Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20170921

Anna a very good morning, everybody. This is bloomberg daybreak europe. Were here in the city of london. Manus we have some great guest including the Greek Economy minister, joining us shortly after 7 00 a. M. Followed at 9 30 a. M. Ceo tim cookple and lloyd blankfein. This morning, one simple chart. The dollar went up. Look at the bottom of your screen. The dollar bulls were brave enough to show their face for one day. The chart is telling you the fed is stoic, if nothing out. If nothing else. Underpricing still about reducinge the view of where the longterm ultimate rate will be. That perhaps is little bit of softness. Anna that is a fascinating one to counter all the other hawkishness we talked about already. Diverging Monetary Policy between the fed and the boj as the boj does nothing. Lets put up the risk radar and cheney have markets have reacted. And show you how markets have reacted. A Balance Sheet reduction, meanwhile no change at the boj. The yen came down, yields went higher because of the fed and this divergence, the week in having an impact on the japanese exporters. Japanese stocks going higher and more nervousness about the tightening message coming through more consistently from the fed. There was one dissenter, the new minister on the boj. But no change and their targeting 0 . The Balance Sheet continues on the trajectory. On the back of that fed fed flashes of big green light to the global bond market rally. We will discuss that with our guest. The sub 3 , the paradigm shift tenures on in the discussion. Anna it doesnt really underlines a drama we saw in the markets yesterday. Yields went higher on the fed announcement. People say and how quickly we hit 2. 3. Lets get the bloomberg first word update from juliette saly. Bank of japan keeping the asset purchase unchanged after an unexpected sign of dissension on a board chosen entirely by Prime Minister abe. A new member of the the decision in his first meeting. U. S. Secretary of state has laid out washingtons case to european allies about flaws in the 2015 nuclear accord. Its development of Ballistic Missiles and funding of terrorism, tillerson spoke to reporters hours after President Trump said he would make his decision about whether to walk away from that pack but would not reveal what it was. He takes his responsibility in this matter quite seriously. That is the reason he is very carefully considering the decision of whether we continue to serve the security interest of the American People are not. Robert lawler has reportedly asked for documents about saw President Trumps action since taking office. According to the new york times, it includes the firing of Michael Flynn and fbi director james comey. The paper said mueller is also interested in an Oval Office Meeting donald trump had with russian officials. U. S. Securities and exchange itsission has set a hack of database may have allowed cyber criminals to make illegal profits. Ae regular said there was breach in 2016 that only learned last month about possible illicit trading gains. It said hackers exploited of vulnerability in edgar which holds millions of company filings. U. K. Prime ministers had to accept for the first time the need to discuss the europeans demand for brexit bill of tens of billions of pounds. According to a person familiar with matter, theresa will hold talks with her cabinet for deciding half as she can go in promising money to the e. U. And landmark speech tomorrow. There are mere has signaled she will try to bypass the e. U. Negotiator. Has been offered help from President Trump after it was battered i a second major storm in two weeks. Thea made landfall in southeastern part of the u. S. Territory yesterday with friends with winds reaching 170 Miles Per Hour and causing potentially billions of dollars in damage. The entire oline was left without our. The entire island was left without power. The death toll has risen to 233. Rescue efforts continue around buildings that have been reduced to rubble in the earthquake in mexico. The state owned Electricity Company says it is now restored power to about 96 million customers. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. We have yen weakness pushing the nikkei higher and holding it at the twoyear high. The hang seng market flat and australias market is among the worst performers today in the region, down by. 9 . Quite a big drop in the singapore iron or contract today. After tencent of a stake in the company, making its first foray into the traditional finance, paying 372 million for 5 . Door to indicate its unlikely to raise its first half forecast but remains its target of 11 which is where the stock is now. The story are seen across Energy Players in the asian region. Manus thank you very much. The Federal Reserve chair acknowledge this years fall in inflation was a bit of a mystery and suggested that Central Banks were on course for another rate hike this year. 4. 