Transcripts For BLOOMBERG Bloomberg Markets 20160905

A pound is interesting. Lets talk about that throughout the show. We have equity markets. There is a decent rally from friday. And then oil is the story as well. We have Ryan Chilcote joining us shortly to talk about whats been going on. 2. 65 . Up we can blame the russians for that drop. And the dollaryen, down. 6 . Lets check in on the first word news. Theresa may is dismissing claims made by boris johnson. He called for a bloomberg he called for a points system. Theu. K. Needs to speed up Bloomberg Program he needs to speed up the brexit program. Speed up the process especially in the external dimension. And therefore we cannot waste two years on the u. K. With how to maintain them inside without one of them wanting to be inside. So we cannot afford that. He also said that the u. K. Should expect a limit on exports to the eu. It was a political humiliation for angela merkel. For the first time, her union lost the antiimmigration in the state election. Her popularity has plummeted since deciding to allow refugees into germany. She is Still Deciding if she will run for a fourth term. Obama and Vladimir Putin have agreed to continue talks about peace in syria. Says the Department Russians walked back on parts of a syrian agreement. Global news, 24 hours a day. Powered by our more than 2600 journalists and analysts, in more than 120 countries. Mark russia and saudi arabia have agreed to Work Together to promote more market stability. Lets find out exactly what has been said with Ryan Chilcote. At one point, the market was up massively and then we started to see this conference kicking off. Ryan i want to show you the move. This is fascinating. We started to see oil decline. This is the biggest move since the decline of april and we Mike Huckabee have above 50 a barrel. All of this on an announcement sayinge chief of staff that saudi arabia was preparing a significant announcement. We then learned that russians would be joining the briefing at the g20 meeting. Price of oil. E it gave up half of its gains. Russia and saudi arabia agreed to coordinate action on the oil market. They discussed a number of outputents including an freeze but they did not agree on an output freeze. Day. Interesting they are getting closer. They are the worlds two largest Oil Producers. Youuntil you have a deal, dont have a deal. Does the market there is a conversation happening . He market knows that they are happening and talking. Also knows that these guys are producing enough oil as a humanly can. Ryan that is right. Until the other countries agreed is shute output yourself out of markets and lose market share. I have a nice chart that shows that. As you can see, as the oil price has fallen, Russian Oil Production has risen. It is just off a record. It is very close to 11 billion barrels a day. And this is russia, the church is the same for all the big Oil Producers. Opec reached a record last month. Saudi arabia isnt far off a record. They all know it is a battle for market share until you have a deal. So maybe the move we saw downwards in the oil prices is easy to understand. Because we thought we would get a deal in april when the countrys got together and then the russians were expecting it but the saudis said they wouldnt do it unless the iranians did it. And they did not join. They upped their production. The saudis upped their production and here we are. Ryan chilcote, thank you very much. Nejra a gauge of u. K. Services jumped the most on record in august. Halpenny joins us now. Good afternoon, thank you for joining us. We got the better than expected data last week. Manufacturing among it. Said, wait for the services data, it might be too soon to tell. Do you think the u. K. Will avoid a recession . Derek it is certainly looking like that. The figures today from manufacturing and services are back up to where they were in march. So it isnt just the they reversed the drop postbrexit, they have done more than that. Degree of rebound and given that the bank of england projection 22nd half of year is growth all around thatate of late suggest what the bank of england is expecting is achievable. Of Englandthe Bank move too soon or too much . They will argue that they were confident in what they have done. But of course, we will never know. I think for the markets going inward, it does place doubt the explicit guidance from the bank of england. With cuts probable before the end of the year. And for sure, that is up for a debate. So perhaps the performance of the pound could be important. Risk wethere is a good could save bigger move on the upside over the short term and that could start to play in to the bank arguing that cuts could be needed. They dont want the pound to rebound to significantly. Right now, today i would be long. 3637 is feasible versus the dollar. Positioning data comes out on on the specng, so side there is scope for a much bigger liquidation with the type of data we have had. There are two sides, the fed is one of them. Carney talks, what you need to hear him say . Expect marki would carney to highlight is that this is sentiment. There is no evidence of hard data. Data, it isthe hard positive. Given the fact that they acted aggressively, they need to throw caution in. I think the year and for the sterling is that 1. 27 or thereabouts, are you in line with that . To 1. 24. Have a move but to be honest, i struggle to come up with a story as to what will bring us lower. Their argument was that the u. K. Was going into a recession but we are not seeing that. So we now have a flush forecast for the rest of the year. And we are seeing strength versus the euro. Enough . At the goldilocks scenario for the. K. , that still carries on the pound is down sharply. The data should be bouncing back in this environment because everything at the moment is halted. Im trying to balance this out with what is the negative creeping in how volatile willie serling be . , over the last six weeks, it has not been focus. Comments from to reason made in china over the weekend. I would not be surprised to see increased intentions within the a softent with regard to brexit versus a hard brexit. And certainly disregarding the points system and method for controlling migration which was the Brexit Campaign from boris johnson. Inevitably there will be friction that is created there. So that could come into play. ,s we get close to that point article 50 could be triggered at the First Quarter of next year. The closer we get to that timeframe, the better the chances. Nejra we are down two basis points on the 10 year today. Derek guilds had a big move initially. Theif we are correct that markets could doubt the chance of a rate cut, we are beginning to believe that perhaps the low is already down. Will stay withny us. How much longer can japan continue on with the Stimulus Program . This is bloomberg. Guy live from london, i am guy johnson. Nejra you are watching bloomberg markets. Time for the Bloomberg Business flash. Barclays is close to naming a jpmorgan executive to run the investment bank. Charge ofe in barclays corporate and international division. That would fill the final vacancy on the management team. Marks spencer will cut 500 25 jobs at its headquarters in london according to a person familiar with the matter. They reported a 9 drop in Clothing Sales and two months from now, the ceo is scheduled to outline his plan for the company struggling International Unit. Be cheap for samsung to replace all the potentially defective smartphones. The Korean Company may spend up to 1 billion to replace all of the phones that have been shipped since they went on sale last month areas three dozen of the samsung phones were found to have batteries that caught fire and exploded. That is your business flash. Guy the bank of japan governor, ruling out new ways to try and rule out inflation. He reiterated that there is room for further easing if needed. Even within the current framework, there is ample room for further monetary easing in quality, quantity and the Interest Rate. And other new ideas should not be off the table. But we should bear in mind is not the limit but a comparison between the benefits and costs. The case with any public policy, there is no free lunch. Halpenny is still with us. What did he say . Derek you have the most important quit. Lunch andn no free he outlined the factors of negative rates and the negative implications of that, but what he seemed to be saying is that what we still need to do is to. Ook at the broader benefit and if the bank of japan view is that it ultimately is beneficial towards achieving the inflation goal then they will cut again. So he was highlighting the negative that saying, while there are negatives, ultimately, the benefits could outweigh those. The they already own half market in japan. Highlights it. You can see the incredible move lower in yields. Ins is the biggest move back yields. Since 2013. Will we see them slowing down or acting out . Derek at jackson hole, when he gave a speech there, the flattening of the curve was one of the negative factors of Monetary Policy. To the has led speculation that they could pull back on the payment purchases. And they will have to do that. So that does make sense. Of course, everything is about communication. And i think there is a high risk of an error in terms of communicating to the market and the tapering that it has been anything but tightening. I dont think we will get a explicit tapering. I dont think that is on the cards at this time. What they may shift towards is telling the markets they need more flexibility, and that the expansion of the Balance Sheet will be pursued going forward. Shift would of jgb be off but there are limits their. I dont think youll get an explicit tapering. In fact, we dont think we will get any current announcement. The shortterm, we are expecting rate cuts and the interest paid on the reserves to go in more negative. Nejra im glad you said you are not expecting anything, a cousin we saw it has a high on 30 years and the 10 year and a lot of people said that had to do with the uncertainty. But you seem certain that we will not get any announcement. Is there any way that governor kuroda could surprise the market . He has a history of doing that. Derek of course. He reiterated the policy easing cautious meant staying from when they were in january and they moved into negative rates. So there is a chance for a comprehensive assessment of Monetary Policy. But they will have to come up with a big announcement. Again, i would go back to communication being hugely important. If they can communicate to the markets that they need more flexibility in terms of how they finance, if it is coupled with the idea they can go more negative, then as a package, the market might take it. But broadly speaking, the big picture, the boj is running out of options. They are reaching the limits of Monetary Policy. Be buyinguld they other assets like foreign bonds . Derek that would be great but from a g20 perspective, there has been a explicit guidance on sticking to domestic instrument and pursuing domestic Monetary Policy. Nejra thank you to derek halpenny. Go to china for the latest out of the g20 summit. This is bloomberg. Nejra the g20 summit is wrapping up this morning with president obama expected to speak. Shery ahn is covering the summit and she joins us now. What can we expect to hear from president obama . The summit has been delayed for quite a while. We were expecting president obama to speak an hour ago. We are not quite sure what we will hear