Migration and the environment . Billionaires are stunned by the a da vinci painting for a whopping 450 million after commission. Is this market exuberance . Matt why just billionaires . I feel like the whole world is stunned when someone pays 450 million for a piece of canvas was some paint on it. You cant even drive it. A half hour away from the open of european stock trading. Lets look at the futures. 6 . Stock futures are up this is after asian stocks rose overnight. It came back with bank stocks leading the way. Then asian stocks were on a tear. The nikkei was up 1. 5 . It looks like a turnaround today. Take a look at treasuries. Should point to a risk off trade as well. This is a oneday trade of 10 year treasury yields. Asy are up substantially investors sell the debt and look to do something else. You talk about whats happening in the asian markets, lets bring you the chart. The nikkei is bouncing back. The yen coming down as a result. Lets look at this chart here. What youve had for the last few days is a gap in the climb and then a climb. Buy the diphe mentality. Commodities have been a feature in this story. Remember, what we have seen in oil is important. We are not featuring very much today. Oil is stabilizing. Gold a little off this morning. Lets get a news update. Rob johnson is a come the first republican to oppose the senate tax plan. Do enough toesnt help pass through businesses. House leaders have cleared the way for a vote today on their bill. Released aers latenight brief that would repeal part of the obamacare law and make some tax breaks temporary. Donald has talked up his asia visit and says there is progress on gaining respect from regional leaders and trade. He says the trade deficit is unacceptable and the u. S. Needs to whittle it down as far as possible. There are stern warnings for trade violators. We will never again turn a blind eye to trade abuses, ating, economic gretchen economic aggression, for countries that propose open trade but do not live by the rules. In zimbabwe, two high profile opponents of mugabe have returned to the country as his family remain in detention. Yesterday, troops took control of the stateowned broadcaster and the seed of parliament and sete Central Banks. The Australian Dollar strengthened and bond futures did after the Unemployment Rate dropped more than spect it. It fell to five point 4. 5 . Positions extended their surge. Germanys Angela Merkel is said to be wary of pushing u. K. Prime minister theresa may too hard in brexit talks. Officials see a risk that excessive pressure over the bill could week in may at home. If may is replaced, many are hardline brexit backers. The art world has been stunned our daknown the and vinci painting has become the most expensive work ever sold. It had been estimated at 100 450on but it finished at million. Global news, 24 hours a day. Powered by more than 2700 journalists and analysts. This is bloomberg. We will will guy come back to the da vinci story later on. Lets talk about whats happening in the equity space. Most of the major indices are up. 600, which is on a sevenday losing streak, at this time it looks like a positive start in europe. Is it buy the dip day . Mark cudmore. The next todays feel important. Mark certainly. Of thet a boost from one Major Internet Companies in china. The gave a good list to china markets and japan followed as well. As you say, the tax reform in the United States is a major hurdle for everybody. If that goes wrong, we could be back down again. Today the mood is good. Im sure that will spill over to europe as well. One of the big conversations today has been what will happen in that tax bill . Even if you get some progress on the tax bill, the s p is trading at 19 times earnings. How much further can ago . Sometimes on the forward you cant takes, it purely on historical comparisons. That market is somewhat different today. The investing basis different. You have a lot of money coming out of china. The conditions are not comparable. To theople will point fact is have a tremendous run. Other parts of the world are little bit cheaper. U. S. Markets are relatively stalled in comparison to parts of other other parts of the world. Asia does not seem so expensive compared to the u. S. What clues is high yield at the moment . That is one that worries people. Maybe a bit too much than the market can digest. People will be watching to see how new issues go. At the end of the year, people typically want to lighten up and it is not easy to sell high yield bonds into a foreign market. How that trades over the next couple of weeks will be very important. If highyield starts to trade badly, it coulds bell spill over into the equity market. What it means for other asset classes, highyield is a big factor. Matt what do you make of the fourth 50 million painting . 450 million painting . Mark not really my category. [applause] its quite extraordinary. About the dowok reaching 36,000. I think its in a completely different orbit. Absolutely. Its insane. 