomberg. ♪
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♪ matt: well-connected european open. we are minutes from the start of cash trading. touick stop -- few stocks watch. one traded in the u.s. but globally, google. earnings andrted sales that were in line with analyst estimates. revenue, minus partner costs. it is those partner cost that up concernedg that have
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investors. nonetheless, the stock gained. page, check out the anr the pricing yellow with the 12 month target in white. you can see how many buys the green represents versus holds in yellow. you can expect that price target to be raised again. manus: don't fight the trend. see how that opens later today. shoes, imaging gets a bit. $1.2 billion. that is a premium to last night's close. you also see stada on the move. with covestro. 56.5%.
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exceeding 2015 levels. patrick will discuss with matt miller and myself, what is next on the checks on covestro.
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♪ just under 40 seconds to start of the european trading day. set for a brighter open around the european equity. yen tells me risk off, yen is rising. the german info index to come in. a little short covering in the currency markets. paireddividuals named germany is going to be a complex. underperforming the alpha in london. matt, good morning. matt: i am looking at the dax.
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slightly longer-term perspective, if you look over the dax hasr, allrperformed the msci country world index. the reason is a strong euro, but also carmaker woes have been a real problem as the diesel concerns rise. manus: matt, there you go. if i had a bell. markets are open. we are off from the gallup. 73.83 in london. , they willoming out have a meeting. aex up. london up .2%. waiting for gdp numbers. lots of conversation is morning on daybreak. mispriced, the boxes moving. their agenda to do a transition period of time. 130.30, cable is up.
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you can markets a little stronger. let's get across to matt. and little breaking news? matt: on the carmakers, we have been talking about this the last few days. since the german magazine on friday broke the story that the regulator -- cartel was looking into alleged collusion between daimler, volkswagen and bmw. now we are hearing the u.s. is reviewing possible allegations of collusion between the german carmakers, as well. i think of them as three, if you break out porsche and audi from volkswagen, their own by volkswagen, they are five major german carmakers that are being talked about in this collusion scandal. under investigation by the german cartel office. they have parted and hit by that hard on friday and yesterday, in trading. under investigation by the eu. we found out a commission is
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looking into it on saturday and now we are hearing the u.s. is reviewing these allegations as well. possibly the investigation has been thought about by the department of justice. that can provide more pressure on carmaker stocks at the open. manus: we will get straight across to nejra cehic, just one balance. the european commission and germany's cartel office said on saturday the have received information about a possible collusion and are studying the matter. just looking at the dax, immediate response in the tax on the carmakers. vw unchanged, dialer up .8% in bmw -- daimler up .8%. merrick, taken away. 2.25% steady. slightlyets moving higher up about one basis point, 1.19% is where we are on the
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10-year gilt yield at the open. in terms of european equities, if i look into the industry groups on the imap for the stoxx 600, you were talking about carmakers within this wheel, they would fit into the industrial section. that industry grew up -- group up. some of them said unchanged at the moment. real estate and utilities outperforming on the upside. materials, as well. energy up .2% despite crude. ,peaking of over performance stoxx 600 versus the s&p 500. an interesting chart. the difference in relative performance if you talk about it in local currencies. that is blue line. if you talk about it in dollar. when you look at these stoxx 600 and s&p 500 in dollars, the s&p -- stoxx 600 starts to look at
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her in relative performance. i have been talking to guests recently about the relationship between bond markets and equity markets. risk premium is what we are talking about a lot of the time and citigroup saying bond group still too low to hurt equity prices. they are saying the 10 year yields would have to hit a 3.7%. bund years 3.3%. to be a threshold to equities. you can see we are far from those yield levels on bonds right now. thanks very much for that. is's take a look at what going on as far as the individual movers. i am most interested in the carmakers, but i did see when manus flashed a board of the carmakers, a couple are gaining. i pulled up the mov screen on the stoxx 600. boxme quickly strong down and look at the percentage change rather than the index
