It is 7 00 here in london. A parade of military might in of peace talks on tuesday. Fighting continues in the east. Angela merkel is warning not to expect a diplomatic breakthrough when president putin and president poroshenko talk. This is classic angela merkel. She is managing expectations. She is tempering expectations. She is visiting kiev, and she said, dont expect much on this meeting on tuesday. Trip washe quote. My aimed at preparing such a meeting, which wont bring about a breakthrough. Merkel also called for resolution of the dispute between ukraine and russia and gas from on natural gas transit and delivery. She said there wasnt a red alert yet, but the clock is ticking. Winter theloser to situation will demand and consume more energy. What is the latest on the ground in ukraine . These holdout cities are being surrounded by progovernment forces. At the parademe in kiev president poroshenko talked about the need for another 3 billion euros in additional funding. Quote e actual he also accused russia of sending artillery shells from russia into ukraine. One other thing is merkel added her voice to the nato calls, saying russia is clearly Arming Ukrainian rebels. It seems like diplomatically they are ratcheting up pressure on russia. Merkel said it could always come to another round of sanctions if russia continues its behavior. Started aarkets have weeks trade. David is standing by with an update. That. Ngs for it is a little better compared to the last time we spoke about an hour back. Its the time of the day when japanese markets are just about wrapping up their session. That is a standout. Japan is up by half of one percent. Hong kong is doing quite well. As is south korea. It is a mixed basket. We are looking at in volumes. I think the action is in the fx market when you have the likes of the dollar yen. Aussie dollar it is really about Dollar Strength pushing down a lot of these currencies. Chimingo point out the the chinese markets. We have seen this market rally 10 or 12 over the last few months. What they are saying is best case scenario, five to 10 upside. One of the warning shots they say wakeup calls is the pmi data, which came out last week. Something to watch. It is a fairly uneventful trading day. Talk to me about Malaysian Airlines. Gete is a speculation they job cuts, review their fleet size, and possibly look at their ceo and who is in charge. Where are we on this story . It just about what we know so far. Dramatic changes could be coming. Let me go through this so you can get the details. The airline is said to be it is asng job cuts. Much as 20 of the current workforce. They will be looking at reviewing their orders for new aircraft. Change ationed, that the top. They are looking at replacing the ceo. At as many looking as three people up for the job. Malaysian week airlines is set to report their. Ast set of earnings a lot of moving parts. All know the disasters Malaysian Airlines has had to an alreadyn top of very Competitive Airline market in southeast asia. Thanks for that roundup. Lets have a look at European Equity markets. London is closed for a bank holiday. Paris and frankfurt up nearly 9 10 of one percent. This is the druggie affect effect. I think acknowledging the da is new. F longterm you use this new gauge. Is a fiveyear inflation rate. It is fiveyear fiveyear felltion swap rate, which two percent this month. They werent in the original text. He went off script to do this. I think those equity market signified you and i just spoke. I said, what a dramatic shift. Your report was, he had the data. It shows you how materially and dexterous is he a central banker . Some would say he didnt implement qe. There are legal reasons why. There are political reasons. We all know that. Many say he should have done it sooner. Basically flagging that he probably will do it sooner rather than later. Perez said to open a little bit lower. Said to open a little more. There is paris. That is up 9 10 of one percent. We have looked at jackson hall, and every year on average on the day that the chairman had spoken the s p rose by 1. 5 . On friday we were down. There is a bit of hawkishness and dovish nist. Dovishness. There was no recipe. Progress mightr mean they may need to raise rates more quickly. We decode druggies message draghis message. That is after the break. Welcome back. The drugmaker has the first drug a the u. S. For what could be fatal lung disease. About theo talked significance. This is a great idea of the strategy. We lookall the criteria for. It is a strategic fit from the standpoint of a medical need with efficacy for this medicine. It is a pulled fully a portfolio fit. Also in our development pipeline, and it is a commercial fit because of our strengths in the United States and the outside world. Mario draghi has signaled the ecb is prepared to add fresh monetary stimulus to the euro zone. He said the central bank will use the available instruments needed to ensure price stability. Setting policy and so much more. With me is andriy andrew. Thank you for joining us. Good morning. Tell us the significance of Mario Draghis portion of his speech where he went off script and essentially pushed the ecb closer to qe because he warned investor bets indicated significant declines. How significant is that . I think that is the most significant part of the statement. He has the first time acknowledged longterm Inflation Expectations are beginning to da or. Hor to deanch while he didnt use the word this is the first time he has a ba did away from the message that Inflation Expectations have been firmly anchored. Most recently as the beginning of this month when he was saying they are firmly anchored. He is saying there are some singles for market next dictations that they are heading lower. Mean we start to bring forward our assessment of when we believe the ecb will implement qe, or is that jumping the gun . That depends on what your iitial expectations were. Still think the ecb will want to go through the motions in terms of rolling out the targeted lt ros. I think we would need a