Europe. The stoxx 600 utility sector is up by 1. 48 , outperforming significantly. 20. Ling pe, trailing pe on the auto sector. Cyclical sectors very undervalued at the moment. Utilities are getting a huge valuation attached to them. Lets move over and talk about this light volume session we are getting in the United States. Vol is trading lower, so the vix is down again. Continue to watch what is happening. Up. Tility continues to be earlier on, we saw a bit of a spike in the euro versus the dollar. And has subsequently faded, it is now trading down on the session. The bloomberg dollar index is pretty much flat on the session. Central banking a big part of all this. You had a lot of news over the last couple of days on this story from both sides of the atlantic relating to the ecb and the fed. Christine lagarde is set to become the first woman to run euro area Monetary Policy. Directoranaging nominated to replace mario draghi as head of the European Central bank. She will be taking over just as the eus economy appears to need fresh stimulus. Its here what Loretta Mester had to say a little earlier on, from the cleveland fed. This was her talking to tom keene and Francine Lacqua about this nomination. Lagarde is christine a very Strong International credential. I think she will do quite well. Think she will be open to investigatings all aspects of the economy so she can set Monetary Policy in europe, and i think shes going to do a fine job. Guy shes going to do a fine job. We are joined now by the saracen economists cio. What do you think . Guest the obvious headline is she is incredibly experienced. If there is a greater synchronization of Monetary Policy, she is the one. Doubt is theagging giant academic underpinning which bernanke or draghi has. If the going gets tough, does she get buffeted around . Guy do you think the two points are comparable . Do you think the mistakes weve seen from the fed could be replicated . She comes from a different background. She is a strong communicator. Do you think we cant compare the two, or do you think the fact that they are both lawyers makes it a useful point . At the moment, hes not a bernanke or draghi or yellen. On the other hand, if what we are really dealing with is bashing Heads Together to coordinate fiscal and monetary time of theh unfinished euro project, who better . It depends, but the markets are little bit scarred on that volatility we saw in q4 as jerome flipflopped. It is pretty fresh in the memory. Is draghi handing her an gun . It is interesting you talk about this combination of fiscal and Monetary Policy. Got twoeve new positions with von der leyen and lagarde. I am curious how you see policy developing in the euro zone. Anna terry policy has done an awful lot. Can it do more to lift euro zone growth Monetary Policy has done an awful lot. Can it do more to lift euro zone growth . Guy m draghi has done quite a lot. We are almost 50 under his inflation target. Weve got wider divergence across european economies, not convergence. Weve got a horrible looking beginningdebt trap to rear its head in italy. Its a stack of Unfinished Business on her tray. Most of draghis tools are looking pretty tired. Expectingack qe and it to have its previous impact is a big ask. That is something we barely nearly inverted in germany. Going to have to break out of the straitjacket. That is why you are hearing different sorts of fiscal and monetary combinations talked about. Im sure thats where europe goes next. Guy j ok. Bunds trading 38 on right now. That . Keep buying given what you just said, what is the outlook for the bund . Germany is going to have to be a big part of this. Guy m the interesting things about these bond moves, inequities we use the u. S. Taking the lead. In bonds, it is europe. This began in germany and then came to a convergence of peripheral european bonds. Remember, germanys got some real problems. Its got this capital key, which means there are very few bonds to buy if qe reactivates. Plus youve got insurance companies, so it is a different underlying mentality. Of course, you have to ask the question, if bond yields are andding 40 basis points the relatively well covered dax is yielding three, are we prepared for a shift . Guy j how would the german bond theet react if, despite recent history, the germans ofide they have had enough poor rail structure and appalling internet and decide to start spending some money . The way they do that is get rid of the balanced budget start spending some money. The risk is asymmetric at the moment. You can see you are going lower and bonds continue to get bid. I get your point about the dax. I am wondering if the risk is that if politics in germany start to change, we see some money getting spent. Guy m if it is a story that strengthens the union, strengthens the euro, if this is part of a bigger role for fiscal , the germans are beginning to take the shackles off. If that is the case, then the spread of the peripherals, is there. Ench he would probably need a geopolitical event to happen. We would need a trade war standoff. We need a brexit deal. We need a slightly more positive economic outlook. That could be