but we know that he had a very busy schedule here at the summit. The president over the weekend, where they joined the climate agreement and they discussed everything from north rising protectionism around the world and not to mention, Cyber Security. President obama also spoke to Vladimir Putin for over an hour. They discussed ukraine and syria and they had a oneonone for more than 20 minutes. So a lot could come out of this meeting. We just heard Closing Remarks from the president we were expecting that an hour ago and he just spoke, warning about weakened global growth. He said that all fiscal and policies thatble are old dont work. He warns about protectionism as well. Shery ahn, leaders and top policymakers have been warning about the Global Economic outlook. Which would you say has been the general mood surrounding the summit . The mood has not been bright, to be honest. Everyone has been warning about week local growth. Saying that we could see the slowest growth. They are also warning about projection of them rising around the world. Imf cymakers from the they are all warning about the negative impact of antitrade measures. I spoke to who warned about this. Take a listen. Fore is no longer growth. Trade is lagging like investments. So, no surprise why the World Economy is only growing at 3 . It is below the rate of growth precrisis. Mery wtos chief also told that the trade outlook is not right. Ahn. thank you to shery most economists are predicting an extension of the program. This is bloomberg. Nejra live from bloombergs European Headquarters in london, i am nejra cehic. Guy and i am guy johnson. It is labor day in the United States and the bulk of the citizenry therefore enjoying a day off. Not the president of the United States. He is in china and we are awaiting him to take to the podium and we are expecting a full press conference with q and a and it has been somewhat delayed. We were expecting this an hour or so ago. To anyone who has attended one of these events things can go a little ride arrive and timing is never what you expected to be. Nejra we do not know exactly what president obama will talk about. We have been focusing on the comments to theresa may, the uk Prime Minister. Guy lets listen in. President obama i want to begin by thanking china for hosting the g20 summit. This visit offered the eighth opportunity for president shi and me to meet. We agreed to advance our corroboration across a range of issues including climate change, global health, development, counter narcotics, and nuclear security. We also addressed our differences on issues like religious freedom, maritime security, and a level economic Playing Field but we did so in a clear, candid, direct, and i think, constructive way and that has helped us to manage problems and it is consistently helping us to improve relations between the United States and china. This is also my eighth and final g20 meeting. Let me put into context what we have done over the course of all of these g20 meetings. I think back to april 2009 when hundreds of thousands of americans were losing their jobs and their homes in their savings each month and unemployment was and around the0 world for the first time in a generation the Global Economy was contracting and trade was shrinking and the International Financial system was nearly frozen. By several key measures the Global Economy was on a worse trajectory than it was at the onset of the great depression. The size of the scope of the crisis was not what made that london g20 historic. What made it historic was the speed and magnitude of our collective response. One nation cannot solve the problem alone so together developed and developing nations alike took a copperheads of an unprecedented set of actions to vent another prevention depression and set the stage for recovery. We stimulated demand across our economies and america led the way. In my first 10 or so weeks of president s we had passed the recovery act and set in motion plans to rescue our Auto Industry and stabilize our banks and jumpstart loans to Small Businesses and launch programs to help homeowners with finance. Our g20 partners followed with similar actions. To stabilize the Global Economy we rejected protectionism. We worked to keep markets open and trade finance flowing and boost lending capacity to respond to countries that were hurting the most. And to prevent future crises, we took steps to reform our regulatory system including the historic wall street reforms more than six years ago. These were the actions we took in 2009. They were actions that prevented another depression and created conditions for the Global Economy to grow by more than 25 over the past seven years. What we also did was to elevate the g20 to become the worlds premier form for Economic Cooperation and that allowed us as Global Recovery progressed to take further action to strengthen the Global Economy. That is what we came here to do. We have had long debates about the best way to support sustained growth, but americas voice has always been one of bold action and that stance has been backed up by our Economic Performance. Havecas businesses created more than 15 million new jobs and we cut unemployment and half and wages have risen by almost 3 which is much faster than the pace of inflation. One of the things that we learned through the g20 process is that more than ever our economies are interconnected and we have more work to do together to keep the Global Economy going growing. We have to grow wages faster and shrink inequality faster and get every give everybody a shot of security in a changing economy and that should be the way forward for the g20, to make sure the benefits of trends like globalization and technological process are shared broadly by more workers and families who still feel like the Global Economy is not working for them. That is what we did here at the g20 summit and we committed to using all of our policy tools to promote robust growth that creates opportunity for young people and the middle classes they are working to join. We focused on making sure businesses can compete fairly at all working families can take advantage of the new prospects Digital Economy creates. We reaffirmed our commitment to support emerging economies through an array of development initiatives. We also discussed ways to unlock which will benefit trade provides law keeping it fair for our workers and the Playing Field lever for our businesses and that includes High Standard trade agreements that benefit the middle class like the tpp that includes working together to abstain from unfair currency practices and address corruption in global tax evasion and it includes our agreement to establish a new form to address the market distorting policies in the global steel sector that have worked that hurt workers and businesses. We also added momentum to the fight to protect our planet for future generations. On saturday the u. S. And china entered a Paris Agreement and today the g20 welcomed efforts to enter the Paris Agreement by the end of this year. If there is anything that the past eight years have taught us, it is that the complicated challenges of the 21st century cannot be met without coordinated and collective action. Agreement is not always easy and results do not always come quickly. Respecting different points of view, forging consensus instead of dictating terms can sometimes be frustrating, but it has how progress has been one and will be one in the future. It is why we have come so far we have an eight years of the crisis that affected us all and it is how g20 can make progress for all people in the years to come. With that let me take questions and i will start with roberta crampton. Of reuters. I want to ask you about tomorrow, the next leg of your trip. Tomorrow you will be meeting for the first time with a leader whose war on drugs has led to the death of about 2400 in just the last two months since he took office. Today he said in a very colorful way that you better not bring this up and i am wondering are you committed to raising this with the president and are you concerned that meeting him will legitimize his approach on this issue . President obama i just came out of a long day of meetings so i just heard about some of this. I have seen some of the colorful statements in the past. So, clearly he is a colorful guy. What i have instructed my team to do is to talk to their philippine counterparts and find , in fact, is a time where we can have constructive, productive conversations. Obviously, the filipino people are some of our closest friends and allies and the philippines is a treaty ally of ours. I always want to make sure that if i am having a meeting it is actually productive and we are getting something done. Significant the drug trade the plays, not just in the philippines, but around the world and fighting narco trafficking is tough. We will always assert the need to have due process and to engage in that fight against drugs in a way that is consistent with basic international norms. If and when we have a meeting this is something that will be brought up and my expectation and my hope is that it could be dealt with constructively. I will have my team discussed this. I have a whole bunch of folks that i will be meeting with over the course of the next several days. As i said, historically our relationship with the philippines is one of our most important and my relationship with the latino people bash filipino people has been warm and productive. I expect that will continue, but i want to make sure the setting is right and the timing is right for us to have the best conversation possible. I will make an assessment, i just got out of these meetings. The certainly true issues of how we approach fighting crime and Drug Trafficking is a serious one for all of us. We have to do it the right way. Michelle kaczynski. Thank you. Same subject of colorful guys. What can you tell us about the hour and a half long meeting you had with president putin. The tone of it and any progress that was made and you agree that the relationship between our two countries is frozen . Senator reid recently cited Intelligence Briefings with his suspicion that russia is trying to meddle in the election and may have direct ties to one of the campaigns. Do you think russia is trying to influence the u. S. Election through hacking . Putinent obama president , but typicallyl the tone of our meetings are , businesslike and this one was no different. We had a range of issues that we had to discuss but the two most ,mportant as have been reported discussions that have been taking place between secretary foreignd russias minister about ways in which we can institute a meaningful, serious, verifiable cessation of hostilities in syria and our capacity to provide some humanitarian relief to families, children, women who are suffering an enormously under the burden of the war. , we hadill recall initiated the cessation of hostilities a while back initially, it did lessen some of the violence and slowly it on wound and we are back slowly it unwound and we are back into a situation where they are bombing with impunity and we think that is strengthening the root of them to recruit. They now view anyone fighting assad hasside legitimized and that is a dangers dynamic. We have had some reductive conversations about what a real cessation of hostilities would look like that would allow us both, the United States and russia to focus our attention on common enemies like isil. Of trust that exists, that is a tough negotiation and we have not yet closed the