Very interesting. It is an a 2007 low. 10932 a week euro down a 10th of 1 . The big points, today boys come out today. Of course, on greece, janet yellen finishes her testimony over in the states. He speaks in lincoln of all places. Across europe, it is on a sixday winning streak. We are not going to make it seven. The cat 40 is pushing high as well. In the equity market in france just to get some stock movement. The big news was the watchdog in the u. K. In the Telecom Industry keeping and i on this particular company and the possibility of a breakup. They might have to push out the opening. Bt group down by 2 10 of 1 . Stock goes up by about one third of 1 . Climbing the most in some five years. Up by 1. 2 . That is in europe, lets head out to asia to get an asian market wrap. Yvonne good morning, jonathan. We see out of this greece drama there are new bailout terms anything in the green as a closed on the trading day. Shanghai, what a volatile day. A fourday winning streak for the negate desk nikkei. All the stocks down under there are up. The shanghai up. 4 what a day and other volatile day. It jumped to the highest we have seen in six years. We saw a bit of an advance as well. Please a hundred of companies coming back online. Again, 24 , less than a quarter of the market still frozen. You see the breakdown here what happened first, we saw a plunge of 2 than the scifi percent swing up 5 swing up. Exhilarating to a record accelerating to a record. That is despite those gdp numbers. There also are some concerns on the Financial Sector because the stock market home has really been what is fueling this sector with these increasing record trading volumes. Everyone is trying to open an account. Now that we have seen the fragility of the stock market wiping out nearly 4 trillion and value. Down about 1 today, and more doubt coming for the rest of the year. One of the hedge Fund Founders talking about how there are large implications. Bigger than the u. S. Subprime mortgage crisis. I want to end this on currencies. The new zealand kiwi is really taking a tumble here. It is that a six year low. Inflation 0. 3 way below the 2 target rate. There could be another rate cut in the cards. Jonathan thank you very much. Human europe, pushing high but a couple of points. The dax on a sevenday winning street streak. Greece is in focus, the equity markets dont seem to be much of a problem. Protesters rocking the capital tonight as lawmakers passed a bailout. Our Bloomberg Team has more on this story. Caroline hyde is in athens. Prime minister separates alexandra doesnt look like he is the fight to rebuild his government here . Caroline he has some willing to do. They managed to pass this bailout with really quite a significant amount of yeses. There were just in excess of 60 knows but a bulk of them came from his very own party. But now, then . Will he have to continue to pass legislation while winning the opposition . Next week in the next vote comes on the second part of the bailout. It will do tend on winning the opposition when he needs it, or really form a new unity government . Could he called the elections . He is a very popular man. I spoke to an analyst, they say he is still the man who holds the reins. He is the most popular man amongst the population. It would seem that they we could see a bit of a reshuffle of his inner sanctum particularly those that spoke to vehemently against the bailout like the Energy Minister who said proudly he would be voting no. We could see a reshuffle in the longer term. We could see new elections. Jonathan hans nichols, Caroline Hyde says he holds the reins in greece who holds the reins in germany . The finance minister had a message and he did not disguise it. Hans he is very clear that this will be a difficult process Going Forward in part because of the size of greeces debt. The problem is that he isnt offering solutions, he is only saying what isnt possible. He says it isnt possible to offer a haircut within the eu. At the same time, he doesnt see how you can make greeces debt sustainable. How do you square those two statements . Before he headed into that meeting. It is a difficult challenge. Take a look at greeces overall debt burden. They are maybe a little more pessimistic, these are eu figures. They have a baseline scenario and a worstcase and average case scenario. The average it 187 . No one will argue that is sustainable. You had more pressure out of washington for the imf. How do you get germany to budge . Yesterday they suggested extending maturities for 30 years could be a backdoor haircut. Even the backdoor haircut germany seems opposed to. That is a problem. Jonathan caroline, when i break this down, the germans seem skeptical about this, the greek government seem skeptical. The greek people are certainly have an opinion on this. We saw a riots last night. Tell the what it is like this morning. Caroline calm after the storm. It was a phenomenal scene behind me outside the parliament. 