Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20170807

Job fueled rally. Asian stockse with back at a decade hundred at a decade high. It is bloomberg daybreak europe. Anna edwards is out of the office of the next couple of days. One market that is not pausing. On friday, ther dollar. It had a jobs report that delivered. It had everything entered the market could have wanted, but still the dollar theres seem to be in charge. Bears seem to be in charge. Have a look at this. Week moving200 average look like . This is the 200 day moving average. If it breaks this level, you are potentially looking at a more dramatic reversal of fortune. Gary cohn startup thought to shore up the market. He is going to the hamptons this weekend for charity and said he was confident of a tax overhaul to be a published by the yearend. To that end, we are keeping a close eye on this 200 week moving average. The market is building up at the fastest pace in australia, new zealand, and canadian dollar. Lets translate this into your risk radar. We are waiting for inflation data this week. The un has sanctions over pyongyang. The french are coming. May, you better get your game on if you are going to be different. Up. 6 . Asiapacific financials are up. Tech is up. Youre seeing this momentum carry higher in the equity trade. Japanese equities. In here. Toyota upgraded their twoyear profit forecast. We will talk more with david bloom later about where he thinks the fx move this for the dollar. Move is for the dollar. Ore, these are the december futures. Whether you agreed this is the right price, but these futures are hot to trot along with steel. Do not take this lightly. As we go intoocus the market opened this monday morning. Juliette saly has a focus for your business flash. Juliette in the u. S. , john kelly has moved swiftly to bring team. To a chaotic job, he isay on the said to have told staffers that, whatever their former allegiances, he expects all of them to put the country first, the president second, and their own needs and priorities last. President trump has spoken overnight to his south korean counterpart about north koreas International Intercontinental Ballistic Missile last month. It comes after the United Nations Security Council imposed a sanctions that would ban exports. He tweeted, just completed call. Withhappy and impressed the United Nations about. Venezuelas president has had a group of 20 mercenaries that packed a mercenary base in the early hours of yesterday morning , two of the attackers were killed, one injured, and seven detained during the assault on a fort in valencia. I have asked for a maximum sentence for those involved in the plot of this terrorist attack. The maximum penalty, and will be no leniency. Civilians and deserters. Juliette global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. We have asian markets tracking back at those near 10year highs. It has been a good start to the week on the back of that record we had on friday, u. S. Jobs report boosting sentiment. Ou have the nikkei back above the surgeon iron ore helping the Australian Share market. It is up. The other japanese index we track is at a near twoyear high. Have a look at some of the stocks. Part of the reason youre seeing this momentum coming through in Japanese Equities is also on the back of local corporate earnings. We have the order after the bell , raised its for your forecast. It has that 1. 6 billion merger. That it may endorse toshibas security report. This is ahead of the winding up of its Western Digital unit. A steel producer in australia, one of the best producers in the region. It is getting very close. This is an interesting chart showing the momentum that has occurred in the chinese equity market on the back of currency fluctuation. You can see the red bar is when in december. Weaker as you have seen, it strengthened and the dollar weakened over the past course of this year. We have seen more momentum coming through in text Chinese Consumer stocks. Into Chinese Consumer stocks. By 1 nsumer sector is up in the First Quarter this year, 70 in the second quarter. A lot of momentum coming through consumer msci china discretionary index. Manus thank you very much. It is 7 07 in paris. Frances changing. It is the message from Bruno Le Maire. His First International Television Interview since the election. We started by asking about the row with italy. This is an exception. There is a direct link between the shipyards and the defense interest. Have a look of the decisions taken by the United States, for instance. They are doing exactly the same when their defense interests are at stake. When your defense interests are at stake, i think that this is normal and everybody could understand that we defend our economic and strategic interests. How can you reassure foreign . Nvestors latest a look at our decisions with the president. We have decided to reduce taxes. This is good news for foreign investors. We have decided to simplify the labor market, and we have taken very deep decision to simplify the labor market. These are very good decisions. Just have a look at our decisions, and i think the all the decisions we have taken with the president are a clear signal to foreign investors, you are welcome in france. , non the battle postbrexit hasr International Company chosen paris to relocate. Why do you think paris is losing the race to frankfurt . We will win the race. We will win the race of attractiveness, because we are making the right decisions and because we are standing firm. During the questions last month, we will stand firm. We will stand firm. We will take the difficult decisions. We will lower the french taxes. We will make our country more attractive. We will take the Structural Reforms and decisions that are needed. We will simplify the labor market. Banks, investors should be aware that frances changing, and that this is not something fake. This is something true. Things are changing deeply in france. That is why we will win the battle of attractiveness. There, theo le maire finance minister in france. Lets get to the reporter who sat down with him. Great interview. It firstlly putting and forward. Frances changing. It is open for business. He is trying to target the likes of google and amazon in terms of the taxation debate. What are the plans . France to lower its Corporate Tax to 25 . The news here is that Bruno Le Maire wants to team up with germany in order to do the same, and the hope is to align the Corporate Taxes in france and germany to 25 . Thatnts to try and achieve as soon as next year. He thinks if