Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20171121

Anna a very warm welcome. This is bloomberg daybreak europe. Im anna edwards. Manus im manus cranny. We have one of her last interviews as the ceo of easyjet. Thats at 7 00 a. M. Anna later, we speak with david duffy. He will be joining us later on to talk banking. The world is a strange place. The german elections, very boring for a long time. Challenges and janet yellen plans to step down from the fed. You look at the world, you look at north korea. Its been named a state of terrorism. Where do you put your money . Gold did have its worst loss in two months yesterday, down by 1. 2 yesterday. Where do you hide . Open interest takes a spike. Open interest in gold is at the highest since june. That is at the close of business last week. Increasingly, geopolitical events have reported the tactical use of gold in the short term we have heard this before from a variety of people. Lets see where it goes for the rest of the week. Anna we will show you where we are on the msci asia. Despite that, we have more appetite for asian stocks. So, interesting trends there. As the msci opened the asian session, putting some concerns for geopolitics, putting aside all of that and heading higher. We put the Australian Dollar in there. Big questions over the outlook for ates. The rba is less confident on the outlook for wages. This is more about the gradual loss of Interest Rate premium. Manus Morgan Stanley says you will see the aussi dollardollar at 1. 65. Eurodollar,our 1. 1772. It jumped the most in three weeks. That was on the flash news that the Coalition Talks had dropped. You have this light stall with nature. My conclusionso is growth will not be particularly effective by the eu, the minority government. We will wait to see if we have more elections. Even the dax rebounded from its sevenweek lows. Lets get the bloomberg first word news. Reporter donald trump is designating north korea as a state sponsor of terrorism, subjecting the regime to sanctions. North korea joins iran, the sudan, and syria on the u. S. Terrorist list. President trump this designation will impose further sanctions on north korea and related persons and supports our maximum Pressure Campaign to isolate the murderous regime. Reporter u. S. Federal reserve chair janet yellen has said she will step down from the board of governors once her successor is sworn in. It widens the scope for donald trump to reshape the leadership. Powell was nominated to replace yellen. The Australian Dollars cells at a fivemonth low after minutes from the Central Banks november meeting suggested policymakers are in no hurry to raise Interest Rates from record lows. The reserve bank of australia said there is considerable uncertainty about when and how which pressures will converge, adding to inflationary pressure. Tolthy saudis are seeking restructure their businesses to reinvest assets if authorities widen their crackdown on corruption. Several family groups and businessman who are not implicated in the purge are talking to International Lawfirms about how to restructure their companies to make it harder for the kingdom seizefiscate or fee assets. The survey found that 69 expect a tax hike, compared with 31 , who think a cut is on the way. Philip hammond is under pressure from the labor opposition to increase spending when he outlines his plan. The Washington Post is reporting that eight women said charlie rose made unwanted sexual advances towrads them. Rose apologized for his inappropriate behavior. The Associated Press is reporting that cbs has suspended rose and pbs is halting production of the program. Bloomberg, which has a production and Distribution Agreement with charlie rose, has suspended the show from airing on Bloomberg Television and radio. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. You can find more stories on the bloomberg at top. Heres david ingles in hong kong. David yeah, its a very good day here. Look at what we are seeing across the region. We are, give or take,. 4 short from the alltime high. We are getting strength coming through from different parts of the market. So, its the chinese story. Have a look at some of the other benchmarks. Japan is already closed. Gap higher today,moved lower off of the highs, but Still Closing well. Hang seng, just a few points sho rt of 30,000. A lot of these names we are watching are in china. This is one of the brokerages reacting off of the chinese move. Tencent is the other thing we want to bring up, the biggest stock in the Asian Pacific there we go, up another 2 . Tencent is now the fifth Biggest Company in the world. As things stand, it is now worth well over 500 billion, well over facebook. That being said these are the things that typically happen when you get a rally of this sort. Back to you guys. Manus a very venerable club, that 500 billion mark. Now, one of our top stories, german chancellor Angela Merkel has signaled she would prefer to hold new elections rather than trying to form a minority government and she made those comments hours after Coalition Talks collapsed. A i have no plans for minority government at the moment, so we have to wait. A new election is one way. A minority government is another. And in a country that has so much to do, that is something to be thought of carefully. I dont want to say never, but i am skeptical and i think new elections would be the better way. Anna matt miller is life for us in berlin. Does Angela Merkel think she would emerge stronger from new elections . There are many different views about who would gain if we go t o the polls in germany. Matt there are a number of competing views on that. Becauseones guess now it would be such a long time until