U. S. Cpi is due out today. Can the fed raise rates again this year if that measure remains subdued . s head start. She is holding a 15 point lead, but will still need a coalition partner. Who will it be, matt . Matt that is the question we are all discussing in germany. We will be discussing that over the next six weeks, for sure. Right now, a more immediate threat. We are less than 30 minutes from the european open. Futures are down across the board after the big drop in tehe u. S. Yesterday. As guy mentioned, people fleeing into haven assets. Bitcoin is trading at an all intraday high. The bunds, coming down. This trend is interesting. Over the last month we have come down from 0. 6 to 0. 5 . Trendmove in a downward as investors prepare for more risk. If i look at it one day look at the bund trade, we have come down in yields, meaning investors are buying debt, se eking safety and pushing the yield down to 0. 4 . Guy gmm is a fantastic function because it creates a score card and rates it relative to recent experience. There is the s p 500, and its a different color from the rest of the markets. That move was bigger than we have seen of late, by some significant margin. The s p 500, down by 1. 45 . Its the middle of august and in reality, most people are out of their debt. We are in a low liquidity environment, but still, Pay Attention to these moves. South korea is down by 1. 7 . The Chinese Market is down by 1. 64 . The european markets are down by 1. 5 . This morning, the dollar is bid the yen. Thyou can see that on that scre. Lets show you what else is going on. Here is the commodities market. Ironore, down by 4. 52 . The market is really stern to pull back on some of these commodities. Lets get our first word news update was shery ahn. Shery thank you. All the top that janet yellen has been talking about strengthening the Balance Sheet faced a test. Bloomberg data shows securities are already lagging behind treasuries for the First Time Since 2011. Investors are demanding 29 basis points to buy the bonds instead of treasuries with a spread on most troubling from 2016s low. Facedanks are set to mounting pressure from regulators to write off bad loans. European authorities are now beginning to lose patience with some irish lenders, many more Urgent Solutions are sought, unless convincing plans are laid out. Kenyas main Opposition Alliance has demanded the candidate be declared the winner of the president ial election. The National Super Alliance Says it obtained data showing the primer for minister the former Prime Minister won more than 8 million ballots, compared for 7. 75 million president kenyatta. Singapores economy posted faster growth in the Second Quarter than previously estimated by the government. Most domestic product is seasonally adjusted and analyzed 2. 2 in the Second Quarter from the previous three months. That was revised up from the earlier estimate of 0. 4 and beat economist estimates of 0. 5 . Google has canceled an all a hands meeting to address hiring issues and a memo written by an engineer. He called thehat meeting off after questions to online, were posted raising concerns that employees and t identified in the leak would be harassed. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Guy thank you. President donald trump has stepped up his campaign a pressure on north korea, warning things will happen to them like they have never thought possible. Investors are going for havens, from what the Hedge Fund Manager ray dalio said. Inked ins used his l put to recommend investors 5 to 10 in gold. I wonder if he has made that move already. Matt i wonder. Meanwhile, William Dudley offered a positive outlook for the u. S. Economy. The jobs market and inflation. Yesterday in a speech he predicted an increase in Consumer Prices over the medium term towards the Central Banks objective of 2 julyt us. S. Cpi data for at 1 30 u. K. Time. Goodman joins us live from singapore. Lets talk first about gold. Ifseems that obviously, somebody is a big investors says that to the market, he is talking from his own book, but historically come it has been a safe haven. Is it still as much of a haven as it was . Sure, gold is a safe haven, and in high demand. Ago, regarding north korea, people were saying, it is not that big of a deal. North korea is a problem from time to time, but now the rhetoric has really changed, just as President Trumps frederick has changed. We have australia saying it will support the u. S. If needed. We have ray dalio recommending gold. This flight to safety has heated up. You mentioned bunds, saying people are rushing to bunds, even at a yield of 0. 4 . That is not an attractive yield, but because there is demand for these securities, it shows how strong the demand for safety is now. Guy he would have thought the Swiss National bank went from laughing to crying this week. Lets talk about what we will get in terms of the cpi number. Core pcu is certainly something to Pay Attention to, but we should look at the cpi. 2 thend up with the 0 market is expecting, can we price out the possibility of a december rate hike . Or is it too early to do that . Right, i think the number we are looking at is 1. 