450 million for a painting. The estimate was only for 100 million. Talking about the possible turnaround in stocks, maybe not so much an art critic. You can follow him on the bloomberg at mliv. Coming up, the future of asset management. Blackrock vicechairman talks about robots and working with his ceo. Will preview the latest episode of leaders with lacqua next. This is bloomberg. Welcome back. Were going to give you the price action in the pound. This is on a politico story that seems to indicate the eu is rejecting the uks idea that its headed towards a trade deal. This would mean no direct branching in Financial Services and only limited movement. Thats a major part of the you can economy. It does seem to be moving the pound as we speak. Lets get a Bloomberg Business flash with ed. Telecom is looking for a merger. Telik indications carriers are facing intense competition in the netherlands that is spurring deals. Plans to step up drilling in norway for a second ofr in the first indication its expiration plans for next year. They are looking at 25 to 30 wells next year. While still an early estimate, statoil could end up drilling as many wells in norway as it did globally this last year. Volkswagen is in partnership with china to build energy vehicles. It willing reduce 40 locally produced videos vehicles. In will start production in the first half of next year while sales will start in the second half. Shareholderry fox the murdochmove families controlling interest has failed. They owned almost 57 almost 57 of votes cast war against the merger. Most other investors with voting stock favor a single class of shares. Thank you very much. Blackrock vicechairman has warned that tyrants have the ability to the stable economies. Could createrates a precautionary savings effect. Here is a preview of the latest episode of leaders with lacqua. Whats it like working with larry fink . Theres a good question. Hes a bit older than me and i try to keep fit but traveling with him is a workout. Is he demanding . Yes, but no more demanding that he is on himself. Has coined this stage phrase that we all have to be students of the market. For anybody ause blackrock not to be a daily student of the market. That shapes the culture very much. This relentless, never be satisfied, always remember that the world moves on, you have to continue to learn everyday. Inhave a lot of initiatives internal programs and academy where he force everybody and encourage everybody to live that cant do if people that or dont want to do that, they are in the wrong place. ,he culture that he carries very much runs throughout the firm. You can see that full interview with Philip Hildebrand lacqua. Rs with theres a chance to catch it across the weekend globally and you can watch it any time on bloomberg. Com. Capital management has disclosed a 3 stake in Deutsche Bank after making a similar sized investment in commerzbank. The top held her of both German Companies and create speculation about a german bank merger. Lets go to our reporter now. What is the thinking behind this feud . Would investors be happy about a german bank merger . Its a good question. Only have a 3 stake in Deutsche Bank and a 5 stake in commerzbank. Both are too small to indicate a merger. Alliesuld need to find to bring it about. It wont happen for a while, i suppose. Is that what they want . We dont know yet. Hopefully will learn. Im struggling to find any other reason why you would want to do this. They are small but theyre not insubstantial. What does that mean with the management teams of those institutions . Its pretty clear that they are not an investor that sits passively by the side. They get involved when they put money into a business. Im pretty sure they are already in talks and have reached out to management. What will happen over the next few days . I dont think the management of Deutsche Bank is going to be unhappy about the investment. They know that there has been a lot of pressure recently for disappointing performance. Its going to pile some pressure for business to pick up. Matt what are the chances of this ending with a merger with commerzbank under cryan . There were talks. We know there were talks between the two banks about digital merger. Those talks were abandoned at an early stage. We think. Banksw people inside both said it doesnt make sense at this point. The talks can be resuscitated at any point in the future once the banks feel they are Strong Enough for a merger. Its too early to say if that happens and if it happens under cryan. We dont know how much longer he will be at the bank. Probably for at least a few more months and a quarter. We see through merger . This is all happening without a government in berlin. What is the political overlay of this was that governments are support . Once that government starts to form . The government not only holds a 50 stake in commerzbank but they also, a banking merger of that size wouldnt happen without the government giving it its passive approval. The liberal party is a likely candidate to take over the finance minister he. They are in favor of selling the government stakes. They havent said they want to sell but its likely they would be in favor of selling it. Prospect of such probably be a positive factor. Guy great reporting as ever. Are minutes away from the market open. Deutsche telekom one stock to look out for. The techs. On they open is eight minutes away. We will pride details we come back. Welcome back. Im matt miller in berlin. We are minutes away from the open. Stocks you want to watch. Ceo said hesom open to considering an ipo of the companys dutch unit or a merger with tell it to with tele2 in the netherlands. May indicate some movement. And stevens is stepping up into a new position. It looks like theres going to Movement Based on a difficult plant in alabama. Cisco was up sharply overnight on the back which reporting its doing great well. Meansis thursday which the dvd is the function of the morning. This is bloomberg. Guy four minutes to go until the start of cash trading through the fill value castrating. Until the start of cash trading. Asia rose strongly on the back of tencent, but remember, the tax story out of washington is real very much present and needs to be watched carefully today, matt. Matt absolutely, although it could