we have those new elections. We would have renewed campaigning. Merkel is sure that she does not want to be in a minority government. Indeed, the german people would prefer not to have a minority government. There have been a number of polls since sunday night, showing the germans overwhelmingly prefer new elections to that. So do many of the parties. You heard merkel say that there. The greens have also said they would prefer new elections. Is whereoks like that we are headed. The only question is, how long will that take . Im going to interrupt you. We have the turkish lira against the dollar, a new record low for the lira. The central bank opens new forward auctions. This is a new record on the currency. The comments from the market, they have the overall market in mind. Theres new pressure there. Lets put thet turkish story to one side and come back to you, matt, on the german politics. We will keep an eye on the turkish assets, but tell us about the german president s role. We are getting one message from merkel, saying how she would prefer another election to a minority government and then we get the president telling us something else. Matt well, its not her decision, right . , frankwalter steinmeier, in this case, is in charge. Hes prodding most parties into a coalition. He will meet with the sbp to force his party into a coalition, or at least Coalition Talks with merkel. Its very difficult and indeed come unprecedented. It has never come to new elections in germany postwar. What steinmeier has to do if he cannot form a new coalition is to name a temporary chancellor and allow parliament to vote. Parliament then has to vote three times. If they cant come up with a new chancellor in government, then they go to new elections. This would take some time and indeed, some people are saying it would not be until april that we have new elections here. Manus thank you very much, matt miller in berlin. We will see you a little bit later. Lets welcome our guest host for the next hour. Bob, good to see you. Theres a lovely line in the story we have written about the Angela Merkel being the queen of battles. It would appear that she will roll the dice. What is the risk here for europe . Bob um, i think the risk is you end up with indecision over the future strategy for the European Union. And that obviously has applications for the brexit negotiations as well. Decisionmaking in the eu could withy stall if you end up a caretaker government in germany, or if merkel stays as chancellor in a minority, running a minority government everywhere is difficult and obviously, if we have merkel in the minority decision, decisionmaking and managing the German Economy becomes problematic. I think the answer to your question is it jams up the decisionmaking process will step anna do we read anything into the collapse of the talks, the things that the sdp has objected to . Requestsvery specific about the ability to not leave the European Union. Bob correct. The longerterm European Union strategy has been to have this inner courre in the eurozone and then around that, a ring of countries, such as sweden and denmark, that were not in the euro, but are strong members of the European Union. Thats the longerterm strategy and within that, within the eurozone, to have more Fiscal Consolidation because obviously, the big anomaly in the eurozone is we have Monetary Policy coordinated, one clear policy. We are moving, though i would argue too slowly towards a Banking Union and Capital Markets union, but there is still a lot of work to be done on the fiscal union. That is the next stage of the big european project. If we dont have a big, cohesive government in germany, that stalls the next phase of european integration. Manus the politics are fairly clear. Theres a vote that needs to take place if she decides to go a certain road, but from the markets perspective, we were trading at 1. 17 this morning. The market is fundamentally long of euros. I mean, net long, its the highest in six years. Were you surprised or heartened that the euro remained steadfast on quite shocking news . Bob i think we are stuck in the trading range at the moment. As we get into later december and january, you could see the 1. 14 breakdown to 1. 12 or against the u. S. Dollar, but that is a fairly minor move. The reason it would be more positive on the dollar is obviously, the economic numbers out of the states will continue to improve. I think if we do get a text deal through congress, which i think we will certainly get a large part of the tax deal through, thats dollar positive. I think the market is right in discounting that the fed raises rates in december. It probably raises rates one or two times during the first half of next year. All of that dollar positive ont h the euro side. If you look at the Economic Data ine urope, and i said as last time on bloomberg, i challenge anybody to find any weak data coming out of the eurozone at the moment. Anna so, thats the currency side. Bob conclusion on the currency side is we are stuck. The conclusion on the currency side is that we are stuck. Now, on the bond market anna the political factor is far from the biggest factor affecting the german yields. Bob the key factor is, what do you think the ecb is going to do . I think they were extremely clear in the october press conference, which is that qe goes to 30 billion. Then you have the reinvestment of bonds maturing. So, its 30 billion plus. There is a very clear message for the ecb, and that is for the foreseeable future, and that is the first six to nine months of next year. Though i think german bund yields will drift higher in line with market yields worldwide, the operative word is drift. The First Quarter of next year we might drift up to 60 or 70 basis points on 10 year bunds. Manus thank you, bob parker. Work, tuneling to in to bloomberg. You can find Bloomberg Radio on your mobile device. We have earnings next for the third quarter. Tom coming up, sharing the bre xit spoils. Paris and amsterdam emerge the tories in the reallocation from london. Anna at t prepares to battle the Justice Department over its proposed time warner merger. This is bloomberg. Manus a nice shot of singapore there for you. A bit of a dull day, weather and markets. The asian equities, highs through to hong kong. Dont forget we had a flutter in the Global Equity markets last week. Upensnese stocks, bounding 2. 