Your moment is now. That is going to be the pressure. Tesco up over 3 . I caught a few Little Things that caught my eye. I want to go to the bond page. Not so much where we are in terms of yields. Money is going into treasuries. Panic in the bond market. Yields down to levels we havent seen in 2014. What we did see was japan. They sold ¥50 billion. U. K. Bonds and ozzy bonds. Aussie bonds. There is dollar ruble. We have had confirmation from the central bank. They have done that day after day. Is 20 billion they have been involved in selling. Carolyn will fill you in on the details. When you have got is air france. Our top line is going to be affected by half a billion euros. Caroline hyde at the details. The ebola threat is there. Cruise operators are having to change some of their stops in west africa. Eye on those stocks along with Airline Stocks. S p is down 1. 65 . As in the is going to freeze jobs and hiring. S p is going to freeze jobs and hiring. The pipeline may lag in the fourth quarter. This is the story. Keep an eye on those stocks. Thank you very much. Industrial output for august is down by 1. 8 . Seasonally adjusted, you are looking at a rise of 0. 6 . That is amiss out of spain. A rise of 0. 6 for the month of august. If you look at equities we stay lower. Yesterday the imf released their latest forecast. Stocks are near from the levels. They have to deal with legacies of the financial crisis, debt overhangs of governments and corporations. High unemployment. They have to deal with the force from the future, which is potential growth rates are either lower or have been revised down. Lets get some perspective on those comments from richard jeffrey. Thanks for joining us. You are sitting at your desk looking at it. We see equities down one point 2 . We see people blaming the imf. Do you listen to the imf . No. Why not . We look at fundamental valuations of markets. When we look at fundamental valuations of equities we discount high levels of half it ability we are seeing. We look at trend earnings and those in relation to the market at the moment. Markets like the u. K. And european markets do not look expensive. The u. S. Looks slightly more expensive. It has got decent momentum. Economic fundamentals are improving. I think the markets that look very frothy and the once the imf should be banging the drum about our bond markets. Causetion has been to huge mispricing of a crucial asset class. I think that is what they should worry about. For instance, the bank of england has talked about liquidity risks for bond markets. Lets talk about on markets. You look at treasury. Is that undervalued . Overvalued . How overvalued is that . I think it is appreciatively overvalued. It rather depends on the view you take on longerterm growth and inflation targets. If you take a neutral view and say inflation is likely to average 2 and real growth is likely to average 2 , that is a 4 return on the economy. That is what bonds should be returning in the longerterm. They are much lower than that. I think that is significant overpricing. You have a preference for equities versus bonds. You are still cautious about the equity market. When you look at the u. S. Equity market, what is intervening that underpinning that . There are multiple factors. There is no doubt quantitative easing has helped markets. I think the most important thing is the fact the economy has been recovering. It has shown the best economy of any western economy. It is underpinned by that and supported by earnings. Stay with us. We are going to talk european politics after the break. Equities stay lower. You have got the dax down by 0. 8 . Check out air france. That stock is rated lower by 3. 3 . There will be a 500 million euro hit to this years earnings after the pilot strike. Stay with us. We are back in two. It is impossible. You cannot reform a country if you are not able to face obstacles strikes or conflicts, but i think italy desperately needs reform. These reforms are tough. Not be liked by everybody. The government has got to go on. That was the employers lobby commenting on the challenge faced. They are not likely to see eye to eye when it comes to labor market reform. Chancellor merkel will probably call for less. Twoputted together is the bureau chief. The renminbiout led market reform. He seems to backtrack. I keep hearing the word reform, but every time it is used it seems to mean less and less. They will be voting in the controversialless aspects of his plan, such as providing incentives. Delaygoing to temporarily showdown votes on more controversial assets, such as making it easier to fire workers , lessening the chance they would be able to contest those actions. He wants to diffuse the tensions surrounding this. There is opposition from the leftleaning labor union. He is getting opposition from within his party from leftist elements there. I think he wants to maybe take a positive and get some of the tackleapproved and then the more controversial aspects. On to todays vote is there thatisk of losing confidence vote . I dont think so. I think perhaps he will abstain, but i dont think they will vote against todays measure. Grip on the a firm party. He has a majority, though he has vocal dissent, which doesnt help his ejection of getting consensus on Structural Reforms he wants to push through right now. Lets assume he manages to pass these measures. What is his next ir d . Priority . I think he will move on to the question of changing the electoral law. There is still a risk italy will have early elections as early as wantspring, so i think