Transcripts For BLOOMBERG Bloomberg Markets European Open 20170707

Matt miller in hamburg at the g20. This is what were watching. Bonds being bashed. Investors heading for the exit. Number lead payroll to more selling . G20 kicks off. Please use a water can against protesters. Todays main event is trump facetoface with Vladimir Putin. Dozenty in at least a u. S. Power plant has been breached. The chief suspect, russia. Matt, welcome back. Matt 30 minutes to go until the open of the cash trade on equity indexes. If you look at their futures right now, you see a little bit of a mixed picture after a slide for the cash trade. Futures popping positive for germany and france. Still negative for the ftse in london. It will be interesting to see, but as you say, the focus is really going to be on the fixed income trade as though yields continue to sort. German yields went from zero spot for two zero spot six fast. Interesting to see how it is happening across europe and in the u. S. The moves have been aggressive. The european open has not been the greatest gauge to Investor Sentiment over the next few days over the last few days. The action has kicked in midmorning later on into the afternoon. Yesterday, european equities flat at the get go the s p 500 stateside, down by point. Down by. 9 . Look at what is happening with the japanese yen this morning, down. 4 . The russian ruble, p attention to that meeting in hamburg later on. Meetingt trump president putin. It is fascinating in terms of the geopolitics. Putin clearly has waited for this event, this facetoface to set the tone. The russian ruble down. 6 today. So much to talk about. We will work our way through with some great guests today. Heres the first word news. In the u. S. , russia is seen as the chief suspect amid warnings of hackers working for a Foreign Government breached at least a dozen American Power plants. The will creek Nuclear Facility was among the sites targeted. The warning has a sparked concerns that the attackers were searching for vulnerabilities and the electrical grid. U. S. Led effort to broker a United Nations Security Council steam at condemning north koreas latest missile test has broken down. The u. S. , france, and the u. K. Were unable to overcome objections from russia and china. It is a setback for the trump administrations top foreignpolicy priorities. The middle east, the tory the qatari government refusal demonstrates the emirates has linked to terrorist roots, according to a state owned saudi press agency. The four countries expressed their deep surprise that qatar rejected the demands and pledged new measures against the door off the gulf nation. Thousands of people protesting against the g20 summit of Global Leaders arrive. Pledged massve resistance. One of the most closely watched events will be a meeting between donald trump and Vladimir Putin. The bank of japan has asserted controlled over the nations bond yields. The central bank offered to buy 10 having your notes. The yen among to a loss. Flung to a loss. To a loss. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Guy lets get back to the main action we are seeing in the markets. This bonds selloff has been creeping around. Hedge funds have built off. Bullish wages on the long end of the treasury story. They are rushing for the exit. It started in europe. Hard to pinpoint exactly what happened. Was it french auction . Was it the no side of the ecb . Whatever it was, it has been moving around the world with great speed. Jeffrey good luck says the recent selloff is assigned there is more pain to come for treasury bulls. Lets get a view from singapore. Mark joins us. Does this have legs . Is that it . Where does it take us . I think this has legs, but i disagree that the treasuries are the focus. I think treasuries are the worst way to play this bonds selloff. Europe is where we are seeing the real move. It is because the ecb will need to taper. Theyre running out of bonds to buy. We are on earlier and highlighted a chart showing european yields seem too low in the context that the economies of the u. S. And eurozone are beginning to converge in terms of gdp growth and inflation. European yields need to go higher. I should caution, we have had a big move in a short space of time. Shortterm, things looking stretch. Overall, i dont see why you would fight these moves. Matt what about in the u. S. . We saw the 30 year yield rise to almost the 3 level. The has been calling for tenure and 3 in some time. Are we going to see steepening of the yield curve . I think we might see a steepening at some point. I dont think the treasury yields will rise significantly higher. If european bond yields go up, that will drive treasury yields a bit, but i dont think they will. We have seen inflation prints continuously fail to their target and disappoint on the downside. The u. S. Does not happen inflation trouble at the moment. They will hold off in hikes. That might lead to a steepening, but i dont think that is the theme. Which are worried about bond market will sell up next. I think europe will continue to lead it. We have a lot of ecb speak coming up. My question is, if europe is leading this story, how big a divergence to we get between the core and periphery . That is one of those keep pivots that tells you about market sentiment. Moment, we will probably see in the shortterm that divergence widen. We are seeing risk aversion here. This is causing pain across markets. We are seeing it spillover into emerging markets, which has been a great trade. We are seeing commodity volatility, big moves