Will this kick off a big round of consolidation in this sector . Can draghi get the dollar to bounce . The ecb is said to wait until autumn. The Council Meeting today. Where less than half an hour away from the europe in up and. We are counting you down to what may be an interesting stock story. Those numbers are interesting but lets take a look at what is happening with equity futures and the fair value. Heres a story we are looking at. 4 up by much,. 3 or percent. The dollar refuses to budge from level weis, a very low find ourselves with at the moment and equities are following on. They are following on in positive forms. We are at incredibly elevated levels. We will see a move higher. You can appreciate from that elevated position we are moving into. Lets show you what is happening with the gmm. China well bid overnight. By 1. 6 . Germany down by 1. 25 . In the koreanf won is trading up. There are some rubles trading to the upside. An interesting little story. Thecommodity story back on agenda. Lets move to the other side of the screen. This is the picture we find ourselves with. I want to highlight a couple of things, iron ore is trading ray strongly overnight in asia. 1. 77 . P by a big move on iron ore overnight. Feeding into the chinese and commodities story. Lets check out catch up with the bloomberg first word news with juliette saly. Juliette thank you. In the u. S. The white house is confirming that President Trump at Vladimir Putin a second time at the g20 and hamburg, something that was not disclosed at the time. Last night, trump lasted on twitter about reports of the encounter declaring he was once again the victim of a fake new story. He tweeted fake news is be coming more dishonest, even a dinner arranged for top 20 liters and germany is made to look sinister. Leaders in germany is made to look sinister. Wilbur ross says american investors and exporters must be allowed to compete on equal footing. The two sides held talks in washington later today amid rising tension. The Trump Administration blames chinas overcapacity for creating global let. Glut. Policymakers are said to be drying up plans for the future of stimulus for consider after the summer break. No definite proposal for timings been devised and policymakers who start a two day meeting have not yet been held from our discussions on bond purchases. The the ecb spokesman declined to comment. Muchanticipated return to bond markets have been held off by the International Monetary fund. On the amount of debt the country can hold. The debt ceiling is included in a series of documents agreed on by the washingtonbased fund and greek authorities. They are to discuss a new credit line for greece tomorrow. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. About whats talk is going on with the dollar. The Asian Session making gains on the back of record moves in the u. S. Mark cranfield joins us from there. What is it going to take to get the dollar to bounce . Draghi them aario you might be able to do some the on thursday but i have no idea. Happy, asiano be currencies are strong, asian equities are strong, commodities are making a rebound. There is the china story, a lot of optimism about china feeding into the industrial metals. The mood is pretty good and people are happy with the way the dollar is paving right now. At some point i suppose even the u. S. Treasury might be a bit concerned that as of now, nobody is too bothered about it. Guy it has the potential to store up problems. What is priced to the ecb . We have the story running this moaning talking about the fact he may wait until the autumn. We have the sequence of the meeting coming up tomorrow. We have jackson hole coming up as well and then we get into that autumn period. How is the market feeling about the sequencing, the timing of the communication shift from the ecb . People seem to be fairly comfortable with the idea that this is going to be a slowmotion decision by the ecb. It will be very gradual and mirror what the fed did under janet yellen. She has done everything and a steady pace, she has tried not to shock the market, a little bit at a time. America seems to be taking his cue from her. We are getting more information but it is being pushed in sue the future. We will get more tomorrow and a bit more at jackson hole and more in september. Providing they continue with this slow and steady movement, they probably will not disrupt markets too much. Ok. We are in for a quiet summer. That could be a slow and steady move into the autumn. I am thinking about what happens between now and then, equity markets continue to climb. The dollar stays where it is. Are we getting locked into a thely quiet summer or is dollar if the dollar snaps back it will be huge. Positioning is getting really stretched. Our people prepared to sit back getread the summer out and neutral and not worry about all of this, i am wondering how you play it. School holidays are about to start, people will be exiting the market pretty soon. Is this how we will find it when we returned from our holidays at the end of the summer . There is a lot of people hoping that is exactly the case. They can feel their equity portfolio, go off for a couple of months and find it slightly stronger when they come back. Not too many Asset Classes are going crazy at the same time, that can work. While one of the factors is the on market. It will not upset the other Asset Classes if it stays healthy and maintained. You could have a good market equity market. If the bond market goes wild it will upset everybody. Guy the bulls are firmly in charge of the moment. There is the seem surprised that they are in charge as much as they are. Who knew that we would be back at these kinds of levels and more of it downside move on yields rather than an upside. Is it a surprise that the bond market is where it is and to the point about big changes, where is the momentum in the bond market . It has come back to europe. In the