Transcripts For BLOOMBERG Bloomberg Markets European Open 20170530

Race. S tailwinds and headwinds Earnings Growth thanks to cost cuts, while British Airways efforts to slash spending are blamed for the epic holiday meltdown. An half hour away from the european open, the start of cash trade trade lets look at futures, down ross the board to reject it down yesterday rita looks like we can have a softer open, your stocks futures down 2 10 of a percent. With the futures ftse didnt trade yesterday because of the make holiday down 3 10 of 1 . Futures us little changed train take a look at the gym in, some very interesting moves to see them yesterday. I got index is still open here. 2 and you have the Chinese Renminbi gaining a little bit. Thats really losing a little bit of strength there. To watch currencies survey. Especially want to see the euro british pound. A bit have those big moves. Interesting to watch, neck asked sugar down as well, 4 . To watch this contract. Here you can see sovereign bond most are in really the asian markets over the action is that accept for the spanish market. You are going to want to watch today what happens with the bone trade, especially after Mario Draghis comments yesterday. Well talk more about that and on Angela Merkels comments over the weekend, and her weekend with modi. That happens at about 10 00 a. M. Local time. Get the first Bloomberg News with sophie kamaruddin. Thanks, matt. Televisede event lasting. Jeremy corbyn outlined his vision for britains future outside he be you, while Prime Minister theresa may explains why she had initially opposed calling the general election. In europe, from turning this ntry to interpret tax came haven with low tax, which is, and investment. We want high wage, high investment, rowing economy, with good relations with our neighbor and with the rest of the world. Would be ahere general election. After i became Prime Minister come i fell the most important case for the country was the stability and getting on with triggering article 50, so that we made sure that we were delivered in a vote of brexit. Japans jobless rates remain at the lowest from her than two decades last month, closing at 2. 8 . Meanwhile retail sales meet expectations beat expectations wrote rose 1. 4 for march. Spending fell more than expected, 1. 4 . The formeror dictator panama died at the age of 83. He recently underwent enough ration after some ring a hemorrhage following brain surgery there he has been a key u. S. Alec about was forcibly removed from power when american troops invaded panama in 1989 and he was later jailed. Global news 24 hours a day powered by more than 26 hundred journalists and analysts in more than 120 countries. James bullard has reiterated his views on rates, saying they are ready as to whether need to become a speaking exclusively with bloomberg. The dovish official rejected the idea that 200 basis points of hikes are in order. I think a good thing about unwinding the Balance Sheet is it will create policy the committee in the future for we needed. On the rate itself, i think were not very far from an appropriate rate for the u. S. Economy that will keep inflation not too far from target, and the labor market performing well. Is the idearee with that we have to go 200 basis points higher in order to get to some sort of neutral rate. I dont think its the environment wherein. I think we can stay about where we are, possibly higher than where we are today. I want to bring up charts for this year is not sure if you can see this as well, but it simply shows what caf au lait has been talking about, we have been hearing over and over again, which is we have a hot jets market, and which numbers seem to be cooling, whether you are looking at the twoyear cpi, or course cpi. Jim, wise of the year about life here monthend beakers that we have seen . Your from John Williams and toers who echo it seems be the consensus which is toomer hikes this year. What do you see that they dont . I think those Inflation Numbers have been a little bit surprising so far in 2017. Forgone conclusion for the june meeting. Well the last three fed hikes did result in treasuries actually rallying after the meeting, which is an impression that the market was going come is the fed owing to quickly . Every time they hike, they worry it might be a mistake. We survived on the sites. We could see replay but we seem treasuries rally, a bit of a reaction come is this too much, then the economy were copes and will see yield stripped higher again. Thehat do you think about inflation situation, dropping corp. Et is the alarming. Fiveyear 2 , where the fed wants to be. They do have it looks like mark sustainable closer to europe. Theres no sign of runaway inflation, the most of her thing. Inflation is unlike sustainably on the stop topside anytime soon. Is there risk of us going back to a deflationary battle . Probably unlikely, employment u. S. Market is strong. I think the problem with the fed he got focused on this arbitrary 2 figure for the inflation target, when in fact it seems against sustainable level is probably around 1. 