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points first. udc -- you do see anglo american as a winner. glencore, up as well. covestro, kind of leading up. the rear of the pack. we will be talking to the ceo in a moment. tose earnings, and according dz bank, great second quarter. as far as losers, let's look at the index points. i'll pull down the drop-down menu, looking at index points. b.a.t., one of the biggest losers. vodafone, not a lot of standout trends yet as far as winners and losers. kind of like the bond trading general. -- trade in general. interesting to see the individual stories in today's session and the big thread --
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story is going to be the meeting that starts today and ends tomorrow. manus: absolutely. what will the fed have to say? that is the question for markets. they have a two-day meeting that gets underway this afternoon. aile the market is pricing in 0% chance of a hike next month, the investors are watching out for the announcement to the start of the balance sheet runoff plan. numbered intelligence reckoned the fed will signal the unwind would get underway. peter chadwell is ahead of european rates. do agree, no move today? that is an autumnal surprise. but should be? the fed has been at pains to communicate this is clearly to the markets as possible. if there was something in the statement saying they are on track to start reducing the balance sheet in the fall, i
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don't see a problem with that read it would help transparency, it would help market pricing and it would mean less risk of taper tantrum. fed is trying to prevent an unwarranted tightening of financial conditions. manus: he want to avoid an unwarranted tightening. the two-year market believes inflation and the fed is fully engaged. these are net short positions for to your government bonds and they -- two-your government bonds and they are cranking it up. would you be part of this short the two's westmark? -- two's? peter: i don't like the flattening or on the u.s. curve. once the reduction starts to accelerate, it is more than -- of a 2018 story. if we also get more week headline-- weak data, inflation will still be
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weakening in the u.s., if there is no pickup in wages, i think the market is going to be assessing over this further deceleration of inflation in the u.s. and there will -- they will be thinking, what is the -- where can the fed funds go to put the two-year rate higher? i don't think the two-year rate can go that much higher. to be a expect there hike in september and we just expect the balance sheet is all the fed can do for the rest of this year. matt: for the rest of the year, you don't expect hike in september either? peter: no, this has been a long-term view. we expect them to do one more hike next year, but really, it is about the tightening of financial conditions that will start to materialize as the balance sheet runs off. it should mean further hikes are substituted. we are also expecting, if the administration lame-duck, we will see
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the market continued to factor out upside risks to growth, fiscal stimulus expectations are going to be pared down and that will have -- it will bring the economic cycle closer to the end. matt: peter, can you can't that out -- count that out? is that all about the fed now? we thought we would get fiscal action with the administration, but should be an easy win, it doesn't quickly are getting any kind of legislation. peter: to talk about it in terms of where the 10 year note is going to change. i think it is fair value for an administration that is a lame-duck. not doing anything on the fiscal side and therefore, growth expectations don't change. therefore, the only thing i yieldcould lose the higher from here is the balance
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sheet reduction. what the fed does, definitely a significant impact on long-term yields in the u.s.. as the balance sheet unwinds, i think we start to get financial conditions tightening slightly, and that is going to be always managed to get. -- all we managed to get. it is going to take a turnaround of events in washington to have a different view and pricing more rate hikes from the fed. therefore, we don't expect the dollar can really recover from here. matt: peter him and you stay here with us. peter chadwell, head of rate strategy at mizuho international . a lot more to talk about with peter. havet to remind viewers we new headlines out on the automakers. -- andimler mercedes have been hit hard, the stock has been hit hard the
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last couple of sessions. friday and monday because of allegations of collusion. investigation we know is opened by the german cartel regulators and the european commission looking into it. i was confirmed saturday. now we are reporting that the u.s. is reviewing these allegations as well. there is no indication of a formal investigation get up and by the doj, but the u.s. is reviewing allegations on collusion the kobach for decades -- that go back for decades. one big blow on car reputation after two years ago. manus: you're talking about five brands going back to 1990's and you said it yourself, these stocks have parted and knocked bmw and 3% on monday. up next, the uk's trade acknowledging a transition period might be necessary for striking a deal with the eu.
