Financial markets, but at a price. And a big weekend in bond. Splose vote expected as 200 d delegates vote. Could be germany could germany be heading for another election . That is one thing we are focused on in berlin. The than half an hour from open. It doesnt seem to be affecting Coalition Talks or Government Shutdown, equities much. Mixed, not a lot of direction except for in london where you see them up. 1 . Ive got treasuries up for a change of pace, i put in a gipt screen. Tick by tic transactions with the ask price in red, the bid price in blue. 2. 64 ande up to about change now. Breaking through another technical level on treasury yields. Right now, we are hovering to go four figures out. Keep an eye on treasuries. We will be watching to see if this rally in yields, the selloff in bonds continues. Two point 65 seems to be something people are talking about. This morning, equity markets yesterday ron offer. We have turned in asia this morning, but that was the theme. The yen is bid this morning. The dollar index is trading lower by. 2 . , 122. 64. Is bid steve majors thinks the european curve is the one to watch in the flattening story. Lets show you the commodities space, because this is interesting. You would have thought that the u. S. Data yesterday would have sent oil prices higher. Trading 1. 27 ironrent trading at ore is bid in asia. That is something to think about. Maybe we will see a turn in the commodities space. Here is Juliette Saly with your first word news. House passed u. S. A spending bill last night to avert an imminent Government Shutdown. Senate democrats say they have the votes to block the measure in a bid to force republicans to include protections for young immigrants. The stalemate weighed on equities and of the dollar and treasuries rose above 2. 6 to a threeyear high. I will send it back to you in london and berlin. Juliette, thank you for that. Joining us from singapore is mark cudmore, bloomberg mliv strategist. Also with us in london, steven major, global head of rate strategy and fixedincome research at hsbc. I saw him yesterday on the m. V. P. Function. If you look that up, you can see the most searched names of anyone among the bloomberg clients. Let me start with you, mark, because we have some more dollar weakness here. We have been talking a lot about this, jones in the newsroom earlier this morning. Anotherwe see Government Shutdown . Does that draw people to the safety of the dollar, or is that not the case, as it would be in concerns about a debt ceiling or downgrade . Mark it is interesting on that debate. In the moment, there is a view that if there is a Government Shutdown, it will put flow into treasuries. It does impair the longerterm concept of treasuries as a longterm safe eva in, but if there is a shutdown, the eight that that is where the initial move will be. Everyone is using everything as a excuse to sell the dollar in the equities market. Admit, there is lowering conviction as it seems like everyone is using every news event as a reason to sell the dollar and by the euro. Lets bring in stephen from hsbc. 265re trading near the level on u. S. 10 years. Does that make any difference to you . Does this excite you . If only it was so easy to make that money that way. It is probably a buying level. I know that isnt very fashionable, but we thought yields would peeking q1. Is momentum for yields to keep going up here, but this is a buying opportunity and i am looking on a three to six month view. I would sooner be buying than selling at this level. To actually think yields go higher and we can get toward 3 or higher, you have to have a clear view on inflation and need to know something i dont know about the dynamics behind inflation and why it is where it is. You will have to call higher inflation and a fed that will go so far, 2. 75 number and they have been true to their word. They are sticking with the idea that the mediumlongterm stops. In five years time, that is where the money rate will be, 2. 75. To be bearish, you are calling something that the fed is not telling you and isnt evident in the inflation world i am looking at. We are not ready to tear up and reversed the views we have had the last five years. There is a reason for low inflation. Demographics, technology, ai robotics stuff, all the reasons we discuss regularly. They havent suddenly gone away because of the new year. As far as im concerned, i do the opposite of the bearish people. Matt first of all, i have the dots up here and if you look at this chart, you can see the 2. 75 level you just referenced. Bestis where the feds guess is at where it will end 2019. Talked recently to someone at Goldman Sachs and other strategists, and they take it as a given that this year, there will be four rate hikes rather than three, because inflation will be faster than expected. Why do you doubt that . Steven i dont see how you can possibly know there will be four rate hikes. Each one is state contingent. It depends on what is happening at the time. I can imagine there will be another one or two and then we rate and will see the behavior of the Asset Managers when you get to 2 yield on riskfree, short debted assets. No one knows what will happen to inflation. Stuff happens, and the best laid plans dont actually come to fruition. I expected the idea of four is a without interruption difficult thing to call. The fed is trying to get rates up for whatever reason. It could be they need something to cut when we have the next downturn. By definition, the next downturn is getting closer and closer because each year that goes by is closer to the next