5 cents. It doesnt look like we will fall too much, with will will run away to the sought topside. Overall the should be good for the economy, they just have to make sure they get this keep the scenario and they have to reject medication since you have the whole world of by this 2 figure. Yesterday, mario draghi was talking but the fact that external factors of the biggest problem for europe. He talked about neil protectionism that he hears of the u. S. Problem for the european economy, sustainability of inflation here area is not a problem for the u. S. Economy definitely. s i think inflationary figures are very much a global issue. One of the big themes of the Global Market was commodities disInflationary Forces provided mainly by china, and other emerging markets, which help to be good space to the economy. Forgetting that again now. Overall the backdrop is, Inflationary Forces but a by technology, and also by demographics globally. I think Inflationary Forces are global issue. Another issue is whether we get into patient has from a inflation and asia mainly based on the prices, very soon do, wage which means that ppi in china and asia will probably come down a bit. That one truth cpi and asia, that means we are again unlikely to get a strong inflation rate coming to europe and the u. S. There is some risks to the downside is well, perhaps even more risks to the downside then topside, but i dont think either side is a panic right now. The big concern at from mario draghi would eight, a lack of Wage Inflation, really and sent for all central bankers that are looking to boost their economies. Do you see his comments yesterday as being more dovish iyou might expect yes more dovish than expected. Inflation, this will be a recurring name. He expect to technology we are not seeing machines take any jobs yet globally. This is a theme of margin. Machines will be pressuring the jobs. Human start asking too high wages, its easy for managers of companies to switch to enough data process. Will oversee rapid Wage Inflation for an entire labor market in the future. Its not going to be a theme we have to deal with going forward. Draghi was more dovish than expected yesterday in the euro will react in days ahead. Mark, speaking of currencies, talk with her pound chart that i saw on the mliv chat. Averagese the 10 day creeping down possibly below the 21 day average. His is the death cross Technical Analyst worry about mark its not. Version hasterm worked well in the last few months. Forecast two of the big declines weve seen in the last x months. Sterling, momentum is turning over. Its going lower. Quite bearish there at the moment trade i think dollar can start leading the way in terms of, itll actually be able to us cut as opposed to a broader sterling index. Overall its not looking great for sterling in terms of longterm fundamentals. Negative yield. The selection that was meant to be a nobrainer conservative landslide victory is getting closer at the margin. Still expect a conservative victory, but a little bit of uncertainty in play. Nobody knows what the labor government will need anyway. Also, for to consider the history british polling has not been greater. Mark, thank you very much. On the market mliv bloomberg at mliv go. Obviously this is something that we do every morning to get caught up with the markets. Highly recommended. Coming up on the show, building and frexit, what renowned architect Norman Fosters take on the eu. That interview next. Plus costcutting back helps them fly high. More in the full year earnings and outlook. This is bloomberg. Welcome back to Bloomberg Markets you, european open. Right now, one to go to Bloomberg Business flash. With the sophie kamaruddin. British airways says its i. T. Systems are up and running and it will operate a full flight schedule today. That comes after the holiday week and travel misery for thousands of passengers. Citigroups estimate in the chaos will cost airline 100 million euros. Successfully job doug a legal challenge by the management to ousted chairman. The commercial court of the netherlands rolled the company is under no obligation to honor shareholders, led by the fund for votto moving that strengthens the dutch haymakers hands and talk with the u. S. Pbg indicator. Credits and united overseas bank, total of 1. 2 million u. S. Dollars. And somef banks the 30th singapore since the penalty preventing Money Laundering requirements. Thats your bloomberg distance flash. Matt very much. And learning to add newplus a on orders to its existing delivery schedule this is British Airways is reserving a full schedule, it says he throwing cap today after its i. T. Related outages this weekend. Bring us your phone real sore his bloomberg earlier and described child does he sees ahead. Continues to be capacity in the market that came in over the last 12 months for the middle east and africa. Still out of charge capacity come into spain and portugal. Market or much in the in that goes out, will continue will say see pressure with a sterling in the year on year basis. Weaker than it was this time last year, just before market or in that goes the brexit referendum. We see difficult console not are the next number. Are under the insured reported been cast joins us on that. I have to first asked about whether or not they can take advantage of this be a thing read so many as flights were canceled with British Airways. A lot of people, even if you is their back on schedule now, are going to say, i dont trust you have if i was right here. For ryanair rebut the manchester were attackly booking some that theres been an influence since the there will be a power outage. But you get to a point but brand image, persons the ache of their new ceo as all of costcutting measures, changes like food on board, whether thats really how much you have the way for. Bill based in smaller within the context. For the customer, whats the difference at the end of the day between ryanair pa and outlook is true. Absolutely. What about from investors perspective, shares the game yesterday. Believe. Down 1 i does moving investors are happy about todays earnings report. Wireless or so none in 10l find that for sure minutes or so when the market opens. S a company that ludicrous of course amounts the kind of growth come next year they are expect any percent of the maybe thats more the cautious side. Well see how that plays