gaps in a way where we think it would actually work. My instructions to secretary kerry and mr. Putins suggestions to mr. Lavrov was to keep working on it over the lot over the next several days. That is a predicate for us to be able to transition into a serious conversation about a political solution to this problem that would involve all of the parties that have either directly or indirectly involved themselves in the syrian conflict. We also spent time talking about ukraine. Agreement that arose out of the enormity negotiations ,etween russia, ukraine, france and germany, but it has not been implemented and i have made very clear that until it is implemented the United States will not pull down sanctions that it is important for both sides to try to seize this opportunity in the coming weeks to finalize an agreement and to figure out a sequence in which that document is put into effect and there was agreement not just in butn myself and mr. Put also chancellor merkel that the effort should increase in urgency over the next several weeks. Constructive, but not conclusive and we will have to see whether we can actually or whether, in fact, president putin, despite talking about wanting a negotiation or solution is in fact comfortable with this constant lowgrade conflict along the russiaukraine border. Finally, we did talk about Cyber Security generally. I will not comment on specific investigations that are still live and active, but i will tell you that we have had problems with cyber intrusions from russia in the past, from other countries in the past, and we are moving into a new era here where a number of countries have andificant capacities frankly, we have more capacity offensively and defensively, but our goal is not to suddenly in the cyber arena duplicate a cycle of escalation that we saw to other arms races in the past. But rather to start instituting norms so that everybody is acting responsibly. We will have enough problems in the cyberspace with nonstate actions who are engaging in theft and using the internet for all kinds of illicit practices and protecting our Critical Infrastructure and making sure that i Financial Systems are sound. And what we cannot do is have a situation in which suddenly this the wild wild west where countries who have significant cyber capacity start engaging in competition unhealthy competition or conflict through we puteans where wisely in place some norms when it comes to using other weapons. That has been a topic of conversation with president putin as it has been with other countries and we have started to willingness on the part of a lot of countries around the world, including to our g20 process. Two adopted these norms, we have to make sure we are observing them. William. Thank you mr. President. Os, what are the main things you can offer their leaders and what will you push or in return . U. S. Wondering how you view responsibility for unexploded ordnance. What you pushing for most is it human rights, closer u. S. Ties in the face of china, including their relationship with government . What is the priority . President obama symbolically it is important because i will be the first u. S. President to visit laos. When you think about the history of the United States with laos, i think it is useful to see what has happened in the evolution of our relationship with vietnam, a country i visited recently at the outset, as we are talking trying to build trust, a lot of work can be built around war legacy issues. For the lao, that involves dealing with on exploded ordinance which is plaguing big chunks of the countryside since laos is still a relatively poor country that is developing. Their capacity alone to clean that up is hampered by a lack of resources. We should help and my expectation is that in our meetings over the course of several days that we will be able to provide some really concrete assistance that ensures that innocent kids running through a field or a farmer that is trying to clear a field or a business that is trying to get set up that they are not endangered the possibility of an explosion. Likewise, we have deep commitments to accounting for those who are lost during that vietnamas was true with to the extent that we are able to find out more about our missing in action and our pows. That not only provides enormous comfort and meaning for families and is consistent with our traditions, but it also ends up being a show of good faith on the part of the country and a way for us to move into the next phase of a relationship. A lot of the conversation will start there, but it will not yet be there. We have an initiative helping all of the countries along the ways toelta to find harness development and deal with Environmental Issues and that is something that we have been doing over the course of , for us to benow able to expand that work would be important. It established to people exchanges is another area that historically has been important. I think laos seeing the Economic Performance that others have made, they will be interested in finding ways in advance into the Global Economy and help themselves grow and i think that we can be a useful partner there. It will be a broadbased agenda. Visit ihink about the made to Ho Chi Minh City and driving through the streets and the enormous wellspring of good faith you saw that started with the same steps we will be taking with laos. I hope we can bank i think we can hopefully do it faster make more progress faster than we did over the course of 1015 years because we have learned some things and i think laos is eager to engage with us and we are eager to engage with them. I look forward to visiting what i hear is a beautiful country. Christi parsons. Thank you, mr. President. On the transpacific partnership, how do you plan to sell this to these asian leaders who still have work to do in their own countries with some the politics are not easy and maybe they do not want to do this. So much of it seems like the future is rocky in the u. S. Trades. Usually ratifies deals, do you plan to convey a sense of inevitability . Lameu feel that for the duck session, even if it does not happen then, do you feel like it is inevitable anyway . Whatf i may i wonder you think about the silent protest of Colin Kaepernick and i also wonder what you think about the publics response to it which is really divided. Some police do not want to secure 49ers games and many fans feel he is giving voice to something they feel strongly. I wonder how you look at that. Obama with respect to tpp, i do not have to sell it to asian leaders here who were part of the negotiations because they see this as the right thing to do for their own countries. Look at the architecture, the structure of tpp, what it does is open up new markets for us that are generally closed. Our markets are more open than theirs for the most part, so we benefit from a reduction in terrorist terrorists tariffs and taxes that are already in place. The spur or the incentive for them to engage in Structural Reforms that they know over the longterm will reinvigorate their economy. For example, the Prime Minister of japan, yes, he had to make difficult decisions about opening markets that had previously been closed, but he is also looking at decades of stagnation and an anemic growth and what he said to the japanese people is, if we want to break out of this we have to change how we do business and this provides us a roadmap of how we can become more competitive on the world stage. Vietnam, for the first time is debating in a very serious way how they can provide protections to their workers and allow them to participate and have voice and yes,in for wages that is tough politically for vietnam, but they recognize if they want to move up the value chain in Global Market they have norms. T abiding by basic the good news is they are ready to go and what i will be telling states that the united has never had a smooth, uncontroversial path to ratifying trade deals, but they eventually get done and it is my intention to get this one done because on the merits, it is smart for america to do it and i have yet to hear a persuasive argument from the left or the right as to why we would not frameworkeate a trade that raises labor standards, raises environmental standards, protects intellectual levels the Playing Field for u. S. Businesses. Brings down terrorists. It is indisputable it would create a better deal for us than the status quo. Nobody has been able to describe to me, with all of the general criticism of trade you hear coming out of some quarters, no one is able to describe to me how this would not be a for u. S. Ant improvement workers and businesses going forward, compared to the status quo. And so, i intend to be making that argument. I will be less persuasive year, because most people already understand that. Back home, we will have to cut through the noise once election season is over. It is always a little noisy there. In terms of mr. Kaepernick, i toe to confront i have confess i have not been thinking about football while i am over here. And i have not been following this closely. But my understanding, at least, is that he is exercising his constitutional right to make a statement. I think there is a long history of sports figures doing so. I think there are a lot of ways you can do it. As a general matter, when it comes to the flag and the National Anthem and the meaning that holds for our men and women in uniform and those who fought , that is a tough thing , to thento get past hear what his deeper concerns are. Some think he cares about real, legitimate issues that have to be talked about. And, if nothing else, what he has done is generated more conversation around some topics that need to be talked about. So, again, i have not been paying close attention to it, but you have heard me talk about, in the past, the need for us to have an active citizen. Sometimes that is messy and controversial and gets people angry and frustrated. But i would rather have young people who are engaged in the argument and trying to think ofough how they can be part our democratic process than people just sitting on the sidelines and not paying attention at all. My suspicion is that, over time, he is going to refine how he is thinking about it. Maybe some of his critics will pointseeing that he has a , around certain concerns about justice and equality. And that is how we move forward. It ismes it is messy, but the way democracy works. All right, last one. Angela of bloomberg. Thank you, mr. President. The g20 group today discussed the importance of tax fairness and consistency among countries. How much of that discussion was eu this vision and how do you balance your efforts here to ensure global tax fairness with your need and desire to protect u. S. Companies and their shareholders . Youif i may, how would assess the likelihood of the actions taken of making a difference in overcapacity . Pres. Obama great questions. This issue of tax avoidance and evasion is something that we ane actively promoted as issue for the g20 to tackle. Onlyve worked with, not the g20 countries, but also some of the multinot go multilateral organizations, like , to refine how we approach these problems. It is a complicated hes a business. We did not bring up the specific case of apple, because, as a general rule, i do not want to bring up a single case in a forum like this, where we try to shape broader policy. Home, we have been focused, whether it is on the inversion rules we put forward, the proposals we put forward to define who the beneficiaries are veil, so that we