Transcripts For BLOOMBERG Bloomberg Markets European Open 20170802

Silent tech valuations and will the next iphone the expectations and is tax reform still needed to keep investors on board . Overation clouds hovering socgens ceo. It is trying to solve this issue as quickly as possible. Absolutely. We are less than a half an hour away from the european open but when equities and indexes will start trading here, you see the intraday futures for the equity indexes up across the board, we. Ad gained just today as well for the equity indexes. We will continue into positive territory. Automakers were gainers yesterday and they will be really in the spotlight. Muchnot tell you how germany is focused as a nation every single, major newspaper has on the front page a story about dieselgate which we will be covering of then down and sideways today. D tradelook at the bun kaman this is a chart showing the end of the trade yesterday and the beginning of the trade, it is up today. It jives with the green arrows on futures. Investors are selling off the bun pushing up the yield on to 0. 5 and willing to risk and put that money into futures and equity indexes later. What do you see on the gmm . Guy lets talk about what is happening with the euro, we will start with the yen and progress to the euro. The yen is on the slide, down by. 3 of 1 . The euroyen hopping popping higher. It is a oneway street right now but is the starting to get a little bit stretched . Take a look at some of the Interest Rate stories surrounding some of these key currencies. Some notes on out that story yesterday. The yen is a big story but i would argue the euro a big story as well. India, the Rate Decision, do not take your eyes off of that one. The Rate Decision is something we want to be focusing on out of india. Lets get a bloomberg first word news update with juliette saly. U. S. President donald involved in crafting a Statement Released a his son about a meeting he had with a russian lawyer. A white house spokeswoman Sarah Huckabee sanders said trump weighed in as any father would based on the limited information he had. It provides an account of the investor conflicts with assertions made by the president s lawyer to weeks ago. The u. S. Senate has confirmed Christopher Wray is the new director of the fbi. By a vote of 925. He has vowed to defend the organizations independence after President Trump fired his predecessor james comey after a probe into the russian interference of the 20 election. Rex tillerson has urged continued pressure on north korea. The goal is not to topple kim finding excuse to send our military north. He said it is time to get the regime ready to enter talks although a condition would be north korea giving up its Nuclear Weapons capability. Deutsche banks most likely exit scenario shifting 4000 jobs to Continental Europe from the u. K. Over several years. The bank will transfer most of the positions to frankfurt and berlin when eu britain quits the eu. The job transfer could be higher or lower depending on the outcome of the new of the uks negotiations with the eu. Officials declined to comment. France and italy have failed to find Common Ground over the shipyard on Frances Atlantic coast. In the talks which lasted less than an hour, italy did not budge from its demands that think antiairy and stx have a majority state a stake. Its set up strained relations between the two governments. I am ready to come back to rome in september to try to achieve an agreement before the onting of the head of state the 27th of september. We are open to corporation to cooperation. We are willing to reach a stable and solid agreement. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Guy and matt. Rivalhe worlds most company is expected to open at a new record high this morning. Optimism. Apple shares are trading 6 higher after reporting demand for the iphone create and the ipad and the mac sold pretty well. Thirdquarter numbers were certainly a useful sign may be Going Forward from here and the market liked it. Lets show you what you can see on your terminal. The numbers came out here, this is the overnight so you can see this market move that we saw, sharply higher. Near the one 60s. Thats let crossover to mark cudmore in singapore. I am suree been they are kicking themselves. What this means for the wider market. It is a positive for the next few weeks. Driven on the back of tech and part of the reason is a large part of the market is suspicious of the rally. We hear that there is a bubble in the stock market because of valuations. This apple earnings, the results cynics. Ence the no one can fight with the fact that these Tech Companies are making good money to my they are still doing well and no one will fight the rally until they see some signal that Monetary Policy is going to change, that there is going to be Balance Sheet reduction so given that the fed is out of the way, most Central Banks meeting have been underway, we have a green light for risks to do well until jackson hole at the end of this month. The structural story is still good. There could be a black swan but no point in looking for a turn when there is no imminent capital on the horizon. Matt the Tech Companies are based out of california for the most part. Is the weaker dollar helping them out here . Weaker dollar probably is helping a little bit. What youre seeing is the weaker dollar combined with the tech rally is helping some of the asian equity markets and asian currencies. One of the scenes is korean stock markets and taiwan, the local asian currencies should continue to do well overall. There is a good correlation between the taiwan dollar and apple stocks. There is a general message that while the big Tech Companies are out of california there are some big ones in asia. Samsung is a great example and that is a positive message into the asian environment which means the region is getting a boost on this good apple story. Guy