5 trillionsaid Balance Sheet he was spoke to reporters yesterday. To maintain the target for the federal funds rate which continues to expect the ongoing strength of the economy will warn gradual increases in that rate to sustain a healthy labor market inflation around the longer run objective. We also decided that in october we will begin the Balance Sheet Normalization Program that we outlined in june. This program will reduce our Securities Holdings in gradual and predictable manner. Overall, we expect the economy will continue to expand at a moderate pace over the next few years. In the third quarter, however, Economic Growth will be slow down by the severe disruptions caused by hurricanes harvey, irma, and maria. Kelly joining us is david , great to have you with us. Yellen, her stoicism and the reaction function remains unchanged. Onward and upward, is that a correct interpretation of last night . David i think this is very much as expected. The economy is fine, which it is. Think it is inappropriate to have Monetary Policy this easy and thats also true. There gradually increasing rates. It makes sense come you want to avoid asset bubbles and rearm yourself it case there is a problem down the road. I do think the federal raise rates again in december. Maybe that will raise rates three times next your. They want to be addictive ball but people should not misinterpret come of futures markets are getting this wrong. Help us understand what it means. A percentage chance of a rate hike at a particular meeting, and it looks like 60 for december and it looks like its not priced in for next year. David everybody is misreading this. The odds are basically set by the market bookmakers. Its like you have a local horserace and have some local favorites. This night may not win the race thehis nag may not win race, but bookmakers have to set the race that way. Its pushing down the yield curve and that will push down the derivative market so it just mirrors that. It looks like it says the fed will not raise rates that if you talk to ecommerce and headwaters, they say the fed will raise shortterm rates because they want to avoid asset bubbles. Can perhaps be rate this as well because many say this is the great indicator, but we have a huge a new trajectory from the fred from the fed and a new terminal rate. Its below the longterm rate. Did help us in any way or is it just another pie in the sky, forward thinking . David i think its quite a good tool in terms of what they are thinking. I think the Federal Reserve is probably misunderstanding how Interest Rates are impacting the economy. Low rates dont stimulate the economy so they keep thinking they could take a rate hike. The economy grows by itself. You cannot grow with a collapse in confidence, but every day in and wantpeople wake up to make more money. They want to buy more stuff, work more hours, and get ahead, and they will tend to grow the economy. The economy will normally grow 2 . We keep thinking are giving all this aid to get us there. It would do it anyway. Anna is it a problem that we have the fed talking about putting up Interest Rates when half the mandates are about inflation. They openly admit, and its probably been healthy to admit that its a bit of a mystery right now. Wise inflation not higher . David i like the fact that the dont say they know it all. When i was growing up, it wasnt that important to have high inflation. Why is it so important to have high inflation . You want to avoid deflation, but having high inflation, you dont need that. It used to be that if unemployment goes high, inflation would go down, and vice versa. Now for 25 years weve not had a significant increase in core inflation. Thats ok. What happens is as you put too much money in the system, you get asset bubbles. The workers have no bargaining power. Core inflation is insensitive because of Global Supply systems. Anna is it wages . David the union system has collapsed. Uber and airbnb, never try and sell your labor by the hour. Workers are powerless in this economy and in any transaction, the price gets set based on the balance of power. We have a situation where management and the buyers have all the power and sellers have almost none. Then unemployment rates could fall further and still not manifest themselves in a materially higher inflation. David thats right, but everyone whos willing and able to set an alarm clock can get a job in america right now. And you shouldnt stoke the economy just to avoid those who are not willing to set an alarm clock. Manus but are we in a market that is so mentally scarred after five years of covering that confidence is david were like someone who checks into the hospital and they keep having more and more operations and to lay have all these drugs that they have to have to get by. We think we need all the stimulus and help and we really dont. Anna good that we cleared that up. David stays with us this morning. Theyll have all the analysis on Bloomberg Radio on this mornings decision in just a moment. Anna and they will talking much more about the fed of course. The boj hose fire, but it was not unanimous. The decision had a surprise dissenter in its ranks, going against the ranks. Manus and tim cook talks about immigration at the Bloomberg Global business for. Will bring you that interview, next. This is bloomberg. Anna this is bloomberg daybreak europe. Its 1 19 in the afternoon over in singapore. The japanese market going its on way in response to the fed. Thats get the Bloomberg Business flash with juliette saly. Juliette the indian mining billionaire plans to spend as much as 2 billion on angloamerican shares. He says it is a family investment and he does not intend to launch a takeover. Angloamerican declined to comment. Google has agreed to buy part of the engineering and design team for 1. 1 billion. Taking on 2000 employees with experience working on it devices intended to showcase the best features of the Android Software that now power the vast majority of the world smartphones. The deal comes with a nonexclusive Licensing Agreement for intellectual property. Crh has agreed to buy the cement company in a deal that values target at 3. 