Transcripts For BLOOMBERG Bloomberg Markets European Open 20170515

And russia say they are in favor of extending an output cut into next year. Oil jumps to its highest level in two weeks. How far could a Short Covering rally take crude . We will talk about that in a moment. And europes new power couple. After a big win for merkel in the key state of north rhinewestphalia, how will macron and merkel reshape the eu . They meet in berlin later today, matt. Matt thats right. Expecting that meeting around. Oon, so six hours from now we are less than a halfhour from the european open. Bureau stocks euro stocks rising a quarter percent. Cac futures, looks like a risk on day. Investors are selling off bunds. I have a threeday chart, lets move it to one day so you can see the price action. You could see some volatility there, but yields are still up 0. 4 . Right now, to. 0 guy what do you make of the win for merkel . North rhinewestphalia is big, and she took it big. Is it in the bag, when we get to the central vote in september . Matt i dont think you can say it is in the bag, because we still have four months, and last year in the u. S. , not everybody thought donald trump was going to be the next president in july, or even in august or september. But we do have a really shocking victory for merkel, it is the second time in 50 years they have taken north e otherestphalia, so th party is the worst showing since world war ii. Really, really shocking message sent from voters in the most populous state in germany. Guy going to be fascinating to see how the meeting goes. I think macron starts small, works his way up. He will be talking soon about europe bonds. How will germans be talking about that . Short has been a proponent of eurobonds. This is how the markets are set up, ignoring equities. D, kiwi. Dollar on bi and aussie bid. Let me take you to the other Asset Classes as well. Clearly we are trying to figure out how to price in the cyber attack over the weekend. The other story we mentioned is whats happening with oil. The oil Energy Complex is solidly bid. Whats interesting is if you look at the positioning, what it tells you is the market is certainly not long oil at the moment. That positioning story could be as important as anything else when it comes to trajectory of crude, and much i would say is made of this meeting with opec. Lets get the bloomberg first word update with juliette saly. Juliette thank you. An unrivaled global cyber attack is poised to continue claiming victims today as people return to work and turn on their computers. Even in hospitals and other facilities. Ineffective organizations and businesses including the u. K. s National Health services, russias ministry of the interior, carmakers, and petrochina and fedex. This is something we havent seen before. The global reaches unprecedented. The latest count is over 200,000 victims in at least 150 countries. Iniette chinas economy better shape as the government 10. 7 . Sails increased meanwhile, fixed Asset Investment expanded 8. 9 for the first four months. All those figures were lower than the previous period and beat economist estimates. 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, juliette. All traders playing catchup. Saudi and th arabia and russia y they are extending cuts to shrink a global glut. It was announced at a joint press conference in beijing. We are joined by Tracy Alloway in abu dhabi, and mark cudmore who joins us from seou. Tracy, walk us through the market reaction. I thought we had already baked in some sort of an extension from opec. Tracy yeah. You and a lot of other people. But that said, think about what it took to get the price action we saw this morning. Oil was a bit slow to move off those headlines. Now wti is up 1. 5 . But this thing that has happened, saudi arabia and russia are making some strong statements here, including a joint statement that they will do whatever it takes to get to their longterm goal of reducing global inventories. Meanwhile, they are talking about extending the Production Cut agreement for nine months instead of six months. That might be what is helping some of the Oil Price Action this morning. I know you mentioned cftc. Unwind alle funds bets on an opec driven rally, and that could mean theres extra money around this morning to deploy back into the oil price. Its important to really interpret the Oil Price Movement in that context. Matt does that mean the bears still have some trouble ahead, tracy . Its difficult to say, matt. But i would argue that this doesnt really resolve the fundamental, underlying problem that opec faces. Whenever they push up the price of oil, you see u. S. Shale producers come back into the market. Not setting aside, by the way, all the concerns about compliance, exempt opec members like libya. Ongoing,hale issue is and it is difficult to say that extending the Production Cut agreement is going to do anything to battle that. Indeed, some of the commentary i have seen from analysts already points to the fact that in 2018 now they see risks to the rebalancing growing. That means they pushed out the timeline little bit for rebalancing risk. Guy mark, what do you make of this . Is this good money . Do they have any choice but to do anything other than continue the cuts when they work their way forward from here . There dont seem to be many options on the table. I think your phrasing is good. They need to do it, they are forced into a corner. As tracy said, this will probably have some followthrough in the shortterm. Because that positioning situation you mentioned, positioning has been cleaned out, and that means the market is healthy. Its able to get a rally. This kind of bush news came at a good time, especially on the back of the u. S. Data showing inventories continue to decline. But the longerterm picture, not only is there a shale situation, but the global stockpiles remain very high. Studytudy in the this inventory comes from a record inventory. It will take a while to clear out excess supply, and whenever the inventory spikes, we get inventory from shale. Matt mark, will this matter . Does it affect the move and other commodities today . Certainly we are seeing a bounce and other commodities, and i think part of that is the sentiment spillover from oil. But i think its important generally. It implies theres the demand to mop up this excess supply in the market, and that sends a good signal. Its not like the other commodities. If oil rallies multiple percent, it doesnt mean all commodities rally strongly, but it does mean they can pick up and get positive support. There is definitely a broader commodity sentiment here, that the whole asset class has been deleveraging. Now it is looking for positive signs. Oil may