in fx. We are seeing a market that was vulnerable for a bit of correction. We are seeing that pain. Some of the consensus traits are hurting. We see a little bit of a divergence. We might see then that the periphery, youll start coming down, where is the core yields dont come down as much. The move in the core yields might be more permanent. To be an is going interesting one for the ecb to grapple with. Mark, thank you very much. We have been talking about this. Some great charts and analysis coming through. It was a move that was ready to be made. It was fascinating to see what the trigger was yesterday. We have seen big moves in the bond market. P. M. One p. M. Today we get bill gross is take over what we have seen. You can watch the show using the tv function. You also get all of the data, details, charts on this sidebar. You can ask biggest a question. You can ask the guest a question. It is going to be an interesting day in hamburg. Matt absolutely. There is so much confrontation here. Will the leaders confront the turkisht president after he says the germans are committing suicide by not letting him speak . Will anyone confront president she as north korea launches a new missile . Trump confront Vladimir Putin after allegations that the russians have hacked Nuclear Power plants, adding to the allegations that they had the 20 16th elections . This is bloomberg. 7 43 in london. Lets take a look at where the bond Market Action is looking at this morning. Thewaiting for the 10year is unchanged at this point. That doesnt capture the moves we have seen. You can see the range we have been in. You can see the breakout. It is a big move them and it is significant. The bond market has been selling off and selling of hard. Lets get a Bloomberg Business flash. Samsung top analyst estimates with its best ever operating profit. As ase to 12 billion Global Demand for semiconductors remained strong and the new galaxy phone one over customers. Qualcomm is suing apple for patent infringement. The chipmaker claims that apple infringes six patents, covering various aspects of mobile phone technology. An apple spokesman said the company has always been willing to pay a fair rate for Technology Used in its products and attempted to negotiate with paul, with qualcomm for years without success. Guy Terra Firma Capital Partners will begin talks to raise 3 billion euros for a buyout fund. A terra firma spokesman declined to comment, but we will put that to justin king when he joined the set 9 30 a. M. U. K. Time. That is your Bloomberg Business flash. At least a dozen power plants in the United States have been targeted by hackers. Russia, the chief suspect. Lets go to Stephen Stapczynski for more. He joins us from tokyo. Lets talk about what we know, what we dont know. Did the attack have any impact . The attack had no impact, according to the sources bloomberg has spoken with. Lets take a look at the nuclear aspect, which grabs that the most alarming part of the hacks. Reactor, one nuclear Nuclear Power plant that was targeted in kansas. This facility was built in the 1980s. While the hackers were able to get into the administrative system in the facility, they were not able to get into the operating part of the facility. Notupper and room was hacked, because it is not digital. It runs on an analog system. According to experts, it is hard to hack these nuclear plants. What you can do is hacks some of the more advanced parts of it. Actually taking control is impossible. Seen bye hacking was the american government, there wasnt any impact so far. Connection of a given what is happening today in hamburg, represents something more to real more material. Has significant is the concerns that this is a russia story . Stephen according to sources bloomberg has spoken with, russia is the prime suspect of this. The reason for that, why is russia prime suspect . The Technology Used is sophisticated. It seems to be similar to what russians have used in the past for similar hacks. In the you came, in the ukraine, they were suspected in hacking their power grid. It is the same attack. The experts in the u. S. Are still unwinding what happened. They are still researching it. There is not a definitive target. They are not saying this was definitely russia, but they are the prime suspect. That would create problems with what is happening at the g 20, what is happening with the u. S. Considering all of the accusations russia has had in the past regarding hacking in the United States during the 2016 elections. This will not be something taken lightly by the United States government, however, who actually hacked it isnt certain yet. There is still more research to be done going forward. Guy Stephen Stapczynski, thank you very much. Matt, back to you in hamburg. Thousands of protesters clashed with 15 to 20,000 50,000 to 20,000 police here at the g20 summit. [sirens] police fired Water Cannons, pepper spray as protesters threw projectiles and set off fireworks. Organizers of the demonstration are denouncing the g20 summit as a vehicle for global capitalism. The violence continued overnight. Organizers pledging mass resistance. The protesters and police have reported unspecified numbers of injuries. Large demonstrations are expected later today and tomorrow. I am here with tony czuczka. How serious are these demonstrations . Surely there nothing compared to meeting in 1999. Standardis the anarchist protest. Hamburg is has a protest tradition, if you like, even though it is a commercial center , which may be is one reason why, but it is also an anticapitalist