5 billion dollars on enterprise value basis. The transaction has been unanimously approved and is currently expected to close by early next year. The company said escrow stockholders will be entitled to receive a cash merger consideration. Thats the Bloomberg Business flash. Bank of japan has kept its monetary stimulus unchanged. Programs remain on hold. There was a dissenting voice, the new board member, joining us miller. Rett tell us more about the new dissenting member. He keeps the dissent alive. Thats right, he certainly does. Is the youngest member of the board at 44. He is clearly the youngest member by a long way. He is a dove on the board. This time he has a dove, sony previously advocated for fiscal spending. Hes talked about the need to defer plans for a sales tax hike here in japan. Thats a very different prospect from what we previously saw from the governor. Anna what does it mean for governor kuroda and his policy . Nothing in the numbers to worry about, but where does he go next . Correct. S hes been very powerful since 2013 when he came through. He forced his way through their and we should see the same thing happen but we will get continuing debate on the board. Interestingly, we will get debate about whether enough is being done to bring japanese inflation to 2 . Manus thank you very much, brett miller. Is a global strategist over at j. P. Morgan Asset Management and he is still with us. If you are a bit vexed with the fed and our need for great stimulus in the nine states of america, what do you have to say to the japanese, because they just keep on printing money . David and how is that working out for them . Manus gdp is up. David thats the point, they have achieved nothing on inflation for years, despite enormous fiscal spending. But the employment rate in japan is 2. 8 . There is nothing wrong. But its a morphine drip of more and more cash into the economy and more bond buying and fiscal spending. Its building a problem for the future. Is clearly not working. They should just ease out of it and focus on the structural change that abe is talking about. You need to get confidence going. Be more like american consumers, spend money you dont have. I dont know how that prescription goes down in tokyo. Do we take from the conversation that Central Banks in the u. S. And japan are obsessive too much over inflation and structurally, need change in the central bank mandate. Last 25 years in the u. S. Weve had a tech bubble , commodity bubbles, housing bubble, all these bubbles refueled by superlow Interest Rates. You never had an inflation problem all the way through. Bubbles do not deflate, bubbles burst. Thats why you ended up with to marin the stock market crashes and the worst depression since the great depression. Manus i have to ask the question david i dont think the u. S. Equity market is in a bubble yet , but we are doing our best to blow one up. An equally with housing, i dont think housing prices are in a bubble position yet. A little bit higher than average but not exactly bubbles. Anna what do you see behind the bubbles . Onid she didnt push back the fiscal expansion which is completely inappropriate an economy with 4. 4 unemployment. Overoptimistic when he came to power. Everybody said you need fiscal expansion to get to 3 . David 3 is nonsense. There is no need to get to 3 unemployment as they measure it. Think her not talking about bubbles and not pushing back on fiscal policy maybe a little bit of a political signal. She really wants to get the appointed. Dollar trump has talked about that donald trump has talked about that people like his policies and want them to do well. Her performance yesterday would go down well at the white house. Being very careful not to upset the white house, which i think is interesting. Manus can we circle back to the bank of japan . It all ties together. , hate the word counterfactual but everything you have said refers to what happened in the last eight years david . Lowd we keep assuming that Interest Rates stimulate the economy. But if you look under the, you find a very low Interest Rate and the promise of continually low Interest Rates stimulated absolutely nothing. Rates are not going up. Anna thank you so much, david kelly. When we come back, we will hear from tim cook, the apple ceo. This is bloomberg. Tokyo a live shot of where its 2 30 in the afternoon. A shot of the emperors palace. Lets get to the markets. Guy johnson is standing by. A very good morning. Lets talk about where we go with these markets. Not much priced into the markets at this stage. Pointing to a very flat open this morning. Lets talk about what we can see around the world. The aussie dollar on offer, kiwi and yen on offer. Canadian dollar on offer. Dollar. Day for the u. S. Equity markets in asia on offer as well. Australia and new zealand both trading softer is morning. Trade, onenteresting it has been in place for quite some time. The white line here is the spread between the u. S. And german starting to widen out. The blue blue line is the bloomberg dollar index. 200 basis points here and we start to widen out. Maybe we start to see significant dollar traction as well. Back to you. Anna theresa may is said to be weighing whether to discuss the e. U. Demand for brexit bill in her speech in florence tomorrow. Manus person familiar with the matter saying Prime Minister will hold talks before deciding how far she can go in promising money to the e. U. At movable be designed to kickstart the stalled negotiations in brussels. Anna david kelly is still with us. Lets do a little on the politics and get your view and how you look at u. K. Assets as a result of this. What is your overall approach to u. K. Assets in the midst of all this uncertainty . David i think the fall and stirring sterling has negated a lot of fear that came out after the brexit vote. Theres a fair amount of nervousness about what a hard brexit could mean for the u. K. Economy but if you