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how long will it take? we discuss brexit and the gilt market next. ♪
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♪ manus: welcome back. her up in market open. 14 minutes into the trading day. european market open. 14 minutes into the trading day. rising, paring asian
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stocks running high for the past 10 days. overnight comments about the resilience of the eurozone. ask up .2%. -- ask up 2%. -- dax up 2%. the movie store is the auto story and the progress now about further investigation. the u.s. said to review allegations into the german carmakers. vw down .5%. a little move. mrr on your dax. , red shoes on the bottom. jimmy choo, it out there, 230 pence, a hefty bit. the stock traded 227. the bid comes in from michael cores.
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stock trading just below the bid size, 800 96 million pounds. $1.2 billion. looking to buy the shoemaker, jimmy choo. the deal, $1.2 billion. i have been looking at recent fun acquisitions and know that jimmy choo floats in the middle of valuations. cass amigos tequila went for $1 billion. the shoes are worth slightly more. --ks about to copy going just a couple of interesting smaller mid-cap level. bikes,shoes, tequila, the way you role in this show? matt: don't use them altogether. something moret serious and close to home. the u.k. trade secretary
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acknowledged it would be a stretch for britain to negotiate a trading relationship with the eu by the time of their divorce in 2019. another sunday u.k. government will seek a post brexit transitional period, he said "it will be nice to think we could get a full trade agreement by march of 2019, but that would be an optimistic view of recent free-trade agreements." stay with us, p or chadwell, head of european rate strategy at mizuho international. up, they won't be able to reach a trade agreement in a couple of years. it took the eu 18 years to reach a trade agreement with canada. how do you see this going out? will we have an indefinite transition period, because the eu and the u.k. are not going to be of negotiate a trade agreement in that amount of time either. peter: indeed. the way i see this pointing towards there being something -- the referendum called for
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brexit, what can be delivered is going to be termed a soft brexit, something like the a dealsolution or still which aims for a hard brexit but has such a long transitional deal that in reality, it is a soft brexit. we're probably going to have to go towards a second referendum at some point, is where i see the greatest probability of an outcome. matt: how does that shakeup for the pound? peter: positive. matt: we have seen it come back up to 130 and change right now. is that optimism for a soft forecasts if your are confirmed, do we see the pound gain strength against the dollar against the euro? peter: i think the move to the pound is relatively small. i've seen cable fair value at 132 for what it is worth, but i also think that what is priced short sterling in bank of
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england hawkishness should evaporate. i don't see that data to support it. we are likely to see significant bank of england members change their tune back towards a more cautious approach. the dynamics are going to be positive for sterling on the trading go she nation stance, softer brexit materializing from the more hard brexit people such as dr. fox, but on the other hand, you've got the interest rate differentials not supporting much further strength in sterling from here. just small upside, i think. manus: one thing that caught my eye was the public are borrowing requirements by 7 billion higher than it was last year. this is a trajectory. we got this from bloomberg intelligence. if you have a longer transition period, moderately worse fiscal situation, what does that do to
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the international buyers? the keeper of the lights, i call them in the u.k.. transition is a good news, a soft brexit might be good news, so this would add to a guilt iltitive story -- g positive story? peter: more supply than is priced into the market. i think we get a steeper curve, which allows more foreign investors to keep lightswitch , but itorting sterling is really that the yields are going to start to entice them a bit more. i think there is going to be more term premium as the political flap is relatively strong but the monetary policy dynamics are not going to be very clear. there is still a lot of optimism priced into the curve and that is going to get flushed out and we may see the skilled curve -- curve a bit of a
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emerging market currency. matt: peter, we will hold you with us here. there is still a lot to discuss. you mentioned optimism. the greeks are coming back. we will talk about europe and or globally. peter had -- chat well at mizuho international will stay with us. i want to get to an important interview. second quarter profit rose, marking the 10th straight quarter of implement for the company. with us, patrick,'s, the ceo. he comes to us live from germany. reading to analyst notes, it seems investor, analysts, pleased with your results of our. -- so far. i wonder when you look at this kind of success, how do you reward those who invested in your company? i know they have been asking for a bigger dividend, they have