activist center. That is where these demonstrations come from. , theyhat we could see were limited in scope. The police boxed in the demonstrators. A lot of them seems to disperse. Matt they were being arrested, because they were wearing masks. Germans are wary of people wearing masks. Is that illegal here . Tony yes. There are always rules for these demonstrations. The Hamburg Police department one. Tougher there was a tough police response. It could have gone the other way. In this of german scribbling about the money spent on this. Grumbling about the money spent on this. Is that the biggest problem for the organizers . Tony that is one problem, if you like. The organizer is the German Government. This is right in the center of germanys biggest city. That requires a bigger security operation. Guy most protesters are nonviolent. There is this socalled black block of grand carcass of anarchists. What is the story with the mayor coming here . Tony that is one of the quirks of the summit. Seeingart of the protest , the black block have a particular agenda, which doesnt exclude violence or elevated resistance. That is why she is coming here. He has comeike here. You also have donald trump your, who stands for something entirely different. Are veryre protesters much against a global free trade. We have seen donald trump on that side of the argument a little bit. Maybe where wright meets left. Meets left. Inre was a lot of resistance germany when barack obama was president. There was a lot of resistance to ttip. It is not like there isnt that sentiment in germany baked in. Matt tony, thank you so much for your time. Us aboutzka talking to what is a sideshow to this g20 summit. Injured, buty gets i drove by the black block on my bicycle on the way to the media center here. It seemed to be about 20 or 30 anarchists having fairly nice conversations with local police and blowing up a huge inflatable object. We will see how things evolve over the weekend. More people may be joined the demonstration. We are minutes away from the market open. It seems the french are out shopping the good weather. The action has been a derivative of what is been happening in the bond market. Also the equity market and fixed income market. That is where we stand at the market. The german 10year is about. 5 . The bond market fell off in germany significantly yesterday. You can see what is happening in france as well. We are opening the u. K. Market shortly. At this point, it looks like european equities will be opening softer. We will see how things go. This is bloomberg. It has been the bond market in charge. Its somewhat more than others, some markets may be down about 0. 5 . You will see some action today. Pay attention to the recent yellen. We also have payroll numbers coming out. Matt get your bets in. I also want to point out that the g20 meeting is about to kick off at 10 30 local time. Angela merkel kicks off the meeting, and they have their first working session. They start by talking about terrorism, then that trade and finance, and later, climate change. We are all waiting for President Trump to meet with president putin. Guy we are looking for to that meeting. The market is opening. To be honest, the market for equities has not been great for sentiment. We have had some flat, quiet for equities. It has not been a guide for what is about to happen. Bond Market Action the primary driver of what has been going on. The market down by 0. 1 . Similar story for the rest of europe as well. There you go, there is the cac opening up. Whats find out how the guilt open is going. Manus the European Market openings are slightly lower. Asia has its biggest loss in a number of months. Financials are flat, industrials at 0. 3 . If you put the two markets together, equities and bonds markets, the question is are we over dramatizing it . Some shortcomings coming through on the american equity markets. This is bond and equities together. You have not seen this kind of move since 2013, but this is a very different scenario. From a nuanced language number of Central Banks. Dont mess with us. The combined loss of 1. 7 . Is it the beginning of a rebalancing in equity markets . The fed warns about these conditions and markets. This is the bund market. The break at 1 they are trying to get to 0. 6 . This is volume, and the volume surged the most in a year when it came to the bund market. That there has been a bit of a drift off in terms of yields in the bund this morning. These are your september futures, you can see we are taking ever so slightly higher on the gilt yields. What is the next move, if at all from the bank of england . I will let you lineup with the capital thoughts. Lets see what happens next in the bond markets is it the tail that wag the dog . Matt ins go over to terms of what is happening. Lets start off with index points in show you where the weight is. Off, you are seeing some of drug stocks are off as well. Lets show you what is happening on a percentage basis. Interesting that the market does not like the numbers that has seen this morning. Thereo the other side, seems to be something coming out of the space that there may be some m a story around. I need to get to the bottom of that, because i am not getting confirmation on it. Loomis is trading higher. That is where we sit on the equity markets, but that is as we indicated not where the main action is. The bond selloff is a sign of more to come for the treasury markets. The added 10 year treasury yields could move towards 3 this year. The back end of this year. Act with us, andrew wilson, the ceo