think about u. K. Stocks, most of the ftse is an International Index anyway. Buying a global kind of index. There is some concern. I have no dog in this fight, but i hate to see its a tough issue. How do you negotiate your way out of this . Its going to be a tough job for the British Government to negotiate that, but i worry about that in the United States also. Britain is a democracy. America is a democracy. Democracies are scarce and precious. People need to recognize the world is in this boat together. Toy need a unified approach get the best deal for britain and for europe so that both will prosper going forward. A long and complex negotiation. There is no magic deal. You have to realize theres a lot of false hope being promised. When you look at the bank of england, its a direct impact on markets and sterling. Many people are saying the bank hikegland will do one rate and that will just be undoing the emergency business put into the economy last year. Where you sit on that . Inflation is ripping higher, for all the wrong reasons. David i dont think it is because of excess demand in britain. If youre trying to slow the economy and get rid of excess demand, thats the only way that Monetary Policy can reduce inflation. If thats what the bank of england wants to do, that is worth thinking about. Britain, i think there is a good excuse for keeping rates pretty low. You want to keep sterling from going up. America, the dollar really is not what is driving the economy. In britain, a lower sterling has a safety valve for demand. Im sure the bank of england will think carefully about this. There is a lot of uncertainty around brexit. Having a policy of weak sterling is probably not a bad idea. Anna you were calling on the japanese to be more american in their Consumer Habits earlier on. Consumer strength continues to be there in some cases. The retail sales number was more than forecast. Is not just around prices. It seems the consumer isironment in some places untouched by all the political concerns. These are relatively low expectations we have on consumers these days in terms of consumer spending. Itse u. S. In japan partly about consumers but its also a lot to do with trade. Think about starting at what it does to trade. In the u. S. Or even in japan. You veryvid, thank much. Stay with us, david kelly. Majorer rueck, the second reinsurer to tell us they will miss the profit target. This goes back to both the hurricanes and the earthquake losses. That will certainly be a stock to watch at the start of trade. Payment ofdividend the level prior year is still a possibility. Thats just a little bit of comfort that whats not a great set of news. Net income may not be achieved. Yellen ond from janet the impact of the hurricane and how gas prices may go up, suggesting it will prove to be temporary. Clearly european reinsurance is that. Suggesting apple shares fell the most in more than a month after an analyst said demand for the iphone eight is substantially lower than for earlier models. Manus the preorder volumes in the u. S. Fell below those of the iphone 7 and the iphone 6. Also saying demand in china is even lower. Anna the apple ceo tim cook spoke at the Bloomberg Global business for yesterday. He was asked about immigration to the United States and. Pecifically about daca we are pushing extremely hard on this. I think its the Biggest Issue of our time currently, among all these big issues. This goes to the values of being americans. Are we human . In a track of the rally . These people, a tract of morale at the . A tract of morality at apple, we have many who came to the u. S. When they were to your so. They didnt exactly make a decision to come. Only knowhere, they our country. This is their home. Hey love america when you talk to them, i wish everyone in america loved america this much. ,hey have jobs, they pay taxes they are pillars of their communities. They are incredible people. So to me, it would be like someone coming to mike and outng, mike, i just found you are not really a citizen here come you need to leave. Unacceptable. This is not who we are as a country. So i am personally shot that there is even it im personally shocked that there is even a discussion of this. This is one of those things where it is so clear, and its not a political thing, or at least i dont see it like that at all. This is about a sick Human Dignity and respect. It is that simple and straightforward. Subject ofder immigration, if i were a country leader right now, i goal would be to monopolize the worlds talent. I would want every smart person coming to my country, because smart people create jobs. Thing that ultimate creates a great environment in a country. A land of opportunity, a land where everybody can do well if you work hard. These are the things that drive people and give people a sense of purpose. Very aggressive plan, not just to let a few people in. I would be recruiting. I went to ellis island on sunday myself,i wanted to feel what it was like to come to the country. If you have ever sat in the great hall, and one of the benches that was there in the early 1900s, you can feel the people in that room, and you can kind of feel both the anxiety and the hope. That is where we all started from. Not ellis island, maybe it was for ginny, like my family, but we all started somewhere. We are all descendents of immigrants in the United States. Anna that was apple ceo tim cook speaking at the Bloomberg Global business forum. He was talking about protecting the children of illegal or undocumented immigrants from deportation. Manus it is a hugely contentious issue. A few more lines on the Hannover Rueck story that we broke. A billion euros of net income, that was