Transcripts For BLOOMBERG Bloomberg Markets European Open 20170612

Control with voters in his party on track to a sweeping majority in the National Assembly. The nasdaq selloff turns into asia trading as Goldman Sachs warns at low volatility may be blinding investors. Until the start of the cash trade. Lets take you through the future boards as they stand at the moment. A lower are set for opening come pick up late on friday. You saw the Technology Part of 1. 8 , appleropped. 34 , alphabet, thats whats driving these markets lower. Ofis this leveling in terms understanding of volatility. Samsung also sold off in the asian market. Equity markets are set for a lower opening. Lets have a look at gmm. India offight by 1 , by half percent. You see that through the asia equity trading. In the currency lock, you have an interesting day shaping up. Note major move on sterling thus far. Canadian dollar slightly firm. The euro is up by an eighth of a percent, 112. 05. We had the Federal Reserve and we have all to blame in terms of sterling risk. We will talk about that soon. Lets get to Juliette Saly with your first word news. In france, Emmanuel Macron has expanded his control with his voters to get a sweeping majority and the National Assembly. 31. 5 of thet vote, 10 percentage point ahead of republicans. According to projections, the result would give mccrone backers between 415 out of 455 seats in the lower half of parliament. U. S. President donald trump has renewed his attack on former fbi director james comey, tweeting that his league comments about their talks work cowardly. He also said they could be illegal. Attorney general Jeff Sessions will testify on capitol hill tomorrow about alleged russian meddling in that 2016 election. He said its important in light of commies testimony last week. Reportedlyting postponing a planned trip to britain this year after the recent terror attacks in london. According to the new york times, trump has expressed increasing skepticism over the past week after coming under intense criticism about a misleading charges against londons mayor. North korea says its moved closer to testfiring and Intercontinental Ballistic Missile hitting the u. S. Mainland. Recent tests have shown the military is not far away from such a weapon, despite trumps blood to prevent that from happening. Last week, they said it intercepted and destroyed a missile over the pacific. Isolated qatar was ready to understand the concerns of its neighbors and go back to stability in the region. The country would not abandon mediation until the impasse was resolved. Eastern nations may be easy. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Manus . Manus thank you very much. In addition, he is also been may,g of ditching theresa the Prime Minister. He wants to be the custom union. Getting on with the job and formidably a good time minister. The holy grail for middle torilla says its david davis who was one of the major pushes behind theresa may, calling this election. How is that going to sit with the Democratic Union . They dont want a hard border between Northern Ireland and the sides of ireland. Of prot brexit, but they dont necessarily see that situation. We dont know what their position is on brexit or what it will be after tomorrows meeting with theresa may. Lets talk about her. She is going to face serious lawmakers. The core of her party, its a showdown that could signal the end of her premiership a day after she was forced to promote prominent brexit hardliners. This is her clinging to power. Lets get over to anna edwards. Very good day to you. For therooted in there longhaul, you might never be back here. Talk us through the changes. We are studying the ship, but it had a hint of brexitheavy. Lets talk about the reshuffle we saw on friday. Its conversationworthy. Its also worth noting that the people she left and position, one of those is Philip Hammond and we understand that the chancellor is the soft brexit chief and he only agreed to stay on in the cabinet if he was given more say. Thats interesting. He also left in place the foreign secretary, the brexit secretary, trade minister, all of those say the brexiteers have been promoted to cabinet. Secretarythe justice and sacked from that position when he became a minister. She also mentioned to appoint damien green. He is going to be depressed secretary of state and he was a key remainder. You can slice and dice this many ways. Theeems to be shaping cabinet around her. She has the first Cabinet Meeting today. Think there are really amazing lines from the weekend, which they didnt manage to shoot themselves in the head. These allegations and counter allegations are going to run, but is it only a matter of time before she is forced to step down . Is this just trying to avoid a leadership challenge as the cap down to the start of brexit takes away . Lets have a think about this. We heard from the former chancellor in the u. K. And he seems to be enjoying his job in journalism. These editor of the evening standard. This is what he said yesterday. Theresa may is a dead woman walking. Its just how long is she going to remain on death row . We will know very shortly. In other words, we could get to the middle of next week and it could all caps for her. Wasets remember that she he was fired by theresa may from the cabinet. She said, you need to get to know your party better. Lets put this in context with those members of the cabinet we have heard from. Forced johnson denied he is running. The headlights from the brexit secretary, david davis, talking about may is a good prime unmoving as as supporter. It does not sound as if there is a clamoring in the short term. There has been talk over the weekend and we will see what comes to pass about whether there is an anointed successor found. Thatll have to see where goes. For the moment, she is hanging on. On the greendwards in westminster. Lets conquered these markets and politics. He is part of the bloombergs mliv team. Recriminations, support, lambasting of theresa may, all of that, and i get this response from cable. 