Transcripts For BLOOMBERG Bloomberg Markets European Open 20170424

Will draghi spoil the party by turning the ecb toward exit . And trump says he will announce a tax reforms this week, but how much detail will he really be able to reveal, matt . Matt less than half an hour away from the european open, and it is going to be an exciting day. Lots of Movement Across a wide range of asset classes, but take a look at futures to start with. , you can see at the bottom of your screen, cac futures up 4. 5 . Were expecting to see big movement in french stocks today for once. We have already seen big movement in debt. I have bunds on the top of the screen, this is a threeday chart. If you look at this, election is here. This is where you see it coming down in yields, bunds shooting up as investors get out of the trades they had in place before. This is a longerterm look at the spread, and you can see here at the end of the screen that it has come down dramatically. That is what you would expect after we didnt get the kind of event that could have reared its ugly head. Markets are more complacent, and today will be more of a risk on day because of it. Guy complacent, comfortable, looking at a macron presidency with a smile. The Swedish Krona is bid this morning, danish krone bid. The euro really leading all of that. The euro is trading up 1. 1 . Remember, we have the tax story to get to from the other side of the pond, and we have the ecb to think about as well. Lets show you whats going on elsewhere around the markets. Matt has already walked in through the periphery trade we are seeing. The safety trade coming out, again, i work you back toward the ecb meeting coming up. Well, down offer as over 3 . The real trade is going to come through at 8 00, 9 00 in paris, when we see this big move on equities. We are expecting massive movement. Watch the french banks today, that will be the one trait that stands out. Lets get the first word news update with juliette saly. Juliette guy, thank you. The white house says it will offer up an outline of its tax reform plan this week, but the specifics may not be ready until june. Earlier President Trump told his twitter followers big tax reform and tax reduction will be announced on wednesday. Budget director Mick Mulvaney says they expect to lay out the principles, but admitted the full plan wouldnt be ready for a couple months. U. S. Treasury secretary Steven Mnuchin says the imf outlook for the American Economy is a little conservative, as he repeated the Trump Administration goal of 3 growth or more. Last week the fund reiterated its forecast of growing at 2. 3 , hin said they are wellpositioned to expand faster, which will help the wider global economy. Sustained u. S. Economic growth is good for Global Growth, so if we can grow the u. S. Economy, that is not just good for the u. S. Worker, that is good for International Growth as well and creates opportunities. Thats what we are focused on, it if we do a good job it will carry over, in the spillover. Takette mario draghi may a faster route to Monetary Policy normalization than previously thought. Well no policy changes are expected at thursdays meeting, most respondents in a survey now say the ecb president will revise Forward Guidance as early as june, six months sooner than an earlier poll. Economists also reduced their estimate for how long it would taper qe. Multitrillion dollar Wealth Management product industry is slowing for now. The China Banking Regulatory Commission says outstanding products rose 18. 6 from a year earlier. The growth rate slumped from 53 during the same period last year as the industry remains under scrutiny for regulation due to potential threats for financial stability. Global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. This is bloomberg. Guy . Guy thank you very much, indeed, juliette. The euro surging to the strongest in five months after the independent candidate Emmanuel Macron won the first round of the election with Marine Le Pen joining him in the runoff. The pollsters had a really solid night in france, a mcron win by a considerable margin. So what next for mr. Macron . Does he look at how to unite a divided country . Does he think about how he will deal with the parliamentary elections coming up so shortly . Lets go to paris, with Francine Lacqua, who has been up all night watching what has been going on. An extraordinary night, a 39yearold with very little political history, now the front runner. Francine, what next for mr. Macron . What does he have to do . Francine you are absolutely right. When you take pause about what happened last night, it is unprecedented. A 39yearold, unknown to the french people. Theer banker who became economy minister under francois hollande. He doesnt even have party banking. I would say whats crucial watch the polls. He has been pulling about 60 , 62 against Marine Le Pen in the second round. Lets see if there is any movement on the polls and lets see how he campaigns, whether he goes for a dirty campaign, or whether he plays more neutral. After all, so Many Political analysts are saying with Marine Le Pen there is a clear plateau. Its unlikely if not impossible that anyone will vote for her in the second round. And as you rightly point out, if he does become president , he needs to govern and talk about tax reform. That is what equity markets are so strong. He needs to talk about these reforms, which he can only do if he has some strong coalition, and at the moment he is not represente d. Thats the next hurdle if he becomes president. Matt how much of a done deal is that, fran . Is there any chance that fillon voters could turn to le pen . Is there any chance melenchon voters could turn to le pen . Francine this is something we were trying to explore yesterday. A few believe that the far right and