8 , which would be below the 2 fed inflation target. Keep in mind, the fed uses a number of different inflation gauges to monitor inflation. 1. 8 , of course, is less than 2 . Even if it is 2 , there are still several other inflation gauges that are below that target. We have conflict going on right now. The fed signaled it will raise rates once more this year. Traders in the market are betting that it wont. There is this conflict that has been set up. It really looks like the inflation gauges are not coming up to target, that the fed might have to revise the projection for another rate hike this year. Matt wes, im looking at a chart of the u. S. 10 year yield, right now at 2. 2 . In the beginning of the year, people were talking about going to 3 , which would be literally off this chart. Whats the outlook for treasuries right now . Thats pretty fascinating. Even of the fed has raised rates three times over the last several months, 10 year yields have fallen. So, does not always follow that when the fed raises rates, treasuries must fall in price of rising yield. I think there are a lot of reasons to be bullish on treasuries now. The weak as encouraged overseas investors to buy. Some of that demand is showing up from foreign Central Banks. We mentioned the 0. 4 bund field. 5 e u. S. Treasury yield of 4. 2 is far more attractive than what you can get in germany or japan. Last of all, even though the u. S. Economy is chugging along, inflation, which is what investors are worried about, does not seem to be picking up. Guy wes, thank you very much, indeed. Fantastic coverage. Wes goodman, joining us. You can follow the entire team , ayour bloomberg mliv fantastic function. Another fantastic function, matt, tv. Speaking, coming up. You can also watch videos, the mostwatched video, the videos between north korea and south korea and President Trump talking about north korea as well. It is dominating the mind of the markets right now. Matt dont forget, the google scandal. It is also dominating the markets at the moment, though it is not affecting their investment decisions. Up next, time to toughen up. President trump says his fire and fury warning maybe wasnt tough enough. We will talk about that. It is infecting investment decisions. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Im matt miller in berlin, alongside guy johnson in london. Now we go to shery ahn in hong kong for the Bloomberg Business flash. Wonry google u. K. Has approval to build a campus alongside their existing buildings in london. It can accommodate as many as 5000 workers and it was approved yesterday. The building will be the highest building in the European Union and construction will start next year. Chinas online watchdog has launched an investigation into multiple violations by baidu, and waidu. They made no immediate comment on the notice. The bond board member from uber is stepping down. Graves served as the Senior Vice President of operations and is on the executive Leadership Team tasked with running the business in the absence of a ceo. He will relinquish those positions next month, but will remain on the board to help the Company Search for a ceo to replace the cofounder. That is your Bloomberg Business flash. Guy thank you. Donald trump has stepped up his campaign for pressure on north korea as he warned the regime not to follow through on firing a missile towards u. S. The latest or marks reinforce the aggressive the latest remarks reinforce the president s stance, despite Rex Tillerson trying to ease tensions. I think this is the first time they heard it like they heard it. Frankly, the people that were questioning if it was too tough, maybe it was not tough enough. Matt joining us now is our asian political editor. Give us a sense of how this is being perceived in asia. Im wondering whether or not the pressure is being felt more in beijing than in pyongyang . Certainly throughout asia, there is a lot of concern just about what is going on. They are used to threats emanating from north korea. Almost to the point where they ignore what kim jong un is saying. The difference this time is the rhetoric is coming from the white house, which is ramping things up. As far as china goes, they have been pretty quiet and are telling people to calm down. Yet, we did see an editorial in the communist Party Newspaper today, warning essentially, that if the u. S. Tries to invade north korea, china would be there to defend them. At the same time, they said if north korea provokes, we will remain neutral. Matt basically, china is saying i saw that editorial as well that they would band together with russia and north korea in an axis of power against the u. S. And australia, etc. Isnt this kind of unexpected that they would support north vehemently . E they have supported north korea for years, since the creation of north korea. Interest. A strategic they see north korea as a buffer. Tate against the United States if north korea were to fall, you would have u. S. Troops on the border, potentially a nuclear arms unified korea aligned with the United States, not to mention a refugee crisis. From chinas perspective, that is a great strategic bet. They want to maintain the status quo on the peninsula, a divided peninsula that keeps a buffer between the u. S. And chinese border. Guy