the trigger. Guy j you could argue that if those turn out to be negative events im just wondering. Youve got ursula von der leyen going in as head of the European Commission. Youve got Christine Lagarde, very keen on infrastructure spending, going into the ecb. I am just wondering if we are starting to get the pieces put in place for europe to deliver upon what made people havent dissipated it should have done a while ago, which is spend some money on stuff. That will reduce unemployment and start to get the engine spinning again a little bit. If it was a trade war with the United States, would germany spend money to get out of it . If the German Economy slows significantly, what they spend money to get out of it . What would it take to get the european economy engine spinning . At the moment it is slowing down. First of all, you need new people, and weve got them. You need the populists in the center right to sort of converge into some economic solution. We are already seeing salvini be more assertive in in gauging with the European Union on a more constructive path. It looks like they might back off these fiscal fines. We dont know if theres anyone who can really conduct the orchestra. Perhaps it is lagarde. Perhaps that is the answer. But we need a theory to stand behind it, and that is what we dont have. We dont have a rulebook. Guy j and you wonder what kind of role von der leyen could play in that. Stick around. Saracen and partners sarasin cio. Up. , dax, and cac action in the italian markets today. Headlineets at the level are going a little bit today, but not much. Highd hit an intraday for the s p, but volumes are light. Volatility pretty low as well. More market coverage coming up. This is bloomberg. Guy j live from london, im guy johnson. This is the european close on bloomberg markets. Lets get a first word news update. Here with the details, courtney donohoe. Imports surging by the most since 2015. Trade with china surged. That may reflect companies rushing shipments before president trumps latest increase in tariffs. Iran has a warning for europe if it doesnt comply with the terms of the 2015 Nuclear Agreement by sunday. Iran will increase its enrichment of uranium. Iran wants relief from u. S. Sanctions, and calls on europe or an economic lifeline. This could eventually give iran enough to produce a nuclear weapon. Deutsche bank ceo christian sewing may spend as much as 5. 7 billion to restructure the firms securities unit, according to the financial times. The potential cost could result in Deutsche Bank reporting a loss this year. Andman who led ford saves chrysler from bankruptcy has died. Lee iacocca was one of the first celebrity ceos. He became ubiquitous during the 1980s with his tv commercials and bestselling books. Lee iacocca was 94 years old. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im courtney donohoe. This is bloomberg. Guy j thank you very much indeed. Over to abigail doolittle. Abigail we are looking at gains for stocks in the u. S. The s p 500 hitting new alltime highs. The nasdaq up for the sixth day in a row. The stoxx 600 fairly broad, up about 8 10 of 1 . A little bit of weakness for emerging markets having to do with the asian session. 500 alltimep high, lets put it into the perspective of last year. We are basically flat come about at an alltime high back here in september of 2018, more recently in may, last week, and now a new series of alltime highs. Buyers are very much in control. Helping out the s p 500, here are the top stocks on the day. On talks ofaring broadcom buying the firm. Jeffries financial up 4. 5 . They put up a solid quarter, and their trading business stronger than some of their peers. If we take a look at what is happening for bonds and risksities, interestingly and commodities up 1 as the dollar is about flat. We also have these haven bonds puzzling to many people. The fact we have this huge flight to safety, the german 10 year yield now yielding 39 basis points, and the 10 year yield breaking support. Lets check in on a chart weve been watching for weeks. That is starting to fail. It could come back on a payroll support surprise on friday, but last year around 3 , huge downdraft on volatility. This year on the dovishness of the fed, the 10 year yield now below that trend channel range. However, you might be surprised to see a bounce back up with the rsi stills adjusting we could see some momentum to the upside for yields, downside for bonds. Right now, that global bond rally really in charge, as you know. Guy absolutely. It will be interesting to see how any people turn up for work friday. Lets get back to guy monson, Sarasin Partners cio. We have nominees at the fed. Shelton i think is really interesting. She believes the phillips curve is broken. Guess the question i would ask you is how far could she go . If she gets to the fed, she looks like the perfect candidate for donald trump. How far could she go . Christopher waller is solid. In the case of judy shelton, she was on the campaign team. Could there be a deeper story in this . There have been rumors and trump has mused if it would be legal to switch the chairman early. What would