2 . Your business flash. Reporter antitrust enforcers will be think in court. The Justice Department is due to block the companys bit to buy time warner. Randall stephenson left the door open for negotiation. But he reiterated he would not sell to cnn to appease washington. Theres been a lot reporting and speculation, whether this is all about cnn and frankly, i dont know. Should beey surprised that the question keeps coming up, because we witness such an abrupt change in the application of antitrust law. The bottom line is we cannot and will not be party to any agreement that will even give the perception of compromising the First Amendment protections of the press. So, any agreement that results in us forfeiting control of cnn, whether directly or indirectly, is a nonstarter. Reporter nestle is exploring a purchase of a u. S. Maker of organic and budgetary food. The switzerlandbased company has held talks about purchasing all parts of hain celeste ial. Nestle has declined to comment. Automobiles is looking to deepen ties with the at chrysler. With fiat chrysler. The companys president said it is also poised to enter the u. S. Market with its flagship series. We are aiming to enter into the u. S. Market in 2019. This is a very crucial move for guanghzhou auto. At the current stage, our nationalization process has taken off. We have laid all the groundwork and Carry Forward our car sales and Service Operations in 14 different overseas countries this year. Entering the u. S. Market will be a huge breakthrough for guangzhou auto. Reporter that is your Bloomberg Business flash. Anna theresa may won the backing of her cabinet ministers to offer the eu more money as she seeks to break the deadlock in brexit talks. The u. K. Has been told to come up with a solution to the irish border. Mind, with all of that in bob parker is with us this morning. Bob, if you look at it, the possibility of raising the offer to 40 billion to 50 billion, somewhere in that region, it s ort of seems almost like a seismic move in game theory, but she wants conditions. If shes going to make these all of bridges, shes going to want conditions. Lis looking more and more like game theory coming to the floor rather than desperation. Bob i think thats correct. The situation in germany might be a negative factor for the brexit negotiations. But having said that, if one goes back two or three months, we have the spread after the florence speech. The u. K. Was offering 100 billion. Thats a bit off thes spread. Now it seems to be narrowing, between 40 billion and 60 billion. Well probably end up in december with a number, not a precise number, but an agreement somewhere in principle between 40 billion and 50 billion. If theresa may has an offer of the reaction will be that it is not enough. His mandate is to get more money out of the divorce procedure and in addition, theres still this intractable problem with the irish border. Some think the issue with the border is externally difficult. I dont know what the solution is. Manus there is more border crossings in Northern Ireland and there are around the rest of europe. Go figure ont he logistics of that. Anna the big items this week are the budget, th e Housing Market addressing the intergenerational imbalance. Bob there is going to be a policy initiative on rebooting the Housing Market. The obvious,ating we have a major problem with the Housing Market in the u. K. It is not just supply, but the price of housing. I think we will see an initiative there. From anna you also want to see something on investment . Bob one interesting question is this subject linking productivity with infrastructure spending. Its clear we need a major boost in infrastructure spending. This is the one issue i agree with the labour party on. [laughter] anna bob parker thank you. Taking a stand on at t, coming up. This is bloomberg. Manus a live shot of tokyo there for you, the emperors palace. 1252. Llaryen, 1 just a line coming through on the mugabe story. He must except the will of the people and resign. Union. E zimbabwe african this was a couple minutes ago. Mnangagwa will return to zimbabwe in right security conditions. What are we watching today . Manus guy, what are you kicking the news off . 100 on the miss price, absolutely flat at the get go. It will see how the other european markets fill in behind it. It will be interesting to see how germany is trading today. By 1. 6 markets are up this morning. We have gains being generated out of asia. We are watching the tech stocks on the back of that. The nikkei, also up by 0. 