be one of the positive signs in the shortterm, but mediumterm it is not looking great. Guy thank you very much. Mark cudmore, bloomberg macro strategist. Tracy alloway, avenu abu dhabi. If you want smart analysis throughout the day, and alive ego mliv go. You get a lot. The market live is running throughout the day around the world. Coming up on the show, we will speak to the ceo of the German Company reported earnings this morning. Had we will hear exclusively from the italian finance mr. About finance minister about challenges facing the Banking Industry in his country. This is bloomberg. The open is 19 minutes away. Matt china has laid the framework for its new eastwest trade route, known as the belt and road initiative. President xi jingping welcomed World Leaders and business figures to beijing, describing the plan as a project of the century for china. Our china correspondent Tom Mackenzie joins us now. Take us through the details of this grand plan we are hearing about. It is a grand plan. We have had president s in town. Notably, we havent had any g7 leaders, other than italy. Fully have had in terms of the details, we heard from president xi jingping outlying an additional 78 billion usd going toward the project. Sayst suisse, by the way, eventually china could pump in up to 500 billion in the next five years. We also had 18 countries sign up for a financial proposals paper as part of this project. And we had a meeting of the development banks, the likes of the world bank, the aiib, China Development bank along with state and policy banks, and private banks like Standard Chartered and santander to drop of financing framework. And you have had comments, of course, from some of the leaders here about how they think they can benefit from this initiative. Are morevent had details on the level of transparency that many are looking for on this, and whether or not this is any more than china trying to open up new markets and move excess capacity. Were waiting for new details on that. There may be a press conference from president xi jingping and we may get more details. Guy its interesting, talking about the world must unite like a flock of geese. Interesting language. Im sure theres a decent chinese translation on that one. Can you all caps of the challenges to get this to work . Is the challenge really tha convincing the rest of the world that chinas motivations are good here . I think it is. We heard from the chairman, the talkingead of kpmg, across 150 countries, saying the number one risk for this is enticing and encouraging private investors to get on board. If they cant get private investors to match this money being pledged by china, it will fall flat on its face. We also got concerns from the germans that this wont be a level playing field, and they have so far refused to sign off on the final communique. They want to know that German Companies can bid for these projects and there will be preferential treatment from more for Chinese Companies from or for Chinese Companies. We also had the u. S. Representative seeing he wants a balance of a playing field, and we heard from Kristi Lagarde saying she wants to make sure the Infrastructure Projects are environmentally sound. Theres a lot more flash to put on the bone of this hugely ambitious project. We may get a few more details in the communique, and we havent even touched on the geopolitical concerns. Countries like india have stayed away because they are so concerned about their partnership with pakistan in contested regions like kashmir. More communication should be a later today. Matt tom, thanks very much. Tom mackenzie, joining us from the ground in beijing. Lets get back to the corporate news. Gelsinger reported Earnings Loss near 17 . The Engineering Company confirmed its 2017 outlook. With us now on the phone from mannheim, germany is the companys ceo. Thomas, thanks for joining us. Let me ask first how you intend to get back to the black here. Is it pharmaceuticals that expect to deliver you back to profit . You record theif strategy that we presented in february, we tried to simplify things. We said it would be executed in three phases, stabilize, buildup, build out. The stabilize phase, we recognize that the headwinds would maintain, that we would have a difficult environment, and we would focus primarily on cost and selfhelp. If you look at the numbers closely, you see that is taking hold. We are getting costs under control. That gives us the confidence and the strategy from february beginning to take hold, and we will deliver on 2017 aspirations, not because of any one industry giving us tailwind, but rather because we are managing our business and we ares utilizing our business. Matt so you are focused on cost cutting. Does that mean we arent going to see any m a action this year . You will be looking at acquisitions . No, we said that will be part of our plan, but after the stabilization phase. If we are going to continue on isck, as we think we are, probably went to materialize until the end of the year or next year. Guy good morning, its guy johnson in london. Fabian capital owns just shy of 30 of your business. Are they on board with the strategy at the moment . Any signs they could be thinking about a next set . They have been on board for quite a long time. They have two members on our supervisory board, and when we presented and developed the strategy, they were really part of the process. They have been on board while. They show no signs of letting up. You probably would have seen a slight uptick in their percentage of shares that they own in the company, that was a result of our canceling the 4 treasury shares we had. I think in terms of a shareholder, they are the kind of person you want to have on board, and i am quite happy with their involvement. Guy lets talk about active ownership on their website, which is always interesting when you run a company. Thomas, can i ask you a more pertinent question to this morning . Do you run any xp in your i. T. Department . Have you experienced any problems this morning when your staff turn on their computers . Thats a good one. I was checking this over the weekend. We have seen no effect, study as you go. Fingers crossed, but we arent seeing any affect. Matt i want to nail down the plans from the forecast for fiscal year 2017. You expect to return a positive cash flow. Is that still the plan . And is there any change to your outlook . No, i think what we have described is an industrial landscape that uspets what we see today. Try to look at our overall market, remaining difficult. Thats expected. Thevered oil and gas, then oil and Gas Companies will be successful in taking up costs, roughly 40 in the last three years. And of course we are part of that