out in the nurse very well positioned to benefit airlines ago i tell you massive restructuring stash the general European Airline market Aviation Market is in trouble. Theres too much capacity, its going to take while feather to start recovering. Is brexit a concern for reiner still western mark are they ready for that question mark efficiency to say ryanair stash they said the cigna statement today, something which is the strongest wording have heard from them saying that theresa may doesnt want to stay in the open side agreements , an agreement that allows free passage between the eu and u. K. Whether thats sure were not, were not entirely sure. U. K. Hasnt said anything about brexit. Expect them to prioritize aviation because its so integral to the economy. We can be sure the stage. Thats another thing investors probably dont want to hear or would concern investors. Et me broader question because of the costcutting issue, which is helping ryanair it has made people angry. With British Airways service, not just because of the outage the bottom line is, people just click on the lowest cost flight they can get. So these airlines have no other choice but to continue to cut costs . Thats the question i think the industry has been grappling with reiner started. Its this idea think when the lowdid again they took the position that, its not just about lows its important, and we will have customer loyalty. That is proven to not really be the case. Thats why the ceo of ig notes ares ceo the aig this is really awhat significant or destruction of British Airways to compete likes and make the money on the long haul thank you so much for your time. Are minutes away from the open. Next we look at movers in todays trading including akzonobels and Amsterdam Court rejects elliotts bid to oust the chairman. This is bloomberg. Trade ons away cash the european open. Notes get to your stocks to watch. I sunocos one of keep an eye on this morning. Amsterdam court throughout latest bid to oust the ceo, anthony bergman. This does a couple of things for bergman command for xo. Mainly, it strengthens their defense against the takeover by tpb they were both their takeover bench by tpg tpb just the latest has driven up the stock charged that you are looking at over the past one year. If it doesnt happen the investorss, how are going to react . We will that stock at the open. Futures lower index for the index across the beard board. Four minutes from the European Market open. This is bloomberg welcome back to Bloomberg Markets european open. It looks like we could have a soft open this morning after yesterday, london was closed for the bank holiday. The u. S. Was closed as well for memorial day. We have a slightly weaker pound this morning. Doesnt seem to be having a positive effect on the ftse futures. About. 25 down. Tack mispriced about. 20 5 seven. 75 . It looks like a soft open as far is concerned. In little softness in currencies after some of the comments yesterday from jim bullard and mario draghi. Were about to the European Markets open, lets cross over to manus cranny for the start of trade. Manus great to see when london. Welcome. When we talk about markets, mario draghi is fully committed to extraordinary policy. A sweep of red around european complex this morning. I wonder to what extent the to ben story, renzi seems pushing for even an election as early as the often time often autumn. We will wait for Economic Confidence numbers later. In the u. K. , we also have theresa may going headtohead. Mliv, talking the possibility possibility of euroyen having formation as draghi recommit. Mliv, talking the we have all gotten ahead of ourselves. Change the forward guidance, change the direction and intonation to the market. Draghis message couldnt have been clearer. Moveo you think the euroyen could be in terms of markets. A key line is 122. 56. One of the strongest markets despite a terror attack and an election is this. U. K. Market is up nearly 5 in the month of may alone. You are seeing it outperform each of its peers in france, the swiss market index and on the backs. You have this significant outperformance in london this morning over the month. Look at some of the real balloons. Itself,recovered vodafone are reestablishing the upside. The question for markets is that that sterling drop is already well priced into the market. Matt, good to have you here all week. I am off to digital radio. Matt euroyen, is that the pair that the pros watch . I will have to ring tom keene on that. Matt i have the pro here, i will ask him. Manus, thank you for that. Lets take a look at what is going on i will have to ring tom keene on that. Matt as far as the individual movers are going. I have the mov screen on my bloomberg. I switched it to index point so we can see what is moving the markets. It is definitely banks. , macro sender, ing, all moving down. Taking points off the stoxx 600, that is the important thing to show here. Percentage screen , you dont get a picture of what is driving trade. On the upside, a more mixed group of companies from kerry. Roup to paddy power, linda not really telling you the same kind of story you are seeing on the downside. Clearly the story today is of the banks, after all the Central Bank News we heard out of jim bullard and mario draghi yesterday, we are going to discuss that now. Starting with the st. Louis fed president , he said the jury is still out on whether the Trump Administration will meet wall street expectations. I have to say jim bullard was excited about the possibility of trump when he came into office. Speaking to bloomberg, he said at some point, the honeymoon. Aim will come to an end and washington is going to need to deliver on the policy promises that were made during