the original target they wanted to achieve. The guidance are giving us at this morning at this moment will give right to further strain that will exceed the large loss budget of 825 million euros. Anna for keeping and ill that sector at the start of trade. Just a reminder, you can watch. Rogram on tv you get the charts and functions we are using and you can click on the is and use them in your own conversation and you can also join in our conversation by clicking on the button at the bottom of the screen to ask the guest a question. Angela merkel moves to shore up support as the smaller parties gain ground. Behind the mist recall in u. S. Inflation . This is bloomberg. Shade. Futures off just a the dollar bulls come out to play. Equities indicating just a shade lower tonight. One of the corporate stories involves an indian mining billionaire who plans to buys much is 2 billion worth of additional shares. More on this. T what are the details of the deal . Theyre set to become the biggest shareholder by as much as 1. 5 billion pounds of additional shares. Raise the state by another 9 in addition to the 12. 4 that he already bought in march through his Family Holding company. His will be funded by Family Holding company. Manus he jumped to number one on the registry. What are his intentions, so to speak . ,s it purely a personal holding or could it be that he goes for an allout it for the company . Hes notll maintains going to offer a takeover of the company and its more from his personal family investment because the company has managed to [indiscernible] and the commodity prices. Theyve managed to cut their debt by almost half in the past year. Anna thank you so much for the on thetheir from mumbai movements of this indian billionaire in the mining sector. Seating some ground to smaller parties though it remains well ahead. Is angelat message merkel delivering to shore up support . S offinal furlong canvassing. Matt shes asking supporters to go out to families and neighborhoods, fanout and get people to come in and vote for her. Shes trying to convince germans that the centrist strength she has shown over the past 12 years is the reason for the prosperity the country is currently experiencing and its not a time for experiments. This, as you said, shes lost some support. 40 to 36 , from and a lot of those votes are like to smaller parties the greens and the left. They and how are differentiating the social democrats . How is he trying to bring out that differentiation . Matt hes taking advantage of merger yesterday, saying we are against this kind of thing. Worker friendly party. Every chance he gets, he does say that. In a sense its at odds with his other messages that are very antiAutomotive Industry, released in favor of bringing a stronger force to bear against the Automotive Industry in the latest diesel scandal. A lot of voters are less confused as to which way he wants to go, considering the Automotive Industry employs 800,000 people directly in germany and one in every four jobs is related to the Automotive Industry in this country. Task. S a difficult there are questions as to how much he can differentiate himself from Angela Merkel, considering that have been in government together for so long. Manus thank you very much, matt miller there in the final throes of the german election. Speaking overow , saying the australian economy looks to be improving. The Australian Dollar was moving. 7 sincelower, down the top of the hour. Momentarily as he started to talk about Interest Rates, saying they are more likely to go up then down, but it was not longlived. Another thing on cryptocurrency, that millers favorite subject. No immediate implications for policy and they are very much a speculated play. Onie dimon has warned cryptocurrencies on a number of occasions. Peterbring in rosenstreich. Good to see you this morning. Possibility that an attractive negotiation ensues, Angela Merkel has to put together a coalition. What is the risk of a protracted discussion peter im starting to have flashbacks of certainty. We dont see that as a function of what is going to happen. I think there will be normal well have aand strong, centrist government in germany. If we are trying to make too much out of this situation, i think you will be training the headlines and find yourself in a difficult situation. We dont see a lot of risk coming out of germany right now other than what were building up ourselves. To the lengthnt of time it takes to build a coalition and who in sub in the coalition. Who ends up in the coalition. Peter what is going to matter at the end of the day, is it regional or growth issues or the relationship of germany to the rest of europe . Thats what markets are looking for. Even from the different mixes in parties and coalitions, it is still looking for a strong europe with a strong germany leading the way. That should be very good for the euro. Between fedbe going voices and the ecb. Mario draghi has three public appearances. All on the tickertape to come. Do you think there will be a consensus message . A tapery tried to get that should never be named a taper . Peter the communication message is balance. They have to talk about the improvements in europe, but do it in a way that doesnt mean the paddle on the normalization policy is to the floor. They need to talk down increasing the ability to keep flexibility and make sure they dont further drive the euro. You can point to domestic improvements in europe and the labor market, but at the end of the day, the improvement is the weakness in the euro that drove a lot of that positivity in European Growth. Saying thelly start inflation forecast and growth forecast looks good, labor markets are