the euro yen is popping higher. Have we seen evidence that the euro is turning to look stretched, the story may be waiting in that direction. Mark when you analyze whether assets are stretched you have to specify the timeline. I would say that the euro appreciation is justified and the structural story against things like the dollar, sterling, yen remains balanced on a longerterm basis and that narrative around the euro did shift and that was confirmed by. He macron victory the euro has moved out of a multiyear time of trading to post crisis territory, proper recovery and growth and we know the next move will most likely be for reduction in the evening is he posting they have had. The euro story remains positive. However, it has done 10 since the april lower on a trade weighted aces. It does look quite stretched in the shortterm, that has been low and steady and one of the problems is people get complacent, they get relaxed and leveraging up more and there is no volatility trying to make traction on the small gains. The move is stretched and we could get a violent correction that it is a correction that will not turn the trend, it will be a deep correction and go back higher again. Matt thank you very much. Mark cudmore there mliv strategist talking to some of the things his blog covers. You can follow his Market Insights on mliv. Threell see at the top things that are helpful every morning and at the bottom is german dinosaurs. That is the story, a topic that we will be covering all day today. Berlin so ihere in am going to head over there in a little bit, auto execs are going to make a pitstop at the diesel summit. Find out if they can prevent the fuel from veering offroad or they will technology, meet with politicians and those two groups, politics and Business Executives circle the wagons and try and cover themselves. This is bloomberg. Guy 843 a. M. In berlin. Heres juliette saly. Isiette Societe Generale grappling with the burden of negation for past misconduct which overshadowed a demand for products. Frances thirdlargest bank said it increased its Legal Provisions by 300 Million Euros, that it did not specify that helped push secondquarter net income down matching analyst estimates. Definitely there is a better mood in france, better level of confidence and for example, we saw in the Second Quarter and increase of our longterm investment, increasing the 10 . We saw also gdp growth figures pretty solid for france as well as for europe. The growth rate at 20 of 2 . That reflects the confidence level improvement and i am pretty positive for the next 12 there arehs provided reforms, provided new steps toward building eurozone, i think Continental Europe can do pretty well. Commerzbank has reported its weakest quarterly revenue since 2014, revenue and germanys second largest listed bank fell 7. 7 to 2. 0 7 billion euros as it struggles to make money out of new plans. The ceo is focusing on the retail and corporate business. That is your Bloomberg Business flash. Guy and matt. Matt thank you. German Auto Executives are gathering with government officials in berlin today to discuss measures for cleaning up diesel cars and avoiding bands and cities which are now ever more likely. According to people familiar, carmakers are closing in on a tackle of initiatives to diesel emissions that could cost up to 5 billion euros. Joining us now is professor dudenhofer. Howme talk to about important these automakers are to the german politicians because although they do not ,ant to be seen as too close having a liability in september at the elections, they do provide germany with at least 800,000 jobs, what is at stake here . Take the if you theliers and the carmakers, politics are looking and discussing with carmakers for decades if you want that and the strange thing is that our chancellor Angela Merkel by herself nominated the chief from the ministry of traffic, that shows you they are close together. I think it is too close. Matt what about the issues that the automakers, i should say . Hat the city governments face in stuttgart where oxygen levels have risen above European Union bands, are diesel car inevitable in these cities because even if they agree on a fix, the air quality has to be kept, moved cleaner, doesnt it . Ferdinand exactly. That is a problem. We have to germany, 40 cities have bigger problems with due tons and they are 70 of diesel cars and they have to act area the problem is we had in the past 10 years ago the government get that information from the eu each year and did not act at the same time. They know exactly how week the registration procedures for diesel cars are. Have tond germany they fulfill procedures and the emissions are not of interest. Nobody is controlling and that brings a big problem for the political system. The parties, the government of has partart of of the responsibility of the Current Situation and the carmakers say, ok, we respect the legal claims, we did everything what the law is demanding from us and now we are in that situation. We can pay billions of u. S. Dollars or euros to fulfill the problems you have caused with bad laws. Guy good morning, guy johnson in london. What happened to german innovation, where did it go . Why didnt germany produce the model three, why was it tesla . Ferdinand that is a good question. Very proud ofe its diesel cars and they have tech subsidies on the fuel and diesel fuel and that brings a big boom. They have been convinced that they go into the future without [inaudible] they wanted to modernize its diesel cars and therefore they electric vehicles, the same applies to the government. Our chancellor told us she wants to have one million electric vehicles in 2020 but they did nothing. No action and therefore we are in the latest [inaudible] isnt this meeting irrelevant . France and the u. K. Has set dates for the ending of the combustion engine, sales of. Whatever germany does, in its big markets if its big