1 on up and eight of euro sterling and cable is virtually flat. Fx market are holding up harder and there could have been a much more aggressive stealth off on this, could in their . Couldnt there . We did see initially that starling moved lower and that was the big mover in the morning. But that was an exceptionally quiet session overall and it wasnt moving much. And it has come back up again. Veryll, fx markets are calm and reacting to all that uncertainty. The market is getting fatigued from trading. Uncertainty,l brexit uncertainty, we are almost a year since the brexit referendum and people are being bored of trading ever single handle it. Every single headline. Manus those longerterm fundamentals may become her haps a little it clearer over the next series of days because theresa may and the Democratic Union party will meet tomorrow. It may well be that the dep are not in favor of a hard border between the north of the south where i come from, what they are in favor of exit. But not necessarily in favor of an aggressively hard brexit that we presume, that we all presumed was Theresa Mays Brexit because we never knew what her actual position was on brexit. We knew she wanted a strong and stable government and she delivered the chaos she promised. The softer brexit, do you think that rings true for market . I think markets will definitely Start Playing that it you are seeing it come through on friday and on the weekend but there is now a greater possibility for softer brexit. Some are saying there is a chance of second referendum or a loophole to skate this brexit pack. I think its unlikely we can alter the brexit scenario. The eu holds the cards. I dont think the election result changed anything. The eu has the power and the negotiations will be more on their terms. There will be compromised because they dont want to ruin the british economy because its linked with the eu economy, but they dont want to see britain come away with a clear victory. Not too much has changed from the election, but some of the market are trying to play the exit theme as an argument to buy sterling on the debt. Manus lets talk about macron. Earlier, interview kerry did one with a guest in paris. Its almost like its tony blair doorn, but he is on track to well in the second round of these parliamentary elections. The ramifications of that for for the euro,s does it reengage the euro on the upside in terms of bullishness . I think it absolutely should. The euro is not reacting too much. We are seeing spreads coming tighter this morning, but overall, the euro has had a measly reaction. It could be a quiet day, we are coming to early summer markets, people are bored of trading. It could reflect the fact that euro positioning is based on cfd positioning has turned long the first time in three years and along verywill move quickly in the last few weeks and maybe it is complacent and stale and there is a chance of aggression. It doesnt seem to be great despite that the news is good. Mccrone and may have won the election. The book she should have read. Ever strategist from singapore. You can get everything online. Coming up on the show, we will have the latest and resolve the dispute between qatar and the saudi led protest. Andones french revolution on course for a Huge National assembly majority. This is bloomberg. We are 50 minutes away from the market open. Manus its 7 47 a. M. In london and 2 47 in hong kong. Juliette saly instead invite with the business flash. Juliette . Optimism in the u. K. Has plunged after theresa may lost the majority in congress. The survey of visitors over the weekend showed 57 of britains economy over the next year. The institute of directors says its higher than when the country voted in june last year to leave the eu. Board approvedts several changes to the right hailing company, but provided no clarity. His confidence and head of business in michael. They approved all recommendations from an Investigations Commission came after a meeting yesterday that lasted more than six hours. The company declined to comment further. Led the Technology Shares in hong kong after recent gains were excessive. Hong kongs stock market has become reliant on tencent which immersed for 6 this year, 100 million u. S. Dollars in value. The Largest Internet Company accounted for a quarter of the gain in 2017. That is your bloomberg is this flash. Manus . Manus lets talk about the gulf crisis and the mediation that has gone on. You have kuwaitis say qatar is ready to understand, thats the phrase they are using, the concerns of their neighbors. They are assigned that the week old dispute led by saudi arabia may be easing. Qatars main benchmark at 7. 