treasury market things are not moving much. For now, the any direction for bond markets is driven by europe but at the same time, they seemed to be careful about not pushing it too hard. Providing bond yields in europe go up steadily, it should not disrupt the other markets too much. Bank of japan is still very easy. We are not getting any problems from japan. The u. S. Has gone quiet. It comes down to europe and as long as they continue to keep it slow and steady, everything should be fine. Guy we will see. , we could a change probably look forward to that. Thank you very much. You can follow the entire team at mliv. Were working our way into the earnings season, so much to think about in terms of what is going on with these markets. You can follow it all on your bloomberg. Lets talk about corporate news. Releasing First Quarter earnings showing the jump in profits of 50 . We are joined by the companys ceo and founder. Good morning, nice to speak with you. Of are raising the top end the range, can you give us the reasoning behind that . Absolutely. Were very confident of the performance of the is this, the First Quarter came in above expectations. Profit is off 50 but they can increased 25 . We are seeing bookings going into the summer. Some success into winter. Were not commenting on it but for the time being i have seen the businesses performing strongly and the markets are strong too. Youre talking about lower fuel prices than previously. Fewer costs than previously. Will [inaudible] on fares . Ur outlook that we will continue and should that be the case we will see that impact slowing in the fed environment. We have seen it many times in history. Will start seeubg seeing fares rising. You might see more capacity and a changing environment. 320s cominge new into the fleet. What is your expectation for using them and you mentioned capacity. Are you going to shift capacity around and what do you think your competitors will be doing as well . This beyond growing business at a rate of 20 will continue to gross in the coming years and we were we were ordering additional aircraft from the manufacturer. A320. Bringing an we believe we will be in a good position to lower our cost base and continue to drive the Capacity Game in the European Airline industry. Basis growing, we have 28 we just line we just opened. We keep that and capacity. You cant will you continue to add capacity to london . People are quite surprised at the decision considering what is happening politically and with the possibility of significant change in the operating environment. Will you continue to add capacity there as well . Our u. K. Are growing london and particular has been grown around 16 . Those. Inue to deliver the only weakness of the market we are seeing is rising from the big sterling but if i look at underlying demand i think it remains intact. We are seeing very strong inbound markets into the u. K. At the same time we are also seeing the [inaudible]. Nd they like our services we are continuing to grow our business. Some newbring in Senior Management, members, what are they going to bring, why do you need them and you are dropping your larger hand baggage charge. What operationally will that do in terms of aircraft turnaround, give me a sense of what that will achieve. Guest lets start with management, we are very pleased, management for the company, we jones andting stephen the chief executive officer. We are appointing a to Financial Officer and a technical officer. Those positions are required to drive this business and the organization to the next level. Stronginue to have growth in the market. We are going to double the business in for five years. ,e need to update our system our systems and processes and structures and create leadership capabilities to achieve that. Cutting back, where listening to our customers. Our customers are happy with our services but we are bringing to cutting,t charging for where the critiques we have been getting from customers area now we are falling in line with the rest of the industry. There are some operational challenges but the industry has figured out. We see [indiscernible] were going to incentivize travel. You will be will be operating some of our services and products. I do not think we are going to be seeing a significant difference as a result of the change of politics. Guy thank you very much, the ceo and founder of weezer wizzair. Ceo the departure of the change the game when it comes to the activist investor . Does this reopen the door to that story . That story next. This is bloomberg. Akxo will beof replaced. Ours beat to speak to amsterdam business supported. Barclays says everything is playing second fiddle to what is happening with the elliott story. Will these resignations reopen the door to what is happening . Will it reopen the door to pbj . Ppg . It has six months where i can come back with a new offer. It does not say that the Home Business will leave. A first withn elliott. By doing know about the man that will replace him, what is his view about where we stand with elliott . There is a Senior Management change, does that signal a shift potentially in this Companies Feel of the deal . There is no change at all for successorgy but the is the head of the chemicals decision and it is about the market is looking at when they will [inaudible] attention behat retained if the head of the Chemicals Division is leading the Country Company . The questions this morning being asked of this company. Thank you, joining us on the latest. Watching,ks we are selling off its food business, focusing on baby food Going Forward area to will that stock react as well . The open is eight minutes away. This is bloomberg. Guy six minutes to go until the market opens. Five minutes in reality. Daimler taking precautionary action recalling diesel vehicles. We will see how that stock reacts to this news. Keep an eye on that. Clearly, the diesel story is not done yet. I talk about