Minutes time. They are ups the ante in its deal to bayer ups the ante in its deal to monsanto. We are less than a halfhour away from the European Equity market open. Lets take you to the bloomberg and show you what is happening. I am going to give you a clue, the w ei function, the fair value cut relation, looks like we are going to see a positive start. European markets are softer. U. S. Markets are slimmer. Bonds were down as well yesterday. Lets take a look at the big moves we so this morning. Canada, new zealand, swissie, all seeing moves come through. The u. S. Move yesterday really catching everybodys attention. Japan back in focus. Lets get to bloomberg first word news with david ingles. David thanks guy good lesson about president thanks guy. Lets talk about president obama. Trumpscized donald affection toward vladimir putin. As he spoke at a Campaign Rally for Hillary Clinton in philadelphia. Eight weeks from election day, democrats are feeling queasy about Hillary Clintons narrowing lead over donald trump. The real clear politics at the polls has the property tycoon within 2. 5 points of his rival. Bayer is said to be proposing an increased offer and trying to clinch the acquisition of monsanto, the worlds biggest maker of seeds and pesticides. The company is going to raise the bid to 129 per share. That is 22 above monsantos Closing Price in europe yesterday. Both companies climbed to comment. Both companies declined to comment. The ceo of one of the worlds citizenshis makers felt let down by the system. Speaking in an interview with francine lacqua, unilever ceo gave his views. He have not seen their incomes go up many have not seen their incomes go up in 15 to 20 years. Increasingly the world is set against them. It is not a vote against the as it wasstem according to some people for brussels or immigrants or anything. David global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. This is bloomberg. Guy echo guy guy . Guy a selloff is ripping through wants and equities. At such a level through bonds and equities at such a level that it signifies a shift in part of that market positioning. They are tracking each other on the way down. This is weird stuff. The question is what is happening . Is this a central tank put that we have all known and loved now being called into question . Bob parker is on set with us. Bob that is right. I think what has changed in the last two or three weeks is investors are now focusing on what the fed is going to do in 2017. Not necessarily whether they raise rates in september or december 2016. My own view is they are going to do nothing was nothing in september but we are going to end the year with the fed raising rates 75 basis points. 2016,progress through headline inflation and core inflation both converge. As A Janet Yellen has said, she ts the Federal Reserve investors are saying where are we going to be at the end of 2017 . If you buy janet yellen to statement, the fed funds rate is going to end well above 1. 5 in the second half of next year. Guy is this about the fed or the bank of japan . Thebank of japan rethinking shape of the japanese curve, backing away from the long end, selling duration. Taking rates very negative. Bob it is a confluence of things. It is the fed focusing on what is going to happen. Secondly, it is will the bank of japan ease Monetary Policy further and challenging weather policy weather policy is exhausted . The bank of japan owns over 35 of all the jgbs. They can buy more but investors are saying what is the effectiveness . Coming back to europe, maybe we should not forget that investors wrongly were expecting further action from the ecb. With the question being is the ecb on hold . Is there a shift toward relaxation of the School Policy . What is the impetus . The answer is very little. Guy if im selling maturation, what do i buy . Bob yet to put in long and short strategists you have to put in long and short strategists. Sitting in short Duration Bonds is one safe haven, but if we get high u. S. Treasury yields as i think we will and going into the beginning of next year, i think it is possible we could see a 10 year u. S. Treasurys north of 2 in terms of yields. Bunds back in slightly positive territory. The only place really to hide an environment where we have a for the correction and equity markets is either you sit in short Duration Bonds or other safe haven assets which are not sensitive to rising yields. Or you put on longshore strategists. Guy you are telling me to buy the dollar . Bob i am. The bank of japan is struggling with a cash flow into the yen. Has thisof japan ongoing battle, but in terms of sterling and the euro, i find it different test difficult to see what the upside is in the euro. It moved back down toward 105 as we in the year as we ended the year as we ended the year. Guy back with a vengeance, volatility takes the markets on an emotional ride. Bayer upping the ante on monsanto. We are going to await direction at the start of trade. The european this union. Live in stroudsburg. We are going to speak to eu composition commissioner margaret vestager. All of that coming up. This is bloomberg. Guy 19 minutes until the market open. Lets get the ebf with david ingles lets get to Bloomberg Business flash with david ingles. David bayer is proposing an increased offer as it tries to increase the acquisition of monsanto. Companyamiliar says the 129 a share for 56. 5 billion. That is 22 above monsantos Closing Price yesterday. Yesterday both companies declined comment. Is will probably decline 45 . Europe suffers from a drop in tourism. Excludingid 13 currency shifts in the months of august missing estimates. The fall includes a onetime restructuring charge. Hermes and then in its target the parisbased company said it is no longer forecasting annual Revenue Growth of 8 excluding currency shifts. Instead it says it has an ambitious goal for growth. Warren buffett has 1. 