getting stronger, we could see a scenario where we have that type of environment. That will derail the European Growth story very quickly. They need to have a balance communication method. Is it the area where they start to be more alarmist . Markets have a wonderful way of just getting behind an idea and running with it. I know people that are still stuck up there in trade. Never say never, and when they get behind an idea come they can run with it very quickly. Do you think it ramps up over the next three have in six months . Is that a trade you would do . Peter we will talk about it later in the dollar story. One thing i recognize last week, the consensus behind the dollar weakness story was almost completely consensus. Demise of thethe dollar, and that worries me, especially when you have volatility at such low levels. When everyone gets behind the story, that is concerning. You have a raft of speakers coming out of your. They have to keep a delicate communication strategy. The markets are tuned in not to data points but to verbiage. Anna are you still long in the pound . Peter we still are, we are still positive, but it is a knife edge play. On one hand you have the brexit situation, a complete uncertainty. On the other hand you have the boe. Onus we will keep an eye the all important thing for markets. Manus the fed signals full rate hikes by the end of 2018. Announcing the start of a Balance Sheet unwind. Anna a suspense. President trump said he has made up his mind over the nuclear deal but refuses to say what it is. Manus theresa may is considering discussing the brexit bill in a bid to kickstart stalled the negotiations and brussels. The cabinet meets today. Anna boosting the holding of Anglo American by as much as 2 billion. Manus welcome to bloomberg daybreak europe, our flagship morning show in the city of london. Anna i am anna edwards. We have the Greek Economy minister joining us here in london. Huntington plenty to discuss with him. Manus it is day two of the Bloomberg Business form including forum including tim cook. How are the markets set to open . It was all the way up to the top of the hill and the fed is holding ground. They say full rate hikes by the end of 2018. They have adjusted their longerterm view on the rates a little bit but futures were slightly higher. A little bit of reaction. Bulls poppedwls out as well. The risk radar is where we see some of the denver station. The dollar goes a little bit higher up by 1 . Lets have a look at the risk radar. Diversion Monetary Policy seems to be what is going on in markets. They are pledging to do that keeping a forecast for Interest Rate hikes, three in 2018 so steady as she goes, onwards with the course from the fed. The boj is not changing policy. It is not doing anything but continuing to do what it is doing, i should say. We have msci asiapacific down 1 . F percent we see diversions and japanese at. 2 of 1 . To the boj reacting to what is going on with the fed. Manus we have gone for 2. 01 , back to 2. 07 . Here. E our guest are european bond markets are set to start trading and the bunds, you have futures markets. Lets have a look. Are lower by bunds will see whate happens in germany. What does it mean for the politics of europe . Anna bund bulls may find support. Certaina merkels most victory. How long will it take to form a coalition . That may keep markets on edge. Lets get a bloomberg first word news of a. Heres juliette saly. Juliette the bank of japan has kept its monetary stimulus unchanged but a dovish new board member [inaudible] in his first meeting. He argued that there was little chance of reaching the inflation target within the projected timeframe and the effects of the current yield program were not strong enough. That was an unexpected dissension on a board chosen by shinzo osby shinzo abe. Tillerson said the agreement has not kept iran from playing a destabilizing role. Tillerson spoke to reporters hours after President Trump said he had made his decision about whether to walk away from the pack but would not reveal what it was. He takes his responsibility in this particular matter quite seriously and that is the reason he is very carefully considering the decision of whether we find 082 continue to serve the security interests of the iraq and people are not or not. According to the new that includes the firing of his National Security adviser Michael Flynn and fbi director james comey. The paper says mueller is interested in an Oval Office Meeting trump had with russian officials and which he said comeys dismissal had really great pressure on him. The uks Prime Minister is said to be weighing whether to accept the need to accept discuss the demand for a brexit bill of tens of billions of pounds. Theresa may will hold talks with her cabinet before deciding how far she can go in promising the money to the eu. In a landmark speech in florence tomorrow. She has signaled she will try to bypass michelle vanier. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. The nikkei is up i. 2 of 1 closing higher at 20,347 points at a fresh to your high but elsie where but elsewhere, they asx 200 down. 8 of 1 . We are seeing the regional index drag down as a whole. Having a look at stuxnet been watching, China International corporation, it is up by 18 in the hong kong session. Million. Aid 372 carmakersyd electric rallying. Bluescope is one of the laggards in the region down by 5 . Deutsche bank indicating it is unlikely this steelmaker will be able to raise its first half forecast, still has a price tag of 11 aussie dollars on that stock so closing a little below that today. Manus thank you very much. The Federal Reserve chair janet yellen acknowledged that this years fall in inflation was a bit of a mystery. Suggesting the central bank was on course for another rate hike this year. Anna an october start for shrinking its shrinking its trillion dollar Balance Sheet. Spoke to reporters yesterday. Rate,ntain its fund we expect the ongoing strength of the economy will warrant gradual increases in that rate to sustain a healthy labor market and stabilize inflation. 