the impact on companies. Diesel in the longterm, that is a different question. We talked about akzo. Numbers out next week that this morning, tom bush and has stepped down for health reasons. Will it have an impact on geoples thinking regarding pp and the road forward question mark we will be watching reckitt, selling its foot business. Focusing much more on the future Going Forward on the baby care unit which it is bulking up in. Keep an eye on what is happening with the mining sector, that is one to watch. We have seen a Strong Performance overnight for iron ore and that could feed back into the miners as we continue to watch what will happen. Bp another stock to Pay Attention to. This deal price clearly front and happen front and center. Operational factors coming through. The market open is four minutes away, plenty of stock stories going on. And whatare at highs is pushing them higher, the reporting season is on. More on the market of stocks than a stock market. Is picking up. About. 2 of 1 . Pay attention to what is happening, weve seen the china market overnight that is very strong. The market open four minutes away. This is bloomberg. Guy welcome back. Lets talk about where we stand with european futures and what they are pointing us to in terms of the market open. Sort of half an hour ago, we were higher. We firmed a little bit. 4 higher in terms of the markets. Yesterday was a great day for european equities. We are picking up off the back of that to put it in context a little bit. Theres plenty of stocks to watch. Take a look at what is happening with daimler. Stock to Pay Attention to as well. You have to remember the context and backdrop of all of this. U. S. Equity markets continue to push higher. That is the backdrop in those ways. Can Equity Investors just continue this push throughout the summer is one of the questions we are left thinking about. Treasure markets are a big factor behind that. With the ecb coming up, we could see volatility surrounding the currencies. About what is happening in the equity market open. This is the story we find ourselves with. Ithave on the right board will kind of be just a moment. I apologize for the small delay. There we go. We are tracking that confirm a little bit. 74, trading that level for the ftse 100. The stoxx 600 up i. 3 . Akzo plus reckitt thrown into that. Is up by. 4 . Manus cranny. Manus this earnings season is getting underway. We have the market the reckitt, a story of investment. 20 times earnings. What are they going to use it for to pay down debt . Green around the european equity. Our gasquet the point that mario draghi will be dancing on a pin into miles news conference. As for european equities, valuations are back at 2010 levels. We have incredibly we have got their incredibly quickly. Looking at double digits. That is what the market is expecting to deliver in terms of earnings. 23 billion has come back into european markets. Again, the view from our discussion this morning on daybreak was very much that macron is going to trump the trump in terms of momentum. Labor market reform will be delivered. Very aggressive schedule being laid out by baron, a very optimistic view on europe being laid out by blackrock. The pe is the critical thing and earnings are the key issue. Gilts are opening down through the futures, labor day futures, down by 11 to. You are 11 pips. Trading there at 1. 22. That is the gilts. Guy let us go to the mov screen. A lecture looks, strong number electrolux, strong. Market seems to be finding favor with it. Stock is up by 5. 6 this morning. Let me change this to him that points and then i will show you the fact that reckitt is trading up by 1. 4 this morning. Oil stocks are dead. Shell and the p as well. On the downside, sound out story this morning is volvo, down b. This is the trucks business. We are going to be talking to laterss of the business on in surveillance. Looking forward to that conversation. The other thing to mention as well is we continue to have weakness in ericsson at this point. It is now down another. 7 . That is moved to the macros and find out exactly what is happening where we work our way towards his ecb decision tomorrow. The ecb is said to be setting scenarios for a future passion for quantitative future path for quantitative easing. No proposals have been devised meetingcy makers are ahead of this meeting. Let me summarize. No discussions yet. Not going to have them probably at this meeting. Likely to have that as we work our way towards the autumn. Just remember you have jackson hole coming up as well. Toio draghi is going endeavor to say virtually nothing tomorrow. Our guest now sitting with us on set. How successful do you think he will be . Guest he should be quite successful tomorrow. As you said, he will say as little as he possibly can. Might mention the euro i think in the sense of avoiding depreciation of the euro. That makes some sense. Things in general seem to be going more or less the ecbs way. Employment is doing well. You have a good, robust, Economic Growth story in the eurozone. He isaghi tomorrow, inevitably going to be asked about tapering, how they are going to do it. He is saying you will have to wait until september. Guy is that how the market is set up and priced . With jackson hole coming up, he booked his ticket to the united states. Is the market expecting kind of back end of august, early part of september . September. Y the ecb meeting in september. The ecb very rarely like to surprise or shock markets. Certainly before an event. For example, on the kiwi in 2015, draghi over delivered and the ecb overdeliver, but they are not likely to do it before announcement day. He did it in jackson hole for points. In fairness, if you listen to the tone of the ecb, they are more or less saying september. I have heard nothing from the ecb that suggests they might indicate something tomorrow. The markets are trying to figure out does the dollar stay down here, does