7 . A decent session out of asia. This is another chart i want you to Pay Attention to. This is happening in iron ore. You have this channel, where we have been drifting sideways within it. Now it appears we can see a pop out on the upside. Are many factors that could encourage this move to the upside. If we do see iron ore break ing out to ethe upsdie, i think they could be fascinating to watch in the event of that happening. Some big numbers potentially on iron ore could feed through into that sector. Anna thank you, guy. Eu ambassadors meet in brussels ahead of the Leaders Summit next month, paving the way for what they will achieve in middecember. Manus janet yellen will appear alongside the former bank of england governor at an event in new york. She has remained pretty tightlipped until she goes. Anna we have been talking about her decision not to stay at the fed, and the latest round of talks between the united states, mexico and canada are due to wrap up. Keep an eye on currency markets. Manus President Trump has been handed more scope to reshape federal policy reserve. What we mean by that question mark after janet yellen said she would step down once Jerome Powell is sworn in to succeed her. Anna bob parker is still with us in london. This adds quite a lot of power to President Trump to shape the board of governance at the fed. We are looking at the list, Lael Brainard appointed by obama. Then, there are four open positions trump can shape. This is quite a lot of power is in his hands, really. Bob two things. If you look at the voting pattern of powell, it was very similar to that of janet yellen. The fact that powell has been appointed as the new chair of the fed, i would not suggest you would see any major policy initiatives from him. Having said that, it is entirely possible that these other appointments could be new fed governors with a more hawkish tone. Now, i think fed policy at the moment is absolutely clear, which is an Interest Rate increase in december, possibly three Interest Rate increases in a 10the path of qe, billion reduction in the Balance Sheet per month by the middle of next year. What is really interesting as the second half of next year, when the reduction in the Balance Sheet could be more, and it could be as much as 50 billion per month. That gradual reduction in the system could get more serious during the second half of next year. You have got on your screen what i call spot the dot. There is a lot of criticism, whether this actually is appropriate guidance for the market. And i think that criticism is probably justified. That is one thing powell might well do, change the guidance procedures. And possibly end up with a Guidance Program which is very similar to what the ecb does. These spot the dot graphs anna they will be gone. Bob they could be cast into history. Manus just interrupt the fed conversation, we have breaking news from an Italian Energy producer. They are confirming the dividend payout ratio at 70 of adjusted net profit. This is Forward Guidance for them in 2018. 2019, adjusted income target, 4. 8 billion is what they are guiding in terms of adjusted net income target for 2019. The dividend payout is confirmed as 70 of the adjusted net income. Anna speaking with an interview with nlc, that will be later on today. Join a conversation if you want to hear about enel and what they are up to. Lets get back to the conversation about fed. You said there might be three hikes . Bob in 2018. Anna if they dont, what are the reasons . Bob the risks are they will do more than that. There are some market commentators that said we could get four next year. The big unknown is what happens with the tax bill. If we do get, and i think it could happen, not before christmas, but certainly before january or february, a large component of the tax bill being passed. Right now it is rather jammed up between the senate and the house. Having said that, theres a probability we see a cut in corporate taxation, of up to 20 . There is a high probably be have the tax relief on repatriation. Theres still this ongoing argument about tax relief in particularly states like new york and new jersey they have major issues with the tax reform bill. But if the tax reform bill goes through broadly as planned, i think we could easily be seeing close to 3 growth next year. That would suggest a higher trajectory for Interest Rates. Manus what does all of that mean . Theres a variety of s p watches outt there. Endould be at 2950 by the of 1018. At the end of 2018. Bob i would say the correlation is virtually 100 . We all know the priceearnings ratio at the s p is one of the highest at the moment. We have got some extreme areas of valuation. So, to drive the s p higher, we have got to have a boost to corporate earnings. If you have an economy which is going between 2. 5 and 3 , assuming a large part of the tax bill goes through, then you will have corporate Earnings Growth staying in excess of 10 . That would justify an s p advancement. Bill, dont get the text get the tax bill, and you did corporate earnings grwoth reversing between 5 and 8 thn we have a different conversation. This is critical because it leaks into corporate Earnings Growth and economic growth, and the outlook for the s p. Manus that part of the tax bill, the repatriation of dollars. The last time they repatriated dollars, i would need to go back and find the exact dollar, but it was paid back in dividends and buybacks. Do you think that will be the same . The conundrum is very high on the agenda. What do they need to do to incentivize you not to do the share buybacks, but investing capex, which improves the productivity . Bob i dont know if bloomberg reported is, but Steve Mnuchin recently asked the question, to what extent, if you repatriate money, will you reinvest it in real assets, such as factories . Apparently, very few people put their hands up. They would do exactly what you just said. And uh, the way around that is you have the differential tax. The detail is quite difficult, but you say the repatriate tax, if you invest it in real taxes, then the investment rate is lower than if you pay it out in dividends. You have to have a conversation about what you would do