cost saving. The oil and gas operators are locking in the saving, so we are saving the we are seeing the renegotiations come to an end. Although we have ongoing contracts, customers are coming back and taking a bite of the apple. Now we have managed to lock those in for the next two to five years, which means that around 50 per barrel will be cash flow positive and begin to look at more stable planning. If you look at the u. S. , the landry cant is double what it was in 2016. Were waiting to see a pickup in activity, not only in upstream but in downstream, near the location where petrochemicals go. The middle east for us is somewhat hesitant, but chemicals are picking up there. Smelters and other industries are beginning to show signs of revival. Given the state where we are on the industry, we are confident of being able to manage costs. That will take us in a better position for taking out capacity, managing s gna. We are on track to improve our bottomline performance, and toward the end of the year we think we can turn the cash curve the other way around. Guy thomas, it has been a pleasure. Thank you for taking the time to join us here on bloomberg. Thomas blades, ceo of bill finger. Were starting to get a more solid bid on the crude contracts. Brent is now north of its 200th day moving average, which is interesting. You can see that on the gm and screen. Brent wti also strongly bid. Up next, we will take a look at the movers in todays trade. We are anticipating its going to be fascinating to see which Companies Benefit and which do not benefit. Ilfinger not affected this far. This is bloomberg. The opening is seven minutes away. Guy we are four minutes away from the market open here in europe. Keep an eye on whats happening with your stocks. Oil is firmly bid. The other thing you need to be aware of is any effects of the hack attack that has taken place, and how that will be priced in. We already have some understanding of Certain Companies that have been affected. Stocks like brenda, telefonica. These are companies that could be unfocused. Could be in focus. There are other companies that could be benefiting. Security companies. A attention to the long short of this trade. I think it will be fascinating, matt. Matt absolutely. It will be interesting to see how many people will pay up and how many peoples databases will be negatively affected. We will talk about that, and the equity markets are open. This is bloomberg. Guy monday morning, plenty to think about. Take a look, let us at where futures are taking us. A little outperformance in london. This is the fair value. London looks like it will open around. 5 higher. The dax and going to be a fascinating trade today, up by nearly. 6 . Interesting with the politics in germany pointing towards a merkel victory. Matt, what else are we watching . Matt i am looking at the price of bitcoin again today, guy. I have a chart showing oneday moves in a graph. The price with this blue line here. We did hit an intraday high of 1886 for bitcoin on thursday, then on friday, the ransom was only payable in bitcoin. A job. 130, but it is now back up to 1765 for bitcoin. Guy let us talk about the opened. We are taking a positive story for most of the main markets. Watch the ftse index. He ftse 100 is out of the gate we are expecting more to come through. I am intrigued to see how the al stocks react to what is volatile story surrounding crude right now. But we are firming. Let us wait for the cac to open up and then we will have things over to manus cranny. Numbers emerging. Manus cranny. What have you got . Manus thank you very much. The belts and growth story is ,he cherry on the top of hope the hope and promise is from trump. These are longterm promises coming from xi jinping about openness and globalization versus trump. That seems to be driving the market this morning despite the retail sales. And thestment, industrial opera numbers, all delivering less than the market had anticipated. What can the pboc do in the face of that slowdown . Upope, business financials. 3 . The more mrs. Schaeuble speaks to kata brown, the more they are convinced bari, over the weekend in he said the number of forming loan story nonperforming loan story was tens of millions of euros. Story is undoubted in europe. It is becoming much more of a firm story 31. 7 . Where does that put us . You will see a growth of around 1. 7 . This is you can Economic Growth beginning to level off. Here in the white, you have the eurozone, so you can see the eurozone setting to outpace the e. U. Momentum youind of have gone in terms of the overall growth story in europe during the oil story is front and center. Brent is big, wti is big. You can see they are closing up. 2 . This is the positioning of the markets. They had washed themselves out. The market had essentially given up on its very long bullish position it created on the first cut that was agreed to. The market has got fresh ability to take itself higher. This is the shanghai composite closing on the data. The movement seems to be on the hang seng. You have got a nice bit of momentum. It is the belt and road story that drives the market. Im off to the radio. Let us turn our attention to what is happening with the markets and some of the moves we are seeing. Unsurprising that, we are getting a move in some of the oil stocks this morning. I have the set up with index points. While that shall, one of the biggest gainers. Bp is dead, total is bid. Some of the other stocks as well. Some of the drug stocks. 12 stocks have gone exdividend in europe. Be aware of that. You can see it wont are presented when it comes to the losers. Phillips has gone exdividend this morning to read edp had gone exdividend this morning. A whole bunch of others as well. This morning. Edp has gone ex dividend this morning. Also bunch of others as well. Do not worry about it too much. Just mechanical. Crude prices jumping after saudi arabia and russia said they would pay for extending all out tput cuts. Ou speaking at a joint press conference in beijing, the Biggest Oil Producers said is needed to curve reach the goal of reducing global inventories to the fiveyear average. We have come to the conclusion that the agreement needs to be extended. We will not reach the desired inventory level by the end of june, and therefore, we also came to the conclusion that will probably be better at the end of the First Quarter in 2018. Guy the Saudi Oil Minister joining us on set. The fixed income cio at blackrock. How do you build oil into your models when it is as lumpy and bumpy as it is right now . There is so much volatility near term in oil prices. It must suggest a technical situation. Our analysts would suggest higher prices that we saw in april has drawn