the dollar shoot back up . What will it take to move the dollar. You dont think draghi will deliver anything that will change the greenback dynamic. Peter the first is what the fed is doing and what we have priced in for the fed. From what is priced in, and think the market expects another two rate hikes over the next year or so. That is consistent with what the fed are looking for. I do not expect too much surprise. With respect to the fiscal side of things with the Trump Administration, it becomes ever more clear they are going to struggle to get much done. I do not think the dollar is going to do an awful lot. I continue to see higher levels in eurodollar. Guy is the dollar fairly valued . Peter i think it is still quite expensive. It is expensive and basically, what you will find in the next year or two is before the next two or three years, we had the central bank divergent story and we will get convergent story with other banks catching up to the fed and that will weaken the dollar. Guy to where . Give me a sense of where this is. Peter eurodollar could easily go to around 125. Quite easily. Guy and draghi will be able to live with that . Peter if growth and inflation do with the ecb expects them to do in the eurozone, they will not worry too much about currency devaluation. Guy what about the u. S. . In some ways, this is what janet yellen wants. She may not raise rates that aggressively, so she will keep the front end fairly well incurred. She will use the Balance Sheet rates. Long and rates. End it is a great scenario for them. Given where the dollar is trading, it is expensive. They start to normalize her policies, the dollar will lose a bit of ground. It is a sweet spot for the fed and that will continue. Guy what is the treasury market doing around all of this . Is it fairly valued in terms of where the u. S. Tenure is . Peter i think the yield are fair. I dont see a reason for yields to skyrocket higher. Guy if it is north of that peter i think that is aggressive, frankly. It is aggressive. What the fedng for are doing in terms of saying we will normalize the Balance Sheet and sell some long and securities, and therefore you assume you get some upward lift or pressure on u. S. Treasuries, but if you look at what emerging markets are doing again, they are buying dollars again. They are buying u. S. Treasuries, so in that case, that will keep the back end of the curve quite depressed. Guy on emerging markets at of things, you see where the dollar stays cheap for a long time and we end up with a crisis at the end of it. Are we heading down that road again. The market loves bem story. Loves the e. M. Story. Peter you have seen an increase in yields through that is usually bad news for emerging markets. If you look at commodity price the relevance, that is net negative for e. M. , but i do not see it as being vastly overvalued in the way it was three years ago when we had the taper tantrum. Basis, i have more of a neutral view on emerging markets at this stage. Guy cool. Stick around, and plenty more from Peter Kinsella. You are bloomberg customer, the best way to watch this show, to watch all of our programming is via the tv function. You get the stream which is fantastic, but also all of the breaking news, and there is plenty of it. Plus, guest bios. You see a chart like this and you can pop it out into one of your other panels on your bloomberg and use that in whatever form you fancy. I put it into presentations and do whatever. Ask the guest a question. Interactive television. Up next, pondering the pound. What path will sterling take as brexit negotiations continue in brussels . With theappening inflation story as well. He still to use an upward bias on the number. We will discuss all of that, next. This is bloomberg. Guy welcome back. You are watching the market open. We are 12 minutes into the session in europe. A quick look at where we stand with equity markets. Youttle bit better today as can see, but not by much. The ftse 100 kind of continues to languish around the 74 level. 73. 91. You are seeing out performers in the aex this morning. That is helping boost the story. You have got axa nobel in focus akzonobel in focus. Numbers we used the markets. To 7319. Let us move on and get back to central banks. Mark carney has said the data which shows the u. K. Inflation level unexpectedly slowed in june to 2. 6. Does not change the banks outlook for the economy. The price gains will be above target for period of time. Church, yesterday, in a what he was unveiling in winchester was a new 10 pound note for the u. K. She was buried in the cathedral. Us, peter. Cpi, if you look at the it was well above where the boes inflation target is at 2. 6 . That is exactly what we have got. I think what we have seen yesterday is kind of consistent with what the boe, broadly speaking, expect. Carney is correct. It should not change the outlook on that much. The rate outlook, i am of the view they will have a rate hike. The view is basically predicated on the fact that when we saw last years rate cut, this is postbrexit emergency him from the boe. Worstcase scenarios have not manifested. If we look at the rates now, compared to normal growth, it is inconsistent with where and u. K. Normal growth with where you can normal growth is. Saying is onere and done. We will take back the 25 and see how things develop from their . Peter if you look at market pricing, they are pricing in only 15 pips of rate hike over the next few years. Im probably too low. The think the risks lie on the upside for u. K. Rates. Guy and sterling . Peter sterling will modestly appreciate. Offensivek at the Exchange Rate terms, it is cheap. Evaluations dont tend to last that long. That will not be the case for sterling either. With a slight lift in rates guy slowly. I have been hearing the argument that sterling is structurally time now,d for a long and it has kind of remained in a range of 130 and coming up a little bit, but