13,000 gathered protesting by police, and by petrol bombs. Today it is quiet. Many are saying we will not see violent interrupt again today. It might do next week at the next round of voting. We will continue to see protests, but not turning violent. That is what the local Law Enforcement tells me. For three weeks we have had a bank holiday. Will we see them open tomorrow . As yet, we have not heard if the bank holiday will be extended. Many said they cant see any likelihood of them opening before friday. Jonathan lets talk about that, hans lets talk about the European Central bank. The focus will almost explicitly be on greece. What is the story . Hans indications are that if greece moves with the political process, the ela will be increased. The question is how much collateral is left . Before they close the back, the idea was that you could have collateral that would backstop 95 billion in assistance. They are frozen just a little bit under 89. I slight increase it is unclear if that will lead to the opening of the banks. What we could get from the ecb is an indication that the ecb except the political process as it is happening, and they are willing to increase. Jonathan the Bloomberg Team in berlin and athens. For more, were joined by the yoga davon. Gentlemen, great to have you with us. I want to some with you chris, politically, this is the most unstable the eurozone has ever been. Look at the bond market, and we say doesnt matter so much. But it does matter. What is your view . Chris i think the are divisions between germany and france. There was serious stress underway. The question is what is the alternative . You have outlined the huge tensions. Grexit would be in a far worse position if we discussed picking up the pieces afterward. As her correspondents pointed out, the debt restructuring has staff forecasts. The issue of debt restructuring left to be on the agenda and the runup to that package. Jonathan a question for you, when you look at the situation they had the ecb money on july 20, and more money in august what does this do you look like . I think there will be a lot less pressure on the market in terms of what we expect to see Going Forward. I do think the market is very tired of defending greece. You after remember that it is a tiny economy. Its about a third the size of apple in terms of equity stock. I always go back to fundamentals. It is earnings that drive share prices not political events. I think what is going on is very difficult for the domestic economy. As far as a market event, i think the markets are starting to ignore it and go on to other broader issues. Jonathan another thing that drives equity markets is a weak euro and qe. I look at the 12 month, what is it . 90 . What will be the biggest driver of that. Chris maybe we can talk among Commodity Currencies coming of little later. I think the fed story will come through the next 69 months. Particularly this year, it is been on the short end. That hasnt even started yet. That will still be seen over the next months. It is very clear that the ecb is going to really manage expectations. Money market rates in the euro, and they really want to encourage a weaker euro. A both sides of the lending a very much driving that. Jonathan we at the deck above the other side of the trade, the dollar. The euro situation does that remain the biggest driver of european stocks . It is been the euro in q1 and q2. With a really be about earnings . Yogesh because of a weaker euro, would actually be elevated. As a result, you will see price appreciation. Everyone is in agreement with the markets to see dollar strength. We just look at bursting prices and a fair value. The euro already 18 undervalued. You will just an event like greece put massive pressure on the earnings. It really has not budged much. So whilst the market is talking we wonder whether that is really going to happen. Jonathan would you be brave enough to take the other side . Yogesh this is one of the many decisions you have to get right away. Jonathan you will stay with us and we would continue the debate after the break. Theyre going to return is that a problem for audi . A lot to talk about in the works. Coming up, with dark about the Worlds Largest economy. Janet yellen feeling bullish. A little bit later, netflix subscribers so soar. Is a bt breakup in the cards . Those stories and more. Jonathan im jonathan ferro, it is said to bring you up to speed with some of bloombergs top stories. You can telecoms watchdog says it is seeking information on a breakup of bt. Bt stock is slightly lower this morning. Protests arrested on the streets of athens overnight as the Greek Parliament passed a bailout to keep the country in the euro for now. More than 13,000 people gathered in the nations capital. Greek banks remain closed. Later today, the European Central bank will hold a meeting in frankfurt where greek Bank Liquidity will likely take the stage. The central bank will deliver a press conference given by the manner the top. Federal reserve chair janet yellen present an upbeat view on the u. S. Economy before lawmakers yesterday. She reiterated her want of a rate hike. Janet yellen the conditions likely would make it appropriate at some point this year to raise the federal funds rate target. The importance of the initial raising should not be over emphasized. What matters for financial conditions in the broader economy is the entire expected path. We have no judgment at this point about the appropriate point to raise. The advantage to begin earlier is that we might have a more gradual path of rate increases. We are not going to raise rates if we think it will put the economy into a recession. When they finally begin in a deliberate way looking at what the impact of those decisions are on the economy strikes me as a prudent approach. Jonathan im sure it