recession. We are getting a year older each year. Mark, let me bring you into the conversation. Breakevens, 30s and tens. To come to the point stephen is making, why is the market suddenly getting all excited, buzzing about inflation . I dont understand how you make money on that trade. Mark i think there are a few things about why the market is getting excited. There is momentum in yields at the moment, not technical people out chasing it just, but people are looking for stops. Oil has also risen farther than people were expecting a month or so ago. Excited about tax, Financial Assets are rising. There is a positive feel toward andth and inflation momentum there. I have to say, iming agreement with stephen that i think overall, yields will come lower from here and i do think the idea that inflation has run away after five years seems bizarre, because i dont understand the new impetus to change the game. Hikes, if there are four and i agree that is a vulnerable call, but if there are four rate hikes, that is probably when you will see the rate curve get toward parity. That is why you see the 10year yield not spiked much further from here. Matt i think the idea as that falls toemployment 3 , people are betting the phillips curve will finally kick in or get more curved. In any case, that is something we could argue about forever. Quickly, let me ask you about what investors need to know about the possibility of a Government Shutdown. If we get it over night, over the weekend, what does that mean for Asset Classes . Where do we see the most moves on monday . Mark i think we will see a negative reaction across equities. The base case for most investors is that there wont be a shutdown. It is a bad idea in an Election Year and people think there will eventually be a decision. If there is a Government Shutdown over the weekend, i think equities open port and monday. Combine that with the risk of the german election, i think there is risk this weekend. As we go in to the close in the u. S. As a result of these events, if there is even sign of a widening divide in the u. S. , there might be a sign of investors taking more off the table before the weekend. Event, t a binary it is, but not a 5050 one. It is a lot of risk to carry into the weekend. Mark, thank you. Mark cudmore from our mliv team. If you want to get up early monday morning and see the market analysis, those guys will be up and that it very early on monday morning. Mliv on your bloomberg. Steve major, global head of research at hsbc. I just saw hsbcs notes, can you ask steve major if he thinks flattening will come via shortterm rates. The ecb conversation is up next. This is the open, 17 minutes to go till the start of cash trading in europe. This is bloomberg. 15 minutes till the start of cash trading in europe. Lets get a business flash with Juliette Saly. Agreed to pay has about 100 Million Dollars in penalties to resolve the u. S. Justice Department Investigation into the rigging of currency rates. Part of the deal, hsbc entered into a deferred agreement with prosecutors as a result to help against any traders and in the jewels swept up in the matter. Uber has completed its deal with soft softbank, triggering governance reform. Shareholders sold about 8 million at a discounted price to a group of investors led by softbank, making it the largest shareholder. The japanese conglomerate also invested 1. 25 million to uber at a valuation of about 70 billion. That is your Bloomberg Business flash. Juliette, thank you. Economists have brought forward their estimates of when europes central bank will set an end date for bond buying. Action is expected that the next meeting thursday, the first change in Forward Guidance is foreseen for march. Still with us, steven major, global head of fixedincome research at hsbc. Ts for theave do ecb, per se, but we have almost every governing member on record with the exception of draghi, saying there should be an end date communicated. The you expect that anytime soon . Somen you can infer dot plot, because the rate we will end up with in a few years time is traded. If you went five years forward, it sits below 1 , which seems about right to me. In the u. S. , it is above two, called at 2. 25. There is some measure for what they will get to. In thing that is out there contention is the speed with theh you get the move to first rate hike and the magnitude of each rate hike when it comes. That is where we are now. We are left with passing the the kremlin. Like everyone is hanging on every euro so it will be the zone in equivalent of considerable period on the Forward Guidance. At the pattern around the asset versus purchases and of the first move. You can plot the path of the forward weights. I am not calling for a rate hike anytime soon. I am talking about the markets implied level for rates in the eurozone. That is going up. In answer to the question that came in. Guy ive got the german curve here. Steven in answer to the question about the flattening we have called for. This is not a new idea. View isfication to our the bearishness at the front end of the curve. It is the upward move in the short yields that would drive the flattening. The long and will stay put. The yields will fall in the tenure plus, maybe the 30 year is the best place to focus on. Our recommendation is to sell 30s. And buy it is about the implied path of the rates and that is different than saying there will be a rate hike next week. We are talking about the market getting ready for the start of normalization. The end of asset purchases matter to me because they open the door to the first