he to change the rules, to make it easier for a stable majority to emerge from the election. Ago italy had an election and didnt produce a clear winner. No clear majority. He wants to push through legislation that will change that. That wont be easy, but i think he wants to deal with the risk of having an early vote by putting in rules that hopefully would produce a clear winner. Thanks for joining us. Lets bring in richard jeffrey. Lets ban the word reform. They keep saying it but dont follow up with anything. What needs to happen . What needs to happen in europe is reform of labor laws. The euro can only work if we see labor working as efficiently as it does in germany. If that doesnt happen the euro turned out to be a deflationary construct. Word reform,ar the but we also need to see the reforms. We need to see them come through in productivity growth. If we can see that maybe they euro stands a chance of surviving a bit longer. Talk to me about what s can do. Italy has been in and out of recession for the last 15 years. Can the ecb do anything about what is going on in italy . I think it is tough. I think you have to take a step back and say, they took it a little bit by surprise and terms of timing, but mr. Druggie thought these actions were going to be effective, if mr. Druggie thought draghi thought they were going to be effective, why didnt he do them earlier . Things the Game Changing that should happen are much more on the fiscal side. Much more onably the regulatory side as well. It is difficult for banks to start lending more aggressively when the regulator is saying we have got to strengthen balance sheet. You have got to be much more cautious. The big trade was mario draghi is going to conduct should beqe and you overweight european equities. If the stimulus doesnt work, what does it mean for markets . Equity markets have given very good returns over three years, but most of those were brought forward. I think it is what is going on in the United States and to a lesser extent the u. K. , which cause market concerns to be brought forward. Destined to be a year of pause we never anticipated the source of equity returns repeated. I think the risks are that actually it persists for a little longer. It continues to persist as well. He told bloomberg, i would like to see central banking as a boring activities sooner rather than later. Nobody discusses Monetary Policy in pubs. Is that Wishful Thinking . Can they ever pull back from here . I can understand what he is saying. What worries me is monetary only becomeot boring. It has become confusing, particularly when you look at the myriad of statements that come out of the Federal Reserve and one person. I think it is important people discuss Monetary Policy. Important they understand the implications. I think it is important Central Banks dont give confusing signals. Important is also Central Banks start to normalize Monetary Policy. U. S. And theat the u. K. Why wouldnt you start to raise Interest Rates when economists have good momentum. You need to get Interest Rates to a level in which people understand what longerterm rates are going to be. Do you think the u. S. Has good momentum . I think the u. S. Has good momentum. I think there are fundamental changes. In particular what is going on in the Energy Industry is making it look quite attractive. I dont think we will get to the grocery its we saw prior to the recession, to the growth rates we saw prior to the recession, and i dont think we should. We have seen momentum buildup. We saw a difficult time around the turn of the year. We have seen good job creation come through. Ishink the economic momentum pretty reasonable. The Federal Reserve minutes are out later. What are you looking for . I am not sure i am looking for very much. Foruld be looking surprises, but i dont expect to get any surprises. It to oneprobably put side. I think the minutes that are going to be important are the Ones Published to the end of the Third Quarter last year and to the end of the second quarter. The year wealf of are going to look for tone change, particularly for comments by yellen. Thank you very much. There just heading to break. Lets check in on European Equity markets. We are still lower. The dax off session lows, still down by half of 1 . A stock on the move, air france. This talk stock has been taken taking a beating. The strike may shave 500 billion euros off four year earnings. We will discuss that later. Stay with us. We are back in two. Welcome back. This is on the move here go on the move. Air france. Lets talk about that. They are not flying high this morning. The carrier reveals that the strike could cut profit. Lets bring in caroline hyde. More than many people expected. It has been about 400 Million Euros. They are trying to swallow a bitter pill. They are taking a hit. Anywhere from 350 Million Euros. They are anticipating how much this can not future orders as well. Half a billion euros for the strikes. They are trying to fend off the likes of easyjet and ryanair. At the moment they are giving them easy wind. 18 . They hoped the issue will be reduced. At the moment it looks dark. It is not the only island being affected by strikes. Seven days of walkouts this year. It is not only really affecting cargo. It is not hurting that much. It is a 100 Million Euros is going to affect them. It feels more like an art than a science to really gauge the hangover. If we were looking for a winner, it has got to be easyjet. They have come out and say that. 3000 seats in just 10 days. That boosts their earnings by 5 million