Transcripts For BLOOMBERG Bloomberg Markets European Open 20170531

More rate hikes this year . Amazon ascends. The stock topped 1000 a share in the u. S. Yesterday but how much more room do stocks have to run with the record rally . We are half an hour away from the european open, from the open of cash trade. Take a look at where futures are trading right now. We are seeing gains for most european indexes, a little bit of a loss for dax futures but the futurese in action. We have not seen the asian news carry through yet as far as Index Futures go. Theo see it if you click on gmm screen, you can see in the forex, the renminbi, the yuan getting a big move. Anytime you have a black oxen the middle of one of the panels on a gmm screen that means youre seeing a move that is more than three standard deviations away from the 30 day average. You see it here in the renminbi on and off shore if we take that and and pull out the bonds commodities, youre going to see china highlighted again here as far as the move with the sovereign bonds, the fiveyear dropping 5. 7 basis points as people buy into those bonds. You also see a big three standard deviation move on rubber. Interesting stuff on the gmm this morning, a lot more action than you see in your equity Index Futures. Lets go to bloomberg first word go to sophiet we kamaruddin in hong kong. Sophie in the u. K. , the pound slumped as anxiety surrounding the outcome of the general election tightened. Theresa Mays Conservative Party may lose its majority by 60 seats. A pollrperformed after in the times showed the tories may lose 20 seats at next months election while the main Opposition Labor Party could gain 28. Japans industrial output rebounded in april hitting the highest level since 2008. Industrial production increased 4 from march when it fell 1. 9 . That is as overseas demand continue to support the nations economic recovery. House trump White National security adviser Michael Flynn has agreed to turn over a limited number of documents sought by the Senate Intelligence committee for its investigation into russian interference in the 2016 election. According to a person with knowledge, he has agreed to produce documents the committee subpoenaed from his two companies, flint intel, llc and flynn intel incorporated. In afghanistan, suicide car bombing has killed or wounded 70 people near a diplomatic enclave. It is the worst attack in the capital since the raid on the countrys Largest Military hospital in march in which 50 people died. It comes during the first week of the holy month of ramadan. The u. S. Is the first ever test of its Defense System against an icbm was a success. After the interceptor shot down a mock weapon over the pacific ocean. The test comes amid mounting tension with north korea. Is u. S. Economic outlook looking worse because of its uncertainty over tax and infrastructure policies while europe is looking stronger s larryg to black rock fink. It is consistent to believe that or there is a belief in the marketplace that we are going to s the Second Quarter. When i what i hear from businesses is it is not happening. Sophie global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt thanks very much. Lets talk the rate path in the u. S. Softbrainard has said inflation could cause her to reassess the way forward for monetary policy. Between some tension signs that the economy is in the neighborhood of full employment and signs that the tentative progress on inflation may be slowing. If that tension between the progress on employment and the lack of progress on inflation process, it may lead me to reassess the expected path of policy in the future although it is premature to make that call today. Of inflation, we get figures out for the eurozone andy at 10 a. M. U. K. Time we have decent inflation figures for germany last night as well. For more, lets bring in Mark Cranfield from our mliv team in singapore. I want to go around the world with you because there has been a lot of action to discuss and a lot on the mliv blog this morning. Lets start off with brainerds comments. She is ghoulish dovish and combine that with larry finks , the porridge seems like it is a little bit cold. Mark that is true. People are very interested where this new level for mutual rates would be. We are used to 4 but it is going to be much lower than that in the future. From what she is saying she thinks is closer to where the inflation part is it might not be 2 , it might be below 2 but if that is the case the projections for fed funds in 2018 might be higher. Matt it is interesting because the charte a look at we still have an incredibly high price, let me change this to oi s. We still see an incredibly high probability for a hike in june and it seems to go out every month forward. You just see strong probability of a hike coming . Mark the market is still in june that way. As we have seen in the last couple of years, the market can change its fixings very quickly on where it sees the fed funds going. Peopleet other senior replicating what brainerd said talking about lower inflation, it can quickly translate into the futures market and all the rate hikes get priced out. Also what they are considering is the fact that the