rate move. Yes, a purchase and doesnt matter in the flow argument. Most of those are false. The real issue is the timing of the first rate move. We are coming from 40. We are coming from unconventional policy mixing Forward Guidance and asset personages. We are hanging on every word at the next meeting. We will be providing live coverage of that event. Lets go into david blooms world for a minute. Steven heaven for bed. Forbid. Guy if the euro appreciates to quickly . Fixed income, we have to find a way to make a living. I dont know about the timing of all of this, but clearly, there is a real rate differential between the eurozone and the u. S. We are talking multidecade wide. That will compress. It could be the u. S. Yields coming down or eurozone yields coming up. Clearly, i am talking about the eurozone yields coming up. If the frontend of the curve steepens out and the coupon curve flattens, that should be good for the euro. It is davids call. With the fx, you have both sides of the argument. Also, it would be fairly hubristic for anyone to think they can control the euro. It is a bit like the oil price. It is not something that can control. They can control. The 120 is the middle of the range in the life of the euro. I know that is not rocket science. You want something more complicated, but it is not overvalued here. Matt let me bring you back to forfixedincome world, which you are so famous, and ask you where do you have the most issue that aan market has mispriced. What about the people who want to hear where steven major goes against the grain. Where will they stand the best chance of beating everyone else . Steven we are looking at the calls we have made this year. It is the flattening of the eurozone curve. Is 50year germany today, i imagine it would be nearer to zero later. It is a flattening trade in general on the eurozone curve starting from the fiveyear and upwards. Certainty on these recommendations, but i would say that is where we have high convictions starting this year. How do ii ask you, lay corporate furry in corporate . Steven the value is in some of the short dated sovereign credits. At the frontend of it as offering good value at the moment. People may want to look at greece. Morse most Portfolio Managers might look back at 2017 and have missed portugal. When you have these sovereigns that are so yield rich at a time when corporate spreads are so tight, we have to be careful about corporates. Recommend the we front and of italy, 10year in spain. Portugal that the rating upgrade that was widely expected was still a bullish event for the market. Was ahese portugal story in 2017. People dont want to miss greece. Guy steven major, global head of fixedincome research at s hsbc. We need to talk about some of the stocks that will be moving. We are joined out of moscow. We are going to cease him big moves in europe this morning. Certainly a number in the u. K. K. Lets start off with remi, called higher this morning. Why . Been all as high as 2 because they are reporting pretty good q3 sales reports that beat estimates. It is a said liquor producer that is feynoord famous for remi menton cognac. This that has really been paying off. The demand for liquor is surging in china and this is helping the company and its sales. Matt lets talk about carpet operating. K. Company Floor Coverings, bed and retailer and other stuff. What is the story with this stock . Ksenia this is the big negative news of this morning. The stock is being called down from 10 to as lois 40 , which 40 retty dramatic low as. It has lowered its profit outlook on the deterioration of u. K. Sales. This is a key period for the carpet retailer, but unfortunately, this year, the sales have been weak. This is really about consumer amand in the u. K. The u. K. Economy is not doing that great these days and the demand for bigticket items such as beds and floors and carpets is obviously lower. So the company is adjusting its profit outlook based on that. Death and taxes are the only two certainties in life, but we have big news from the debt element of that equation. [laughter] matt dignity. Ksenia are you talking about dignity now . This is the interesting one. It is the only u. K. Publicly traded funeral competit company. Dignity is being called down as much as 20 lower this morning. Forecasting lower results for the year of 2018. The u. K. Have been flat yearoveryear. This is really hurting the Funeral Service provider. What it is doing is cutting its simple Funeral Service price by about 25 . This is really quite dramatic. Guess we can hope fewer people die, but they dont. Ksenia galouchko, thank you for your time. Manus minutes ago until the start the cap trading cash trading. Lets talk about what is going on the currency trade. Dollar down, euro big. The european curve nearly flat. Nikkei up overnight and oil is trading softer which is interesting considering the inflationary impotence impetus. Where does that leave europe this friday morning . Let me say the wei. As you can see, mainly negative, not by much. London looks like it is going to outperform, not by much. The bond market story, does seem to be actually dominating and the Government Shutdown story. Lets show you what is going on. Lets get some numbers. 