Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20170530

Relations with the u. S. Manus welcome to daybreak europe, are flagship morning show in london. Share buyback is the Headline News for shareholders in reiner. The market good for 800 million euros, 600 million is the number announced by ryanair. The market had penciled in 1. 20 3 billion, bang in line. Ryanair sees an 8 rise in terms of net income for 2017 and 2018. A share buybacks starts the week 1. 4 5 billion euros. Thats a rise of 8 . The company is also in review with boeing to accelerate growth. Is the great debate within the discount area in terms of accelerating. Overcapacity by the National Carriers which seems to have been running out of pace, but in the lowcost carriers you are seeing that fight for market share in alitalia. Ryanair are in a fleet review with boeing. 2016 was a big year for them, around 93 . Theyve cut costs quite aggressively. These are the questions that we will be putting to the cfo when he joins me in just under an hour. We will put those questions to him, weathering the brexit storm, the key question when he joins us shortly. Let me talk you through the momentum in the market. Mario draghi spoke to the market yesterday, saying we will remain fully engaged, too soon to get off that exceptional easing that youve got, the exceptional liquidity. How do you favor the move youve got, with draghis still fully committed . Do you want to sell the yen . Thats the exceptional thing. We have a double top formation coming in. Is the euro strengthening in the wake of the french election, beginning to fade . They would say that if you touch the level, that is where you will break on a drop lower. So how do you fade of the draghi moves . It could be through euroyen. Lets talk about the implications on markets. Some are on vacation, so we thought we would to get off of the msci asia index, dropping slightly. China closed, hong kong closed, taiwan closed. Slightly skewed, samsung off by 2 . Draghi says he is still fully engaged what does that mean . A great deal of valuation has been built up, do we question that . Corbyn went up against may last night. Looks like the tory leader is dissipating from 9 to 6 for the morning shows. Gold was much better, back in the green. It is near its highest level in a month. There are a number of factors, one is the u. K. , and we also go to nonfarm payrolls on friday. Talking aboutup, the run within the Balance Sheet, slow in orderly. The fed will communicate effectively. It wont be anything like the taper tantrum, and that is what they want to avoid. Its a rerun of taper tantrum. They will communicate within an inch of their life. Sophie kamaruddin is standing by with the first word. Good morning. Sophie hey, manus. The president of the st. Louis fed says the jury is out on whether the Trump Administration will meet wall street expectations. Speaking exclusively to ball bloomberg, he says at some point the honeymoon period will come to an end and he will need to deliver on the policy promises that drove the stock market higher. He businesses that shot up after the election, the president was perceived as more probusiness than the previous administration. Washington does have to deliver at some point, and i think that is a concern going forward, whether the honeymoon period would end at some point, and maybe the reality of american politics would settle in. Well see if that happens are not. I think the jury is still out on all that. More ofwe will have that exclusive interview in just a few minutes. Over in the u. K. , the leaders of the two main Political Parties faced questions in a televised event last night. Jeremy corbyn outlined his vision for britains future outside the eu. Meanwhile, Prime Minister theresa may explain why she had initially opposed calling the general election. We will threaten europe by turning this country into a Corporate Tax haven with no investment. We want high wage, high investment, growing economy, with good relations with neighbors and with the rest of the world. [applause] i said there wouldnt be a general election, and after i became Prime Minister, i felt the most important thing for the country was the stability and the getting on with triggering article 50, so that we made sure we were delivering on that vote. Sophie japans jobless rate remains at the lowest in more than two decades last month, holding at 2. 8 . Meanwhile, retail sales beat expectations, rising 1. 4 for march. Household spending fell by a more than expected 1. 4 . Global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Now lets check in on the markets in asia. Were looking in on whats going on given the lack of what we have had this session. China, hong kong, taiwan are offline. In tokyo, the nikkei 225 has trimmed some of the days losses brought on by the stronger yen. The asx 200 sees a recovery in the late morning session, driven by the events in financials and mining stocks. The kospi is set for a second day lower amid high trading volumes. Checking in on the days activity in asia, lets take a look at mumbai. Itss leading the most in more than six months after lg display jumping on reports of investing 3. 5 billion in led technology. Samsung shares declined about 2. 3 , leading the drop among asian tech shares. It is the biggest drop in the share price to date. I want to dry your attention to japan. Stuck near aate is 23 year low, the white line on this chart. With that tightening labor consumers are holding back, spending continuing to slump. Household spending fell 1. 