happen if we get the dovish policy he wants . You can say it might be crazy, but crazier things have happened. Hisink that tying in with repeated criticism of fed policy, you have to at least have an outside chance to think the unthinkable. Thats why it is worrying people. For markets, it is quite attractive. You get an Even Stronger fed put , and he is probably irish on the dollar, bullish for gold. Lagardeou got christine for the ecb, a former politician. Trump got shelton, and clearly trying to politicize the fed. Is the era of centralbank they getting to get eroded . Guy m i think what is happening is a natural handover from monetary to fiscal policy. Qed,ave the backwash from negative rates, inflation. There is a need to stabilize property prices, there is a need for policy tools that are not monetary. Latee it with trumps cycle stimulus, almost unprecedented. We see it in the labour party and the u. K. With peoples qe. We see this same story appearing , which is how can you reform monetary into fiscal . How can you coordinate . That can necessarily drag against the arena. Im not sure that is a bad thing if we get back to where we were before. Guy j that is a very difficult thing to do, i would have thought. It was a hard fight in the first place. Can i talk to you about what that means in terms of what i do with my equity market per folios equity market portfolios . We have seen momentum stocks packed with defensive names roaring ahead of value stocks, cyclical stocks. Youve got the european auto on fiveurrently trading times or seven times. Times. Es trading on 20 is that going to reverse . Is that trade as stretched as it is going to get . I am wondering what the relative valuations of the sectors look like in europe. You can see it against the backdrop of central banking. Guy m i think three things are colliding. First of all, you are basically making large sways in the bond market unusable for a large section of investors. You reported on the bloomberg a couple of days ago that 36 german bonds have a positive yield. Market, younal bond can go to credit, but quality has fallen away so much. So you are forced into equities. The second trend is deglobalization and trade impacts. , which isis climate extremely powerful in directing equity flows. Where is the obvious place to go . Defensive and green, looking at the utilities embracing alternative energy. They are really at the sweet spot. I think that starts to flow out and you get a more diversified european leadership. ,e are looking at three things automation, climate change, and some of the pharmaceuticals. Defensive yield quite successfully without going near the banks or the energy stocks. I think utility leadership is part of a wider rotation into somatic bond substitutes into thematic bond substitutes. Guy j as we leave it, we see the italian 10 year trading at when he five basis points above the german tenyear. We live in interesting times. Guy monson, Sarasin Partners cio. We are having quite a turnaround. Ive already had plenty of tweets today talking about this. A lot of people still scratching their head as to what is going on. You can see that on the righthand side of that chart. This is bloomberg. Guy u. S. Markets look a little bit like this. Broadly positive on the equity front. I will caution the volumes are like. 20 ,e down by circa actually even more over in europe. For instance, the cac is trading down by 28 . Of theseeing around 1 4 normal volume being wiped off. We wait for the early close in the United States, for the equity markets first, and the bond markets an hour later. This is bloomberg. Guy 30 seconds until the end of regular trading in europe. That is the picture. Italy growing bright green at the bottom end of europe. Italian banks shining. The italian banking is outperforming significantly. The ftse up. 7 . Ftse tradinge, the at it is the banks that are the prime drivers. Lets take a look at how the european markets breakdown. This reiterates the story we are seeing. The action is being driven out of the bond market into the italian banks, which is changing the headline story when it comes to the foot seem it. Lets when it comes to the ftse mib. Lets take a look at the grr. Travel and leisure is doing all right but it is the big proxy names doing well. Food and beverage, utilities, strong multiples. These are highly valued sectors. Normally you consider the banks to be something cyclical when it comes to the sector make up of the italian banks are driving that sector higher. Spanish banks in as well. Onnch banks doing well expectations on what will happen in the lagarde era. It is the italian banks providing the big move. Where are we seeing weakness . I hate to add to the light volume story. Oil and gas, commodities, and basic resources are the areas where we are seeing weakness. It is the cyclicals trading to the downside or underperforming the market. In the United States, light volume. We will see equity markets closing early. We are seeing reasonably decent bids in the equity market. The s p hit a record high earlier on, another intraday record high. The dollar index is down but the euro is down. The president