4 billion after wells fargo fell 3. 3 yesterday. Berkshire hathaway fell 2 at the same time. Wells fargo lost its position as the worlds most valuable bank to jpmorgan. Its share price has been hit after a revelation that its employees opened over 2 million accounts without clients approval. That is your Bloomberg Business flash. Guy 16 minutes until the market open. What is the state of the European Union . Jeanclaude juncker makes his state of the union speech at strassburg shortly. Lets go there with francine lacqua. She is inside the European Parliament. Francine thank you so much. We are awaiting that state of the union speech that starts in 20 minutes. This is a very telling time because the Commission Says not to have enough teeth. On one commissioner who has criticism for having too much teeth. Ewen after a company that was not paying enough taxes in ireland. This is apple. There has been a lot of criticism that this shows the rest of the world that europe is not open for business. You disagree . Completely did what it shows is that europe is open for competition completely. What it shows is that europe is open for competition and we want competition to be fair. It gives Great Companies great opportunities. If you look at europe, it is a 500 Million People potential customers. Rmb of highest quality and very skilled people. Europe is open for business but not tax evasion. Francine there has been confusion. People that follow it less closely confusing the 20 tax system in ireland. Margrethe every member state can set the level of corporate taxation. In ireland, they decided 12. 5 . In other Member States, 20 . That is completely on their own did what they cannot do is give selective advantages to specific. Whaties their own they cannot do is give selective advantages to specific companies. Francine euro are targeting u. S. Companies. You are targeting u. S. Companies. What he also target European Companies will you also target European Companies . Margrethe if you look at these year, it we last think half of those who had the benefit, they were european multinationals. You find both, because we target no one. We have an obligation for equal treatment, no matter your national doughty, your size your nationality, your size. Francine numbers of the green party say that ikea gives a lot of money to your government. Are you opening something against ikea . Margrethe we have received the duck mentation that the greens have made. We have nothing to comment on as the case stands. Ncine the commission has the commission is looking at online platforms. Margrethe we have a number of corporate cases, actually three by now. In europe, youre more than welcome to be successful, to grow, to be big and we will applaud you all the way. The thing is if you start to misuse your dominant position, to prevent others from having the same fight for success, then we get concerned. That is the example of the goal case example of the google case. We think they are using their dominant position to stay where they are and not to allow for others to compete in a fair way. Francine what about over . Margrethe uber is between things. My colleague responsible for sigel markets, because on the one hand side, it is great innovation. It is a great use of resources and there are issues comparing with traditional transportation of taxis. And of course if taxes are being paid. Francine you are looking at facebook and linkedin. Our social platforms a concern . Margrethe our concern is only if competition is being closed down. That is the important point. One of the things that not we, but the German Authorities are looking at is in the gray stone between competition and privacy. Facebook, because they are so dominant, you dont know when your Football Team is having their training session. That is a very dominant position it has this been used to minimize your rights when it comes to privacy . It will be very interesting for everyone to follow and get the results of this inquiry, because it is in a gray zone did the germans are the ash gray zone. The germans are looking through this to german eyes and european eyes. Cine margrethe data is one of the more important things, because that is the of business. That is the new line of business. Any sort of traditional industry will be more data prone in the years to come. We will launch a consultation about our trust told. Trust hold. In order to ask peoples opinions if we get the matt right the right mergers on board. With knowledge and data is another currency, asset than just the turnover of a company. I think that is important in order for us to be able to secure that there is competition, also postmerger in some of the new industries. Francine what about Agriculture Companies . Er is offering to up its monsanto. Margrethe that will be exactly what we are looking at it will when we looking at. When we look at merger control, it is postmerger. It will be competition. In to will not be locked just one provider. Francine we await the Jeanclaude Juncker speech 12 minutes from now. We are expecting their president to speak briefly about brexit. He wants to talk about the existential problem that eu leaders now have to face on whether they believe the eu is here to stay or not. Guy bellringing, perfect timing. Thank you very much indeed. Francine lacqua talking to the competition commissioner. Going to bed, bayer is set to propose a higher offer for the cultural firm, monsanto. This is bloomberg. Guy lovely london. Another great day. It is like being on holiday at the moment. Six minutes until the market open. It is a roller coaster ride. The markets have been all over the