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been asking for more buybacks, can you give any cash back to investors? patrick: it was a record first half here in terms of that and 10 except -- consecutive quarters of year on year of is a pretty promising performance for us as a startup company. we have seen a lot of good growth in the market and that is very positive, but what is happening at the moment is we are seeing a lot of strength in sales, as prices have risen with a very high industry utilization rate. so we have been profiting from that, as well. not only that, we have been improving our mix in terms of product range. that has been driving the sales value and will drop straight through that all -- to the bottom line. that is positive and generates a lot of cash. as you say, shareholders would and some sure of that cash we have said to them in the next
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24 months, we don't carry out a significant inorganic growth step, we will share that with our shareholders. most of our shareholders who were in from the beginning have enjoyed the almost threefold rise in our share price. do meet many of our shareholders who started from the beginning and her pleas with that performance. beyond that, -- and are pleased with that performance. we have to invest in some in growth. it is not much. it will be something like 5 billion euros of cash generated over the next five years. we have also said to the if we haven'tthat used a significant amount of that in the next 24 months, we will return that either sure -- through share buyback or special dividend. that gives us an opportunity to look at add-ins to our portfolio. it is not going to be some make a deal. there is no opportunity for a fourth leg in this business.
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it has to be through adding added more, which specialty elements to our coatings, 80 did -- adhesives, specialty business. we would like to grow organically -- in organically. matt: that make sense, if sales are growing, you want to take advantage. if there are areas you can strengthen through acquisition, i know you have been talking about this in the past. not a major deal, though what parts of coding and special unity need strengthen? which areas would you look to do that had an purchases in? -- add-in purchases and? patrick: there is an overall check on inorganic growth and it has to be value grading. a lot of people are doing deals which i think they will regret in the future.
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any sort of do acquisition if it is value creating for our shareholders. that already rules out a number of possibilities. we want to achieve one of two things with those. you either want to increase our geographical scope for businesses we are in or we want to add new technologies into the portfolio to enhance the range of technologies we can offer to the 4.5 thousand customers we have in the business area. it has to fit those business criteria. we have a list of 400 different possible targets. i will clearly not speculate on them with you today or they might get rather expensive. that is the way we are looking at it. typically they are small. they are relatively minimal in size and they are probably not on anyone else's radar screen. very specialist types of companies, very often family operated. manus: we don't want to let any
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cat out of the bag. patrick, good morning to you. i'm series to get your perspective. we spend a lot of time talking about the value of the euro, we ruminate over the rising value of the euro. you are doing business with it. it is your calling card, issued overvalued for you and getting to be a bit of a headache for you? as much as we are making it out to be? patrick: the only area we see currency exposure having any sort of impact -- and it is really the first time in the decade or more that i have been here that i have even talked about fx, the strength compared to the dollar is the important one for us. you can brexit is not a big deal. it is 2% of our business. everything we invoice and the u.k. we invoicing euro, not in pounds. america, we are pretty much self-contained. it is not a big deal.
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our costs are insane currency as our sales and the same is pretty much true in asia. manus: we are going to have to draw a line under it, but thank you for your perspective this morning. that is patrick thomas, the ceo at covestro.
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guy: the hellenic hiatus is over. greece goes back to the bond market after a three-year pause. they are planning 1/5 of its balance sheet from london to frankfurt. what is john cryan's grand plan here? on a collision course? the u.s. is said to -- there are no indications as of yet of a full doj investigation. welcome to bloomberg markets -- to "bloomberg markets: european open."