is much more exciting than that. It lasted just over two hours. Just to start with you, this is the loosest tightening in history. Would you agree with that . Yogesh probably. We were talking about cash levels. I dont know if you saw the bank of america fund report, the duck about Financial Institutions now holding the highest level of cash. There is a lot of cash on the sidelines. In the end, theyre just happy sitting on cash. Jonathan chris, when you hear stuff like that cash and the sidelines, it is always something people might say. Over the last couple of months where else would it go . You cannot go because that was risky. Chris we are seeing that in the currency markets. We normally talk about the carrying trade. In indonesia in places like brazil, and turkey there are a lot of those local issues. Because of the high volatility, carry trades have not been popular. You have to choose your trades and ideas region by region. Jonathan as yellen goes into day to i was looking at commented a statement they released. On consumers, theyre continually saying Consumer Spending has picked up. They boost the Consumer Spending and lower prices will come through more definitively. Why dont i see that in the data . What is janet yellen seeing . Yogesh i think youre absolutely right. There is a lot of talk about a rate hike coming in september. We think it is more likely in december or next year. It is hard to see data supporting a rate hike in september. I think that is very confusing at the moment. Chris i just come back to the point about consumption. Talking about the oil shock from last year. Maybe we will see increased household savings. This wasnt going to get suspended, maybe it is encouraging to see that they do agree this improvement is a net positive for consumption. I think that is a more positive. You can expect a big paragraph of the bottom with but, that is why we are not going to do anything. What that means is, we think it was still a chance in september. It is not priced sufficiently i think the dollar is stronger against a lower euro. Particularly the Commodity Currencies, because they had hoped for fed tightening to do their work and weaken their own currencies through 2015. That is not happen so far. New zealand is cutting next week probably. Jonathan where do i go right now in the context of the fed . Or, do i just ignore the testimony today and get on with business . Yogesh i dont think you can ignore janet yellen. You cannot go in to the bond market with the possibility of rate hikes looming. When it comes to Global Equities that is the alternative to cash. That is what is bringing the markets high. We have a weaker euro and lower oil prices. During a minor headwind, it is slow going. This is a good place to be right now. Jonathan as a look at euro sterling dropping is that a better trade for me . If i want to trade sterling strength . Chris i think so, yes. It is probably the fed, but you mentioned lincoln later today. I think we think it will be uk data that drives the strength. So, im sure they are not welcoming sterling strength. Everyone wants a weak currency to sell goods into the euro zone. If so, i think the u. K. Economy is about 20 larger than it was in 2008. The bank of englands at the top of the pack. They will have the tolerate some sterling strength. Jonathan can the tolerate the stronger pound . Chris and this unless things go ground of crazy. There will be an adventure ebb and flow. The trends are very clearly low for the next 12 months. Jonathan thank you very much for joining us this morning. Up next are you better off listening to french radio today is that of janet yellen . They should chill out. The reinterpretation of trading i find far more to listen to french radio stations. Jonathan after the break, well bring you more from that. Jonathan good morning. 30 minutes into your trading day. Lets get you up to speed. The dax on a sevenday winning streak. The longest winning streak since march of this year. 100 and seven points higher. Up the board, the euro sterling drops to a fresh sevenyear low. If you live in the u. K. , and are going on holiday, you are happy. In the bond market, boring. The tenure in germany with a yield of 0. 83 . Italy with a yield of 2 . It was as high as 160 just over a month ago. We had gyrations in greece. In the move the bond market and the Commodity Markets lets gige up to speed on the top stories. You can tell a says it is seeking news at a breakup of bt group. It will hear hearings on separation of the company. It is slightly down today. Netflix subscriber growth soared today. And now a 65. 