the far left has more in common than any centrist party, like what happened with the u. S. Election and some Bernie Sanders voters going to donald trump. This could be a concern. What most political analysts are saying is that the gap in the polls is so strong that to go from 35 , 38 Marine Le Pen to win the French Election, something pretty drastically have to happen. We also point out that we have had many european officials coming out to congratulate Emmanuel Macron, which means that amongst World Leaders there seems to be an understanding when you look at the polls that hes the next president of france. But with a tiny bit of caution. Guy Francine Lacqua, in paris, great work, great coverage last night out of the french capital. What do you want to call it . You call it a relief rally, call it what you will. Markets, particularly french banks, are going to be pretty good at the getgo. Lets go to singapore and join mark cudmore to get his take. How sustainable is this move . I think there are two things to think about. First to put the context of where we came from. We are seeing a risk rally into the weekend. This started before the weekend. Obviously the French Election results have seen a massive shift in a positive direction, in equity markets are the euro. In asia, there is some shortterm retracement. I think we could see similar profittaking this week, and what that means is more shortterm and equity. It wont continue on a straight line. However the Bigger Picture is that this is a really big, positive confirmation of the move that was started last week. European risk was one of the big terrorists this year, whether the eurozone might be under threat based on the elections in holland, france, and germany. But even then the populist parties are falling behind. Suddenly one of the biggest terrorists is behind us and i think investors will gain increasing confidence that they can keep on playing this global reflation trade. Matt what is the next big thing mark, . What is the next catalyst that investors will watch . Good question. I think this week we shift back to the u. S. One of the things will be trumps tweeted about a proposed tax plan. Given that expectations are now so low, that if he delivered anything concrete it would be a positive surprise. The risk reward is skewed for a positive surprise. The other thing is the potential for a Government Shutdown. That would cause volatility, but is skewed to be more negative. Those events competing against each other could cause more volatility, but the backdrop is Global Growth picking up, we are getting through these risks, whether its european risks, syria, north korea, we keep on moving beyond them and the world continues to grow. It will be volatility in the shortterm. Guy lets talk about the ecb. Mario draghi is paying a great deal of attention to what happened last night. We saw pmi data comes through, strong at this point. Is that the next thing the european markets will price and, the fact that exit will be started to talk about . And as a result, this corporate spread comes back to the table . I think that is something markets will really focus on, but it is not as easy as that. One of the issues we are seeing, all global reflation trades Commodity Prices continued to sink. Last week they really clashed down. Oil prices, food prices, even Industrial Metals bottomed out last week. Now its looking dodgy again today. I think a monday prices are trading so poorly that it wont be easy for the ecb to remove stimulus. Certainly growth is strong, but inflation is still not on target, and it looks like Downside Risks may be creeping back in again. This is a big thing for markets but its not a clearcut answer. Matt mark cudmore, thanks very much. Our bloomberg macro strategist. You can follow Market Insights from the entire team on mliv. Highly recommend it. Guy and i follow this every morning. Coming up on the show, we are back in paris, where we speak to an advisor to melenchon. Who will his supporters now follow after this, if he does indeed concede, loss . Then, taxing talk. President trump promises a big tax announcement, but the finer details may not be ready until june. Find out why. This is bloomberg. The open is 16 minutes away. Matt welcome back. Im matt miller in berlin. Guy johnson alongside me in london. We have just about 13 minutes to go until the open of Equities Trading across the continent and on the island. Cac futures, gaining 4. 5 , a relief rally. It back to risk on, or at least is no longer risk off before the tightly fought French Election first round. Four candidates with the real claim on a runoff play. Fillon in Jeanluc Melenchon both missed out. The results trickling out at 8 00 p. M. Last night. Lets cross back to Francine Lacqua in paris, joined by a special guest. Francine . Francine thank you so much. Day to with us a bad be in paris, because it is gorgeous outside. This is an advisor to the far left candidate Jeanluc Melenchon. Thank you for joining us on bloomberg tv. What have you not heard from your candidate . Who will he tell his supporters to vote for . Well, you probably heard him yesterday, but we want to have a consultation first. Its over the time where you have a political leader what is the position of all these members . 