what are people talking about, in terms of donald trump . Im just wondering what the perception is. Is he seen as being a wildcard . Is that perception seen as being esqueiberate nixon strategy that nixon seemed to pursue . What is the perception coming out of the white house . Question. Ts a good it depends on where you sit. Japan,ies are australia, south korea. They all say they are glad donald trump is putting the military options on the table. That needs to be there. And we support the u. S. I think what you are hearing behind the closed doors is more, we dont taken seriously. We dont take these threats seriously. We dont see any mobilization towards war. There is a concern, in a sense, the mad man theory, will it work this time . It remains to be seen. People are worried that there is a wildcard in the white house now. Just on what he is saying about north korea, but the whole trump administration. Nature, andctable the the danger something might happen. Whether that would change kim jong uns behavior remains to be seen. He really wants to be declared a nuclear state. He wants to be accepted as that and he sees Nuclear Weapons as the only thing as preventing the United States from invading his country. Matt it is certainly unsettling europe, and ie in am sure for those closer to the possible danger as well. The situation has definitely roiled markets. We will talk about the drops in futures. We are just nine minutes away from the open. We will see how it affects the castrate. Affects the cash rate. Up next, we have your stocks to watch. This is bloomberg. Guy six minutes to go until the cash open. More broadly we are expecting markets to open up down 0. 5 , adding to the losses we saw yesterday. This is the ironore charge going back to the beginning of this year. The red line is where we started the year and you can see ironore bouncing off this level. The market is very nervous about the geopolitical story. We have come down, not sharply, but we are beginning to unwind some of this trade. The miners are the ones to be watching out for at the getgo. It could affect london. Matt yes, i am watching, it is the 13 billion biotech company. The company says the revenue forecast is now 1 to 3 growth. It previously had forecasted bigger growth than that. We are looking at a cut forecast for novozymes. That could be one reason to see the stocks come down. It has already shown some pretty serious growth and then retraction. It was up at 1. 25 , and it is currently up 16 after coming down from the june highs. Again, novozymes, after missing the Second Quarter earnings figures, is now saying it expects revenue to grow this year, but not as strongly as it previously had. So, watch this 13 billion stock at the open. Guy matt, before we get to that market open, four minutes now. Let me show you the wei screen to give you a heads up on what were looking at a couple things to highlight. The european markets on the fair value calculations are called lower. We are down by 0. 5 . It looks like the dax will outperform. I want to highlight what is happening appear at the top. Take a look at the fair value on the s p. It looks like it will open flat, which is interesting considering where we came through yesterday. We will deal with the european cash open in a moment. We will get to the states a little bit later on. Inflation is the big story of the day. This is bloomberg. Guy a minute to go until the cash open. We think will will see we will see a negative start to the day. It looks like a fixed state is going to stabilize. On. Et inflation data later moment, we are pointed to a drop of around half a percent. We are going to add to the losses from yesterday. Matt i have been playing with an idea, it i havent seen gold moving that much out of the range. Gets freakedbody out about a nuclear catastrophe. To pull faith haven here. You have the u. S. 10year in white, the japanese yen in blue. The last month compared to put going. Theas taken the luster last year compared to bitcoin. It has taken the luster. We will show you this screen in a month. The mining stocks are likely to be under pressure. Iron ore was down 5 overnight. A substantial move. The london market is not underperforming significantly. London is down 1 at the getgo this friday morning. Aex looking at drops. Dax does. E how the the bond market is a bit at the moment. A soft looking. A soft open. Matt i am checking the grr screen on the stoxx 600. You mentioned miners, basic resources down 3. 1 . Bankston 1 . Oil and gas than 1 . S at the the miner bottom. The defensive sectors of the least of the losers today. You have utilities at the top. You can see telecoms and food and Beverage Companies up there. All groups down today, as you may have expected, and the defensive groups are the ones that are taking the latest hits as as peopleits, go more riskoff as far as stocks are concerned. Guy absolutely. Rio is down 5 . Lets take you to the mov screen. We will highlight the Mining Sector. Glencore is off 4. 66 . Billington is down 2. 