fiscal stimulus from the u. S. Government might not be coming this year at all. At the beginning of the year there are looking for stimulus and it is looking further away. The fed can focus on core inflation which is still very low. Met the fed does focus on core inflation, Important Message there. Lets talk about what to expect from the u. K. And the town. We see the possibility of a 10 Day Moving Average moving below the 20 date moving average, we talked about that with mark cudmore. When you at the tacticals to the new poll from the times and ugov it is possible that conservatives do not win majority. What does that mean for sterling . Mark the shock for people investing in the u. K. In the Foreign Exchange market, where over one week to the u. K. Election and the only thing we should be discussing right now is how big will the conservative where questioning if there will be a majority. We have had to backtrack dramatically. If this fight carries on the way it did, by the time we get to next weeks general election the pound could be back at where it was when the election was called. This is not the scenario that people expected. Theresa may was supposed to win this election call this election because she was supposed to win it easily. Live marketn follow insights on the blog, there is so much there, i highly recommend checking it out. Mliv. Tom keene will bring you a conversation with dallas fed president Robert Catlin kaplan. That is on Bloomberg Television and radio. You can also check out tv or live go. We are live in rome for the latest on the italian markets prospect ofmerging early elections. We talked tech after amazon hit the 1000 mark yesterday. How much more room do stocks have to run . We will get of you from an investor. This is bloomberg. Matt this is bloomberg markets, the european open. I want to get to the Bloomberg Business flash. For that we go to hong kong and sophie kamaruddin. Thanks. Deutsche bank has agreed to pay 40 minelli dollars to settle allegations that its u. S. Operations failed to maintain adequate protection against Money Laundering. Operationsd the u. S. Fell short in complying with the Bank Secrecy Act which requires lenders to help federal agencies prevent illegal transactions. They imposed a ceaseanddesist order on the bank. Anthony levan gasquet, the executive at the center of a legal spat with of a bit was hired to lead the self driving program. Claim was levan gasquet ski stole tradeow secrets. Sellaying out a plan to 25 of the nationalized lender. Governor plans government. Lans to sell stake according to previous government estimates the sale may raise 3 billion euros. S for footballted season has not stopped the club from topping the list. It has not won since 2013. But the value has risen to 3. 1 billion euros. Clubsurveyed 32 leading with a combined value of almost 30 billion euros. One third of that comes from three teams, united, real madrid, and barcelona. That is your Bloomberg Business flash. Matt thanks for much. Italian markets shuddered at the prospect of early elections. All markets were affected by that yesterday but especially in italy where italians dump starks after matteo renzi signaled that a possibility of a vote in september or october. Bloomberg news brohm chief. What sparked concerns of an early election being called . Sayingdra as you are renzi signaled he would not be against it and also the fact that the major parties are starting to come to an agreement and that is what you need to go vote. And oncem is complex the parties agree on the lot there is nothing hindering them from going to early vote. Renzi is pushing hard to put go to the boat and that is making investors nervous. Index hadftsi stock it is today drop in more than five weeks. Is the possibility of the Fivestar Party coming in the biggest concern here . Alessandra absolutely. In general, markets do not like uncertainty and election is uncertainty. We do not know how, what kind of electoral they will agree on. It will be proportional law, that could result in a hung parliament. That makes investors very nervous because you will not , the economy could suffer and the fivestar, the italian populist antieurope party could win the election. They are neck and neck with renzis party. Lot. Ach, that is not a they have to form alliances. Very uncertain, very stressful situation but renzi said it could be even worse if we wait longer. He said lets hurry it up and do it even if the markets react badly and get it over with. If we wait until may or something along those lines in 2018, it could be worse. Matt let me draw your attention to spreads, periphery spreads we have a chart on the bloomberg. Italy spreadsand from germany. You can see it has gone up to almost a little more than two and recovered a little bit. A lot of this has to do with concerns on italian bank sheets. That would be in jeopardy if the elections go wrong. Pls shaping up, how is the banking crisis shaping up . Alessandra it is difficult to resolve. We are talking about 360 billion, there are different estimates going around. 