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i am matt miller in berlin alongside manus cranny. manus: 30 minutes into the trading day this tuesday morning, and here is how things are shaping up. equities are holding off nicely strong. the stoxx 600 up .25% this as the federal reserve begins the two day meeting. will they talk about balance sheet reduction? keep an eye on those auto stocks. let us get to juliette saly with your business flash. juliette: manus, alphabet shares fell. the company's costs are rising as they expand the advertising businesses. the company reported sales minus partner payouts. that was in line with analyst consensus forecast, but below more bullish expectations. profit was hammered by a record
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antitrust fine from the european union. michael coors has agreed to buy a jimmy choo for 896 million pounds, clinching the stilettos. the companies have approved the deal that will see the handbag brand pay for the luxury shoemaker. akzonobel has reported second-quarter profit that theed analyst estimates as newly appointed ceo seeks to convince shareholders that targets set by his previous predecessor are achievable. in separate statements, the chairman announced he plans to retire in april and the company appointed another other as the chief operating officer. telecom's chief executive officer is leaving the company after a greeting to a separate -- agreeing to a severance package. richest goldene
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parachutes ever granted. that is your bloomberg business flash. payouts like that, i thought they were the thing of a bygone era in banking. juliette, thank you very much. let us talk about greece, back in the bond market after a three-year hiatus. they are hoping to bang on investor interest in a recovery story. it is expecting to be -- peter chatwell is the head of european rates strategy at mizuho. this is a very symbolic day for greece. prove that they have got market access. three years ago, on sellers increased in september, but they haven't seen the value that the bond fell.
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if you will invest in that, you would have a rocky ride. they got an upgrade from s&p in the outlook for the rating on friday. board.t the imf back on the international monetary fund signed up with the conviction that they want to the relaxation from the you -- from the e.u. things are looking up in greece. the privatization program is on track. the government will wait for the majority, but it has held on for several months now. so it is good timing, but it is all about market access. this is not a one-off. of aeds to be the start sustained reentry for the capital markets in the coming year. manus: from a market perspective, -- i think that within an ejb portfolio, there is a place for them. they need to be carefully segregated within the portfolio and managed. i think, over a six-month horizon, it will probably work out well, switching out of the
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2019 into this new bond. mark: performing bonds in europe this year. manus: yes. matt: that is the interesting question to me. mark, that means us first say i will never forget the fixed income class you gave me as a young reporter 17 years ago, and was then andricing is now still the most interesting aspect of bonds. why would an investor -- they are being offered to tender their bonds for --, their 2019 bonds, why would they trade them theyf only for the reason thought they would get a better price for the new offering? you are expending your maturity, going from a two-year bond repayable in 2019 to a five-year bond, which is what the new issue is. there is a real pickup because of the way the yield curve works . there is a liquidity premium
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hopefully in the new issue, which will trade more than the old issue. if you remember the bond class, liquidity and healed, and what you really want as an investor. there is a lot of reasons to think investors will switch out newhe 2019 issue to the issue. it ensures there is a backstop of cash that will come into this it,issue, and let us face the rise you had on the 2019 issue on the way down to 55 102.6 -- get into the new issue. you will pick up maturity. good reasons. of the most important classes i have ever taken a bloomberg. peter, let me ask you about what is making that roller coaster rides possible and if it will be a problem for the next issue as well. will come back in.
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they have sealed the 1.8 billion euro deal. we had the story last week. are they guaranteed to stay on board? is that the most important piece of this? >> the most important piece of this is that it is no longer an anti-austerity government. relatively conventional. the main opposition party is even more conventional. the political situation looks .airly good reestablishing market access will actually be a good thing. this is very much the switch rather than -- there is a tender there. the real test will be when it is a solid auction in isolation with no tender offer, which should happen, i think, in this environment where fixed income assets are in such short supply.
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these are good conditions. manus: i think that also is predicated on who picks up these bonds and whether they can bring in some of those better-no names, some -- better-known names. what does it say about systemic risk of the great european project? >> funny enough, i think brexit the --ing greece because will think schaeuble wants an increase out of the euro -- wolfgang schaeuble once an increase out of the euro. the new music about greece has changed. the commitment is there to 27 and gethe e.u. 201 some reform in brussels. so this is helping greece. greece is back as a fully fledged member. they have been on the outskirts for several years. peter: we have this economic swing.