the same momentum thing here. We have had a big slump in asian markets. We had a big slump in european markets as well. Take a look at this chart. We justsee that witnessed is the longest slump we have seen in european stocks onedayred by percentage changes in the stoxx 600 in over a year. If it turned around in asia, can turn around here, to . Futures indicate that to be the case. Guy let us talk about the market open. Here it comes. We are expecting just shy of. 5 purity expecting similar numbers to be posted elsewhere around europe. There is the ibex. We are up by. 6 . We are rising. Matt was just showing us the chart of the downtrend we have been in reversing today, but it is early. The next couple of days could be very interesting for the stoxx story. Let us get details on what else we are watching. Nejra interesting to look at what is happening and bond markets. We saw the 10 year treasury yield dropped five basis points. Yield has rebounded today but we are perhaps not seeing quite the same thing if it comes to the tenure gilt yield. We are unchanged at 1. 29 . That very much that he, tracking what is happening in the blend market instead of the treasury market so far the session. 1. 29 on the 10year gilt yield, talking about a rebound in european stocks. We have seen seven Straight Days and we are in the green across the wheel today. Up some point in percent on the benchmark overall. 3 in the some benchmark overall. Now, let us look at some technicals, or one technical in particular. This is just eurozone stocks. Percentage measure flashing oversold on this measure. Gauge,been a pretty good apparently the most profitable for european investors. Perhaps this is signaling that they should be buying the d ip. Whether it will continue, that is the question. U. S. Market open, futures pointing higher. Correlation to the stoxx six broken over the past few days. What does this mean . Are we going to see some sort of divergence between what happens in europe and the u. S. Over the next few days . Are they going to move in lockstep . Guy thanks very much indeed. Quick look at the movers. , up. It is continuing altice is continuing to gain. Downsideke you to the and see what is happening there. I have yet to see the price. Electrolux is trading soft. Is exdividends as well. There is a whole bunch of exdividend. Shell down. Divvy payer. Royal dutch shell going exdividend as well, dragging the story down a little bit. Matt. Matt we have stocks making a comeback in asia overnight and stocks making a comeback in europe. Futures are positive right now. Lets talk about whether buying the dip is right. He joins us on set. Of thisthe end socalled slump we have witnessed over the past five or six trading sessions . Isen if the history so far any evidence, and surely it is, what really concerns me is the impulse this time is coming from the credit side. Very popular etfs actually down on the year. Side of thee credit business coming down, and that, combined with what we have seen in the u. S. In terms of lending to the commercial, which is also falling quite dramatically, to the extent that we are seeing a recession warning on that side, combined with the fact that the forwardlooking fed is not believed by the markets. Matt i have the hyg etf on my terminal, and you are right. Yeartodate, it is down, not at its worst level, but the worst in 10 months. Is a lot ofs is the equity moves due to an expectation we could get reforms in the u. S. . Steen particularly referring back to the highyield space. The thingkey part of the highyield market will be looking for. There is about an 8 billion cost to 10 billion cost as it stands right now. The credit impulse, dont forget we saw the 10year rate breaking 4 last night. The day before last night. Clearly, china is on a campaign to deleverage economy. We also have to remember that lending will create the credit cycle, so the credit cycle is stopping holding even in terms of the Central Banks. By the dip is maybe too much. We want to see the difference between me equity, how that trade, and how the credit trades. All the last two to three years, the Financial Condition, despite fed hiking, has been easing. We start to see Financial Conditions tightening. Let us see by monday, tuesday next week. To change the narrative is enormous. We always had, for the last qe period, we have gone down 5 to 6 . Weve either dip and then move on. To break that is enormous. Steen i think what we have learned over the past 24 months is we initially always looked at what the fed is going to do, with the ecb is going to do. Both the u. S. And europe, they have been dropping and dropping and dropping. It has been reasons why you should buy the dip. Any selloff has been easier monetary conditions. If now the change is real, if they are going to do what they say, if the ecb is contemplating an exit strategy, if the Balance Sheet is coming neutral to down, if the credit impulse is impacting, than the Financial Condition very slowly will start to rise, and that is what we have seen this year, and it would have been the start of the change. A major change to a oneway trend we have seen over the last 10 years. Guy we talked about it earlier. About this. People tell me that what breaks and the psychology is the return of inflation, and at this no evidence point that we will see a significant upswing in inflation. There is a creeping sense of the market that maybe that is going to emerge. What i have his tips, inflation, and treasuries, and this year, tips are outperforming treasuries. Kind of indicator is that . Is that an indicator that may be the bond market story is starting to hit the rails, hit the buffers . Steen clearly, inflation would break the trend for the market because you have to adjust the forwardlooking premium you need to take from inflation. Dont forget that the Financial Condition has been easing. We have had 30 years, 30 years of one trend only in Interest Rates and inflation, which is down. From a practical point of view, stage, it needs to change. It is hard to imagine they will go to the negative. We are at that point where the Central Banks want to reign in the credit. China wants to deleverage the bank possibility to lend and make money on it, disappearing. All the good news has been pricing. We have bubbles. 