tweeting earlier on that the europeans and the chinese may be using their currency to boost their economic performance. The euro spiked on that and subsequently faded. As i say, action in the bond market the prime driver of what we are seeing. There are a number of different reasons. Also what is happening in the Central Banks with the new denominations in the United States and Christine Lagarde looking like she will take over at the ecb. Lets bring in paul dobson. Nice to see you this afternoon. I want to start off with italy. The bond markets are slightly crazy. The italian story is fascinating. Btp less thanof 200 bits over bunds . Paul the narrative is clear they are off the hook. The European Commission says they will not pursue this further because has done enough, at least on paper. Thear they are saying spending has been lower than anticipated and therefore the balance looks ok. They still retaining are going to continue to spend to drive growth but at the same time maybe they are not being quite so aggressive behind the scenes as they are in public. That has given enough room to get this away, in which case, italian yields are phenomenally good in terms of the pickup for the credit. Ds, weoure looking at bun are on the cusp of the ecb deeper rates. A massive pickup for italian yields. Guy i would assume lagarde has a big part to play. The news of her potential nomination started this weekend and now has become a reality. Christine lagarde understands how european politics works. She is a safe pair of hands. Italy has a problem, lagarde is one of the best people within european see within european circles to be able to handle that. Is there a sense of that, the market is pricing in, if italy goes wrong, lagarde will fix it. Paul you can say the same thing about mario draghi there were worries he was going to be a hawk. Mario draghi cannot contain all the worries until he had to do something. I do not know whether lagarde would be entirely different, but you can see that since the talks started it would be a frenchwoman and everyone jump to the conclusion it would be the proeuropean Christine Lagarde. Spreads that were already compressing between italy and nearly 2 today, that is how low they are. Everything is compressed further. You see the spanish 10 year at 1 orou see ireland at less. Great for those countries. If they cannot get their deficit or debt down, then nothing will help them. Guy may be changing the rules, which could also be a factor and affect issuance and you wonder how it will be back in. Is the Market Pricing in more qe . Mario draghi has talked about it. We not done with mario draghi yet. There is this argument that if it had been a halt coming, mario draghi may have acted more aggressively before he leaves. With lagarde, does mario draghi have to do that . Paul i have not heard that argument but i find it quite compelling. I think draghi will be happy to set Christine Lagarde up for a spike or whatever the terminology to see it through if he does not do it himself. The chiefso empower economist who is a pretty dovish influence himself. It does feel like the shift in power in the governing council will be in favor of more dovish policy which could mean more qe. Certainly that is what the market is pricing in. Euro, it isst the the credit that the ecb will be able to buy, probably more spain , more portugal and those kinds of things. Guy what we make of the u. S. Data today . Number, we are still trading over 55, but that number is softening. How does that change my perception of what the fed will do and where i trade u. S. Rates . Isl the market the fed going to do something and payrolls will be the key determinant of what, exactly. All of these other data points are less important. What was interesting earlier today when we had Loretta Mester on television talking about the things she watches, she was talking about payrolls. Lets see whether it is 75 k we had last month but whether this is the start of a trend, and even that not terribly low by her reckoning. She is still thinking about the inflation data you can see showing up in surveys, some of the below the surface inflation. She thinks it is holding up reasonably well. She is not a Voting Member but she does kerrys way within the fed he does kerrys way within the fed she does carry fed, and ifthe there were information that there was a more entrenched slowdown and it could cause master to ship to aim mester to shift to a more dovish stance and that could indicate we will get more dovish market action. Of there different parts cycle and Different Things being priced in. Qe in europe will drag down the long and the long end. , there is aet pretty big absence of recovery in inflation expectations. Based on that, you cannot see the bond yields going up particularly rapidly in either part. Guy it does feel different in terms of the shape of the curve. Thank you much indeed. Paul dobson, bloomberg managing editor for your for fx and rates for europe for fx and rates. Lets talk about what is happening elsewhere. Shares soaring. Broadcom in talks to buy the top security company. Broadcom seeking expansion to a more profitable business line. Lets bring in Bloomberg IntelligenceSenior Analyst for analysis. Is broadcom becoming a conglomerate . Thanks for having me on. Yes. It seems to be that case. They made the acquisition quite a bit back last year and also they made smaller acquisitions earlier this year. If you think about broadcom as a whole, it is a chipmaker that has been a serial acquirer and has been branching out into the software and it seems like it is branching out in the for its acquisition strategy. Guy what is the upside in symantec . Woo the synergies are unclear. Youre getting 1. 