the campaign and in the last two months. That has driven the stock market higher. Listen to a chunk of jim bullard here. Jim the Business Confidence numbers shot up after the election and the president was perceived as more probusiness than the previous administration. Washington does have to deliver at some point, and i think that is a concern going forward, whether the honeymoon period would end at some point and maybe the reality of America Politics would settle in. We will see if that happens or not. I think the jury is still out on all of that. Matt we have one of the pros here to help us out. Peter, senior fx at rate strategy. Your you for giving us time. Let me ask you what you take from jim bullards comments. When i talked to him right after prettyction, he seemed excited about the possibility of Trumps Campaign promises, about stimulus, about deregulation, about tax reform. All of that looks pretty far away right now. Peter it certainly does. Made some fair points. We were in a situation where, for the last number of years, the obama administration, we didnt see Infrastructure Spending which was needed in the u. S. Were justified at the time. But if you look at stock markets and the dollar since trump was elected, we have effectively retraced were justified at the time. Pretty much all of the socalled trump trade. Sense, we find with trump at the moment is he has been fighting a number of battles with the fbi and various other investigations and that detracts from his broad policy outlook. Were not getting too much with trumps structure. Matt i pulled up the bloomberg dollar index and put in november 8 as a starting point. We have taken an absolute roundtrip from 1200 mac down back up first, 6 , then down to 1200. What do you think about the slight Dollar Strength we are seeing here in light of bullards comments . Anothert see the 200 basis points. Ec the odd man out . Peter we have seen an improvement in trend growth globally and the u. S. We are still in long way away from precrisis levels and wont get there anytime soon. I think 200 from levels is a bit of an ask. Hes going to be correct on that one. It it lookst case, like draghi was more dovish than expected because we did see Euro Weakness against the dollar today. Peter a little, we came from numbers it it looks like 106 a number of weeks ago. Last week, draghi, the ecbs chief economist and kissed on seo highlighting the need for policy stimulus. What we are seeing from the ecb is the doves trying to get in front and make a case for continued loose policy. The risk for the ecb is similar to the bank of england years ago when they want to maintain a loose policy, but the data comes in so strongly markets and up frontrunning ecb. Get to the ecb, i want to stick to the fed. They had their meeting on june 14, a week after the ecb meeting, but still front and 84 for investors is june a foregone conclusion . Peter i think it is. I think a rate hike is fully priced in and justifiably so. I think we see a september hike and there are polls where we see Balance Sheet reduction. We will have to see how that data turns out in the coming weeks because certain markets are more skeptical of a september rate hike at this point. Given the data, it is justified. Like 106 a number of weeks ago. Lastmatt the trade policy, it s another thing draghi mentioned if it is an external factor that is a problem for the eurozone, isnt that a bigger problem a domestic problem for the u. S. . Peter no question. If you look at the comments merkel made in which she said, we cant rely on the u. S. As a reliable trade partner, and she was correct in saying that. The g7t take away from meeting, the Trump Administration took little interest in pursuing a constructive agenda with international partners. Consequently, you are likely to see trade policy become more of an issue in the coming years. Matt understandable merkel made those comments, but aggressive considering the u. S. Is the consumer of goods . Considering she still needs to work with trump on so many issues, including she wants him on Climate Change him a she wants him on board with paris, she wants to work with him on defense. They spend so much more than germany does. , merkel hasoint is met trump probably at this stage. Both meetings didnt seem to go very well. Our perspective. Consequently, her saying this is pretty much an acknowledgment shes going to have difficulty working with these guys. The comments are justified. Met him in washington, d. C. , it was awkward and then she said here the meetings were difficult and tense in sicily. Were going to take a quick break. Peter will stay with us. Berlin. P, modi is in the indian Prime Minister kicks off a fournation tour in germany. We are live in berlin, live in mumbai with all of the details of that. Plus, the latest on the state of the race in the u. K. Election, just nine days to go until a vote here in britain. This is bloomberg. Welcome back to the european open. Line lets check on markets right now. Nejra cehic has your midcap movers on a down day. Seeing suche not massive moves as we see in mid caps. An interesting story nonetheless. Pandora one of the best ers. Rma up 1. 3 . Perhaps the stock moving a little on that in todays session. On the downside, easyjet. Company news seems to be pushing it, but a number of airlines coming under pressure. Ryanair and iag among them. Easyjet down 1. 