Pricing surrounding the feds next rate decision. Plenty of great coverage coming up. Lets get a first word news update with olivia hows. Olivia at the vatican today, russian president Vladimir Putin met with pope francis. It is a sign of closer ties between the kremlin and the catholic church. Russian officials said the meeting would focus on syria and ukraine. Tomorrows the pope is due to hold talks with the ukraine about conflict in that country. British special forces have seized a supertanker suspected of carrying iranian oil to syria, in violation of u. S. Sanctions against the syrians. The tanks are ready to go, and the fighter jets are set for the flyover, all part of President Trumps changes to the two directional fourth of July Celebration on the National Mall the traditional fourth of july silla brush and on the National Mall. There is concerned that the 20th to Nuclear Treaty with iran is about to collapse asked that the 2015 Nuclear Treaty with iran is about to collapse that the 2015 nuclear deal with iran is about to collapse. 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 olivia hows. This is bloomberg. Guy thank you very much indeed. Lets talk markets. Lets get ahead of some of the data we are watching from the United States tomorrow. The chief Investment Officer of cross Bridge Capital and the director of european economics at Citigroup Global markets are joining us now. Gentlemen, good afternoon. Its been a busy week. We have seen huge moves in the bond markets. Btps generating some huge returns to the upside. Some incredible developments. Christian, what do you make of the price action . What does it tell me about the developments we see in economics, particularly for the euro zone . Christian it tells us a lot about what the base case of investors was going into this week. That we wouldar deficitexcessive procedure against the Italian Government, more arguments between various leaders about how the new Eu Commission president is going to be. What we got at the end is a relatively quick solution to those. T is not final yet we haves adjusted more continuity, and weve got the eu with good news for italy. Guy is a good news in the long term for euro zone assets . If youve got a continuity candidate at the ecb, big news in terms of pricing, but when i look at what the market is on theng with 40 bps german tenyear, that has got to be worrying. It is. You have these negative rates for nearly five years. Zone has to be processing the fiscal spending. I think maybe we are getting there. The germans will agree to do more spending, they may be relaxed the growth and stability under which everyone is tied up. When you see the euro zone as a whole arguing that we should be at 2 or 2. 4 percent, it is ridiculous when we get to 3 because you dont have any growth happening. If lagarde really wants to stamp her authority and say she is different than the past, the focus has to be on fiscal response. Guy you think she is put in that role for that job . Do you believe that, and there are speculations of deals to make it happen, but if you believe that lagarde has been put in place to just carry on, then europe, you could argue, is in deep trouble. Monetary policy bullets have been fired. We are where we are at the moment with fairly dismal data. Do you think lagarde has been put in place to change things or finish what draghi started . Christian i think shes part of a package where you have to have women in certain positions, a french person in certain positions, and she fits those bills. Shes got broad experience in macro. Shes been there during the euro crisis. I think thats why shes there. I dont necessarily think she is there for any particular Monetary Policy outlook into the future. In fact, shes not an economist. Shes going to preside over the executive board, which will not have any economists on it. I think the ecb is likely to be more cautious than it has been with mario draghi. Guy speculation is being driven that we are at a Pivotal Moment in europe. That actually, we need a fiscal approach rather than a monetary approach. The bullets have been fired. You wonder how many more there are in the gun at the ecb. You wonder whether or not we are making a move towards a more fiscally driven economy. The u. S. Has had a fiscal push. It clearly delivered a better economic outcome. Is europe now on the cusp of delivering more . The instant ramen the economic institutes are beginning to just hint at the possibility of this happening. What would it take to get germany to spend more money . Germany has the fiscal space to spend if necessary, and obviously the economy is slowing down, so in , they would just not borrow. That political commitment now leads to this procyclical tightening, so that is the risk. As the labor market starts to cool down, which it hasnt really yet, but there are some signs it might once unemployment goes up, i think thats the moment where people will see perhaps they cut some taxes, and maybe that is going to be politically popular as well. I agree that maybe we are moving in that direction, but i think we also have to keep in mind that fiscal stimulus is not what solves the issues in the euro zone. We need a stronger, higher permanent growth rate. We need Structural Reforms that drive up the neutral rate. That would create a bigger space for Monetary Policy as well, and would have a stronger stimulus. Guy but how do we get there . Monetary policy has not gotten us there. Could fiscal policy in the near term provide the political narrative to allow that to happen . Singh and Christian Schulz staying with us. Remember, boston pops fireworks spectacular during on spectacular airing on bloomberg tonight at 8 00 p. M. Eastern. This is bloomberg. Guy from london, im guy johnson. This is the european close on bloomberg markets. We are back with manish sig with manish singh and Christian Schulz. President trump thinks that the u. S. Dollar is overvalued. 