4 in april. Manus thank you for the roundup. A couple quick lines we have been on the phone with the ceo at ryanair. They have no interest in purchasing alitalia. They could take two to three additional boeings in the future. That was their first headline, on growing the fleet. Two to three additions, no interest in alitalia. He sayss alitalia he sees alitalia surviving as a longhaul operator. We will have more of a discussion with him when he arrives at the studio. Lets talk about the fed. Reiteratedrd his views on rates, saying they are close to where they need to be. Speaking exclusively to bloomberg, he projective the idea that 200 basis points of hikes are in order. Abouthink a good thing unwinding the Balance Sheet is that it will create policy space for the committee in the future if we need it. On the rate itself, i think we are not very far from appropriate rates for the u. S. Economy that will keep inflation not too far from target, and the labor market performing well. Thehat i disagree with is idea that we have to go 200 basis points higher to get to some sort of neutral rate. I dont think thats the environment we are in. I think we can stay about where we are, just a little higher than where we are. I want to bring up this chart for our viewers you can see this in the studio. It shows like kathleen has been talking about, what we have been hearing over and over again, a hot job market but Inflation Numbers seem to be cooling, whether you are looking at pc, cpi, core cpi. Why are you the outlier among the fed speakers we have seen . We hear from John Williams and others what seems to be more of the consensus, to more hikes this year. What do you see that they dont . I think those Inflation Numbers has been a little bit surprising. So far in 2017 you can see in the chart, they are all bound on the yearoveryear basis. We have been arguing that we are making progress to 2 inflation, but these have been going in the opposite direction in the early months of 2017. I also think in the First Quarter we got a relatively weak gdp report. It was revised up a little bit, but even with that revision, i think the first half of 2017 gdp be relatively ordinary growth of around 2 . The idea that the economy is growing a lot faster, that this is going to push up inflation, i dont think is matching up with the numbers that we are actually seeing. Furthermore, Inflation Expectations actually started to decline after our march rate increase, and thats an important variable to keep track of his well this discussion. A as well in this discussion. Manus mr. Bullard. Ubs, head offrom u. K. Investment office. Bullard is an arch dove. Good morning. He goes straight in, we dont need 200 basis points. He is bucking the trend. Would you agree . Well, remember, last year when that dot of his caused such a stir, its not surprising that he is sticking to his guns. Let me talk about the current rates, close to where they need to be this is a dynamic process. Its consistent with the current forecast on when the u. S. Economy is going to hit trend or go above trend on a cyclical basis, and that is where they get to have it. But ultimately, where he is coming from is when they start to put in motion the balance doubt nd i highly manus he is the outlier, to be fair. The runoff in the Balance Sheet will be slower than ordinary. High caught up with evans in dublin. It is firmly on our agenda, we know the Balance Sheet reduction is smooth and orderly. Lets talk about the market. This is the bond market, we tacitly accept the market with three rate hikes, a high probability. But the bond market should not fear a rising fed. Is that your view as well . I would say that the bond market right now has made his peace with said. With the fed. When a dove talks about unwinding the Balance Sheet it is a sign you have to pay attention. The bond market will say, ok, we dont have anything else to work with, and given how the risks and the data is, it will be a surprise to the downside in terms of expectations. Thats why they really dont need to fear more. Manus the counterweight of the scale is of course washington, and delivery by donald trump. Ard,ve what he said, bull at some point the honeymoon period will come to an end. Washington needs to deliver on policy expectations, and tax changes would revalue the corporate sector by 10 15 . Here is when i prepared for you, so hesjones, nasdaq, encroaching into capitol hill. Is that a warning shot to capitol hill, or is that the voice of o hope . Its a combination of the two. The warning, it will have to reprice. If you look at the expectations over the last two quarters, clearly tax changes among several things that has been the case. The other side is, if you do deliver, their will trend growth that might be elevated, we could get an upside to revaluation, and this gives them more room. Right now they are creating the conditions for low rates and a soft policy to allow capitol hill to find its way. Where our fascination is with hiking rates. Then we through in a morbid fascination with she reduction. When do we begin to talk about change of power of the top of the Federal Reserve . I think that is going to be the unavoidable topic heading into the second half is something you cant avoid. The ecb over the next few years is something to be concerned with, but i think the fed right now is laying the groundwork, whether there is going to be a change or not, they want the motions to put forward. I think there will be a consistency. Manus lets see who slips into gear with yellen talking for another. Overtime. Jeffrey stays with us. Coming up, theresa may facing intense questioning during a debate. Can she convince the british to back her in the battle for 10 downing street . This is bloomberg. Manus 6 20 a. M. 1 20 iin hong kong. Lets get to sophie kamaruddin. Sophie banks. Thanks. Again inas reported annual earnings after scaling back factory growth. Net income at europes Biggest Discount airline has reached 1. 