3 million subscribers. European car sales accelerated at the fastest pace since five and a half years. Car sales have risen for 22 consecutive months. Bloomberg tvs guy johnson spoke to hugh hendry yesterday. Take a listen. Hugh theres some of the most magnificent macro managers in the world. The cedar prophecies for 2018 you find nothing that they write about happens. How much did they lose . Then you see they made so much money. They got everything wrong in that intellectual debate and seems to get stronger. Guy is that because greece is paying the bill . Hugh i just dont think that is the case. I dont think recent significant. It is desperately tragic. Greece, the thing i told you that was much rampant language greece needs a grownup. Maybe it has to be imported. Greek people, the one thing they lost most is the normal political economy that we have come to accept. Guy china, it has had this pivot, is understanding the need to get the household sector going. That they need to create domestic growth. When you look at the volatility in the stock market over the last couple of weeks, is that part of the transition . Is that some and they just have to go to will through . They do to figure out how that will start to get into the sector. What is going on there . Hugh let me tell you why i believe we are seeing a blue market in chinese equities. We have long seen a dissociation between Economic Growth and stock Market Performance in china. It is not a mystery. China was a bit like one of these copper retailers where you can increase your capital by Opening Stores but the margin return is collapsing. A smart analysts can see it. China was there. The gdp machine were being obliterated. Once they rejected that model, you see an improvement in marginal returns. That pivot can be extreme. You go from equities having no interest to being something of perpetual value. That is important. China is very much like europe in 2012. It had a debt problem. Chinda a had it in its local administration. The banks can do alchemy. They can take the paper, and you get free money to put back into the economy. China can do that. Chan is the preferred beneficiary of the end of the booming commodities. They benefit more from what we have seen. The chinese currency is the safe harbor because it reflects all of that. In terms of trade, it has improved dramatically. These give you the ingredients way longerterm bull market. The mystery is why it is so distrusted by the investment community. Again to my knowledge, in 2010 i was looking into gdp growth. Peoples at how can you belong on china . This model works better. The danger is that we display to o much with the retreat in chinese equities. Things got out of hand. The thing is, we cannot by the crazy stuff. My biggest problem was that i was not keeping up with the markets. I own the hang seng enterprises. Im a lot happier owning that today. Jonathan lets bring in guy johnson. People remember the videos that he was featured in of the ghost towns in china. Shorting china, here he is a few years later coming out of the wilderness. What is the story . Guy he used to believe in the dollar. He is not a goldbug anymore. He was huge on the dollar. They made 35 . He now really believes in the equity story. He believes that we are going through a big paradigm shift. He thinks wages will start growing. You Things Companies will start paying people more money. That will be in a very Virtuous Cycle where Previous Capital has one. Now whats up north will start winning. He only has one play at the moment are. Tc sees china as being a big part in that. Jonathan the last five years that has been a Strong Equity story. You do wonder why higher wages would be good. Guy it will improve productivity. He talks about 40s hims fordisms. It was crazy. Ford doubled the wages of the staff. As a result, he would really pick up the best of the best. He thinks that will start happening again. The reason why we have nothing productivity improving is because companies have not favored labor enough. That will start to turn. Once you see the consumer it went to the other extreme of the 70s. You could end up with a 20 year. In which Wealth Creation is pushed towards labor and that can be good for stocks. Jonathan talk to me about the story of the man. Height of the financial crisis made a ton of money. Then it went quite. Been a big trade played off. Guy he said he never worked as hard in those three years he was struggling. He made a series of calls which the board not convinced that life. Three years of really working hard. He had an epiphany moment that was at jackson hall. It was this recognition during this speech of what was happening in europe. There was the tacit recognition of everybody in the room that the u. S. Needed to start taking more restraint. The u. S. Would get back to the Global Economy and would start doing some of the heavy lifting. The dollar would strengthen. The biggest aggregate demand but with the acceptance by the fed the dollar would go up. He saw that early at jackson hall. He may that play, he switched to the strong dollar nad completely turned around his funds. He said it was all down to that jackson hall moment. Jonathan he is back in a big way. You can find the full interview on bloomberg. Com. Still to come, the top performer in the s p 500 this year sold 10 following its earnings. Were talking about netflix. What bigname Hedge Fund Managers have been saying about this. Jonathan welcome back, lets get to one of our top stock stories. Netflix surging 10 after hours after posting Strong International subscriber numbers. Some big names in the Hedge Fund World have been speaking out about netflix. One recently sold his stake the cable . 6 billion. Making 1. 