they can outlined their Corporate Taxes, that will show the way to other countries to follow. He is asking those with a lower to raise their taxes in order to get to a level Playing Field across the eurozone. That may sound ambitious, but that could avoid the issue we saw last year with apple, who was ordered by the e. U. Commission to pay 13 billion euros in back taxes. Manus that is a great debate. Great interview. Great work. We will catch up with you later on. Tim graf. Is there is a great distance between the rhetoric of change in the delivery. Markets like what they have heard so far, but we have not seen every any evidence. Tim i suspect it will take some time. Labor market reforms and france are not going to come without some protests after we get to september. I suppose the president s popularity having faded a bit will get them give them some impetus to push back. Nationalization actually helped him in that regard. Doesnt show france immediately moving to this new economy. It gives some comfort. Manus we may have some stoploss along the way. The ambition to a 25 Corporate Tax over a five year couple of time. The markets have front from the ambition. We have french equities outpacing the stoxx 600. Have the markets got it right . Tim we are getting a little less interested in europe based on the fact that the currency has appreciated so much. The earnings cycle is getting more mature and valuations are not stretch. The trade is very crowded. The momentum is still some there. The earnings cycle is not mature like it is in the u. S. There is a little bit left in that. They are challenging they are channeling a speech from 2009. Japan,as recovery in which were hastily jumped upon. They didnt manifest. Nikkeive tracked the 1998. The euro is tracking that in the same way. This euro trade is deeply guarded and could follow the same trend. Do you think we are overcrowded in the euro rally . Tim i think it is due for a bit of consolidation. The earnings cycle is still the fundamentals are pretty decent. We have seen that in our data for q2. The euro on a longterm for value basis, you can make the argument it is not fair value. Someone have it as cheap. Manus we are up 6 . In 32 month high. We spoke to a couple different ceos and cfos last week. Some are beginning to reflect on the value of the euro and the challenge from an income point of view. , theyb seems to be havent said anything at and terms of stopping the trajectory of the euro. Tim it has been a sharp move, but it has been steady. It is not been sharp shot higher, where it might depress inflation. You look at the trade figures, they are still strong. The euro trade balance is in aggregate. The surplus has not weakened. It is not a sign of the currency is getting too strong it. Not at worrying levels were you have growth taking a hit or Inflation Expectations coming off. Manus tim will stay with us. Great work by the whole team in paris. Chinas sanctions on north korea. This is bloomberg. The hang seng up. That is not the broadest rally in the world. Juliette saly has your business flash. Gbs spent 3. 7 billion on technology the last five years and starting to see the investment save costs. Singapores biggest bank is seeing significant improvements on the expense side. Are formidable competition in digital finance. We are more nimble. Our culture is more startup like. It has been formidable from competitors. Companies have cost acquisition that is low. We are sitting on a pool of hundreds of millions of that they can sell into Financial Products weekly. Googles you diversity chief as back has pushed back against claims. In a memo, it provides a detailed list of possible nonbiased causes to be on under representative of woman in the industry. Tomorrow, Sheryl Sandberg joins emily chang for an interview to discuss Company Culture leadership, the Global Network impact. It is tomorrow. That is your Bloomberg Business flash. China says it is confident that the new sanctions on north korea will bring them back to the negotiating table. The issue was discussed at the a. S. E. A. N. In manila this weekend. Haslinda is on the ground there for us. China and the u. S. Doing something diplomatically together. There is great hope. It the right calls outcome. The Australian Foreign minister says it is the step in a wreck correction. There is great hope that sanction will work. The Foreign Ministers of Southeast Asia cannot with a statement, calling the Nuclear Missile launch by north korea a great concern, a threat to stability and peace in asia and the rest of the world. What is interesting is the reaction from china. They have said the sanctions will put the lid on north Koreas Nuclear program. It is confident that north korea will come to the negotiating table, and that is important. That hasnt happened for a long time. The last time the north and south in together was in 2015. What china said also is that sanctions shouldnt be the end goal. Denuclearization of the Korean Peninsula must be through negotiations, and chinas adamant about that. The role of china and what they have played is crucial. The role china has played is crucial. The fact they have agreed to endorse the sanctions means the sense of gravity of north , weas Nuclear Capability have said time and again, is that is it it is at an advanced stage. Last at this the meeting are concerned, they say it is a step in the right direction. It is a matter whether these sanctions will. Upse are the third set sanctions imposed by the un Security Council. Sentience before have not worked. Manus think you very much. Great job on the ground. A little bit of breaking news. Is to buy Nxstage Medical for about 2 billion. This is the first of the news flow. It is a 2 billion deal set out on the table by nxstage. Is with us. We are going to talk about Warren Buffett in a moment. I deal on the table. We have a lot of investment. M a activity is something people are searching for. Do you think the next stage is americas corporates reaching into your in terms of the recovery story . How do you look at m a at the moment . Tim it would make sense, given the high cash balances. Activitytting were m a could be the last push you see in the investment markets to drive valuations higher. The conditions are there. The environment, investment uncertainty globally is still high. It may restrain factors, but it is not too surprising given the high level of cash balances on sheets. Manus circling back to this move between china and the United States trying to use the un. I was the price. I was surprised. That is a significant move from