with the money it have a tax of vantage to invest in real stuff. Have a tax advantage to invest in real stuff. Anna what interpretation do you take from the flatness of the yield curve at the moment, bob . Some people say this is suggesting another recession and some say it is a function of divergent Monetary Policy. We have accommodative Monetary Policy still in japan with that ford money going back into 10 years in the u. S. Bob the flattening of the yield curve does not discount a recession in the u. S. The probability of us going back into a recession in 2019 is close to zero. The reason why you have got his behavior in the yield curve is number one, expectations for the fed to raise Interest Rates that pushes the short term of the yield curve up. You have been got the tapering of the fed Balance Sheet. Its a very slow process. That puts an anchor on the longer end. Plus, you have the discussion about what is happening with inflationary expectations. They are only increasing very slowly, indeed. If you look at inflation excitations for 2018, it is panning out at 2. 5 inflation. That is anchoring anna its the same with the tax bill. Therefore, this could change. There is a very high probability that we will be having a conversation in three to six months time about the pace with which u. S. Treasury yields are rising. I think it is inevitable that by the middle of next year we will see 10 year u. S. Treasury yields around 2. 80. I think the pace of increase will be very slow because the tapering process is slow, and because the worsening and inflationary expectations are slow. Manus well, the want to avoid is the inversion of the yield curve. Bob correct. Manus bob parker stays with us. Anna at t says it is prepared to go to court over its proposed merger with time warner. This comes after the Justice Department sued to block the companys, 85. 4 billion bid. Mccombsor more, dave joins us. What is the market telling us about this announcement . The shares of time warner have been dropping over the last few weeks on expectations that this could happen. You had President Trump tweeting about cnn and the time warner was, mentioning that that one prospect. You had those shares dropping. They had a market cap of 62 billion in that is compared with the offer of 85 billion. That is a pretty big gap, maybe five times of time warners earnings. I think investors are saying there is a chance the deal will not come off. Anna what sort of impact will this combination have on the industry, if it does go ahead . Industrywise, it would bring at t up to where its biggest rivals are you know, verizon and comcast. Those are multimedia massive projects where they have all ends covered. What the government is saying now is it would also cause media prices to rise. You have a feeding frenzy going on for media content, especially in the area of sports. This would put at t in control of, for example, the nba basketball tournament. That is a big media pie there. They would be able to raise prices on it a bit. At the same time, you have lots of people entering the media fray. You got amazon and netflix they are all bidding for these Media Properties at the same time. Everybody is trying to get their hands on this content. Prices will be going up one way or the other, but consolidation is bound to promote that as well. Manus dave mccombs, thank you for the update. And, if you are traveling into into t int tune Bloomberg Radio. We are going to talk about yellens exit from the fed after powell is sworn in. Anna coming up, as the government crackdown on corruption continues, why and how their production wet well. Manus then, we speak with the ceo of easyjet in her first interview of the day. Anna this is bloomberg daybreak europe. New in the morning in york. The Holiday Season kicks off already. This is the week of giving thanks, if you are stateside. The 50 Bloomberg Business flash. Lets get the Bloomberg Business flash. Ed the at t ceo said he would see them in court after the Justice Department blocked their bid to buy time warner. He reiterated that he would not sell cnn to appease washington. There has been a lot of reporting and speculation, whether this is all about cnn and frankly, i dont know. But nobody should be surprised that the question keeps coming up. Because we have witnessed such an abrupt change in the application of antitrust law here. We cannot lone is and will not be party to any agreement that would even give the perception of compromising the First Amendment protections of the press, so any forement that results in us footing of cnn, directly or indirectly, is a nonstarter. Ed france and the netherlands wove won the contest to host t taking authoritie. Two cities emerged victorious after a series of secret ballots by eu governments in brussels. Nestle is among Companies Exploring a purchase of hain celestial group. Companyzerlandbased has held preliminary talks about purchasing all parts of hains celestial. Representatives for hains celestial did not immediately respond to requests for comment. Thats your Bloomberg Business flash. Several family groups that are not implicated in the crackdown are taking to local banks and International Law asking how they can make it harder for their a ssets to be seized. Anna give us a sense of what is going on in saudi arabia. What does this say about the state of the kingdom . Reporter i think it really speaks to the uncertainty that were seeing on the ground in saudi arabia. This is a crackdown that has come wrapped up in anticorruption clothes, but there is a big question mark in transparency, the way it is being carried out, and also about the role of due process. At the same time, we have seen some wealthy suaudis try to protect