306 2 billion euros area there is different banks concerned. Which caused mps all of this in some ways is going to be saved although it is not a Straight Path for the bank either. There are these two Smaller Banks and the eu is saying it is time for a bail in. They want the italian governorate is saying no bail in. The debate will be electoral. There is not going to be much room for negotiation and for being reasonable because you want to please electors. Thank you. South african president jacob zumas public Approval Rating has reached an alltime low and most embers of his ruling African Congress want him to resign according to an opinion poll released two days after he survived a second bid to oust him. Opposition has been on the rise ever since he fired the finance minister and made a number of other executive changes at the end of march. John asus now from burke. What has been the Market Reaction here . Rand comingeen the under pressure since jacobs amount survived that over the weekend to have him ousted as the partys president. The market was hoping for a friendly successor which could have been the deputy president. His campaign to be the next leader of the anc seems to be gaining steam. Six months ahead of the succession bid that will play out in december this year. His Approval Rating is at 66 from 53 just six months ago when the first bid to oust president jacob xoma was set before the ancs executive committee. Matt what are the possibilities in that he will be called to step down . A lot of people would assume it would end in his ouster but it seems to be he is the teflon don here. He has definitely survived. The most motions to have him ousted as president. The Credit Rating downgrades the country suffered after his onprise Cabinet Reshuffle march 31 seem to have mounted the pressure on him from within the ancs ranks to have him removed as president. Were expectedings to release a ratings review on the countrys growth prospects. That is something that could be a Pressure Point in terms of whether the country will see more downgrades. How growth fares in 2017 as well as the Market Reaction to this president going forward. Matt thanks for a much tomorrow very much. We are minutes away from the open. S Deutsche Bank. Agrees to pay 41 million for Money Laundering lapses. Deutsche bank is paying fines for bad behavior. We will take a look at the stocks to watch. This is bloomberg. Matt welcome back to bloomberg markets, european open. I am matt miller. Lets get the stocks to watch, just about six minutes to go until the cash trade opens. Here and across the continent. Deutsche bank in frankfurt, looks Like Deutsche Bank is once this time itfines, is only 41 million but it is to settle allegations with the fed that it has failed to maintain adequate controls against Money Laundering. The interesting thing i think is that this is over billions of dollars that were laundered so it is possible Deutsche Bank made more money on the laundering issues that i has to pay in the fines. Very interesting stuff there. Also interesting to look at metro, another german stock coming out with earnings. Metro and its media business, saturn has a loss before special items of 4 Million Euros them sales wereks like unchanged at 5. 2 6 billion euros. Carry. Etro, cash and metro media saturn, metro stock germany, it could come down at the open. Finally, watch cellnet. We germany, had headlines thatn tower is looking to explore and ask is and acquisition of cellnex. Crown castle is another buyer. We could see a bidding war buildup over sell cellnex. It is up 24 . A few stocks to watch their. Formats until the market open. If you take a look at futures you can see that little change on the equity indexes but slight gains on the euro stocks eurostoxx index up. Coming up it is the market open. This is bloomberg. Matt welcome back to bloomberg markets. The european open just about to kick off. The live cash trade. Futures have been relatively mixed here in europe. This is what are we looking at there . The intraday trade. It looks like these the the the futures that we are looking at. They are gaining now. You had seen dax futures down. Cac futures unchanged. We have the first day back from u. S. Markets since the memorial day holiday. The first day back for london since the bank holiday and all of those major indexes were down. Do we see a little bit of a bounce today i guess is the question. European markets opening in just 12 seconds. For that, lets go over to manus cranny. Manus . Manus were struggling to get clear direction. May 31. The stoxx 600 has rallied. 8 this month. Up from four months in a row. This is the longest winning streak on the sox 600 since 2013. In average in may we add about 1. 5 in value. On average in june over the past four years, we have lost nearly 40 . Is our run almost done . 90 billion euros worth of equity value has been added. Larry fink says it will grow faster than the United States of america if not faster. Consumer staples up. 8 . Youre seeing a little bit of a mixed intonation of n the market. The pound is down. The pound is having problem. This is the bloomberg pound index. The chart you want to go to. Down 2. 