of Goldman Sachs Asset Management and cohead of global fixed income. Good morning. That is your target as well, isnt it . Andrew we have seen a real shift over the last couple of weeks. Talkingaghi started it about the need to remove accommodations and talked about tapering of their purchases, so it changed the sentiment. I would agree. The under menton the underlining fundamentals are solid, broadbased, and the fed is on this move to continue to raise Interest Rates. The expect the details around the tapering program as well in a september. There is some chance of july. There is a sentiment shift. The bond market is telling you the world is getting better, and the Central Banks need to stop removing accommodations. Yesterday was an interesting day, you see a jump 50 basis points on the bund. Andrew, your target is about it is not new. It are others who see yields going lower. I think theyre are looking for 1. 35 . What are the biggest risks to a 3 yield . What could push us lower rather than continue higher . Andrew i think to have a yield close to 1 of a 10 year treasury you would have to see a u. S. Recession on the horizon. We do not see it. There is nothing in the numbers that would suggest we are anywhere near close. I think the move higher in a theds is a reflection of stronger economy, of the improvement in the labor market, we will get an update on that later today. Of yields terms moving higher, if it is off the back of solid growth and a some uptick in inflation, that is the conundrum that we can talk about. If it is off the back of that growth, i dont think it is a problem. A lot of it is the speed in which it happens. I think the talk we heard from the major Central Banks is trying to get the notion out there without causing a lot of disruption. It is a very fine balancing act that they are trying to perform. Is going to happen slowly, gradually, markets are reacting much sooner. I think he has moved his target up to 1. 9 . He is closer to 2 , but he does have a downward expectation. There are a whole bunch of factors in his thinking. What is going to be the effect of the Balance Sheet unwind . We roughly understand how it is going to happen. Eitheror when it comes to Balance Sheets and unwind. Andrew it is well known. They have outlined the schedule. They know exactly how much they will run off on the Balance Sheet, so you do not expect it to be a big event in and of itself. I think the combination of the girl rate hikes, the next one is likely to be december, as well the projection of 2018 were pretty close to it. Guy the market isnt, though. Andrew stephen stapczynsk that is the interesting andrew that is the interesting piece. The numbers like today need to be firm to confirm they are on track to raise Interest Rates. Are we moving in that trajectory . Are the dots more likely to be right than the market . Matt to what extent the geopolitical tensions hurt your forecast and the feds plans to raise rates . If, for example, the u. S. And china start to get into it over both korea, could be could it be a problem for rates . Andrew geopolitical is attempting to call a break to calibrate. It disrupts markets with isatility and if the event not very good, bonds tend to rally. Those tend to be shortlived. Unless it is something really major, we would say, maybe have some shortterm impact, but it doesnt really derail the economy. It is hard to imagine Something Like north korea could really escalate to the point where it has a material downward impact on the u. S. Economy. Shortterm, yes, certainly the potential for volatility. Longerterm, i think the fed is on course. They are pretty resolute about removing accommodation. Guy enter, thank you very much. The ceo of Goldman Sachs Asset Management. He is going to stick around. Trump tweets, you can get this on your terminal, he had great meetings with merkel and moon. Take onget bill grosss it. He will join us from janice henderson. From janus henderson. If you have the bloomberg, you can use this to access it. Yet the radio page, the event coverage page, you have also got some of the key video moments we have got for you here as well. Ebs talking about why it is still long at the euro. Plenty of great video to access via tv. This is bloomberg. Guy welcome back. It is 8 12 in london. Lets check in on the markets and see which direction we are going in. Down 3 10 of 1 across europe. As ive been indicating this isning, the open in europe not the greatest of gauges in terms of where risk sentiment is. Lets look at the individual stocks. Nejra we are seeing a stunning move here, up 45 at the moment. 2009, the most since hitting the most since 2015. They supply industrial scaffolding and insulation, and it is rising. About3pany is valued at 22. 