Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20170911

Daybreak europe everybody, this is our flexion morning show from the city of london. I am anna edwards. Lets start to whether dollar has got to. The dollar index and the dollar the risk onyen and attitude coming through on markets, rebounding from the lowest in two years. Different than when we went into the weekend in europe when the conversation was on owning anything but the dollar. The two waiting on the currency lifted a bit, which has to do with Hurricane Irma and north korea. It is clearly deadly and very devastating to those affected, but not quite as powerful as has been feared and it spared miami, meaning some of the protections have been coming down. No missile tests from north korea yet, also lifting Risk Appetite a little bit. We are higher across the asian equity markets,surprise we see strength in the japanese markets, the weakness in the yen , a rest bite for japanese exports as the risk is coming through in Foreign Exchange markets. On the u. S. Markets, suggesting we will be higher, the u. N. Voting on increasing sanctions toward north korea. John yang warned pyongyang warned that could result in hostile measures. 09 we got down as far as 2. 01 in last weeks trading session. We didnt go below the psychologically important level, but we saw the risk on attitude and market, helping to weigh on treasuries and lift those yields a little bit. William dudley saying the hurricanes could affect the timing of rate hikes. Lets go to bloomberg first word news with Juliette Saly. Has warnedorth korea of the retaliation if the United Nations Security Council approves the u. S. Proposal for harsher sanctions against the country. Kim jongun says it is closely following moves with vigilance in the u. S. This comes after a draft resolution to tighten sanctions on pyongyang after conducting another nuclear test. Accelerated from earlier, Beat Estimates from all but one of the economists surveyed at bloomberg. It can support metal and can support the plan supply and demand. China policymakers are pushing back against the surging you on that made lifting of rule currency expensive. It will no longer need to set aside cash when buying dollars. The new straws currencies lower and analyst say it might become more range bound in the near term. Brexit secretary warned lawmakers if they block legislation today, it can lead to a chaotic departure from the european union. David davis rejects accusations the government has launched a withdrawal bill. The law contains henry viii powers that allows people to make changes to existing laws by passing normal scrutiny of parliament. Former white house strategist steve bannon said he is absolutely going to work on the republican assessment because of its lack of support for donald trump. In an interview broadcast on cbs , he said Administration Figures that disagreed with the president should resign. If you are going to break, then resign. The stuff leaked by the white house i thought was on accessible. If you find it on accessible unacceptable, you should resign. If you dont like what he is doing, you have an obligation to resign. Gary cohn should have resigned . Absolutely. Juliette you can catch more of that interview on charlie rose. Find it atyou can 6 00 u. K. Time tomorrow. Angela merkel has called demonstrators rowdies driven by intolerance. Despite some discontent over her liberal fiji policy, her christian democrats leads polls by 16 Percentage Points two weeks before the vote. Dont miss our weekly 30 minute germany decides show every monday at a 30 a. M. U. K. Time. 8 30 a. M. U. K. Time. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. The fact we did not have any action from pyongyang over the weekend and Hurricane Irma seems to be weakening has given investors reason to get the toes back into equity today. The nikkei up 1. 4 , the biggest jump since the second of june. Also, a big rally coming through in hong kong, particularly automakers. Sydney up 7 10 of 1 , doing far better than it was, up 7 10 of 1 . Asian stocks as a whole at the 10 year high. We have seen a movie out of those risky safe haven assets into riskier assets. Byd is an electric carmaker in china rallying on the news china wants to ban or phase out fossil fuel cars. Falling the most in six years, btv 5945, we are talking about the pickup in chinese prices, much better and stronger than what was expected. This chart shows the relationship between chinas food costs slowing. That is the yellow line. Then you have cpi moving sideways. Industrial prices are rising and Morgan Stanley has upgraded its pbi. Anna thank you, Juliette Saly in singapore. Hurricane irma smashed into florida with water and violent winds, wreaking havoc from miami to the western coast. The storm left 3 Million People without power and millions temporarily displaced. Hurricane irma finally it made landfall in florida on sunday as a category four storm packing winds as strong as 130 miles per hour. It crossed the florida keys this morning and officials described the situation as a humanitarian crisis. The storm is moving up the west coast, threatening naples, fort myers, st. Petersburg, and tampa, with Hurricane Force has high storms surge as 50 feet. I spoke with the mayor 15 feet. I spoke with the mayor. We are a lowlying community on the water. 