where we were. What did you think when you read the story . Has the notion that trump tried to send a message to china to do more to solve the north korea issue, and china may actually be listening to some degree. Chinas a situation desperately wants to not accelerate further than it has gone. If you have conflict on the Korean Peninsula, you will have a refugee crisis in china. They probably will come to the table to assist the u. S. Sanctions give them that peaceful are charges peaceful alternative. Manus lets see if it yields the path they want. Tim graf stays with us. About theptimism Worlds Largest economy. We discussed the strong do is hiring numbers hiring numbers from friday. Is inflation coming . This is bloomberg. Welcome back to daybreak. It is just on 2 30 in the afternoon in tokyo. Dollaragain flat as a pancake. Just a couple of other lines coming through. Paying 30g 30 per common share. They expect the deal to close by the end of 2018. This is the Fresenius Medical to buy nxstage for 2 billion. Those are just a few of the lines coming through on the prospective deal. Lets get across to guy johnson. He is going to set us up for the market and. Just under an hour and have to half to go to European Equity markets go. Matt miller and i will take you to the open of little later on. Lets talk about what we are seeing in terms of the fair value calculations. We are up by around. 2 ,. 3 on the ftse. That is the expected call in terms of the open. Just walking you through what else we are seeing. Asian markets fairly solid. European markets had a fairly decent day friday after the payrolls. This morning, i want to highlight what is happening with steel. It is been rallying aggressively over the last few days, and continue to rally again today. You can see this in the singapore iron ore futures, and in the steel contract. The move is definitely exacerbated by leverage, but nevertheless, we have a 43 move off the lows. A 45 move up the lows on iron ore. As i say, that is a big trade, it tells you a lot about what is happening in terms of expectations surrounding china. You can see this drifting out into other Asset Classes as well. Does the rebar futures you can see popping higher. Emerging markets, material stocks down here. A long way to go if they are going to be playing catchup. That can be an interesting trade surrounding what is going on with the steel china. Manus, back to you. Manus thank you very much. There is a new and it edition of daybreak on your mobile. North korea, we just covered this. The un Security Council unanimously approving sanctions on the close state. China expressed confidence that it will bring pyongyang to the bargaining table. Representatives from opec and nonopec nations meet in abu dhabi today. This is to discuss potential supply cuts compliance which fell to 86 percent in july. That is significantly below what we saw earlier in the First Six Months of the year. The meeting lets saudi arabia and russia pressure producers. Story, daybreak focuses on the brexit bill, which could be 2. 6 billion pounds to settle the brexit deal. The sunday telegraph had the story. Government officials, exit secretary Davis David Davis said, news to me. Nobody on message. One other story which captures the global zeitgeist of investors is Warren Buffetts Berkshire Hathaway finding it hard to grind out higher profits this year, in large part because of slumping results in the insurance business. The operating profits slipped after the Third Straight quarter. Railroad units failed to cover the loss in the underwriting side of the business. 86yearoldperiod, buffett is still sitting on quite a cash pile. Tim graf is with us from state street. It is interesting when you break down warns businesses. The insurance side, 22 million underwriting lost, but he still has 100 billion. Does that reflect something of the investment world . Does that reflect what the reality is out there . I think so. There are a lot of corporate in the u. S. And europe that have cash to deploy. You have seen the weakness in them that spending numbers globally, it is the hallmark of the postcrisis. It is not the sort of healthy type of investment spending you want to drive productivity growth and longerterm growth higher. It makes quite a lot of sense, i think. ,anus when we break it down the profit on the utility side millionhire is up 560 from just a year ago, 482 million. Real businesses produce real cash. They do. The it is a hallmark of last five to 10 years of the equity markets, where defensives and most recently, kind of an overweight in financials really describe how berkshire has traded. That is their business model. The defensive side has not done very well in the early stages, then after you started to get the fed talk of rate hikes 3, 4, 5 years ago, you are now seeing the financials pick up again. Would you have as a consequence is Berkshire Hathaway outperforming the s p by about 38 . Warning. Llow tim, you stay with us. Lets talk about market a little bit more. Asian stocks hit highest level in almost 10 years, amid strong u. S. Hiring data. There is Economic Growth in the World Largest economy. 2009000 jobs rally in july, more than anticipated, which boosted the u. S. Dollar initially on friday. Take a listen to what some of our guests were saying about the report. This is a very fine report. These are good numbers. I do not think it moves markets much. Rate tickingoyment down, labor force picking up, the labor force beating expectations. The recovery is continuing. I think its a we see a lift back to 2 in terms of that core inflation rate, the fed probably will produce quantitative tightening, but wont raise shortterm rates this year. The one thing we are really not seeing his Wage Inflation. Why arent we, despite the fact that the economy is strong . Towe would obviously like see some Wage Inflation. That means we are putting more income in consumers pockets. When they have that, they will have more money to spend, driving more Economic Growth. That is really what we want to see. Manus tim graf is with state street. Lets add his voice to the assessment of the jobs report. I read a whole variety of reports. 2009000. Bank of america said it is everything you could ask for. Just read the bidding rocketsolid report. Tim very good report. I would hope that this stage the u. S. Wage growth would be higher. 