30 2 billion euros through the end of march. Be joined by the ceo at 7 00 a. M. Successfully dodging a legal challenge by the activist shareholder to oust the chairman, the commercial court of the netherlands ruled that the company is under no obligation. Int strengthens its hand rebuffing takeover talks with the u. S. Suitor. Singapore has find it credit a total of 1. 2 million usd as regulators complete a twoyear review. Singapore branchit the and the penalties were for breaches of antimoneylaundering requirements. And thats your Bloomberg Business flash. Manus thank you very much. Sophie kamaruddin. Politics. Theresa may and Jeremy Corbyn battled that they should be elected as the next Prime Minister in a special general election program. He accused the Prime Minister of backing down over policies on National Insurance and social care. Only this march in the budget, you proposed to increase National Insurance contributions for the selfemployed. Within a week, you backs down from that. Do you accept that . Yes, i accept that, and we very clearly said if i were sitting in brussels, looking at you as the person i had to negotiate with, i would think she is a blowhard who collapses at the first sign of gunfire. [applause] ooh, that was punchy. The head if u. K. Investment at ubs is still with us. Applauded for that statement. Hes a very aggressive interviewer. That collapses at the first sign of gunfire. A warning shot for brexit negotiations. Ultimately. Once you have set your position and were on the scale, especially in the u. K. Side, some consistency is going to be expected. In the context of this election, when we saw that initial reaction, it was in the hope of a strong majority. They are going to be able to assure greater consistency and that is what happened with the question. If i look at your notes, you talk about the pound and start with that as the mainstay. Large majority indicated in the if i look at yourpolls, room te brexit talks. They squandered whatever has happened, that strength has been squandered. Its all about the dissipation in the transition period. Is that what worries you most . Lets be clear, the shrinkage in the lead doesnt necessarily mean a sudden shrinkage and number of seats. This election is still going to be fought in the marginal seats. But at the same time, i think the fear is that all that that came about when this election was called, if they need to be revisited on top of some of the soft Economic Data or expectations which have come through of that came aboutn this election was late, i think that is where some sterling long needs to reassess. Manus the strategy for you has been underway to u. K. Equities. To a certain extent, you would say that trade weighted dissipation isnt fully factored into the market. What does it take to change that view . Our Asset Allocation is underweight europe. The u. K. However, market is still relatively exposed to overseas earnings. The surgeon sterling over the last few months or so, that probably has eaten into any potential effects and remained exposed to the domestic side. The bottom line for the election is further uncertainty not going to be welcome, and i think this will add to that. Manus the other piece written up was this shift in terms of when thepread, potential hike from the bank of england could come. It is shifting further and further away. Q2 to 30 . Do you agree it is slipping away . This is going to be extremely tight conditions because that is what they look to, Household Income and cash flows, mortgage servicing. Yu stays with us. Abenomics, all the arrows are inflight. This is what delivered the boost in unemployment. We discuss abenomics. This is bloomberg. Gone 2 30 in the afternoon. A glorious day in the Emperors Palace in tokyo. A slight drop in the dollar. Were all back from a long weekend here. Wakey on the markets. Nejra we are seeing some losses on the msci asiapacific index, but it has reversed that, trading pretty flat. Japanese equities also erasing earlier losses partly driven by the stronger yen. Its better against the dollar in the session. You can see the nikkei volatility, implied volatility near its lowest level in three years. We are seeing fairly quiet markets in asia. Space,look at the equity we are seeing quite a bit of action in fx. We saw a decline yesterday after dovish comments from mario draghi as he saved the eurozone still needs extraordinary stimulus from the ecb. He also talked about how wages hadnt really been convincing and feeding into inflation. If we look at eurodollar, the losses today are stronger than they were yesterday when we had a bank holiday in the u. K. Euroyen, this was the trade to watch during the french election. It had its lowest since may 19 in this session. Ive got this from the mliv blog, euroyen could be forming a bearish doubletalk and the key breaks a two week low, a of that could trigger an accelerated decline. They are looking at potentially bearish sake alton sterling. We saw sterling rise yesterday, investigator against the dollar in the session. Today, is the 10 Day Moving Average completes the decline it could be setting up for a saloon and given whats happened previously it could extend bolo 125. C were that euroyen trade goes. The new edition of daybreak is on your mobile. Lets get into the top story, the shift in political machinations. Merkel moves on. The german chancellor, can she put her europe must go it alone approach into action . She is hosting the great and the india and chinese leaders. She will hold talks soon. Next up is emmanuel macron, india andcalling for a meetingh russia and vladimir putin. Even as he rebuked kremlin media, macron also said he would support new sanctions against russia if there is an escalation in conflict in eastern ukraine. Finally, we focus on todays reading of the euro area Consumer Confidence numbers which rose to a new multiyear high. Is one of thement most reliable indicators for growth. Slowed tolation has 1. 