their assets. They are setting up new legal structures to protect themselves, and selling more of their liquid assets, converting iliquid assets into cash. There are so many question marks over this entire process. We have been talking about the impact on the saudi economy. This is coming at a time when the saudi economy has been slowing, thanks to lower oil prices. You have to wonder what this will do for domestic investment. Many saudi Business People are now retrenching from the regular business activities. Princeracy, just as the is trying to transform the economy, Tracy Alloway with the latest on the saudi story. Lets talk about the thirdquarter earnings season. Its going to close in the picture has been mixed. The beats actually outnumbered the misses i will get there outnumbered the misses by 40 , which were pulled mostly lower by higher expectations. We got there. Anna insurance and financial saw strong results, while health care and industrial disappointed. Give us your thoughts on the earnings season. As it lived up to your has it lived up to your expectations . Bob yes, it has lived up to expectations. I think the key factors are number one, european dividend yields relative to Government Bond yields are high relative to that differential. So, as a result, i think investors will focus still on high dividend yields in the eurozone. Second factor is, like most markets, we have seen an underperformance in areas like utilities, like telecoms, like the expensive consumer sector. Sectors which benefit from low bond yields i think will continue to do well. Sectors that benefit from the stabilization or moderate weakness in the euro. The euro, i think will go back to 1. 12 to 1. 14. Obviously, that boosts the export sector. And i think the background, lets not forget, has adjusted expectations of european growth. Its constantly being revised upwards. I come back to the one statistic that i think is compelling. The index is at a record high. Manus translating that, on this chart, it looks like the smaller stocks are outperforming the larger stocks, the larger market cap stocks here at the bottom. It is not that they are dramatically underperforming, they have had a good run, but the heartland of europe is outperforming. Bob you used the right word, the heartland of europe. I think it is a number of factors. First of all, it is the small and midcap stocks that benefited the most from this acceleration in economic growth. Secondly, if we go back one year, the small to midcap where cheap, relative to large cap. Benefits from the fact that bund yields have stayed around 40 basis points. I dont think smaller midcap is that vulnerable. Anna interesting that Goldman Sachs is giving us their reports on the food sector this morning. They are cutting to under weight. European food and beverage was cut to underweight. This is a challenged sector, isnt it . Bob the way i would look at it is, the relationship between Consumer Discretionary i think it will significantly outperformed the Consumer Staples over the next six months. That is consistent with what my friends at goldmans are saying. Manus it is good to hear you have friends in high places. Technologyrelated deliver here, along with the financials. Bob i think it will be exactly the same in 2018 if somebody looks at the First Six Months of next year, i think utilities and telecoms will underperform. I think of them are discretionary and industrials will outperform. I think Consumer Discretionary and industrials will outperform. Anna coming up, Carolyn Mccall joins us for her first interview of the day and one of her last probably, as the ceo of easyjet. Thats next. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Back to the ballot. At says she is open to new elections to break germanys political stalemate. Anna beefing up the bill. Maya reports say theresa has won the backing of her cabinet ministers to offer the eu more money. Manus janet yellen she will leave the central bank once Jerome Powell is sworn in, giving President Trump more scope to reshape policy. Anna at t prepares for a court battle with the Justice Department over its proposed time warner merger. Manus welcome to bloomberg. Its our flagship morning show. We are in london. Im manus cranny. Nna im anna edwards we have corporates from london reporting numbers. Cr eight says that q2 sales amounted to 20. 7 billion euros. Bida rises 2 . E there is consolidation of plenty in this space. Morgan stanley raises the company to overweight. Those of the topline numbers. Sales rise by 2 . King fish, the Home Improvement store, it seems like the French Market is the weak spot. U. K. And ireland sales up by 1. 5 . Other International Sales up by 2. 7 . France is down by 4. 1 . Overall, 3. 4 billion pounds. U. K. And ireland have come up with positive sales growth. We are also focusing on the u. K. Consumer. It seems the France Business is the weak spot. Manus lets talk about easyjet. One of europes biggest airlines. Revenue for the full year is about in line with analyst estimates. 5. 