470 miles Million Dollars for a bit 475 million for a painting . Money his flow do bubbles, not productivity. But it is a very valid point. Guy we will continue the narrative. Up next, we will cap about this rediscovered da vinci selling for 450 Million Dollars including commission. What does that tell us about asset prices . What does that tell us about the velocity of money . Qe . Does it tell us about what does it tell us about the experiment we have been in since 2007 . What happened last night could be a momentous market momentum i think. We will talk about that, next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. I am matt miller. That easily makes this the mostold christ expensive work of art ever sold, obliterating records and far exceeding its estimate, which was only 100 million. But what does this sale tell us about asset prices and the state of Global Markets . Let us get our thoughts with steen jakobsen. We already heard you talk about the fact that you think this points to bubbles, but i mean, its just an amazing price. Blowing away the record. What is going on . In bitcoins. D that is the only way i can justify that price, to be honest. And clearly, this is bubbles. We see it everywhere. We see it in the amount Football Players are getting paid. This is too much money this is the too easy Monetary Policy for too long. Matt name our junior could not afford this painting. But lets take a look at the chart i have got here. This is a tenure look at the s p 500 priceearnings ratio, trailing in green. Forward ratio in yellow, but you can see, even with this slump we have had over the past week of trading, we have not been this high, really, since 2009. Least in thet, at u. S. , priced to perfection . Steen perfection does not exist except in paintings, apparently. And clearly, this thing that we cannot say where there is a bubble or not, there is a bubble when we go super exponentially. The yearoveryear growth has accelerated north. Cryptocurrency, real estate, the msci global index, it is straight up a bubble. We can remain in that bubble sphere for a long time because , back tos to happen where the earlier discussion is, it needs to change or we need an extra genus. Genius. Guy bitcoin does fulfill the criteria youre talking about. Cannot back it up to another conversation we were having about inflation . There seems to be a lot of the money that was produced by , etc. , seemsencies to have found itself in assets. The da vinci is one of the more notable examples. You can see it everywhere. What happens and im wondering can we get that money into the hands of people that are going to spend it . And how does that happen . The questionn ask differently. What is the difference between having one billion, 10 billion, 50 billion . Guy your potential to save growth. Steen the number one question is how do i preserve my capital . They have no equity exposure, nothing. They are living scared, thinking everyone is going to steal their money. All these bubbles are being created in equities and real estate. There is no connection. These are people on a very rich vip island that have no fairies, no connection to real life. Guy how does that money get off island . Because if it gets to their real economy and people have a propensity to spend and start spending it, the inflation will go to all the way up here really fast. Steen it is going to come through lending. The only way you get a pickup in inflation is through velocity and money. Faith incause you lose the economy like zimbabwe, or are passionately because people start asking for more funding from the banks. You increase the multiplier in the fiat monetary system. Velocity of money is at an alltime low. The island, the inhabitants on the island are growing both inside of the island and the size of population. That is a critical problem i in terms of investment. We have electrical cars and other things which will create a Massive Development flight away from the island because everybody wants a piece of cake of this. We have seen volkswagen announcing they will be in full cooperation with their chinese front and 10 billion euros worth of investment to have electric next year. Every time in history where we have seen the sort of buildup, the 1920s and 1930s, ultimately, there is an event which creates the move away from it either being in terms of the new inventions of that, being that the money disappeared. And that is my point. And people think it is going to be the phillips curve. If wages are going up, they are going to hire less people. We are not actually increased to full level. Matt by the way, im just looking at check out this chart that i am working on a my bloomberg. What we have got here in white is the price of gold in dollars and an orange, the price of bitcoin in dollars. I will go ahead and normalize it so they start from the same. 5 what ago and you will see they look like in the same spot. It is unbelievable, obviously, the rise of bitcoin. About the lack of it in gold. How come gold is only trading at 1300 