440,000more than members now, so the time of having the political leaders saying whats best for its members is over. We have citizen involvement, and our priorities are what they want. Francine so if they wanted Marine Le Pen for president it what not happen, it simply would not happen. Jeanluc melenchon spent his entire life fighting against the extreme right. He thinks voters, the people who support us, are backing us francine but why not throw his weight behind because there are other options on the table. People might want to have a broad support for Emmanuel Macron, or thin support with conditions. There are a lot of options. Francine would that not be a vote for Marine Le Pen . I strongly believe that this country is fairly republican. Francine i want to talk about the u. S. When you look back at the election in november, some saide sanders supporters its very much like your candidate, and they ended up voting for donald trump. How can you be sure this will be the case . Because we learned from the u. S. I think also the situation is quite different as well. What we have seen in this election is the end of twoparty domination. It was not the case in the u. S. , it was all framed by this very traditional political even if hillarys an outsider, was the its very different here. Over the candidates from the primaries, its new people, new faces, new ideas, whether you like it or not. So give me a sense Jeanluc Melenchon had huge momentum in the last two weeks, he was very strong on social media, he gave great speeches. What will he do, and how much support do you think you will get . Broadhink we will have a support, because we are the u nique face of the left. I think we will have a big group in the assembly to come. Francine thank you so much for joining us. A key advisor to Jeanluc Melenchon, the far left candidate who wont be in the second round, but he is the only one among the top candidates that so far hasnt come out and said you should support this candidate and not the other. Guy Francine Lacqua, thank you. Another fantastic guest analysis of what will happen next in the second round of the French Election upcoming. As francine has indicated, how will mr. Melenchons voters go . Minutes away from the European Equity market open, and it is going to be a fascinating one. Clearly french stocks are going to be the big story. We will be watching and potentially looking at a near 5 rally in french equities. Watch the french banks in particular. We are also going to watching key stocks as well, the worlds biggest cement maker announcing its ceo will leave the company in july. The market open next. French futures pointing to a near 5 rally. Bloomberg bill the open is a minutes away. Bloomberg bill. The open is eight minutes away. Guy five minutes until the equity open. Keep an eye on whats happening with french futures, because as they transition into cash, or at least cash stocks trading, we will likely see a decent sized pop. At the moment, the fair value points to a their 5 rally, 4. 528 at the moment. I would argue that its probably going to be the french banks that really get a move on this morning. Probably something of a relief rally. I think you are going to see that really topping the agenda. Be aware that you do have an awful lot of european banks reporting numbers this week. That is something to bear in mind. When you look at what happens today, keep in mind we will see a lot of reports coming through. Those are the big names we will see. Matt we have some big names going to move today as well. The trade that opens in four minutes, the ceo says they are set for a good first quarter, Goldman Sachs agrees. The ceo is out amid a probe on his dealings in syria. Jimmy choo says he is ready to sell the company, looking at offers for a popular ladies shoemaker. Jimmy choo up for sale. Coming up, the market sale. Guy welcome. A minute away from the market open. Lets take a quick look at where we think we are going to go. Lenny get my futures up. This is the fair value calls, for. 51 to the upside. 4. 51 to the upside. French banks look like they will be well bid. Weve got these liquidity. Matt, over to you. Matt i was just going to point out a chart that Kathleen Hays highlighted to the earlier this morning. Gorgeous chart on the bloomberg terminal, you can access it as well by typing in the code on your screen. Is is a look at the euro over the last year. You can see the bullish gap up, the lowest end of the trading range since well above the 200 day moving average. Guy absolutely. We are going to see how these markets perform. The ftse is open. Remember, the french banks were already rallying friday, bnp up, socgen up. Thats the cac starting to open up, and as you can see, its a pretty decent rally. We are already up by 2. 7 . I would expect to see some of these french banks really getting a decent rally. We saw them moving pretty struggle yesterday. Lets see how they open. Equities bid in europe. Manus good day to you. Ui, thatch may say o the chinese say non. You are looking at an extension of the four weeks of losses, stocks dropping the most in three months. Ons is as the clampdown leverage continues with the chinese banking regulator ordering local units across the cross guarantee lows. This is trading collateral across the system for a variety of loans. The chinese want to take that whole momentum, the bullishness out of the market. Look at this, absolutely banging. Financials up 2 . Risk has absolutely been taken out of the sails. The great rotation . The great rotation was last week, spreads narrowed on the bonds, equity markets the biggest rotation since 1999 out of the u. S. Entity european markets. Financials up over 2 , industrials up. This relief rally is palpable in fx, in euroyen, dollaryen. This is the euroyen volatility. If you want to pick up this chart, 8013, bottom of your screen. The bonds are dropping, risk reversals dropping. Its euroyen where you are seeing the biggest momentum. We are getting a little bit of that back. Were waiting to see where we are trading on the gilt market. You sell one of the biggest loser the u. S. Treasury in three months. You look at the dollar, down. Yields ratcheting higher. What is going to move the bond markets . I know you and matt have been talking about the differential, and that narrows it more than the market had expected. Theres an absolute how that will sense of relief. Eurodollar, who cares what happens . I think that is perhaps a little bit ahead of themselves. Guy . Guy manus, french banks have just opened. They were up 2 friday, are up 10 this morning. Socgen, 10. 