77 even is where we are trading for the ftse 100. Absolutely on the flight line. You are going to get similar numbers posted by the cac and the ibex. We get a ratings decision for spain later on. We will wait and see what happens. Lets wait and see what happens at the cac with the cac. We will see what the morning brings in terms of the story, down by. 1 . Financials are off. Softer. S trading we saw the Oil Price Trading lower. Materials are big. Iron ore thousand back. Bouncing back. I. T. Looks a little bit better. Financials, matt, trading on the downside today. Matt exactly. It will be interesting. Ubs is a bellwether, kicking off next week. Investors wondering if they are going to move them a bigger of he gives you more information in the upper lefthand corner, for example, right now we are almost looking at even brent. 205 stock down. 140 yet to open. Here you see the leaders. It is on percentage change and there you are going to see more dignity than ubs. If i switch it to index points, i get a bigger name, because they are moving the index around with their weight. Basf as well and shire. Ec technical, bio and drug stocks moving up at the top. At the bottom we see total and royal dutch shell. Bp at the bottom. Hsbc, allianz, a lot of the big banks are moving down as well. You see banks on both sides of the ledger as investors get their bets ready for the european banks earning season kicking off. The u. S. House of representatives has passed a spending bill to avoid a Government Shutdown. Senate democrats say they have the votes to block the measure in a bid to force republicans and the president to include protection for young immigrants in the bill. Some sort of daca production. The senate has adjourned until later today. That would then affect assets next week. Joining us now is charlie diebel. Charlie, i am glad we could get some time from you. In light of this Government Shutdown and in light of the possible Coalition Talks failure out of germany this weekend, what do you expect to happen on monday . Those are riskf off type of its come anything working efforts that endangers the Coalition Agreement in germany probably will have a marginal impact on the euro. Increases the sort of paralysis in terms of the look forward. As far as the u. S. , this is washington. It is always a pragmatic story. If we do get a shutdown, i am sure it will only be for a short tof time. Short period of time. It is a machination for politics. Manus steve majors didnt give whether or not that level holds. Is there a line in the sand . Charles i dont think it is a line in the sand because i dont think we are entering some longer term bear market. What you are witnessing is the market trying to respond and. Iscount the tax legislation they are trying to discount where the markets are pricing the forward fed. Where they think the fed may or may not have to get to if we see inflation continue to become, particularly if the oil price continues to remain buoyant. To 275. If you get what i dont think they are going to do is accelerate to where it can go north of 3 . To a degree, i think we are in a range trade. Matt you dont expect a real selloff in treasuries. If we do get a Government Shutdown, is that one of those things that sucks people back . Is that a better alternative than the yield you get for stocks . Charles this is an interesting question. How high the yields have to go before endangering the goldilocks risk environment. That is a very valid question. I dont have an answer. What you can say for sure is if this shutdown degrades into some sort of ongoing spat on a week per week basis and we are having this perpetual uncertainty if you would get help bond markets behave before, that is generally people dont like that kind of behavior from politicians. That could stop the selloff to some degree. I dont think it is a longerterm factor. I dont think it is terribly relevant on the six to 12 month horizon. It could put a stop to the selloff we are witnessing. Manus lets talk about the fed. Trying to understand the reaction to the change of management we got. It is little more vague. Is the i think that very interesting aspect is that you are asking about the level of yields. What the curve determines versus what u. S. Break even will tell you is the interesting story. U. S. Breakevens are moving up. If you go back three months, they were in the 185190 area. The of move that significantly in the wake of the passage of the tax reform bill. The curve is flattening broadly speaking. It has turned more mixed. He was curve has been flattening for quite a while. Those two are sending a different message, and that one is sitting is saying and saying inflation rushers are going to build a get to a degree unhinged. The curve is telling you that the fed has got its game face on. But that is doing is hedging the end of the cycle. Get lantin as they curves flatten at the get toward the end of the cycle. You heard steven major talking about flattening in the european curve. If that is the case, if the break even story is right, and that brings a fed response, is not just it is very bearish at the front end. Matt one of the issues we have been kicking around is one of the fed needs to get faster because inflation rises. Mark cudmore was saying he doesnt see anything Game Changing in terms of inflation. You mentioned the tax bill which obviously brings with it, in terms of apple, massive consequences. Plus, we got an employment down, expected to go below 4 which is. Ardly imagining how that works theres the possibility of an Infrastructure Spending from this administration which does seem to take a long time to get things through. All those things together could cause a jump in inflation. Do you expect that from the u. S. Economy . We do expect inflation to move higher, that we expect to move higher in a relatively muted basis. That is one of the reasons the breakevens it protection in case that does happen. Mostly, there are still detractors like under equivalent brents and accommodations sort of dragging down on the cpi. We do think inflation will pick up. We dont think it will get out of control. Under a powell fed, we dont anticipate any difference in terms of reaction. If they do start to see signs of inflation pick up, there are lots of metrics to say the u. S. Economy is running at the barrier, at the limit to what he can do. On that basis, thats what it can do. On that basis what it can do it on that basis, the fed can respond. Guy 2006 os of u. S. Potential shutdown. 