6 in may. Those are your daybreak stories lets talk about japan. The Unemployment Rate remained at 2. 8 in april, the lowest level in over two decades. That john to applicant ratio, one of the benchmarks we look at, climbed to the highest level since the mid1970s. Retail sales topped out estimates. Joining us now, from tokyo good to see you. Good news on the economy. Fifth straight quarterly expansion growth, private expansion rising. Does it look like this is a trend that is firmly established and will continue . Well, it could be. Exports has been carrying japans economy for about a year, it was the biggest contributor to gdp. The First Quarter we saw private pointsand todays data to japanese consumers starting to feel better, Household Spending down but the more comprehensive retail Sales Numbers beat expectations for a fourth straight monthly gain, the highest in two years. The Second Quarter is off to a good start in terms of japanese consumers. Manus we have low jobless numbers, still a big question mark about it. Impact on wages thats the key, isnt it . It is the key. So far, wages have only shown slight games, but economists say the Labor Participation rate is topping out in they expect the labor market to continue tightening and continue supporting consumption and wage gains whether that will hit a tipping point, and we see significant wage gains, remains to be seen. Manus thank you for the update. Our guest is still with us. I have written down, abenomics . We were rather quick to write it off. Cap we been quick to write it off . We see a rather splendid relationship between the Unemployment Rate in this applicant rating, the highest since the 1970s. Abenomics is it working . Have we been too aggressive in our critique . I think the critique was the aseframe, where he hailed it something miraculous within two years. But now things are happening when it comes to wage gains, when it comes to inflation being generated, remember how corona was saying it will be up 20 , Companies Aren using cash flow to set rates, november power is on the side of the labor market when you simply do not have enough workers to fill in the gaps. That is when the workers have the Pricing Power over wages. Thats abenomics working. Now the question is lets see whether it can be sustained or not. After 30, 40 years of stagnation japan are bank of going to let it run like lava. If you have had such a tortured time and the employee hasnt had the opportunity to squeeze for japan are going to let itwages, the propen longer and harder relative to said, to ecb, to boe, it is greater. Absolutely. You see how draghi was pulling back expectations despite good ecb numbers. Now people will be saying can this yield curve be maintained . Happen, theings central bank make sure it is running hot as possible. Manus yield curve targeting i put a couple yields together. This is fiveyear, twoyear, threeyear. We have had this nice optic in terms of yield at the shorter and. Are you concerned in any way that the bank of japan would step back in terms of what they are doing . The story is the stealth tapering of bond buying may take a summer break. Is that a probability . As long as you are on the right side of zero, i dont think the boj will see an issue at that point. This is making things less loose. Thats very different when it comes to market impulse. They are not tightening things, so they create the conditions and let Inflation Expectations go. Now they can unwind the loosening they have done. But to push inflation is running to hot, and its time to scale back, nowhere near that. Manus you mentioned the dollaryen. It has been such a haven in pretty awful geopolitical times, terrorist atrocities. Yen is absolutely behaving in its classical function. What does that do for the rest of the year . We have this debate between economics and politics, and it doesnt look stable. Dollaryen, id say the adjustment taxes still on the . How long can the reflation trade last . How long can that continue, our view is the want to push the dollar higher against major currencies. At the same time, the doj needs to let go. Even though dollaryen is not flying, wages are coming through. So can japan let that go . Weaker yen doesnt translate into wage gains, but a tight labor Market Driven by domestic conditions, it doesnt matter where the yen is. Thats got to be the shift. Didnt really get what he wanted, did he . My perception is that nobody really got what they wanted from g7. From abes point of view, he was the first out of the gate when President Trump was elected playing golf down in florida. Abe has that route to go down. To japan is very much in favor of tpp, multilateral trading frameworks. In that sense of can japan act as a counterweight to use that bilateral relationship. Manus hold that thought on japan. Lets pave it to pivot to euro. What the euro area still needs is monetary stimulus to restore stable inflation. That was the view of the ecb president. He told parliament the recovery is solid. Downside risks with the Growth Outlook are further diminishing, and some of the risks we were facing at the end of last year have receded measurably. The fact that domestic consumption and investment are the main engines driving the recovery makes it more robust and resilient to downside risks, which relay predominately to global factors. Manus a fairly dovish president. He couldnt have been clearer, could he, in terms of the commitment from the European Central bank to remain fully locked, fully loaded. And this, i think, is a hint that the stock protections in e are not going to the nowhere above 2 or anything like that. Is the his view is like any other central bank, they would be accused of being behind the curve rather than tightening expectations and hitting the economy at the wrong point. Extent, we certain have been too aggressive. The