shop. What is going to happen today echo level happen today . Bayer is one i want to talk about. We have a story that the german giant is upping its offer to 129. The terminal is the way to tell the story. This is the first offer, this is the second offer, this is the third offer in this dotted line and this dotted line this is where the stock is at, 106. A huge spread. This bid at 129 can be quite interesting. Bob parker, what is going on here . Usually the stock trades up. You anticipate more to come. You what that chart tells is investors do not believe this takeover is going to take place and perhaps they are making that judgment either because they think the regulators may ban it or they are thing of monsanto management is going to continue to say we dont want to be taken over at any price. That is misleading because there is a price for everything. The only question is you are suggesting a bit of 129 may be later today. One has to ask at what level would monsanto management say yes to a takeover . Your chart shows you if you go back we have only been close to 130 back in 2014. Guy this is 2013 and this is 2014. Failed at both and comes back down again, it is going to be a big gap. That can happen in a heartbeat. Bob is that gap going to close if and when monsanto management starts to shift and make more positive nor reduce positive noises toward bayer. Guy the luxury sector slide bob i do not like the luxury sector. In europe, consumption is weak. In china, the critical market, the Anticorruption Campaign is hitting top level consumption. I like midmarket consumption in china. Luxury good consumption in china guy Jeanclaude Juncker is coming up next. The market open is next. This is bloomberg. Guy welcome. Im guy johnson of bloombergs European Headquarters in the city of london. Caroline hyde is on assignment in cologne. We are moments away from the start of european trading and this is your morning brief. As volatility makes eventual return. Is the central bank push getting called in . Beyond brexit. European Commission President assesses the state of a fragmented union. We will hear from jeanclaude junker. And why dont monsanto investors believe the german giant . We are moments away from the start of european trading. Were expecting a more benign start. Yesterday, a lot of volatility. Atdid selloff a little bit the back end of the session. The auction prices in the last 15 minutes are getting in the way, but we saw the softening up on the line. We are expecting them to open a little more positively. Ftse 100 beginning to climb a little higher, but not by much. Were expecting other markets to follow suit. Really undo some of the losses we have seen over the last couple sessions. Let me walk you around europe. We are seeing the imap positive; denmark, ireland, sweden, the u. K. Gaining. Were waiting to see some of the other markets but it is reasonably positive. Security is up by. 3 . The bond market, as ever, fascinating. We will talk about that a little bit later. Well tell you what is happening with the gilt market. Nejra looks like we are up one or two basis points. We saw the 10 year yield rise by the close yesterday. 93 basis points on the 10 year yield here in the u k in the u. K. The 10 year treasury yields have been unchanged. We have seen yields tick lower elsewhere in europe after a selloff in the bond market resumed yesterday. Taking a check on whats happening in european stocks, we digging into the imap, are seeing a bit of a rebound in europe, even though in asia we saw the msci drop for a fifth day, the longest losing streak in four months. Looks like europe is recovering slightly. I. T. Stocks leading the game, industrials up. 4 , utilities following behind. In terms of stocks we are watching, i want to start with the luxury sector, because of course we have had numbers today. First what up they did was abandon their midterm goals of a percent annual sales growth. Were seeing a move down, about 5 on the stock. Saidmont, meanwhile, that first have operating profit will probably get down about 45 . This is adding to the gloom across the luxury goods industry. Both those stocks lower at the open, is what it looks like. I wanted to bring up a buyer as well. According to people familiar with the matter, its proposing an increased offer of 129 per share for monsanto, set to double its break fee to about 3 billion. Little29 a share is a more than what analysts were saying is needed to clinch the deal. Talking about a 56. 5 billion deal, which if it goes ahead, would be the biggest ever by a german company. We have heard is that monsantos Management Board was scheduled to discuss this tuesday. Dealre set to review the dal today, but of course those talks still could fall apart. A lot of consolidation going on in this industry, so with is getting scrutiny from antitrust regulators. You can see bayer of. 5 at the open. Guy thank you very much. Caroline cant hear you in cologne, but i am sure she is enjoying every moment. Lets talk to bob parker about whats happening. This is what we are seeing right now coming out of strasburg. Were waiting for jeanclaude yunker to speak. Heres a quick excerpt of last year. This is what he had to say for himself. In his state of the union this time last year. There is not enough to europe in this union and not enough union in this union. Bob parker, will we get more of that today . If one breaks it down between the Economic Outlook and the political outlook, on the politics, i think europe faces a difficult 12 months. The next one we have the italian referendum. That fivestart now has control of room. Of rome. If renzi loses the referendum, there will be an italian election. Lets not forget that fivestar is antihero and antiEuropean Union. Next year the antieuropean party may be in the netherlands again. Germany may move from a five Party Parliament to a seven Party Parliament with afd coming to parliament potentially for the first time. At the moment they are only in regional parliament. If you look at this Patchwork Quilt on politics, it will be a very difficult 12 months. Ye i thinks, juncker will put forward the case for evermore union, and he will probably repeat what he said last year. But in the face of that political uncertainty, i think a lot of people will challenges credibility in making those statements. Then on the economic side, the outlook for eurozone growth next year is probably less than 1. 