per ounce . Steen cryptocurrency for the on clearlyble crowd is more appealing. We had this computer game called the and that is what people want in on. World, i around the asked what do you think about cryptocurrency . This is what everybody ought to talk about. Gold has not had the monetary conditions to support it. It has not been inflation coming. In terms of cryptocurrency, you have the unaccountability these are be, these are the tax authorities, while gold has not had anything to go for it. As things will normalize, i do think that gold will start to pick up its price. Matt im looking at the dots chart. The market obviously does not believe it. The fed says it is going to raise three times next year after a hike in december. Those that pricked the bubble a little bit . Do we get a normalization of asset rises as the fed is to normalize policy . Steen in history, when the fed has said they will hike, they have actually followed through. Saved the fed but in a hiking cycle, the historically have delivered. Next year,s deliver that will carry the market lower on the the actual price marginal cost of capital will increase significantly higher. Guy kind of circling back to dipe we are now, by the day. Buy the dip day. You can see what is happening with the u. S. 10 year yield. All this theoretical stuff about what is going on in changing, of how long it takes to change this, because this last phase of an equity rally intensity punchy, so have we had that . Or are we still going to get that . I. E. , maybe in two years time, i like tuneup on my equities i start to like tuneup on my equities. Steen instead of believing in my interpretation, a Machine Learning program, what it is doing is exactly what youre saying. It has increased the government on risk, which is basically cash , one to three years. It is interesting, to achieve the same amount of risk, it is keeping the equity, but it is increasing the alternative on the other side. Guy sounds like risk parity. Steen it is not risk. It is the other side. It starts by the risks you take. It was very good at picking up that something was coming. Guy well they could government bonds. Steen coming out of it, what it did was it bought credit first. Credit being the first derivative equity. That makes sense because at the time, you had credit impulse from the tops. It was credit fed into the system. Right now, it is very dubious about credit and its increase in government bonds and keeping the equity side. When this kind of model kicks in, it is getting to a critical point. For the next two to three days, it is spread between the hyg and the xps that would dictate whether this is the start of something. We definelike today, it. It is going to be four stars. The fed will react. If you look at the forward market, you look at the ois market in terms of one year they are starting to price in the federal reserve. Market are you that the will redefine the buy the dip because we are moving from three hikes to one behind the space. We are back at the drawing board, what will really change the Financial Condition . Guy work function on your bloomberg. You configure out exactly what the market is pricing in terms of forward meetings. Steen jakobsen will sit around. We will bring you the stop member of the day so far. Ditching its ceo designate. We have another writedown being talked about as well. The stock is having a tough day of things. This is bloomberg. Guy welcome back. Let us talk about a stop on the move this morning. Nowave the designate ceo, no longer going to be the ceo. We have a step up from the board. Let me check my notes. Looks like another big writedown. Here is the dashboard for what is happening. The price, to 91. The stock is trading down. It is pretty close now, 52 week low, trading to 91. There is still 13 buys on this stock. You wonder whether or not those increase or decrease at this point. The stocks trading at a decent volume as well. That is the decent trend. The trend in terms of the volume, certainly there. We will carry on and talk about more industrials, particularly electric cars. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Matt global stocks stabilize as european equities open higher. Is it a bu buy the dip day . The party talks arrived today. Can she close big gaps on the environment, agriculture, immigration . And divinity or delirium . The art world is stunned by the sale of da vincis christ painting for a whopping 450 million . Is this complete and total market exuberance . Good morning, and welcome to Bloomberg Markets european open. I am met miller in berlin alongside guy johnson in london. Of the venn diagram religion in the markets as well is something that is interesting as a thought process surrounding the da vinci. It does seem to be a bit of buying going on every second. Every sector in europe is higher. Financial services, auto parts, health care, food and beverages, actually quite some defensive elements trading higher this morning, though Financial Services is doing reasonably well. Is not doing that well, which i am a little surprised about. Bankes seem as if the story is fading. Interesting market rally this morning that is being driven food and beverage, health care, stocks,nd of heavy utilities. Not utilities. Bondlike socks are doing well. Basic resources and banks are not. I wonder if there is a little subtext going on. This is an interesting market this morning. Let us get a bloomberg first word news update with sebastian salek. Sebastian the first republican to deny the tax plan. He says it does not do enough to help partnerships, limited liability companies, and other businesses. That came as they cleared the