and more producers, so you have this interesting balance between the cuts as described and also the u. S. Production. We do not think oil prices will move materially higher but not fall materially from where they are as witnessed by the saudis. Oil is an important factor in the inflation profile. What i would say, and we were talking about this earlier, is that it is interesting that the u. S. Inflation numbers have been softer. Argin, a bit to the extent that that is important in terms of the feds view, that is where we would start to take notice. We do not suggest oil prices will move materially from this 40 and 50 on range, but if the inflation data in the u. S. Is ever so softer, it may give an already dovish leaning fed the opportunity to be more sanguine, more relaxed about the rate hikes as we go through the rest of the year. June is a done deal. They will deliver in june. The question is how does that set the tone for what is andcally about a rate hike a half price in for the rest of the year. How do they handle that . If the softer inflation data does give enough opportunity to reflect, i do not think the markets are quite ready for that. Matt what does that mean then, scott . When we talk about inflation data, im thinking more about the ecb then i am everyone is talking about the idea that draghi could Start Talking about the beginning of normalization. When do you expect that, and how will oil prices affected . Scott im not sure oil prices will have a Material Impact necessarily over the medium term. Conversationhis the ecb is having a something we are very focused on. There was talk about it last week and we are try to figure out what is the market expects from the ecb in terms of either paper, or in terms of an increase in rates. We dont have it priced into europe until 2019. The question would be about the ecb purchases and how they were to taper that Going Forward. It seems that market consensus is that towards the end of 2017, perhaps in september, they would start to deliver a message around tapering. Obviously, the inflation data in europe and the growth data as forward on a chart, has been much stronger, and so, i think the market consensus is for the ecb to begin the discussion around tapering in the Third Quarter of 2017. Could they mention it in june . Is much inflation data closer to target than anticipated. They could, but again, i think they will take the more dovish stance and be more relaxed, so im not sure that be nearterm oil volatility, to answer your question directly, factors into the ecb over the medium term. They have to recognize that headline inflation and core inflation have both increased reasonably over the last couple of quarters. Guy do you think they are wondering why on earth normal business is not unfolding in front of them . The u. S. Economy is pretty near full employment. The bank of england cannot figure out what the mechanics of all of this are. The Oil Prices Dropping around all over the place over is bopping around all the place. When you have a mandate, how on earth are you trying to project forward policy, that the market excitation at a time when you are struggling with mechanics of the basic economics that surround this . Scott i think it is a very difficult task. The one thing that surprised me is how kind of not forwardlooking some of the Central Banks have been in some respects. Look at the ecb, for example. It is clear we are not in a deflationary theory any longer. The cutie program address the deflationary here. In the u. S. , whether we are a target or close to the inflation target, it is clear that the employment picture and the growth picture, although maybe a bit softer the last few quarters, is very strong, so why are policymakers setting rates for two years forward in a sense as opposed to right now . That is a big question. For us, it is a battle between the impact of and the lingering effect of the financial crisis and the impacted have had on the psyche of bankers and mark carney was interesting. He said his ability at the output gap would close at the end of the forecast from a, which is a very powerful statement. Guy and wages will rise . Scott but right now they are not because of the situation with the currency. That is a very powerful statement. If that were true, and brexit for example, turns out to be as expected, then clearly, they are on a rate hiking cycle. Obviously not today or tomorrow. Confuseshat us a bid is a forwardlooking nature of Monetary Policy. At the end of the forecast period, not right now, what is being produced on the output numbers today really is what policy did a year ago, not what policy is doing right now. Matt all right, scott, you are going to stay with us. Scott thiel, cio at blackrock. Coming up on the program, we will bring you our exclusive interview with italian finance minister Pier Carlo Padoan one after fears about the bank that took the spotlight at the g7 meeting in bari. How did he calm his fellow ministers . Europes new power couple. Emmanuel macron heads to hear, to berlin, to meet Angela Merkel in the wake of her big win in germanys most populous state. We will discuss all of that and more. This is bloomberg. Guy 8 13 in london. 9 13 in much of europe. But us have about with this market open is taking us right now. These are the numbers to her not quite as well bid as we first thought this morning. Commodity stocks are bid this morning. There are 12 stocks going ex dividend across the stoxx 600 this morning. Dividend. On going ex that is acting a little bit of a drag. Let us go to narrative catch nejra cehic. Nejra a record high for a Beverage Company after 3. 4 after it said the fullyear results are comfortably ahead of estimates. This is one of the gainers im looking at in the mid cap you talked about Commodity Companies in the oil and gas space. Of the best performers as we have seen. Oil jumps this morning. Im focusing on one that has been lower. Fac fell after there was an investigation filed against them. We are down 3. 7 right now, so it is extending its loss to around 17 . Since juneits lowest 2016. On the downside, im looking at a Residential Construction services and management company. 320 6 million at euro capital increases to issue up to 12. 