3 overall this month. The skew on the pound is one to the downside as we get the types called this morning showing that the conservatives could lose as much as 20 seats in the general election. Labor could garner 28 additional seats. Macquarie are scathing of this poll. We have pluses and minuses in terms of belief on the poll today. Twoweek volatility rising over the past couple of weeks. That momentum is going to continue. Mark barton has a chart for you in terms of the pound. Two days off. Not one but two. They come back and take the market higher. We had the chinese manufacturing data this morning. Ll is good in the world. The story from china is back under the microscope again. Index remains at 51. 2 for the second straight month. Deleveraging, the balancing act, what the pdoc can do on rates versus the deleveraging story. Matt, over to you. Matt manus, thanks very much. We take a look at the market moves, broken down into index Industry Groups. We see a big loss for the metals and miners. You can see rio tinto, glencore, b. H. P. Tch shell, billiton all down. Not a surprise, we see w. T. I. Crude down. Brent crude. 75 as well. Socgen the bigs losers as far as index points. The biggest gainer is British American tobacco and then you see eriksson coming in at number two. Then you see some other banks actually gaining today. Hsbc is one of those as well as some of the drug companies. The pound slumped as anxiety surrounding the outcome of the general election heightened after a poll showed Mays Conservative Party my may lose its majority by 16 seats. Sterling underperformed literally all of its g10 pierce after a poll and the times show the torreys may lose 20 seats in next months election and the Main Opposition Party could gain 28. Interesting pollin deed. There is a wide margin of error there. Andrew perry is with us. Head of equities at Hermes Investment management. As the election gets closer, it is more and more important to risk assets and the pound is getting whipped all around. No question. When we talk about the slump, it is nothing like the slump we had in post brexit and the sterling remained well above those brexit lows. The poll also come and go. We have plenty of polls between now and the election day. A new style of poll which is why ome people are questioning it. The poll suggests a torrey majority. Matt how do you expect the election to pan out . Anybody making predictions on elections now days is chancing their arm. Matt youre bound to do better than the polls, though, in britain. Setting the barlow. I havent gotten it wrong on the last two. Im probably not going to be an expert. I think it is hard for the labor party to get a majority. The boundry changes are against them. The polls have consistently shown a lead with the torrey. I would expect to see the torreys but nowhere near the landslide. The interesting point about this election is the shift to the left of both the main parties which is now effectively a twoparty system. Were talking about the end of austerity. I think under both parties we are beginning to see a rise in debt again just as the time when the economy could be peaking which could be quite could pose some challenges further down the road as brexit rolls forward and we begin to get lows. Matt what does that mean for you as an invest of . If you see the end of austerity coming, you can make some decisions on which stocks to buy and sell . What we have been seeing this year is a swing back from that unbridled russian devalue and cyclical. Our preference all of this year is to remain focused on quality growth stocks, whether that be in industrials, the consumer or the text sector. Those are more the company s that areindependent of economic cycles. Rather than playing a big. Covery on the trump band you look at bond yields. Were not going to be seeing 3 to 4 growth in the United States. Larry growth is talking about growth around 2 . I would not disagree with that. There has been a surge in optimism that hasnt been followed through intangible growth. While things are nowhere near as bad it is a dire levels we got to this time last year, or a bit earlier, there is no way they are going to be as good as we thought they would be in february. Matt im going to bring us larry finks sound in just a moment so the viewers can hear natural it is interesting that it plays along with the shift in sentiment between europe and the u. S. Over the last month but i want to first focus in on the u. K. Here. What i have is this this is the conservative implied majority. It has come down here sharply but it has been coming down and what does this mean for brexit . Even if the conservatives do win a majority and it is not a strong majority, if theresa may doesnt have what seems like a strong mandate, can she still be aggressive with brexit negotiation . Does she have to . She has to be strong in negotiations. I think what she will probably do is coming back to the country in a few years time when she has the brexit deal agreed and put it back to the country possibly in another general election to say you know, we were charged with negotiating brexit. This is what we negotiated. Were going to call the elections a validation to have grems that we made. Matt or invalidated. Or invalidated. This is what the country wants. I think in many ways, it is a good thing. 