continuation of the recent qewdown in growth to bring forward. He certainly did lower the bar a little bit. This isine would be something that could happen from the First Quarter of next year on word unless we get an unforeseen negative shock. Good morning. Spanish yields record low. Italian yields record low. The spread against treasuries is widening. Is the markets ahead of the reality of what you have just said . Is were going to be in this wait and see mode. Are the markets ahead of themselves . Correct. If you look at where yields are in particular in comparison with the u. S. , they are anticipating some sort of action i would say. Wey have committed so that know liquidity is in there. Reasonse fundamental why they are merging with the u. K. And the u. S. That is because inflation in the euro zone is very low. Thestrongest country in eurozone and germany contracted again in the second quarter. There are economic reasons why yields are lower. Comments iner regards to fiscal discipline and ,he ability to address that saying two countries you need to reconsider what you are doing fiscally, is he moving more e . Wards aland holland this is an area where the policy committee perhaps shouldnt be. Think he is adapting to the situation. Eurozone had to frontload its fiscal austerity. Fiscaluntries had lost access. That is why there is so much emphasis in the beginning for the eurozone countries to frontload fiscal austerity. The u. K. And the u. S. Had the luxury of back loading it. Now that the sovereign debt crisis is abating, the fears of the eurozone are no longer there that it will break up. To takethey can afford the foot off the brake and switch to back loading their fiscal austerity. In that sense he is adapting to the new situation. We may see more use of fiscal deficits in the months and years ahead. That is a good thing. How do we continue to play this dislocation between asset economy . The real it is a topic that has been with the feded. Heading one way and the ecb and the boj and another, this dislocation might become more apparent. How do we best position ourselves for that . I think druggie had a showingl neutral chart the divergence powers of real Interest Rates. Means isads currencies should play a rebalancing role in the dollar should strengthen versus the euro, particularly if the monetary stance to verges, and i also think all efforts linked to the ecb that are in some ways under their umbrella, they have a strong effect from liquidity and possibly from additional asset purchases down the line. Longstanding core position should be in periphery assets, bonds or stocks. Those things should play a positive role in a portfolio. Good to chat to you. Thanks for joining us. Coming up, the battle for the brazilian broadband unit and billions of dollars in state at state. We take a look at the bidding wars. Welcome back. Ikea has grown to become the Worlds Largest furniture chain. Now it is trying Something Different in germany. Innercity stores. Same, butn is the there is something radically different about the store underneath. It is in the pedestrian city , not a parking lot. That means no car to ferry your goods home. Mean my colleague in hamburg. Hands full. I am going to try to lighten his load i proving or disproving you can do and ikea shop without wheels. That means Public Transportation and a short walk. Expensive that for the swedish company. It just what he five percent mueller than most stores and was almost twice as expensive to build. It is between 40 or 50 million for a normal sized one. Here we invested 80 million euros. We know in hamburg we have 43 of people without cars. Berlin we know between 20 or 30 of people, without cars. I have my colleagues essentials. How do i get them home . Ikea is offering transport bikes to help innercity dwellers. They are free for the first three hours. If you are helpless they will even help you load up. Then you are off. Tippy. Little tip the i dont know if i am road legal. Avoidn my best to standoffs with cars. Me, but iey respect have got a bell. Breaks. How are you . Good to see you. We have got some work to do. Help . Whacks you are on your own with assembly. I have got to get my bike back. We made it. We prove you can do a big ikea trek without a car. My think i will take a taxi. Menace has got an experience of ikea. Manis has got an experience in ikea. You cant escape. You have got to go the whole way through. And then you queue. I find veryomething difficult. Can you ride the bike with the dexterity. Cant wait to see mark barton in north london at ikea. Up, they say too much of anything isnt good for you. We will tell you why too much fed up a miss and hurt equities, next. Too much fed optimism might hurt equities. Welcome back. We are closed in london, but the rest of europe is trading today. The dollar extending its gains post jackson hole, or is the euro expanding . Most of our stories lead with Dollar Strength. The euro is declining. Traders are the most short on the euro. It is the 25 month high in terms of short positions. Policy divergence is the theme. Druggie moving into easing. You are at an 11monthold. I am looking at the relative strength is whether the currency is overbought or oversold. Good advice on the market. Lets have a look at the swedish kroner. The swedes cut their overall growth target for the second time in two months. This years growth will be 1. 9 . That is below the two and a half percent originally targeted. Next year you see about three percent growth. The lows of 2012 for swedish kroner. These are the top headlines. Days after an american journalist was executed by islamic militants, another u. S. Journalist has been freed. He has been held in syria for an offshootears by group from al qaeda. He was released under the circumstances that have yet to be explained. The islamic militia says it has gained control of tripolis international airport. Weeks of fighting triggered an exodus. Meanwhile Parliament Says they will temporarily resume their sessions and could spend the day reviewing legislatures. Richard attenborough died. He acted in dozens of films. Gandhi won the academy award. He would have been 91 this week. Its a big week for telecom. , butnly are earnings up the race for the brazilian broadcast unit is heating up. Telefonica, Telecom Italia are aggressively competing, considering an offer as much as 7 billion euros. Joining us now is roderigo to talk about more. Companies, they really are beginning to push the envelope in terms of what they are prepared to bid for this company. Is that a Fair Assessment . It is. Theirnica has already put bid on the table. They have said they are willing to pay its. 7. 