84 . Credit agricole, 10. 82 . Bnp paribas, 9 . Real strong french financials rally. It could take us a while to get the orders through but we are up and running now. Bouygues,nge, engie. Theyre up another 10 this morning. We always knew they would be the high trade we saw. That is a decent, decent move for french banks. The spring was coiled, it has just gone round. Was how much there is more to come on this. Matt a huge jump there. We watched the spring coil as the banks took a while to open up. We have the european stocks up the most since june after the French Election results. Im looking at your screen, the only losers on the cac par dolia, which isnt going to the buyback investors expected, and lafarge, whos ceo stepping down. Those are just one point away from the index, which is gaining 203 points right now. The banksry strong, giving themselves the lift off that they really needed. For thegain there french index. I can just type in here sins, and its the biggest gain we have seen since august we 5, 2015. Big, big gain. Speaking of france, in relation in camp macron last night. [cheers and applause] [chanting] [speaking french] id like to say that i realize what my responsibility is. I also know full well what it means, and i will carry on with optimism, enthusiasm. Bloombergs Francine Lacqua is in paris. She has been there all weekend, covering this event all night for us, with four hours of special coverage last night. Francine, fillo endorsedn macron. You just spoke to sophie about melenchon. Does he have to do the same now . She was talking about some kind of reverend inside the party of Jeanluc Melenchon, which means france will not bow down. By frankly find it quite strange, because she also said it would be unlikely they would ever support le pen, because he is so against the far right. It seems to me like at some point, if he doesnt directly endorse macron, he will intimate as such. The concern is that Jeanluc Melenchon, far last communist backed candidate, for so long over the last couple weeks was so aggressive toward emmanuel challenger,ggest that it is unlikely he will do a 180 degree reversal completely, but it is also untenable if he finds himself in a position where he could then be accused of giving votes to Marine Le Pen. It will be a bit of a ballet as they try to figure out the best way to go forward. Guy francine, thank you very much. Francine lacqua out of paris. A busy morning and night for her as we work our way through the results. Market reaction coming through clearly. I want to take you to the screen on your bloomberg. That are the forecasts, give us an idea of where the market is expecting Currency Pairs to go. This is eurodollar. Into 1920. Lets talk with the head of g10 fx research at credit agricole. Are you going to be upgrading your forecast . To start off, were about consensus at the moment. We are expecting europe at 110 yes, wend of 2018, and think the risks have shifted further to the upside. The look at the forecast at the moment highlights that the markets are still expecting too much of a Political Risk in europe, and that risk has clearly abated since yesterday. At the same time there seems to be too much dollar upside in the forecasts, presumably on the back of expectations a fiscal stimulus. I think on both fronts, european Political Risk, chances are that it has shifted, and that should be reflected in a higher eurodollar forecast. Presumably, if everything goes well, eurodollar could go well by yearend and potentially power ahead. We should note that the italian election early next year the risk has clearly shifted to the upside. Valentin, we have seen an inverse correlation between currencies and their respective indexes. Do you expect that relationship to change now . To the degree the euro has been a function of risks associated with the eurozone elections or the french president ial election, i suspect that, down the road, the euro may be restored as a safe haven of sorts, given its status as a funding currency. But on the whole i would expect the facts being that we expect on the back of improving economic fundamentals in the eurozone, the ecb will take steps toward reducing its stimulus in the second half of the year. The reason for the ecb to be rather cautious has been the overhang of Political Risk center dot france. Those risks are baiting, i think the markets focus shifts to the president of the ecb and what he will do next. We expect less stimulus in the eurozone could mean stronger europe. On the whole, the abatement of the Political Risk in the eurozone, was the shift in the ecb policy outlook, will play out as the euro positive across the board, but also against the dollar. Matt valentin, i have the bloomberg fx. Im sure the pros use this all the time to look at eurojan, eurofrank. You mentioned the euro could be a bit of a safe haven since this election clears the way for more european consolidation. Does that act as a pressure release valve for the swiss franc, for the yen . What do you expect will happen in the nondollar pairs . I definitely believe so. If anything, the euro is rejoining the crop of the safe even. You would think the euro would do relatively well against the yen and the swiss franc, but also against gold, which is a safe haven asset. That said, on the whole, i think euro gains could be also pretty decent against commodity or risk correlated currency, if only because we expect that the upcoming policy shift in the ecb outlook to encourage unwinding of europe from the terror trade. It is also encouraging to see the previous charts on