3 in tampa bay, my office would be underwater. Thats what we train for. It is tempting to describe the storm in superlatives terms at it might be the costliest in it u. S. History. Florida may be spared the worst. The bad news is that this is a big monster, but we are well courtney did. Officials across the state will add up the damage and we will have a better idea of what is headed next. Erik schatzker, number, orlando. Coveragewill bring you of Hurricane Irma threw up day and key interviews on it object. The mayor of naples interviews on that subject. Both of those interviews you can see on bloomberg television. Joining us to discuss the hurricane itself and what damage it will bring to the economy. You join us on the state we are trying to address what Hurricane Irma means for the u. S. And the devastation it will cause, the damage to peoples lives, the loss of life will be tragic. But we should talk about the effects on the u. S. Academy. Goldman sachs has been reprofiling where they think growth will come through in the United States and we saw one Officials Say this can affect the timing of rate hikes. Think the two things you about with this kind of event, outside of human cost, you get a Capital Stock and the disruption to the flow of income. Only the latter actually features in the accounts, ironically, hurricanes tend to be good for gdp. The destruction doesnt feature. More broadly, what tends to theen, it doesnt disrupt underlying trend in economic growth. It will be harder for us to read the economy for the next couple of quarters at least. Cause, itake the fed feels like the market is betting that. Anna the expectations are around 25 , 30 on the wirp function this morning. How does that fit for you . They dont want to change Market Expectations or not hike in december. Guest a number of things have happened that think the fed will not go for it in december. If you look at swaps market, pricing at the end of 2018, you have one rate hike, not even one rate hike. Mid2019 before you get a rate hike. The u. S. Economy, in spite of these things going around, looks normal to us. Risk appetite is normalized. If you look at the eye is am, the isn, we need to get onto the process of normalization. Not much inflation. I dont think that should be a source of unease. Inflation is not a leading indicator. The leading indicators tell us things are looking good and picking up. Anna we have done a survey of where investors expect to see treasury yields and the number has been falling. Higher than where we are now. It is at 2. 0870 and the estimates are now 10 years rising. 10 year yields is the lowesttion since november, so it is coming down. Guest that has been the case for 30 years probably, but i think the bond bull run has outlived many of its detractors. I think that was one statistician that said eight centuries of Interest Rate data and this is the second longest and sharpest on record. Us,point is, right now for you cant own treasuries necessarily for most of the returns perspective. It is a safe haven trade right now. For us, if you look at nominal 5 in the that is u. S. That suggests a significant upside. Will it make it . Who knows. There is a significant bid for treasuries. Anna btv 3978 hundred lines the point of how treasury estimates have been coming down. There was excitement about what trump could deliver and i last week, we talked about how he seems to come together with the democrats to do a deal on the debt ceiling. Was this the start of some kind argan whathill grand you can reach across the aisle and move policy forward . Probably not. Maybe, you never know. It seems to let republican noses out of joint, so im not sure if that might be the case right now. When he was elected and before, the argued he would get less done than people argued and thats because if you look at history, the president s that have managed to affect the longest tend to be the consensus figures, the unifying figures. So far, President Trump does not fit into that mode every desk mold. Mold. Update. Ick apple is expected to interview three new Iphone Models on tuesday with an updated version of the iphone the apple watch. Also tomorrow, we get an update on u. K. Inflation with the release of cpi data for the month of august. They reckon the rates will take up 2. 8 . The u. K. President will deliver his state of the Union Address in 00 a. M. U. K. Time. David davis warns of a chaotic brexit if lawmakers block the government plans. Will they breakthrough with the legislative agenda earlier this week . Chances are, they might. We will discuss that next. This is bloomberg. , everybody,e back it is 6 18 in london, 1 18 in singapore. We got Hurricane Irma devastating and deadly, but the damage perhaps not as high in a Financial Sense as it couldve been and no missile threats from north korea. All of that lifting the markets this morning. Lets get a Bloomberg Business flash with Juliette Saly. Juliette uber and lift have been offering free right to shelters near tampa as Hurricane Irma headsup the gulf coast. They publicized the free rides on it twitter feeds and mobile alert services. Always givings right to hospitals. That will make it the biggest market to do so in a move that will accelerate the push them to the electric car market led by companies byd. The vice minister of industry and Information Technology says the government is working with other regulators on a timetable. Shares have tumbled in hong kong trading after the company warned its turnaround plan might take longer than expected. First half revenue dropped 5. 7 as a stronger euro cut into Tourist Spending in recent months. Apples most important new phone be called the iphone x. Strings of Software Code shows three models will be made. The new devices will be unveiled tomorrow and we will show you special coverage from 6 00 u. K. Time. That is your Bloomberg Business flash. Set you can lawmakers are to vote on the brexit legislation today. Getting the bill through parliament on amended will prove ded will be aen challenge. David davis warned lawmakers blocking the bill could lead to a chaotic departure from the eu. The head of Investment Strategy at barclays joins us here in london. As you look ahead this week, our reporting suggests those on the back of the gc could have rebelled might not be able to do so today. To committee stage. And the shortterm, that is the story. Guest it looks like it will squeak through. You hear from can carve and the like and they say they will let it through. The point is, government is in a fragile edition. The narrow majority has so much legislation to pass in the next few