200 seat majority, that is a dictatorship almost. I see no worries in it being a smaller majority than predicted. I suspect it will be higher than the 40 seats you have on that chart. It will be a good working majority. It doesnt help the country to have one party in such a dominant position where there is no effective opposition. I welcome the fact that the labor party are doing better in the polls since we won the opposition. Matt youre going to stick with us. Appreciate your time. Andrew perry, hermes head of eck kis. He is going to continue to talk through those larry fink comments that we have coming up for yousm a lot going on around the world as well. He is making the case, larry fink is, for weaker than expected growth in the u. S. And really the case for europe. Stick with bloomberg for that. Plus we get our fangs into the tech sector. We discuss amazons rally and well get some ticks as well in the sector at 8 30 u. K. Time. This is bloomberg. Matt this is bloomberg markets. On the european open. Im matt miller in london. Lets take a look at how the markets are faring about 12 minutes into the trading session. Not a lot of movement. You see the ftse bouncing a little bit, especially on weakness of the pound. We tend to see that. The dax also up about. 2 . This is after a softer finish yesterday. And the cac, little changed in paris. Nejra . Nejra im starting with a record high gaining some 3 after the moment. People familiar with the matter said American Tower is exploring a bid. This is in a bid to expand in europe. Their main shareholderer is considering selling assets as part of a americaner and according to these people this would hinge on that main shareholder first combining with at lantia. Shares have risen about 31 already this year. Then im looking at rockette internet increasing rocket internet sales. A little bit of a lift to the shares this morning. Up. 09 inching closer to that goal bringing three of its bigger holdings to break even by the end of the year and the c. E. O. Said the quarter shows continuation of our progress. On the downside im looking at one of the worst porpers on the stoxx 600. Down some 2. 7 as well. It seems to be moving on barclays cutting it from overweight to equal weight. Matt thanks very much for that. Larry fink stays u. S. Economic outlook is worse than europe as questions over tax and infrastructure policies remain. I see c. E. O. S underinvesting until they have a better certainty. In europe now we have a high degree of certainty in the core performance copet of europe. That will lead to more investing. So europe will grow as fast as the u. S. If not faster this year. Matt still with us, andrew perry, head of equities, hermes asset investment. Even with the elections and italy, there is a higher degree of Political Uncertainty here he thinks that is going to lead to stronger than 2 growth in europe and weaker than 2 growth in the u. S. , contrary to some bloomberg surveys but still in line with the changing narrative that investors are more attracted to europe than the u. S. I think that storyline has been playing out actually for the last six months. The difference has been there has been a high expectation of the trump bounce that we saw some people talking about 3 , 4 growth in the u. S. Poem is you think about it, it would have been hard to achieve. Trump would have had to have enacted all of his tax changes, Structural Reforms seamlessly and pass all of the legislation. Politician is actually a hard business, particularly if youre not a politician. But 4 matt are you referring to anyone in particular . Somebody wh has take an new role in the United States. Matt he has had real trouble pushing through campaign promises. Were talking about president donald trump. Everybody was excited about the idea that we would get tax reform. I dont know why anyone thought that was possible. That we would get a reduction in regulations. That we would get Infrastructure Spending and stimulus spending and none of that has come to fore. No, it was always going to be very difficult to enact. It is easier to say what youre going to do, particularly if you have never been in politics. When i said politics is a difficult thing, it really is. Thats why we have career politicians who themselves have actually struggled to get their reforms through. At the end of the day, obama didnt get through anywhere near as much as as he wanted to. There is a reflexive pons to trumps election. There is this unnatural degree of optimism for somebody who had no political would actually be able to make things better instantly. Matt politics doesnt necessarily matter this year. We have seen a roundtrip in the u. S. And then here in europe, it seems like were not getting any of the horrible black swan or gray swans that everyone has been forecasting and things are going swimmingly. Thats why we have like europe now for quite sometime. Europe has quietly been getting on with the business, particularly at the corporate level, the last five years, european corporates have been restructuring and written down their costs and become much more productive and invested in new products and marketting. We were just at that cusp where if demand began to pick up, you begin to see that flow through to the bottom line. That has been a bit slow in