1 , the worst performance was december 2014 and the index was one of the worst performers of 2017. The middle east anchor yousef gamal eldin is on the ground. Good to see you, whats the latest . Yousef this is far from a diplomatic breakthrough that would be required to quote a part resolution to the gulf crisis. Bear in mind, its a big statement and coming from the kuwaiti side, we havent heard much from the qatari side on this. The United Arab Emirates minister is coming out with a speech saying, is this the beginning in which reason prevails . Thats the question hes been asking. Not enough momentum to rebuild trust. Thats key in this part of the world. It will take time to recover from the deep wounds to recover from the crisis. Rex tillerson said on the phone, with the saudi crown prince. In terms of the Market Reaction, i have a chart here and the qatar bts. We sawot back at levels last year when china was melting apart. But they have aggressively the full risk, nowhere near default, but markets are showing signs of concern. The real squeeze comes down to the lng market. Liquefied natural gas. Doesnt it . Yousef whats happening in the default space is fascinating. The forward market is also interesting. It at the highest level on record since about 2001. Thats the best qatar is going to have to move on that front. A quick note on what is happening. The biggest exporter, we have a customers coming out of japan that include zero and tokyo gas as well. Try to push in terms of better pricing and better deal out of it. Qatar is in a weak spot, but the fundamental weston remains, how will this Impact Investor sentiment the broader region . Manus the risk of contagion. Thank you very much. We will talk a little bit more about macron on the march, the french president gets offered. Offer the majority in the National Assembly. Thats next. Manus 7 54 in london, a 54 in paris. Well inid fabulously the first front of the polls this weekend. He won 31. 5 of the vote, 10 Percentage Points above the republicans. Is tony blair reincarnated . Good morning. Mccrone hasook like won three quarters of this years National Assembly. You can see just behind me. Majority we have seen in france in more than two decades. 100blicans could get up to seats. We have only 10 seats in parliament because of the system and the socialist family has been decimated, even though there candidate didnt manage to pass the first round. Manus been what does it mean for mccrone in terms of reform agenda . He has set the bench incredibly high. Absolutely. Of course its going to be easier for him to push through reforms. The first major once that Investors Companies are expecting is the labor markets reform that he wants to do i the end of the summer. The idea of course is to make it easier to hire and fire and unions have already expressed some concerns about this. Manus thank you very much. Market open is seconds away. Stocks are indicated lower. This is bloomberg. Manus just a minute ago was the start of the european trading day. Futures indicated lower and this is a fine hangover and im talking about facebook. You are the european conflict is lower. This is the shakedown we had in the tech markets over the weekend event politics of europe are strong, politics of the united kingdom, that is a whole other discussion. But it is something, and if you google it, you know what i mean. Its a thing of the splendid isolation. A very british affair in terms of global markets. Thats the point. London is down 4 10 of 1 . Volatility in the ftse 100 fell every day last week and that was driven by the drop in the pipe which gives succor to the rise in the ftse 100. The reality of conference in the u. K. Is a whole other issue. I would a little bell bring it, but this is what youve got instead. Its a zoom in look on what is going on with the equity markets of it we are expecting it to dine and a lack of belief in the market. Printingdon, which is first and foremost, london trade at 75 o seven and offered all the way down. There is a distinct lack of lastf in theresa may to for a for medical. Of time. Formidable period of time. What shook down the defense rally in the u. S. . And what is the cause of greater losses here . Can theresa may hold the party line . She can take you through the movements in a little bit more detail. Neajra . Here we are, 0. 999. The gilt market was a lot more resilient than sterling which saw its biggest drop since october on friday. Fairly steady today. You can see the 10year gilts yield down one basis point, below 1 on that. Moving on to the European Market , i have the stoxx 600 imap here. The stoxx 600 over all is opening a little lower 4 10 of a percent. Downsidestocks, on the with the i. T. Stocks down by more than 1 , followed by the telecom. Those are the underperformers and on the upside, you have the Energy Stocks in the green, up from 510 of a percent. You are talking about volatility. I prepared this chart for you. The ftse 100 versus euro stock is normalized and what it shows u. K. E volatility of stocks, the drop has been great. Greater since brexit. Resort before we saw that open up, we saw the volatility drop right 6. 2 this year. I have to say we are saying a little bit of a pick up their right now in the ftse 100 ultimately a lot can change in a day of course come we will keep an eye on that. The shanghai composite closing up about now, we have been down 6 10 of a percent right now at 3139. 