slightest nuance of change do you think the market has been too aggressive in the changing of Forward Guidance in the raising of rates, even though the chairman of your own bank said get out of these extraordinary measures as soon as possible . Has the market over arched itself . I think we are coming from a low base. Manus [laughter] when we go from zero to nonzero, that is so much more significant. The day yield curve tightening in japan goes from zero to five, that will be a much bigger deal. Is, is where the new ones nuance is. It is making sure he can allow the current reflation trends to run, because there will be an adjustment, but he would rather see an adjustment come from the highlevel. Manus circling back fx is the prism through which media reaction can be had. I started this show with euroyen. All the good news from the french election, a dovish mario draghi, how do you see the nearterm peak in euro . Your again, eurodollar . Weheading into projections, are not ready to fall back yet because if they do signal a greater threshold, ultimately the ecb anchors their expectations. Inwe still have unchanged terms of the u. S. And a slightly conservative upset, the growth differential is still in europe, we still might see eurodollar run higher, hotter, and euroyen can benefit as a result. But i think the margins are pretty fine. Manus more to come with geoffrey yu from ubs. And remember, if you are a bloomberg customer, you can what fis watch this using tv. You can influence the conversation. Ask a question at the bottom of the screen. Merkel. P, modi meets the indian Prime Minister kicks off a fournation tour in berlin. We take a look at the agenda. This is bloomberg. Just gone 6 48 in london. 1 48 a. M. In the united states, in new york. Just a shade lighter this morning, the indication for u. S. Equities. Big week for the u. S. Theet manufacturing, and big daddy the jobs report on friday, which could make or break a decision for the fed. Nobody breaks the fed. Sophie kamaruddin is with us. Sophie hey, manus. Ryanair has reported a 6 gain in annual earnings fueled by a capacity growth. Net income at the Biggest Discount airline increased to 1. 3 2 billion euros. And we will be joined by the ryanair cfo at 7 00 a. M. U. K. Town. British airways says its i. T. Systems are back up in running, and that it will be operating at full flight schedule at heathrow and gatwick, after a Bank Holiday Weekend of travel misery for thousands of passengers affected by the computer meltdown. Citigroup is estimated the chaos will cost the airline 100 million euros. Akzonobel has successfully dodged a takeover by Elliott Management to oust the chairman. Of the commercial court of the netherlands ruled the company is under no obligation to honor demands from shareholders led by the new yorkbased fund for a vote on the removal. That strengthens the hand in rebuffing takeover talks with the u. S. Suitor. Singapore has find Credit Suisse asotal of 1. 2 billion usd regulators completed a twoyear enview of its involvem with money launderingt. The penalties were for breaches of antimoney laundering requirements. And that your Bloomberg Business flash. Manus sophie, thank you. Sophie kamaruddin with the latest. Indian Prime Minister Narendra Modi has visited germany at the start of the sixday trip that will take into spain, russia, and france. He dined with uncle a merkel last night, and the leaders will have further talks today. Germany is indias largest trade partner in europe, and its seventhlargest source of fdi. For more, lets bring in at about nine she, joining us from mumbai. To see a. Good to see you. A big moment for the Prime Minister what does he want to really achieve from this visit to germany . Prime minister modi left for a trip that he expects will significantly boost economic ties and investments into india. Like you said, germany remains one of europes biggest trading partners of india, as well as the seventh largest fdi source to india. Fdis into india last year were at a record 60 billion usd. Prime minister would want that trend to continue. He would also want the Business Investments to grow, so he wouldnt be looking at striking some business deals with germany, no doubt, about that. The other thing that will be on the agenda is kickstart the whichu freetrade deal, has been bogged down the past few years. Would wanth leaders to see some traction gaining on that front. Manus a lovely line in the story, the deep freeze. Talk to me about germany and india. They have one mutual, clear policy, that they have not joined to chinas one belt, one road system. Will this come up during the talks, do you think . I would assume so. Thattold journalists germany and india both have this newons about global trade system that china is trying to put in place. Were india and germany need to sit across the givenand talk more trade, all wha of what is taking place. Basicallyconcerns are that connectivity is not an issue as far as this goes, but free trade and those principles matter a lot, can they has not been consulted in this entire trade regime that has been put in place. I assume that these will come up during the talks between merkel and modi. Manus thank you for the update. Geoff yu is the head of u. K. Investment office at ubs. This theater of modi and merkel coming together, at has come at a rather interesting time for merkel, as she said the relationship we thought we had, that we depended on since world war ii with the united states, has turned from the west, and looking to the east. This is part of the fear of what we are seeing. Yeah, and germanys resurgence over the last 20 years on trade, trading relationships, merkel has had some degree of reservation, and at what cost would come. Rethink. His prompt a i think that this is going to come up, i think the countries have different reason