5 . Around that we have a lot of convergence. The have weak consumption in italy. We have much stronger growth in spain. But the pattern of Economic Growth is actually divergent between different countries. If you look at the average, however, it is a picture of mediocre growth. Guy for those watching who care about the markets, as we see mr. Scholz sit down and ring the bell, for those listening, there could be a takeaway which is interesting another voice pushing hard, and he has continuously done this to the fiscal expansion story to be taken more seriously. Is that going to be one of the takeaways . I think the fiscal expansion story is very important. The reason i was talking about the difficult political outlook strong when you have a political consensus, as you probably do under the government i japan, in the u. K. , then think taking fiscal action politically is reasonably straightforward. Wethe European Union, yes, have seen the fiscal relaxation in countries like spain and italy, but i think a big fiscal push, collectively, by the European Union is going to be difficult to achieve, particularly given the current german stance, and germany has a budget surplus. Im not seeing much evidence that germany is going to move to an easy fiscal policy, particularly if we have a difficulty forming a Coalition Government next year. Guy a cold coming out as we speak a poll coming out as we speak. Sbd 23 . Thats the latest out of germany, which could life interesting for angela merkel. Paul will stay with us. Up next, we will break down his top calls. Later, well be back in strasburg. Martin scholz is currently speaking, preceding jonquil juncker. Brexit is part of the conversation. Also coming up, we will be pushing about this growing bid in the agricultural giant monsanto. We will have details next. All of that coming up. This is bloomberg. The Jeanclaude Juncker, president of the european commission, at strasburg in the European Parliament. There has been some repetition. Hes saying the European Union still doesnt have enough union. I think he has some foresight last year when he said that. Probably i think he is feeling some Firm Evidence when it comes to this story as brexit looms larger the European Parliament, commission, union. And it is going to be interesting to see how probably feeling some Firm Evidence when hecomes to this story offers a solution that keeps everybody happy. Lets come back to the story in a few minutes. Lets listen in and hear what he has to say. Translator populism creates problems and we have to be aware of that and protect ourselves against it. [applause] he [speaking german] time, more its high than ever, that we take a clear look at the situation. Unemployment continues to be too high in europe, although between 2013 and today, 8 million new jobs were created. And employment is constantly rising. But social injustice continues, and that is why, very quickly, we have to get to work on the basis of social service and equity. We have to work on the energy side as well. Europe is not social enough. We have to make that clear. Debt in europe continues also to be at too high a level. Havete the fact that we seen a drop of deficit rates down to 1. 9. 6 . Dont want to see a flexibility. I think we need to show intelligent flexibility in applying so that we dont break or hinder growth. I think we also need to look into the eyes of those who are observing us from afar. Our friends and partners worldwide. Guy Jeanclaude Juncker, in the European Parliament in strasburg, addressing mps, laying of the state of the union ways, eu, saying, in many the populism does not solve problems, it merely creates them. That is the type that is sweeping over europe at the moment. How does he deal with that situation is one of the Big Questions that Politicians Face across europe. The status quote is being upended in so many parts of the European Union. How does he deal with that as bob parker pointed out, many election still to come. Lets get back to bob parker, from Credit Suisse. Bob, lets talk about the parker picks. Its interesting, given whats going on you think we should be following european banks. I think you should be taking profits on u. S. Banks, and transferring assets into european banks. The thesisas is very simple, tht the right strategy over the last u. S. Has been to ebe long banks and short european banks. That is against the background of msci financials underperforming msci since 2009 by around 15 . Investing in the Banking Sector as a long position has been horrible, but if you have the europe you have done well. What im saying now is what chang will change that, europe e done and european banks are super cheap. I would argue that they are over discounting all the bad news in the european banking system. Where the banks have been successfully restructured, such as the spanish banking system, the french banking system, i dont see any evidence problems. Those are where too much bad news is over discounted. Guy so you have to be selective. I would ask, do we have Risk Appetite for italian or german banks . Lets have that conversation in three to six months. Do you have the Risk