91 . Miners that are adding the weight to the downside in terms of market moves we are seeing this morning. You are seeing iron or trading sharply. , a bignt donald trump factor in all of this, stepping up his campaign of pressure on north korea, warning things will happen to them like never possible. Like ever thought possible. That is a quote. Ray dalio terms of the game of chicken between the u. S. And north korea. He recommends 10 assets in gold to protect against the core risk. Meanwhile, yes. We are on the same page quite literally. Alliam dudley offered positive outlook for the u. S. Economy. A positive outlook for the jobs market, and a positive outlook for inflation in his a speech yesterday, predicting an increase in dpi over the medium term in cpi over the medium term. Here is some of the comments that we have had throughout the week. Going to get to a yearoveryear number of 2 until some of these drop out of the statistics. It is going to take time. Policy has been surprised by inflation coming into the downside during the amounts,d not by tiny by a large amount compared to progress we made through 2015 and 2016. Inflation has been coming up short relative to our 2 target. That matters. It matters that investors believe the fed can achieve its goals. It moved up from a low level in 2015 when it was held down. Were on the weak side. Inflation continues to run below that 2 . For july do today. Joining us now, andrew sheets. Good morning. What is the biggest factor in the market . Andrew geopolitics has taken the lead here. On monday, it would have been absolutely round cpi and the timing of a fed action. The rhetoric we have seen out of , thatgton and north korea has been the predominant factor now dominating markets. Back, these a step are thinned markets. The president , theoretically on holiday, is it just the fact we are in holiday liquidity in various Asset Classes that is driving this pickup and volatility . Andrew i think that is an important point. As silly as it might sound as were people currently are are really are is a factor. The fact is, august is a time when a lot of people around. We have the president and staff not in the white house. Investors often have to deal with markets with dinner liquidity and markets in august. He has to exacerbate moves. That is one reason why historically tend to see weaker Market Performance in august. Matt you think we are going to see a pickup and volatility . Other day we were me suit making a massive deal about the s p 500 being down. Are we going to see 1 moves again, real range . Andrew i would be skeptical about that. You have had a big shock to a market that was incredibly calm. 10year, 10, the day realized volatility for the s p 500 was 2 or 3 , the lowest in 50 years. It is a shock for the market to go from that level of calm to we have currently, but if i think about the factors still in place, you are still dealing with a relatively solid global growth, very dovish policy. Most of the metrics retract dont suggest investors are unusually long. All of those things argue against a large regime shift 1 , 1. 5 moves. Matt one of the facts i saw recently and how Hedge Fund Strategies are failing because there is not enough money out cashe, Retail Investors levels are at the lowest they have been in a decade. ,f they are already so invested or doesnt matter where they are invested, do you expect them to be pulling money out . Where this is a debate you can find data on either side. What i find more encouraging is into if we look at flows the equity market, especially the u. S. , those have been modest. Not just over the last year, but the last eight years. Yet, and i evidence think our u. S. Equity strategist agrees with this. We dont see evidence that retail has rushed a lot of money into the market recently with a need to pull out. I would not say that investors were negative in the last several months, but we dont see that kind of excessive stock buying that would lead to excessive retail sales. This is the wrong chart. Lets talk about what is going on. The market is positioning itself by downside protection. The line goes up. The market ising trying to by downside protection. Is that an opportunity, would you be going the other way . Andrew that is important. As much as the focus has been on the rhetoric in korea or the moves in the smp, the bigger moves we have had over the last 48 hours have been in the mix vix and volatility on it. Whereuggests that is a be the real market pressure is, the real market inefficiency might be, and it is not just mood volatility, but it has skewed significantly. You have seen the volatility on puts rise to unusually high levels versus calls. The best way to lean against that would be, that makes calls relatively cheap, because that is the volatility that is lowest. Andrew, you are going to stick with us. Is a chief cross asset strategist at morgan stanley. A have a lot to talk about on day like today when we see movement on equity indexes. Angela merkels bidding for a fourth term in office. We will discuss what the outcome could mean for the future of the eurozone and u. S. Relations. What changes could we expect . This is bloomberg. Guy lets take a look at where the european markets are this friday morning. U. S. Inflation data later on. London underperformed. The reason for that, the Mining Sector is off this morning. It is far and away the biggest loser we are seeing this morning. Ironically, the