markets are turning they will set the pace, not germany. Ferdinand yes. Politicians and car industry want to save the past. They want to have the car market in which diesel is still strong and they do not want to have binding commitments like the u. K. Or the french or california or like norway and other states [inaudible]also for germany. You have no clearcut road to go into the future and we need more time, we need more time to adapt, it is a big change for the industry. If you do not fixed dates, then you will never arrive in the future. That is a big problem to the german car industry caused by the politicals. Regardless of what the carmakers and up having to pay for previous euro five and euro six diesels and what the politicians and it subsidizing for them, what is the future of diesel . Is anyone going to continue to buy diesel cars . Seeinand at the moment we our customers went away from the cars arehey by 20 of diesels, the fleets are a big issue in diesels because they subsidy of . 18 per liter. Therefore the diesel cars are running as company cars, there are companies that are afraid of the values of the cars. He goes more down and also causes a problem for germany because then carmakers do not have the scales they need in the future to offered diesel cars at appropriate pricing systems. Diesel is a mess, they have to find a solution which is looking more into the future and not in the past and at the moment and today in berlin, they look to find the solution for the past and want to make some soft eights, nobody knows about the reaction of the engine or the orl or the fuel consumption software updates. They want just to give the population and the voters some arguments for september when we have the general election. Matt any of the automakers better prepared than the others . Bmw seems to hold themselves out of these Cartel Accusations in some sense quite reasonably. Are they better prepared to shift away from the Diesel Technology then volkswagen or daimler . Ferdinand bmw announced they will offer [inaudible] the three series with all 3lectric drive, they have the i. Ndi8 they are running very fast to more race in put the business system. Longest time, i have about 2020, that cars columnar ranges are miles, 500 kilometers with the fuel electric batteries like the teslas and audi will come next year. Audi and porsche want to have sales of 50 of its car at 2025. Porsche and audi and the vw group is making a strong effort to go very fast. They have lost time in the past, they lost five years and that is the prophet of tesla. The profit of tesla. Matt thank you. Foremost experts in the country on this subject. Guy the death of diesel, it is coming, is the electric car running ready . Guest what has changed in the last two years is that all this Political Capital with that the car capitals have has been destroyed. All these buyers who have been cheated, they out number the employees and the Political Capital they have to demand concessions from the government has dropped. The alternatives are looking better. Pure battery electrics are looking better and plugin hybrids. They will and if it from this decline we are expecting benefit from this decline in diesel. Our models they take a while to get going parsley because you need a drop in battery costs to get the massmarket going. That happens in our view around the mid20 20s and you get this real pickup. In the next two years you will see sales go from 1 to maybe 4 or 5 around 2021. Guy we will leave it there. The market open is next. This is bloomberg. Track your pack. Set a curfew, or two. Make dinnertime device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. Introducing xfinity xfi. Amazing speed, coverage and control. Change the way you wifi. Xfinity. The future of awesome. Guy welcome back. Cashinute to go until london looks like it will outperform its again. Rio tinto want to focus on this morning. Keep an eye bang on the german automakers. We have the diesel meeting. Decent numbers as well. Defense spending on the up. 20 of stocks to focus on. We will see how they open. At a headline level, nothing doing. At a stock level, plenty going on. Matt i have got a chart here in the Bloomberg Library so viewers can click on this and use it themselves to play around with it. It is g btv 317. Bmw, andercedes, volkswagen. I put each company into its colors. Nal livery volkswagen is outperforming this yeartodate bmw and mercedes. Guy let a single look at how these european markets are opening up and see what is going on. I am hoping this will work. Well see what is happening here. That does not look right, does it . Let us flip back to what is happening with a more standard wei screen and take a look at what is going on. We will see what is happening here. Stoxx 50 barely budging. We are getting a mildly positive start. Let us find out what is going on elsewhere. Here is manus cranny. Manus technology is such a pesky yet beautiful thing. Apple has rekindled the fire of technology around the Asian Session and around the european session. Technology up. 2 . They were the alpha of asia. Financials up. We spoke to the ing cfo. Bullish stories. They are delivering very much in a fixed income space, trashing their peers in the United States of america in terms of what they delivered on the fixed income space and equity trading. Rally thatoldilocks has more to run. That is what we are hearing from. There is still juice in the rally. See what we can get for rio. Are you bothered about the price of the euro and where it could get you . The breakpoints are btv 318, by the way, is 118. 