Appetite for french banks are spanish banks, where the restructuring is taken place, where npls are reasonably manageable . I think the answer is yes. Having said that, lets not get too optimistic. The ecb has come out very clearly, saying that it estimates that npls in the eurozone are still close to one trillion euros. We know that italian nonperforming loans are in excess of 360 billion euros. Its still a work in progress. This ongoing,t lets call it politely, discussion between brussels, frankfurt, and rome over the bailout plan. But overall, i think taking profits on american banks and irrespective of clinton or trump, i suspect the political framework the american banks will be more difficult. Guy if we get a steeper euro curve, do i hold my nose and by the lot . Buy where you think and where we have good knowledge that npls are manageable, and that is france and spain. Guy bob parker, thank you. We will hear more of his ticks later on. His picks later on. We still have the ongoing state of the Union Address taking place in the European Parliament, delivered by Jeanclaude Juncker. We will come back to that and bring you the headlines. He says the European Union is not at risk from the delay decision. Hatsxt, lets talk about w affecting the market right now. Libel liability. We look at the nearly quarter trillion dollars worth of debt and what isted, needed for Companies Paying interest upon it. We are in new york next. This is bloomberg. Guy 8 20 in london. Me break the news for you. Itv, the u. K. Media reporting that the British Government is getting close to green lighting the nuclear plan. The one the chinese are involved with, that has been humming and hawing ever since the may administration started. Theresa may said initially that she was less keen on it than the previous of ministration. We will see ultimately what happens. I suspect that there is a bigger, wider story taking place here we will come back to that, if any news develops. But that is the story itv is carrying. In the meantime, lets take you to new york. Libel liability. Lets talk about that. That is what many jump rated companies are facing, and have been ever since the benchmark for the nearterm borrowing reached a key level, 75 . Resetns of loans could be to higher Interest Rates. Why . Lets find out. Lets go to sally bakewell, in new york. Sally, the chance is impressive. Sally as you say, libel has spikes recently as things take effect. It has also been spiking, by the way, because of the way libor is evolving, which is putting pressure on it. Its particularly interesting in the loan market, because the dynamic there is that most loans have a flaw of 1 but there are some with. 75 , 250 billion worth. That threemonth libor has surpassed that floor, which means that, when the loans need to be reset, or if they are getting the loans, there may be a place for them to have that cushioned. Bor grew especially popular after the financial crisis. Remember how low prevailing rates fell. Investors always had that kind of cushion. Guy the unintended consequences are having an effect and its uneven. Sally it is. If you are a company that has faced a decline in earnings or the stress of downgrades, than it is going to cause you more pain. But there are things that they can do. These loans, when you take out a loan, the point of borrowing you elect what Interest Rate period you want to take. With three months libor rising, the onemonth remains at. 053 , and they could take one of those rates. Guy there is litigation that can be put in place. Sally there is. There are things they can do. Even if it is a small rising borrowing costs, if you are Company Already struggling, it will be a little harder. Guy given this is an unintended consequence of, in some respects, whats happening with the money market funds, is there a next that tatian that once we get through october that these rates will normalize again . Sally a few banks have already said there is the potential for the rate to grind higher, to. 09 of the end of the month. There seems to be a general consensus that it might track down a little bit, that the rice could remain sustained and elevated for months if not a few quarters. So companies and banks will have to think about how they handle their maturities. Uy sally, its 3 24 a. M in new york. Our thanks for getting up so early to join us. Bob parker from Credit Suisse is still with us. You dont like leverage companies. No, not at all. Question, ifsk the the fed raises rates Third Quarter of next year, 1. 5 or h igher, what does that mean for twoyear u. S. Treasury question, which at the moment are sub 1 . And twoyear treasury yields probably move in find that fed funds rate toward. 5 . Likewise, libor will move significantly higher from where we are now. And yes, sally makes the point rightly that companies can take out Interest Rate protection through the swaps market, for example. But Overleveraged Companies face an environment which is exactly the opposite of what they faced the last five or six years, which is one of rising Interest Rates. As a result, you are going to see, i think, Overleveraged Companies increasingly struggle to service their debts. And that is already starting to be discounted in the highyield bond market, and its interesting that highyield spreads have moved back to andnd 400 basis points, that is the highest level they have been in the last month. Guy a couple quick questions. A massive date of issuance yesterday in the european credit. U. S. Purists over here . One point is that the ecb is a buyer of Corporate Bonds, and that is why we have Corporate Bond spreads in euro tighter than they are in dollars. I think that differential between euro corporate spreads and u. S. Dollar corporate spreads widens even further. The response