next biggest loser is insurance. Why you see the financials moving down. They are lumped in. , as wece has some issues know after speaking to some executives this week after the fact that there have been no massive catastrophes is great for catastrophe, but it is difficult when you are pricing future policies. You have the issues of Interest Rates, too. Lets talk about something different. That is politics. It has had a strong effect on the market this year. The German Campaign for chancellor kicks off this weekend. Latest poll suggests chancellor merkel holds a 60 16 percentage point lead over martin schulz. Her Campaign Team is where each her Campaign Team is wary of an election day surprise. Probably only influenced those things a little bit, because there is hardly any difference between the parties. Joining us here to talk about that is ellen crawford. Andrew sheets is with us as well. Lets touch on the first point. Toot of germans find it hard discern between the policies of the two parties. What would change if the spd one won . Alan that looks like a big if at the moment. It would also depend on what kind of coalitions you could form. Latest poll suggests this suggests it would have to be a fourway coalition. It is hard to see. Is, schulz issee to common european policies, perhaps more in terms integrating the eurozone. Angela merkel has made some comments about that. She is open to some of these moves by the french president , but the assumption is she would be more open. Whether that extends to get sharing is a different issue whether that extends to debt sharing is a different issue. Guy what risks is she running . How does that relate to the strategy we are seeing . We are talking about Party Officials concerned about any hint of complacency. Remember when she first ran for ncellor in thousand five in 2005 against Gerhard Schroder and she managed to squander lead of more than 20 percentage points, he was an extremely adept campaigner. In the end, she one by one point. She is embarking on a campaign tour, so it is hard to accuse her of complacency. Matt not all of us wrote a book on Angela Merkel. Alan did. You from anme ask investors perspective, is this an important election for you to play close attention to . You have to be as concerned about this as the french or dutch elections, or can you ofsider this a confirmation Angela Merkels fourth term and that consistency is good for u. S. An investor . Think in terms of the actual outcome. I think markets are going to focus on it somewhat less because of what we have already seen in the netherlands and france, and because there is a broad majority within germany euat is proeurope, pro pushing towards more immigration. What markets will focus on is this idea that, at the core of europe, between france and germany, this idea of working for a stronger European Union, pushed towards reform we might not have seen in a way that we have in a number of years. That boasts for the euro. That is one of our key calls for the fx strategy team. The euro remains undervalued on a longterm basis. This is a multiyear call in our view. Alan, where does the risk like to europe in this election . To europe in this election . The german election is a pivotal piece. Does the Coalition Formation have a bearing on that . If she is in coalition with the driveith that dilute the would that dilute the drive . This is what we have been focusing on. The latest poll showed that Angela Merkel has various coalition options. The greens are in play. They are so much more enthusiastic about eurozone integration. There could be a threeway coalition, which is untested at the federal level. It could be an underground correlation. Underground coalition. Matt is it what are the dangers to Angela Merkel . What could bring her down in the next six weeks . Is the influx of refugees a problem for her . Andrew that is definitely an achilles heel. Alan that is definitely an employees heel. That is definitely an achilles heel. If there were a buildup of people at germanys order, at the moment the focus is on italy, so it looks less likely. If she was to make a snap decision about that, then that would be a problem for her. Who that would benefit is another issue. Also, if there is any sort of. Epeat of the sexual attacks that was a devastating issue. Ror is always looking always lurking. It is hard to see how these issues could boost support for her main rival. Potential for the far right, perhaps the polls are underestimating her. The polls here are more accurate than they are in britain. Alan crawford here in berlin. About angelabook merkel. Is with morgan stanley. He is going to stick with us. Dont miss our 30 minute special every monday starting this eight 8 30 p. M. U. K. A. M. U. K. Time, germany decides. From our teammore in berlin. This is bloomberg. Guy [. You are watching the open. Welcome back. You are watching the open. Lets turn to how investors should be positioning themselves. Alan sheets is still with us. Andrew sheets is still with us. Andrew from an equity equitytive, our strategist has been cautious over the last several months on concerns around with the strong euro will mean. Day, some of the technical indicators that his team follows have