5 million new shares and the stock down 2 right now. The finance ministers of g7 met in italy over the weekend in what led to a watered down communique on trade as delegates agreed to leave the issue of protectionism to the heads of state and upcoming g7 meeting in sicily. An issue that it arrives on the sidelines of the meetings was the concern for italian banks and the high levels of nonperforming loans on their balance sheet. I caught up with the host of the gathering, italian minister, Pier Carlo Padoan. We are seeing encouraging signs of stocks going down, stock decreasing, going down to market solutions, which is good news. Are someme time, there limited specific cases that we are directly dealing with because they will involve public money to be used as a precautionary support to capital, so from that point of view, the situation is not finalized yet, but they are going in the right direction. Matt can you give us specifics as far as an pls net bad debt . How low it could go . Pier the numbers that have been floating around and very billion amount to 700 several hundred billion. I would say that now we are talking about tens of billions of an pls that are slowly but surely being eliminated from bank balance sheets. Is got keel,ith us deputy fixed income cio at blackrock. Are these concerns basically behind us as far as european they stilloncerned . Have italian banks, 350 billion euros in terms of gross nonperforming loans, but the net npls seem to be shrinking. Scott i think that if we look at the sector overall, that is one of the areas in fixed income, the Banking Sector, we find to be reasonably attractive despite the recent valuations in equity markets. In particular, if we look at whereinated financials, you have spreads in excess of 2 in terms of a tier one, much higher than that. Again, policy is incredibly accommodative and supportive of the banking system. We note that italy was able to issue shortterm bonds at 40 basis points last week. That suggests investors share the view that the Banking Sector is in better shape. When we look at italy in country in a bigger the European Union, policy, the ecb policy, remains an incredibly vital and important part of the overall picture. Guy a lot of supply coming on in europe this week, and threatening europe by the back end . Scott in general, we would say the market reacted positively to the french Elections Come obviously, because the other way would have been kind of a cataclysmic cataclysmic is a strong word. Asymmetric event. We have the italian tenure spreads to swap, so take out the idiosyncratics, and they are basically at th where they were at the beginning of the year. Europeanto buy sovereigns, the aggregate market has a negative return year to date. You have to believe in the ecb policy remaining front, row, and center. The peripheral bond complex is less than opportunityset than it has been in the past. We are getting closer to ecb Monetary Policy shifting here, and you know, with around 2 italian 10 years, you have to believe that that process stays in place, and that the good news that is coming out of the Banking Sector remains positive. Matt so what does that mean i far as corporate . When you look at corporate, is the opposite true . That youre getting closer to do better buying you are getting closer and closer to better buying opportunities . Scott there is a big spread between the Corporate Market and particularly the ecbs purchase program. Around 120 spreads basis points for Corporate Market overall, in europe, compared again to a tier one bond of 300 and 400 basis points , and in our view, much of the Corporate Market rally has taken place, and it is really now, when we get into the banking and higheryielding sectors, that we find value. And that is also true in the highyield market, in the u. S. , and also true for emerging markets. If you step back and see policy is likely to be in place for some time, although we will be debating the exit of the ecb and we are in the process for the exit in the fed, it is clear that the inflation environment remains, particularly in the u. S. , relatively benign, and the policy response remains relatively benign. In this case is, the higheryielding assets look attractive. Guy scott, stick around. Plenty more still to discuss. Scott thiel, cio at blackrock. To leaveain prepares the European Union, theresa may will pledge to broaden Employment Rights today. We are going to talk about that. We will focus on the u. K. Election, next. This is bloomberg. Matt welcome back to bloomberg. Rkets european open i am matt miller in berlin alongside guy johnson in london. Bloomberg business flash. Juliette saly. Thank you. Att, the bennison familys atlanta is bidding for the competitor. The italian Infrastructure Company is offering 16. 5 euros per share for 100 of the company. The offer would create the worlds biggest operator of toll roads. Atlanta, which owns romes two airports is a seeking to boost earnings by acquiring assets outside its home country. Rwes firstquarter earnings missed analyst estimates. Adjusted net income slipped 18 to 689 Million Euros in the three months through march through march. The German Company plans a dividend this year as it resumes dividends to all shareholders after scrapping the common stock for the previous two years. That is your Bloomberg Business flash. Guy, matt. Guy thank you juliette. Theresa may will today pledged to broaden Employment Rights in britain as the European Union. She promises to safeguard pensions, the economy, and the workers surrounding that, and wages. It sound like the tory party. What we are going to hear, later on, is a fascinating mix in terms of what is happening here. The Opposition Labor Party pledged to more than double what raises onment Financial Transactions by extending derivatives and bonds, talking the transaction tax, and removing an exception for trading houses. Still with us, scott thiel, decade of fixed incomes yellow blackrock. I want to take us to the mechanics of what is happening here, and that is the pound sterling. This is the cftc data. It is pretty clear that we now have a whole bunch of the shorts that were put in place as a result of what is happening with brexit coming on. 129130. Ading sort of what is your sense of what the market is trying to signal, or what the market is trying not to signal, i guess is more to the point . Scott this is a very tricky point. We have had a very big recovery where we spend a lot of time postbrexit and recall, at the moment that makes it was announced, the pound went from 150 basically down one and fluctuated around the 120 level for a good level of time, and many market analyst expected the u. K. To move into recession. Some people were talking about 4 Economic Growth. Really big numbers. , and it is a big negative number. The market moved the pound. Ccordingly down sharply add on the uncertainty of this process. Since then, we recovered quite a bit. Some of that is a trivia vrable to the fact that the economy has done much better than people would have expected, coming off a little bit now, but clearly, those big negative numbers were not realized. We are moving into a period tore in order for the pound move higher, we have to get back into that range from where it originally fell after brexit, so 130 level. 