3 million euros. A cashtalking about offer, are recommended cash offer. Rally seeing cape significantly. We are seeing gains in a really us Equity Opportunity in aurelius Equity Opportunity. They raise their earnings forecast for the year 2017. On the downside, looking at Howden Joinery group. Decided to and ceo retire, and the company says that Andrew Livingston will take over as the new ceo. Howden joinery one of the worst performers. Nejra, thanks very much. We are back with andrew wilson, the ceo for Goldman Sachs Asset Management. Let me ask you about the concerns you may have or not about flareups. Angela merkel wants to talk to the g20. About trade. St, that could cause a flare up with donald trump. With immigration, that could cause a flare up with donald trump. And climate change, obviously another problem there. Will it be 191 . Andrew i dont know what the voting will be, but we talked about it before. These political things flare up. What are the economic consequences of that . Does it have longevity . We can have uncertainty in the shortterm, but it is about over the next three or six months, how does this play out . The one that is most interesting as we have been talking about, the whole trade and trade disputes have quieted down. There is some potential, but i think the objective will not be to cause flareups. And hopefully we get through the g20, remain relatively calm, and the markets get back to focusing on the fundamentals much, which is certainly easier than trying to analyze politics. We what is interesting is thought the global Central Banks would coordinate. It felt like that. Suddenly, you have the vis reports, and everyone was talking off the same. You are looking at the g20 and wondering, what else is going on in the sidelines . How much coordination and joint thinking is there . With the headline with the leaders, that does not seem to be much, the day, the finance minister of each country has to adopt the right policy. Of course, lets look at this in terms of the economic picture. Everywhere, Economic Growth is doing pretty well. The backdrop is a global economy, which gives the sense they are coordinated. They are all looking at the same data we are looking at, and that is that growth is doing well. Not exceptional, but doing well. They are looking at their own economies in the context of, my economy is doing well, but i look around the world in other economies are doing well. Coordination, it coordinated pickup that they are looking at. What is the best possible outcome to support programs outlook . Andrew fiscally, there are no disputes. Lets get to that piece. Coordination around trade, anything that came out on a positive side, i think the markets will the cap positively. There is some concern around potential trade disputes. Maybe even silence would be enough for markets to feel that we are not going to get the kind of flareups that we would be concerned about. Guy we need to talk about asset prices and what are going on in terms of financial stability. The conversation is coming up. Plus, another conversation with brexit. Come, holding a line on brexit even as the uks softens its stance. We will talk about that next. This is bloomberg. Guy matt welcome back to Bloomberg Markets european open. Imf miller in hamburg for the g20 meeting of Global Leaders. Yields continue to rise. We see the yield rise on gilts, on bunds. Littlende trade is up a under one basis point. We see that continued global trend of rising yields. The question is, how high will it go . Guy and how quickly will they get there . That isconversation driving all Asset Classes at the moment, having a ripple effect. The cost of brexit is also another conversation we need to be having. The brexit negotiator signaled frictionless trade relationship is not these herbal, delivering a blow to the members of the u. K. Government seeking to maintain ties to the eu. Meanwhile, Jeremy Corbyn telling bloomberg he will meet with him next week. The shadow team has had many discussions with the eu officials, members of the european parliament, and we have a Good Relationship with socialist parties across europe who want to work with us in the future, and i will be in brussels next thursday having an extended meeting to outline what our issues are. Guy the extended meeting. My conversation with the leader of the labour party. He thinks there will be more. There could be an election soon, and he is ready. Still with us, andrew wilson. Corbyn, he really thinks he will be prime minister. Changed afterhas the last election, but he is speaking more confident. Reactow with the market to a labour party. . Andrew any sense of greater fiscal stimulus would not be taken well by the markets. It would need to be funded by issuance. We can expect to see yields move higher if fiscal expansion was happening. That is what we talked about previously, but we want to see the details. I expect yields higher, it would depend how big the stimulus would be. Guy he is going to see barnier. Has a numberngland of Different Things it is thinking about. Impacthinking about the brexit is having on sterling, the inflationary outlook, whether the consumer is spending too much money and gearing up to much. The expectations for a bank rate risen dramatically. Do you think the bank of england Interest Rate rises anytime soon . Andrew it is a close call, but we dont think they do. Suggested last time it is a light discussion. We think the bank is working through it. Looked through that because we think there will be a much softer trajectory in the second half of this year in in 2018. As you get a real incomes squeeze on consumers, that islation rate just below 3 putting pressure. We are not seeing wages pickup, even though the labor market is in good shape. Great to see the chart there. We see people spending their savings to maintain their living standards. That cannot go on forever. So clearly, we get weakness in the consumer, and the bank works through this spike in inflation, which because of the valuation, it holds it. Matt do you think the wage growth follows here . We have from the fed minutes in the u. S. , we see that companies are holding back on spending because of the uncertainty for government policy. In britain, that has got to be the case as well. Government is holding back spending because of the uncertainty caused by brexit, probably holding back on a raises as well for the same