3 to 4 would not be unusual. There is is nothing nothing to really get upset about. Will it move the dial on the fed . Probably not really, because you have the fed for this year priced just under 50 for another hike this year, and for more months until they are likely to deliver that in the december report. Manus do you think they will . Tim barring something we cannot think about and cannot talk about right now, as things stand, i think they will. Conditions are good. They can continue to move at this very delivered fashion. That itink the notion might move u. S. Rates, or even the dollar appreciably in the next couple of months, heavily not. You are already partially priced for a hike. You have a lot of time to prepare for the remainder of that height, and conditions are not so robust that you need to worry about pricing in an additional hike in september or just after the december 1. We slide in say another 25 basis points for christmas. Give wall street a little bit of a not. Nod. When you see inflation generated inwe expect the cpi to come at. 2 percent this week. People are saying, forget the jobs, focus on the inflation. Blackrock says we are too pessimistic. Is going to, and it come a little bit more than we perhaps anticipate. Would you go onside with that . There is a late buildup in inflation, and the bond markets are complacent. That is what i want to know. Our job markets complacent . Complacent . Arkets tim it is hard to know where it is going to come from is wage growth is still this low. Skeptical. Le bit there was a lot of overpessimism put into u. S. Breakevens say a month, six weeks ago. Now, were in a nice equilibrium level. Ask you see inflation being that much of a problem for the fed. It will keep them being very deliberate for the next year or so. That is hard to know where pressure is going to come from when you have the influence of technology, pressure on Commodity Prices that we have been talking about, with opec over the last couple of months in commodity markets. So it is hard to for me to see where that is going to come from. Manus are you still long u. S. Equities with conviction . Tim we have actually been underweight for some time relative to europe. More relativehe attractive story of the last 2, 3 years. Manus tim, you stay with us. Headraf at state street, of macro strategies for europe, the middle east, and africa. Coming up, we go for gold. The diggers and dealers mining conference addresses issues surrounding the commodity. We are live in western australia. This is bloomberg. Manus it is 1 43 a. M. In the city of new york. Higher, reassuring the market friday on the back of the jobs report the tax reform is coming by the end of the year. Alwayse saly is reassuring. She is standing by in hong kong with your business flash. Juliette manus, thank you. Health care Group Percent he is has agreed to buy medical device maker and exchange for 2 billion. To buyenius has agreed medical device maker nxstage for 2 billion. The deal is expected to close next year. Diapers the chief has forcefully pushed back against a male workers argument diapers at the chief has forcefully pushed back against a male workers argument that the company has a monoculture. The memo provided a detailed list of what he calls possible nonbiased causes for the underrepresentation of women in the industry, saying the companys leftleading Workplace Culture prevent honest discussion of the issue. On bloomberg technology, facebook coo Sheryl Sandberg joins host emily chang for exclusive interview to discuss Company Culture, leadership, and the social network path Global Impact at its headquarters in menlo park. That is tomorrow at 10 30 p. M. U. K. Time. That is your Bloomberg Business flash. Manus. Manus juliette, thank you very much. Gold is under pressure following the dollar plus rebound, and now a major australian producer says, to beat the global slump, Mining Companies need to go underground. Goldman sachs estimates supplied will be this year, and the executive chairman of Northern Star resources says, smarter exploration and lift output. Lets get to paul allen. He joins us from the diggers and dealers conference in western australia. All, good to see you this morning. A lot of the aussie gold miners are sitting on healthy cash piles. We heard this from one of the gold miners here last week. He wants to keep a hefty bit of cash on the side. Are we expecting to hear news of acquisitions . There is no doubt that the aussie miners are sitting on an awful lot of cash at the moment. The top 10 miners between them have about 1. 4 billion cash piles. But as to how to spend that, there is a difference of opinion. Tolier here, we were talking ceo bob bessey. He said the company would be looking at acquisitions, possibly even mergers, and he said doing that in australia is difficult, as it is difficult to find something of the right size. If you are looking overseas for a target. You mentioned the Northern Star executive chairman. He was also speaking to us earlier, and he said Gold Exploration and going underground is cheaper than m a, and he is very encouraged about where the gold price is heading, notwithstanding with the u. S. Dollar is doing. Lets have a listen to what he had to say. I think it is got an opportunity to go for little bit higher, but again, it does seem off the confidence in oil, and where the u. S. Interest rates are going. A bit of inflation starts creeping in, that is going to be positive for gold. Reporter you have to remember, these aussie miners to look at gold priced in aussie dollars. When you think about in those terms, it is still a pretty attractive opposition at about 1600 an ounce, not far off those nearrecord highs of 2016. Manus we talk about gold, copper, and iron ore, they are traditionally the key focus for the diggers and dealers. But lithium is really starting to grab the spotlight. Revolution,he whole evolution in terms of our perspective on batterypowered cars in the death of diesel, or the potential death of diesel. In other words, lithium is so hot right now. The likes ofs to elon musk, and once again, australias great savior china and their tremendous interest in electric cars at the moment. So lithium obviously the key ingredient in the lithiumiron battery. Just to give you a couple of examples, australias largest lithium mind, greenbush, is here in western australia. The largest rocket lithium mind, looking to double its capacity in the coming years. Its chinese owners are working with tovar investments towards mine developed in there as well. It is important to keep a sense of context about all of this. Iron or, for example, is still by far australias biggest export earner it comes to commodities, worth about 86 billion a year. Just 2. 