can catch people who are avoiding we are doing a bunch of stuff at home, and we want to coordinate better norms internationally. The one thing we have to make sure we do is to move in concert with other countries. Because theres always the danger that, if one of us asked it is notilaterally, just a matter of a u. S. Company being impacted, but it may also on our ability to collect taxes from that same company. So you may have a situation europe, anday into the u. S. Treasury is shortchanged. Is not coronation between various tax authorities, you get a problem. In the same way, there has to be coordination about even some of our closest allies racing to the bottom in terms of how they enforce their tax policies in ways that lead to revenue shifting and tax avoidance and our country. So this is not something i think will be sorted out overnight. I do think that, if we are to regain the trust of ordinary is not that the system rigged, and deal with these trends of inequality that have risen out of Global Inequality and technological change, then we have to make sure we tackled this issue in an effective way. We have made some progress, but not as much as we need to. It is recognized that it is in the interest of all countries, whether developed or developing, to Work Together to put a stop to this. Because developed countries are losing revenue. Erodes their tax base and their ability to educate kids andbuild universities infrastructure. It also wallops developing countries, because often tax avoidance goes hand in hand with corrupt practices that impede developer. In terms of excess capacity, this is an issue we wanted to get on the agenda. We got it on the agenda. Conversationsl there wasdent xi, progress on dealing with steel overcapacity, which is consistent with the plans president xi has himself to reorient the economy so it is not so heavily dependent on state owned enterprises and an export model. We have made some progress. Not as much as we would like to see, but some progress on that bilaterally. Multilaterally, the way this was resolved was the g20 agreed to put together an intensive process of gathering all of the data, determine what the best steps are, which will then be reported in the g20 in hamburg next year. I think there was a validation of the basic principle that, to the extent that overcapacity is the result, not just of Market Forces but specific policy decisions that are distorting a well functioning market, that that needs to be fixed. So it was one of a number of examples that are not always sexy and do not attract a lot of headlines, where issues we raise in the g20 get adopted. Then a bunch of work gets done. And the following year, you start seeing action. And slowly, we strengthen and build up international norms. If you look at the issue of i. T. And the Digital Economy, we were able to get the g20 to adopt a range of principles about an open internet, net neutrality, businesses andt vendors and providers are not disseminating across borders not discriminate in across borders. Reflecting the things that have led to this digital revolution. That will, in turn, generate a bunch of new work. There will still become flex about how people deal with censorship, or how to deal there will still be conflicts about how people deal with censorship. People and help all countries grow and prosper. So my parting words at the g20 were, having watched this process over the last eight i think we all have to recognize these are turbulent times. Are seeinguntries volatile politics. Sometimes, you read the headlines and you can get discouraged about whether the International Community and leadership are able to Shape Solutions fast enough for the scale of the problems, whether it is migrants and refugees or terrorism ore or making sure they economy working for everybody. But if you look back over the course of the years, you find that things have gotten better. Not always as fast as we like, but in significant ways. You look at the progress we made on the financial system. The American Banking system now in 700 billion more capital. It is safer and more sturdy. It is not just us. Because of the g20, you also have an agreement in which all countries are having to strengthen their Capital Requirements and put in place some basic safeguards to prevent happened at lehmans. That is true across the board. , i always like to see even more get done, but i am cautiously optimistic about the progress we made. I tell my staff, when they feel sometimes, that debtor that better is always good. It may not be everything that needs to get done, but if it is when we started, we will take it. All right . Thank you very much, everybody. Thank you. Got to go. Nejra you are watching bloomberg markets. Just there, you are watching you as president barack Obama Holding a News Conference and taking questions at the g20 in hangzhou. Let me run you through some of the things he said. He started by talking about the fact that more work is needed to keep the Global Economy growing. He went on to talk about the steel sector, saying that inequality in the global steel sector have hurt workers. He also clarified that the g20 discussed steel, currencies, and trade. Talking about the syria talk. He says they have not yet closed the talk on the syria negotiations and the talks with Vladimir Putin worker shocked but not conclusive. And he had a lot to say about trade and taxes. Guy that final question from angela really nailing it. What i thought was interesting was he described the relationship with putin. He said he was a colorful character. He described the meetings as andid, want blunt, businesslike. Interesting to see that happening post conversation with john nichols with john mikel with john mickelwaith. Question interesting about Colin Kaepernick. It gave him the opportunity to talk about democracy in china. About it not being the easiest route all the time, but it results in the best outcome. One, he probably initially looked to that question and went that is not a great question. I think once he looked at the opportunity and i gave him that ability to talk about democracy in the heart of china, with that china g20 underway, i thought that was fascinating. Nejra interesting, given the fact that when he arrived at hangzhou, there was some awkwardness. We have the uk Prime Minister theresa mays digging out a we could not show you that simultaneously, but we had the uk Prime Minister theresa may speaking out at the same time. She said there is no date set for triggering article 50. The aussie said before, that is not going to happen this year. She also talked about the point System People brought up, saying that does not give. Guy immigration control give immigration control. Twitter reaction no one has any idea what brexit really means at this point, though we do know the data is not as grim as he thought it was. Nejra that is partly why we have seen sterling rallying today. Lets look at the equity trading in europe. The stoxx 600 up about 2 10 of a percent. European stocks heading for an eight month high. We are seeing quite a bit of risk appetite. The dax up 2 10 of 1 . The ftse off by 2 10 of a percent. I wanted to bring up brand. Up 1. 4 . 47. 51 dollars a barrel. Have seen oil payor some of its gains from earlier between we have seen oil pare some of its some talkr there was of stabilizing the markets. Lets look at what currencies and bonds are doing. I mentioned sterling. It is pretty much unchanged at hit abut a hit it three week high. It is the worst major performing brushed the worst performing major currency, though. We were seeing a rally earlier. 103. 28. Laryen, the gilt 10 year yield down three basis points. The bund down to basis points. And the 10 year yield on german bonds was in the tightest trading range since 1991. And that is ahead of the ecb meeting later this week. Guy the u. K. Data certainly beat. The European Data did not. Where does that leave mario draghi . Faces somes difficult decisions. We will discuss that subject next. This is bloomberg. Live from london, i am guy johnson. Nejra i am nejra cehic. Guy lets talk about what is happening in the u. K. John wraith, the ubs head of u. K. Rate strategy joins us now. Fantastic u. K. Data again. Not necessarily buy into it, but the data has surprise to the upside. Guy this is the u. K. Surprise index. It goes up quite strongly. Is. it that is relative to expectations. And expectations a mealy after the vote were hit hard. There was obviously a lot of shock. And some of the early indicators were there had been a very abrupt slowing of the economy and sentiment. Now it seems as if things have not been that bad. Sterling has fallen a lot. That will help sentiment among manufacturers and Service Industries that export, for example a we have not yet seen the consequences of that on the consumer. We do think the economy is slowing, but we do not think it is falling as sharply as early indicators suggested. Nejra what do you think we can expect from mark carney this week, given what we have seen in the data . John i expect him to defend with the bank of england has already done. He may be put under pressure and questioned over whether hes the things it is appropriate, given the better data, but there is the argument that because we acted so decisively, we kept sterling weak and competitive for u. K. Exporters and short up confidence, that we were ready to step in and do something. Have they not acted, we may not have seen this bounceback and sentiment. Nejra and you think there will be more from them . Given a lot of the talk after brexit was they would focus more on the growth picture rather than on inflation. What do you think they will do . John we think they will do more. They pretty much said they will cut rates further. When they next make a decision on qe or other policies, it will be the First Quarter. By then, we may see inflation pickup. That is likely to squeeze real earnings and mean the consumer is starting to heal the pressure. That is what we have not seen that it will take 36 is that we have not seen yet. It will take three to six months to see that. Guy i want to take you back to the gilt conversation. This is the u. K. Fiveyear. We will look at it from the u. K. Point of view. I appreciate it has come down a little, but if im holding gilts and i have a 10 year duration, does that chart worry me . John it could. It is an important indicator, by going five years forward you strip the noise of what is going on now. I think you will see something similar to this on the earlier chart, which is the shock when the results came out, and then the bounce. If the result we have seen in recent data were to continue consumer year, the rides out any squeeze on real earnings, even as the brexit negotiations started to get get fractious, is the consumer can sail through that, this could rise more materially. By the moment, i think this is volatility rather than any trend. Nejra in terms of bond buying from the bank of england i was reading something that said we have the hiccup at the longer and at the beginning. Weead something that said may see that seeped into the seven to 15 years. D anticipate that . John i do not know what sugar that i do not know what triggered that article, but there was a shrinking of the gilt available. I think there is about 40 billion that the bank of england could theoretically by before it hits the limit on remaining bonds. And though they are buying a lot of gilts, this is a dmo that is selling a lot of gilts as well. The pace is slightly faster in terms of what the bank of a man is doing, but that net amount of of whates not shrink the bank of england is doing, but that net amount of gilts does not shrink. Guy any chance that they will spend more money . John he may well do. Guy thanks for hanging around, listening to the president of the United States, then speaking to us. John wraith, ubs head of u. K. Rate strategy. A potential deal between saudi arabia and russia seems to be more talk than action. Nejra this is bloomberg. Guy u. S. Markets may be closed today, but the rest of the world is still active a lets go to the markets desk. In for a third day in europe. A bit of ar gain and a rally coming through from the oil and gas sector to, particularly led by the oil price. Here is oil. We are seeing it rise and pare again. We heard a significant announcement from the saudi and russia about a potential oil freeze. The market was disappointed to we have seen that, but theyre still again today. I want to take a look at sterling rallying. Here it is over the last month. About more of a onemonth high now. The longest rising streak since may. And july. 4 that is a seven year low. Now up to 52. 