coming. Everybody has given up hope on europe. Whoots why europe remains attractively valued. If you look at it and strip out financials, europe and asia both look fair valued against the longterm while the u. S. Is trading very expensively. If youre a longterm investor, evaluation really does matter. It is probably about 80 of your longterm returns. So if youre buying high, buying expensively, you should expect not to make a great return. Europe is still not expensive and you have that cyclical recovery story. Matt what do you like here . Im looking at the g. R. R. Screen which is a breakdown. A year to date breakdown of the Industry Groups in europe. Obviously tech has really outperformed. What do you think is the right way to invest in the european story . As i mentioned earlier, we continue to favor the structural growth companies. The technology there. You can see a lot of companies and industries and centers there which by and large have longterm structural growth stories. There is a lot of transitions going on. Four major transitions going on in global economy. One is technology. One is demographics. One is climate. Geopolitics. Technology is probably the most interesting. Were going the talk about that later. It is not just the tech sector itself. It is what it is enabling in industrial sect. Industrials you can split down to new industrials that actually get the utilization of technology to improve their returns and enhance their growth rate and still avoiding at the bottom of that list, you know, there cyclicals where is not a growth story and demand is challenged and earnings are volatile. We much prefer those secular trends. Matt were going to take a quick break here. Youre going to stay with us. You can participate in this conversation. You can ask andrew a question. The way to do that is use the bloomberg function tv go. I clicked into the tv box. You see a little bit of the video stream there on the right side there and you can see the headlines that were making as well as the rtchass. There is the link ask the guest a question. If you have something to ask andrew as far as equity investing, the producers will put it in my ear and well geet andrews take. Up next, no brainard . Is she a little bit too dovish going toward . This is bloomberg. Matt welcome back to the European Market open. Im matt miller here in london this week. Lets talk the rate path in u. S. As fed governor Lyle Brainard said she could reassess the way forward for monetary policy. Even so, i see some tension between signs that the economy is in the neighborhood of full employment and signs that the tentative progress we have seen on inflation may be slowing. If that tension between the progress on employment and the lack of progress on inflation persists, it may lead me to reassess the respective path of policy in the future although it is premature to make that call today. Matt still with us, andrew perry, head of equities, hermies investment management. What do you think about that . Combined with yesterday we had an interview with jim bullard and he seemed also a little bit dovish saying he wasnt sure about the 200 basis points priced in and combined with larry fink, it sounds like to por ridge could be a little too cold and maybe the fed is moving too quickly. The fed is always going to move in a glace yall way. No central bank in the world is going to reverse q. E. And make Global Market goes cold turkey. They know that the bull market is largely being driven by the liquidity provided by q. E. There is a challenge as we go from zero Interest Rates to normal. Whatever normal is. Were still in this discovery process of what normal is. Matt they are having the same problem as all the other central banks. They cant get inflation to be sustainable and they cant get wage growth to be part of that inflation. And probably they wont. It come back to industrials. E internet and retail is disintermediating. Making prices much more trarpte. The industry is driving incredible efficiencies. We were talking about stock with keon that ultimate mates warehouses. They just installed a warehouse for ldmh in singapore. It has increased their throughput by 10fold. Matt it is not just that they are selling so many more good through their hubs, it is that the technology is allowing them to do more. More and ship their products through their warehouses and get them out much more efficiently. This is an important thing. This is what amazon has to be about. These are some of the enablers of the new wave of technology in the transition. This is what i think we need to think about in technology is not just Growth Opportunities but where are we going to get the stranded assets . You think about retailers. Shopping malls, the stranded assets. Or maybe parts of the Auto Industry as technology and Autonomous Vehicles begin to change the way that we drive in the future. Ride sharing and things like uber. These are missive transitions really affecting all parts of industry and retail. Matt costing some c. E. O. S their jobs. Were going the talk about your stock pick and get a little bit more focused view now after this break. I want to quickly go to break here. Andrew peary at hermes, were going the talk about that. Amazon reaching 1,000 a share and really a lot of these themes are similar throughout his investment. Stay with us here on bloomberg. Matt out of the blue. Sterling slips after a poll suggests the Ruling Conservative Party could lose its majority in parliament. Where are we with just one week to go until the vote . And rate rethink. Fed governor Lael Brainard says lingering soft inflation could warn aeroview for the path of ols policy. Are we still on hike for two more rate hikes this year . Amazon topped 100 a year yesterday. 