6 billion. Im not so sure if that is a sound signal. It is for him. Rodrigo, the Hedge Fund World is starting to turn against the company. For netflix, theyre delivering subscriber numbers. Roderigo they are delivering with the trevor numbers that have been impressive subscriber numbers that have been impressive. Their actual numbers are not that solid, especially the profits. Jonathan we use the u. S. Market exclusively and we did not talk much about the international market. Do you think it will be likely to continue in the next few quarters . I will also ask the question what are the next big markets . Rodrigo there are two aspects to that. It wasfor them to grow especially in europe. There is a lot of room for growth. Expected to open up into more european countries. Italy and spain of the two major ones this year. This quarter they are opening in japan. They expect to maybe open in china next year. Jonathan we have the original dramas, one compared to a sleek drug. That is been a key driver for growth. How important but that be . Rodrigo it is very important for them. That is what the company is selling to the market. They say 90 of their subscribers are engaging with original content, that is why they are producing more. This year we expect them to release their first films. They are starting to produce films another languages. Jonathan great to have you with us this morning. Lets get the conversation on corporates. U. K. Regulator announces it is seeking a potential breakup of bt group. First of all what are the ch ances it will be broken up . Talk to me about what this could mean. I think the reigning view is that bt will get this revue, but it may face a number of remedies. It is undergoing a big merger. The main argument for it being broken up is the infrastructure arm of telecoms. It has an underlying incentive to discriminate against competitors. Jonathan that is the argument. The question would be how long will it happen and how long would it take . I cant to that investors are overly disappointed with the news this morning. Kasper were ofcom to decide on breaking up it would happen early next year. That would mean a process of several years. Bt would challenge this position. This could freeze the infrastructure. Separating it would speed up investments. Certainly, bt has been trying to steer the company towards paid tv. Quite a sizable amount unchallenging sky in the English Premier League rights. Ofcom should focus more on that is that of making overreach its center. Jonathan very difficult to keep up with the Telecom Center this morning. The news of the potential breakup of bt group. Here is the equity market. Up. 4 . The dax on a seven day winning streak. One of the 25 125 points. Euro sterling falling to a sevenyear low. That stronger pound pouring gasoline over the rate debate in this country and the potential we are moving closer to that first rate hike in many years. Surging 5 after earnings beat estimates. A strong second half. Another index also pushing high. European car sales just keep growing. A lot for us to talk about. Up next, what to watch out for the rest of the day. That did much more coming up. Jonathan welcome back. Here is what were watching for the rest of the day. We get euro zone inflation figures. The press conference a little bit later. We also hear from a couple of Central Banks today. Mario draghi is speaking at 7 00 p. M. As 7 30, janet yellen speaking again in the second day of her testimony. Goldman sachs, Citigroup Google supporting earnings in the u. S. Some big names speaking as well. A big name after the break. Completed the banks that a fairly good run. We have suburb jpmorgan to go through, we had a vote in greece last night. Could there be anything stopping them from raising the ela . We have stephanie into talk about that. Who will go first . She said it again yesterday. She was quite upbeat in terms of batting away china and greece and talking relatively in an upbeat manner about the u. S. Economy and preparedness for the first rate hike. We have stephanie in the first half hour then talking about the ecb. It is a demers the ecb will take center stage. I believe it will be reacting what will it take for them to increase liquidity support . I believe greece will enact the reforms. Jonathan we sit across him another, and are having this debate. When you listen to the noise coming from germany, a man skeptical about the deal wondering if this is the right deal. Prime minister Alexis Tsipras also says this is in the great agreement. It cannot. The definition of badness is doing the same thing again and again madness is doing the same thing again and again and helping you will get a different outcome. If you do not have a Prime Minister that wants to abdicate can you get the greek people to remotely embrace it . And contribute more to the taxation. It is a fairly tough obstacle to overcome. I think it is interesting that he actually touches on haircuts and debt. It has got to be something that is part of this bailout. Make it up as you go along. Some people have accused this of why not changing the rule . Jonathan just to wrap things up, as you say standing by this rate hike scenario we are of says with the meetings in the press conference. She told you not to be. Yes although would the fed dare to raise rates . Would they dare to rasie raise rates in this environment . That is what we did not have dissemination. With a raise rates . Perhaps it is the better thing to do. Jonathan do not miss the show. As we head to the break, and wrap up this show, the ftse 100 up. The dax on a sevenday winning streak longest winning streak since march. Some decent numbers of 5 . Only going to talk about one thing in the fx market that is euro sterling. He will be a happy man about that. That is it for me. Good luck with the rest of your day
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