42 billion in sales. Are going to have a meaningful revenue boost, and then on top of that, you could ofentially marry 50 symantec sales to the ca acquisition they have, which is primarily on the infrastructure side. Guy so the venn diagram does overlap a little bit. Symantec did not have a ceo during this process. How influential was that in making it easier more difficult for broadcom to make this deal work . Woo this is going to be run by the board and i believe star board is part of the symantec board. This is the type of deal that the ceo of broadcom likes. They have dealt with other companies that have been pressured by investors in the past. He does enjoy turnaround stories. This place this fits right into the real house where you have a struggling company that has grown to investors expectations and he might be the runner for the past couple of years. Guy you get the impression he is done, that this will become a pattern, that broadcom is in ongoing acquisition mode . Half,hat we know about the way he grew the company from inception to today has been through acquisition. What i can tell you is if he does consummate this deal, it will bring up the leverage ratio to about four to five times. It will take 18 billion in debt if it will be a cash deal. There will be a cooling period, maybe two years or so until he can bring that debt burden down. Guy ok. We will leave it there. Much indeed. Y lets take a quick look at where european stocks have settled for the day as we head into the break. The ftse 100, the dax, and the cac 40 all rising the same amount today. In terms of the volumes, they have been quite like. In terms of the way we have traded, we came up initially and have gone sideways since then. The auction process, no difference in the auction process. A little bit for the ftse 100. Do not forget to tune into the Bloomberg Radio cable show. Jonathan ferro will be in new york, i will be in london. You can find is on dab Digital Radio and all of your bloomberg devices. This is bloomberg. Guy from london, im guy johnson. This is the european close on bloomberg markets. Lets get a first word news update with courtney donohoe. Courtney china made by u. S. Farm products as a gesture of goodwill. Bloomberg has learned the volume is likely to be smaller than before. Purchases can include soybeans, corn, and pork. How much depends on the progress of the trade talks. American companies hired fewer workers than expected in june according to adp. Private payrolls increased after an upward revision in may. The government is out with its job report on friday. Full coverage for you. Will offer 100 Million Dollars to support the families of the victims of the 737 max crashes. The money will go towards Living Expenses for the families as well as Community Programs in impacted areas. Boeing is describing the pledge as an initial outlook outreach the victims. Boeing is facing lawsuits. In kentucky, firefighters battling a blaze in a warehouse filled with jim beam bourbon. Two warehouses caught on fire last night. One was extinguished but the other has blazed for hours. The retail value of the lost bourbon could be as much as 300 million. The tanks are ready to go, the fighter jets are set for the flyer. President ll part of trumps changes to the traditional fourth of july celebration. The president will speak from the stems of the lincoln memorial. Critics fears he is turning the event into a campaign rally. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am courtney donohoe. This is bloomberg. Uy thank you very much time for our stock of the hour. Canopy growth out of canada is the stock we are focusing on. Shares falling as much as 5 after a shakeup in top management. Taylor riggs is looking at the changes. He ceo is out did he jump or was he portion . Taylor interesting that the board of directors has fired him. He said they are now looking for a new ceo as they look for a new phase of growth. A lot of this comes from the big earnings miss in the last quarter. We try not to look at companies to closely, but in this case, it was a pretty big miss. An up to draw the attention of the board of directors. They lost about one dollar, which was more than the . 