5 comparison, billion a year, so much smaller. But in terms of growth, it seems to be where all the buzz is right now. Manus paul, have a great time at the conference. Great to have you with us this morning. All caps on, our reporter in western australia. Tim graf is from states paul allen, our reporter in western australia. Tim graf is still with us. I love the title of that conference, the old diggers and dealers. They just keep digging it out. Iron ore, 87. 12 this morning, back in the black. Variety ofa whole benchmarks, but the futures are back in the black on the singapore exchange. Up 7. 3 this morning. Reassessmentg this in terms of where we are with some of these commodities. Tim i think iron or is an interesting example. Like oil as well, you were oversupply, and you probably still are oversupplied, but unlike for five months ago, when you are starting to maybe ask weston around the chinese economy, as one example, even though the growth proxies for china at the time were looking reasonably strong, those questions are being answered because the data has held up. Chinas efforts to clamp down on some of the elements of the shadowbanking system they want to rein in our not having so much of a negative impact on growth. You have the cycle still looking reasonably healthy in china and other emerging markets, helping to take that oversupply condition away. You see the strength using just been. Manus just then. Manus you mentioned china, which takes me to the hang seng. The entire china story, if we look at the rebalancing, that is really leaning on traditional methods. Seng, therehe hang is a question about the breadth of the rally the hang seng. At theg seng, 30 day vol bottom, and the 10day vol at the top. Hsbc, along with . 10. How much offshore china you want versus Mainland China and em . The onshore story is very compelling. Emerging markets generally, there is a Valuation Case to be made there, and you have had, in places like brazil, south africa, so many upset that hampered Investor Sentiment over the last couple years, and driven positioning to low levels until recently. The backdrop for emerging markets as a consequence is now actually reasonably positive. You are starting to see the earnings recovery, and it is not such a crowded view yet. Manus no, it is not. The crowds are still huddled in europe. They have taken the boat from america, and perhaps to a certain extent, underexpose themselves to the australasian story. Tim absolutely. And generally speaking, the last 10 years, that is the case. You are going to the safer, developed markets and avoiding emerging. And now we were starting to see the notion that volatilityrkets fx is well under developed markets. These little idiosyncratic risks you see in individual countries does not mean you just blanket cell emerging markets anymore. That correlation of one dynamic has very much received. With us. M, you stay lets talk about the u. K. , because it has a fight on its hands in the European Union in overhauling financial services. Negotiations are due to resume on legislation that translates Global Standards in the eu law as well as a new sway of rules on everything from pensions, bonds, and derivatives clearing. The u. K. Have to enact any loss passed before brexit, and will be expected to have equivalence rules. Tim graf is with state street, and is the head of strategies globally. If we look at the u. K. , we are going through the monthly meetings of where he said, they the nuances. Where are you and your assessment of brexit at the moment . Is becoming reasonably clear that a transitional deal is likely to come. Result, i think, takes away any push you might of had a very clipedge hardbrexit style exit, and what you are seeing now with the discord in the cabinet, even though in short run it sounds very negative, in the long run, it argues to some betternegotiated solution, softer terms. In the meantime, sterling and u. K. Assets can be quite volatile, and longerterm, getting toward the softer brexit dynamics, that might well emerge as a consequence. It seems as though sterling will remain quite week for some time, but will it become appreciably weaker . Less sure. Le it is already quite cheap relative to the fair value. So how much weaker can you get . Cliff,move for the certainly it can get a lot weaker. But if the opposite is true, and you are moving toward a much more transitionalstyle brexit, the impact on growth will be vindicated. Manus we have a story carried from the telegraph, which is that the brexit opening bid is 36 billion. Hillary is just moving along briskly from bloomberg. Com to the brexit broner. 71 three at 75 is your brexit broner. Our opening bid to be 36 billion pounds, the europeans could naturally, they are going to what more. And david davis says he has heard nothing of this. But there seems to have been a shift, out the its small, and we take a bit from anywhere, really, in terms of that. This is important for getting us to the next stage, the brexit bill. Tim this opens the door to the rest of the negotiation process, which ultimately opens the door to some type of trading arrangement between the exiting u. K. And the remainder of the eu. And we do not have a lot of information to go on. We have a lot of rumors of cabinet infighting. The big story to talk about, which for me, i cannot make anything of that in the long run. It is stories like this that could be quite important, because it shows where we started, u. K. Is saying we will not paying anything, the eu is saying you might pay up to 100 billion euros. Were getting somewhere to be in the middle, i hope. Know it is political, and it is negotiation theory and its best. But you have got to say, to the ,utward person looking in here these politicians have done themselves no favors in regards to credibility. There is a huge credibility gap. Everything they said on the way up, and the way in, is just utter nonsense. Tim then you have the election backdrop in the last couple months complicate matters further. When the election was announced, this believe that, we are to get a strong mandate to have a strong tory government. That lead you towards thinking of a harder brexit scenario, and all that changed with the election result. 