dipped down into by territory. That is something we have to watch in terms of preferences. And japan are top Global Equity markets, but europe has underperformed recently. That is something we have to monitor. Matt why are you bond European Value versus growth . Europe the argument for if you have an improving economy them and the valuations are attractive. That is the dominant narrative i here for european equities. If you look deeper into the market, most of the value lies within value, the financial sector, the energy sector, some of the other parts that make up the value when next. That is the part of the market where the majority of the cheapness of europe is concentrated. Positiverting to get momentum. It has underperformed for a decade and we think that is starting to turn around in a longterm view. Guy why are you short u. K. Inflation . Andrew brexit remains a challenging dynamic. You will have politicians coming back from holidays, going into negotiations, and we expect more negative useful. Breakevens are more optimistically priced assets related to the uks economy. Expecting inflation to remain at similar levels predicted in 2007. Matt that was fun. We should do that more often. Andrew sheets is going to stay with us. Russia. P, we will talk we got some impressive inflation figures from russia already. We will discuss the latest edition of Bloomberg Business week as well. We are doing a new series looking at cities. 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. Matt going for gold. The risk selloff deep in some President Trumps latest language about north korea. Ray dalio says, put up 10 of your assets in gold for protection. Is he right . Inflation expectations. U. S. Cpi is out today. Can the fed raise rates again this year if the measure remains subdued . The german election trail picked off this weekend with the 16 ing chancellor holding a lead. She will need a coalition partner, but who will it be . Welcome to Bloomberg Markets european open. 30 minutes into the trading day. Lets talk about where things are. European equities, softer. Miners leading the charge to the downside. The biggest loser is dixons car phone. A note this morning is knocking the stock pretty hard. Saying it hase the lowest price target on this stock. It is getting hit hard this morning. Matt lets move to something completely different. Rising top is seen 1. 7 for the Second Quarter. The estimated trump is despite International Economic sanctions and low oil prices. Bloomberg businessweek published today and every friday looks behind the russian growth story with its profile of moscow, just one of the cities in this issues in this special on metropolises. Joining me now is david. Andrew sheets is still with us in london. Tell me about this series. There are 32 cities in the world now with more than 10 million people. More people are moving to cities. Important gely it is where people live now. We wanted to look at the problems these cities are having and how they can keep themselves from being strangled by their growth. Guy it is interesting that moscow has changed so much so quickly. This gone from being difficult city to live in to being a standout metropolis. That journey has been an incredible one. How would you describe the momentum . David a couple things are at play. The numbers we are about to see youre probably going to Show Consumption remains the driver of the russian economy. You are going to see that mostly clearly inor more moscow. It is a wealthy city and there are a lot of people there with a lot of money, and the city has brought a lot of tax revenue. Matt what are some of the other cities you are focused on . Beijing. Looked at the city used to be a place where there were lots of bikes. They focused on cars, and now they are looking at bikes again. If you look at new york city, how cities have a difficult time knowing what is underneath them. Knowsrk city, everybody where 57th and park is, but do they know what is underneath there . The answer is no. That is a huge problem for cities around the world. Guy andrew, lets bring you into this conversation. Gdp data out of russia later on. Where does russia stack up in the options you see in front of you . It has been perceived as being an oil trade, but that story has been diluted a little bit. How do you see russia stocking up. It is isolated increasingly, finding itself on the wrong side of the political story increasingly. Where do we go . Andrew there is a country where the there fight of things and the economic side of things. Politically generally speaking, we see the russian fixed income is more favorable than other countries. Matt very interesting call. David rocks my thank you so much for joining us. Andrew sheets, chief cross thats andrew sheets is going to stick with us. Is tech disrupting the inflation. This is bloomberg. Welcome back to Bloomberg Markets european open. I want to get the first word news now. Equities and the south korean won have fallen after donald trump ratcheted up his rhetoric against north korea. He delivered a fresh warning after lunch with the Vice President , saying his comments on tuesday, that america would bring fire and fury on north korea maybe werent tough enough. If north korea does