wait for a vote today. Writers made them temporary. U. S. President trump has talked up his asia visit, Planning Progress on trade and the respect of regional leaders. The trade deficit with other nations the u. S. Will start to whittle that down. Pres. Trump we will never again turn a blind eye to trading abuses, cheating, economic progress in, or anything else from countries that profess a belief in open trade, but do not follow the rules or live by it principles themselves. Sebastian Angela Merkel is said to be wary of pushing theresa may too hard brexit talks. According to a person familiar with the german position, officials see a risk of excessive pressure that could weaken may at home. If may were replaced, most of her successors are hardline brexit backers. In the art world has been stunned as its rediscovered painting by Leonardo Da Vinci smashed records to become the most extensive work ever sold. Christt had been the was bought for more than 450 million. Journalists and analysts in more than hundred 20 countries, this is bloomberg. Guy thanks very much indeed. Let us change gears or not. This mine, volkswagen and its partners announced new ranges of electric vehicles in china. The biggest auto markets are on the road. It is just part of a productivity revolution. Steen jakobsen, why . Steen because they need it. The drive in china has been coming from the fact that pollution is the biggest single social problem, so big a problem that every region in china not only has a production limit, but a reduction in pollution, and as you have seen over the last couple weeks, india had 40 times the wto allowed contamination, so the largest components of the world both have a massive pollution problem that is pretty easily swept away by using electrification. Electrification commitment if you are a producer of cars in china and india, it has to be electrified. The Combustion Engine is significantly higher. You have two of the worlds biggest populations, and the consumer demand for roughly approximating 2. 5 billion people is going to drive a massive restriction development. When you have technology pollution, you get a lot of positive spin up. Imagine the car industry as a whole is able to improve the battery storage. That means the utilities doesnt have to spend money on peak demand. It means you can have better economics and energy. Guy your car powers your house when it becomes a store of energy. Why is this, which is an etf that is done well, starting to run out of steam . Steen because it is expensive, like Everything Else in the world. When you look at who is the constituents of that, it is chemistry companies, not the usual guy let us dig into who we are talking about here, and then we can break it down in terms of holdings and allocations. Names,if you look at the it is not what you think. It is not the car industries. It is byd. Are a wide range of companies that contribute to this, so it is a very broad index and also of course, other businesses, but having said that, i think these are the top contenders to be benefiting from this. Dont forget, samsung as a group has the highest research and. Evelopment by far there is one that is not even close. Not even google spent the amount that samsung is using unilaterally in the system. Matt are there any carmakers i am looking at the valuation of tesla. It is difficult because they dont make money. Volkswagen is difficult because they had the huge crash. 37 timesvalued at forward earnings. Either any carmakers that are going to be able to get this in old, established carmakers, and if so, how much are they worth . Steen clearly, there will have to be come today, there are so many brands in terms of Combustion Engines and cars. It will mean you have to consolidate against the groups. Volkswagen, in my opinion, is a winner. Toyota is a winner. There were earlier in trends entries into this market. Toyota is the one brand people trust. They have the knowledge on the production side to do this. I think it is the classic names we had. How much is that worth . In a world where they are selling at 450 million, i dont know, to be honest. Matt most carmakers are trading or six times earnings. Ferrari is a different story. Tesla is a completely different story. Tradingng to get gms double the multiples they are trading at a day when they make electric cars, or is the outlay of initially going to cost so much that it is going to bring them down . Then first of all, i doubt americans will be able to catch up to this. I think they are behind in terms of it because they have a domestic market which is very much more focused on the traditional cost and vehicle market. Germans are supposed to be laggards in this, but the japanese and chinese producers are already way ahead in this and they have Critical Mass. The valuation has to reverse back to who has the Critical Mass for the product they have. It is not going to be the americans. In other words, i would expect companies that have exposure and the ability to gain market share by being an early leader. They will have it. It is an asian play in terms of the car manufacturers. Guy where does this story leave the investors . I have got ge on the screen here, a very longterm chart. They build turbines, big wind systems. It is coming unstuck really quickly. Isen i think this company paying for years and years of managing their earnings and the global way they do business. I think they are behind in the circle. What they do from quarter to quarter does manage expectation in terms of the earnings cycle. Research and development department. That is classic. I dont think they have enough research and Development Money to go