nevertheless, by historic standards, sterling still looks quite cheap. What is it going to take . It is unlikely to be the bank. Brexit negotiations would be enough to get it higher. If you look at the u. K. 10year spread, out of a very wide level, probably the widest it has ever been, normally, those yields tend to correlate very closely, so what you will find is that that spread widened as a result of brexit. If we can have some positive news on brexit with regard to, lets say, transition period boards with regard to top brexit, the 10 year yield in the u. K. Will skyrocket towards a pips ofer, 50 to 75 steepening potential. Guy what is higher . Peter 140, thereabouts. For year end, a move towards that is not possible at this stage. Guy how to you deal midterm . Do you know who will be the Prime Minister will be, you dont know what the brexit story will look like as a result of that. Plenty of options. Do you simply have to park that at this point and say i do not know, i cannot figure it out, therefore i cannot build it in . Peter british and conservative politics is a bit of a pandoras box at the moment. Everywhere you look, there seems to be local the. When you speak to u. K. Politicians off the record at the moment, more or less, the conservatives effectively concede they do not want a change of leadership at the moment because it could lead to another election, which i think they would lose, so i think there is appetite for change at the top sort of in the Prime Minister at the moment. With regards to the brexit negotiations, it seems they made reasonable progress in citizens rights, the average order. The socalled divorce bill will take time. I think everybody recognizes that. They are making progress. It is not the case that each side are turning around and saying there is nothing to discuss here. I think there will it will eventually be done and that is good for sterling. Guy how did the market react to more supply . The chancellor of the exchequer is making clear that he does not feel he wants to lift the Public Sector wage, 1 limit, the wage gap, but the pressure is mounting and i wonder what more supply, which he would ultimately have to generate as a result of lifting that, what actually due to the gilt market . Peter you could see slightly higher guilt, but it depends on the slightly higher gilts, but it depends. As it is, higher brexit, more borrowing. Is it a socalled soft brexit continuing to have a similar freetrade arrangement . Sure. Guy im not talking about brexit. On talking about the Public Sector wage freeze, which in some ways is exercising mind as much as brexit is at this point in time. How much are we paying our civil we continue to see caps in operation, but the pressure to lift is growing, and that is not gilts for investment. That is gilts for more wages. Peter sure. You are saying you are barring for consumption. That is not really taken well. The chancellor does have other options. He could bring a lower Tax Threshold with regard to pension payments, and therefore raise the money in that regard. There is probably more flexibility than you realize. Guy we are going to come back and carry on the conversation. Peter kinsella is not done yet. Later in the day, we will be joined by barclays ceo. He will be joining us for an interview at 9 00 p. M. U. K. Time anyway, we will be hearing from Antony Jenkins shortly. We will take a look at the movers, next. We need to talk about what is happening with peripheral spreads as well. This is inside 100 basis points. What kind of direction is that spread heading in and how will draghi be meeting that . We will talk about that, next, as well. Guy 23 minutes past the hour. Welcome, youre watching the open. Here is a Bloomberg Business flash with juliette saly. Theytian thank you have had separate talks. That is according to a person with knowledge of the matter. Scripd has forming aidering limited partnership and holding an initial offering for assets in the u. S. Assets considered include crude, natural gas, and pipelines in the midwest and gulf of mexico. The potential ipo of the unit could be held in the second half of this year is the company decides to pursue it. Daimler is seeking to head off a crisis by voluntarily recalling more than 3 million mercedesbenz diesel vehicles in europe. The company will extend an ongoing upgrade of about 250,000 compact cars and vans to nearly every modern mercedes diesel on the road. The plan will cost it about 220 million euros. If accepted by officials, it could help daimler avoid the massive penalty. The campaign to sell planes to its biggest rivals home market has suffered another setback. United airlines has become the third carrier this year to postpone delivery of the 83 50. It wants to take four of the aircraft next year. Delphi and american have also postponed deliveries. That is your Bloomberg Business flash. Guide. Guy juliette, thank you very much indeed. Is peripheral story interesting going into the meeting tomorrow or the press Conference Tomorrow with mr. Draghi. I have the board up here. We are back down to 100 basis points. The last time was october 2016. Do you continue to make that trade . Peter i think it could do for a wild. I think they are likely to continue steepening very modestly. We are in around 55 basis points in german defense. Yearend, 70, 75. It will tighten a bit more. It is not going to be a riskless trade however. Spain. E this in it is about to be not legally binding. The market is completely discounting it at this stage. This trade could continue. That spread could continue to tighten somewhat. The issue is really that the ,ype of Political Uncertainty once it starts, it does not stop. Exactly. At some point, it blows. For athe trade could work little while. I am not so sure whether i would want to load up on spanish debt at this point given those concerns. Guy october is were the referendum is coming up. Nonbinding, but nevertheless, the story could be interesting as we work our way towards that. You have the german election coming up. Let us take you to the mov screen to show you what is happening. This is index points. Electrolux continued to be the main gainer. Elsewhere, what are we seeing . Let me flip it back to what is happening with index points. You have a Strong Performance ass morning from reckitt well. The downside stories morning, in my mind, is although, down by 3. 