years. It will get it through and more broadly, what you worry about with the u. K. At the moment with regards to the eu specifically is that, you have a strengthening economy and an increasingly unified political class, thanks to helpful elections. On the other side, in the u. K. , you have a slow economy and a government not speaking with one voice, with a thin majority. How does this speak for negotiations to come . Is gettingation weaker. In his view, he was giving advice going up against the brussels machine, he said the mistake the conservative government made is to assume the eu wants a deal that works for both sides. Like german carmakers, for example, wont be. Do you think he has something there . Guest i guess. I think you are right in a sense. Extra negotiating leverage over the u. K. , the eu would have to be pretty an apt to allow the u. K. To leave their club with better or even the same terms of trade they enjoyed on the inside. That just seems a weird idea. On the other side, you could argue that the eu, feeling less insecure about life, there could be the need to honest the u. K. Might be a little bit less. Who knows . We can that the u. K. Does enjoy it worse terms of trade. Firstrate institutions, stable rule of law not threatened by brexit, but one thing threatening the u. K. Model at the moment is the squeeze on real wages. I pulled up this chart that shows u. K. Inflation rate, wage growth for consumers and that looks set to continue. Guest the consumer is where you are feeling the strain at the moment. Investment is flatlining, which you expect uncertainty around brexit in terms of trade we just talked about. That is deterring companies from investing. On the other side, the consumption story. That is a temporary thing. That imported spike in inflation will pass. You will get back to normal levels of inflation in 2018. However, it is not helpful given consumers. Our point of view, the u. K. When not go into recession but brexit will form a headwind on the u. K. Economy. The point from Capital Markets perspective is that the u. K. Not evaporate, but sizable changes in the growth rate might not be noticed by the worlds capital market, the uks economy is not even the dominant factor in the uks capital market. A mark on thees u. K. Specifically the cousin of guest i think i would go back to the point you made their, which is you want to be worried about everything the u. K. Evaporates in the aftermath of brexit. We still enjoy firstclass institutions, the rule of law, stable rule of law, and a benign democracy. Even amongst all of this turmoil. Relative to other countries, you have a benign drop and that is still longterm, critic a runway for investors. Create a runway for investors. Anna to what extent does the strength of the Global Economy and the upward pull that could bring to the u. K. Economy offset the headwinds from brexit . If the world is performing well, that could play to the u. K. Strengths. Guest it might paper over some of the cracks. While the rest of the world is accelerating, the u. K. Is not. A lot ofer people will say the Manufacturing Sector is doing well because sterling is devalued. We would put it differently. U. K. Exports have not been particularly price elastic. It is quite minimal and a low relative to others in the world. That suggests it is not so much to do with sterlings evaluation but increasing health and Robust Health of eu. Anna speaking of that relationship, to be get to parity . That would be a nice touch for the eu. Guest that would be quite interesting. For us, looking at sterling on a mediumterm perspective, in all but the very worst scenarios, but tactically it is hard to call direction. Anna william, thank you very much. He stays with us. You should be aware we will be joined on the Surveillance Program by the chairman of our bx. Thats from 10 00 u. K. Time. Lots to discuss terms of the Banking Sector and the brexit. Up next, spd leader Martin Schulz restarts his campaign. We bring you the latest on germanys upcoming election. We talk about a coalition after the german would look like after the german election later this month. Thats coming up next. This is bloomberg. Welcome back, everybody. 6 30 in london. 2 30 in tokyo where weakness in the japanese currency comes as a welcome relief for those Companies Listed in japan, the exports. We have seen reduction in geopolitical tension, that means money coming out of japanese currency. Lets get a check on the markets. Guy johnson joins us. Guy lets pick up on that theme, hannah. The gmm trading on the back of the yen. Swiss franc trending weaker, as well. You can see gold trading weaker. The storm has passed through florida, the markets beginning to look ahead, discounts around there and as a result, taking a slightly more positive tone. You can see that on the cpi screen, there is a fair value recognition looking at the start of european trading. 4 10 of 1 , an indication how the rest of europe might trade as well. Here is a function to give you the heads up. Talking of things that are british, lets talk about the pound. Here is a chart talking about eurodollar and eurosterling. While eurodollar he has gone up, eurosterling is trading maybe we are finding relief for the british pound. Here is a nice chart that i pulled out of the and live blog on friday. Mliv log on friday. This is the dollar 10 year. On thedividend yield is equity, trading above that. That is less to do with greece, but really an indication of the battering, the huge battering the u. S. Stocks have been trading over the last few months in trade. Fascinating story. The fact those lines cross is an indication of the pain he felt. Pain being felt. Anna the function is tliv. Lets take a look at the stories. Thus far as the cover story dwells on Hurricane Irmas trail of destruction. Floridam smashed into with walls of water and by the wind wreaking havoc across the state. Atimates put the damage cost 200 billion. Though the figure could fall 45 billionon after being hundred to a category two. , the coalitionon aims to make history by serving two terms and a row and the latest polls give the government a slender majority before voting begins today. Different focuses on chinas august inflation data. Prices accelerated by 6. 