50 to way . Id we get that if the political landslide for the tories is as much as it was for Margaret Thatcher in 1983, that is going to be a very powerful negotiating stance for her, both internally within the , and externally with her e. U. Partners. For us, the election outcome is going to be important. Guy thank you very much indeed. We are going to have more from scott in just a moment. This is bloomberg. The global cyber strike could claim more victims today as computers are restarted, but so far, asian firms have seen limited problems. How will the markets place it in . For even longer. Energy ministers from saudi arabia and russia say they are in favor of extending an output cut into next year. Oil jumps to its highest level in two weeks. How far could a Short Covering rally go . Europes new power couple. After a big win for merkel in germany, how of will they be shaped the e. U. Together . They reshape the e. U. Together . I am matt miller in our berlin headquarters alongside guy johnson in london. Guy. 30 minutes into the trading day. Let us take a look at what is going on. Brent, a big factor in what we are seeing this morning. Certainly on the upside. Bid, ant price oneweek chart. We are up over 5 , but look at the twostep tire we have taken. Theya and saudi signaling believe the cuts that have been enacted by opec will be extended to lower for longer effectively in the oil market. That is helping out. Let us turn our attention to what is happening with the mov screen this morning on our bloomberg. As you can see, it this index point, bp, royal dutch shell, total. These are big dividend points adding to the upside this point. That is a big into beating factor. Matt, there is, a bunch of exdividend in the market this morning. Edp, allke phillips, of these stocks going ex dividend. That is 12 in total on the stoxx 600. That is where the downside move is coming through, but very mechanically. Matt and it is not even thursday. The i am just looking at grr here, which i think is interesting, especially today, because my default to a yeartodate look, it is a group bring to return screen on the bloomberg. I have a here for the stoxx 600. For the yeartodate, basic resources in oil and gas stocks, right there at the bottom. If we go to this dropdown tab in the middle of the screen and click it to one day, we can see that clearly because of the rise in the price of crude, oil and gas and basic resources stocks are up at the top. It is interesting to see that action. The worst performers, the best Performance Today getting a boost from that. To yesterdays german regional elections, german chancellor Angela Merkel is celebrating another decisive victory by her christian democratic party, the cdu, emerging victorious in the vote in the industrial heartland of germany, the partys third theiral victory over riv arrival in the last couple of months. It is another setback for the populism wave that propelled the u. K. Out of the European Union and donald trump into the white house in the u. S. Joining us now is bloombergs government editor for germany. So, tony, this is schulzs third the pizza since he has been announced as the new leader of the spd. He was supposed to reinvigorate the party, but it has not really worked out. Asy there was a short surge our viewers may remember after he was nominated, because the fpd was kind of i mean, whoerate to get someone could lead them forward in his election, but now he has been really cut down to size by voters, especially yesterday in a state that has about 1 5 of the electorate. Matt so this is setting up an interesting meeting today between emmanuel macron, who just one match and france, coming here to meet with chancellor merkel, whom he will likely now work with after these results. You guys wrote a great story last week. I think they put out a piece saying that the macron victory sets up an interesting Merkel Schulz kind of dilemma here as far as the euro and europe is concerned. Will now macron have to plead to merkel for his goals, his desires to have a European Finance minister, european parliament, etc. . You would suspect that macron will i mean, this is his first visit. It is about 24 hours after his inauguration. You suspect he will not come here pleading. What is interesting is that miracle said the other day will said the other about merkel saying that germany having to reach out and help france is patronizing. That was a barb at the social democrats, who are trying to score political points by saying we have had austerity for too long. This is the message you need to back off of, madam chancellor. But what most likely happen is they will have, you know, a general discussion of what is possible, and what is not. And get to know each other, as the cliche goes, and what we have heard privately from the german political circles is that you really cannot expect any sort of bona fide concrete initiatives before the german election, which is happening in september. I askonight ask can sether mr. Schulz proeuropean stance he brought back from brussels, how big an is . Scary start you get a sense of the german people seeing that are the problem, or do they just take it for granted . Tony it is more the latter. Mean, wehat, i personally, from having watched this for some years, when i would say is that merkel herself has portrayed herself and in many ways has been very proeuropean because it is kind of a given for germany. Germany works best when europe does well. That is the line you always hear from her plan in many ways, that is true, because of its economic power and the need for a strong europe surrounding it. I think that has not been schulzs biggest problem with the voters. I think it is more a matter of trying to make his voice heard and trying to set himself apart his merkel on a topic of choosing more or less and that does not seem to have worked very well so far. Matt interesting. I would love to be a fly on the wall to see if anyone brings up euro bonds, for example, something they are likely to disagree on. Ny, thank you for joining us. We will get more reactions from marshalls in the press conference that will happen 9 30 at 10 30 berlin time, london time. Stay tuned for that. Still with us, scott thiel, deputy a fixed income, cio at black rock. Scott, what do you make of the elections here . The weekend or late last week, i spoke with a number of people at the g7 meeting in bari, italy, and the idea was inst it doesnt matter who w here. But is it better off for europe to be in the hands of Angela Merkel, who has run this country for 12 years . Scott i think there is something very positive about the overall outcome we are witnessing. It is important that his visit