77, the low. If you look at it to the 2012 low of 12043. Band witho into a new terms of euro trading. The ing cfo saw the market was fairly fully priced for an adjustment process from the European Central bank. And markets would not dislocate that much. This is the gilt market. This is gilt futures. The price has dropped. Alex is here from jpm. Sterling will drop. 2013 on the paper issued yesterday. We are seeing a drop in the gilt price of futures. On the yield at the bottom of the screen. Guy. Guy manus, thank you very much indeed. Manus, what have we got into moves of the screen . Matt actually, i have got it. This is the stock exits hundred moves green have it set to index points. Are hsbcing to gains adding to gains as well as bengal del valle banco bilbao. Nestle, anheuserbusch, not a giant theme jumping out at me. Let us check out the percentage gainers here. William, andgain, as far as the losers go, you see socgen as the biggest loser in percentage terms on the stoxx 600. Right now, down more than 3 . You see rio tinto and Anglo American after the gains we saw yesterday. Those will be the index point losers as well because they are obviously heavily weighted companies. It is really about the materials and minors as far as socgen is weighing on the index today. Guide. I am mixing everybody up today. Is the euro do for something of due for something of a pullback . I have slightly taken the idea. What you have got here is the u. S. German spread. Correlation at the here and it is starting to break apart. You can see that here. You wonder whether you have the correlation down here, whether or not we are going to see something of a reversion. Metastatic to charlie, head of rates. Good morning. Turley good morning. Charley good morning. Guy you are certainly seeing quite a spread diversion beginning to emerge and you wonder whether the euro can sustain its current performance given that. You have to put it in the context not only of the rate drivers, which are clearly very important motivators, but particularly in the context of how growth is looking and where the data are printing, and if anything, over the past month or two, the data out of the u. S. On the growth side at least has been fine, but on the inflation side, continues to undershoot. Markis raising a question about the fed and whether they will stick to the keep on hiking path. We know they will reduce the dodd sheet in september or they implacably that they will. If the inflation data continues to undershoot, will the motivation for the fed still be there . The potential change, if you like, from the federal reserve, could be a less aggressive rate fast because of the inflation profile. Europe, on the other hand, still using to a significant basis, but their changes going the other way in that they are starting to think about less pulling awayes and from the amount of stimulus they are giving. Changes, it is those that are really driving the currency at this point in time. Forlly, the prospect economic change and fresh stimulus in the u. S. Are looking less and less likely given the u. S. Political situation as it ends, whereas in europe, the Growth Numbers seem very good, and if anything, they seem to be more cohesive rather than less cohesive. Guy the markets like you focus on individual points in time. I wonder what jackson hole could turn out. When you look at the landscape, how pivotal will that be . We will get a greater level of transparency . Well, is there as scheduled to make a big speech. If you were looking at the eurodollar and trying to figure out exactly which weight it is going to go, how pivotal could that be . Charles it could be significant. Youre looking at the level of Interest Rates, the availability of credit, and the currency. This currency move and the tightenedn rates has financial conditions within the eurozone to some extent. Should massively, so draghi be panicking at this point in time . I would say no. Equally, there is plenty of room for some concern. They wont want the euro to go rallying on and on and on because they do not want to curtail the recovery, which has been so hardwon in the first case. In the first place. Matt are investors getting ready for banks to start benefiting from higher net interest margins . Is that one of the stories behind the European Bank Investment Case . Charles i mean, clearly, there has also been following wind of qe and this generalized sort of compression of spreads that has not particularly help to the financial sector. I think the normalization of the european economy is clearly partly behind why financials have done so well in the eurozone recently, and it is worth remembering that the business channel within the bankone is much more centric, whereas in the u. S. , they are more Capital Market centric. Thes not surprising that more certainty we have about the european macro outlook and more certainty about the fact that all of the policy measures have gained some proper traction, then it is not surprising that the banks are one of the major beneficiaries. Matt do you like European Banks here . Is there anything that concerns you about them . Charles i mean, it depends. It is not a homogenous landscape. Has banks that have cause for concern. Deutsche bank and its exposure is an ongoing issue. Some of the italian banks, we now have caused a lot of problems Going Forward. Going forward, remain to be dont with. Know, there are individual spots of concern, but broadly speaking, the environment is pretty positive for the banking sector. I think that is why you have seen this generalized trend towards compression from the banks. Guy stick around. Plenty more still to come from you. We will talk about what is going on in the world. Etc. , etc. , fantastic function. Guess what is still number three in terms of the mostwatched video on bloomberg . Matt teslas model three. I see it right there. A lot of people interested in that. A lot of people want to know what that car looks like. You can pick one up at the base price for 35,000. Risk in thex on the markets and what is going on in terms of valuation. Talk to bring, warning talk to top two. Venezuelan bondholders move as sanctions for default fears. Any upside in the riskiest that in the world debt in the world . We will discuss that, next. This