0 one billion pounds. This is a fluid, changing landscape. Said the dissipation of arable land, air italia, all busted. The free profit for the 8 Million Pounds. Free profit 408 Million Pounds. Joins us. Call of dean she is the ceo. Urner easyjet good morning. Carolyn good morning. Its an easyjets enters. We are structural winner. You can see in the statement that we have made today that the Forward Momentum is strong. The first half is looking positive. That is a direct result of the implications in the market. There is some capacity taken out as well. We have benefited from air berlin, part of the consolidation. Its all very good news for easyjet. Good. Rward outlook is anna you say the forward outlook is good. Its clearly a sector influx. With this series of bankruptcies. Reveals are the deals from this summers bankruptcy key interviewing the winners will be next summer . This has followed 18 months of a lot of pressure in the industry. Devaluation of the pound was very painful for monarch. All of these factors have been involved in what is happened to these airlines. After this phase of consolidation, you will see that as the oil price increases, or stays high, that there will be more of a shakeup. Strong will get longer stronger and the week will be a weaker. Easyjet is in a good position. Because of what you just mentioned but also because of rising oil. You have tripled the value of that company during your tenure. Do you think that to deal with these challenges for the next year, or going to have to be more costs taking out of the business . Are you capable of doing that to deal with the rising cost factors . I think rising fuel is a cost but also makes you very disciplined in a capacity department. The weaker you are, the worse hedge we arent not week we arent weak and we are hedge. Hedge did. Hedged. To the marketted that are costs will be flat regardless of inflation. The important thing is our passengers dont see the model at work. They see friendly, helpful service. That is the balance you have to pull off. Talk to us a little bit about preparedness for breakfast brexit. Car Companies Say march is when they need to hear before they trigger that didnt see plans. Banks about the same. What is the timescale for you or is what you have done in austria the extent of the planning you need to do . I think the airline in austria is a big risk mitigation. It allows us to have flying in between European Countries and domestically. That is a great protector against the risk of brexit. The certainty of a Bilateral Agreement between the eu and the u. K. Government. We think it is doable. The whole Industry Needs one. I think governments have understood that. It will beink conceivable they wont come up with a bilateral. Everybody needs a decent deal. Give me a sense that this aboutg there also stories the city being looked after, going up the pecking order in terms of brexit. His government the same to you . This is a clarity driven group of people that are listening to your industry . I think it would be the Aviation Industry is not known for being quite or passive. We have made our position readily claire really clear. The efforts have been vocal in what is needed. Aviation is a huge driver of the economy. Has notovernment consider that, i would be extremely surprised. Anna its difficult to separate out the structural effects and the cyclical effects. A lot of people are talking about the squeeze on the u. K. Consumer. Have you seen that . Carolyn honestly, we have not seen any evidence this moment. Demand is high. Our passenger numbers are up 10 . We are not seeing an effect on demand the moment. Part of the strategy you use during your tenure was go for bigger airports, library airport. Move away from the secondary. Can you confirm some aspects for us . I a you still going to give advice . I want to know about capacity in the face of those flounders. Are youin, monarch, going to still had 6 capacity . The growth plan is already established for the next year. Purposeful growth. If you talk to our investors they will say we are very disciplined about where we put our capital because you look for returns all the time. There is a lot of organic wrote still to come. If you look at our Current Network are still places week and put aircraft and make good, incremental return. Example ofa great the primary airline network. As a combined force, we will be very strong in berlin. We will be the number one player in that very of orton market. That is the strategy at work. Where clear number one in geneva. Two, we arenumber 92 number two to a weaker Legacy Company area company. When you have this network you can get a better deal because you can leverage force leverage for square. Anna you are going to be handing over the reins soon. A number of successes under your tenure. What advice we beginning to your six lesser . Successor . I have seen him and i will see him a couple times is ordered orderly transition. I will give that advice privately. [laughter] i would love to be a fly on the wall for the hanover. Thank you so much. Shake them up. Carolyn thank you very much. Anna she told me, didnt she . If she had devices not telling me. 293 Million Pounds reported by cyb g. There joined by david duffy ceo of cybg. Tell us how youre doing. David its a very straightforward story. Rockets are up 33 and shareholder returns are up 40 in your declaring your first dividends. You can only do that when youre comfortable with your capital base. We are not creating capital. The number went from 4. 5 to 5. 1 point three. You say it will be a doubledigit story by 2019. Is that still the plan . Absolutely. We are the ahead of the targets we guided. By 2019 will deliver the accumoli promised. Deliver exactly what we promised. They had lampooned idea in terms of deposits to update the market. Have they woken up . David our deposits are up 3 . Strongly so and diversified. As aok at the balance deposit led bank area you land if you do have the deposit. Linda if you have the deposits. We have as in the funding which is unlike all of our editors. A very good cost of funding and greg performance on funding. Anna on the agenda this week in the uks the budget. Anything you want . Housing. Think anything that helps housing or purchase of houses is good. Also, when you look at the women in the men who run the business is up north, they tell me one thing. Ratesy could get business lowered that would help. Manus small and Medium Enterprises of the core the u. K. Economy area, which is this lending august 3 the growth or has stalled . We want to get a gauge. See did not see the anxiousness in the u. K. Consumer. David we have a 6 growth in sm in the snme. Done 2. 