to germany happens so quickly enjoyed assumes power when we were in paris, prior to the French Elections, it was very clear that the le pen camp was going to go to germany right after the elections. A very different message, right . What this does is very proeuropean outcome, particularly given that the French Election outcome it shows a solidity around europe, around the eurozone, and this talk about european breakup is fading dramatically into the background. But i think the point you mentioned is a very important one for investors to stay focused on, which is that just because this is the political outcome does not necessarily mean that things like eurobonds or any kind of cooperative financing in europe is coming anytime soon. I do not think that is the case. I dont think they should mix it with the financial outcome. Guy so many people argue it is not a finished project. We need the things mr. Macron is talking about to make it fully optional. Angela merkel, under her tenure, has shown no interest in moving in that direction. She says thats is fantastic. We will talk about it, but nothing else and the happening. That is not a great outcome for the eurozone. Scott but it is not a disastrous outcome, but not a great outcome either. I think you have to separate the political outcomes, which is obviously much better than it would have been otherwise, no doubt. Is soason that merkel firm on this issue is that is basically what the german people and the German Government are telling her, right . So there is no appetite for broad european financing, so i do not know how outcome that is Going Forward. What i do think it means is that we are in this incomplete union, and the question i think well be in the near term, not to make it entirely complete by having Something Like you were a bonds. I think the most important thing for the eurozone obviously is going to be the ecb, number one, and number two, and perhaps further distance, the italian elections. Im not sure how much of a change that would be. Guy it is not a change. Scott i think that is right. Matt let me ask greece is one of the topics we thought would be huge over the weekend. It really was not. Everyone kind of agreed that they are going to be able to deal with the greece situation by the Euro Group Meeting on may 22. Is it a concern for european Bond Investors . Are we worried about a relapse into total greece, . Scott if you look at greek assets, even the shorterdated zero coupon bonds, but the outstanding bonds, those are the park. There has been a huge rally in greek assets. There will be some form of agreement reached. It is very clear from our analysis that the greek government will basically do everything it can to make sure the boxes ink all the hope that greek government bonds would be included in the ecb purchased program, thus further you irradiating the financing issue that the country has. Never say never. In many respects, the greek bond issue has moved into the background in part because the political noise in greece has become so muted as the country has moved towards a more positive stance with its negotiators. Potential toas the come back on the radar screen, but for now, we are not there yet. Scott thiel is going to stick around. He will be joining matt and i in 15 minutes time on bloomberg radio, daybreak europe, live on dab digital radio. If you are a customer, you can watch this show and listen to the tv , and the radio as well using the tv function. Great to see scott there. Great to see the tv page here. What i would use is this bit over here, which is fantastic. Not only do you get the functions that we use, you get market checks, thebio of scott, the bio of thought. You can access some of the chart as well. You can put the chart in the presentation or use it, talk to clients about it, pop it out, and it will appear under bloomberg. You have functionality and all of the kind of ancillary data. Up next, back to the hack warnings and chaos set to spread. We will have the latest on his unprecedented cyber strike. What does it mean for your business and Global Markets . We are going to talk about that. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are looking at gains across the board, although they are subsiding. The cac now unchanged, as well as the stock 50. Brca 2 out of stock stories. For that, we go to nejra cehic. Nejra let me start with gainers. Atlanta shares hitting a december 2015 high after it said its bidding to buy spanish vertis,tor ever test a to create the biggest operator of toll roads. Is looking to boost earnings by acquiring assets strategy tohis as a reduce dependence on its home market. We are seeing the shares gained today off the back of that m a news. I want to talk about platinum week. The price of platinum was at its lowest during the industry gathering since 2005. It is of more than 2 year to date. It is gaining today along with other metals prices. The worlds third biggest platinum producer. Some of the game today might be down to the general upward momentum youre having a metals today because lonmin raised its annual forecast after week mining performance at its biggest in the first four months of the fiscal year. It has the highest cost of the worlds three biggest platinum producers could with the itsinum price halving, focus has been on stemming losses to survive. We spoke to the ceo earlier today. He is more here is more on that from him. We are doing all we can in the areas we can control to make sure that this business remains cash neutral, including capex, in this of price environment. Nejra on to one of the worst performers on the stoxx offender hundred this morning. The company said karen trading for 2017 in line with expectations. We have even a ebit. The stock has dropped the most in months. The ceo is talking with journalists. We will bring you our interview with the ceo as well. Matt. Right, thanks very much. Let us get the bloomberg first word news. For that, we cross over to hong kong and juliette saly. Juliette. Juliette thank you. Chinas economy back in april as authorities crack down on the Financial Leverage prudent investor output rose 6. 5 last month from one year earlier. Retail sales increased. Fixed Asset Investment, including rural areas, expanded 8. 