2 objective. We also decided in october we will begin the Balance Sheet Normalization Program that we outlined in june. This program will reduce our and gradualoldings and predictable manner. Overall, we expect the economy will continue to expand at a moderate pace over the next few years. In the third quarter, however, Economic Growth will be held down by the severe disruptions caused by hurricanes harvey, irma, and maria. Manus janet yellen being honest, talking about the mystery of lower inflation. Our guest joins us this morning. We were expecting a little bit of hawkishness coming out of the fed. We do believe the market is flatfooted on this one. Its been almost 10 years betting against the feds optimistic outlook and inflation forecast. They made a lot of money doing it. Why change the strategy just yet . Every time they put together an optimistic outlook the market is saying there will never be inflation in the u. S. , it will never go higher at that is the story you hear all over the street. There is enough ingredients that tells me things could change quickly and that is what yellen sees. Anna do you think the market are they talking about the wrong ingredient, the market is focused too much on inflation, a be the fed is playing with other ingredients. A glass halffull, halfempty. It is whether you see the current makes in the Economic Data in the u. S. As a pressure or will continue on this path of not putting additional inflation and i think what yellen sees is u. S. Economics has rejected all common theory. Curve twothe phillips years ago at this point. Just as quickly, it could reverse. You look at the labor markets and how strong they are, and by all accounts, inflation should be significantly higher. Anna she is a labor market economist and admitting there is mystery as to why wages [inaudible] that refreshed the debate. That said fine, we have a bit of a conundrum. Peter i think so and that is what keeps her up at night. She probably wakes up and says, there is going to be inflation, we need to start moving now. She probably goes it is at 1. 4 now and goes back to bed areas that is what we are pricing in. Inflation will Start Building up quicker than the market and that curve needs to steepen. Isus look at this, this 5133. The market is, by the end of 2018 we reckon the t suggests 1. 2 5 . You said the market is flatfooted. When you have got here is the one year forward rate. Still well below where the. Ederal reserve is heres the dot plot and heres the market. This gap needs to close. What happens for you to close the gap . We need a pickup in inflation. That is clear as day. That will drive the story. For the dollar to start gaining, we need the other side, in europe, we need the ecb to decelerate their tapering talk and that could be as we said, it could be the german elections this weekend, it could be spain and catalonia. It could be italy. There are an enormous amount of events that are building up. It could be the brexit story that are chickering the smooth sailing that the ecb is presenting. Anna thank you for your time this morning. Peter will continue his conversations with bloomberg on Bloomberg Radio at 7 30 a. M. Manus you can listen to that radio conversation at the rest of the team on Digital Radio if you are in the london area. 45 minutes to go until markets european markets start to trade. That is going to be one to watch. Chr is buying asheboro for 3. 5 billion. They have told the market it will be tough to hit the profit numbers. Anna it is 8 16 a. M. In berlin. We are nearing election date election day and germany sunday. We bring you programming and coverage of the results on sunday and the german election. We could be higher at the start of trade. Coming in with a stronger open. We will see in 45 minutes time. Stoxxstocks futures euro trade. At the start of u. S. Futures look flat to negative. Lets get across to juliette saly. Good morning. The mining a billionaire plans to spend 2 million on Anglo American shares. He says it is a family investment and he does not intend to launch a takeover. He has built a 12 stake in the british minor the has been benefiting from the recovery and commodity rices. Anglo american declined to comment. Google has agreed to buy a cc design teams. It is taking on 2000 employees with experience working on it signature signal devices. With al also comes nonexclusive Licensing Agreement for htc intellectual property. Messagere said it made profit target due to natural disasters. Hurricane maria and the mexico quake will give for the rest to financial strain that exceeds the buses the budget. Hannover rueck re said it is on course for a Dividend Payment this year. Anna as greece enters the final year of its bailout questions remain as to how the economy will be able to stand on its own two feet when the rescue program and. Ends. Here, minister. Lets start by talking about the bailout and where we are on that story. The third a lot review starts midoctober. Bel it the concluded concluded or will it drag on 22018, what is the timing . Guest it will be completed by the end of the year. We will have more than 80 done by the group that meets in november and the rest of it are the Euro Group Meeting in december. Is view is first review different from the Second Review which took much longer. All