3 , eating the 5. 7 estimates on resilient demand in closures and mills. 1. 8 fasterp to than predicted. We will get for the analysis of the china growth story, what it means for florida what it means for china. And what it means for global central inks. We talk about that later in the program. In germany, Martin Schulz is taken to the internet to restart his campaign. Kohls scop merkels block is still on track to win the election but she is likely to need a coalition partner. We have less than two weeks to go. They missed out on a prime chance to govern at a federal level four years ago. Lets bring in William Hobbs, head of Investment Strategy at William Hobbs head of Investment Strategy. We understand the polling in germany is more reliable than some polls we have seen in the last few years than other parts of the developed market. There will be a coalition in germany, what shape will we get . Guest to the market, probably not. Seeingeresting thing is the cpsc lurch to the left and polling suggests there may be other Coalition Options for the cdu to pursue. Will it result in a Material Change . Probably not. I think people are licking their lips at the prospect of Martin Schulz coming into government, from a euro area aspect. Might be burden sharing, that kind of thing. It might progress the conversation along those lines. That feels less likely, the generally the german elections should be hopefully a nonevent for markets. Anna your base case is around the grand coalition. Guest thats right. A what about the broader around here . You see a state of the union on monday and a number of things are set to come out of that it you talk about burden sharing. And bankering union integration is something that has stalled because of the german stance. They want to see other countries in the eurozone doing more work in the Banking Sector before sharing the burden. What progress do you anticipate on that kind of putting together the infrastructure behind the eurozone . Guest its interesting. People felt there was no progress made with regards to the oslo exception of the eurozone. Exception to the eurozone. Moves and the Banking Sector, there has been huge progress and slightly unremarked to a certain extent. Are we going to take further leads to what we want to see from the eurozone . No. As you see, the political environment is fractious a little bit and less than it could of been. The thing to think about from the german and french perspective, they have a unique opportunity given the powers entrenched in both countries. There seems to be a will to move forward. If the economic backdrop continues to be helpful, that could be a couple economic backdrop as well. They dont want to waste the opportunity. Anna it will be interesting to see what he talks about, whether he references exit or tries to turn the page on that. Looks as if they might talk a bit of protection for eurozone businesses from foreign takeover, perhaps from chinese takeovers. If it has teeth, it could shape capital flows. Guest to a certain extent. You wonder how much more is rewarding verbally rather than actually. It is a delicate game they have to play because there are large top large chunks of eurozone that are protectionists come up and want to sound pro trade. That is one of the things they made a big deal of since President Trump was elected, that they see themselves as standardbearers for globalization and they want to balance that with defending certain parts of the french electorate. Anna they might try to put that trade agenda to the full again, distancing himself with trump. On the ecb front, the dominating euro, the strength in the whether that will upset the ecb, what did you make of what you heard from the ecb . It is down a little bit. So about the 1. 20 level. A surging euro will complicate their inflation target. The impact on growth is probably less than the character, much like the u. K. , most european exports are not that sensitive to price, especially those coming from germany. Bmw is the cheapest car on the market. That is something worth bearing in mind. The recovery we are seeing is to mystically driven. The contribution is not expected to be that strong next year. And a sense, they are going to want to talk is down little bit. Economy i would be worried about within the likes of italy, where the economic complexity has been falling dramatically over the last several decades. 1990, you are on par with germany and france in terms of complexity of their product and goods they were manufactured. They have now deteriorated 40 and china has caught up. China now, in terms of competition, italy is the economy that stands out as having the most in common in terms of export characters these with china. Anna so the threat to italy is not just clinical. It is political. It is much more structural than that. Guest the two go handinhand. The political dysfunction italy has suffered under has created an environment people invested sufficiently and you have an economy that has not kept up the moving times. The problem when you fall behind and he stopped innovating. The economy is not going to stop for you. China movingg higher and higher in terms of the cost of the average cases they are selling and that suggests italy is one of the ones that will be more wonderful to a higher euro. The european economy is looking good at the moment. Growth will be the fastest clip since late 2010. Pmis arejoying above 50 in most Major Regions right now. You have a nice helpful global backdrop for the euro area. I dont want to get too carried away with the fiscal euro, it is something to watch for. Not 1. 