9 for the first four months. It missed economist estimates. Theresa may will pledge today to broaden Employment Rights in britain, as the country pulls out of the European Union. The Prime Minister will say that if the conservative party wins, she will introduce measures to get economy workers meanwhile, scotlands first minister has said a vote for her party will help protect the economy north of the border from the impact of brexit. One message in this election on brexit is whether to leave or remain for the euro, yes or no in 2014. If you vote s p, you are strengthening my hand to make sure scullins voice is heard. Ds voice isotlan heard. Juliette global news, 24 hours a day, powered by more than 2010 at journalists and analysts in more than 120 countries. This is bloomberg. Guy thank you very much indeed juliette. That is get that to the cyberattacks reid priddy much unrivaled in terms of what we have seen thus far. They will continue claiming victims as people return to work and turn on their computers and find problems. European Law Enforcement agency many computers have been affected by the ransomware. What do we know monday morning that we did not know on friday . How much for what are we f orward are we . There are chinese universities being hit. Computers in south korea, hospitals in jakarta, and ticketed timetables. It is very fragmented. It is within companies. We are hearing reports that some of the areas we thought affected are false and something, they have been doctoring screen grabs so the picture is increasingly hard to understand. Matt we are hearing as all that nobody is really paying up. I mean, they are not asking for very much to begin with, 300, is where the ransom starts. You have got to pay in bitcoin, which means and to only three different Bitcoin Wallets. We can see pretty easily with the blockchain how many people have paid. It is less than 50,000. Of money. Ot a lot people are shocked about how far it has spread and how quickly. Shock, the people responsible are in shock. It may not have been expecting the scale of the attack to spread so widely, so perhaps they might not be after monetary gain as well. They might be after an impact so the money at the moment is a bit of a side point. Guy is this a microsoft problem . Anymore byupported microsoft and they have made it clear that this is a problem that lies elsewhere, not with us. They put out a Firm Statement out about what is happening here. Two things to ask on the back of that. A, is there anything will pressure be on microsoft to provide patches for xp for this Going Forward . Do we even have any understanding about how much how Many Companies and organizations are still running xp on a standalone basis, unsupported basis with anything around it . Giles the microsoft the microsoft question is a very good question. Microsoft are now in a very tough position. They do not want to have to update for every security vulnerability that someone who cannot even be bothered to update your system it is not in a position they want to be in. It is a very expensive problems you have it while they can say no to update, when the government comes knocking on the door and says this is now your problem, you are in a dominant position, you sorted out, then it will be interesting to see the response. Guy it is interesting to see how the ip is protected, 50 years. They have not supported for 15 years. Giles, thank you very much indeed. I suspect we will be seeing more of you. Giles turner on the hack attack. Matt, are we going to talk about what is happening with bitcoin . I know it is a favorite subject of years. Matt i think it is very fascinating. Over the last couple of months, we have seen it skyrocket, doubled this year, tripled if you look at it since last august. As we just mentioned, the cyber attack has renewed focus on bitcoin. Some would say, shadowy Virtual Currency demand it as payment by the hackers. For more, we are joined from tokyo by bloombergs eugene nak amura. Tell us how this ransomware works with bitcoin. If victims are required to pay in bitcoin, does anyone actually know how to buy it and do that . Eugene that is evidently a struggle for a lot of people. Even if they wanted to pay, they probably do not know how. It is not very easy. What happens is once you get locked up, according to screenshots we have seen of the virus, of the ransomware, there is an address at the very bottom. A Bitcoin Wallet address of the know who, so if they owns bitcoin, that is all you need to send money to somebody. As couple of strings of letters and numbers. That is a someones basically bank account, so if you put that into your Bitcoin Wallets and you click send them a your bitcoin is going to go to that exchange. Yuji it is very easy. That is why hackers like to use Digital Currencies to extract ransom. Bitcoin, itgetting really depends on your country. Some countries do not have been quite changes, so you cannot actually trader dollars for bitcoin, pesos for bitcoin, yen for bitcoin. A lot of the bigger countries have wasted by bitcoin. If you are infected, you have to open up a bitcoin account at a bitcoin exchange, where there are people that sell it to you face to you facetoface offline, but it is a pretty difficult task, which is probably why we havent seen tens of thousands of people only do it we have only seen tens of thousands of people doing it. Guy camera draw a link between what is happening to running this attack and the price jump we have seen . Maybe there was a front running of what was happening here . Yuji that is an interesting thesis. We have seen bitcoin writes about 4 , 5 ise since the attacks have started coming up your you are talking to giles about less than 50,000 has actually been tracked as ransom paid out. Day, that small sum, every tens of millions of dollars of bitcoin is traded every day around the world. I do not think that people buying bitcoin is why the is up 45 . Always al, there is lot of speculation in the bitcoin world. Something like this can be enough reason for somebody to take a shortterm punt and drag the price up as we have seen over the last two bank to three days two to three days. Guy we are going to come back to this. I have a strong sensation. Us. Nakamura joining let us talk about european equities and what they are doing this morning. We are reasonably well bit across europe. Not a great deal. What we have seen this morning is the ftse 100 and the dax hitting fresh record highs. It is not a big move, but something to Pay Attention to. We have a few exdividends in the market. He stoxx 600 has gone around 12 exdividends in it this morning. Up next, it is going to be bloomberg surveillance. Francine lacqua will be joined by tom keene later on three tom keene, back in new york and he seems to have taken the decent weather with him. Matt and i are going to bloomberg radio. This is bloomberg. A champion of the trade. The chinese president pledges billions to the road initiative, telling where leaders its you the project of the century. Strike has taken more victims as people return to work. Chancellorsn party moves big in the latest election test before the national vote. Good morning. This is bloomberg surveillance. Im Francine Lacqua in london