equities time and time again we have been seeing evidence that equity resuming, so presumably eurozone investors will buy highyielding assets abroad, and with the Political Risks of abating, made turned their attention to the obstructive assets in eurozone stocks. All these factors, if you line them up, it is difficult to find the euronegative factor. The risks clearly pointing to more euro upside from here. Guy give me a sense of positioning at the moment. Ideas, they a few give me a sense of where the market was coming into this, the scale of the options positioning, what you have been seeing in the sea of data. Im trying to get a sense of how this rally works and how coiled the spring was. On the whole, it felt like the market was cautious. Most of the shorts were focused euroswiss, especially in the market. These are also presumably the candidates about whether euro will do best in the lateterm. On the whole, what we also have seen in recent months now is that there was quite an outflow , and also theone appetite for eurozone equities have been debated significantly. T wouldld argue that i discourage people. If you think of the drivers at the moment, improving macro fundamentals, abating Political Risk, you could argue that investors will Start Building euro long, and that is our argument. We are more constructive on the euro, not because there are big shorts, but rather because the investors will start adding to their lawns. Guy i have the risk reversals up here. This captures the second element of the french vote. We still have a way to go before we but as you say the market is neutral at the moment, and looking at the factors from a macro perspective guy valentin will stick around. The head of g10 fx research, credit agricole. Lets show you whats going on in the markets. We have seen this french jump, as you can see. Its not up by as much, but nevertheless, french banks incredibly strongly bid. The spring was coiled. It started to unwind and we are seeing that for the height beat. Strongly, strongly bid. A beautiful skyline in france as well. This is bloomberg. Matt a quick check on the markets. 70 minutes and the trading day, i am looking at the cac. If you look across all markets in europe, gains across the board, but the strongest is the cap. The cac. Its the biggest move up in french stocks, in the french index, i should say, since 2015. A massive, massive jump up as the risk on trade returns or the risk off trade gets covered, which covers all the banks. Socgen putting up big gains, but also total, sanofi. A lot of big gainers. The only losers on the cac are lafarge after the ceo steps down, deciding not to do a Share Buyback that investors expected, a big pop across french stocks. Speaking of, lets go over to paris, with Francine Lacqua who is covering the election and was there all weekend with a special program. Shes back this morning, joined now by a guest in the city. Francine thank you. We are in paris, the sun is shining, and we are overseeing the eiffel tower with a great view of the rest. Joining me today is the senior economist at exxon. Think you for joining us. First of all lets talk about the equity markets. I know you are an economist, but we are seeing a big pop on french equities. Matt was just bringing us the latest on the cac 40. How much does this have to do with the correction, because it coulds a lot of t have been a Marine Le Pen melenchon standoff . I think this is a lot about this. We are seeing broadbased risk on movement, with powerful spreads that are contracting. I can also see that in the euro, depreciating by more than 2 . I think what really surprised was the possibility of a market very unfriendly result, at a time when we were quite aware of the risks and had our own model to correct. Either said was that Marine Le Pen or Jeanluc Melenchon were slightly above 20 . Weorning what we have have point estimates for the first round that show the polls are fairly credible looking forward. I say this is what its about. We went from 20 risk to below so that risk is kind of gone from markets. I think thats what its about. Francine there are those who say we should be more cautious marine had one fourth the french voters with her, and she is in the runoff. I know polls indicate that macron look at around 68 , but what if . Right, and thats what i meant by the risk going down to 10 . You cant say it is impossible. French, asis not napoleon liked to say. And of course, its difficult to say what happens to voters. I think the key variable here is turner. In the is turnout. In the first round we had very good turnout, barely below what we had last time, which compared to brexit is a very large turnout. But today, it is not obvious to me that in the runoff people are going to go and vote for a mainstream candidate that may be was if we take into account the polls for the second round also whatceoff, and we have historically estimated as the vote transfer metric, will we see is that theres a very largely. I would say impossible, no. Very unlikely. Francine given me a sense of whats president macron, if he does get elected, means for the french economy. On labor, unit. Its a good transition. We go from the market reaction, which is about the market friendly candidate, to what does it mean for the french economy. Runoff,here is not the its the general election in june. Four major parties running for the general election. Macrons party, the right wing party, and Marine Le Pens front nationale because its a localbased vote, my guess is that you will see no outright majority for any of them. Have a changing face of french politics. Compromise may have to be found. Its not obvious with whom. Macron is planning to form a government, and what he will have to do to his political agenda for the french economy, just yet, the Economic Policy