40. , dont miss our weekly 30 minute germany decides Program Every monday at a 30 a. M. U. K. Time. We bring you the latest Market Analysis in the runup to the election. The conversation continues on radio, as well. They talk about norways election. More details on that today and tomorrow. Tune in to radio on your bloomberg device or your dab device in the london area. Up, we will focus on the global Auto Industry and its electric future. This is bloomberg. Anna welcome back, everybody. You are looking at live pictures of the south Korean Foreign minister making a speech saying south korea has not considered u. S. Technical weapon redeployments. They had not discussed issues with the United States of it close United States. Closely watching Public Opinion on technical weapons. Lets get of the word business flash with Juliette Saly. Lyft haveuber and an offering free rides for people trying to escape the florida coast. They posted their feet on their website. Lyft is also getting free rides to hospitals. The company warned it turnaround plan might take longer than expected and it reported declining revenue. First half revenue dropped 5. 7 since strong euro cut into Tourist Spending. New phonest important in years will be called the iphone x according to its latest operative system. It shows three new models will be called the iphone 8, eight plus, and iphone x. We will bring a special coverage of that event from 6 00 p. M. U. K. Time tomorrow. That is your Bloomberg Business flash. Anna thank you very much. Setting a deadline for carmakers to end a sales of also feel howard nichols. The largest auto market follows the u. K. And friends in planning for a time when all cars will be electric it throughout the week, we will focus on the electric vehicle sector. What is chipping it, the winners it, thers shaping winners and losers. William hobbs from barclays is also still with us. , warm welcome to the program. What are the biggest factors in now . Ng this and why factors,ere are a few one of them is technology. Every year we surveyed the market and the cost falls again. They are down 74 . That is a big drop and you cant put the genie back in the bottle. Technology is evolving area not only that, desk evolving. , there are also policy levers in place. Emissions, tightening regulations, these are pushing automakers in the same direction. You are seeing them response. Prepared chinese are to set a date to end fossil fuel powered cars that run on this combustion engine. Which countries are leading this . Bdg 4117 shows the growth of electrical vehicle sales by region. Europe, china, and the United States in the mix. The United States worked right china right now. Guest china will finish 2017 at over half of electric vehicle sales. This is leading the market, but china is also the largest auto market in the world. If you want the highest percentage of new sales, you have to look to norway, where you are getting about 40 of sales being electric. This happened in a short period of time. The Chinese Government is pushing hard on this. They have not actually set and and date an end date. We are still waiting for more information. Even the fact they are considering it, shows how far the market has come. Anna how do you view the sudden of the electric vehicle . What is the best place to pay, around Battery Technology . Guest very difficult. You want to be careful not to hop on the technology itself the manufacturing itself is often, they have gone a long way and that is the case with a lot of these. The interesting thing for company watchers is which of the companys will learn how to dance . Will they be ruled out of this market or will they managed to be huge and get into this market longerterm . It has implications for oil markets. The interesting thing about stock markets in general is that it is littered with companies that started doing one thing and finished on another. There are selling shells into the u. K. Theanies that survived are ones are flexible and agile in of to hop on to new trends and take advantage of it did of it. This how big a change could be in terms of manufacturing. This is interesting. Talking about europe and how european manufacturers cars survive. They aree hand, driving an agenda around incremental holocene, then you have Car Manufacturers with blood voices across the eu. Guest this is challenge across because on the one hand, they dont want their left behind. They are tweaking regulations to get a couple more Percentage Points out of diesel. That might make automakers wonderful to another country who has pushed their automakers in a stronger way. European policymakers are grappling with this, how much to tighten economy regulations and whether to introduce quota this is all auto manufacturers have of vehicles int their mix. Of those ands one they have been trying to learn about how well it has worked or havent worked, but european policymakers, this is the real crunch time on decisions on how do they want to regulate the auto market and what should they do . Anna fascinating story to watch. We will be focusing on the electric vehicle story, all of this and put the more to come on this. Staying in china come up policymakers at the pboc are pushing back against a surge in yuan. Strengthened to more than 2 in the last two weeks but it is trading lower. William hobbs is still with us to talk more broadly. We have a change around the currency Going Forward and inflation data out of china. Ppi, higher than the previous months. From a global perspective, this matters. They chartt which out product, that is part of the story that Central Banks Pay Attention to. Guest from a china perspective, this is evidence that chinas capacity reductions are coming through and the chinese economy is looking ok. It is probably healthy. We find out later this week. Argue, i, i would dont think there will be many arguments, there is not much evidence of inflation around the world if you are looking at import prices globally. It is looking benign. Such a bankers dont have much to worry about right now. Anna the other factors are low