62. the shift as well, we have seen, i suppose the sentiment is, is carney paving the way for more gilt buying . Are looking at twoyear paper really having a cracking kind of run. You have a fiveweek rally into your paper. Do you see that potentially continuing in terms of the market for gilts . To see,is hard for me in that the inflation dynamics are still reasonably higher here cause of the previous week this in sterling. On the notion that growth is likely to remain slow here, gilts are likely ok. But on a real yield basis, they still look very unattractive for the time being. Unless inflation collapses, which, it may well drop as base affects kind of rolloff, unless it collapses, i struggled to have an opinion either way im gilts at this point, because they are very unattractive on a real yield basis, but growth is slowing. Manus tim, thank you so much for sharing your thoughts this monday morning. As tim graf, head of state street might microstrategy are the europe, the middle east, and africa. Coming up, we dissect the jobs report. David bloom is in the house, controversial as ever. Winky by the dollar wiki by the dollar . This is bloomberg. Track your pack. Set a curfew, or two. Make dinnertime device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. Introducing xfinity xfi. Amazing speed, coverage and control. Change the way you wifi. Xfinity. The future of awesome. Manus the French Economy minister tells bloomberg in an exclusive interview harris will be the winner from brexit. Paris will be the winner from brexit. , ise will win the race weird making the right decisions because we are making the right decisions and standing firm. Manus the u. S. And china agreed to impose u. S. Sponsored sanctions on north korea in an attempt to deter its nuclear program. Will beijings actions the difference to pyongyang . Getting pause. The dollar stalls after fridays jobsfueled rally as Traders Await the inflation data. Asian stocks are back and decade high. In a decade high. Tous youre welcome daybreak europe. I manus cranny. Breaking news coming through for you. Softbank,o firstquarter operating profits, ¥479. 3 billion. The First Quarter net profit, 5. 5 billion, the estimate was for 7 billion. Think of this is one of those Telecoms Operators searching the growth, the only huge portion of sprint in the United States of america. They are in talks with tmobile. Considered to be at the operating level of the business. Ins is also a huge beat terms of the net income level. Dividend will be 22 yet ¥22 per share for the full year, so softbank to pay full 44 again. The second half dividend will be 22. Firstquarter operating profits comes in at ¥479. 3 billion. Forestimate out there was ¥323 billion. The dividend coming through. That is the first piece of breaking news. Lets travel to germany for you now. We have german june industrial output dropping 1. 1 . The estimate was for an expansion of. 2 . You have a little bit of a fading in terms of the june industrial output, down 1. 1 . Another breaking line coming through from paddy power this time. You have a change at the top of paddy power. For brioneing that corcoran will step down as ceo. Numbers,beating softer softer numbers coming through from the germans, and paddy power that fair has a shift in leadership at the top. They are also telling the market to see trading in line with the views for the first half underlying growth, will be about 21 for the sixmonth revenue growth. It will be around 9 . You are going to see Peter Jackson take over as the new ceo. What is happening in the world . The world is optimistic place. Asian equities are rising, 209,000 jobs are created in america, iron or is absolutely banking higher. You are going to see a move in billiton,n the bhp you are going to see a move in the financials as well. These markets are set for strong open in london, paris, and frankfurt. All set to trade on the upside at the start of trade. Dollar index, it is all about cti. Week, i am, so last being told by my guest host, david bloom. The argument from the market is, then garden blackrock are saying, were underestimating the momentum of the trajectory. 5 , you aredex of actually seeing this movement, the u. S. Security council. Will it bring north korea to the negotiating table . That is the question for the markets. Dollar is just a little bit softer, and by 18. We have december iron ore futures down by 1 8. The production kurds should not be taken lightly, reduction curbs should not be taken lightly. Saly, she isiette standing by with the first word news. Juliette manus, thank you. In the u. S. , new white house chief of staff john kelly has moved swiftly to bring order to a chaotic team. That is according to accounts from 12 administration aides outside observers. Job, thefth day on the forstar general is said to have told staffers that whatever their former allegiances, he expects all of them to put the country first, the president second, and their own needs last. Trump spokent overnight to a south korean counterpart about north koreas Intercontinental Ballistic Missile tests last month. The call comes after the United Nations Security Council post additional sections on north korea that would ban exports of coal, iron, lead, and seafood. Tweeted, just completed call with present mood of south korea, very happy and impressed with his vote on north korea sanctions. Britain is offering to pay a brexit divorce deal of 36 billion pounds to push talks with the eu toward a future trade deal. That is according to the sunday telegraph, which cited three government officials. Brexit secretary david davis told the sunday times report was, news to me. An official at the European Commission said the body would not speculate on rumors. Venezuelas president is that a group of 20 mercenaries attacked a military base in the early hours of yesterday morning. Speaking on take state television, Nicolas Maduro said two of the attackers were killed, one injured, and seven detained during the assault. I have asked for a maximum sentence of those involved in the plot of this terrorist attack. The maximum penalty, and there will be no leniency under the circumstances. Civilians and deserters. Juliette global news 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. We do have asian stocks back at highs,ear10year december 2007 levels, the nikkei closing higher by over 100 points. Strong earnings, softbank beating the street as well after the bell. The asx 200 being fueled by that surge in iron ore, of about 1 on the close. Hong kong stocks also looking very wellbid. Course, we hadf that strong u. S. Jobs report on friday, generally, you are seeing every Single Market in the region tracking towards multiyear highs. According to stocks in detail, toyota came through after the bell on friday with a very strong firstquarter profit as well. Then we had that news of the tie up man that and toyota in the u. S. It is closing higher by 2 . Toshiba still very strong on the close, up by 6 . This is on news that automated doors it securities report, and then samsung is losing some of the gains we had earlier in the session, because in the last hour, we have heard the south korean prosecutor what to send sam suns to jail for 12 years. Seeing a little bit of downward pressure on that stock. Btp 8727, shows you the impact youve seen on the one movement of the last year. We have seen the dollar weakening, yuan starting to strengthen. Since december, this index has up byn a quite a tear, 20 in the First Quarter, and 17 in the second. A lot of interesting movement in stocks, when you take into account the fluctuation of these asian currencies. Manus juliette, thank you very much. Lets get what is moving in these markets. 