40 of gdp is driven by exports, and you dont have any local growth in the euro zone. Point . Sident trump got a looking at the levels, may be, but i dont think it is being driven by the euro zone deliberately trying to keep the euro weaker. I does agree with that. Guy with negative rates, it is hard to make that argument. Manish but i think mr. s point is political mr. Trumps point is political. Look at the comments last week. It is ridiculous to say that nobody knew him, i made him. That is not the remarks of a very sensible person. I think it is playing to his audience. It doesnt mean much in terms of policymaking. Guy what do you think of this . How would a stronger euro affect your models . If we went from 1. 12 now to 1. 2 , what does the outcome look like . Christian that would obviously probablylation lower by a few tenths of a percentage point. Not the end of the world, for sure. It would undermine competitiveness, company profits. They would be investing less. It would cool down the economy which is already quite cool. That is the sort of thing that is a bad appreciation of the euro. If the economy is going down and the euro is going up, that is bad. If the euro word to appreciate because of fiscal stimulus or good integration of reforms in , it would be a good appreciation because it would cool inflationary pressures. It would boost private consumption and reflect stronger confidence in eurozone growth. The euro at the moment, if it goes up, would be negative for growth and inflation. Guy what have you got penciled in for the fed this year . Manish right now i think theres going to be a rate cut on july 31 by 25 basis points. Theres a big argument going on, is the equity market correct or the bond market . They are both correct. They are just telling you the story in a different manner. If you look at what the fed has been doing since the 1980s, theyve been fighting inflation. Then you had big deflationary risks, which were avoided, but there is no signs of inflation. The equity market looks at the says you havend auto sales flatlining, but not cratering, Business Confidence ok, and the fed is about to cut rates, so they are right to be up. Guy if you break down the equity market and look at what sectors are most highly valued, it is the defensive stocks carrying the weight of the market. They are bonds, essentially, in another form. Are they really telling a different story at the moment . Manish no, they are not. I come back to the nominal growth argument. If you look at nominal growth prior to 2008, you have growth for years. That number has since halved. Emerging onward, where market has become a big contributor, that is actually holding up very well. So it is not as negative as people think. If you break the story into Global Growth from advanced economies and the conservation emerging markets, it is not that bad. In the meantime, because of many , if you go onsons amazon and want to buy something, you have a hundred different providers. Changes technological have made structural changes to how inflation can impact, and the world is getting far more integrated. I think those things are structural. If i dont see inflation risk, i am buying. Guy do you think the fed just get and starts to accelerating rates of inflation . Is that the game now . Cycle,an the american because of the timing of fiscal stimulus, was always going to come to a difficult point right about the summer. This is when growth grows down, so the fed rate hike cycle would be over at this point. , it wouldveorld hit the neutral rate point and kept it there. It turns out perhaps the rate was already too high. They up to their neutral rate and the global cycle has turned iswell, so the u. S. Economy risking low central growth with no equilibrium and we have to cut. But i think the of is economy still looks very strong if you look at concurrent data, domestic data. There is slight weakening, but i wouldnt say we are necessary in recession territory yet, or anywhere near it. Our base case at the moment is that the fed will not cut. Guy not at all this year . Christian correct. Guy christian is going to lead us now on that interesting note. During this program, weve had people talk about 100 basis points this year to zero. The market is clearly reasonably divergent in its views as to what will happen next. Of citigroupulz global markets, thank you. Manish will be sticking with us. Up next, we will talk about oil. This is bloomberg. Live from london, im guy johnson. This is the european close on bloomberg markets. Bloomberg has learned saudi arabia and kuwait are the closest in years to restoring oil output from a neutral zone shared by the neighboring nations, after making a recent breakthrough in talks. In a separate develop and, iranian tension is rising. British forces seizing a syria bound supertanker carrying iranian crude off of gibraltar. The europeans are saying that was in violation of european and u. S. Sanctions. That story in the last few minutes has moved. Its find out what the latest of 11 czar with will kennedy. What do we now know the developments are with will kennedy. What do we know . L guy do we know where the oil was going . They are claiming responsibility, but the question is where it was on its way to. Will we dont know why the iranians think this was a legal action. Premier said it was his view, and this is what downing street said as well, that this was headed to syria, which cannot be supplied under u. S. And eu sanctions. Guy is there any other potential port that this tanker could have been heading for in the mediterranean . Will it seems extremely unlikely. The only other countries turkey, getting supplied by smaller tankers through its canal. It would not make economic sense for them to send this great big ship all the way around africa. In