20 hours to go until the u. S. Potential shutdown. It is cutting prices, hitting profits going forward. Understand that stock is trading to the downside. Lets talk about Floor Coverings, corporate writing in the u. K. This is beginning to become something of a theme. Investments are really suffering at the moment. Corporate right, just the latest. Carpet right, just the latest. Nearly losing half of its value within the first few minutes of trading. Absolutely battered but this is been the theme of a very tough consumer environment of the now. An indication of what is happening in the Housing Market which we saw from countrywide yesterday. He got clobbered. Stunned at im still the response or lack of it but fevertree has become the effect of tonic for gentile. There is interest in unilever surrounding that business. It was always thought of as being a takeout target. Unilever could be the name of the frame. Stocks trading up by 14 . Going to been you more stocks in the move. That is next going to bring you more stocks on the move. That is next. This is bloomberg. Matt welcome back to the european open. We are 14 minutes into the trading day. Right now, we see as far as the equities indexes are concerned, a pretty unchanged picture in london. Unchanged on the cac. The dax up about. 25 that no trend as far as the european trade. Lets look deeper under the hood, as they say. We go to nejra cehic. Beers have reported numbers yesterday. The fouryear net gaining 50 driven by chemicals, sales up as well. Still up. 8 . On the downside we are seeing moves. Viala lille down ferro down. Contract to of a ferrovial. A of things fitting into the negative sentiment for the stock. Conomy dropping the most since 2011. Third quarter ebitda, it also confirmed its year outlook. When that says the First Quarter number was disappointing and also points to a little bit of a disturbing signal. Little bit of pressure there. Guy i want to come back to the stocks we were talking about. That is carpet right. That is carpet right. It is being battered but charlie diebel, lets bring you back into the conversation. We anticipated this. What are the implications . How can the market can test how can the market be pricing in a rate hike . Charles the reality is you are still torn between the binary exit come to some degree. If we head toward a no deal theh looks less likely than bank of england will have to cut rates. It may even have to do more qe. We definitely would have to stimulate the economy. The alternative scenario is if you like the Customs Union positive type lack of this is all about brexit. Guy this is all about brexit. Charles in my mind, it most definitely is. You have seen response from cable starting to pick up. Beenquity market has performing ok. O that is simply hope that we get a decent outcome. If that happens, you can expect a pretty decent rebound. Complainingve been of the lack of certainty so you should see a positive rebound if and when you do get some deal. Matt ive got a pretty cool screen up here on the bloomberg. We have been debating a little bit whether or not the best way to look at stock is mrr which is members rank return or mov which stocks in terms of their affect on the indexes. His is most i have london here. The big losers, ive got it arranged by the biggest losers. Dignity, carpetright, etc. Theres a lot of other stories there. You can click on a different tab to see the stocks that are moving higher. You can to the stoxx that are getting traded the most. Is a pretty guest it is a pretty great screen to monitor the markets. How much can you trade this brexit action . How much do you want to . Is it better to make a decision and then stay with it until you get more certainty guy is there a time certainty . Is there a time when you think you will get enough certainty to make those kind of decisions . Charlie i think that is a good question. What can you do to drive your investment with respect to the brexit outcome . As you point out, depending on what headline you get, forcefully you can gain exposure to some of these things in a variety of ways. Sterling has been trading higher on foreign exchanges, partly because of the weaker dollar. It gives you exposure to the upside should you want to get it. Guy lower on the year. Thelie you can use pervading trend elsewhere to gain exposure. That is what im try to say. That is quite a useful thing desk useful way to think about it. Useful way to think about it. Manus guy we need to talk about what is happening in the emerging markets. Up next, paying the debts. Time running out to cash in on the em trade. That is next. This is bloomberg. Matt welcome back to the european open. 22 minutes into the session and take a look at my world map here on the bloomberg. You can see we dont have a lot of direction in the trade. You will notice france is gray. The u. K. Is gray. Italy is gray. Austria is gray. Switzerland is gray. That means there is not a lot of direction up or down. You do have gain in germany and. 33 drop in spain. It looks like the stories