is bloomberg. Guy welcome back. You are watching the european open. We are 13 minutes into cash trade. This is the picture we find ourselves with. Not exactly a clear sense of direction. We are barely budging in terms of where we sit right now. Summer, august. You have to bear that in mind. You have to remember the apple affect we have seen in asia lets representatives in europe that may be a factor. A 6 pop in apple. To payly something attention to, matt. Matt absolutely. Another thing to Pay Attention the incredible Political Developments in venezuela. It has been dubbed the riskiest that market in the world. Debt market in the world. Speculation the u. S. Could impose sanctions that would cut off oil revenue, the all of of almost the country cost income. President Donald Trump Administration has applied penalties only to individuals after the leader, maduro, push forward plans to rewrite because attention in what critics call a grab to power. Some are calling him a dictator now. The institute of International Finance are warning a hawkish fed could spell trouble for bonds. The number ofng fed hikes could disrupt the eighth consecutive months of inflows into developing nation assets. Charles. H us on set is the financial problems have sort of a different scale in humanitarian terms. What is going on in vail swale a could turnnezuela very violent. What do you make of that market from a financial perspective . I assume almost all investors would be best advised to stay away. A lot of people could look at the possibility of an opportunity. Charles i mean, the truth is you have got no Real Transparency on what may occur from a political standpoint, and whether indeed they will honor the outstanding debt that theyve got, so from a risk reward perspective, at this point in time, it does not really make sense to most investors. Out, thishtly point is a very attractive deal on offer. If it turns out that, you know, that they do meet their bond payments, you could well find this is a great opportunity. Seems veryo me unlikely about the edge and thereby you should not be getting a vote. Matt more of a gamble than an investment. What you think of the rest of the emerging Market Opportunities as highlighted by the imf really . Charles this is something that we have had as an investment across both of our young teams and in the Global Markets as well. Basically, favoring em duration over gm duration. That is looking for exploiting the better yields, but it returns on offer, in what is a relatively clear sweet spot in terms of the fed raising rates. It is low and predictable growth which is good. Globalization is moderate global inflation is moderate. It is a very constructive thesenment for highyielding assets, and thereby, you know, you can call it a grab for kerry or yield yield, but it is something we have been pursuing for a number of months well. Guy i have a chart which shows foreigners piling into indonesian bonds. You have a sense of the banks in 2003, the money rolling in. Charles yep. Guy when does that start to continue . In the nearterm, mediumterm, longterm . You are getting a proper meal yield, something pretty attractive. What would it take to start to dark in the clouds over it . Charles a big move in interest mark or a big question over global growth. Both of those with the potential risks. At the moment, the federal is behaving in a pretty predictable manner, and the rate cycling is very slow and measured. So that does not look particularly likely as long as we do not see inflation out of control. Investingont like hot money, money that will walk out the door at a moments notice. Charles theyre obviously are hot money flows in all of these things, but you do not get a chart for example, the one you have on indonesian bonds where it is hot money. These are people moving thatturally into markets previously perhaps they were not involved in, but they are there for the longer term. Flows thathortterm you can describe it hot money, but the underlying trend is very much that this is longterm, real money investment into these economy, and there is a lot of differentiation as well. E performing well are attracting differential flows. Withhe is going to stay us. Up next, litigation lingers. We are going to discuss why frances thirdlargest bank is trailing behind its peers. That is next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. I am matt miller in berlin. Deutsche bank, most likely exit scenario, involves shifting 4000 jobs out of the u. K. According to people briefed on the planning, the bank will transfer most of those positions to frankfurt and berlin when britain quick that you quits the e. U. This is a story we are following closely. French banks have posted a drop in profits of 20 , matching the average analyst estimate for the Second Quarter. Drilling, onset down exclusively with the banks chief executive about challenges facing the bank and its preparations for brexit. Strongave presence in paris and london. I do not think that the adaptation to a brexit scenario, which is still very unclear, is a significant challenge. What we said is, effectively, we think that between 300 people and 400 people might have to move to paris, and we have said we would choose paris for relocating these people. I do not think it is a big expense. Let us wait for the real scenario. We have time to decide when and how, so well see when we have more clarity from the negotiation point of view. Caroline the bank is putting 300,000 per job. Is that something that would be similar for socgen . We have not disclosed any costs. It is premature. We have to renew the licenses and the systems. Caroline is it premature to say that banks may need 50 billion in extra capital to face brexit . It is still a lot of uncertainty on the outcome of this negotiation. You know for example, whether we can keep branches on both sides of the channel or have to put in place is a very big difference. I