88. Manus lets get into some of the movers on the u. K. Market in the stoxx 600. That should reflect the u. K. Risk, which is the risk to the u. K. Economy. Berkeley, to the weekly done by 3 . The confidence in this country is eroded. , 93, 92,cracking chart which looks at this. Home of parliament, pessimism it in the u. K. , we are more pessimistic from a business point of view. More customers the on the prospects of british economy over next year, higher than the morning after brexit. This is on the dime side. Wimpey, travisr perkins, british supplier, babcock international. It is skewed in terms of the u. K. And very aggressive. William hill dine there at the bottom of your screen. We have a first workpiece. Its negatively skewed according to the hbc. Can we look at the upside . We can always find a wii bit of good news right there. Lets try and find the silver disaster scenario that we have on our hands in a moment in terms of the Coalition Chaos that has been delivered. Thats the proposition for markets, what have you got . Lets talk about the u. K. , hard brexit, soft brexit, what could it be . Support for theresa may is now so weak that she will be unable of arce through her vision clear break with the european unit. Lets get to an edwards, rooted in the long haul. Brexit could be a long time, you could be there for a long time. Where are you with the brexit drawing board . Will be back in the studio sometime before march 319. You never know. He is being distracted bloomberg as the biggest advocate of soft exit in the cabinet. We will see what he has to say it when he get is that Cabinet Meeting with the rest of the cabinet today. We understand on bloomberg, but he only agreed to serve on the cabinet if he was big given a bigger say. Greene came back to the cabinet, the remainder, supporter of theresa may. Subsite balance on that to the conversation. Senior ministers are suggesting that the eu has been emboldened by everything we have seen over the last three days or so. There is a possibility of a softer brexit. On the other side of the matter what labor is not a lame party itself. They are still talking about brexit, something hard brexit years have been seeing over the weekend, points to the disappointing performance of the s p and perhaps this wasnt really all about brexit. We will see how the conversation goes. You can paint it either way. You can find reasons to believe that the results of theres a, friday, we can see a softer brexit. You could also see reasons that it is not quite so clear at that. Understandou want to , this is the personification of it. Scotland is we leaving the power wielding the power. Arlene foster, the Democratic Unionist party who wants to wield the ax stick, its almost like the breakup of the spice girls. As a real kind of position to be in. The scots and Northern Irish beholden to both. Got your music metaphor, i have another one in, tails wagging. There is one tail liking this dog with a very slim majority. Its a slim majority that they have their partners on board. There are be all kinds of tales trying to wake this dog. Some policy they want to force through, they will be trying to get into theresa mays year and say we will support you on this if you get our way on that. Whether its scottish conservatives or trying to way the westminsters dog. Want brexit, but they also want to stay in the customs union. Singles to leave as market and customs union. Hes the secretary, of course. Talks are see the foster and make tomorrow and see what it is they want in exchange for their support. Manus thank you very much. Lets welcome andrew sheets, chief across at morgan stanley. Before i start the conversation with you, how is your noel coward, by the way . Noel coward . G on let me take you inside the Technology Drop down over 2 . You begin to understand where we are. 5. 4 . T that, amf done by the chip suppliers, semiconductor, snl, get that right and you will be aware and a sunni endowment 3 . Coward wrote a piece saying the rat are repairing to leave the bbc. Its a rough old. This is the worstcase scenario for market. We have not fully got going yet. I disagree with that. Was anhad in the u. K. Outcome that raise political uncertainty, but it also lowered what is the biggest risk to markets, the u. K. Would pursue a hard exit cushioning strategy. With a much slimmer majority, razor thin hold on the comments, with the need to go in on an alliance with the dv. The odds of theresa may pushing hard brexit are lower and that produces one of the major tail risks we had to u. K. Growth and for the pound. Think ok, what makes you that the tail risk is really been reduced . Because i put it to you as the europeans dont want to see as an incapacity to the economy. Not at all, but it hands all the cards to the opposition. Just the way we approach that is that europe has held the cards all along. This outcome just increases the odds that the u. K. Will realize its negotiating position is a weak one. It will have to compromise, it would not be able to go in and make unilateral demands. Ultimately, the greater realization of that at the beginning of the process is the best outcome. It reduces risks later on. Have had a couple different comments that the eea, region model, that would be access to the Single Market, but that comes with wretched thoughts for the right, which is the european courts for Justice Movement of people. Is that something you think could be an offtheshelf interim solution for the u. K. If the soft brexit takes the weight . I think it very well could be. To here is that you have a new government that i think has not position,ized its own especially given the terms of any sort of agreement with the dep. You have an oxidation opposition that is supremely energized and successful with a softer brexit message, and i think both of those things matter. The odds of softer brexit outcomes, that maintains a Single Market access in exchange for other things, is becoming significantly more likely. Byus we saw the pipe drug 1 on monday, we are almost in this state of no mans land for the pound, but we have here is a valuation metric for the british pound and that is what is holding in this bandwidth. Are you surprised that the pound has held as reasonably well as it did . Where do you think we are building up for a little bit more of an aggressive move on a that has beensis adjusted for inflation. Its at 94. The longterm averages is 96. Is there a floor in the pound now . I think the pound is about right in our view. We will appreciate a little bit between now and the next two or three months, see it moving toward 1. 