productivity, populations, and it structural trends in the development market. Guest we also talk about the structural trends in inflation and there must be some of that. A lot of people talk about the globalization story, technology, so on. Quite a lot of that seems to be in the past. People would say if you are talking about technological improvement, then it has been benign. Trade, if you are looking at the acceleration, that does have deflationary effects, it feels like it might be in the past. The other point to make about the internet, and again, there is definitely an impact in the past on that. It is whether you think there is an impact happening now. , he argued in the u. S. Now, 70 of prices online versus offline are comparable. , it is rest of the world almost all prices are comparable now. Thats just the internet disinflationary effect on price. With youtuberket, to watch for wages to turn up. Broadly, i think the relationship between growth and inflation is prone to textbooks. Anna it has been defying the texts. How vulnerable is the chinese economy . There is a lot of focus on china as you head into autumn fall. Lots of people have told me they dont think anything will happen before then. Courseoes it set its beyond that . Deny thatody would they will want to slow down debt growth and thats what they are trying to do. The inflationary data allows them to focus on Financial Stability risks. Shadow banking, local government financing. More broadly, you want the economy to slow to a sustainable path. Anna there are reasons you are not too concerned about this. They are not going to bring about a collapse. Guest its different. A lot of statistics thrown at us , a lot of lack of context. China has a different economy. The Balance Sheets are relatively simple affairs. You have deposits and loans to smes. The lack of reliance on an interbank system suggests it is savings fund economy. You will have faster debt growth. For the corporate sister corporate sector, is growing fast. I think some of the things people are looking to go wrong are probably wrong. Anna thank you very much for spending the last hour with us this monday morning. William hobbs, head of Investment Strategy at barclays. Over an hour until the start of the european trading day. We will keep an eye on the stocks for you. Up next, the latest on Hurricane Irma, what it is doing to florida. This is bloomberg. Anna irma its florida. The hurricane hits florida. The hurricane has left 3000 without power. Chaotic brexit warning. David davis wants that lawmakers are not to block the governors the governments repeal bill. Painandsuffering. North korea against pyongyang. China is to set a deadline that will in the said of vehicles the sale of diesel powered vehicles. Anna a very warm welcome. It is daybreak europe. Our flagship morning show. I am anna edwards. It is some 00 here in london. We need to bring you it is 7 00 here in london. We need to bring you numbers. A bee foods operates in the food industry. 13 seeing up by 1 . Year sales up by that is an interesting guidance on the sales expectations around this discount clothing brand. An operating profit will be well ahead of last year. The consent has been some of the fx may impact on margins and we will keep an eye on that. Watch baby foods at the start of watch ab foods at the start of trade. This is a picture across european futures. Where expected see a bounce at the start of the trading day. Markets in asia we are expecting to see a bounce at the start of the trading day. Markets in asia, that was the story in fridays section. We saw the force in irma. It has been destructive. We are seeing reductions to the estimates for how much damage this hurricane might bring. Not as possible as had been feared. Saw no missilewe tests in north korea. All of that culminating in a strong start to european equities. The asian equity story, some of the weakness in the japanese currency helped with the japanese stock market. That is the story behind the. 6 bounce. In seoul and hong kong, also higher. The nikkei up by 1. 4 . The United States suggests a decent bounce coming through in the u. S. Equity story, up by. 5 . Lets focus on u. S. Teen years. Money going into u. S. 10 years. Money going into stocks, we have seen some of that coming through. Last week we did get as low as 2. 01 on the treasury yield. We did not get below 2 . We keep watching out for that. Just a headline crossing the bloomberg at this morning on the subject of pharmaceuticals. The israeli pharmaceutical business naming the chief as its ceo. This is in the pharmaceuticals industry, getting a few comments coming through. Shares. N new the headline we are getting this morning naming chief schulz as its ceo. Lets check in on the bond market. The rotation we are seeing coming in from the weekend. With the jewel push from Hurricane Irma and the north korean peninsula, what is that doing to futures daca futures . Heres Juliette Saly. Juliette anna, of korea has warned of retaliation if the United Nations Security Council approves a proposal for harsher sanctions. The regime says it is closely following the moves of the u. S. The morning came as the u. S. Calls for a vote on a resolution to target sanctions on pyongyang after the sixth and most powerful nuclear hit. Inflationoduced and produced and inflation that be estimates. Beat estimates. Shows the effects of revealing domestic demand. The uks brexit secretary has warned lawmakers that if they lock legislation if they block legislation, it may lead to a caddick to a chaotic departure. The government has launched a telegraph of its eu withdrawal bill. The henry viii powers that allows changes to existing laws by passing normal scrutiny by parliament. In the u. S. , steve bannon has said he is going to war on the repugnant establishment because of its lack of support for donald trump. An interview, thats in an interview, he said the who doesnt agree with the president should resign. If youre going to break with him, resign. The stuff that was leaked come i thought was acceptable. If you find it unacceptable, you should resign. I am talking about gary cohn and some other people. If you dont like what he is doing, you have an obligation to resign. Gary cohn should have resigned . Absolutely. Juliette test more that interview with charlie rose catch more of that interview with charlie rose. Angela merkel has called antiimmigration protesters rally. Rowdy. Merkels christian democrat led bloc leads two weeks before the vote. Show. Miss our germany we will bring the latest Market Analysis in the runup to the election. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. The fact that we didnt see anything from pyongyang over the weekend and as Hurricane Irma starts to weaken, it gives investors reason to buy into equities today. The nikkei closing at 1. 4 . Also a strong rally come through in hong kong led by those automakers australias market posing higher by. 7 . The cost be very strong. Spi very strong. China is to phase out also fueled cars. Pradat tumbling tumbling in trade. Up byrrie Group Closing 3 . We are talking about that pick up on the factory floor in china , 6. 3 rise in august year on year. This chart showing you that is we see ppi moving higher, you are seeing the food inflation traffic starting to fall. Morgan stanley raising its 2017 to get projection for china citing supply cuts and better than in Infrastructure Investment on the factory floor in china. As a price beat as we head into that annual conference in october in china. Stability betterthanexpected. Singaporeette saly in. Hurricane irma has smashed into florida with walls of water and violent means making just violent winds wreaking havoc. Mylan winds wreaking havoc. Eric shatzer reports from orlando. Eric Hurricane Irma made landfall in florida on sunday as a category four storm packing winds as strong as 130 miles per hour. It crossed the florida keys this morning and officials describe the situation as a humanitarian crisis. The storm is moving up the west coast of the state threatening the cities of naples, fort myers, st. Petersburg and tampa with Hurricane Force winds, flooding in a storm surge as high as 15 feet. I spoke to tampas mayor on saturday and asked him what the area of 3 Million People was inspecting. It is always the surge. We are a lowlying community on the water. If we had a cat 3, my office in downtown tampa would be underwater. I dont think that is going to be the case. That is what we train for. Eric it is tempting to describe the storm in superlative terms. The winds are slowing and florida may be spared the worse. The bad news is this is a big monster. We are very well courtney did. Eric very well coordinated. Eric on monday officials will analyze the damage. Erik schatzker, bloomberg, orlando. Anna joining us now, eric monaghan. Eric lonergan. The u. S. Story dominated by what is happening by the dreadful destruction we could see from Hurricane Irma. How much does this influence your expectations around the u. S. Economy . William dudley said that this could delay the fed. Like the latest reports suggest the damage is less bad than feared. It is an area i know reasonably well. In terms of a human standpoint, it couldve been worse from what we understand. In terms of the Macro Economic consequence, with a lot of these events we are seeing, it is likely to be temporary. The fed has to be sensitive because it is a phase of national crisis, but if you extend three to six months, it is unlikely. Anna i have a chart that shows what Goldman Sachs has been doing to the growth expectations. We profiling them a little bit. And of taking the shortterm growth expectations out and pushing that further into the future. If the fed was looking for a reason to pause, were talking about harvey and the activity around houston is still ongoing. If the fed were looking for a reason, this could be one. Eric i dont see why they would be looking for a reason to pause. There is a debate happening in Monetary Policy which is about what do we do if inflation is below our target . The economy is doing pretty well is doing extremely well. The fed would be raising Interest Rates and so the real debate is if inflation is below target, we are concerned about Financial Stability, do we keep on raising rates . That debate has not gone away, so i think markets are complacent about what the fed is going to do. Anna it is a problem what the fed does in december goes into the heart of what Monetary Policy should be about with its lowinflation environment. Should such a banks be targeting should Central Banks be targeting lowinflation . If youre watching the data, what reason is there . Eric there is a crisis going on in Central Banks at the moment. Theres a huge tradeoff between asset prices, Financial Stability and inflation stuck below that targets. They dont control inflation as they will like to do so. You are right and that debate is not going to go away. There is a fudge could get around there is a fudge that they could get around which is mario draghi solution which is you dont target inflation, you target your forecast. I would not be surprised again, what the fed does may not matter relative to what janet yellen says. The fed is predisposed to keep on raising Interest Rates. The economy is booming. The market is barely pricing of the increase in Interest Rates over 12 months. Expectations are very vulnerable. Hurricanes, debt ceiling, we may not be talking about any of those in a short time. Anna Market Expectations around , if you got your bloomberg, you can pull this up. Strategists are expecting the u. S. Senior to be higher, 2. 48 is the average expectation now. They are expecting us to go higher but that number keeps coming down, so it is the lowest since november. Strategists were expecting to see that above 3 . Is that elusive echo elusive . The price is telling us that it is close to 2 . That is where the market is pricing it. Peopleselling you, expectations are higher. There is a perception. The market is consistently forecasting higher. Anna you think the market is going to get to the feds program . Eric in february, we were at 2. 