would not be in a position to assess exactly the final cost and impact of the brexit. We have nothing of clarity on the outcome. Matt we have plenty of big banking name throughout the day. Best will be joining francine. And we will see the ceo lloyd bank. We are looking forward to other those conversations on bloomberg. Let us get back to killing common, who joins us from to caroline connan, who joins us from paris. Litigation costs once again overshadowing performance elsewhere. How frustrating is this . Caroline he told me this has no real effect on the bottom line foruse this is something the investment authority. This is just in the Second Quarter. Ae issue socgen also took next her 300 Million Euros in provisions this quarter. The ceo of such an did not really specify for which disputes and when exactly this money is going to be he did tell me that socgen has to not stall some of the aroundown litigations the probe in the u. S. Related to trade valuations, and also on the rival. The ceo told me he wants to solve this litigation issue as soon as possible. This is overshadowed with the revenue at the investment bank, falling less than some european bears. Jump insocgen structured products this quarter. Matt is he confident about the outlook for france . More confident . Caroline he seems to be very confident. He said there is a better mood in france and he also saw a jump in investments for small and Medium Companies by 10 this quarter. He sees a better outlook for europe over the next 12 to 18 months. Matt carillion, thanks so much caroline, thanks so much. Caroline kanaan. We will discuss risk and reward, next. This is bloomberg. Auto salvage. Camacaro makers on politicians get this critical industry back under control . Gsd the things are the fand are out. Will the next iphone live up to expectations and is tax reform needed to keep the investors on board . Plus, litigation clouds linger over socgen. We just talked about ceo bloomberg who tells befriends lender is time to thought this as quickly as possible. Good morning and welcome to Bloomberg Markets Bloomberg Markets european open. Guy. Guy let us talk about how we are 30 minutes into the trading day. This is the picture we find ourselves without the moment. Equity market that headline levels. Really are going anywhere in a hurry. Focus should not be on what the indices with level. We are going to get big moves. What we are going to get is moves on an individual level, so the market is stocks rather than the stock market. In terms of what is moving on the upside and downside, the of socgen, one of the big movers on the downside. That is quite interesting. On the upside, william hill, hugo boss, trading higher. The texas is gaining as well. Saoks on the looks lufthan looks fairly favorable as well. Fairly decent sized moves in terms of the individual thought names as well. Action. Ot much thing that is taking headlines as well is what is happening with crude. We had Inventory Data out of the state. More data later on as well. Oil moves are fairly sharply moving on the back of this. That is interesting in itself. They have been writing through the 50 level. We have been writing through the 50 level. Is 50 the wrong price for crude . It is the upper end of the reign as far as we are concerned. This is particularly a u. S. Dynamic and the efficiency of the rig, the ability for the Oil Producers to get more out of the know, itoil and, you is a real accidental chart if you look at it. It is really quite impressive. We cannot see any real tensions on the supplyside coming along. Unless you are particularly bullish on the demand side of the story, then, you know, that combined with opec is perhaps not necessarily speaking to pulling additional restrictions in. We cannot see any supply issues. Move a to see oil bit lower down towards the 40 per barrel. Again, very much in the context of the sort of range bound type story. Uy Adam Greenspan is worried about the market. Why if some of the components of inflation are going anywhere in a hurry . Inflation is a big part. By any kind of historical comparison, the answer is yes, they are. Not surprising when you consider the bank of japan and ecb as buying huge amount of bonds, but if you look at the u. S. , we are talking about starting to unwind qe. Your levels are pretty low by historical comparison. 2. 3 percent. Is it a bubble . Say, because would all of the structural changes you have seen in the economy, you are not seeing Wage Inflation improve. Have ald not normally nineyear economic expansion without which is soaring. Not working. Exactly. Something very different has obviously happened to the neutral rate of interest and mutual level of rates in the u. S. Economy, and it is obviously lower than it was before. Is it necessarily where we are . Perhaps not. If you look at how inflation is behaving and how all of the normal things that would really worry a central bank, they are all green. They are fine. The bond market is saying you do not need to be in a rush. Bit valuations may be a rich and it may well be that in one or two years time, it should be at more like 3 . Being, with inflation where it is for growth potentially softening up a bit , what is the reason for the market to sit there and say we have to sell bonds . At the same time, a lot of the equity valuations are related to the low bond yields. Go hand, the two would in hand, you know, to cite some of the concerns, it is this risk of matt i want to stick with oil for a moment. I have got a chart up here from a story we published based on a basically, all of the oil majors are making more cash, and here, you have Free Cash Flow yields for the big, integrated Oil Companies in the white columns. Now that oil is down at 50 per barrel compared to when it was back over 100 per barrel in 2014. Is it good to have a little bit of belttightening or austerity for this industry . I mean, i suppose i would view it in a slightly