reason. Does that loosen up and businesses start letting go of a little more cash . Andrew i think it will be talk in the u. K. Because the outlook is soft. We saw that earlier this week with some of the investment numbers in the auto sector. They are running at 40 of what it was last year. The investment picture looks really soft. As long as there is uncertainty along the Economic Growth story in the u. K. , i think companies will be very reluctant to push for higher wages. , we areso in the u. S. Not seeing wage rates move as much as you would think. I think it is particularly a key here. That puts downward pressure on wages and that is likely to remain. With inflation moving up, it puts a real squeeze on household incomes, and i think that is what the bank will be looking at. Guy can the boj, and they feel different at the moment, keep jgbs in the band . Came overnight and in short, but the rates didnt go higher. They played out more in the currency market. Is moving in a different direction for some of the other major Central Banks, clearly removing accommodations. Japan is not. Great stuff. Thank you for joining us, great to get your thoughts on these markets. Andrew wilson, the ceo of Goldman Sachs Asset Management and global cohead of fixed income. Up next, matt is there at the g summit. Will they can donald trump to sign up to free trade . This is bloomberg. Matt bonds bashed. Investors head to the exit. Will todays payroll number out of the u. S. Lead to more selling . G20 kickoff. Riot police used Water Cannons against violent protesters. Todays main event is President Trump facetoface with Vladimir Putin. We are live in hamburg. On that note, hack attack. Security at a dozen u. S. Power plants have been breached, and the chief suspect is said to be russia. Welcome to Bloomberg Markets european open. I am matt miller here for the g20 meeting, along with guy johnson in london. Guy lets go where we are with the markets. It has been a fascinating week for a number of Asset Classes. Is not as it, it the european story looks exciting, but yesterday it was. T is the bond markets bond markets of the primary driver of all Asset Classes right now. The cost of money ever important, and we are starting to get some serious action. We knew it was coming, we can see the ranges. Ds it continues to ripple around the world. I want to ask a guest out of berlin about this. Carsten brzeski joins us. How much does it have to run . Theten you do feel nervousness about tapering, but i think it is overdone. I would expect president draghi to sound more dovish in two weeks. But this is a tightening of financial conditions. Where do you think the major risks are to hire yields . 3 , he islking about obviously short bonds. TalkingGoldman Sachss about the same level. But there are others out there, steven major, i misquoted his forecast, but it is at about 1. 9 now, going the other direction. What could push yields down from here . Carsten i think it is a bit more dovish Central Banks and the lack of inflation, which is around the entire world. We do see a bit of tapering. We will see a bit less accommodation from Central Banks , but i think the fed and the ecb will make clear that what they are doing is clearly not tightening monetary policies, and it is less accommodation. Work on thes this periphery . If we fear that we are getting into a tightening pace, one of the biggest beneficiaries has been the periphery of europe. If that were to be the case, do you see periphery spreads widening out . Carsten i think normally when we do see tapering, this would be the impact that we see a widening of spreads between core and periphery. This is exactly what the ecb does not want to see. When it started the qe program, it was called to repair the transmission mechanism. They do not want to see a widening of spreads. The ecb will start ecb start to intervene verbally at that sees the currency rising to sharply . That could be the real problem when it comes to inflation. They think they have dealt with deflation, but the currency starts to rise rapidly, then it could be back on the table. Carsten exactly. It could be. As former president trichet movement,s an abrupt which is the biggest concerns of the ecb. Once we start moving toward the one. 1. 20, i think they would start to intervene verbally. Emphasis on the sequencing issue, that interest meets Interest Rates would remain low even at the end of the qe. Matt what is the likelihood of that . How are markets positioned if we do see an abrupt move in the euro, and that brought in inflation at 2 or more . How are the markets positioned . Carsten i think the markets are looking for guidance right now. Buying a more positive story coming off of the eurozone. They are also buying the strengthening of the Euro Exchange rate. That is where they are positioned right now. In either move direction, i think this is something that markets are not really prepared for right now, and it is a move that Central Banks would not like to see. I think that the big central ks, they would prefer it the eurodollar Exchange Rate continue trading in this bandwidth we have now, around 0. 