pounds. This is the irony of the situation. Why are we seeing those strikes . Pilot want to swallow the potential threat to their benefit from companies such as Louis Vuitton the such as lufthansa. Limited just to france because they have to acquiesce the demand. They are doing this to take on discount rivals. That does mean the business have to change. At the moment they are just handing passengers. Also thengly, consumer. It would be interesting to see how much this affect the change in passenger demand. In 1998 air france pilot threaten to walk out ahead of the world cup. Can you imagine the damage that would have reaped . A third of the population thought that was a bad idea. They thought that was well justified. Now it has flipped. Two thirds said it was unjustified. They pay about 200,000 per year. They should start to see a bit of a change for when they start to retire. This is something the heads of air france and lufth ansa have to tackle. They have to cut costs if they are going to compete. It is going to be shortterm pain. Were looking at Airline Stocks under pressure again. Some people drawing a line between that and ebola affecting a spanish nurse. Not a materialis risk for airlines. Stay with us. Welcome. Numeric headquarters. 30 minutes into trading. We are low. The ftse is down. That is the picture of the market. Here is caroline. Tesco is higher. It is leading the charge in europe. Had a good day yesterday. About whetherrs they could be selling assets. Selling Data Analysis . That was what was being talked about. About hsbc. Board has gotten stronger. They say many of the risk is priced in. The chief executive is getting on it. He is decisive. Cultural changes are occurring. Hsbc thinks that now is the time to buy tesco. This is the u. K. In the United States with numbers. The issue seems to be the rail franchise. 2. 5 billion pound franchise. A concern. Learly be they say it will not affect mediumterm targets and many are looking crestfallen about it. An interesting note about the u. S. Economy. Greyhound, the bus company they say the economy is picking up. Not so. Air france and the story. Sincecurrently the lowest 2000 and this time of last year. I seem to be having a technical glitch. Half a billion in euros is how much the strikes hurt. Before we move on, breaking news. The stock price is down. A big red hair in my terminal. Silvio says he plans to retire. Who will replace him . There are strong internal that hees and he says is not plan to take the post. We will bring you more. Here are other top headlines. Fallo abe says the yen may further. Lawmakers say the diversions adds weakness in the currency. A the voiced concerns yesterday. The record jobs growth was too good to be true. It will be in favor of the data. 121,000r readings show jobs. The revise is 32,000. Glenn stevens described the figures as volatile. A minister faces a confidence vote on labor reforms. He made a case yesterday. Take a listen. I am the first to say that employment is not created by unfair dismissal and the Justice System reform. All of these things attract investment. Lets keep it on italy. Pessimism looms. And combinedsis warnings. Economic indicators in europe and diverging views on jobs. Proceedsus on how to may not be close. There is renzi. Lets look at silvio. The senior economist. Us and i for joining want to go behind reforms and talk about the problem in italy. Does it come down to it being too hard to get rid of people who are not good at their job . We are talking about reform of the labor markets and there is not a measure that would succeed. Were talking about a set of measures and a better labor market and what he is trying to do is get authorization from the parliament to proceed with a labor load that has not been fully defined yet and that is what he does. Negotiations and supplementation of wages. Also, unemployment protection. These need to be touched and it will be discussed. Mario did things around the and came in on the idea that he did. Government and i inl be wary of anticipating the approval. Puts themus minister on alert and it is difficult to formulate conclusively. It results in what matters and we can lay out a timeline within which wednesday as the reputation of a prime minister. And if, by the end of the year, we dont see labor reforms, he will certainly fail. Theres a lot of focus on growth. And we would like to give him the benefit of the doubt. It has been in and out of recession. You have a number like 95 of companies and incentivizing want because they do not to be exposed. How do you change that . Broad questt of a for growth and the reason why there are bottlenecks in the labor market and on the supply see with theou can theance on enterprises is nature of the problem and structural reform. Labor reform needs to be evaluated in conjunction with what comes from the budgetary and there is approval around europe. Structural reform elements that works together and thatundamental problem is it is clear that they are talking up the idea that Monetary Policy is not sufficient. You need a larger stimulus. At the moment, it does not come from countries. The reasonable way to generate expectation is by europeans for collatinggets and Investment Plan and it needs to be taken at a centralized level. This is a solution. You have merkel. Why not increase labor market mobility . Why cant the German Government borrow over 10 years and stop trying to balance the books . Why not . Interesting idea. We know the political constraints in the Monetary Union and i am skeptical that something along those lines will