to that is, if i am an american bond issuer, much more attractive for me to issue in euro. Guy bob, been a pleasure. Thank you very much. Bob parker, Senior Adviser a Credit Suisse. A couple quick headlines relating to monsanto. Bayer could announce the deal as soon as today. The Management Board is said to support the offer. Its going to be interesting to see whether this reporting comes through. Bayermonsanto talks are said to continue. Today will be a big day for m a if this turns out to be the story, and were going to be watching very, very carefully what happens with the monsanto share price. Meantime, i want to take you back to whats happening in strasburg. Jeanclaude juncker still on his feet, delivering the state of the union. Not enough union in europe. This is bloomberg. Guy welcome back. Whats on the move this morning . It could be monsanto. Lets talk about what has been crossing my bloomberg over the last few minutes. Monsantos Management Board met yesterday on the bayer bid. The result could depend on the vote today. We could see an announcement on a deal as soon as today. The blood center Management Board has supported the improved offer; we understand that we were moving wrong, that the offer was around 129. We heard that around 130 things would get interesting. Lets see if we can bring you up a bayer chart. Well talk about monsanto later on, because it is trading well below the current price. Lets see how they are doing. Around half of 1 . Im going to bring up i just feel we should do this now, to show you whats happening. We are currently trading out one of 6. 10, so we have a big gap to close. Lets show you whats happening and whats going on around europe, we have a more benign environment with the stoxx 600 up by 3 10 of 1 . Lets find out which stocks are moving with nejra cehic. Nejra moving downward are a number of luxury markets, not looking benign this morning. Richemont came out with numbers today, basically saying that firsthalf operating profits with probably decline about 45 , revenue sliding 30 excluding currency shifts in the five months through august. In terms of elmers it abandons its annual sales growth target adding to the loom spreading across the luxury goods industry. Speaking of swiss watches more specifically, that industry is grappling with another year of declining exports as chinas campaign against extravagant spending has been aggravated by a drop in tourism after terrorist attacks in france and belgium. Richemont said it is unlikely the current negative environment will reverse in the shortterm. These two stocks are some of the worst performers on the stoxx 600 today. One of the best is the compass one of the worlds biggest catering companies, which was upgraded to overweight at j. P. Morgan. They say they can continue to driven by growth organic growth and marginal improvement. They also see Free Cash Flow acceleration had and that the stock is still trading in line with consumer staples, the visibility is better. Have been underperforming the stoxx 600 travel and leisure index. Guy thank you very much. Lets take you to strasburg. The european Commission President has been addressing. He parliament there on brexit he said we need more unity. Francine lacqua is there the big take away so far . Brexit,t hefrancine he mentiod and i think that is the takeaway. He was going to mention it, and he is trying to position himself as less emotional than what we saw with the aftermath of brexit. He is saying he respects but regrets the u. K. Decision to leave the eu. Then he moved on. This was only a halfhour into the speech; we are expecting another hour of addressing parliamentarians. Hes talking about migration, about the investment fund. This is fiscal spending. Remember the plan, something we had heard about. The problem is that the commission to proposals that it is up to the Member States, which at the moment are quite weak. It seems he is also focusing not only on the existential question, and whether we need the European Union will survive. Hes actually focusing on the things he can get done. The paris climate pact is saying that eu members need to ratify that and they need more agreement. Guy is he focusing on the challenges . Clearly europe has many challenges right now. The brexit story is clearly one of them but nevertheless there are plenty of others. From what i have heard, we have to address these challenges, this is how we do it. Francine yeah. And this was exactly the town we had understood from insiders that the president wanted to strike. This is not anything about optimism, its not a speech about how we can and must come together. This is a reflective speech on the state of the European Union, which at the moment, whether you are european or into european, is frail. This is because mainly governments are week. They are succumbing to populism. He believes that brexit is a symptom of what we are seeing more spread out. There is no rosy picture here. Its more of him trying to spur governments into action, to ask them whether they really believe in the project are not. Guy francine, keep listening. Hascine lacqua in strasburg the ecb president delivers his annual state of the union. What the objective here . Francine is laying out what is being said, some of the ideas that surrounded. The managing director for the Eurasia Group is with us. What is he trying to do today . A number of things. The first is a recognition that the Member States are divided in the aftermath of brexit, and he sees an opportunity to advance the commission off agenda and interest, which is to push for federal response to brexit. The, i dont think commission with mind and the u. K. Ended up with a heart brexit, which is a clear signal that you shouldnt play with populism, because if you do, the