efforts are to complete the review on time at the end of the aar so that 2018 is concentration in Different Things and how to get out of the memorandum of understanding. Manus the biggest questions around that relief. Do you see the eurozone deciding on debt relief measures in the coming months as the imf wants question mark what is the timeframe for that realistically as we go into the closing dates on the german election which has its own significance. Lets deal with the time life timeline for that relief. There is a discussion for the debt relief for the longterm bonds for greece and the expectation is by the end of august 2018 when we are coming close to the end of the memorandum of understanding. Seriousuld be a discussion and perhaps decisions made about the longterm outcome. I am optimistic that things will happen. One has heard that there will be a present value reduction but there will be the extension of maturity of the bonds and also different Interest Rates that will make the dead the debt [inaudible] in 2018. Be anna we have heard from one party leader who is in the coalition, the ftp leader said greece may have to leave the eu if it wants to qualify for further debt relief. Do you this is a person who may or may not end up in the german government. Does the general election have the application for the debt relief story . Inappropriated be for me to make a remark about who is the partner for chancellor merkel. The government will emerge from the elections in germany will not be different from what has been the current government. Manus we look at and markets, we look at equity markets, which i to assess various countries in various ways. Over the past month i will show our use of spectrum of the banks. The banks are under pressure in greece. , this is thehere past month, you can see perez down by 35 . I thought we would show month to date. Is there a new initiative to address the nonperforming loan issues, will the bad loans get reduced by 2018, 2019, it seems optimistic. Is this canary the greek canary in the coal mine . Guest the imf has requested an hor which is not necessary. They proved to be, the banks are under and they were done the worst scenario possible. The ecb has indicated there is nothing wrong with the greek banks. The new stress tests will take place. Investigatingk is a suspected irregularity that iraeus p to knowt is difficult what happened if indeed anything happened. What is important to know is not the stress tests are necessary now, they have been scheduled and one has to accept what the ecb says. It regulates the greek banks and therefore this is where we have to be. A and trumps presidency in terms of dealing with the nonperforming loans guest a number of measures have been taken. Thegreek National Bank and intous bank have entered negotiations with companies that will take and services loans and there is a legislation wishes out of court work which is outofcourt workouts. The target which is a 40 billion reduction by 2019, based on the latest estimate by the governor of the bank of greece seem to be on target. Look you make anna and i ore we do not work very late hard. You are on the road, you have met 31 institutions. Guest i met 23 today. Another 10 tomorrow. Get to ist i want to what is the appetite, what is the feedback for your paper, how confident is the story that you are telling in terms of growth and what is it matching with investors . Believablestory is because one has to see the statistics that are coming out from greece. Every possible Economic Indicator that measures the health of an economy is positive and upward trend and therefore investors have shown some appetite because there are tremendous opportunities in greece and therefore will see is a good number of them have invested in greece and want to extend their investments in other economic sectors as well as the to continue to show that it is possible to be profitable and to invest in greece. Anna are any of the investors ask about the el dorado case . The biggest investor in greece that has suspended his operations because it is waiting for news around permits and they are waiting to hear something from the government on this, can you say anything to el dorado . Guest i was exciting this question but there was only one question on all these funds. It is not that im heartened important in terms of the investing public. It is a complex case. The latest decision was to go to arbitration with some difference of opinion and it is troubling to have the el dorado announce that it will suspend operation for five days before the decision will come out from arbitration. Anna they said they want to hear constructive comments. Guest some licenses have been issued for you and we have to wait for final results. Manus the bottom line is numbers. Are you going to have to implement more in 2018 two hit the primary surface target . Guest no. We are on target for this year. The primary surplus is going to be met, it will be exceeded, and plans are underway with the measures we have taken, we will deliver the 3. 5 for next year. Anna thank you for being with us this morning and we wish you well on your trip to london. They that is it from daybreak in europe team. You have the european open next. Anna you can hear all about that here and on bloomberg daybreak radio. In the london area. 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. Guy good morning and welcome. This is the european open. Cash equity opening and 30 minutes. I am guy johnson in london. Here is what were watching. Delivering december. The dollar rises as the fomc signals it is not done raising rates this year. Underpricing more hikes in 2018 . Andrts swirl about bnp unicredit could be me