for being more cautious, but at the same time, relationships between germany and china, they are deepening as well. This realignment from the west to the east is still happening apace. Manus when you heard those comments yesterday, or over the changed,the world has pivot, etc. , what was the discussion at ubs . Was there a surprise that this thinkr pivot, or do you that we just cant be sure of what happened, so we must look to the surety of globalization . None of us were flies on the wall at g7, so something mustve have happened to trigger such a strong statement. We can follow on from scholz, how they picked up on the political mood in germany, where the german people realized they need to picvot away from the relationships they thought they had. I think we need to take a step back to realize, is there something genuine, or is it manus is it politics . With the votes coming up, they are in full election mode. But the wider point is after the u. S. Election, are we a seeing a realignment. Manus pragmatism rules. Thank you for being with us, for sharing your thoughts. Geoff yu is the ubs had that u. K. Investment office. Long futures indicated down. 2 . Well see how the markets fare, s p 500 indicated higher. Arriving in the building, the cfo for ryanair. He joins the daybreak team, after the Company Reported again in annual earnings. What next for ryanair . The cfo will discuss. This is bloomberg. James bullard says must trump must deliver on policy promises. That said u. S. Stocks higher. This as he predicts, winding down Balance Sheets will come in baby steps. They run off in the Balance Sheet will go smoothly. It will be managed, slow, it will take quite a while. Are epidemics take a taking flight as jobless rates hold that a two decade low with retail sales up for the fourth month. If merkel, the chancellor german chancellor host indias Prime Minister, as she stands her ground on distance and relations with the united states. Welcome to daybreak europe. I manus cranny. Markets onumber of the holidays. Deliver, that was the political message to trump for. R. Bullard you will get more of that later. You got copper and oil coming a little bit lower across the complex. N by an eighth of 1 per merkels meeting with mr. Prodi. Lets talk about the radar risk this tuesday morning. China and hong kong, taiwan, they are so close. 0. 5 . Well take it anywhere we can get. Saying asian equities break the trend. They have been following under pressure 2 . The question global equities, the brits progress europe, the expectations in earnings numbers in the case was europe would continue to work higher. Corbynadtohead, Jeremy Theresa may. For the times itvs good morning conservatives 43, labor 27. Thats to suppression of the lead from nine Percentage Points to six percentage point. A market didnt like it. Gold is back a bit, 1267. It had gone red three dollar index up a quarter of 1 as we go into the start of tuesdays trade. That is how the markets book. First word news sophie kamaruddin. The president has said that the jury is still out on whether the Trump Administration will meet wall street expectations, speaking exclusively to boom bullard, endboard said at some point the honeymoon time will come to an end. Washington will need to deliver on the policy promises that have driven the stock market higher. Lex business after the election, the president was perceived as more probusiness than the previous administration. Washington has to deliver at some point. I think that is a concern going up forward, whether the at somen would end point, the reality of american politics would settle in. We will see if that happens or not. A think the jury is still out on all that. More of that exclusive interview with James Bullard later in the show. In the u. K. , leaders of the two main Political Parties faced audience questions and a televised event last night. Jimmy corbyn outlined his vision for the future outside the eu. Prime minister theresa may explain why she had initially opposed calling the general election. Without threatening europe during this country to a Corporate Tax haven come up with low tax, low wages, low investment. We won high which, high investment, growing economy, good relations with our maker, and with the rest of the world. [laughter] [applause] i said there wouldnt be a general election. After it became Prime Minister the most important thing for was the stability and getting on with triggering article 50, so we made sure we were delivering on that photo brexit. Japans jobless rate remains at the lowest them on the two decades last month, closing at 2. 8 . Retail sales made expect the expectations, 1. 4 for march, overall spendings felt more than expected, 1. 4 . Global news 24 hours a day powered by more than 26 hundred journalists and analysts in more than 120 countries. You can find more stories on the bloomberg. Checking in on markets, switch up in asian trading session, daysese tears now losses that will fewer tissue were fueled earlier by stronger yen. Thats the only g10 currencies gainer. Also rising against the euro on ecb rhetoric. Theyre carving out up one third of a percent. Mumbai but heavy falling almost 10 tier, most over six months after its rocket in the fourth quarter. Apple fire lg display jumping on its investing about 3. 5 billion dollars into oled technology. Samsung shares leaving the drop among asian tech shares today cost falling over 10 points today. Visualize that data out of japan this morning for the chart atv 6407. Btv from the white line here that tightening labor market, wages are starting to grow the blue line. Japanese consumers are holding on to pursestrings, as you can see from the bottom panel here. Salt Spending Continues to slump for 14th straight dish Household Spending slumps for the 14th straight month. Thank you. 6 gain in annual earnings, europes biggest also in talks with going to we have the cfo who joins us now. Neil, good to see you. You have had a good set of bers coming your delivered they buy back. Help me with this, ive read note three your delivered by back of 600 million. The market has penciled in 800 million. Where is the disconnect customer talk to me by back. Anything man with deliver the 600 million share buyback, now this morning one billion of returns this brings us to 5. 