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it is only right that countries such as greece, they are given the opportunity to go into this, whether or not this is a full on reintegration of greece into the eurozone. it will still be a reintegration that could easily reversed. the political risks have significantly shrunk. matt: thanks very much to professor mark gilbert, bloomberg gadfly columnist, and peter chatwell. you can click on any of the three panels we have got up for panels.tive you can see although the functions and we use as well as taking part in the conversation by clicking on the blue link at the bottom of your screen and writing in.
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latest developments on those reports of collusion of german automakers. it is a big deal and another piece of a very difficult story for this key german industry. this is bloomberg. ♪
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manus: 22 minutes into the trading day. nejra cehic has everything from information to making trading day, to chocolates. >> let us start with business
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intelligence. business intelligence and academic publishing, writing the most since february 2016 after its first revenue beat, but it has agreed to sell. the shares hitting a record high on that, up 6%. performers ont the stoxx 600, if not the best at the moment. upm, one of the worst performers. sh paperthe fini manufacturer. finally, i know you have been looking forward to this. t down 3%.king at lind its forecast the weakest revenue growth in at least eight years. operating profit also missed analyst estimates. it has been a bit of a challenging u.s. market for nestle and hershey. its three vamp of the
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russell stover brand in the u.s. is taking longer than expected and has been weighing on sales as well. were: those chocolates expensive in the zurich airport yesterday. by with saly standing your first word news. juliette, i know you are in suspense. manus, u.s. senator john mccain, who underwent surgery last week for brain cancer, will return to washington today as the senate prepares to take up and battled health care legislation. the development could boost republican effort to get enough votes to pass the measure. his presence could provide a lift to gop lawmakers, who were urged by donald trump yesterday to seize the moment and move on a repeal of obamacare. meanwhile, president trump and his advisers reportedly theussing in private possibility of replacing attorney general jeff sessions. according to the washington post, citing people familiar with the talks, some --
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members of trump project circle, including white house officials, have increasingly raised question among themselves in recent days. turkey's president has urged qatar to negotiate an end to the crisis. a spokesman said president erdogan -- during his trip, he met leaders from saudi arabia, kuwait, and qatar. the government has pledged to overhaul the judiciary after struckesident down bills that would have replaced the supreme court judges and revamped the judicial council, which makes key personnel decisions. his decision followed eight days of nationwide protests by tens of thousands of people. global news, 24 hours a day, powered by more than 2700
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journalists and analysts in 120 countries. this is bloomberg. matt. matt: the u.s. is said to be reviewing allegations that german automakers colluded on technology to gain an advantage over rivals according to a person familiar with the matter. there is no indication the department of justice has opened a formal investigation, but we cartel in germany and the european commission are also theseg into this -- collusion allegations. joining us now in the berlin chris how significant is the u.s. getting into this? they are in enough trouble as it is with the european commission. chris: it opens another front. volkswagen'sth issues with the u.s. government, they have to be careful with what the u.s. does and how they
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view actions and activities that may have taken place in germany. overseer watching their every move right now, so it is significant that volkswagen have to pay attention. daimler has had its issues in the u.s.. they had a point appointed -- court-appointed overseer. they have got to watch there back in the u.s. both of them are -- matt: is bmw the odd man out here? the report suggests that daimler and volkswagen have kind of turned themselves in to the cartel to try and get a little bit of an advantage, was a blower advantage. meanwhile, bmw is the only one who is basically denied -- has basically denied the allegations. what does this set up look like to you? anis: bmw did come up with interesting statement where they pointed the finger at their arrival, saying "hey, we are clean. we have taken a tougher line with these omissions. we have two separate visions