2009000umber of friday, they were at in july. That goes to the u. S. Dollar on friday. Lets take a listen to what some of our guests had to say about this report. This is a very fine report. This is rather strong economic report, that i do not think it moves the markets much. Labor for sticking up, the wage number beating expectations, so the recovery is continuing. Until we see a lift back to 2 in terms of the core inflation rate, the fed probably continues quantitative tightening, it not raise shortterm rates this year. The one thing we are not seeing is Wage Inflation. Why arent we seeing Wage Inflation, despite the fact that the economy is strong . Wage inflation means we are putting more income in consumers pockets. They will have more money to spend, driving more and more Economic Growth. That is really what we want to see. Cohn had the closing words from the lawn of the white house. The opening words for the fx market of the week, david bloom, global head of currency strategy or 88 at hsbc. U. S. Iraqsolid report, everything you ever wanted a rocketsolid report, everything you ever wanted, but were getting it back. The market look for 180, brought about to 20. The one standard deviation 220, but it didnt happen. We do not get Wage Inflation. If Wage Inflation picks up, this will happen, that will happen, but we are getting lower and lower unemployment rates, and no pickup and wages in the united kingdom, United States, australia, i can carry on. Country after country after country. Manus then when will the fed admits that targeting 2 inflation growth is perhaps they cannot flipflop. David come on. We all have targets in this world. When the fed start forecasting 3. 5 rates . There were zero. Three point 5 , and then december, they went. 25 . It is not happening. Manus than the next big thing we try to hook onto is the cti data. 2 ,stimate has been plus every single month. Since 2015. There is not going to be any david for many years, the u. S. Economist said, inflation will be 2. 5 this year, and that means on average, it will be point to a month, so then you working backwards and say,. 2, and then the next month,. 2. If you say. 2 roughly every month, you will be right every month. The problem is that the economists think it will be 2. 5, and he keeps undershooting. If we get ones and twos more often, they are wrong. They are looking for inflation, bonds to selloff, they are getting tired, they are getting thrown out of the market for being wrong year after year after year. And they are back at it now. Manus well, ok. They are long and they are wrong. David since 2007. Manus you think they got the message. If that is your contention, you did not like the relative strength index i have. David i thought that was like a wrist injury you got. Manus that is a repetitive strain. Since 2007, i am going to put it to you this way. Were bopping along at the 200day moving average. The next move in the dollar, if we are wrong on the data, and there is no Wage Inflation, and quid pro quo, i should be schmoozing the dollar and not worrying. David but that is what the market has been doing. As you can see by the chart, weve given that a lot of the 2014 fake rally, the fake normalization 2014, the fed said by the next year, we will have 3. 5 rates, and the whole world was lagging behind, and the u. S. Was alone, and how well that saidat the banks, and they everything was amazing, and the dollar goes screening upwards in 2014, and we are now saying, i want my money back. I want at least half of my money back in that big rally in 2014. A fit afteroing 2014, what if you look at your chart, the dollar goes up, and by the time the fed raises its rates in 2015, there is a peak in the dollar. Had real momentum there, adding at the fastest pace, the fast money is adding longs in aussie. David so we are selling aussie at the moment. We think cap is done. Is a fantastic story that teaches us what is going on in foreignexchange markets. You think cyclically, you forget about the structural and political it aspects. Does the fed, 2014, and says, i am raising rates. In the market does dollarcanada falls, if you could show a chart, it would be nice. Canada, absolutely moves 10 within six weeks. You see this collapsing dollar. Manus you are the most demanding guest. Here we go. David we talked about rate rise, right there at that peak there in may, you start talking, coming down, and look at that move. Absolutely beautiful. That is the kind of idea, the ecb is getting more hawkish, eurodollar flies upward. If the rate structure is changing, you get all these things happening. Manus and you dont you do not believe the rate structure is changing. David in canada it is. But now the market is, i can do with canada and aussie, we can get 10 returns on those things. No, is the rate market and the ratesada and effects went together. Said, i. And the rate market said, sorry, good for you. So the rates market is not going with aussie in the way, and kiwi, and that is why we do not believe in them. So actually, we think aussie will retrace. We have 75 by the end of the year, but we are selling it now. Manus and kiwi . Story. Same the rates market and fx market are in disagreement, and let me tell you one thing. Rates are smarter than effects. Fx. Manus the meateating bond traders meet the quicheeating fx. David bloom stays with us, he is the global head of currency in strategy at a set hsbc. Coming up, less than three months into the job, is the honeymoon over for the french president . We will bring our exclusive interview with macrons economy minister, Bruno Le Maire. This is bloomberg. This strategy is based on a level Playing Field, the same rules for everybody. When you are doing business in france or in europe, you have to pay taxes. You cannot take the benefits of doing a business in france or europe without paying the