by. They have negative cash flow now. Going tocompanies are be very hard for them to turn around and actually become heavy. Guy is that true of siemens as well . I talked to vest this the other day and what is going on . Steen they change their planned every three years . In myrystallized it opinion is the zero to 24 months, everyone has to realize the dynamics of electrification, but across the board, as you say, stories of energy, this is going to change. Internet, in my opinion, the biggest unleash of capital from these islands, doing nothing to something that is good for growth and productivity. Jakobsen, cio of saxo bank. Coming up, the german chancellor is under pressure to kickstart talks on the government as a selfimposed deadline looms. We discussed this, next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. About 44 minutes into the session, we have equities up across the board. German chancellor Angela Merkel is facing the first big hurdle of her push to form a coalition government. After months of exploratory talks, merkel will give the heads of her block the free democrats, and the green party today a look. We are joined by bloombergs German Government reporter minor burden by our German Government reporter. What could push us past this selfimposed deadline . There are two major areas where they totally disagree. One of them is migration. We know the cdu and the csu have agreed they want some kind of upper limits to migration into germany, whereas the greens are totally on the other side. They have much more liberal views regarding immigration into germany. That will be one Sticking Point. Matt . What about the liberals . What are their views on migration . They want regulated immigration. They are in favor of immigration law. Germany has this weird system where lots of different laws regulate which people can come to germany, so this needs to be simplified. I think there is already some agreement between the lawmakers from the various parties on that , but it is mostly about how many asylumseekers will enter the country and how you actually handle the family reunifications. We know there are lots of families of people who have come to germany. How many people do you let into the country . That is one major Sticking Point. Matt the other Sticking Point we spoke to michael yesterday s climate, emissions, carbon dioxide, and nox emissions as it relates to design internal Combustion Engines. Rainer that is true, energy and transportation. The greens actually want a shutdown of 20 lance 20 coal plants. Germany can do that without any harm done to energy security. Others think that is not doable. They argue germany should not rely on Energy Exports from france, nuclear energy, or poland coal energy when the solar panels do not produce enough energy. The other is transportation. The greens are adamant that emissioneeds to meet reduction goals no matter what, more or less, and the ftp and cdu are much more reluctant to go along. This is a horrifying im not sure if it is true or not, but is it really on the table that the greens might insist on a speed limit on the audubon . Rainer i know that would really hurt you a lot, but that is one option. The greens running the environment ministry, if they go very strict on this, could impose certain measures to reduce co2 emissions, one of which could be speed limits. Another one would be, you know, banning certain kinds of certainon engines in a time period. So all of that would be on the table. Matt it is a depressing subject. Guy matt was sitting down. He was standing, he would be falling. What happens if this does not work . Who would benefit . Would we have to go back and have another poll . If there is another election, what does the landscape look like here . Rainer that is the big fear of all parties involved, really. They had 12. 6 of the votes in the sick and fourth election. If these parties show we cannot agree, these are established parties that have all been in government. If they failed to agree, this would send a signal out to voters of the afd that voters of the political establishment are unable to form a coalition. Parties havethese been meeting today and are going to negotiate into the early hours of tomorrow morning. They are pretty close. There are really big Sticking Points which we just mentioned. We have some optimistic voices this morning. We have come such a long way, but we should really be a will do this. Chances are not that bad. Matt and of course, we have never had a second election called in the postwar history of germany. They all feel like it is their patriotic duty to form a government, right . Even though they say they are not afraid to call new elections or force new elections, it is very unlikely. Thanks, rainer buergin, our German Government reporter in berlin. Guy let us get steen jakobsens take on this. Cio of saxo bank. There is a lot of optimism around europe. It started when mr. Macron got into office. Im wondering if the book end is the formation of this german ,overnment which in many ways if the liberals get control of the finance ministry, may get a break on some of the stories that the french would like to see pursued here . Steen it is clear that macron is not looking forward to an fdp led treasury or finance ministry in germany. That is going to be creating problems next year. We also have on the other side here, we have almost had the whole austrian and hungarian empire again. All of these countries are now migrating to a new austrian president that they are trying to separate themselves from europe. Guy they are not completely on the same page. Steen but they are coordinating what they are doing, meeting. Forms