1 billion of the ending mending already. Lending already. Given what you said in the parts of the economy that you are connected to, you have a story about global banks relocating next year in the face of brexit. They are of a different nature to your banking business. S is how many had one . Does this have any headwind . David at the margins, it will probably be nourish and fear that will drive any risk we face. We dont do business overseas. We are domestic. You are a new ceo. You are kicking the tires and looking at what you want to do. The productivity conundrum the united them, i want to get your position. One of the arguments is that is to push for ceos more technology and impress improve productivity area where the you stand on tech . David its fundamental. Banking world to change radically. In the longterm youre going to see very different layers that is. Spent 300 the million over two years investing in digital. We built a new brand which has a wire over 100,000 customers doing 1 billion one billion worth of deposit. Moving over to their transaction, theyre making needs, they want to do is the and one location. Building your technology for that mindset is important. Anna you have to very story is fiction. Impetuse gives you the to do it. Experimental. Experimental. O be kic off ace i got the lot of promises for the future yet the big banks market share has got bigger. Scale matters if youre going to challenge the big banks. Anna why . There are a lot of complex factors one of the key want to scale. When we have 3 million customers, we have all the services lloyds have but we have replicated everything that the near banks avid technology. Banks have in technology. If you have technology and scale, you can win. Anna manus talk to me about how you make money. Part of that is Interest Rates. As you hundred customers, as you look at the results of that, any ramifications . If carney was sitting with you what advice would you give him in regard to strengthening this economy moving forward. I probably would not want to advise carney area carney. The question of balance is what i look at. We havent seen any negative sides yet but we passed the bulk of the 25 points on to her savers. As the economy goes through brexitit goes through , lets understand all that data and healthy economy settle a little bit. Anna did the borrowers pay more to . Our rates will increase by the rates points same way they reduce when it went negative. Anna thank you so much. Lets get into these markets now. As of the futures are unchanged. What is happening in the u. S. Is all going to come down to tax. You will have a much more cap the. In fed. More trumpa stocks and in slow or. And an inch lower. We look at the european futures as all the little bit. Lets get a bloomberg is this flash. At t ceo has told antitrust enforcers that he will see them in court after the Justice Department sues to halt the companys bid to buy time warner. The doors open for negotiation. Eric reiterated that the ceo reiterated he would not pay sell cnn to appease washington. There is speculation that this is all about cnn. Is it . I dont know. Surprise that is coming up. We witnessed such a difference in the application of antitrust laws. However abandon the free press. Any agreement that would force us to spin off cnn directly or directly is a not harder. Nestle is planning to anchase hain celestial, organic food maker. Replyentatives did not with a comment. Has signed a new deal with the nfl for digital streaming rights. According to people familiar it expands the previous contract that limits did the carrier to streaming on screens seven inches or smaller. Guan jo automobile is looking to connect with chrysler. In exclusive interview, the companys resident said its also poised to enter the u. S. Market with its flagship series enter we are aiming to in the u. S. Market in 2019. This is a crucial move. Internationalization process has just taken off. Will carry with our sales and operations in working overseas countries. Huge. S. Market would be a breakthrough. Ed that is your Bloomberg Business flash. Angela merkel has to know she would revert to hold new elections. New comments hours after Coalition Talks collapsed. I have no plans for a minority government at the moment. We have to wait. Way. Election is one a new election is another. I think new elections would be the best way. Anna does merkel think she would emerge stronger from these elections . There are many people think many things. Many theories. Matt we have one of those classic moments of silence. Matt eller will return and ask is for phone. We put together the ftse 100 and , and the dax has outperformed all those market. To what extent does this political im not saying impact vacuum could the euro . Stocks . Are we in a Holding Pattern . Anna we saw the dax rebound from its sevenweek low. Is this going to make a norman amount of difference to the synchronized local growth story . Perhaps thats at the forefront. Perhaps the ecb as part of the story. A big story in european politics. Gmm. lets check in on these are some individual stocks. Keep an eye out easyjet. Karen mccall spoke to us. Thats good for us. Matt miller and guy does it will be here. This is bloomberg. Guy good morning. Welcome. Youre watching bloomberg. Your open soon. Miller is in london. Merkel says shes open to new elections to break germanys political stalemate. We will speak to mp member at 830 8 30 k time