1 . Politics, according to mario draghi, has become a tailwind from a hit headwind. Carsten i think it is right now. When you look at populism or the risk of populism has disappeared for the time being in the eurozone. I think it is a tailwind. We see the euro for you the euphoria in the eurozone. What is the next big risk . The next big risk could be the italian election, but they will only be coming in spring 2018, and there we see support for the antieuropean party has weekend in light of trump in the wake of the brexit negotiations. Matt if we start to see bunds climb toward 1 or continue to climb toward 1 , does this present a problem for the German Economy do you think . Or is it a positive because of the profitability of banks that they have been calling for for so long . I think it would not be a problem. If you look at this mornings data, even Industrial Production is catching up with strong soft indicators. The German Economy could do with a higher Interest Rate. This would be a steepening of the curve. It would help the probability of german banks. Guy stick around, we need to say what the g20 will mean for this story. Get the take will of the bill gross on the story as well. If you are a bloomberg customer, you can watch the show using tv. Click on this interactive tv box, but you also get radio and event coverage as well, and theres plenty of event coverage coming up out of the g20. You can also pull in the most recommended videos we can give you. There is both joining us. Watched,et the most look at the mostwatched. Steven major talking about the bond market. The mostwatched video we have. Greatl bring you some video, i promise you, over the next 24 hours. There is great stuff coming out of the g20, is in there, matt . Matt absolutely. It is less than an hour before Angela Merkel kicks off this meeting with opening statements, then you have the working Group Starting on terrorism, trade, etc. At 3 30, there is a working group on climate, and the big question is will President Donald Trump attend that session , or will he skip it for Something Else . This is bloomberg. Guy 9 41 in hamburg. We will keep you updated with the latest out of the g20. Lets catch you up with the stories you need to know about. Here is the bloomberg first word news. In the u. S. , russia is the chief suspect for breaches in a dozen American Power plants. According to former u. S. Officials, the wolf creek Nuclear Facility is among the sites targeted. It has spawned concerns. The u. S. Led effort to broker a United Nations Security Council statement condemning north koreas latest missile test has broken down. According to officials, the u. S. , france, and u. K. Were over unable to overcome objections by russia and the u. K. Setback to the top priorities. In the middle east, the qatari government refusal to afford to accept the block. That is according to the press agency. The four countries, saudi arabia, the united arab emirates, bahrain express their surprise that they rejected the 13 demands. Brexit bracket secretary posts the biggest names in business today. Among those attending the talks were david davis, the ceos of barclays, hsbc, tesco, and easyjet. Is held at a mansion 35 miles outside of london that historically serves as a weekend retreat for the foreign secretary. In foreign costs are lower with its fixed rates. Lower bids were attended after the efforts to benchmark the 10 year notes at 1. 1 percent. Yields dropped to 0. 05 , while the yen swung lower. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Match, guy. Matt, guy. I am here in hamburg at the g20, where Angela Merkel is going to give her opening statements. The German Government says they do not want to challenge u. S. President donald trump here. But at the same time, they want to talk about in focus on trade, immigration, and climate change, three issues in which the u. S. President disagrees with most of the rest of the Global Leaders. Ki is still with us. How do you price in this kind of political frustration and things that could be worse if you talk about what is happening in turkey and north korea to markets . How difficult is that . Carsten it is extremely difficult to price it in. Not to say it is impossible, especially when you look at the trade story, it is almost impossible to predict what is coming out of the u. S. Administration. Will we see more protectionist measures or not . If there were to come, this would have a negative impact not only on the German Economy, but the entire euro zone. Guy talk to me about the impact of the meeting of putin and trump . That has the potential to set a tone for a number of different conversations. Europe is dealing with the migration crisis at the moment. T of that is mediterranean the mediterranean. Or not wering whether should be paying attention to the trickle down effect of what could be the more pivotal meetings out there . Carsten it is, although it this g20 meetings, it is for the show. Longerterm political impact because it is about building up relationships, interpersonal relationships between leaders. It is a diplomatic circus. It also means that we will not see any big decisions. Geopolitical decisions are not only made by the leaders come about by the civil servants, the diplomats. It is a long process. This bilateral meeting is more for the show, more as a symbol then if we could expect tangible results to come out of it. Matt more importantly, especially for the short term, is how the rest of the world greets president erdogan from turkey. He says the germans are committing suicide by not letting him speak on his own mptation demonstration. China continues pretty serious economic relations with north korea after they launched another missile, putting them at odds with south korea, japan, the u. S. As well. What do you think are the most important hot points here at this g20, carsten . Korea, itt is north is turkey, how to deal with turkey. Finding balance that the industrialized nations have not always found, mainly, what our economic