terms of the way the sanctions work, how does this process evolve the story . What does it tell us about iranian ambitions, iranian ability to deliver on those ambitions, and the potential tightness of the open market for their crude . Will iran has been supplying regime with oil over the past few years. What oil they are consuming, a lot of it comes from iran, and they tend to get that from smaller tankers. It may be that because of the sanctions on iran exports, theyve got very little places their oil can go, and they are putting ships onto supertankers, many of which are standing idle in the persian gulf. It may have just been an opportunity for them to shift those cargoes around to somewhere they thought would take the oil. There arent that many options. China is still buying a little bit of iranian oil, but the sanctions have been extremely effective. We seen a romney in production collapsed by more than weve seen iranian production collapsed by more than 1. 5 Million Barrels a day. Guy will kennedy, things very much. Lets talk about some of the other stories we are watching carefully. It is time for the Bloomberg Business flash. Deutsche bank ceo christian sewing is putting the final touches to a sweeping turnaround plan. The Bank Supervisory board meets to make a decision this weekend. Among the matters being discussed, huge job cuts focused on the investment bank, another management shakeup, and speculation about the cfo. Raise 9. 8t to billion in hong kong later this month. Its ceo says that would give the company flicks ability to seek local partners. British Bookmaker William Hill will close 25 shops, and people will lose jobs as a result. They have been hurt by new legislation that limits bets on roulette and poker machines aimed at cutting gambling addiction. That is here Bloomberg Business flash. Lets take a quick look at where european markets are. Very light volume has been a feature of the day for equities. The ftse 100 is now in negative territory. With the u. S. Out for the day, volumes have been a little on the light side. The dax just gained positive territory. We are watching for news on Deutsche Bank. There was a report earlier suggesting that the cfo would be signed lined. Would be sidelined. That has now been debunked. Climbse mib continues to higher. Italian banks the prime reason for that. We have seen a significant move this week in the valuation of btps. The italian 10 year moving aggressively. That reads through very quickly into the italian banks. The link between the two very strong. Coming up later tonight, the boston pops fourth of july concert spectacular, airing on Bloomberg Television and radio at eight a clock p. M. Eastern time with fantastic coverage at 8 00 p. M. Eastern time with fantastic coverage. This is bloomberg. Guy we are wrapping up the day in europe. Endeconds to go until the of regular trading. Not many fireworks to talk about. A very flat session. Italy is the standout story again as the italian banks continue to move to the upside. The ftse 100 down. 1 . Late volumes is the future. The italian market providing excitement. Btps have been the real story. Yields have come down sharply. Christine lagarde coming into the ecb and that pricing out the possibility of action being taken by the European Commission against the Italian Government. The Italian Government only tweaking a few numbers to make that less likely. That is why we are seeing the rise this week in the italian equity market. Lets break things down. This is probably the more interesting way of looking at european markets. We see the banks rising, driven by the italian story. Real estate doing better. What we have seen are the more defensive names leading the charge. Cyclicals andthe some of the defensive names. Lets take a look at the bottom of the market. That is italy. Some of those defensive names, mixed up with some of the cyclicals. Utilities trading softer today. They have been a big leader in terms of valuations. Mining stocks trading down. The move to the downside on iron ore. That is beginning to fade. Health care off, media off, Technology Trading to the downside. I do not think the European Equity market provides useful signals in terms of what we can take from the close. It is a difficult story to digest. What we have seen is that we are seeing very light volume. You can see to the right hand side, that is the european close. You see the volume going through the market, but as you can see we are well off our highs, trading around 75 the normal volume we have seen throughout the day. Well be back tomorrow, the u. S. Back tomorrow, payrolls tomorrow, i expect youll see more volatility into the market. Lets turn back to the u. K. We have not talked much about the u. K. Brexit fatigue may be beginning to compete degree been. To creep in. What do you think of Boris Johnson government will look like and what you think it will look like to investors . You will see tax cuts which will be stimulative. The key thing is what happens with the brexit deal. That is when uncertainty goes away. It is no secret that investors have held off because of the uncertainty. If you talk to anybody in the private equity sector to see where theyve been allocating money, it is clear investors have held out. What happens on october 31 . Is there some sort of an agreement and then you need time to implement that deal and therefore you deal a bit more, that would be fine. That to my mind will still be the big factor. Guy do you expect another delay or do think a hard brexit is possible . Manish i do not think so. Both sides do not want that, and it is clear. Is not in a position to do with the no deal scenario. I think if you look at the Economic Conditions in the user in the eurozone and the way we talked in the first section, that means we have a new set of he is not just the people but the votes behind him to push