taxes that other companies, french for european companies, are paying in europe or france. The same rules for all the companies, and for all states. Does that mean you want to lower the Corporate Tax to 25 everywhere in the eurozone . We will lower the corporate till 2022, to 25 and then this is the second step, we want to have the tax harmonization among the members of the eurozone. You have 19 members of the eurozone. One currency, the euro. And you have 19 levels of taxes. And you have 19 different economic policies. We cannot go this way anymore. That is why we are advocating for tax harmonization. The first step of the tax harmonization at the european level would be a tax harmonization between france and germany. I am quite convinced that no later than 2018, we should be able, with germany, to have a common Corporate Tax which should be the basis for harmonization of all Corporate Taxes at the level of the 19 Member States of the eurozone. What concession to you expect from the germans to further this european integration, and in exchange, would you accept a german as the head of the ecb, for example . We will be patient. We are in 2017, and the decision must be taken in 2019. We still have some time before deciding who will be the next chair of the ecb. But we should not wait before taking decisions as far as the integration of the eurozone is concerned. I really think we should be able, at the end of 2017, to e the first step to boards towards more integration within the eurozone. Manus that was the French Economy minister, Bruno Le Maire, speaking with Caroline Connan on. This is his First International interview since the election. Great interview, well done. How did le maire defend his thesion to nationalize shipyard, which sparked such outrage in italy . Not opposedsion was it all by the italians, and it was good for the image of the government at home, that bad for the image of france abroad. So Bruno Le Maire insisted this decision did not mean france was going down the path of protectionism, and that this was an exception, because the present some strategic interests, and he compared that decision to the u. S. Decision when they are protecting their defense interests. He also said france does not want to end or a trade war with the u. S. , china, or russia, even though he said europe should consider retaliation after donald trump decided to extend the u. S. Sanctions on russia last week. Manus thank you very much for joining us from paris. Great job with the interview. David bloom is the head of currency strategy and hsbc, and is still with us. The euro has had a cracking run this morning, trading all the way around. We have not got 120 yet, david. 117, 89 this morning. Is it getting stretched . Is the euro rally getting a bit stretched . Was, youat i argued would get to flip politically. We were worried about le pen, and we thought the u. S. Administration was deliver, and now we think the u. S. Administration will not deliver, we are not worried about european politics. We are all optimistic about the european cycle. That is priced in. Toyou want the euro rallied go now, you need to feed it something new, and i do not have anything new in the locker at the moment. I am matts down at 120 at the moment, and i am happy for it to be maxed out at 120 at the moment. Manus what is that new and different be . Could it be tax reform in france . David tax reform in the United States. Have got to guess which one it is, the eurodollar, i am not trading that it. We have no strategic advantage over the market. No thought process that is somehow different to the markets. You should not trade it. Taking a political guess, that is not the u trade currencies. Manus that is what you said the last time you are in. David oh, consistent. That must be a first. Manus [laughter] i dont know to even dare show you this chart. You can lambasted all you want. We have the nikkei going back right up to the. Of 1988. And the point about it is, for you go off in a direction, from month to month, even the low growth of the 1990s, everyone called a variety of false dawns. The currency rally, the nikkei rally, and we have overlay the euro, which did not exist in 1990s. David so lets take something that didnt exist and overlay it with something else. Sorry, ive got another chart. Manus i want to continue. I am determined to continue with the principle of this. Where is the next smart move in terms of the euro . Politics,not trade the state of play remains same in the eurodollar, eurosterling, if you have to take an exposure of the euro david taken on the long side, i would, but i would not get overenthusiastic now. Isis 118, when my forecast 120. You get overshoots. We all know that, and you get blowups in the fx market, if you look at the rates market and affects market, your intended about 118 or so. We have got a big blooms as you yields wouldnd rise. There is still some juice left in a higher euro, as in a high eurodollar. 105 two 118,from and then from 118 two 120, you are picking up pennies now. Pick up the pennies, pick up the pennies. The pound look after themselves. One line on sterling, one thing that is factual, the worst streak in Consumer Spending since 2013. Are we any closer to a breakout in sterling from the 130 . Is stabilized,it because the whole idea of what is going on in the u k politically is stabilized. The chancellor had a lot of stay in say in it, and he is calling the situation down. What i am saying is, we had a political and structural move. It is very possible we are getting to cyclical territory but is negative now for sterling. I am still got sterling at 120 by the end of the year, and eurosterling at parity. Manus that is it from bloomberg today. David thank you very much. We check our phones 85 times a day. So it only made sense to create a network that keeps up. Introducing xfinity mobile. It combines americas largest, most reliable 4g lte with the most wifi hotspots nationwide. Saving you money wherever you check your phone. Yeah, even there. See how much you can save when you choose by the gig or unlimited. Call, or go to xfinitymobile. Com. Xfinity mobile. Its a new kind of network designed to save you money. Is the european open. We will bring you that first trait of the day. I am guy johnson here in london. Matt miller is in berlin. What are we watching . Paris pushing integration. The british finance minister tells bloomberg the euro area unification should be accelerated regardless of who becomes the ecb president. 36 billion pound divorce suggests the u. K. Is ready to pay up to break the deadlockin