8 , the most in two weeks. Arista down 2 here. This is the Bakery Company that has been battling shortsellers in its stock. The stock has last more than half its value in the past three years. Arysta has worked profitability will remain under pressure. At america and europe will weigh on profitability and optimizing capacity will take longer than expected. This ahead of the appointment of a new ceo. We are seeing arysta shares down 2 . Modi indian Prime Minister has arrived in germany. He dined with Angela Merkel last night and the two will have further talks today. Germany is indias largest trade partner in europe. This meeting comes days after chancellor merkel said reliable relations since world war ii are in some ways over. For more, were joined from mumbai. Let me start in mumbai. What does Prime Minister moby Prime Minister modi hope to achieve . He is on a trip for more investments from germany, europes largest economy. Germany is also one of the investors into the economy, as well as the single business biggest trade partner for the eu. Want minister modi would the trend to continue. He also wants india to move up the rankings for business investments. All in all, he is looking to attract more investments. Another thing that he is theably wanting to start is euindia freetrade talk that has been put on the back burner since 2013. We will see more on that eluded. More on that who do. Matt what is merkel looking to achieve with this meeting . I think first of all, especially after this unfortunate meeting with donald brussels,before in she wants to send up the signal we have other partners on the global scene we can work , besideswith and india china is a very important and it would be now a very good signal that the two leaders could say, we want free trade, global free trade and maybe even get this Free Trade Agreement done finally. Matt modi has other visits planned, going to spain, russia, france. Are those visits likely to yield anything substantial . Thatan the thing is is with spain, he will be wanting to drum up more investments from spain too because spain remains a big fbi partner. With russia, what happened is relations have been a bit russia andpecially pakistan both held military exercises last year, which hasnt gone to well with new delhi. That might come up. Defenserelated issues with russia are likely to be on the agenda. We could see some movement on those fronts. Lastly, i think he will be in france, which i think will be a big economic issue, because i think he wants more and more investment french investment into india. Matt finally, limited get you on the think everyone has been talking about. Her Campaign Stop in bavaria on sunday. How seriously do we take merkel s invocation that europe has to go its own way . Is this just an Aggressive Campaign speech, ornish she really want to kickoff ties the u. S. , which is germanys biggest customer . Think, as you said yourself, it was a campaign speech. The area where politicians normally are pretty drastic. For merkel, it was a bit unusual to use such tough for its. Tough words. Disappointment with trump was still very much in her bones after she came back, so i think she had the feeling she had to send a signal also to trump. On the other hand, of course she is a german politician. She is coming from east germany. Who really Still Believes in the special transatlantic relationship. I dont think that will be the end of transatlantic relationships. , maybews and we all know eight years at the most and someone else will come and the relations might go back to normal. But right now with donald trump, it will be difficult. Matt all right, thank you. Were going to hear more about this modimiracle meeting throughout the morning. With this is peter, rate strategist at cba europe. I keep going back to this screen on the bloomberg behind me. I put germany in a dropdown box and as far as exports, let me go here. We can see and it shocks me, the u. S. Buys more stuff from germany and france, which is next door. Just a massive customer. Was merkel his german beer truth serum . Was she just so disappointed after brussels in sicily . Was probably speaking to the choir because this was an internal meeting. It probably does reflect that we have a new relationship. I think the u. S. Doesnt seem to be practicing a constructive type of relationship. Certainly when it comes to global trade, Climate Change, etc. Merkel is it knowledge and what everyone knows at this stage. ,e are in for another three three and a half years of difficult policymaking between these two very large nations. Matt you have to draw up a new map as someone who follows these things and watches flows . Protectionisml out of the u. S. . Two things have to look different now . Ater if you look protectionist measures since 2008, we have seen a steady increase in protectionism from countries, particularly the united states. It is not like it is coming out of nowhere. This has been creeping higher in recent years. A moreoing to be explicit policy focus from now on and we have to get used to it, im afraid. Matt peter, you will stay with us. Senior fx and rate strategist at cba europe. You will stay with us because there is a lot to talk about concerning fx. We have more from the ecb, what do draghis comments mean . We see action today in the currency market. Do people expect less tapering . Did tapering already start . This is bloomberg. Welcome back to the european open. The euro fell against most of its major peers after mario draghi dampened speculation the bank was ready to announce tapering at the meeting next week. Has tapering already started . Fx andith us, the senior rate strategist at cba europe. I had this discussion with guy johnson often. Going from 80 billion to 60 billion, is that not tapering . Dont think so because they have extended the actual duration of the program. Matt did anyone expect the program to come to an end . Peter not as much as the ecb did. Matt so one for guy. Do they start tapering by the end of this year . Probably starting next year. They year, the ecb should have finished its quantitive easing program. Thereafter it will get gradual increases in deposit probably st year. They will proceed with consecutive monthly productions of about 10 billion per month, which would mean by this time next rates, but if we were to get to the end of zerowith rates of 0. 