interests and what our political interests . And what interests are superior and which are leading . Especially when you look at the relationship of europe and turkey. I think that is clear. It shows that it is extremely hard for the German Government to react to erdogans accusations, because if they were to, it would be nice for erdogan to use again in domestic politics. It is extremely hard balancing the International Sphere with domestic politics, like the german elections. Guy do you think this g20 will have a meaningful impact on the german elections that are upcoming . Carsten it could. If mrs. Merkel succeeds in bringing some tangible result to the public. Her party is currently positioning mrs. Merkel as the international leader. Maybe the last leader of the free world. Buys it,rman public mrs. Merkel needs to deliver some kind of results, some nice pictures, but also resolved. If they do, they will clearly have a positive impact on her resolve in the opinion polls, it will strengthen her currently on the other parties. The German Government is saying they dont want to boost frustration levels with the u. S. Government, but at the same reallyf Angela Merkel shows some opposition to donald trump, really makes it a difficult g20 per donald trump, doesnt that help her in the opinion polls come september . Carsten it clearly does, and i think we have already seen a change in her stance. She has become, for her sake, more aggressive than a year or two years ago. She is opposing trump because she knows first of all, it is necessary because she is not alone. She has aen says lot of support in the g20, but she knows it will help her in the german elections. One way or another, you can clearly score in the german election if you do the up front bashing. Guy that is what is happening at the headline level. If you are a central banker or finance minister, do you think there is another conversation happening . While all the attention is between leaders, do you think finance ministers are sitting around in another room going, the economy looks good right now. Maybe the fed bankers are talking about tapering, getting away from qe. They be there are things we can get on the same page on. How do you think that subplot will develop . Think the discussion will clearly focus on financial regulations. Started in g20 2008, 2 thousand nine with getting financial regulations together. That was the answer to the financial crisis. We see that these efforts have slowed down over the last several years. G20eep20 finance the finance ministers are focusing on a level Playing Field for the financial industry. It will be the main focus. The other one is on free trade, protectionism. What is the future of trade . It will have an impact on this current story we see across regions. Guy thank you very much, indeed. It will have an interesting impact on a number of events happening in europe. We are getting live pictures coming through from the g20 in hamburg. The head of the commission is delivering some comments, and the head of the council speaking as well. Juncker saying the eu has the winds in its sales. In its sails. Some headwinds being made. If you want to watch what is being said, you can do that on your bloomberg. Go to live go go to liv manus . Still to come, investors checking out. The volume is higher, but it is the pricing point that seems to be the problem. Well talk about stocks to watch next. Matt guy welcome back it, it is a 54 in london. R making comments ahead of the start of the summit. He sounds positive about european growth. He says the eu must avoid simple measures that could help out protection being one of them. Here is the interesting line. He is maybe setting the tone in advance of the summit. The eu and the european economy has grown a far more strongly, says mr. Juncker, then the United States. The tone ofets that competitive when it comes to the euu. S. Relationship. Matt absolutely. Cheerleader for the eu economy, he has been that for some time now. Been onets seem to have his side for a while. The interesting thing today will be to see whether the g20 meeting and its headlines will take the spotlight out from the bond market route we have been we have beenrout following. Maybe it is not a complete break out yet, we will see if it continues. Lets not luke tries lets not lose track of whats happening in the equities markets. Ejra we have centric a centrica gaining. There could be of takeover target. And stada, there has been a proactive takeover of the drugmaker. And another group has built a stake in stada. We dont have comments from the various parties involved, but the stock is moving higher. Down 4 . Four is the market is focusing on frances largest retailer cutting prices, raising concerns that profitability in its home market could decline. Guy thank you very much. Up next is bloomberg surveillance. That is here on bloomberg. Looking forward to that conversation. We will carry on the coverage out of the g20. Matt is there all day. Plenty of great coverage coming from him. He will also be joining the digital team. Matt will be on television for a little while, but then we will go on. Justin king will be joining us. It imports of that conversation. Some interesting stories. Lovely day in london. This is bloomberg. Inncine tensions run high hamburg, as trump prepares to meet putin at one of the most highly anticipated summits in ye ar. Timelobal selloff rcalls on the era of easy money. U. K. Business leaders head for a country retreat to discuss the exit. Ys good morning, everyone. This is bloomberg surveillance