uncertainty is not lifted. Whereas from the european membership of france in the eurozone, that risk, which was the focus of markets, is gone. Francine but does it mean in terms of coalition . Will it be a Broad Coalition . Will it be cross Party Support on different issues . The key is who he names in his cabinet and as his prime minister. Yeah. The way it works is that the will the real government that will be able to govern france will only emerge by midjune when we have the result, and then it is not obvious to me will there be an Alliance Prior to or after . Then we are entering into a phase that looks a bit more where you have to form a coalition and create a government, which is not what we are used to. Fory its interesting, french people and for people interested in french Economic Policy. But for markets, i believe now they are going to move on and focus on what matters next, which is the ecb, the fed, and the huge u. S. Policy uncertainty and how much fiscal stimulus can be delivered. Those are going to be the three focuses of markets. Francine thank you so much. Im going to hand it back to you in the studio, and that we are back with a pretty special guest. Much,thank you very Francine Lacqua. The head of Macroeconomic Research at axa. We are looking at big gains across the board in european stocks, even the dax and the ftse are showing their biggest gains us in september of last year. The cac is the real outlier, showing its biggest gain since august 25, 2015. I have the screen up here if you want to look at it, sins. It allows you to see the last time you had gains as this size and magnitude. Lets go to nejra cehic. Nejra, you have the midcap movers. Nejra i do. We are seeing a broadbased risk rally across european equities, of strategists say the sectors likely to benefit most from the results, if we look at french stocks, are banks, retailers, carmakers, and midcap stocks. If we look at smallcap, it was oversold last week. Those stocks really punished in andrunup to the vote, those smaller and midcap stocks are more exposed the domestic economy, making them more vulnerable with a le pen win. This is a contractor with numerous business lines, including publicprivate partnerships in construction. It has hit its highest since 2007, rising the most in more than a year. The swedishele2, telecoms company, they got it be on firstquarter net sales, hitting its highest since august, 2015. This is rand gold, declined along with other producers, hitting its lowest since the end of february. Tracking is happening with the spot gold price, dropping the most in seven weeks largely on risk on and a move away from safe havens. Guy thank you. Lets show you the french banks we keep talking about. These are the numbers we are posting right now. We are anticipating that we will be seeing decent gains throughout the day. The cac is up by 3. 51 , of the banks are much higher. Up next, talking tax. President trump promising a big tax announcement on wednesday. How many details will he find out . And i suspect it will be a more drawnout process, but we will discuss tax and trump, next. Did you know slow internet can actually hold your business back . Say goodbye to slow downloads, slow backups, slow everything. Comcast business offers blazing fast and reliable internet thats over 6 times faster than slow internet from the phone company. Say hello to internet speeds up to 250 mbps. And add phone and tv for only 34. 90 more a month. Call today. Comcast business. Built for business. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Are matt the estoppel the establishment crashes out in france. Polls point to a macron presidency. Rally on. The euro gems. Stocks surge. Thanks seeing a big post. Turned the ecb toward the qe exit. Willd trump announcing he announce big tackler big tex reforms this week. Good morning. I am matt miller in berlin alongside guy johnson in london. Guy 30 minutes into the trading day. Quite a morning already. We knew it would be. Let us talk about what we are seeing. Cac. Ve a strong bid on the and a lot of that is being driven by the banking stocks. They were bid friday. That is the other thing to bear in mind. We got the risk on five on friday that has accelerated and monday. This is the cac 40. Bnp paribas on up 7. 5 . Which you financials, were always going to see they had the most to lose if le pen had come through. She did not do that and as a result, the coil is unwinding. And the french banks are strongly bit. Turning to another aspect of the eurodollar trade. The dollar aspect. The white house will offer of an outline of its tax reform plan this week but the specifics a not be ready until june. A big taxting that reform announcement will be made on wednesday. The full plan will not be ready for a few months. Similar to what you said, not very many details. If anything, the details will come later in the year. Opefully before the summer so we can have a more reasonable discussion in the congress. People may use this as a verdict for trumps first 100 days. They may make up the headlines but not very much substance. Matt are you concerned about a government shot Government Shutdown . What will that do to the fading rally of the dollar . Prevailink reason will especially on the republican side and the continuing resolution that will be voted on, on friday it should pass up with the support of the democrats. No Government Shutdown. If that were the case, small risk. Historically, that has worked to dollar ande discourage dollar buying. The dollar has suffered the most historically as a safe haven currency. You could think that would play out positive in the eurodollar. Confusing trade overnight in the sterling paris sterling pairs. Walk me through sterling positioning. It is a case that the pound is oversold and still relatively cheap as a