are really under the hood today, guy. You got some Floor Coverings and Funeral Homes that are making big news. As far as the big drivers, there is not a lot of change. Guy you can see the funeral story positively in some respects. Less than what is happening in zimbabwe. Lets talk about what is happening in zimbabwe. Zimbabwes new president says he has a plan to revive the country. It is first podcast interview since taking office, he told bloomberg zimbabwe is open for business and the nation is committed to paying its debts. Ask the current constraint for us to succeed successfully engaging [indiscernible] acquiring isfor our debt burden. I have committed this country to pay our debts. Butay not succeed overnight we have committed ourselves to begin addressing to pay our debts. Once we do so, i have no doubt that we will begin to lend support to this country. Matt still with us this charlie diebel. What does the weakness in the dollar that we have seen and now they bloomberg dollar index has hit a twoyear low, what does that mean for emergingmarket debt . Charlie it has been one of the driving factors into the Strong Performance from all of the em countries. In a world where u. S. Rate complex doesnt get out of control, as is our central scenario. We see just toward high heels but not a really strong bearish move. You end up in an environment where the kerry dynamics, the yields idiosyncratic stories continued to flow into em. We have been seeing that for quite a while but we expect that to continue, largely because we dont think the fed is going to let the inflation story and u. S. Rate complex get out of control. If the dollar turnaround significantly, that would be a challenge to that position. We tend to think that you would find those with a positive idiosyncratic story would perform better. Surnames are preferable, places like indonesia, malaysia. Guy i have a couple of charge. These are indonesias international reserves. They go back to 1999. The currency is the very stable. The chart goes in one direction. We got this chart which is international interest. Foreigners piling into indonesias the nominated bonds. Indonesias the nominated bonds. Charlie you have to understand how volatile the currencies to be. Be. He currencies used to we have potential for further rate cuts. We expect the rates complex to continue to perform well. With the potential upside that they could allow the currency to drift to higher levels after having not moved for the past six months. Matt charlie, thank you for that. Charlie is going to be joining us on Bloomberg Radio daybreak europe live. You can also hear that if you type radio on your bloomberg. Come back, we will talk about oil. This is bloomberg. Matt we are 30 minutes into the trading. Lets get you top headlines. Count down to the shutdown. House passes a bill to avoid the u. S. Government closing democrats in the senate say they have a blocking vote. Will trumps First Anniversary be a difficult one . Be my guest. The french president tells the u. K. You can keep for access to the eu markets, including finance, but they have to pay a hefty price. Big weekend. Is expected desk a close vote is expected as delegates debate starting a formal coalition. Could germany be heading for another election . Good morning and welcome to Bloomberg Markets european open. I am matt miller here in berlin. Guy johnson is in london. Guy lets talk about the markets. We are 31 minutes into the trading day. What are things looking like . It is all of the commodity. Mr. Will kennedy has already sat down. It is really impacting the equity market. Basic resources, we saw iron ore backing up, moving up overnight. What weve got are the miners trading up stronger. That has been the outperforming sector today. Personal households and goods looking good. On the other side, we got oil. We are backing away from the 70 line on brent as a result of which, the oil stocks are the worst performer in europe this morning. Heres sebastian salek. Japanese social Democratic Party is looking for a way that is 600 sdp delegates to stop forward Coalition Talks. Sdp leaders predict [indiscernible] young Party Activists leading campaign to shun policy compromise is going to opposition. Britain must pay into the European Union if it wants banks to keep flat after brexit. That is the message from emmanuel macron. Mccrone made the comment alongside after a daylong summit. Firstly, im going to be very clear. Im not here to reward or to punish. Im here to do the maximum for a mutual interest. I have one request. The Single Market is preserved because it is fundamental in the European Union. Sebastian John Williams has been in has been interviewed by the white house. That is according to a person familiar. They say he was not viewed as being on the short list for the job. The fed leader of the bank in san francisco. He also served as a senior economist and president bill clintons council of economic advisers is economic advisers. More optimistic views on inflation might beginning sway among policymakers. While no action is expected at the meeting next thursday, almost half of the respondents to a Bloomberg Survey by june. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Guy thank you very much. Opec has increased its forecast. U. S. Production has rebounded to a near record level. Getting that chart ready. Lets pop that onto the screen. There is the u. S. Story. Opec and its partners on sunday to review their strategy. We are joined by will kennedy. Steam . Run when out of will it is taking a pulse. It is taking a pause. A question of it being slightly overboard and taking a pause. What is coming into focus is focus is production. In 26 minutes time we are going report. He aia people will be looking carefully at how much they will forecast show production will rise forecast shale production will rise. Matt is it Something Like the eye reports the iea reports . Will change the price direction here . Want to see real numbers of u. S. , how much Oil Production is rising. There is a dictation that it will reach a there is an expectation that it will reach a record in february. Analysts think the market is going to develop. At the start of the year, they will Pay Attention to that forecast and it may be it does have some market sentiment. Guy what does the opec story mean . In many ways opec had a really good year. Will the question is did have two good of a year. Too good of the year . Grouplies outside of the have been very disciplined this year. We will continue with the deal. We will stick to our cups here. They are going to worry about opening the market, enticing too much misapplied into the market and upsetting of the good work that they have done. Expect thee will same message, no change. Behind doors come i would not be surprised if they manage the exit. Matt well, we can glean a lot of information from the opec stage on the bloomberg. If you type it in here on the lower lefthand corner, you see capacity. The saudis have a lot of spare capacity. Not a lot of other countries really do. If you look in the upper righthand corner, you can see the total monthly estimated crude production. I will make them larger and click it to a max. What we see, even with the cuts here, opec is still lingering at pretty much alltime highs for production. Is this cartel really working . Will it is working more than i expect people more than people might have said it would. People were very down about opec. Shale havethat u. S. Very Little Market power. This year will test that. I will make two points about that chart. Yes, they are still producing. The demand is growing very strongly. Produce nearng to record just to supply increased demand. The country that is important is venezuela. Oil production has been plunging because of the economic and social crisis. It doesnt have the wherewithal to resurrect production. On all the new supply coming , were starting to recognize the disappearing supply from venezuela. They i put the same are going to think about how to exit this deal. How tricky is it going to be managed that message . Manage that message . Will it is going to dominate. Guy you would just cheat it and i would smooth the story. Will that may happen but what is new is russia. Russia is a key part of this opec deal. Russia doesnt have the same tradition. It has company squeezing oil. It has private companies producing oil. Yes, i think those are the kind of discussions may be some sort of phase exit from these cuts. Much. Thank you very , keeping us uptodate on an issue. If you think about the size of the Oil Producers and their effect on the index, one of the most important in this market. Up next, merkel and the sdp, we look ahead to this weakens decision over a German Coalition or not. This is bloomberg. Matt welcome back to the european open. Not a lot of direction as far as the indexes. Theres a lot going on especially midcap stock. This weekend could be crunch time for german chancellor, Angela Merkel. On spd the sdp votes sunday about whether to accept formal Coalition Talks with merkels union bloc. Martin schultz is in favor. If it doesnt happen, his career is probably over as far as leading the spd is concerned. Sdp is concerned. We are joined by guntram wolff. First off, the main question, what are the chances that the spd delegates on sunday votes to go ahead with Coalition Talks with the union . Guntram i think it is anybodys guess. Were talking of a very tight race. The rules really next to the country. If you talk to people, some might favor and some are against. Another brick coalition would be bad for the social democrats and were destined will basicallys desk will basically destroy their profile. Well. Onomy goes really on the other hand, there is this looming everybody is wondering how long will merkel stay. Matt i was just listening. It . Would they vote against arent they getting a lot of what they want . The spd . Out of this agreement . I think certainly they party. A real fiduciary they probably dont want to destroy what is left of their leadership. There is a widespread feeling that they dont really get much out of it. Then there is not a big investment hike, theres tax cuts in an area where clientele of the spd strictly sits. Typically sits. It is an agreement that has a lot of christian democrats feeling as the merkels partys footprints. Socialiststhe young in the spd that are causing the problems. What does that tell us about the future trajectory of the spd . Guntram they want to increase their profile im being tough on the leadership. This guy is playing it really well. Certainly, it is a clear declaration from the Younger Generation that they want generational change. The direction, again the party is very divided, like many social democrat parties across the world. On the one hand, people say we have to move to the left. We have to become leftalternative. Basically we have to move to the center and captures the centric vote. It is that fight that is ongoing at the party. Matt this week and we have the delegates voting, there are 600 of them. These delegates are much closer to government jobs than the membership of the party. If it is this difficult to get past the 600 delegates