for a no deal if that is the only option. It was never an option before because the parliament had voted against the no deal. That will be the outcome anybody is looking for and that makes the deal more likely. In what shape and what form we will be and how much each side will give in, that is a matter of political discussion. Morenk there will be far resolute than you are seeing now. Guy do you think a deal is more likely than a general election or a second referendum . ,n terms of the rarest outcome you get agreement between london and brussels, do you think that is the most likely outcome . Do you think a second referendum we can talk about . Do you think a general election is likely . Second between a referendum and a general election, a general election is more likely. And a general election, i do not think either has a huge advantage. Lets a Boris Johnson goes to brussels and has a conversation and says this is what we are going to do. Thenussels plays hardball, Boris Johnson comes back to the parliament and says we have to proceed no deal. There is no majority for no deal , therefore an election would have to be called. That is how we go to a new round of elections. I do not think we get there. Guy what stops is getting there . There . Stops us getting manish in the past no deal was not a scenario, now no deal is a scenario and they have to face it. You look at the data in front of view you can have a brussels is detached from the real world and they might say we are going to pursue it irrespective of it. Of course you have a small likelihood of a no deal scenario, you have to play hardball. Realistically, that does not make sense. I would say it does not happen, but it happened with mark yes but could it happen . Yes. You have liberal democrats polling strongly at the moment. How in a four party situation do we get clarity . Parties. D to does go we now have four parties. That is a good point. If you look at what has changed in the investment world, the breakdown of political consensus is one of the biggest worries in the western world. The way i see that is there has to be we have seen reports telegraph before that the brexit party and the tory party led by Boris Johnson is going to come to some sort of a deal to not contest against each other. We have a good majority. Guy really . At the if we look numbers, they go up to a 100 seat majority. If they get an alignment. Realistically, people are worried about labor coming to power. Labor cannot come to power on its own. They will come in in a coalition that of labor agrees to a coalition, they will do sharing. If not, you end up in a fractured majority. That in my mind might not be a stable government and we might have another round of elections. That is not a scenario anyone wants to go but that tells you couldte down in political lead to uncertainty. Guy the point i am getting to is that u. K. Assets are cheap, the pound is cheap. Is there anything that will change that scenario . Manish getting a deal or working for a deal followed by the policies that Boris Johnson is talking about, the tax cuts, those are going to move the asset classes. If there is no clarity on what is happening on brexit, then we continue with the same thing. I do not see how anything will change. Guy thank you very much. Mannish saying joining us from joining us from cross Bridge Capital. We just finished broadly flat at the major markets in europe during the ftse down a touch. The miners driving it. The dax up a touch. The ftse mib interesting as we see a revision of the banks. Tomorrow we will have payroll and the return of the United States so volume will improve. Why is the u. S. Out today . It is the birthday party. We are talking about independence day, we are talking about the fourth of july, which means we are talking about the boston pops. We are forward to our coverage a little bit leader on. This is bloomberg. Guy from london, i am guy johnson. Lets get to bloomberg first word news with olivia howe. Via President Trump says government officials are working on the holidays to get a Citizenship Question on next years census, a day after the administration said it was dropping the matter, President Trump out to fight on. Justices say the administrations rationale was contrived. The only House Republican open to impeaching trump is leaving the party. He is a mosh said disenchanted with Party Politics and frightened from what he sees. He wrote in the Washington Post he is declaring his independence. He said the Mueller Report convinced him the president has engaged in impeachable conduct. Russia is considering reducing key Interest Rates according to the governor of the central bank. Economists polled by bloomberg see the Russian Central Bank hold the rate at 7. 5 . B w and qualcomm are among the winners in a fight for the car of the future. Rules fortors scrap Wifi Technology as the basis of how cars talk to each other. The companies argued wifi offers for offers for global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. Im olivia howe. This is bloomberg. Guy thank you very much. Lets return to donald trump. He has said europe and china are manipulating their currencies. Bloomberg spoke with inductor with investor mark mobius about how trump views could impact markets. Mark the currency weapon has been on the table for a long time. The chinese have used that weapon. It is interesting that in preparation for the meeting the chinese allow their currency to get stronger. That eased tensions somewhat. The u. S. Is in a difficult position because the u. S. Dollar is a global currency. U. S. Is very little of the particularly that the foreign reserves of the u. S. Are not that great, so very difficult to do anything about the currency. Other countries can control their currency. China controls their currencies closely. The only thing the u. S. Can do the other countries into