6. 7. Telecom has not officially made it. They have a Board Meeting. The report is they will be making a 7 billion euro offer. They expect telefonica to up that offer afterwards. Theyre really pushing it. Telefonica is actually cash. To get where it is going interesting. One is cast. One is stock and holdings. Where do we go next in this battle . Thats a great void. Both companies are offering some stocks. The differences telefonica is offering a big portion in cash. Telecom has not made the offer. The reports are it will be mostly stocks. The next step is a Board Meeting to officially approve the offer, and then we will be able to know exactly what they want. Boarde have the vivendi meeting as well where they will discuss the offer from telefonica. The next word meeting board the 28th. 28th. Then we will know where we stand. Who has got the upper hand . Will it come down to cash or who has got the better equity deals . When you look at it from a financial aspect telefonica would appear to be better positioned. Their financial situation is much stronger. They are offering cash. For a unit everyone has the impression the vivendi would be willing to sell because it doesnt have to do with longterm strategy, but Telecom Italia has got one thing going, and it is the relationship ofween their ceo and the ceo vivendi. Sometimes when it comes to big deals, personal relationships can weigh as much as the actual financial details. Lets see who wins out on the personal relationship side. 7 35 in london. European stock markets have been outperforming the u. S. For most of the year, but the tables have turned in the current quarter. European equities have been underperforming in the u. K. And germany. Stocks us is our reporter. Thank you for joining us. What has changed . In the sudden change fortunes of europe versus the u. S. . It is interesting europe has underperformed the u. S. Thomas especially given the contrasting central bank. I think it has been driven by the fact that investors think the ukraine and russian conflict will have a better impact on europe and the european economy, we have had weaker data. Investors thought the european economy was further along than the data is showing now. Is whether question good news is bad news. Meeting september coming up and jackson hole right behind us, will we enter a time where bad Economic Data and european equities rallying on expectations of the ecb doing more . Faqs they are traditionally months where we have seen large stock market the kleins, but the pressure ukraine story is not going to go away. It has clearly had an impact on psychology. I think the bigger question is will the economy with the highest exposure, will we see impacts in sanctions come through in thirdquarter Earnings Results . Unless there is a big risk to energy supply, investors have learned to live with it. Havent had a massive selloff you might expect to see. Volatility is one of my favorite major gauges. You have written great pieces of investors betting against that. Talk me through your thinking. The stocks recently reached a oneyear high. This is the european counterpart. U. S. The vix is near 11, near multiyear lows. The spot is near 17, which is close to a historical average. Reflectedat is being is european equities have underperformed the u. S. Investors are nervous about investing in a weaker asset. Germany is and underperforming. Is that an opportunity . Probably more so in germany. Has the most at stake in russia. That is why the dax has underperformed. Now they might look interesting to investors. Valuations are more average all across the board. If you are looking at value, germany is interesting. With the u. K. The risk is still interesting for investors. The strong pound also impact u. K. Companies more. I just want to get your interpretation. We have our biggest weekly rally in almost six months. The balance of payment showed pumpedropean investors one hundred 67 billion into overseas equities. Debt. Llion into offshore this is money leaving europe. And we had redemptions. I am wondering if that is the start. When you read that kind of data, does that say anything to you . I think that is related to the fact that the purple economy stocks did so well last year and even into this year. Areas look weaker, given the weaker Economic Data, that money comes into areas where there might be more value the u. S. Look stronger on an overall basis. Maybe that is a safer place to park your money. Thanks for coming in on this bank holiday. Coming up, russias multibilliondollar Company Makes way as we tell you why the company had to have this particular drum make rug maker. Coming up next. It is time for some company news. Fell the most in three years. Roche was said to have backed away from the bid for the company. They instead focused on an 8. 3 billion acquisition. Burger king, the secondlargest American Burger chain is in talks to buy the canadian doughnut chain and move its headquarters to canada. This would make it the latest to seek a relocation to a lower tax company. The merger would create the thirdlargest fast food chain. To resolve aorkers dispute over wages that resulted in a boycott that cost two days of extra weekend shifts. Workers are demanding the bonus be counted as part of their wages. Workers are doing their normal shifts but would not take on any additional duties during the suitealks. More m a the pharmaceutical sector. Burke spoke to the ceo about the deal and the strategy. We will conti