whom you could argue want to stay in government to keep their livelihood, isnt it going to be even more difficult to get this passed the 400,000 Party Members who vote after the talks . Who are less reliant on being a member of the coalition . Guntram yes. Absolutely. I think that is what everybody said we may be up to get across this weekend. Formalmer coalition Coalition Talks start was the agreement is there among the leadership. That formal agreement will be put to test with the entire social democrat based. Base. Ial democratic the likelihood that they will be unhappy of course it depends on the outcome but even then we may see a rejection and we are in here for another several weeks of uncertainty depending on how long the Coalition Talks will be ongoing. Yesterday indicating in a speech at the bundesbank that he believes that one of the reasons why wages are being held low in germany is because of migration. Given that and given this is a very city member talking about this, how easy is it going to be to resolve this migration issue between the cdu and the pd the cdu and the spd. Want to the good gibbons spring conference i went to the bundesbank conference. Immigration is a key factor. If you look at the immigration numbers into the labor market from the rest of the you not from the africa or from the middle east, we are now up to and have 300,000 immigrants per year into our labor markets. This is very significant number of people that enter the labor market. That is what you want. You want people from countries where unemployment is higher to move to germany where there is more employment. That keeps the lid on wage growth at this stage. This is pretty distinct from the whole discussion that the politic the political system is now having on basically migration from outside of the eu which often is not entering the labor market, at least not in the first five to 10 years. It is a pretty different story that we are talking about. Ask aboutram, let me the people involved. I heard so much on german media about marshalls. If he doesnt get this through about martin schultz. If he doesnt get this through, maybe the entire leadership will be out. What about Angela Merkel . If she doesnt make this work, how do she hold on to the chancellorship . It has to be seen as a major failure. Think the mood is really one that if she doesnt manage now, there may be some form of an interim government. Perhaps she will stay for so. Her two years or by 2019, there may be new elections. At the end of the day, indeed, if she doesnt manage now to get this social democracy behind her and have a big coalition, i think her days will not be counted. She will probably not serve the four years. Guy guntram, thank you very much indeed. Plenty of coverage monday morning on that story. Are you doing dry january echo markets are not. Bit hot under the collar about the retreat. The stock is up. This is bloomberg. U. K. Consumer stocks are being battered in the european open. There is one exception. Lets find a what is going on with nejra cehic. Nejra investors getting hot under the collar for fevertree. It is been a meteor rise to the stock. Rising as much as 80 to hit a record. After reports cited m a speculation. Also new positive readings at jefferies and morgan stanley. Not getting quite as much and it does tend to be a volatile stock but interesting to watch. Carpetright, this is a small cap is still plunging the most to a record low. It cut its profit outlook. Declined justales sales decline has been accelerating since christmas. Dignity, this is the uks largest traded funeral provider also drop in the most on record hitting a 2012 low. Announced huge price cuts and it says these cuts are going to earnings just going to going to slash earnings this year. Matt i got to say, fevertree is such an interesting story, because not only does the name remind me of the great classic rock band, stillwater, but jenna and tonic, classically jen and tonic has become so popular here in germany. I find it very interesting that germans are such anglo files when it comes to anything other than football that theyve even picked up a british cocktail and fevertree maybe profiting from that. I want to say the stock of the hour. Basf. Chosen fullyear earnings will be up 50 . It is sales up 12 revenue was up to more than 64 billion in the fullyear. This was a graphic dashboard and a lot of interesting things you can see on this. If you look the lower righthand corner, he can to the stock is up to a 52week high. Basf trading at 50. 4 times earning, up to a 62 week high. Cell. Ne this is a stock that continues its upward trajectory on better chemical sales. Guy . Guy i find it interesting, this is a company that has exposure in the plastics in history. They do a whole bunch of stuff but anything with lasix for that kind of stuff involved at the moment nothing gives a fifth the warm plastic is just getting going. Matt just getting started. Those micro plastics six just plastics are very bad for you. I think of basf a lot in terms of the supplies it gives to the Auto Industry. The Auto Industry, bmw is that a 52week high and the Auto Industry gets a lot from basf. Are off toyou Bloomberg Radio. Well carry on the conversation with jody diebel. It is surveillance of next. Up next. This is bloomberg. We use our phones and computers the same way these days. So why do we pay to have a phone connected when were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And ask how to get a 150 prepaid card when you buy a new lg x charge. Its a new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com good