different metric. What has clearly happened with the decline in oil prices it has goneiency up through the roof. From fouruld get years ago is like one quarter of what you can get from a well now. That efficiency has to be a good thing. High oil prices are not a good thing for anybody. Off theargue that its world moving towards the sort of esg type agenda. There is no reason 100 per barrel is good for anybody but the Oil Producers. Tendsnerally speaking, it to cause more dislocations. Broadly speaking, the fact that these wells can be turned on so quickly and are becoming so efficiently, broadly speaking, it allows them to have relatively Stable Energy outlook for the mediumterm, and on that basis, that is going to be supported for Economic Growth and particularly good for emerging markets. Matt charlie, thank you very much for your time. Gharles diebel will be joinin guy and myself on london dab Digital Radio in the next hour. Coming up, fruitful forecast as apple sets High Expectations for iphone eight sales. We peel through the latest quarterly results. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Miller in berlin alongside guy johnson at our European Headquarters in london. A quick look at the mov screen at the stoxx 600. Buy index points, as i have here, we can see the laggards are really the oil majors and minors. , b. A. T. O, vp, total billiton, all weighing on these stoxx 600 index and pulling it down. You do see, by the way, that the biggest loser as far as index points is concerned is also the biggest loser as far as Percentage Points is concerned, socgen, down 3. 7 . As far as the winners, you have a much more diversified group of baeanies with roche, systems, and novo nordisk leading the pack and adding points, although obviously, not many, and certainly not enough to see gains in these topics is hundred to the index. The stoxx 600. Sebastian salek. Suppression the u. S. Senate had the nomination was approved on a bipartisan vote of 92 to five. President donald trump fired james comey over the criminal probe into russian meddling in the 2016 elections. Deutsche banks most likely brexit scenario forcing 4000 jobs to Continental Europe over the next several years. According to people briefed on the planning, the bank would transfer most of the positions to frankfurt and berlin. They said no plans have been finalized and the actual jobs could transfer to be higher or lower pending on the outcome of the negotiations with the e. U. A Deutsche Bank official declined to comment. Investors in venezuela are losing their resolve amid sanctions turkey government officials and power grab my president maduro. The countrys bonds have lost almost 1 5 of their value in the past two weeks on speculation washington could impose further sanctions that would cut off oil revenue two countries to all of the countrys income. Global news powered by more than 2700 journalists and analysts in more than an hundred 20 countries. This is bloomberg. Guy apple shares set to open higher, possibly later today. The market is waiting for that. Apple says revenue would be at 49 billion to 52 billion. That eats expectations for joining us now, bloombergs tech reporter. I am curious. I have a stock price that tells you apple will be opening up in record territory. It will be up 6 . I am looking at what we have just seen, and im scratching my head to see what is important about the quarter we just had. I know the next quarter will be important, so what is it that has got the market so excited . Adam i think it was a bit of a sigh of relief to the extent that a 45 billion quarter could the sort of a flyover quarter. That is what this last one was. Investors are already looking ahead for any indication of how the next iphone manus theres nothing to upset them . Adam it has been a lot of concern that there is production problems with the new phone. This is the 10th anniversary of the iphone and there is a lot of anticipation. You think of apple, although it has a Broad Product portfolio, you should think of it as an iphone company. It gets over half of its revenue and even more of its profit from the iphone. It is the sun that grieves light breathes life into the rest of the company. When i was a kid, apple under promising and over delivering, so every time they would put out earnings, they would beat in their quarter, and the outlook was always less than what the street was looking for. Now they have an outlook that is ahead of the street. Have they changed their strategy or is it really that promising . Inm they have gotten better terms of this outlook. It was getting to a point where it was almost laughable that people would almost not look at their outlook at all because they thought that it was clear they would blow past it. That was during a very unusual period for the company. There was a stretch where the iphone was growing at a rate that was really mind blowing, and i think to a certain extent, the company itself was almost surprised by it, but now, the company is at this period where it is not growing as much used to. So these sort of indications that the iphone still has some light into it is what is giving people positive reaction to the earnings. A global tech reporter. Give me the global read across. What does this mean for the supply chain and the rest of the tech landscape . Adam it is very good for those companies that supply all the components that go into an iphone. Apple does not manufacture it. Theseartner with all different ones around the world. You are seeing these companies who are going to benefit from this. But there are some other things in here in terms of apples global business. You still see some softness in china where they are having, like Many American companies, complicated market in which they have been trying to navigate, so that isso another area we are looking to see how they ramp up. They have been opening more detail stores. It is something to go aggressively