consequences will be material. Guy where does the balance of power lie at the moment . You look to the germans and get the sense that is not their objective, but nevertheless the institutions of the European Union sitting there at number are bothe commission, very hostile to the u. K. I agree. I think the commission definitely has a lot of influence over the brexit negotiation. If you talk to european councils, Member States, they think they will run the negotiations, that this will be a merkel and may show, and much of the discussion will happen at that level. That is what they want to see happen. The commission has the competence, right . This is taking eu law, reversing andears of integration, normally they have the Technical Knowledge and competence to do that. They are going to have a lot of influence over the discussions as well. I dont think it is right to believe that merkels of the world will deterministically direct these discussions. They will set parameters of the commission will have a lot of space. European parliament is not a big player but it is their influence that will grow. Guy when you look at how the germans will react, you have various people talking about the idea that europe needs to stop with the integration process but needs to rethink and not push for a change that could cause problems, with difficult moments in the European Union. Thats a very different message. The theoretical background of where berlin is and where brussels is feel different. Integrate over what . No one wants five years of navel grazing. In terms of economic integration i think that agenda is until he dead until we get outside the german elections and then the question is does she run, does she win, who was she in bed with . What other policy areas can we cooperate over . The low hanging fruit seems to be all those related to terrorism defense, and that is what this speech is talking isut, where the membership also focused on. I think they see opportunity there to do something shortterm that also speaks to the concern. Guy will there be fiscal spending in the scale you think they need . No. There needs to be a broader rethink and that cant be ahead of the german elections. Matteo renzi may get more fiscal space to win his constitutional referendum. They will maybe do something with the investment vehicle. They will expand it both in terms of time frame and firepower, but again, its focus is fairly limited. Guy how could politics mess up his plans . He is trying to establish himself, trying to get a voice at the table, but the italian referendum, the french election, the german referendum, plenty of things coming up i could muddy it. Right. And in southern europe, there is clearly a problem of populism, motivated by the economics. Friday,lexis tsipras on looking for more coordinated action at the eu level. In terms of economics, we cant do much. Qb isnt working. Qe isnt working. Populism is motivated by immigration and there are problems to deal with. Leaders are constrained, and in that spacex inc. They can play. But its not clear if his ideas will move the Union Forward any more effectively. Guy always a pleasure to get your views. Thank you for joining us. A biased market is the go as the german. Drug group gets a hold of monsanto this is bloomberg. Guy 43 minutes past the hour. Lets talk about with happening with bayer. It could announc a deal with monsanto within the hour. Lets take a quick look at the monsanto german listing. I caution like volume. This is not the liquid of securities, but nevertheless, it gives you an idea. Itby 7 at the moment, and is going to be interesting to see how the story develops through the day if we are to get the news. This setup into this is absolutely fascinating. Us deals team leader is with on set. He has had a busy few hours. What do we know . What are we going to get . E expecting . What we know is that we are in the dday of this deal, three months of backandforth on price, and last night, they came back with an improved offer. The Management Board of monsanto met yesterday to discuss it, and we just reported that they support the offer. Now the next crucial step is the Supervisory Board meeting today to sign off on the deal. Obviously negotiations are ongoing and things could still change, but it looks like we might beginning their. Guy this has been fascinating. And this chart tells the story. These are the offers that come through. This is the monsanto stock price, going back. This but here is significant. This is the first offer. The stock prices all the way down here, quite a gap to close. Today could be quite a volatile day. I think thats exactly right. There are still some concerns about antitrust. You have to step back and look at the entire industry, with three other gigantic deals. People are worried this is the last one in line. Are there going to be issues . Thats part of it. You an have to remember, this is the biggest allcash offer ever, so people are nervous. Could this fall apart . They arent willing to place their bets yet. Guy is it just price . Is that what has changed here . The regulatory stuff is going to be there regardless. And we have been talking about that level, 130, being were the sweet spot o could be. At the end the day, money talks. That is what will decide. But another important element was the brakes the. They originally bargained up from in case the deal falls apart. They double that to about 3 billion. I think addressing the price and the risks, that was the key issue. It looks like theyre getting closer on that. Guy if you were sitting on a merger, trying to figure out whats happening, you have to get the price up to 130, but that is it. There is no beyond that, is there . No. There was talk about bsf possibly getting involved; they looked at possible