5,. 6 , if we get inflation towards 2 , that is still negative Interest Rate profile in the eurozone. Even if we get gradual withdrawal of stimulus and gradual interestrate hikes, were still in a situation where the ecb Monetary Policy is very common native accommodative. Euro goes higher, we will see larger equity inflows, towards the eurozone. The current account is supported for europe. Matt the only risk is an early italian election . Peter it is, but if they proceed with this Electoral Reform whereby they go for a system,resentation similar to germany, it might not be such a big risk but we will have to see how that plays out. Matt peter, it has been great following having you. Senior fx and rate strategist at cba europe. Now, he is going to stick around. When we come back, the latest on the u. K. General election. We havent really dug into brexit yet and what this diminishing need we see in the polls means for theresa may. What does it mean for the pound and do you really believe it . We will talk about that next. This is bloomberg. Matt is the honeymoon over . Jimlouis fed president bullard says washington needs to deliver on expectations. Central bankers has rates are close to where they need to be. And may on the defensive. A new poll suggests a landslide conservative win for the Prime Minister may not be in the cards. How will investors price in a tight race . Ass, ryanair trades lower ticket prices continue to decline this year. Good morning and welcome to Bloomberg Markets the european open. I am matt miller in london. At how markets are shaping up after a bank holiday yesterday and no trading in the u. S. Some asian markets still closed as well. European stocks across the board, even as the pound and euro fall against the dollar. Stoxx 600, down. 5 , being led down by bank stocks. That is why you see the cac down, because it has those big heavy bank on a proportion bigger than anyone else. The dax fell as well as the ftse. John mccain is speaking at an event in sydney, australia at the u. S. Studies center. He is making some comments about, well, almost a direct response to Angela Merkels comments on sunday, saying allies can rely on the u. S. They can count on america has a partner and he is saying that america is far bigger than the white house. John mccain making comments and we will continue to follow with the senator says, often making use as a mac or maverick senator. The leaders of the two main Political Parties faced questions in a televised event. Prime minister theresa may explained why she had initially opposed calling a general election. I said there wouldnt be a general election and after i became Prime Minister, i felt the most important thing for the ntry was this ability stability and triggering of article 50 so we made sure we were delivering on that vote on brexit. Threaten europe with turning this country into a Corporate Tax haven with low tax, low wages and low investment. We want high wage, high investment, growing economy with good relations with her neighbors and with the rest of the world. [applause] matt still with us, the senior fx and rate strategist at cba europe. U. K. Of all, i always take polls with a grain of salt. Mays lead look like is shrinking. What does that mean for the pound . Peter bad news for the pound and markets have traded that way. Now we are trading somewhere around 128. 50. Markets didnt like the decline in the conservative leader. It should be stated the conservatives do maintain a healthy 10 or 11 point lead in the polls. It would be hard to see that compressed further. Thists didnt like compression or contraction in the conservative lead, but in any case, if you look at the data in u. K. , it has been deteriorating. If you saw the q1 gdp data, it was poor. U. K. Economic growth is slowing. There are political reasons and economic that warrant a skeptical view on sterling. Matt do the poll results give you a buying opportunity . If you think at the end she is going to win anyway and have a Strong Majority . Peter not quite yet. The problem is we are going to have elevated headline risks in sterling in the coming weeks. One is the election, then the Brexit Process in a couple of weeks. If you listen to the two sides, the eu were strident that if we situationu national in the u. K. But also the divorce bill if you look at the eus brexit secretary, he is saying even a billion pounds is a lot of money to give any settlement. The two sides are seemingly far apart. Matt they see it has a divorce bill but from the european point of view it is just a bill bill that they oh. We. They o peter getting this to come along is going to take a long time. Matt so the cable rate is when we focused on but it is interesting to think about the possibilitypossibility that s of boe and ecb policy, and the poundeuro. Peter youre basically staying on home on hold. They effectively said they expected to see a decline in household consumption. We are starting to see that. Is moreomic trajectory or less in line with what the boe thought they were going to see. I think they are justified in remaining on hold. Data in theood eurozone, inflation is improving. Not where it should be, but from the ecb perspective, we will see them stopping qe eventually and you have this supported currentaccount surplus in the eurozone. That tells me you are going to see strong euro. Get your views on all of those things this morning. Hopefully we see you again say in. Peter kinsella, senior fx and rate strategist