9, crossing the gap between a contraction and expansion. Evidence of less economic rebound postbrexit, but sterling still has more to go. Down. Past more than 10 nejra coming up, we will look at mark carneys next move. This is bloomberg. Nejra live from bloombergs European Headquarters in london but there, you can see a gorgeous shot of new york, where bloombergs World Headquarters are. I am nejra cehic. Guy if you are enjoying the Labor Day Holiday, it looks like the weather will be great this week. You are watching bloomberg markets. Im guy johnson. Here is the bloomberg first word news from sebastian salek. Economic italys developer says the u. K. Needs to speed up brexit. Once they have decided, we need to move forward. Process. O speed up the migration, trade. Years by waste two negotiating with the u. K. How to maintain them inside without them wanting to be inside. We cannot afford this paradox. Sebastian calenda said the u. K. Should expect limits on exports to the eu one at least. Truck drivers blocked a major highway, frustrated that refugees tried to pop into their vehicles to cross the English Channel pivot camp is known as the jungle and is home to refugees trying to reach the u. K. President obama and russian president by the have agreed and russian president by maier putin have aimir great to continue talks to try to get a ceasefire in syria. Secretary of state john kerry had previously failed to get agreement. The panda is not off the endangered species list. It is now vulnerable. Meanwhile, the eastern gorilla has been listed to critically endangered. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. I am sebastian salek. This is bloomberg. Guy thank you. Lets talk about sterling. The british pound surging to a onemonth high, showing a rebound. A sign of the economys resilience after the referendum. For more, lets bring in manish singh from Crossbridge Capital. He was very much in the out camp. That we should leave the European Union. You must be delighted. Ofish theres not a sense triumph, more that people have to remain calm. Happynot something to be about. But to make it work and make sense out of it. Thatook of the data has been recouped now. Saying it is too early to decide anything and versus business should continue as usual. Nejra one thing about the pmi number is that it does not actually tell you the degree to which people are necessarily positive or negative i guess that is something as well. A nuance that mays just the strength we see now may not be borne out. Manish you ask a yes or no question. We do not ask how positive or negative. That is where it is playing out. This is what we have in front of us. This is what the market trades on. So you have the bond and sterling, which i do not think will continue so you have the bounce in sterling, which i do not think will continue. I think the fed could raise rates on the 22nd of december, so i do not expect sterling to keep rally in. Nejra youre only pricing in a 25 probability in september, sollecito market. Manish yes. The pmi number was less than 50. That is a number of concern. However, if you look at the fed thinking, that you have to get rates higher before the next decision, the best argument here is to get in september. If they had raised rates in june, there would be a six month in green increase. So you get to hikes a year, which is not something to worry about. There is no panic in the bond market other than equities, because this is seen as a sign of confidence. Guy talk to the fed in detail. U. K. And ishe enjoying at the moment, the u. K. Is enjoying the benefits but none of the cost. Everyone is waking up and thought we would see armageddon, but we still have access to the Single Market. This really fantastically cheap pound. If the u. K. Had not had a bounce back, that would have been my concern. Manish true. If you look at what the government is saying, it is not taking everything there brexit deal has said. Prime minister may said she will not go for the trillion dollar system. So you have a new approach in terms of trade. Therell be any way of thinking. Guy is that enough to give us access to the Single Market . Can we maintain it . We do not know how it will work. And there will be checks and balances. That there will be access for u. S. Citizenry into the u. K. Is that enough . Pragmatice u. K. Is a nation nejra theresa may seems pragmatic. Manish yes. And the population is more pragmatic. Youoint feeling is that pay to get access in the European Union. On whattotally depend the population feels. Lets Say Something. The u. K. Has the third highest rate in the eu. It will happen whether they like it or not. Give a response acceptable to the people, and people voted to leave out. There was a question. Your member when Eastern Europe opened up and people started traveling everywhere. You give an option to every so that to put a brake people cannot coming immediately. You can do that. So it is not close to business. More like there is a general question that has been asked, and he if you do not address that, you will have major problems down the line. I find that the approach of Prime Minister may is very dramatic and professional. Nejra is very pragmatic and professional. Nejra are you seeing opportunities in the u. K. At the moment . I read over the weekend from Bloomberg Intelligence on utilities. They may benefit from weaker sterling and investors liking the stable yield. Any sectors you are positive on . Manish not particularly. We are not seeing it in any particular sector. But if you look at the Business Sentiment being positive, you are positive about the economy. Helped. Has rbs, deutsche bank, they are getting downgraded with rates negative for the Banking Sector. Is that the right trade to make . In some cases, the u. K. Banks are waiting on a rational decision. Sure of the not bank of england is really going to cut rates further. This whole thing is going to take long. The bank of england cutting rates does not help if the Economic Data does not look bad. So the point about banks will start doing well does not wash. Guy they will do badly because of that . Manish no. If they do not cut rates, they will not suffer from it, right . We have seen the last 10 days, with when this whole data came out, he saw a relocation into financials in europe and everywhere. I am still positive on banks, but for me, it is mostly u. S. Banks who have the portfolio. So i am positive about that. I am not looking at other banks. I would say i am looking more in terms of where are we in the cycle . The u. S. Is far ahead. Then probably the u. K. It. Then i do not know when rates will rise in europe. More at the looking u. S. Banks. I also believe that the u. K. And eu will have a fight over said thatmarkets, happens, the u. S. Banks will keep winning. Nejra we have seen that rotation on the s p 500. Has been happening the past few months. The move from defensive and cyclical. Do you think that rotation has further to run . Manish until the fed meeting, i will say. And we had the u. S. Jobs report friday. It is not a week number a w eak number. In it will slow down germany. You will see that, through. Every other number has been good apart from pmi. The expectations holding from the atlanta fed. So the data is not looking as bad, not to raise rates when you have not done that for some time. That is my point. To me, the u. S. Election and the referendum are a red flag. I would be careful. Changing my am limit order, because i do not feel comfortable to be long. But under the fed meeting, i am happy to be long, financial. Nejra how are you playing volatility . Everyone is talking about low volatility. We were in the tightest trading range in 15 years on the s p 500. I was talking about low volatility in the blend 10 year yield. Howie positioning yourself around that . Manish are the moment, not much. If as we get to the fomc, you think the u. S. Elections could go badly or the referendum will go badly, you have to have all of the options. That is something i would recommend. But in a few weeks time. Singh, head of investment at Crossbridge Capital stays with us. Coming up, the u. S. Jobs report number fell short of expectations. What this means for the fed rate hike timing. And we might also talk about the ecb. This is bloomberg. Guy lets get a Bloomberg Business flash. Here is sebastian salek. Sebastian it will not be cheap for simpson to replace those potentially defective smartphones. The Korean Company could spend up to 1 billion to replace all of them. Three dozen samsung phones about that batteries that exploded. Plans to ask rollsroyce for compensation for faulty engines. Cancel more than a dozen points after finding broken turbines. Americans may celebrate todays Labor Day Holiday with an extra burger. Ground beef prices are the lowest since 2011. Capital futures in chicago are trading near the lowest in six years. That is your Bloomberg Business flash. I am sebastian salek. This is bloomberg. Nejra thank you. Lets move on to the bank of japan pay we heard from governor kuroda earlier. He declined to rule out new initiatives to stoke inflation. Conducting a conference of review of Monetary Policy. Of Crossbridge Capital is still with us in the studio. What you expect from september 21 . Manish the bank of japan Still Believes negative rates works. Englandand the bank of does not believe it, but they believe it. I believe they will probably do more negative, down to 20. It is likely they will increase their qe target. Nejra and you seeing this announced in september . Manish yes. So. Ink the reason is simple. Look at the japanese yen. If you have a strong yen, import prices are cheaper. It will not let you meet your inflation target. In japan, the strength of the theency is the preserve of finance ministry. Not the bank. The finance ministers he said they will be happy with whatever the bank of japan will decide. The bank of japan has not done anything. Abeeard from Prime Minister that new fiscal measures are being announced. So we have this coordination. At this point, the bank of japan will make that announcement. For me, it would be long. For that, the fed has to act, and people have to have expedition that the fed will follow up. Guy how do you see the bond market . We have this chart, the 30 year. Down, down goes the yield. Then here, it bounces. There is the expectation that maybe the boj stops buying as many jjp. Manish iron am not trading that, so i do not have much comment. But