6 . If you look at Economic Data and said why is the bond market doing that . Shortages, wages are picking up, this is a very strong economy. Consumer confidence is high. There are structural issues you can worry about. Cyclically, the economy is doing it fairly well. Anna eric, good to get your thoughts this morning. More from him as we go through the program. If you are a bloomberg customer, you can watch bloomberg on the tv function. It also allows you to follow along with the charts. You can influence the by clicking on the ask the guest a question button. Jeanclaudeer joker repairs to strike a positive tone. This is bloomberg. Anna welcome back everybody. The sun is shining. Higher by. 7 at the start of the german trading day. Lets check in on the broader markets. Were expected to see higher across europe. The competition of north korea not firing a missile and the impact of Hurricane Irma being devastating. On appeal economic level, no was that adding up to a risk on attitude for the markets. Risk intoe that same the rotation in the bond markets. The dubai market pretty flat. Lets get the Bloomberg Business flash with Juliette Saly. Juliette uber is offering free rides to shelters near tampa as irma heads of the gulf coast. The citys office said the ridesment publicized the on its social media. China is to set a deadline to end sales of fossil fuel car vehicles. Including byd,s the vice minister of industry and Information Technology says the government is working without your written with other regulators. Prada shares have tumbled in hong kong trade. Reported declining revenues. The first half revenue drop 5. 7 . Dropped 5. 7 apples most important new phone in years will be called the iphone x. Streams of Software Code shows three new models will be called iphone 8, iphone 8 plus and iphone x. That is your Bloomberg Business flash. Will Jeanclaude Juncker deliver his annual state of the union speech. He is likely to strike a more upbeat tone than year ago when brexit. As facing his expected to push for a free trade he is expected to push for a free trade pact australia. Lets bring in eric monaghan. Eric lonergan. We are going to get a tone from younger a little more from juncker a little more upbeat. We focusing in on the german election still. Eric the core problems in europe have not gone away, to fight by the extreme greece which is fundamentally the system has a problem with policy. In germany, different tensions outside of germany, there is a anti theres a sentiment centered around populism. Macron is correct that there needs to be institutional reform. That is the crux of these political issues. Anna you dont see enough institutional reform. One of thing Jeanclaude Juncker is saying is trying to get the banking back on track. This is something that is being seen as a nod to macron. Eric they are trying their best but it is trivial in the context of what the real issues are. What is obvious is europe needs centralized fiscal policy. Europe needs a huge stimulus. That is not going to happen in germany has a veto on that. German Political Sentiment suggests that is going to change. Said, 120 at the pace is getting here. Eric i agree and it poses a major dilemma for the ecb, because if they are perceived to be tightening in any way, this trend could accelerate aggressively. Then they have a problem. We know the way currency markets work. They really do what you want them to do. I think draghi has his work cut out. Anna just to interrupt the conversation, a red headline crossing. Japan post is making an announcement. Japan to sell about ¥1. 2 trillion of its holding shares. They are selling these Japan Post Holdings operates two businesses. Just if youre exposed to that part of the japanese economy, you might want to be aware. Eric, lets talk to you about that. The dieselgate has been a part of the german election story. That is raised questions about the future of diesel. Theme, where do you see the opportunities . Is it in the chinese and for structure . The recharging cars chinese infrastructure . The recharging cars . Opportunities, in the large parts of the energy sector. The intriguing thing is you have not seen the impact if you look at actual underlying demand for oil. Underlying demand, despite predictions, demand is kept growing. Anyway, there is a more profound observation in a way, there is a more profound observation. This announcement by the chinese is extreme eric. Is extraordinary. The state sets these markets. China is almost carving out a new model of capitalism. It is attempting to establish an edge and that is a fascinating development. If they succeed, they are setting a template or a challenge to other capitalist economies. Europe tryingseen to make moves. You have seen policy change affecting the purchase of vehicles quite considerably in places like london. We are going to be left behind by china. Eric they are one of the biggest economies in the world. If they can accelerate technological advantage, they are going to become global leaders. Pricese are seeing share. Eric, thank you very much. That is it for daybreak europe. Open is up next. You can tune in when youre in your car or anywhere you would like around london and beyond. Plenty going on. Stay here on bloomberg television. 34 minutes to go until the start of the Equities Trading day. A little more risk on today. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Good morning. Welcome to Bloomberg Markets european open. Cash is about to open in europe. We will bring you the first trade on the day on the equity front. I am guy johnson. Matt miller is over in berlin. He is getting ready for the motor show this week. A big event. Lets talk about what we are discussing, irma slantin to florida. Irma slams into florida. The big question is what will the cost of the