structures. But at the end of the day, bayer is putting allcash on the table. Guy that will annoy my Production Team but, what are they going to have to sell . Everything . Will we get more announcements today on the disposal . Announced theyr will raise a huge financing package, and i think in terms of asset disposal, its too early to say. But we know from last week they are willing to sell dermatology. I think people are looking at assets including their stake in the plastics business, and could they sell animal health. We dont know, but they have leverage. Guy fantastic reporting. Thank you very much. Aaron kirschwell. Up next, the surplus turning into profit. The oil sector continues. Thats ahead in todays u. S. Inventory data. Stay with us. This is bloomberg. Guy 8 50 in london. Brent crude traded near the lowest close in more than a week after the Energy Agency says it expects the world what to continue. Bob dudley says he sees the price staying at around 50 per barrel, at least in the short term. I think we are in balance. I could see the price at 50 for the rest of the year, and than in 2017 a little bit above that,. But there have been more than a trillion dollars of projects canceled and deferred in the industry. The key is demand. There is demand growth of over one Million Barrels per day, in china, europe, and north america. And as long as that demand continues, i think you will see a tightening of these markets. Guy later today, u. S. Inventory numbers come out. For more, lets bring in ryan chilcote. Ryan, the date of the week from the u. S. , it moved things around what are we expecting . Richard interesting, bob dudley talking about the oil market. He was one of the first to say it will be lower for longer. But not forever. Now he is saying the market is already in balance, different from what we heard yesterday from the iaea. What we do know for sure is that we have a glut. Lets check the glutometer. An inverse relationship between the blue line and the white line, which is the brent crude price. We will get u. S. Inventories at 3 30 p. M. London time. The estimate earlier in the week, when we did a bloomberg survey, was 4 Million Barrels per day. Api gave us the Industry Data yesterday, and they say they see a rise of 1. 40 4 Million Barrels per day, which means more of a glut, which means prices should fall. Of course that should be priced in. Let me show you one other thing here which is pretty interesting. Doha fits intoow all of this. This is a look at short, the white line, and the wci price, the blue line. Were always asking ourselves, what will happen in doha . Will they agree on a freeze . Chris had a great note it doesnt matter. Talk is cheap, but it is profitable. The last time they announced talks in doha, what happened was the number of short fell about 67 before we got the talks and they failed. Then we saw that the price of crude climbed some 55 . Fastforward to the talks on the 27th. They were announced a while back. Since they were announced we have seen the price climb of about 60 , and short fall 57 . Theres a bit of a boy who cried wolf element. You can see the shorts climbing at the and, but generally speaking, talking up oil, talking about unity is opec, they have been useful. Guy great stuff, thank you. Ryan chilcote, on one aspect of the energy story. Lets talk about another. I get in on the morning here, and onestory stood out with quite a chart. This is aussie export on coal, and it is quite a chart. It really crept up on a few people. Look at that rise. 2013is a threeyear chart, 2016. Parabolic. What is going on . 50 rise bro is here to tell us. Its an incredible chart. There have not been many commodity charts like this in the last couple years. One of the key factors behind this price spike has been a fundamental shift in chinese governmental policy, restricting the number of working days in their coal mine from third hundred 30 to 276. Theoretically that translates to a 15 drop in productivity, so they have to rely on imported coal. But its important to note that coal is primarily about quarterly contracts in the current one is 92. Therefore a lot of those quarterly buyers get in touch with their suppliers, saying we want more under those quarterly contract, squeezing this market tightly. That is pushing the price. Guy thats a factor coming to a pinch point. The demise of coal, though this has been long predicted. We need to be careful what were talking about here. China is a big factor in all of this. This tell us anything about whats happening in the wider cold market . Not particularly. But thermal coal has benefited greatly in the last couple months, up 70 per ton. It hasnt risen as sharply as others, but this is a continental squeeze. Guy you dont see this very often in the commodities space. Jesse, thank you very much. We have a brexit themed highlights of the day ahead, in just over half an hour. Unemployment data out of the u. K. , and theresa may takes questions the commons. Parliamentary Foreign Affairs committee. E ukave news out of p. A. , th Prime Minister has not made a final decision. It could be ready for chinese assistance, which has been the subject of much discussion. To wrap things up, lets show you whats happening out in strasburg, with jeanclaude younger on hisassistance, feet e European Parliament, addressing the mps in the annual state of the union. Hes talking about an expansion of spending. Wrapping up. The pulse is up next. Mark shattered, volatility returns as ahead of the central bank meetings. A bounce back from record lows. Europe opens and the green. Not enough union in this union. Juncker gives his first address in the state of europe. We are live in stratford and strasburg. , hence6 billion offer the germinal the german chemical maker sews up the deal