currency. But in the fundamental picture, we believe that the eurozone fundamentals are arguing for a pounder euro against the at current levels. At the same time, it does feel like the rally in cable, unless we see more fundamental support in terms of improving u. K. Data, may soon abate. A good sellinge opportunity when it comes to cable. On the whole, the pound you could say safely that most of the Political Uncertainty concerning brexit has been put into the price. The path of cable will depend on how the u. K. Data shapes up to isfrom here and what the boe going to do. And on both counts, cautiousness is warranted. Is retail sales last week was a case in point. All of that keeping boe fairly accommodative. Case of eurosterling, it is an interesting buying opportunity. Renewed you are saying you think gregs it has been priced into cable in euro sterling as well. You do not think that the French Election results could make brexit and even worse deal for the u. K. . It is always inherently difficult to determine how much the Political Risk is in the price. 120 inst time we tested cable in early october, that was on the back of the realization that voters preferred a hard brexit. Earlier this year, at the end of january, we got another test of the 120. On the back of the realization that we were preparing for a really hard brexit. And in midmarch, there was another test when people started u. K. Emergingthe from the twoyear negotiation period without a trade deal. On all occasions, we tried the 120. And in all three, the Political Risks seemed to increase. Moment, what we price to following the prime ministers announcement of early elections last week was that brexit. Those risks are still there. The price is telling us that they are already in the price. With macron now presumably the french president , ultimately that is confirming the view. It will be very difficult for the u. K. To redefine its role within the eu. More worrying is the fact that the eu will try to make an example of the u. K. And discourage other eu members from leaving the eu. I do not think that the early elections in the u. K. Will make job any easier. Great to see you this morning. Thank you for your detailed analysis. Remember, if you are a bloomberg customer, you can watch the show a bunch of ways. Tv is a great function because of a number of different aspects. Down here, at the bottom of the screen, you can ask the guest to a question. You can also use this function as well to talk about the different functionality that we are talking about in the charts we are using. It is all they are on your bloomberg, tv. Draghis next will as tensions ease. Will the ecb president consider a faster route to normalizing policy . That is up next. This is bloomberg. Matt welcome back to bloomberg markets. 41 minutes into the trading session. We are looking at gains of 3. 6 in paris. You are looking there at the eiffel tower. It you were long, the french banks, it truly is the city of love today. We are seeing banks gaining 10 . The gains in equities and in the euro as well. Fronts definitely front and center. City putting out a note this morning reiterating its positive stance on french banks saying on the back of the decreasing Political Risk premium. The lower sovereign spread. Lower uncertainty. Ditagricole. And cre since has had its highest 2011. 11. 5 ,risen as much as most since 2013 in terms of the intraday jump. Bnp paribas has hit its highest since 2008 rising as much as 10. 3 , the biggest jump since 2011. Two of the best performers on the stoxx 600. One of the worst performers is center cup. A different story. This is about the conservative party in the runup to the june 8 collection bringing up Energy Prices as a potential part of their campaign. On gas andut a cap electricity prices. It is the biggest electricity supplier for britain. Let us find out what is happening around the world. Here is the bloomberg first word news. Juliette the white house has said it will offer of an outline for its tax reform land but the specifics may not be ready until june. Hisident trump told followers in a tweet that a big announcement would be made on wednesday. They expect to lay out the administrations rentable that a full plan will not be ready for a couple of months. U. S. Treasury secretary Steven Mnuchin says the imf outlook for the American Economy is a little conservative. He repeated the Trump Administrations goal of 3 growth or more. The fund reiterated its forecast that the u. S. Would grow at 2. 3 the year but mnuchin said economy is wellpositioned to expand faster. Sustained u. S. Economic growth is good for Global Growth. Economy, grow the u. S. That is not just good for the u. S. Worker, it is good for andrnational growth as well provides opportunities. That is what we are focused on. If we do a good job, it will carry over in the spillover. Juliette global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. This is bloomberg. The Ecbs Mario Draghi could consider ending the Central Banks qe program earlier than some expected. Most economists believe the ecb president will provide guidance as early as june. Much of that depends on what happens next in france. Number ofeared a hurdles surrounding france. Then guard is the largest holder of french debt. Joining us now is the companys head of fixed income for europe. Let us start out with the basics. Let us start about let us talk about this chart. What is the right price . Probably maybe 10 basis points. Maybe 15 from here. You are seeing it move back to the fair value. There is still a nonzero chance of a le pen victory. We have to see how macron goes about forming a coalition. Is risk to the eurozone decided but looking at france itself and the economic policies that macron is looking to implement could be a little more challenging. Guy