30. But the pound is a balance between being a cheap currency or purchasing power, but also has a lot going against it. If you set politics aside, you have a large trade deficit, a negative real interest rate, so those are also waiting down on it. We think at 1. 2 seven, its roughly fairly valued and it might appreciate a little bit the next couple weeks as softer brexit gains foothold. Manus up next, monochrome marches on the french president s new party. It looks as if it will do quite well. What does it mean for markets . We will investigate. We have all the latest analysis on the future of the u. K. Following the election that left the country with a hung parliament. This is bloomberg. , 9 15 8 15 in london anywhere else in europe. This is state of play. Technology down two point dented 2. 7 , a real drop precipitated by the nasdaqs lackluster performance a drop of 1. 48 on friday. Apple at 3 . Technology is down 2. 37 . Its a rebirth of volatility. Thats all you have to think about. Is it angel or the beginning of something much more aggressive in markets is it angel or the or theng is it a jolt beginning of something much more aggressive in markets . Under pressurel this morning, so you are seeing this hangover from the nasdaq knock on effect, facebook, alphabet, and amazon all losing 2 of their value on friday. State of play on markets, lets talk about french president Emmanuel Macron. Is on track to a sweeping majority in the National Assembly in the first round of the legislative elections. 134. 5 of euro party the vote. Thats almost 10 percentage point ahead of republicans. Is the chief strategist at morgan stanley. They have been given jellico in terms of macron. The Frenchamerican Foundation president was more or less intimating that this is a rebirth for the french economy. What is my risk . Is that he wont be able to follow through on what he has promised i think thats where todays or yesterdays election result is quite interesting. You have a first stage of a Market Reaction, removing other candidates as the market solve brought greater uncertainty. Skeptical,is still but he will actually be able to all of through on these reforms. The fact that he is looking like he is heading toward a legislative majority, that could increase the odds of putting things through. Its a positive and for the currency, it could also help people long in yields as think they could get movement on the fiscal side as well. Manus a little more risk in terms of yields rising, that money has artie started to flow back into europe. Do you need to see delivery before you engage more money into france . I think the risk in europe is that what is working changes. If you had a rally that has been extreme the cyclically led and t has been around since around a week euro. Below we see Going Forward is for it. They still euro being stronger now, we think it is financials and really value in europe, which leads the market higher from here. Of aisk is, its more rotation every story and what has been working Going Forward is a little different than what has been working in the past. Manus helping the prospect a long is the viewpoint from the ecb, still fully dovish. They are changing in the wording, but the language, if you listen to the whole of the ecb news, i emphasized listen to the whole of it because in the rhine, it is we are there fair and square. Things are Getting Better now, but we are not convinced about inflation. We are there in perpetuity. I think the policy remains accommodative, but also just as important, as you alluded to, it remains printable. The ecb is going out of its way to guide markets in terms of this is what we want to do and when we want to do it and we are going to give you a lot of leeway and we will talk about later on in the program, but i think this is important as we talked about the fed this week, we have a major conference to the fed and how much guidance will it give . So far the major Central Banks are being extremely friendly to markets indicting their policy along with it. Manus we will talk about the fed shortly. This is our chief strategist from morgan stanley. , the to come, the fed prospect of tightening the Balance Sheet. When can that begin to be reduced . Bryce, brace, breaks. Brace, brace. Its now 3 23 a. M. In new york and we are starting the week with another discussion of the Federal Reserve act expected to increase their rates twice more in 2017 and shrink the Balance Sheet for the end of the year. Theite a clear downturn in outlook for inflation, according to 43 economists week survey here at bloomberg. Andrew sheets is the chief strategist at morgan stanley. In a break you and i were chatting. I was being facetious in terms financial conditions are at cap are what you want to drop that. This is the index, sending at. 83 . Easy, easy, easy, and you say that for you, the financial conditions overwrite the data. Financial conditions are soft. This is quite important. There is skepticism that the fed can continue to hike this year because of some of the data has been weaker than expected because inflation has been undershooting expectations. The recent we think they will hike this week and hike in december has a lot to do with that chart. This idea that financial conditions have eased substantially. From even from march on our estimates, not to mention last december. With think the fed is trying to tighten policy. Theres this idea that the fed is moving in one direction and financial conditions are moving the other direction of it we dont think to hikes is overly aggressive to write that ship a bit and loose financial conditions more in the direction the fed wants them to go in. Manus to hikes would be market etiquette, but we have this chart this morning about where the prospect is for rates. The consensus has moved down and down. The Third Straight down will be the end of the year. If its the end of the hikes, as you suggest, do you join the club . Do you skew yourself lower as to where you go to . We are already lower than that number. Our global strategist has our forecast at 250 by the end of the year. To 70. We are subject sub to 70. 