4 . This is bloomberg. Guy akzonobels ceo has resigned for health reasons. Up, mccormick buys will this kickoff the next round of consolidation in the sector . It has been long talks up. Can draghi get the dollar to bounce . The ecb said to be preparing to get an exit. Today. Ncil starts good morning and welcome. You are watching Bloomberg Markets very this is the european open. Let us take a look at how the headline indices are performing in europe. Not exactly a riproaring start in today. It is positive. The london market, the exaction, treating to 7381. Toxx 600 of by. 2 stopped whats this morning, volvo on the downside. Electrolux, very strong this morning, on the upside in the consumer business. Elsewhere, reckitt on the move as well. They all seem to be faring fairly well this morning as well. Tech stocks in there as well. S p performing not badly. And center. Up Mitch Mcconnell new proposal to repeal obamacare appears to be dead already. Sinceless than 24 hours he dropped his replacement plan. U. S. Treasuries said trump tax reforms would get the same fate. Meanwhile, u. S. And chinese economic teeth are citing differences chiefs are citing differences. Joining us now for more is bloombergs kathleen hunter, a feature on this program now, it seems. Kinsella, senior strategist in europe, still with us. Let us talk about kind of what is happening with the health care site of things. Is this a republican problem . Is this a Mitch Mcconnell problem . Is this a trump problem . Kathleen i have been thinking about this a lot. You can characterize it as a republican problem. I say that because, back in 2010, when the Health Care Law was initially tasked, it was a flip of the current scenario. You had obama in office, you had a democraticly controlled house and summit, and you had democratonly votes. This is the reverse of this situation. They were able to get something through in 2010. The difference now is the Republican Party is so splintered, and you have really kind of the trump wing of the Republican Party and the traditional conservative week of the Republican Party and you have the more stylish and business traditional, what we think of as traditional reagan republicans. You have that different forces within the Republican Party. The Democratic Party has a spectrum within it and even more so back in 2010, but i think the real problem is that when you look at the leadership in congress, you see it in paul ryans caucus, in the house, in Mitch Mcconnells caucus in the senate, there is a wide range of views and the push from the conservative wing that is pushing them further and further to the right, everything they do. They want more and more in that direction. That makes it really difficult to half broadbased legislation the whole country will be happy with. Guy right. In some ways, the market is correct to assume this is just a healthcare issue not just a healthcare issue, but a policy issue. Kathleen absolutely. It reflects where things stand in washington. It is the seating to look at ving and look at it as oneparty control and think it means things are going to be easy to get done. Barack obamas first years in office were one of the most Productive Congress is on record. They passed the fiscal stimulus in february of that year. With passinge year me Health Care Legislation that became 2010 mall. There were a number of major initiatives passed in the first two years of obamas administration, and the fact that we are not seeing that in the Trump Administration and it is looking more and more like he endd and his first year his first year in Office Without any accomplishment shows that what we are seeing is the splintered Republican Party, where oneparty control doesnt mean you can get everyone on the same page very easily. Guy with all the focus on what is happening with russia and new news on that now and all the focus on what is happening with health care, you are wilbur ross and you have the chinese coming to see you. What can you expect out of that . What should be your aspiration level in terms of that relationship . Kathleen it is significant. You noted a moment ago that they are sidestepping some of their policy differences, and really, it sounds like what ross is going to be focusing on is kind of beating the drum of the Trump Campaign manager about the need for open markets, and the need for a more fair trade relationship between the u. S. And china, and that seems to be a real focus of the Trump Administration. We saw it earlier this week with the white house came out with essentially if wish list on after negotiations, correcting what they see as sort of a bad during the campaign, trump promised to trash these bad eight deals the u. S. Had. What the imitation is looking for is kind of that rhetoric about, at least, rhetorically, following through on that Campaign Pledge to make trade warfare to the u. S. Guy great stuff. Kathleen digest with hunter from washington. The story that keeps on giving. Every twist and turn, there seems to be new aspects to it. Kathleen hunter. Let us get back to you Peter Kinsella, joining us from cba europe. It is a bit like brexit, like what is happening in the u. K. Trying to understand u. S. Politics at the moment is incredibly difficult, yet the market is beginning the market in some ways has an ability to extrapolate more easily. It can look at what we are having with the Health Care Story and can then extrapolate that into for the policies. We have taken out the reflation trade. We are back to neutral. My question