there are still some things to think about what you think 1015 from here. Ecb. Draghi is watching. Does how does the French Election change his trajectory . Ton. T a when you look at inflation. Still looking at the bottom of the range. Draghi does not have an incentive to move sooner. The pending risk from brexit and the italian elections coming up in april and as well. Ections it is hard for draghi to move any quicker. And it is really hard for the market to remove stimulus as quickly as they tend to think as we tend to think the markets camp. It took a long time to get off of zero in the u. S. Matt from a market perspective debtom a long french perspective, what is the best Case Scenario for make run Going Forward regarding coalition . Coalition with the central parties all anyone has been wanting to do at this point is support him for the president ial election for the next two weeks. They have not gone beyond that and said they were willing to build a coalition yet. Expectt outcome we can is him making a deal. He is a dealmaker. Is probrussels. Can we Start Talking about eurobonds now . Eurobonds. Are you talking germany . The can we integrate eurozone further . Can we Start Talking about shared liabilities in the bond space . I think we can and we already have. The eurozone has come together when push comes to shove. It is noteworthy that we are not pop upthe greece stuff anymore. It was on the table two months ago. And that is relatively quiet. It does show that there is cooperation. With the French Elections out of the way, hopefully, it is showing a renewed cooperation. Now that they have a reason to unite as europe on the brexit side, it only moves things forward. Are going toou stick with us. Paul malloy is the head of fixed income for europe with vanguard. We will continue to get your thoughts as someone who helps run 3. 9 trillion in assets. Coming up, Donald Trumps tax reforms. How much of a cut is on the cards . How will it help the u. S. Consumer and u. S. Corporations . We will talk about that next. This is bloomberg. Firmly in focus. It Beautiful Day in paris. The markets are loving the action. 4. 84 to the good. You will find the french banks are strongly bit. Bought ng, para paribas up nearly 8 . Some really decent gains being posted. We have macron we got what we expected in the numbers we were expecting. That is what the french banks are doing. Solly solid bids this morning. Matt definitely, a lot of action in european markets. Looks like there could be some action in the u. S. As well. The white house will offer an outline of its tax reform this week. Specifics not available until june. On twitter, the president said there will be a big announcement on wednesday. And Steve Mnuchin says the ims outlook for the American Economy is a little conservative. He told Christine Lagarde that the Trump Administrations goal of 3 or more growth can be achieved. Last week, the fund reiterated its forecast that the u. S. Would only grow at 2. 3 this year. Still with us is all malloy. Interesting chat there between lagarde and Steve Mnuchin. What do you think is a realistic expectation for u. S. Growth . 3 is the bottom of what mnuchin wants to get to. Donald trump penned a little note to him saying you need to get us to 5 . Paul 3 seems a bit aggressive at this point. When you think about what all it takes to get to that kind of growth, you are really going to need Global Growth to pick up right alongside it. Europe will need to move forward and hit its growth target. It has been good in recent months but we are still not out of the woods yet. While i wish them yet cut while i wish them luck, a do not think 3 is in the immediate future. Guy what is the right price for treasuries . Or 260. Round 220 until we figure out what happens with the tax plan and fiscal stimulus, there is still a lot of uncertainty out there. Before we see the next move, higher and rates, we need more clarity on how much spending and borrowing will need to be done out of the u. S. And any move be economic driven and disappointment driven. I think we are in a bit of a Holding Pattern for the near term. Guy we could end up with an interesting scenario where donald Trump Administration pushes harder on the supply of treasuries and we get more coming through. And the central bank might inc. What is the worst Case Scenario for treasuries, particularly from the supply side point of view . Paul the market could anticipate the one trillion fiscal policy and that would steepen the yield curve price substantially. Unlesst will be anchored you really see that 3 or 3. 5 growth. That would force the fed to move faster. Now, the market is still pressing at two or three hikes. It should be anchored on the front and and selling off in the long and if you get any fiscal stimulus or if the tax cuts get dramatic. , it has been a pleasure having you. ,reat to get your thoughts especially on a day like this when so much is moving in the markets. Paul malloy is joining guy and myself on bloombergs daybreak radio live on London Digital radio. You can turn off the television and turn on the radio and join us. And you can find that on tv. Not only does it Stream Live Television but radio as well. If you do can if you do choose to continue to watch bloomberg television, up next is surveillance. Continue her amazing coverage if she can stay awake. Up next. This is bloomberg. Francine both establishment parties crash out in the first round. The country braces for a runoff between nationalism and globalism. The euro jumps and stocks surge in a relief rally. Will this push draghi and the ecb toward a faster qe exit . And tensions rise between asia as the u. S. And japan began naval drills. President xi urges trump to show restraint on north korea. Francine lacqua in paris and mark barton covering your markets