come up in the nearterm. So, the ball is back in the courts of the National Government in the shortterm. Texas context, the allowance of fiscal slippage in spain, italy, and includes an budget executions are good. Not sufficient, given the scale of the problem. That, given our approach to what can be , there is expectation of growth lower and the risk is a problem which i think is difficult to contrast with what we are discussing at the moment. Lets great insight from the italian. It matters. Renzi is getting started. He may be on his way out. He plans to step down as the chief when the merger is completed. A Bloomberg News reporter. Longestserving ceo of any european automaker. You could call this the end of the era. Yeah. Yeah. Sure. The fiveyear plan will be executed and it is time for him do something else. It is time for him to leave. He has a 24 hours a day job. And he needs a team to take over his world. And this is a part of an interview we did. She is not concerned. As a strong candidate to replace him when it is the time. For the first time ever, a final of 2018. The end and it be 66 years old will be time to do something else. He said that he likes to date said it is time to do something else. The news had the stock dropped. We have should not be concerned, should we . He is iconic and considered by many analysts like andn who held the prize they toldbe concerned us and this is part of a long interview we did with them for businessweek and more will come in the coming days. Quickly, before we go, i want to ask you the question. You are in italy and we see him leaving. Fiat becoming more american. Does it continue . A move away to the u. S. . That, forve said sure, they are shifting the center of gravity from italy to the u. S. Because, in the u. S. , they make about 80 of the prophet and more than 50 of revenue. That is why they are moving. The commitment is to invest in italy and higher laidoff workers. We will see if this comes true. Great work and thank you for joining us this morning. Big news in the last hour. Sergio steps down. We had to the break. Here is a look at this. And at the drug pipeline other fever out rates. Welcome back. Global served. There is another risk. Affected people in the region. Frances is developing a vaccine that could help. Lets go with sam. First of all, talk about the difference between ebola and dengue fever. Mirror images. Ebola is difficult to transmit has a high mortality rate. Transmit andy to is not as bad. Nobody would want to have it. It is a much lower rate. You have a high morbidity rate. How do you fit in . We are in the lead for making the vaccine. It is complicated. There are 45 key strains that you need to be immune to and if you are not immune to one of them, you can get a bad outbreak of disease. What they did over a decade of work. It is difficult to juggle the different strains of the virus that you need to develop. They seem to have gotten there. Fantastic news for anyone who gets the disease. Other news and i want to touch on it. You think the french drugmaker others the u. S. Authorities of allegation of bribery activity. A mirrorink about image of what happened with gs 10. I dont know. Not enough information to say it is as big as the situation and the reality is, as we have ago, this a year seems to be part and parcel. To be a Large Organization and we get situations like this arising. About theheadline united arab emirates. They may have a lot of ,histleblowers coming forth knowing that somebody is listening. Always fantastic insights. They on howquick the stocks are trading. The ftse is lower. The dax is lower. About. To talk welcome back. We continue to watch rio tinto. Shares opened higher yesterday and investors believe a deal with glencore may be on the table. They are not far from renewing a bid and the deal would have created an industry giant. It would have taken over with a market cap. And thewatch this space stocks turned around. Tinto finished lower. Lets talk equity markets. Some say they are frothy. The imf has called the equities frothy. Lets go to mark martin whos. Een looking at the performance thanks. Frothy is the word. A Monetary Policy report, said valuations of social media and biotech stocks appear to be stretched and whats take a look at the index in the u. S. Of native and smallcap stocks. Signsnalysts say it shows of frothing this and it is very clear where the trend is. Nasdaqpward and for the biotech index. Look at where i circle on the chart. That is july and that is when the fed made the comment. Since then, the fed did not the falling by 11 . It puts in a correction. 10 or lower. The nasdaq, which the fed 6 since, it is up by july and it is only below the alltime record high. Ande have the companies indices come from . 2009, it has risen by 250 . The biotech index is up. On valuation grounds. What is it looking like . At 250 times the current earnings and above the fiveyear average. It is trading at 50 times the estimated earnings and above the fiveyear average of 47. 8. Abovealuation metrics are the longterm average. Are they frothy . I leave that for others to decide. Thank you very much. Are they frothy. Frothy . Check out the 10 year bond. Yield is zero point 89 . And low growth is not much to get excited about. You want to talk market and bonds and you know where i am. The pulse is next with guy johnson. Two minutes away. Helpwanted. The emergency summit on jobs and growth. Step down after the merger is completed. Travel sick nets. The thread continues around the world and they suffer with the impact of the pilot strikes