after. Matt is apple at risk of becoming just a Luxury Company . Because as they move ahead with their own standards and they kind of price them out of the markets like china, is it a problem that they get a little niche . Luxury, too adam it is certainly true that they live at the sort of top end of the market. That is a very, very profitable place to be, but they are still selling so many phones by it is hard. I am looking to see the number of phones last quarter. I do not have it right here. They are selling millions and millions of these phones. It is not just luxury buyers. What you have seen them do is theirf slice and dice iphone catalog. You have some at the very top end and others that go down along the way, so they can pick up different price points along the way. When they tried to go lower end with some of the phones they introduced in the past, they actually have not been as successful. Matt all right. Very interesting stuff. Obviously a good point. Adam satariano, our Bloomberg Global tech reporter, has been covering apple. Really appreciate it. Buckle up in berlin. Pitstop atmake up the diesel summit. Find out if they can prevent the fuel the engine technology, i should say from steering offroad. There is a pretty cool protest sign that members of greenpeace have hung up on the transport ministry. You can see them hanging there as well. Welcome to fort knox. This is bloomberg. Matt welcome back to Bloomberg Markets european open. I am matt miller in berlin alongside guy johnson. German Auto Executives are gathering today in the german capital along with German Government officials to discuss measures for cleaning up diesel cars and avoiding bands in in cities. Ans the carmakers are closing in on a package of initiative to tackle some of the diesel emissions. Them 5d end up costing billion euros, 6 billion. Joining me is david bailey, professor of industrial strategy at the Aspen Business school. Also me first about what the real problem is here. The e. U. Regulations limit the airnt of pollution in the and some german cities have already gone well over those levels. How can they fix it . Do they have to . Is it key . What is the story . David europe is different from the United States. Europe has gone for diesel in a very big way. Be good foren it to the environment. We have found the regulations on air quality were never properly enforced and there is a huge downside for air quality, particularly in cities. You have major air issues and a lot of european cities. Diesel is a big contributor to that. It was a fundamentally wrong of the technology chosen by the european car industry. There is a big backlash against that by consumers and my mental groups and politically, we are likely to see much more in the way of restrictions at a city level against the gulf and the government setting targets to eliminate natural and diesel ins completely by 2040 france and the u. K. The german manufacturers are particularly exposed in a big way. There is two issues about today. The politicians want to seem to be doing something ahead of the parliamentary elections in a couple months time. The carmakers want to do something. There is a massive shift away from diesels taking place. Diesel share of the market down by 3. 5 over the last year. Some analysts think it could be as low as 15 by 2025. Matt is it too late for that, david . The main reason you want a diesel, at least in germany, and you get more mpg and you have pretty cool torque, but if you take those things away, by emissionsblock knox they are so out of fashion at this point that you do not want thee the last guy holding hot potato or the person looking for the chair with the music goes off, right . David absolutely right. The technology that may be needed to fix the problem could take away the very attractiveness of the driving characteristics in terms of acceleration and the torque and power you were talking about. Because of the massive consumer shift away from this, consumers are spooked and concerned about the residual value of cars. People shift away from diesels. They will be fined. And a finance the cars in europe, something called personal contract plans, it depends on the residual value of the cars. If it is worth less than they planned, the Car Companies will take a financial hit. Guy the Car Companies, im sure, and the finance guys working in their divisions, will find a way of making the consumer pay for this. Comeare going to have to otherwise this is an existential crisis. He said we cannot turn up and me you promised me ask, w, but now, you are only giving me y. David it is a bit of a light bel moment in that Car Companies were not selling to consumers what they said they were selling. A number of things will probably happen. The technology that is needed to make them clean will impose extra costs on consumers in the long run. In the short term, there is an issue about to compensate consumers. Some sort of diesel scrappage scheme to stir a shift away from into clean vehicles. In the longer term, i think government will probably accelerate a shift into electric vehicles. Guy would you buy a diesel car tomorrow . David actually, i got rid of by jesus three years ago, partly because i was concerned about the environmental issues, and i switched over to an electric car and a hybrid car. Guy we will leave it there. That probably answer the question. David, thank you very much indeed. David bailey, professor at Aston Business School in midland. Have 1 30 p. M. , we will speak to Goldman Sachss ceo, joining the scene later on. We will have plenty of great conversations coming up. Up next, francine was surveillance, joined by tom keene later in the morning to read matt and i are going to london dab Digital Radio. That is all coming up. This is bloomberg. Apple shines in the newest iphone demand. Can automakers and politicians sharespact under control are lower and we will hear from the ceo. The environment for