now is, is the trajectory this has a negative effect on the u. S. Economy or was it kind of or do we kind of price it out and expect to get nothing from washington, and that kind of leaves the u. S. Economy on its preexisting trajectory . Peter i think youre quite correct in what you say. The questions you pose really mirrors comments at jpmorgan couple of days ago. 2 at growth between 1 and in the states, if we have politicians on board, engaging in real, constructive reforms, because lets our gdp growth rates. The market at the moment is quite saying when, continue as you were. I would nothing we are ignoring washington. If you look at the dollar, it is weakening with every nonevent from the trump is meditation. But as regards the equity market, it is continuing as it was. Guy you did see a treasury Market Reaction and a dollar Market Reaction. Have we fully price out the reflation trade . Are expecting zero in terms of policy Going Forward from , because i thought that a few weeks ago and we are still pricing it out. Have we got to the point where we are not pricing of the reflation trade but actually pricing out pricing in a drag from the inability of washington to do anything . Peter i would not say we have prompted up holy. On the commodity side of things, that has been priced out. The dollar has retraced all of its public gains. Equity markets are very elevated. That aspect of it as not really changed all that much. Here, we think of the market, for me, this is focusing on the story of what the fed are doing. I do not think they will be asked to what is going on in washington at this stage. Equities are trading at incredibly elevated levels. Have expected, you would expect that if the u. S. Economy were to falter and we were to see nothing in terms of retouch reaction, you would what do you watch for a broader . What should we be watching for a barometer . What should we be watching . Guy one thing on the valuation stories in the united states, the s p and so on are overvalued. When you strip out the tech sector to a large extent, they are not crazily expensive. It is more of a tech story than just a broad valuations story. That is what takes for the to end. Bull run you have basically got to see i would think a really large slowdown in Economic Growth. You would probably we have seen some nascent increases when you look at the auto sector in the states. They are having some difficulty with some payment guy financing. Peter financing, etc. I notice in the bank reports come q2 earnings, quite a few noted the credit cards have increased, which is interesting. Guy the aggregate had increased. They are lending more, so it is a point taken. Any car market, something the Pay Attention to. Peter kinsella at cba europe. Is done sitting here. He will join us on bloomberg abybreak europe on london d digital. We will carry on the conversation later on. In the meantime, let me remind you that if you are a bloomberg customer, you can watch the show using the tv function. We have updated it. It is fantastic, which is why we keep pushing it. It is a fantastic function. Highlight the radio because you can listen to the stream. 9 00, Peter Kinsella coming up on the program. You can also pick out some of the best video we have got from around. We have the most recommended. You can check out the mostwatched, which is interesting as well in terms of what youre seeing. You can click on the schedule to give you an idea of what is coming up. And what you can see here is is arndtoming up next ellinghorst. He is recalling 3 million we will get a perspective from him next. This is bloomberg. Guy 8 43 in london. Germany. That is get your catch up on what you need to know. Heres juliette saly. In the u. S. , the white house has confirmed President Trump met Vladimir Putin a second time at the g20 in hamburg, something that was not disclosed at the time. Trump lashed out on twitter about reports, declaring he was a victim of a fake news story. He said it is becoming more and more dishonest. European Central Bank Policymakers are said to be drawing up plans for the future of stimulus, the consideration after their summer bank. According to your area officials, note times have been devised and policymakers have not yet held formal discussions on the end of bond purchases. The analysis does not mean a stimulus change is imminent. And ecb spokesman declined to comment. Greeces much anticipated return to bond markets this week has been held up partly due to a feeling on the amount of debt the country can hold. According to three officials familiar with the matter, the debt selling is the imf is expected to discuss a new credit line to greece tomorrow. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in 120 countries. This is bloomberg. Guy. Guy thanks. Daimler is recording more than 3 million recalling more than 3 million diesel vehicles. The plan marks a change of approach after mercedesbenz vowed to fight accusations of cheating i all legal means. By all legal means. Joining us to discuss all of this, arndt ellinghorst. Good morning. This is daimler, or cities, trying to be proactive. Arndt absolutely. They are fed up with all the negative press. They want to take care of Consumer Confidence into their technologies. That is why they are stepping ahead. Couple of weeks before this, a big meeting with the industry, the german government. Guy why do they need to do this . What i am seeing at the moment is continuing car to sell. There may not be other options, but diesel cars are continuing to sell and continuing to sell really well. Is there an effect on the number and Consumer Confidence surrounding the product they currently have . Guy totally. Consumers want to buy powertrains that are electrified, even in germany, the capital of diesel technology. So, what the Industry Needs to away smooth the transition from Combustion Engines, particularly diesel, into more electrified powertrains. Guy so how long before we