anything in terms of even thinking about attacks of anybody that we love or represent or our allies or us, they can be very nervous. They should be very nervous. Things will happen to them like they never thought possible. About for all the talk Janet Yellens plan to shrink the Federal Reserve Balance Sheet will hit will hurt treasuries. As. Mortgage bonds will face greater test. Securities are lagging behind treasuries. Extraors are demanding yield to buy the bonds instead of treasuries. Mountingks face pressure from regulators write off a loan. Authorities have received the biggest i wish lenders and the biggest iris lenders are losing patience. Angela merkel is going into six weeks of election campaigning with a commanding lead in the polls. She has a 16 point percentage lead ahead of the official start of the campaign tomorrow. Dont miss our 30 minute special a. M. U. K. Ay at 8 30 time, germany decides. Google has canceled an all hands meeting to address gender issues and the firing of an engineer that stirred controversy with a memo about hiring taxes, citing concerns over staff safety. The ceo said he called the meeting off after questions to be asked were posted online, raising concerns that employees identified would be harassed. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I want to come back to that story relating to google in a moment. Number of different angles we can see on what is happening with tech school opened me tech globally at the moment. Investors are awaiting u. S. Cpi data. Should investors be thinking about inflation theory . A titer jobs picture doesnt seem to boost price pressures, and tech mps might be the reason. Take a look at amazons profits, which are incredibly low. Take a look at amazons turnover, which is high. You get the impression that amazon is selling globally at cost. That is something that could be disinflationary factor. We need to talk about gender, what is happening with tech. ,oining us now, julian david the ceo of techuk. Andrew sheets is still with us. Tech is a disinflationary factor. It generally has that impact. It improves productivity and filters back in that way. Low you look at the inflationary environment we have, do you think tech and Companies Like amazon or as possible for that are responsible for that . Julian yes. Move toook at the manufactured goods, there is a huge reduction there. You look at the emergence of being driven by text, the use of robotics. That is now also being applied to services. The internet is powering that. You have the ability to use assets more productively and to increase the flow of assets. If you look at things like airbnb bringing in trillions of dollars of flexible accommodation in terms of market , that makes a big change. Behind a major force better pricing, better offers, more flexible offers for consumers. Matt are we talking about two Different Things . On one hand you have the sharing , and that is allowing people to pay lower prices for services that providers used to charge a premium for. Or are you are a driver offering a room for rent, you dont make that much money on that service. On the other hand, you have a company that is such a behemoth, it is willing to not make a profit in order to eat up the market share that everybody else used to enjoy. Arent those two different issues . Julian there is a consistent threat, which is Technology Enables the kind of approach. If you look at conventional retailing, the technology around superstores, which came into place, the ability to manage distribution using tech to do logistics really give you the opportunity to operate that larger scale with lower margins, better pricing for the consumer. The internet allows you to do that on a bigger scale. I think technology is a driver of this, and you are going to see this across services. On one hand, technology. On the other hand, if you look , it is the willingness not to make any money in order to knock the other guy had a business and controlled the entire market, no . Julian the ability to take a longterm look at this, the willingness of investors to go with that in the ability to finance this is a necessary part of it. At the end of the day, you have still got to go back to the performance. If they are able to get a better performance by using technology , then that isay going to give them the opportunity to grow. That is going to drive investor interest. Andrew, is the phillips curve broken because of amazon . Are strategists have found the phillips curve is still in place, still working in parts of the economy. It is just not working in others , partly due to technology and other factors. It is still there. It is important as julian alluded to, we need to differentiate between low inflation, the negative demand shock, which is concerning for markets, or a positive supply shock, more technology coming online, more supply, which is a positive. I would say our interpretation is more towards the latter, that the inflation dynamics we are function ofre of a a positive supply dynamic than a week demand dynamic. That is a key debate for markets. I wonder how long investors are willing to put money behind a company that doesnt make any money, as long as it grows revenue and takes market share . Is there no set time limit for that come in because amazon has been doing it for 20 years . Julian i think that is an interesting question. That has been asked ever since they got going. I used to work a lot with conventional retailers. The wisdom was, this cant last. Conventional wisdom does not always work out. It didnt in this case. Matt andrew, what do you think . Andrew i wont comment specifically on the company itself, but this has been a trend that has been in place for a long period of time. I also think you have a market talked aboutt people being willing to buy gold despite the fact it has a negative income. One of the fallout that will Interest Rates is that the opportunity cost of investing in a business or investing in an asset that is not necessarily earn money right now, that opportunity cost is lower. There is some positive dynamics and negative dynamics. Guy we will leave it there. Gentlemen, thank you very much. Andrew, you are going to stick around, but we will give you a break. You are going to join us on the radio. We are going to carry on the conversation with julian davis. We need to talk about what is happening with brexit. Theresa may sticking to her timetable despite doubts. We should also talk about gender within the tech landscape. This is bloomberg. Guy what should you be watching today . The big data point is you is inflation. It will be out at 1 30 p. M. U. K. Time. We also get russian gdp. We are going to hear from two fed president s later today. Lot. Ve heard a the fed firmly in focus. Matt the fed is going to be in focus if you are watching that inflation data. Those two are closely connected. I want to get back to the tech theme we have been discussing. Theresa may still aims to stick to her twoyear brexit deal goal, despite members of her own cabinet expressing doubts over the timetable. Must night, liam fox called this optimistic. Philip hammond envisions a threeyear bridging. Threeyear bridging period. Julian david is still with us. Techre talking about issues as far as markets are profitability and inflation in the u. S. Is concerned. Lets talk about issues as far as employment, location, positioning, and brexit. An interesting story earlier about how Media Companies may need to look outside the u. K. , because licensing issues. Atyou see the same concern Tech Company Headquarters as we do it Bank Headquarters and the u. K. Postbrexit . Julian absolutely. You could Tech Industry was very clear in the run up to the referendum that the best solution was staying in the European Union. Accepthe referendum, we that. We have been clear we need to be very close to the Single Market and we need to concentrate on three areas. The first is skills and talent. We are already seeing it is difficult to get the talent we need to be a Global Leader in tech. Secondly, the regulatory and regime and equivalents equivalents regime. It covers services and other things. We need to have that is close to europe. The last is data. It will be impossible for Tech Companies to operate without the data. That is a big deal. That is a cliff edge. The data is here. Cool won approval to build a london headquarters. Are you surprised they are building that . Julian no, because the u. K. Is a big tech opportunity, tech center. We are globally up there. It, thesenk about kind of things are set against an industry that is growing. U. K. G an investment in the probably make sense. They also dont know how this is going to turn out. We are hoping the governments going to get this right. It is encouraging to hear that kind of stuff being talked about about the transition. We are saying we need a long runway to land this brexit claim. It is not going to be done in what is left, a year . It is two years and three. You need to get these things done, otherwise people will have to make decisions and move stuff. We need that transition period and the data. Not just us, but all the industries. About, went to ask know there is a need for more biological diversity at Tech Companies in the u. S. Bloomberg is a company feels strongly about it. We have been reporting on it for years now. What about ideological diversity . Is it possible to have a difference of opinion in these companies, or are they really, have be turned into an echoed chamber . And echoed chamber . Recently, an opportunity an employee was fired for expressing an opinion. Haven obviously, i dont the detail and cant comment on individual company situations, but clearly, tech thrives on them thrives on innovation, on diversity. That is diversity of opinion and people in the market. It must be said, we all understand there is a problem around the participation of the female workforce in tech. You cant carry on with that in the face of what is a can a continuing still storage. A continuing still shortage. We are going to carry on the conversation on bloomberg radio. Surveillance is next. Francine going further than fire. President trump steps up the pressure on north korea. They can be very nervous. They should be very nervous. Things will happen to them like they never thought possible. Francine stocks drop and volatility spikes as markets digest the saber rattling. Fifth timeit be lucky for u. S. Inflation . Well dudley says dont