the bank of japan is now looking to buy foreign bonds. Guy they would never allow it. Manish that is my point. The meeting becomes interesting. Kuroda explained that is how it will happen, if it happens. So even if rates go higher in the u. S. Or anywhere, there should not be panic in the bond market. Because we are not really responding to an increase in rates. What you saw in 2004 and 2006, 17 rate rises. That is the dream. I do not know if we will ever get there. Bond should not be in the market. Even if you see it will come up. I do not like to use the word goldilocks, but that is are we are. You see in the brexit talk as well, it is not i will allow you to do this it is about growth. Immigration was never an issue before. If you do not answer the growth question, you will have problems down the line. Nejra if i can shift the conversation to the ecb. To this earlier. In some ways, the ecb and boj facing the same challenges. A Columbia University professor says the ecb does risk going the way of japan. Looking at the ecb meeting, what do you think the ecb is going to do and what does it have the capacity to do from here, given its constraints . Manish the ecb probably believes negative rates will work. Though i do not think they will do more negative rates at this time. But there was big panic in respect to brexit. But that is not fact. So it is not as catastrophic. It does not put the ecb in the same panic. But they have to react in do more qe. So we probably see status quo. I do not think they will extend their qe, which ends in march next year. It will be later in the year that they decide. But i do not expect them to do much this year. So i am thinking status quo at the meeting. See europe popld up on the back of that. Positioning for something to happen. Andks for your time thoughts. Manish singh, head of investments at Crossbridge Capital. , russian president Vladimir Putin in our conversation with bloombergs john mickelwaith. This is bloomberg. Nejra youre watching bloomberg markets. I am nejra cehic. Guy i am guy johnson pay lets talk about the russian president. Nejra yes. Talk with John Micklethwait ahead of the annual g20. Micklethwaitt asked about the future. Putin i hope so. We believe in the fundamental basis of the european economy. We see that with european leaders. These agreements, in general, i cannot say right or wrong that, depending on what side you look at it from, we do not financial rejection. They tried for structural changes there are no less. I am for into a problem about a i am referring to a problem that overcomes the dominant role of the oil and gas sector in russia and dependent on oil and gas revenue. Also is dependent on the Structural Reforms that came. I think european economies have a pragmatic approach to do with the problems facing europe. That is why we hold about 40 of our revenue in europe. John do you think britain may be more compliant or likely to do a deal with russia, now it is outside or is going to leave the European Union . Britain has a special relationship with the u. S. If it conducts a moran and inform policy, then it would be possible. If britain is guided by the commitments and thinks this is to Greater National interest of them, it is not our choice of the end of the day. It is the choice of priorities. Thaty case, i understand the reliance on the relationship with the u. S. Will take president s. Ready, thate uks is as far as we will be ready to do. President was russian Vladimir Putin in conversation with bloombergs John Micklethwait. Do not miss our special program without conversation, airing this afternoon. In london, 5 00 em london time. 12 00 p. M. In new york. Coming up, eurozone pmi fell to a 19 month low. How will this impact Mario Draghis policy decision later this week . Of the u. K. Pmi out as well. Services pmi came in better than expected. We will look at the eurozone next. These commentsve from shinzo abe, talking about what is happening. Looking to pass the tpp. Also saying china has been an important friend to japan for many years. This is bloomberg. Guy 9 00 a. M. In new york. 2 00 p. M. In london. And at 00 in hong kong. From london, i am guy johnson. Nejra i am nejra cehic. This is bloomberg marketson bloomberg television. Nejra we will take you from new york to london to vladivostok. Today, gaining as much as 4 earlier after talks between russia and saudi arabia over a potential production freeze. Guy the brexit shock fades. Evidence of the potential rebounded since the june referendum. Nejra the bank of japan says there is ample room for more monetary easing. The market thinks the bank may be reaching its limits. Nejra lets see where the markets are trading now. Starting with the european equities. The stoxx 600 heading for an eightmonth high paid up 2 of 2 10 of 1 . The ftse off 2 10 of 1 . The dax pushing harder, up to tens of 1 . I want to bring up print bren t. Oil has taken a little bit of a some ofip today, paring the gains from earlier as talks between russia and saudi arabia on stabilizing the market fell short of talking about a freeze on output. If we switch the board and look market, overall, we see a weaker dollar after the jobs data friday fell short of expectations. By average. In august, the number usually falls 4000, but we fell more around 3000. Stronger sterling on the weaker dollar. That is also partly down to the betterthanexpected services pmi. On sterling. It hit a sevenweek high today. Looking at the dollaryen, 103. 39. Yield,n the 10 year gilt down for basis points p the german 10 year yield heading lower as well. Though tenyear yields in germany in august were at their tradingding range range since 1991. That is ahead of the ecb decision later. Guy if you are enjoying the Labor Day Holiday, we will bring you back. We will get you caught up with sebastian salek. Sebastian president obama discussed syria, ukraine, security in a meeting with russian president Vladimir Putin. And News Conference, president obama described the top. Talk. Obama president clinton is less colorful president putin is less colorful. But typically, our conversations are more blunt, businesslike. Did talk about reaching a ceasefire in syria. At least 43 people were killed at the home and a major russian airbase in syria. The Saudi Arabia Oil mr. Says there is currently no need to freeze oil minister says there is really no need to freeze oil output. There was speculation they would agree to cap outputs. North korea has fired more test missiles, according to south korea. The south korean president criticized the north for what she called provocations hurting ties between south korea and china just hours before. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. I am sebastian salek. This is bloomberg. Guy thanks. Lets get back to if mario draghi will extend his qe program a second time. Will the parameters and rules start to change . Here to give us an excerpt and perspective, Marchel Alexandrovich of jefferies group. So what will draghi give us . We think he is going to extend the program by six months. Push it isey will september, 2017. But in order to do that, parameters of ge will need to be adjusted. This is the interesting bit of the press conference. How they go about adjusting the rules. There are varied possibilities, but each one day take could be important. Mind, the easiest thing to do is to say the role the rule relating what we can buy, we want check that out the window. That would open a bigger universe for them to be able to buy. Is that the most logical way . Marchel they faced two options. Be able tothe ecb to buy bonds below the deposit rate. That does extend universal bonds. We think that is not sufficient. Something theyll be helpful and more important for the ecb would be to actually increase the issue limit size. They can buy up to 32 of any individual bond in situation at this point. They will have to push up that number may be to 50 or 70 . If they combine it with the ability to buy below the deficit rate, the ecb should have the flexibility to carry on with qe. And it is only a number of Central Banks affected by it. Some of the smaller ones have affected. They face an issue of scarcity. If youre changing the rules, you have to do a properly, so you do not come back every months in a three months time. Nejra in terms of doing it once and properly, what about the p capital key . Key is we think capital a redline ecb will not be able to cross a what we have learned on the one hand, there is a lot of information that gets published. But the more you know, the more you do not know. It is digging into statistics. We do not know how exact they much booze the bundesbank exactly how much bunds the bundesbank has bought. We think they can seal the gap. Able to hitns be the amount you need, but it can be more creative. The parameters of this program allow for it. Nejra what do you expect in terms of Inflation Forecasts . Any changes there . Marchel headline inflation is difficult to forecast, because oil prices that into play. We had headlines about talks between russia and iran and so much. We talked about core inflation, which we think will be realized revised lower. Given where we have been the last few months, we think the forecast will get revised to 0. 9 . But it is not a big story. The bigger story is this is a passing down of revision. You go back the last 18 months. It is mechanical. Quarter after quarter to quarter, the ecbs revising down its core inflation forecast. On the one hand, qe is working. He can see that in the market. We can see that in the market. But the underlying target that ecb is looking at, inflation, it is going nowhere. It has not moved the past 18 months. Guy how do you think guilds would react to the bundesbank bund it is a the necessity. That is what you sign upmarket . Marchel for when youre part of the ecb and part of the europe system. All of the comments about ecb agreeing with everything the ecb does is drawing he is defending this idea of a single Monetary Policy working across of the euro system. That you can pick and choose which policies to you and which do not. We are all in this together. The bundesbank would have to buy according to capital key. If that means they own 70 of the market down the line, so be it. Not much can be done about this. Guy we will see how german politics developed. Marshall and jeb bush Marchel Alexandrovich from jefferies group. Nejra oil has come off as high after a potential deal between saudi arabia and russia seems to be more talk than action. This is bloomberg. Guy live from london, i am guy johnson. Nejra i am nejra cehic. You are watching bloomberg. Rkets time for the Bloomberg Business flash. Here is sebastian salek. Sebastian barclays named a jpmorgan executive to run its investment bank. He will run the corporate and International Business position. He was jpmorgans global head of equities. But hundred 25 jobs will be cut ofm the london headquarters marks spencer. Two months from now, the ceo is some talk about a struggling International Unit pay the head of the pan Central Bank Says new ideas are not off the table when it comes to boosting inflation. Declined tooda speak about a new initiative today. Result in anynot reduction. Guy thanks. It has been something of a wild day for oil. Russia and saudi arabia have apparently agreed to ensure oil market stability. They did it during the g 20 meeting. Here is Ryan Chilcote. A busy day foren oil prices. I want to take you to the movies all with brent. This is 8 00 in the morning. The price of oil rising more than 8 in anticipation of what we are told will be a significant announcement from the Saudi Oil Minister. That came from his chief of staff. Then we get a press conference with the Saudi Oil Minister, where he was joined by the russian oil minister, where we anticipated they may Say Something about joining together in an oil freeze. Instead, the said they would Work Together to stabilize the oil market. That they discussed options, including a phrase, but that they had not agreed on a freeze itself. The Saudi Oil Minister added he did not see the need for freeze now. You see the huge climb down on the price of oil on the back of that you have to go to the beginning of april to see this back ofmove on the declining stockpiles in the United States. Stockpiles which, since then, have only risen. Nejra i want to jump in, because russian president Vladimir Putin sat down with bloomberg editor in chief John Micklethwait for an exclusive interview. Lethwait began by asking whether president putins sticking had changed on oil production. Pres. Putin if i said oil out the wood and, i was mistaken. Wouldi said oil output end, i was mistaken. I said new deposits would not be price. Ioned at the should we speaking, that is what happened. Strictly speaking, that is what happened. Even surprisingly, our oil and Gas Companies are continuing. In the past years, the Oil Companies have gone 1. 