270. This like in the economy, this is the other question, do you believe the wages grew the fastest pace since 2007. How much slack is there in the u. S. View . Is limited and hard to say. It can be difficult to anticipate weight changes because they can happen quickly when they do happen. The policies are moderate, we think the fed will move because they cant be as short of that as they would like to. Manus thank you very much for your views this morning. Theresa may faces a showdown, a the tenureat answers of Prime Minister. Test the question for the country and the markets. Can she hang on to the job . We hang on and was mr. With the analysis. This is bloomberg. 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Are looking at theresa may, on her return from element in and its precarious times for the pm, theresa may it will face furious lawmakers from her conservative party as investors look for any excuse to sell the pound again. Francis macron expense control with voters, putting his party on track to a sweeping majority into the National Assembly. Tech take them, the nasdaq fell off into the european trade after goldman mourns low volatility may be winding investors. Sector on therst stoxx 600 this morning. A very good morning, welcome to Bloomberg Markets european open, im manus cranny. At European Headquarters in london. Dayminute into the trading here, as you are waking up to technology risk, thats the biggest driver on the downside, across the european complex. Market after we saw the in the United States of america lose a great deal of value. You are looking at most of the 2 , stocks losing nearly youre talking about amazon, alphabet, apple losing 4 of its value. London is down 3 10 of 1 , the reality of trying to cobble together this coalition is beginning to come home. The brexit secretary is talking about the importance of the opportunity to walk away. He implies that this could be the version that theresa may still wants to propagate to the country. Its important we can walk away. Will we reach a deal with the do p Democratic Union party in ireland . Could there also be a possibility of no brexit deal . This is a challenge for theresa may as she places her party today. Ministers are looking at her plan for hard but what is she going to do in terms of suggesting that the u. K. Good remain in the european Single Market as the premise are right to stay in power . Theresa may said she was focused on the immediate job. I said during the election campaign, if elected i intend to serve fullterm. What im doing now is getting on with the immediate job. Thats whats important and thats what the public would expect. They want to see the government providing certainty and stability. What is the critical time for the country . Manus we come from promises of the stable government and the. And edwards is out west. Late at the series of appointments, walk us through the agenda of the day and how important that is. Meets theinet backbencher committee. To talk face her party defeat, atand the least losing the majority at the polls. In terms of reappointments, two new apartments need to be made. There seems to be something for everyone in it. Are, theeen was remain first secretary of state, but you have to promote some key brexiteers. You could interpret that to suggest she is having to give a slightly strong her hand to the brexiteers. We understand Philip Hammond, the chancellor, that said he would only serve again if he is given more of a say on where things go. What would david davis think of that . He has been talking to the u. K. Media about how he does not want to stay in the union, he cannot deliver a brexit in the Single Market. How will those views rub up against those of alan foster, the head of the Democratic Union party . He will be in london tomorrow to deal, ae a supply relationship with the conservative party to talk about controversial legislation to enable them to govern the country with stability. Whethernty to talk about on it leads to soft or hard brexit. Ive been listening to your guests come up on the site of leading toward a soft brexit. We will have to see if that comes to pass. Manus thank you very much outside was mr. Comments,vid daviss the dynamics havent changed. Were in protagonists power before the election remain. Lets welcome our guest. Election,e of the copresident thank you for coming in. David davis is making these comments. This is the brexit secretary, the man in charge at the moment. Still working on contingencies for no brexit deal and has little doubt that they will reach a deal with the Democratic Union party and some of the elements will be pruned away. Still working on contingencies for no brexit deals. When we hear about soft brexit, what do you make of that . Its meaningless. As meaningless as what we were talking about before. Before it was brexit means brexit, no deal is better than a bad deal. The bottom line here is, you look at a twopart, 80 loss of the vote. In the manifesto, they are a market to lead to out. Custom union, if you remain