start to see if you think about this meeting coming up and what they are doing right now, and you think about what they have got in trade in terms of new vehicles coming forward, what kind of duration are a about here, from ofd of now to getting rid the Combustion Engine or managing of the Combustion Engine . Arndt it is a transition that will take 10 to 15 years, if not 20 years. We are not moving from a Combustion Engine to a better electric vehicle, we move towards 48 full technologies, hybrid, plugin hybrids. The battery is growing in the car. The engine is increasingly becoming commodity, a 2, 3 cylinder engine. Guy i want to come back to this issue of diesel. Recalling alle these vehicles. Clearly, that will be very expensive. Our current customers are current customers upset with what they were getting and well that influence what brands they buy next . Does it matter that daimler is doing this differently to say bmw or g. M. Or whatever . What is valid trying to do differently that will change Customer Perceptions not in the vehicle they are currently driving, but in the vehicle they will drive in the future . Arndt we take over, we had knowledge there is an issue with our realworld omissions versus emissions versus bench tests. Cars,ant to recall the offer software updates, after which the engines will commit 10 to 20 less. Guy the customer has already made the decision they will be buying an electric vehicle next. He or she knows that diesel is the technology of the past, not the future. Arndt we will see how many of these 3 million customers will get their software fixed. As a consequence, you will have which more into your is a downside. Some people will say they are happy. It performs well and then you not care that much. I do not drive around cities. I am not opposed to the risk of city bans, so i do not care. What is clear for future purchase decisions, people are more conscious regarding the omissions of the vehicle of the emissions of the vehicles. That is one reasonable load is stepping up and saying look, in the future, we will offer more electrification. Assume, 90 will still have a Combustion Engine, but they also be electrified. Guy a hybrid mix. In terms of residuals, what is the story with residual that the diesel . Ith it is the car company that takes the risk. If you see residuals collapsing surrounding diesels, it is the Car Companies that would suffer. What is the 5 to 10 acceleration in the depreciation of a diesel car 18 months into the depreciation curve look like . Good that is a very point. In europe is a leading market for corporate costs, which are heavily exposed to diesel. If you do the math on an operating lease contract where the oem carries the residual burden risk on their books, if residual values fall by 5 to 10 , the annual cost for, say, a foredes or bmw volkswagen, it would be more than 1 billion these are things we can calculate. It would be a tangible impact. So far, we have not seen a move in residual values. I am very surprised by that , people seeweekend what is going on with diesel. The diesel share is falling rapidly, so you have to ask yourself who is going to buy all these used cars. Guy there must be a lot of pcp coming off lease fairly soon. Arndt absolutely, but we know those numbers. We know the diesel makes in every country for each oem and we know the leasing exposure as well. You can run sensitivities. Carmakers have already adjusted their residuals. Guy which market valuations have as well. Family trading this morning has gone nowhere for quite some time. The markets have priced that in . Arndt there valuations have fallen relative to market, 30 to 40 . There are other disruption fears. Guy are they cheap now as a result . Kathleen arndt they are very cheap arndt they are very cheap. The market is telling you the sector will be disrupted. The markets dont have a future. And or, the market is telling you we are heading into a recession the next one or two years. Guy interesting stuff. Arndt ellinghorst. Laterl step it up a gear on and we will be talking not to the carmaker, but to the truck maker. Will beident and ceo joining the Surveillance Team at 10 00 a. M. U. K. Time. Think about what it would mean to see a shift, for instance, in automotive driving in the truck sector, and what it would mean in terms of employment factors going from here. This is a story i think the market and government needs to think about very carefully. Answers later on in the morning. Downsideone of the big movers this morning. It is trading softer this morning. Electrolux is trading very strongly this morning. Look at that number, up by a 4. 26. Very positive numbers from the notr of hoover obviously a hoover, and electrolux. We will have more on that, next. This is boomer. Guy welcome back. You are watching the open. Let us talk about some of the stock moves we are focusing on. A couple of things to note. I want to flip it to the downside. We talked about electrolux and some of the upside stocks. The third one down, lock maker, etc. Down 8. 7. That is the biggest drop in a decade. That is a big miss. Thelts not taken well by market. I think it is the operating line that is a focus this morning. A big even miss. The operating line not looking that pleasing. Theill be talking about boss of this business. Volvo up by 4 this morning. You have to think about volvo trucks, the automation, the job story at the moment. I think the truck sector could be front and center in that. We will talk about that later on. I am going to bloomberg radio. This is bloomberg. Holiday homework. As ecb policymakers look forward to their summer break, the central bank prepares a plan for a plan. A breakthrough in brussels. Signs of progress emerge as brexit negotiations continue, but could the divorce bill be the stumbling block . The german carmaker who recalled 3 million mercedes to fix emissions. Im Francine Lacqua in london. On todays show, i am joined by the executive chairman