5 trillion rubles. The Overall Investment in energy in thetrillion rubles past year. This is quite significant. Our oil output electricity production is increasing. Production has declined a little. By about 1 . By the way, we are the world leader in terms of natural gas output, with a global share of around 20 . The exporting of liquid hydrocarbon, we are third in the exports of liquids. Our internalts, production has risen. This is due to the increase in hydropower. The demand for gas has fallen. That is the result of restructuring in our Domestic Energy market. And increase into traditional parts of the countrys of the country. John would you still be in favor of a production freeze if the saudis want that . Pres. Putin as far as i am prince is arown very energetic state figure and we have a good relationship. This is a man who knows what he wants and how to achieve his goal. At the same time, i think he is whom wele partner, with can reach agreements and be certain those agreements will be honored. Still, it was not he who not us who it was rejected the idea of freezing output. It was our saudi partners. Our position has not changed. We believe this is the right decision for world energy. Everyone knows the fallout. Be frozen,on were to everyone should do it, including iran, but we understand the run is starting from a very low level. It would be unfair. I am sure everyone understands that. The issue is not economic but political. Hope that every Market Participant will be interested in maintaining a stable and fair. Bal energy pricejohn Global Energy price. John so you are in favor of giving iran leeway for what they need to do . Pres. Putin yes. That conversation was fascinating, ahead of the g 20. John micklethwait talking to the russian president. Ryan chilcote still with us. They can freeze, the russians, because they have the ruble. It has allowed russia to keep pumping. It is interesting what the writers, compared to the oil price. Oil price shows the the climbing. As that happens, russia increasing output. We are not at a record level now, but we are not far off. The russians obviously would welcome a freeze. Because why not . If they put is more than 10. 8 Million Barrels a day, more than they have ever produced before, freeze suits them fine. And we heard from the Russian Energy minister, reiterating that point. As long as the level russia has to freeze its output out is from the second half of the year. Another important issue is until you get a freeze it is like a mexican standoff. Everybody has to increase output and battle for market share. No one will unilaterally freeze their output, naturally. That is a little bit of what we are seeing. If they agree to freeze, everyone could cap production. Not just the russians, but the saudis and arabians, they will battle for market share. You heard Vladimir Putin talking about iran, that he was the Sticking Point the last meeting. The russians wanted a freeze of the saudis wanted a freeze. Then changed their view, saying that then the iranians have to agree to it. That Sticking Point remains. The Russian Energy mnister saying there is a disagreement on what presanctions levels would be for iran. Looks like we are pretty much where we were back in april, which is really know where, when it comes to a phrase. Even though we are just a couple months away from that meeting in algeria. Nejra Ryan Chilcote, thank you. Do not miss our special program on president Vladimir Putin in conversation with bloombergs editorinchief, John Micklethwait. Still ahead, european stocks gaining today. We will speak with patrick armstrong, cio at Plurimi Wealth managing. This is bloomberg. Guy the u. S. May be enjoying the Labor Day Holiday, the rest of the world is still treating. Thats fine with the markets are. Sebastian salek. Sebastian stocks higher on the stoxx 600, up 2 10 of a percent. Good rally for most of industries a particularly strong in the oil and gas and minors. Writing on up 1. 3 , the Higher Oil Prices have seen throughout the course of the day. For thatoller coaster price, but still and again in the session. I want to take you to another asset pushing stocks higher. It is the weaker dollar. Here it is over the last month. Tipping slightly lower today. We saw one drop after the slightly weaker than expected job status. The market looking for 158 thousand, they got 155,000. The wpi function on the bloomberg giving the chances of a rate hike in september at 32 . I also want to look at the pound. Onemonth high. Here it is over the course of the month, rallying on the strong pmi data we saw earlier today. Seeing its longest streak since last may. That data coming in. From 52. 9 down to 47. 9. A7year low. Crossing the 50 barrier to show the economy is contracting in the services sector. The pound still has someone to ties before brexit. Guy thank you. Coming up, we have a great guest. He is short oil, particularly wti crude. What he is long is equities, particularly european equity. It will be interesting to see if that story develops more. European equity has been unlocked by you as investors. On labor day, we will talk about why maybe u. S. Investors should be more invested. And we will get patrick armstrongs intake on. The pound. This is bloomberg. Live from bloombergs European Headquarters guy you are watching bloomberg markets. Lets check in with first word news this morning. British Prime Minister doesntplan with the right to vote her the countrys trade relationships. Today at thehina end of the g20 summit. Our mission is become the Global Leader in freetrade. In my bilateral meeting i signaled our determination to secure trade deals with countries from around the world. The leaders from india, mexico, south korea and singapore said they would welcome talks on removing the barriers to trade between our countries. Said she still has no date set for formally beginning the process of weaving the eu. Truck drivers are blocking a major highway in northern france. The drivers are frustrated refugees tried to hop into their vehicles. To go across English Channel they cant is known they cant is known as the jungle. It was a humiliation for germanychancellor. The Christian Democratic Union lost to the immigration alternative party. Her popularity has plummeted since her decision to allow a large number of refugees in the germany. Speculation is she will run for a fourth term next year. In hong kong, candidates won a vote on the future of chinese rule. Voters turned out in record numbers. More than 2 million ballots were cast. It was hong kongs biggest election since the prodemocracy protests two years ago. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im sebastian solid and this is bloomberg. Guy thank you very much. Lets talk about what european stocks are doing. They are heading for a month high as investors speculate the Central Banks will continue to keep Monetary Policy. Lets get more on whether or not we should belong in european stocks. Patrick joins us now. You are long and european stocks . Patrick not as long as we were a month and a half ago. Everything else being equal, we think you get more policy from draghi and its hard to have a Big Convention conviction in them. Guy they are cheaper than u. S. Stocks. Am why argue with investors interested in european stocks . You get a bigger bang from your buck. Patrick just patrick just a cultural thing. The pessimism with europe. You have many risks in europe, risks with the eurozone, political risks. Historically we have not had so much of that in United States. With the election coming up and the fed hiking, you are seeing some risk in the United States. I think europe is the place to be. You are looking at industrials and banks . Patrick banks are incredibly cheap. Everybody knows the bad news there. I had to their profitability cycle with negative Interest Rates. Band that issues with the capital. In the dire straits some of the present them as. But have got some bad debt people know about that and that is in the price. Industrials, people are pessimistic on the Economic Outlook for europe. If you look at the pmis for europe, it is stronger than the United States recently. Pmis, we has spoken to a number of people about the u. K. Services pmi. They have been positive on the u. K. You think a mild recession is coming in them into a little negative on the ftse 250. Patrick we are short on the ftse 250. Its an expensive index. Youve got potential headwinds coming from brexit whenever the impact does it. I dont think the u. K. Will get through this without any scars. It will not be an easy negotiation. It will result in a cyclical downturn. You have the boe coming in with some nice monetary stimulus and the government talking about fiscal easing. I think that created a bit of a sugar rush. Banks,ing back to the and this is one of those exercises and why am i buying the etf when it doesnt deliver when it wanted to. You get econometrics you are talking about. Book value numbers, trading discounts to book. When you look to the sector that are sector banks and significant better banks and worse ones. Story. A stock pick is to pickingctor by the individual and. Bc is coming to mine. It capital adequacy is quite reasonable barring asian property prices. I think thats probably a defendable dividend trading at a good multiple. The french bank are much more attractive than german banks. Individual banks is just better than going along with all index. Guy let me flip that around on its head. If you believe the european numbers are not going to get better and the Banking Sector will respond, you want the ones that are beaten up. I dont know what is in georgia numbers, but i buy them when they are cheap and stick them in the back problem and say that will be a problem. Maybe that is my barbell on europe. Have i some seriously risky stuff. Patrick we took that view in early august or july. We sold a put option on the whole index when it was down at 85. 