to do it. Side of the euro, you have the brexit talks going around which i think also be all right. A lot of Business People into this environment of noise are a little bit defensive because unlike americans, they do not by trumps version of the world just talk and things will be better. Europeans are a little bit more conservative in the way that they approach. We have massive challenge in terms of europe being very strong and industrial. You have massive french and German Companies. They are a little bit behind in terms of the next election. Guy that is an interesting metric when you look at it on a per capita basis. It is not as high as you would first think it would be. Steen no, but they have some economic and funding base for doing what they do. They are traditionally slow movers. Dont forget also that the longer the germans are taken to the economy, that is what we saw in spain, belgium, so all these countries having sort of a vacuum of leadership is not necessarily negative for the storage. It concerns me that european equities is that broadbase is up 5 . The u. S. Is up 15. We came into the year massively into the French Election because for whatever reason, therefore, that macron was not going to come through. Then you had the rally and since then, we have been flatlining both enemies and performance, and i find that interesting. Guy if you are a u. S. Investor, you made 20 in the dax. 7 as you can see on the screen. Kind of depends on currency starting point. I read more articles about the fact that europe is entering a golden age. And yet i take a step back and think about what mario draghi tells me at every press conference. I am cautious. We are not shutting anything off at that point in time. The reason we are not done here yet is that we are not out of the woods. Coming acrosstes my desk talking about the fact that europe is going to open a golden age and there is a mismatch here. Steen that is clearly proven. That you have it is proving that youre becoming more competitive. If they are going to be the dominant force coming forward, europe is geographically and technologically a better place. Europe has a higher robotics and industrial process. A danish company, a Swiss Company can use that advantageously because we dont have enough demographics to support the longterm. Instead of producing in china or otherwise. So i think that is the positive. The negative spin, he knows his own country and that it is going to be a mess next year and a mess again the year after that. He knows about this fracture that we see in Eastern Europe visavis brussels and brexit. I think he is just trying to be cautious. At the end of the day guy is an geographical allocation the problem here isnt geographical allocation the problem here . When you look at the u. S. , it is driven by tech. I just want to invest in text, dont i . Steen Everyone Wants to buy more bubbles. Guy it is a bubble . Tech is a bubble . Electric cars are a bubble . Steen in terms of the forward expectation, but it is not a bubble in terms of what it will do to the real economy, so my take is really as we adjust a few times today, there is a disconnect. The equity market has almost nothing to do with the real economy. If we can connect the equity market to the real economy, we will probably have much higher productivity and at the end of the day, a better stock market. He cannot create more debt and pretend that is a solution or in the case of trump, just being enemies with everybody. I mean, that does not work. It works is addressing the connection between the two things. The global stock market to the Global Economy . If you do that, we will be just fine. Guy can we connect capital and labor bank . So many interesting thoughts. Steen jakobsen, cio of saxo bank. Let us get a conclusion to all of this. Let us talk about the movers. Nejra cehic, over to you. Nejra here are the biggest movers in this session starting with a private equity firm. We ported a total return for the first half of positive 655 million pounds. Its that private equities on track to deliver a year of strong growth. Taking the numbers politics of positively. Ives politics this is after it added mobile phone customers. That shows may be that a longawaited consolidation in the center might not be needed. The cfo saying consolidation and telecoms behind us for a while, up 4. 1 . On the downside, im looking at citic so. Fourth quarter again it Revenue Growth and ebit. Both beat estimates. Jefferies saying the 2018 guidance is soft. Perhaps that is a negative take away. They are down 4. 6 , one of the lack arts on the stoxx 600 laggards on the stoxx 600. Guy is today buy the dips . I would are you the mix with some of the financials, the trade not necessarily partaking in all of this is an interesting aspect to what is going on, but at the moment, u. S. Futures are pointing higher. Are we going to continue to see that . As we have been discussing, keep an eye on what is happening in credits and what is happening at all of those other etfs that are easy to track on the bloomberg, because maybe that will be an underlying indicator as to what will be happening and the relationship between all the asset classes. That is it for the market open. Im next, bloomberg surveillance. You have mark barton. Matt and i are off to london dab digital. This is bloomberg. Stocks for the s p 500, its biggest drop in two months. Equities in europe and asia bounce back, following historic highs of last week. Is a correction coming . Housean push back leaders clear the way for a vote on their overhaul bill, but one republican senator opposes it. We have the latest. Is running out of time. The germ