at cba europe. Lord Norman Foster is responsible for some of the worlds most iconic structures like apples new headquarters, the millennium bridge, his firm Foster Partners the dollar network from a london headquarters. We thought it would be good to ask him about brexit. He said it is a concern for his business. I was shocked by brexit. Like so many of my colleagues. I am a european. I feel european. For me, that was a shocking decision. However, it has been made democratically, it is the reality and i think we move on. It has introduced an element of momentarily,and that is inevitably reflected in projects. The Bigger Picture is interconnected trade between nations. That is the longterm big picture. This is a very regrettable ripple but in the overall scheme of things, it will succeed. Francine does it impact your ability to attract talent from abroad . Bei very much hope we will able to continue to attract the best talent from europe, from outside europe, the far east, america, the u. K. Itself. Languages,different cultures. We are dependent on the best from around the world. And the global process worlds globally connected. I dont think that is going to change. Francine there is no psychological impact and saying london is not on par with new york anymore . London is strong and vibrant and energetic, it is resilient and i think it will weather this. Matt Norman Foster, renowned architect, giving you his thoughts on brexit. If you are a bloomberg customer, you can watch this Program Using tv. I clicked on tv and am rewinding it so you can see john mccain. This video stream is not the coolest part. Down here on the righthand column, you get the headlines, you get the charts, any graphics we use, you can click that and use it. You can also click on the link here in blue. Ask the guest a question, see you can become a part of the conversation. To thee question producers and they feed it in my onr and i ask it live internationally broadcast television. Next, Vladimir Putin goes to paris for his first meeting with elected youngest ever leader, Emmanuel Macron. Are they friends or foes. We will explore this budding relationship. This is bloomberg. Welcome back to Bloomberg Markets. With markets down across the board, nejra cehic joins us with movers. Stock under pressure after a computer glitch led to hundreds of canceled flights, thousands of stranded customers. The estimated cost of damages coming in at 100 million euros, about 3 of iags operating profits and it raises the question about costcutting measures across the industry. I ag seems to be bearing the brunt today. Shares down 3 . One of the worst performers on the stoxx 600. Akzonobel down 1. 7 , dodged a regional legal challenge to oust the chairman. This was seen as strengthening hand in talksrs from to oust the chairman, but the company didnt have to involve investors in decisions regarding unwanted bids from ppg. Akzonobel moving a little lower on that 1. 6 . At unicredit, this is down 1. 6 . The worst performing industry on the stoxx 600 today. Italian banks came under a fair amount of pressure yesterday as italian 10 year yields rocketed up eight basis points concerns and italian election could be called early. I havent found anything specific about unicredit today, but it does seem to be caught up in that. It is one of the worstperforming banks among 600, thethe stoxx worstperforming industry on the benchmark today. Matt the axle story is the most interesting. When a judge tells a chief executive that he doesnt have to run an acquisition request by the owners of the company. For 30uffed three bids billion and he doesnt have to involve the investors in the conversation . Nejra absolutely, and that is why we are seeing the stock move today. Elliott has been pushing for akzonobel to engage with ppg about this takeover. This is coming as a stumbling block to that potential deal if it were to come. Matt interesting stuff. Lets get the bloomberg first word, sophie kamaruddin. Sophie the president of the st. Louis fed has said the jury is out on whether the Trump Administration will meet wall street expectation. Speaking to bloomberg, James Bullard said at some point, but honeymoon will come to an end and washington will need to deliver on policy promises that have driven the stock market higher. James the shoot up after the election, the president was perceived as more probusiness, washington does have to deliver at some point and i think that is a concern going forward, whether the honeymoon period when and at some point and the reality of american politics would settling. We will see if that happens or not. I think the jury is still out on all of that. Ratee japans jobless remained at the lowest in almost two decades last month, holding at 2. 8 . Meanwhile, retail sales beat expectations as they rose 1. 4 . Overall Household Spending fell by 1. 4 . Noriega, has died at the age of 83. He recently underwent an operation after a hemorrhage. He had be been a key u. S. Alley ally but was removed from power and later jailed. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more. Han 120 countries nato and group of seven summits, Emmanuel Macron welcome to russian president Vladimir Putin to paris yesterday for the first oneonone meeting. The leaders found Common Ground over fighting terrorism, but that is where the agreement may have ended. They traded barbs over sanctions and macron accused putin of invasion in ukraine. Henry meyer joins us with the latest from moscow. Being played this out in Russian Media . What is their take on this budding relationship . Well, the interpretation here in moscow is that putin and macron did not manage to establish a rapport. You have to remember this is not the candidate moscow wanted. Their favorite was francois fillon, who was defeated in the first round of the president ial election. Nonetheless, this was an attempt macron andnces with the reality is the differences between france and russia on key issues, syria and ukraine, that this was always going to be difficult. Matt why did putin go . It was a late scheduled meeting, he didnt have to show up, right . Henry it was an opportunity for try and establish some personal chemistry. I think that is the way he looked at it. You mentioned they exchanged barbs at the conference, that is true. If you look at putins regular behavior, he was quite subdued. He kept a lid on himself and avoided open confrontation. He was trying his best to establish some relationship with macron. Matt thanks, politics and International News reporter henry meyer out of moscow. Principal russia analyst, thank you for your time this morning. Why do think an important a relationship with macron is important to Vladimir Putin . Hasraditionally, france been not an ally in europe but the most sympathetic listener in europe for russia traditionally. This has gone back to the cold war, we have seen a number of french president s try to reach an independent position with moscow previously and this is the first instance we have seen in decades of a french president coming into office with something of an antirussian or not friendly towards russia viewpoint. This is the position macron started from, this is the result of russian actions during the campaign and positions they took toward them, even when it became clear he was all most certainly going to win. Matt where could putin benefit now from his benefit meeting with macron . Is it just that he needs support within the eu . Can he get that with a strengthening relationship . Daragh it is a little bit of those things. Ideally, putting would like to him a more divided european union, he would like to see a position open up on sanctions. With a budding relationship between macron and merkel, and the fact that we saw macron being visibly annoyed at the podium, talking about andrference by sputnik saying directly in front of the russian president this was not a tactful remark, this was meant to call putting out in a public setting. If this was Vladimir Putins goal, he hasnt accomplished it. Matt the g7 summit, it seems italy wanted to figure out how a second track, if not a g8, g7 plus one, and the leaders all agreed they would find a way to work with russia and syria. Daragh these are questions of pragmatism. During the height of the ukraine crisis, you saw europe and the u. S. Who could take a united position against russia and even then, you saw certain countries linksave greater economic with russia or more concerned about a confrontation with moscow, arguing internally for listening loosening of sanctions. Where are in a position there is a greater degree of transatlantic disunity. Europe will be seeking to carve out its own independent position and there will be more debate of how russia gets incorporated into that. Matt we will continue talking about this. I also want to bring up the strength of the ruble. Especially looking at the chart. Daragh mcdowell stays with us. Up next, a top democrat says trumps soninlaw and Senior Advisor jerod fisher needs his security clearance reviewed. Jared kushner needs his security clearance reviewed. This is bloomberg. Matt welcome back to Bloomberg Markets european open. U. S. President Donald Trumps soninlaw and Senior Advisor Jerod Kushner is in the spotlight over whether he saw it secret talks with russia before inauguration day. Examiningvestigators white house ties to the kremlin have honed in on a meeting between kushner and sergei gore close associate of Vladimir Putin. It comes as the top democrat on the House Intelligence Committee says his security clearance should be reviewed. Before we get into that, i wanted to point out the ruble chart because i think it is interesting. This is a oneyear view and you can see we were at 58 rubles to the dollar, now 56. Have seen strengthening since trump came into office and since people started to float the idea of listening sanctions. Ning sanctions. The ruble have seen is strongly linked to oil prices. This is more a function of the realities around the price of oil. We have not seen it go up too the ruble is strongly linked to oilmuch, e has settled into this band of 58 to 66. We have also seen the Macro Economic situation in russia stabilize. They moved out of a pretrump recession. Seeing a, we are greater return to financial after the experience in 2014, where you saw this rapid drop in the price of oil, a quick dirty flow to the ruble and a certain degree of economic volatility around the. The kushner story has blown up in the u. S. It was huge at the g7 read what is the russian take on the possibility that Jared Kushner set up a back channel . Havent seen it if there has been one publicized at this point. Generally speaking, i would expect them to be quite skeptical about an initiative was embeddedess it in cooperation. At this point, our assessment is moscow is trying to figure out stillump administration, trying to figure out how the u. S. Will react and is looking for any source of information it can get. Matt it has been a pleasure. Daragh mcdowell, principal russia analyst at bancroft. I am headed off to radio. This is bloomberg. Francine merkel meets modi. The german chancellor welcomes the leader of the Worlds Largest democracy. Washington morning. The st. Louis fed president tells bloomberg the present Administration Needs to make good on promises. How much longer will the honeymoon last . Narrowing, polls theresa may tries to move against complacency. Is a landslide victory no longer on the cards . This is bloomberg