25 loss that has been forecast. If you look on an annual basis, they are losing 600 million or 700 million through 2019 and 2020. That is not expected to turn down or slow or turn positive through 2021. We know that in the u. S. , a big push has been for Canadian Companies to come in and expand with Growth Opportunities in the u. S. We are different than canada. We do not have a federal mandate on whether marijuana is legal or not. A majority of the states have decriminalized it or made it legal or made it legal for medical use, and you only have about 12 states where it is still illegal. A lot of the new ceo push is as they tried to enter this new era for the company. Was this driven by Constellation Brands . Taylor that is a very good question. Constellation owns 36 of the company and an analyst says they were not surprised as cfotellation had put in a who was previously at constellation. They said given the magnitude of the losses they had in the last quarter, they were not surprised, given the leadership change, and constellation was disappointed in the numbers and part of the vocal proponents of this change. Guy great stuff, interesting story. Thank you very much. Taylor riggs on what is happening with canopy. Time for a Bloomberg Business flash. With the factf that bloomberg has learned samsung has completed its redesign with galaxy told to fix the screen failure. The company will debut the smartphone in time for the holiday season. The company canceled the april 26 launch after the Company Reported problems with the screen on the test versions. The man who wouldve been the ceo bloomberg has learned the former ubs head is suing santander four 113 million. In january, santander cancel the ceo hire him as santander is not commenting on the lawsuit. Amazon will hire more than 2000 workers in the u. K. To develop its latest technology ventures. The employees will include engineers, software developers, and data scientists. That will balance the british workforce to around 30,000 people by the end of the year. That is your Bloomberg Business flash. What we have coming up next . It is 51 minutes past the hour. That means up next is our global battle of the charts. This is bloomberg. Were the slowskys. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Guy 50 minute 53 minutes past the hour, which means it is time for our global battle the charts. You can find the charts on your bloomberg at gtv. Eric balchunas joining us. Eric i want to look at the s p , it tracks the highest etf stocks in the s p beta versus the lowest stocks in the s p. They are about ties this year, both up 21 . The reason that is interesting is because they average about gap on an an 18 annual basis. Typically one of these breaks out and owns the market. It is interesting to see whether low volatility or high beta owns the alley owns the rally. Etfs supporters go much more to the low volatility side. It will be interesting to see which one of these wins the year. Guy fascinating. You look at the valuations on sectors like utilities. Michael mckee, over to you. Michael something different. On friday the labor market is making you come and work. Your eyes will be bleary and your head might hurt a little bit, so i will solve one of the questions you might have an show you why we might see a distortion in the jobs numbers. It is that time in the decade when the Census Bureau starts hiring develop for the senses in the coming year. What we see is in 2010 a big rampup in the hiring from the lows of 2009. We might begin to see the numbers get distorted. We begin to see additional people coming on the payroll, which means the gold line, which is normal payroll, and the white line which is senses hiring, and you can see the little bit in 2009, we will get that in 2019. You have to look at private payrolls and subtract out what the government figure is to get the real number. That was in may. We are overdue for that kind of jump in the hiring. Guy anything that gets me ahead of the curve gets my vote. Friday will be difficult for a lot of people but that will help. However, i will give it to eric, because im fascinated by the story between high beta and low beta and the fact that it has been low beta stocks driving the market. Eric but itin for is only just because getting ahead on the payroll numbers is also worth doing. You can carry on watching some of this etf coverage on bloomberg etf iq with Eric Balchunas today at 1 00 p. M. In new york at 1 30 in new york and 6 30 in london because of the early closers. Coming up, david westin will discuss the nomination of Christine Lagarde. This is bloomberg. David from bloomberg World Headquarters in new york, im david westin. Welcome to balance of power, where the world of politics meets the world of business. On the brief today, Michael Mckee on fed policy in an uncertain trade world. From brussels, maria tadeo on what comes next in the eu leadership rankling, and from washington Kevin Cirilli on president trumps plans for the fbi which include troops and tanks and f15. Lets go to two Michael Mckee. We got trade numbers today. They were not encouraging. Michael the trade numbers widened which shows the president s trade policies are having the opposite effect. What appears to be happening is our exports are depressed, but as companies worry about import restrictions, they bring in more goods, and we had the threatened raise in tariffs for may ron mexico and china. The president till talking about additional tariffs. We are seeing Companies Bringing goods and that is widening the trade deficit. Davi