in the custom union, it means you will not be able to strike trade deals with china. You can fire liam fox because he has nothing to do. Power, deliver this so soft brexit idea, that will not pass the test. You are acting on a script that is not there. Manus nobody killed in the blanks, did they . Scripts, terrible actor with theresa may, bad judgment. She called the election it was wrong. And weweaker than ever are expecting her to deliver a softer brexit. This is fiction. Manus she is going to strike a deal with the Democratic Union party, who support no hard border between the north of ireland, where i am from, and the south of ireland. I have lived through hard borders and checkpoints, i cannot explain how deep that ranks. No hard border, number one, but number two, their view of brexit is, they supported brexit despite the majority of Northern Irish residents voting to remain. This will be the first test. From brussels perspective, we need to deal with three main items. Them leaving the u. K. , and the issue of the border. This will be the first test there. A are concerned about the border issue because with the Democratic Union party becoming a partner from outside, they will assume the good friday agreement comes to the table. Adding more risk just for the sake of remaining in office, rather than trying to provide more latitude in the yuan qe. You eat. Ue manus we were talking about residents rights before the election. That agenda has not changed. Is there a proposition out there that theresa mays move is to go across Party Grounds to go for a softer brexit . Its not going to happen. Party are still committed to limiting freedom of movement. There is no going back. If you look at the votes that were gathered by the s p manus what about your profiting something on immigration . Or is that just fantasy . That is totally fantasy land. Its one of the four key pillars. They behave like a u. K. Government until yesterday morning. Of europe,he context we have waking up to macron and really a strong macron, it looks like going into this. Arope needs britain to remain strong, vibrant, growing economy. Lets not delude ourselves. Europe needs a strong u. K. Agree totally. More ofeeded us stronger u. K. A few years ago. They are rebounding. Potentially with mccrone, they are getting stronger. A strongers start of engine. Idea, yes, its an important partner of the u. K. , no doubt about that. But there is only so far that europe can do to try to meet the u. K. Expectation at this point. They are up in the air. There is no plan yet. We dont know when they are going to negotiate brussels. We still dont know. The clock is ticking. Manus in terms of this coalition that theresa may has, what is the possibility that she is a negotiator in the first instance, you see her lasting for the end of the year . You see another Prime Minister being put in place to negotiate these deals . I dont think anybody in brussels would be reassured by the change of leadership. At the end of the day, we have seen the both of them for different reasons. They are difficult partners for europeans. If theresa may is able to get over the summer, she might then be able to stay longer. Nobody wants to have an election at this point. That she canain stick around as they in office. Im not sure if she stays in power, but she stays in office. If she can avoid the context in the fall, she might be able to continue to for some more time. I am not sure she will be the one to conclude the detail with the europeans. The possibility of dropping off completely, is that off the table . No, its not up the table. We have one year to go. We have a government that is weaker than before, supported externally by a difficult manus so that risk is very real . It is still there. Now we have a weaker than before assumeent me and you, we that the idea of soft brexit has ground, limiting it, turning it into an idea into a Public Policy is challenging. To do it in an environment where the economy could go no further and where the government majority is very thin. Manus thank you. Copresident of halogen. Here is an exclusive interview with an ecu board member talking to bloomberg at 11 30 today. Temperament mccrone on the move, french president is majority. Nal like in paris. Live in paris up next. Manus going to be a long week. Its only getting started. A 40 6 a. M. Here in the city of london, time for bluebirds first word news. U. S. President donald trump has renewed his attack on james comey. His leaked comments about the whitehots white house thoughts were cowardly and could be illegal. And sessions will testify capitol hill tomorrow about the russian meddling in the president ial election is is is important in light of comeys comments last week. President trump is reportedly considering scrapping or postponing a planned visit to britain this year unless he receives more support for the trip. It comes amid backlash after a comment he made after the recent paris terrorist attack in london. North korea says its move closely closer to testing a missile with the intention of hitting u. S. Mainland. They said recent tests have shown the military is not far away from such a weapon, despite president trumps claims to prevent that from happening. Successfully stopped and ibm from detonating over the pacific. I setting qatar was ready to understand the neighbors in the region. The kuwaiti Prime Minister said it would not amended mediation until an impasse was resolved. Tensions may be easing. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Manus . Manus thank you very much. The conservative party lost the majority and it is a different story across the channel. In france, Emmanuel Macron has expanded his control as voters put his party on can on track to a sweeping majority in the National Assembly. We are in paris and joined by a guest. Good morning. Good morning, manus. Quarters of the National Assembly. Lets talk about the reaction on the market. I am joined by the head of Investment Strategy at axis i am in france. Is this a victory in the run of mexico in the market . It doesnt seem to be completely. Especially since if you look at the bond market. There seems to be some signs of new confidence that Emmanuel Macron will be able to deliver on his agenda and we are seeing the bond stretch in germany. At levels we have not seen in a while. Its quite new in this environment. Before a month ago, this, there were 18 basis points in terms of spread between france and germany. That has changed in a month, right . Absolutely. There has been concern about the Political Risk in france. Now its the other way around. We have to think again about france becoming a court market and then having the bond spread going to the way it was before the crisis in 2007. Back to the netherlands or germany trade. The crucial labor markets is planning to do over the next few months by the end of the summer . I think there are two key signs the market is looking out for. Andis labor market reform the agenda for that is very short because we are talking about something over the summer. The second potential positive trigger would be the european , together with the German Government after the german election in december. He wants for example to allow companies to negotiate wages at a Company Level rather than the industry level. Themat going to make decree in france . Structural implement is high and france for a couple decades now. For that and this will be one aspect that will be thated, but you are right clearly it will be a sign that things are moving, that towardal is moving proper level markets. With this tightening with germany, the german Unemployment Rate is set to close in on 4 this year. Whereas the french implement rate is still 50 employment rate is still 15 . Its 20 years back now. Its going to take a while before we see improvement in the labor market. Things are going the right direction, definitely. Within the u. K. Elections, do you think investors are moving and from u. K. Stocks considering more seriously going back to the euro and france stocks . There is optimism about the euro area again. Its not just that. Its also the other story that has improved are medically. Thate same time, its true stocks in the u. K. Have increased after the election. We have very little about what brexit will look like or what the framework will be or how long it will take. There is a chance for investors to move to your area in the u. K. Finally in terms of monetary this givesyou think to unhook theoom euros own economy from life support . Probably they were concerned about risk in the euro area, about diminishing risk, which is the big story. They are more relaxed about that. Have disinflation problem that is sticking around and for now, i think inflation is still falling short of the target. Therefore what we expect is a first step toward localization, but no earlier than september. Thats also when we should get labor reform. We going to see a Market Reaction then that will be stronger than the other election . Indeed. We will certainly see a stronger reaction. We was a stronger reforms in france is go confirmation of germany. All that could contribute to the story in europe. Strategy, investment live from paris, manus . Manus its all about the spread in france and germany. Lets talk about the tech fall off from new york to asia. Asia to europe. Particularly hardhit in the asian markets. In a stoxx 600, this is how it looks, the worst performer is technology. Chief Investment Officer has warned low volatility in facebook, amazon, apple, microsoft, maybe blinding investors to rest. They said the protagonists of the decline in asia, for more, lets get to richard stross, chinas stocks team man in hong kong. How bad can the bloodletting actually get . Onon some chinas stocks of th apple, itsm sorry, hardly that aggressive, is it . There is a little rebalancing away from tech stocks. As you chart these companies, it was the slightest blip pointing downwards. It was refreshing to see some kind of redness in the market. It has been a oneway out most of the year to go with these companies. Tencent,panies like samsung, and others have had were performances this years and this is the first we have seen in some time. Manus if you look at some of the asian performers, alibaba, quite staggering in what they expected. Dwight d you think asian is ing such a vulnerable hit dwight d you think asia is taking such a vulnerable hit . If you think samsung accounts for up quarter of the benchmark china, tencent, alibaba, account for 35 . 45 of the gains this year alone. Soon as you see a fallback in these stocks, it has a heavy weight in terms of impact. Its only natural we will see some pullback. Has been a steady game throughout the year and volatility has been exceptionally low in hong kong and the lowest since 2005. Manus we have to to leave it there. Trend intoow that markets. Sorry we have to cut it short there. We are all over the ecb. This is bloomberg. Francine pressure mounts for may. A disastrous weekend for the u. K. Prime minister. Is a softer brexit now in the cards . Macrons mandate. Voters put his party on track for a sweeping majority in the National Assembly. And as the fed prepares for its next meeting, economists prep for two more rate hikes before the year ends, despite slow inflation. Good