4 billion returns. About 22 of our share of capital over that time. Ts an average or surveyor compared to seven near plus that we see today. Shares grown rapidly. Last year alone by the time we delivered a 6 increase what 36 nine. We saw 14 increase in our share to 1. 050. Strong performance markets will be have a with the 600 million we have, that will bring it back close to the cash net disposition on the Balance Sheet on what we have fitting very well with the Balance Sheet you want to have. Numbers speakrd, for themselves. In net income 1. 3 2 billion, thats up from 1. 24. Thats pretty much what the market was a 1 looking for. 1. 4 billion. Reciprocal back going to come from we still have brexit turbulence. I use that loosely. Wheres that uplift going to come from . This number of moving parts as always, a percent think recent numbers to 130 million customers. Traffic of strong with the 120 million we had question. Just over 49 a barrel. 70 million worth saving, much of which will go back to our customers. Having delivered a five percent x feel unit cost saving further 1 unit cost reduction, a very Strong Performance in time american editors talking but at best, or may letter unit ts, raising hopes will competitive advantage we have over everybody else. To really seven performed strongly last year when sent to the past year basis, with brought in this year we generated 1. 8 billion in revenues. Always, very as limited visibility into her peak summer bookings three no visibility in the winter but we are getting first minus seven. That lack of visibility you say in terms of where we are, theres still overcapacity by the like carriers. What realistically do you think you were going to see a squeeze in terms at first . Does it continue to the end . Came in over the last 12 months from the middle east. Thats still a lot of charge capacity, like spain that still very much in the markets. Respect capacity goes out we will continue see pressure. We see sterling on the year on year basis. Weaker than it was this time last year just before the brexit referendum. That inicult content the winter. Their opportunities, restructure going on in europe, in germany, italy, portugal, dan there may be opportunities there too which is why this morning we said were talking to our companies the with a view to extend the leases to the summer of 20182019 read indeed we would happily talked about can you give me the numbers on that . In terms of extension, how many more you would actually and more important like, where were to go . Would get 50 more aircraft currently being added. We have a nice 47 aircraft coming into for us in the current financial year. We have are ready and increased the bait are based to seven aircraft in frankfurt main. Having started in march, with a there, weorwards over have had at naples the summer, performing well down and do. We could see Growth Opportunities in munich ukraine becomes a 34 country in the tel aviv or someone to sun. Rtunities across europe crexendo in the numbers broke, we spoke to were not interested why not, how much on that is aspend proposition, and if not you, will makes you think is going to remain as a concern . Ive they havent made a lot of money over that time, but theyve been in and out of administration and other forms of support over that time. Think theyll probably come out the other side, focused in the longhaul operations. They have and will remain and will be this number one carrier. We give them number one many years ago because of their actuality. We be more than willing to help longhaul operations in restructure. I dont think m a is something that hugely successful over the years in any event. We didnt have to continue to grow organically in the italian market. Its always difficult to take what a tragic events, you run an airline. Terror threats are significant. Risk to is there anything you can tell us in terms of a shift, and a change in pattern . This is your biggest risk factor . Its one off, absolutely. Muchumbers are very predicated on security events. Host manchester he wouldve noticed weakening and bookings, immediately afterwards. Thats as we always do. Much predicated on security events. We got people flying again. We had offense last year that have a downward impact than everybody elses. Its a risk factor we have to look at. Crawlspace in the organization, strong balance were seeing her profits grow 6 from last year. Harry ps is 14 , we are raising money in the bond 1 . You has had to get on twitter yesterday. From our much more what have you spent on i. T. Systems question mark do control your . We spend a lot of money, you probably say greater labs over the last under peers. Million in the year. We feel we are in a different place, as far as weve distributed all of our four over and over the others will pick it up. Ongoingst testing on basis on our centers. But something that well spend a lot of time old invest a lot of money and. Our rt guys i say no to a lot of people but not to our i. T. Guys on it comes to investing in the technology. Site have a less complex if the worstcase scenario were to happen, we could get on and rajesh up and running quicker. Thank you very much. Coming back to the bloomberg family at 1 40. If you are in the tech to part cfo will look after your. Of next well talk about the fed James Bullard tells bloomberg, no hikes are in order. Rates are close to where they. Eed to be exclusive interview coming up next. This is bloomberg. Exclusive interview coming up next. This is bloomberg. Gone 8 19 a. M. The 4 10 of some 1 . Good morning. Its a brick number 719 7 19 a. M. Fed has amended on daybreak newest president has reiterated his views on rates sank, they are quite close to where they need to be. Spoke exclusively to bloomberg. 