35 . We dont know if there will be a recovery. That, the timedo to do it is when they are selling off rather than after when the footage 12 value on the stocks in the last month. I think the time to put up that strategy is at weakness. The moment is gone away for that . Patrick they are still so cheap so 12 is nothing compared to how much they have fallen. You about thesk correlation between equities and fixed income. It is something we have been talking about a lot with a fund manager who came out last week. He said i am keeping half my money in cash. How would you approach the risks around the coronation . Correlation . Patrick it will be bad news for some investors. People that buy bonds at the beneficiary of a 30 year rally, they are now extremely expensive. If we get into a fed hike regime, those stocks and bonds are at great risk. They will be plummeting together. Stocks seen the safest right now. They are very exposed to the Interest Rate cycle. You are talking about utilities. They traded 12 times earnings, 18 times in the United States. That is 50 higher multiples in the bottom market and that is based on people chasing dividends. If you see higher Interest Rates, they are not natural equity investors. When you start to see some of the deterioration in prices i wouldnt be surprised to see the flows out of those stocks. Pricing andkets some fed rate hikes. 25 basis points in the navy more further down the road. If you get a yield curve and all of a sudden with the fed is trying to engineer, inflation will come given the money. It will catch people off guard. It looked like last april when he saw the 10 year shoot up in a few weeks. That will be a period like and that is what stocks are exposed. The correlation that is so beneficial on the upside becomes a big downside for traditional investors. Halite how are you preparing for the breakdown . Patrick we have reduced the equities net equities the net long it can percent today. That treasuries are not going to basically rally further. We have option plays. It is not a perfect hedge. There will be a time when you really want to switch gears and outright short fixed income. Guy how much of the recent rally was down to the possibility of as abo curve in the state . A cbo curve in the states . Patrick it is part of it and its a rotation into a higher while equities are rallying. Guy we need to talk about oil. I want to do that in the next chunk of our conversation. What you make of oil stocks . You have a trade base of two different assets, but oil has been on such a roller coaster ride today. Patrick todays of the perfect data short data short oil and Oil Companies. Is not even a talk about cats, its about maintaining production. Inventories are still building. You will not have oil prices flying in those kind of environments. If you have big significant cuts, thats what you want to be long on oil in todays the perfect it be shorting oil. Patrick armstrong, cio at palurmi investment strategies. Guy u. S. Markets may be closed today. Is labor day and you ironically take a holiday. Brent is up. Up by a percent. Earlier we were up 5 in participation booty some sort of a deal. What a roundtrip we have seen. Cable of strongly today. 133. 27. Corroded says he will do more. I suspect the market will react a little bit more info u. S. Dollar off. Plenty more of these stories and turn them into investment ideas. Patrick armstrong will be joining back. It is labor day in the United States. Enjoy it. We will see you back at work tomorrow. This is bloomberg. Guy this is your Bloomberg Business flash. May spend up to 1 billion to replace all the 7 phones that have been shipped since they went on sale last month. About 40 dozen have had batter ies that caught fire and inflated. Forairlines is asking rollsroyce for compensation for rollsroyce engines. Ana had he canceled within a dozen flights after finding effective turbines. The conversation maybe in a discounted future purchases. Americans may be selling labor day today, but they will be doing it the next your burger or two. Ground beef rices are the lowest since 2011. An expensive meet may be on the menu for a while meat maybe on the menu for a while. That is the bloomberg flash. Armstrong is still with us now. We want to focus on oil. We started the conversation earlier. Just to be clear, you are not short wti, is a specific etf youre talking about. Etf, you if you buy an get the s p 500. With an oil etf, every much the future expires and have to buy the next month. Oil does a thing called can tangle contangle. You end up with less oil. If you bought a barrel of oil on december 31, the etf, you would only have three quarters of a barrel left. Etfs underperform stock prices. Its a very high carry strategy. Guy lets be specific about will have got here. Is what youre suggesting. Give us walk us through a we had here effectively. This is the find in the orange line, the stock price, and these of the differences in terms of what oil has delivered and what the fund has delivered. Month the etf a underperforms the spot price. Every day in moves of upanddown. It owns barrels of oil. Every month it has to sell the near my future and buy the next months future. The curve is steep. Its possibly stella selling at a low price. Is i go along in the market short i, either go short. That sounds a nobrainer to me. Patrick if it sheets of 10 , the fund will go up 6 . To assible they can go carry strategy the other way. Year today it has been persistent, percent6 every month 3 6 every month it underperforms to the stock prices. You are not convinced they are going to move significantly higher . Patrick i think that is a lid on prices. Supply exceeds demand. Any real strength, you have new production coming back on stream. Any negotiations between russia and opec. Opec for years hasnt done anything meaningful to curtail supply. They are not a functional cartel anymore. They have a small percentage of global production. You are talking about freezes, not curtailment. There is no real great demand for either. You have nigeria, venezuela, production has been slow. Iran wiki producing more. Will keep producing more. There is potential downside. Guy what is the longshort on this . The short oil. Energy companies. Is at the Chemical Companies . What does it look like . Patrick im just happy to be short oil. And reselling a call option on this etf as well is good because general high role cost. You get paid a big premium. Even if they did, you have the role cost down. You can make at about 8 of month right now. Looking at Oil Companies at these levels, what is your view on whether we will see more m a . Does that impact your strategy at all . Patrick you should see m a given where oil prices are. There are Small Companies desperate for cash. That shoulds be a theme that drives. It are picking the most tolerable companies, if they dont get taken over you have bankruptcy risks. Its a strategy that there should be m a but you are picking up losing companies speculating on that. How far ahead to you look when you are investing . I was looking at an interesting nuance in the u. S. Where on the one hand you have explores rushing to the permian basin, the biggest in the u. S. On the other hand Oil Discoveries at a 70 year low, which suggests further down we might see a supply shortfall. Patrick i agree with that. I think in the next 18 months to two years to get supply and demand imbalance. Then you will start to see the lag of investment and Higher Oil Prices eventually. That is the exact reason you ontango. S c when you get several years down the line there will not be enough and there is probably underinvestment right now. But the nearterm its oversupplied. Guy back to troubled companies them, the banks of an lenient. Is there a trade of the u. S. Banks . Patrick it is canadian banks. We are short canada. We talked about european banks being half a book value. Canada at 2. 5 book value. We dont think there is going to be oil prices but that is a possibility it see oil back to where was at the beginning of the year. You see defaults and impact on homeownership and the Energy Sector in canada. They sailed through 2008 no problem and they still have this amount. Is still very expensive. It is canadian banks that i would want to short. Armstrong. K coming up, investors continue to flock the tesla. Should big oil be wary . We look at bloomberg gaslight. That is next. This is bloomberg. Guy lets check in and see whats happening with Global Markets. The u. S. Is closed, canada is closed for labor day. Around the world its been quite an interesting day for european. The stoxx 600 by up by a mere 1 10 of 1 . Things are happening within that sector. We are watching the energy market. The ftse 100 giving back some ground. Individual stocks, the banks are lower, and the pound is higher today. Benefited in sterling terms nicely. Pound goes up, market goes down. Dax about 1 10 of 1 . Lets talk about what else is happening around the world. This is where the real action has been. Look at crude. It was up 5 this morning. The saudis and the russians apparently got some sort of deal of production. The market isnt convinced at this stage. Cable on the back of Better Services data. The dollaryen rate. It is oil that is the story of this monday. Oil and Gas Companies the best performance on the stoxx 600, 1. 1 . Some are starting to say big oil should be afraid of tesla. Unlike the oil, investors cant wait to give tesla more their money. Ian explains. Burns cash, trashes sales targets, and wants to buy solar city that is more of the same. Big oil should be terrified. Why . One word, capital. Investors are pouring into tesla while asking for it back in the likes of exxon. Exxon mobil in its peers rate in mindboggling amounts of cash despite the oil crash, and the International Energy agency estimates the Industry Needs to invest 1 trillion every year to meet future demand. That theory investors should want big spending. Big oil is doing just that. They are spinning is heading down there spending is heading down, not up. Tesla is getting a free pass. Investors wanted to keep spending. Elon musk alks is snding tens of billions of dollars more on ever more bitious project. Analyst stopped forecasting higher earnings around the end of 2014. The stock did not notice. Tesla shrugged off the losses. Every time is all new shares in the past five years, buyers stepped up. There was another analogy. Shale drillers. Despite crushed share prices and a slew of bankruptcies, many of these smaller Oil Producers have kept going aided by willing investors ready to buy more of their stock. Could tesla crash eventually . Sure. Will more sale drillers go bust . Undoubtedly. But if they do others will pick up where they left off. Enough investors believe in that electric vehicles comes growth. They oil majors just cant say the same thing. Denting. Liam liam denning. Guy the european close is coming up. Is in a busy day in europe. Stocks are front and center. Do not miss our special program on russian president Vladimir Putins conversation. 5 00 p. M. , 12 00 p. M. This is bloomberg. Guy is 3 00 p. M. In london. Were live from london today. This is bloomberg markets. Mark u. S. Exchanges closed today for the holiday. Still loads of action happening around the world. We will take you from london to tokyo to moscow in the next hour. Here is what we are watching today. After a big jump in u. K. Services data, sterling is rallying. Also moving is the dollar. Falling today on speculation that the fed will raise Interest Rates or wont raise Interest Rates this month. Oil surging. Talks between russia and saudi arabia in the ways of stabilizing the market. Falling short of a freeze on output. Those new developments, to russian president Vladimir Putin talked to bloomberg exclusively. He would like opec and russia to agree. More highlights from that