easing up on the weakening of their currencies. Good morning to you. At the context of what is going on in markets, some people are saying we are hitting irrationally exuberant times. What would you say from the e. M. Perspective . Is iterpriced in underpricing escalation of trade angst between china and america . I do not think it is underpricing. The risk is out there. Everybody is aware of it. I just returned from a five city tour of the u. S. Everyone i talk to ask about the china trade war. Isher fact is that overwhelming on the positive side. That is Interest Rates. Interest rates are so low. In europe it is negative and going down in emerging markets. As you know, lower Interest Rates in the u. S. Helps emerging markets a lot. I think that is what is driving the situation. Do not forget liquidity is increasing. A lot of people have overlooked the impact of cryptocurrencies. I believe the increase in cryptocurrencies means there is an increase in global liquidity, which cannot be measured. You are an emerging market expert. Ofre has been a chorus people talking about how developed markets are starting to resemble e. M. More. After trump was elected, we had s p saying they were no longer able to separate dm economies from e. M. Based on the strength of institutions. Is that something you are watching or something you would agree with . Mark yes. It is a difficult problem. Think about it. Alibaba, where is it listed . It is a huge Company Listed in the u. S. Is it any merging company or not . These are the issues that are difficult to untangle. If you separate the emerging Market Countries and the develop Market Countries, china, south africa, brazil, those countries, those are growing at double the rate of the developed markets. Salientw becoming more because there are some of the people that have gone into etfs. Everyone is tied to the index, to the big stocks. They are asking, maybe im taking too much risk of being with this crowd in the big stocks. Maybe i should go into a more actively managed fund or an emerging market fund which will be diversification. I think that is what is happening now. Speaking tobius bloomberg a little bit earlier on today. Time for the Bloomberg Business flash. With another sign of how cap regulations are forcing banks to change their business models. A french bank will get rid of the majority of its Asia Research staff in hong kong and instead use contact from morningstar. The saudi billionaire prince has hired a Deutsche Bank executive to look for deals. Bloomberg has learned the banks ceo and saudi arabia will join as the head of international investment. The german Lighting Firm osram confirms it has received a 3. 8 million takeover proposal from bain capital and carlisle. The companys board will meet today to vote on the agreement. In march osram issued its fifth profit warning in just over a year. The companys lights are used in cars and smartphones. That is the latest Bloomberg Business flash. Coming up, we are live in boston with the matt miller getting ready for the boston pops concert and fireworks spectacular. This is bloomberg. Guy some of the numbers behind the boston pops fireworks spectacular. Lets go there now to boston where we find bloombergs matt miller. You are on the stage. What does the view look like . Matt there is a lot more sun here that i typically experience at the European Central bank in frankfurt. A very different climate and even a little bit more exciting, depending on the meeting. Some of the ecb meetings can get crazy now with christine lagarde. I am looking forward to it. These people have been camping out all night long to get the best the to see the boston pops. Some have been coming for 10, 20, or 30 years. This is a traditional ongoing concert. We will celebrate the 243rd birthday of america tonight and we are getting pretty chuffed. Surprised people are allowed to bring gazebos, i would think that would make an obstructed view for people behind them but maybe they are doing it by height. Matt these people organize this down to the t and they have gotten the gazebos here during the day. They will send runners to take them away before the show starts. The boston pops orchestra is the mainstay with Keith Lockhart conducting. For some many of these people, that is the most exciting thing. We have a list of stars as well. ,e will have Queen Latifah here star of rap, acting, i think she is very close to getting her egot. She just needs a tony nomination. Then we have the texas tenors, ameren domenica amanda menna from americas got talent. The first young u. S. Poet laureate who will perform a poem she wrote for the fourth of july tonight. A lot going on. Then you have the cannons. You cannot forget the howitzers firing along with the overture of 1812 and then the gigantic fireworks display, the likes of which you do not have their, even on guy fox day. This is something serious for us. Of themalready see some starting, but they will be incredible after this concert. And matt miller is in charge of pulling the string on one of the howitzers. What more could you want . Have a great evening, enjoy yourself. It looks like the coverage will be excellent. Matt knows everything about the event. You do not want to miss our coverage. It all kicks off at 8 00 eastern. It will be fantastic. Make sure you tune in. We have the concert, we have the fireworks, we have the howitzers. Everything will be going at 8 00 this evening. From boston, from london, this is bloomberg. The following is a paid program. The opinions and views expressed do not reflect those of bloomberg lp, its affiliates, or its employees. The following is a paid advertisement for time lives video collection. Ladies and gentlemen, dolly parton. It is country musics biggest night. When countrys greatest stars perform on countrys biggest stage. Now, you can have your very own frontrow seat