200 basis points of height that idea should be rejected. A good thing about unwinding the Balance Sheet will create policy space for the committee in the future if we needed. On the rate itself, we are not very far from an appropriate rate for the u. S. Economy that will keep inflation not too far from target, and the labor market performing well. Is the idearee with that we have to go 200 basis points higher to get to some sort of neutral right. Thats i i dont think that the environment were in. I think we can stay but where we are, possibly higher than where we are today read i want to bring in this chart for viewers. Shows whaty kathleens been talking about, what were hearing over and over again, we have a hot jobs market but Inflation Numbers seem to be cooling them a whether you look at pce your cpi. Im curious jim, why you think why is it that your the outlier here among the fed speakers we have seen . We hear from John Williams and others who echo what seems to be more of a consensus, which is, tumor hikes this year. What do you see that they dont . Is Inflation Numbers i think have been surprising so far in 2017. You can see those in that chart, they are all down yearoveryear basis. We have been arguing that we are making progress toward our 2 inflation goal. These have been going in the opposite direction and the only months of 2017. I also think in the First Quarter, we got a relatively weak gdp report. It was revised up a little bit. Revision, the first half of 2017 will be gdp growth ordinary of around 2 . The idea that the economy is growing faster than trend, and this will push up inflation, i dont is matching up with the numbers we are actually saying. Furthermore, Inflation Expectations actually started to decline after our march rate increase. That is an important variable to keep track of as well in this discussion. President another conversation we have had bloomberg trade joining us the again Private Banking cio. Great to see you. Last time as so you you run the bank of the canal talk about political risk. Today we talk about the Federal Reserve. He questions the validity of knitting and other 200 basis points to getting you to write. Do think these are ready dovish . Probably. We have to consider that the neutral rate is very close to nominal gdp, and is probably much higher than what we have today. Has a fed is a plan plan to normalized Balance Sheet and the interest rate, it will certainly mean a minimum to hikes for this year. Think what the fed is able to itsve this went of time, the cumulative stabilization market in this. Bond,s very good for the and also for the volatility levels from the market interview, it creates a rush towards momentum trade. Quick to rush towards momentum trade. One of those trades a number have been in the space. Will sure viewers, your only with the s p, nasdaq, and the Dow Jones Industrial average is. Im thinking need to see the chart. Bullard went on to warn the market data some point, the honeymoon will come to an end in washington, will need to deliver on policy expectations. By themselves tax changes in the u. S. Corporate structure. 1050 of the market already have got priced at can the market survive these levels with the fundamental tax changes question mark i think that the tax changes are something for the future. It remains something to be used 2 case we go much lower than of the longterm target. Ave a stimulus reserve the moment we dont need it. We may have the possibility to use in the future. Hillrocessing capitol would certainly be accelerated if the economy slows down pace around 1. 5 in the u. S. For the moment, we dont need any form of fiscal stimulus. Think there is a self propelled economy, which is very moderate, run 2 longterm trend. We have the possibility of adding dish President Trump initiative, still in the game. Is still some key sectors that you prefer. Towards, your top calls. Less thes more or results of financial conditions. We have seen an enormous sterilization of financial conditions people foil more comfortable to invest in the risk area. The pursuit is price for it should be. The risk of have a big risk of wave. Were going to talk anymore. We are pricing their earnings, where they are. We punish the sector were they are not. As well as Consumer Discretionary industrials, you have a momentum trade because their earnings, a positive element. World trade has been lifted up. Its not lonely about the u. S. Economy. Is progressingmy fairly well. The world is evenly distributed across the big blogs. It creates macro stability. Thank you so much for sharing your use daybreak cio in the vm provide have a breaking. Thank you very much. Lets suck about this equity markets. You have a soft dirt but years across european board. Frankfurt, along with spain and italy. All indicated my little bit softer this morning. Reaffirmsrio draghi his conviction that the extraordinary Monetary Policy stimulus is still needed. Thats it from the daybreak team. European market opens up next welcome to bloomberg markets. The european open, we bring you the first trade of the day. Im matt miller here in london. Heres what were watching. As the honeymoon over a shark st. Louis fed and James Bullard says, washington needs to deliver on policy expectations. Dovish chipmaker also said rates are close to where they need to be. May on the defensive, poll suggests landslide and win for the uks Prime Minister mena be in the cards. How investore