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running, not only on the testbed, but also on the road." att was a bit of a dig volkswagen's troubles and daimler as well. they are trying to remove themselves from the situation. everybody was involved in these things. manus: they're a good morning to you. it is election year in germany. angela merkel is at the polls. how is this playing out politically? is it precedent in the press? precient in the press? chris: it is difficult for one party or the other to claim ownership of the issue. people are trying to get political mileage out of it, but for the spd, the main opposition party, is they have been part of the government as well for most tenure.l's it will be difficult to get
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political -- ri merkel is very close to the auto industryder. -- merkel is very close to the auto industry. manus: we saw the sox get a bit of a smack on friday, a double punch yesterday. there is a moderately small movement today. what is it that moves this story forward. is it a concrete piece of evidence? is it something which validates the der spiegel article? chris: right now, the automakers have not come out really strongly. volkswagen, daimler, are the next ones that have to comment on the reports. we will hear something from them. volkswagen hold a supervisory board meeting and reports earnings on thursday. those are the next sort of calendar items that we should hear from them in a little more detail about how they react to this and see it. so that is the next point in
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time. whether the regulators go more formal in their investigation and beyond the studying phase come and go into formal raids, they do that quite often in germany. steelid that with the probe. those are the next events that will really show to what extent and how much -- obviously, if these allegations are proven, would be very costly, especially if the european commission weighs in. to me, the bigger problem looks like the possibility of cities banning diesel and the possibility of diesel not being allowed at all. diesel makes up 46% of bmw's total global sales. how serious is this issue? we hear about the mayor of munich and these are the biggest car cities in europe talking about the possibility of banning diesel cars from their streets. chris: that is a significant
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threat for the german automakers because they need diesel not only in terms of sales -- they could sell gasoline engines and more or less be fine. they would have structural difficulties in changing the mix, they could manage that, but diesel is really important for the german automakers in terms of co2 emissions. diesel is lower co2 emissions, so they need that to meet these tougher and tougher guidelines int are set to step up 2020. they do not have the electric vehicle to offset that cap. threat, thato the will be a significant addition. if diesel gets under more pressure from this and the share of diesel continues to climb, it will cost them a lot more money to -- they might have to pay fines on that front as well. matt: from the safety talked toe -- i have
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executives at bmw who say "look, our euro six diesels are very clean." i think they are allowed to drop 8/100ths of a gram. is there a possibility to get rid of the admissions with diesel if you have a big enough container? can you just cut all commissions out of a diesel car? -- can you just cut all emissions out of a diesel car? chris: the problem is also much the criteria but whether they meet the criteria on the road. they design these cars specifically to meet test criteria on the testbed, but in real life operation, they pollute a lot more than they say. that is the issue that diesel has been facing. that is the knock on diesel. matt: not everybody loves cars and finds this stuff as interesting as we do. thank you so much for your time,
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chris reiter. manus. manus: thank you very much. this will turn into one of the biggest stories of 2017 if the allegations are proven correct. 2017xt, we talk about why has been a banner year for deutsche bank ceo john cryan after a rough 2016. the details, up next. ♪
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8:55. , the ceo, john cryan 300 billion euros worth off the balance sheet to his entity. let us get to the writer of the latest story, mr. ed robinson. you met him. has he got his swag back? be back tolieved to business. passed.oil of 2016 has he has raised $8 billion in fresh equity. he has a turnaround plan. he has established some stability, which is something deutsche has not had in a long time. he is glad to be back to talking to clients and doing banking. matt: unfortunately, we do not have enough time, but i will tweet out this story. i will put it on my facebook for those of you lucky enough to be friends with me. it is a fantastic piece that
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edward robinson and the team put out. check out as well. up next is "bloomberg surveillance" with francine lacqua and tom keene. i will be on bloomberg radio with carolyn hester for "daybreak europe." ♪
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francine: concern for health of that with earnings season in full swing. make or break time for the u.s. stock market? is deutsche bank about to move 300 billion euros of assets from london to frank for? -- to frankfurt? lending surges. this is "bloomberg surveillance ." i am francine lacqua in london. we are looking at data and some of the earnings and


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