1,000 a share yesterday. We are 30 minutes into the trading day. Lets see how things are shaping up as far as the equity indexes are concerned. Stoxx 600, the broader equity index, very little changed there as with the cac and the dax although you have red arrows on the stoxx 600 and the cac, green arrow on the dax. Still not a lot of movement. The ftse we see some movement here gaining. 02 but the reason there probably is the weaker pound. Amazon shares rose briefly above 1,000 apiece yesterday in the u. S. Marking a new milestone for the online commerce and cloud company. Something we have been talking about, technology stock. Dominant role in the current bull mark has prompted comparison to the internet bubble years of the 1990s. Hose parallels only go so far. Pavilion compared enterprise values with the World Information Technology index. By this indicator, the groups evaluation is nowhere near the level it was 20 years ago. You probably dont need a chart to tell you what you already know. Here we made one anyway. And you can see that it was a lot more heaty back in 1999. Still with us, andrew perry with equities at Hermes Investment management. Ill rerun this chart and see what it would look like the you overrun amazon with that. I believe hillary put it in for me. What is it . 8990 . Amazon also was crazy back in the heady days over the internet bubble and really hasnt come back either. But it has been on a tear the last few years. What do you think is going on with amazon . I think amazon has stuck to its Business Model over the last 20 years. And technology has been changing rapidly and its inability to influence the way that we do usiness, the way we live our lives is gaining momentum. The problem with amazon and the other members is because of their dominant position in the index and the rise in the e. T. F. There is this selffulfilling momentum prophesy going on and we have to be careful. It cant be growth at any price or technology at any price. Going back to your original chart, you can look at the industries and say it has a hell of a long way to go. Most of those businesses dont exist anymore. It is a bit of a false comparison. Matt that was a evaluation chart also. You look at the price chart of amazon, you get a different picture here. Obviously it has been having an incredible run of late. The question is how much further can this go . We were over 1,000 briefly yesterday. How much further can amazon appreciate . I come to look at investing in the markets and investing in tech, i want to be cot contrary but i want to look at evaluation. These stocks are great changing way the world behaves and lives its life. But there is a price for everything. I look at that chart and say there is a heck of a lot of momentum built that that. However in the short and medium term, they are very overbought and very susceptible to a modest change in Risk Appetite and perception. I would not be focusing my attention on those names. They are very well known and value. Matt keon for example is one that we, a lot of people havent heard of. What else do you see out there . Robotics Companies Looking at semi, es like dialogue which had a sharp fall a couple of months ago because of its worries about power chips, power chips that go into iphones and things like that. There was a worry that it would lose its contract with apple. We dont think that is the case. It is great work in actually getting more involved in blue tooth and power chip device like that. The internet of all things is still very much alive and well. By 2020, over a trillion device will be connect. There is still a massive opportunity for those enablers. You look at british air ways debacle last week. U know, maybe Something Like amadeus will actually gain rather than there is a market that that would lose from British Airways charting and access to third party. Maybe their technology is more robust. For me it is not just looking at the most obvious. It is beginning to think of other areas, the enablers or the second order. What tris get its . There was a survey that said Something Like 80 of c. E. O. S are not yet ready for the dramatic changes that technology are going to bring. Also think about this notion of stranded assets. Who is amazon going to take business away from . Matt if youre looking at second order, we have a fantastic command for that on the bloomberg. Splc shows the supply chains. I just pulled it up for amazon here. You can see on the left side of the screen, the suppliers on the right side of the screen, the customers and then the competitors down here at the bottom. Any time youre doing research, this tool is incredible for that. You mentioned for example keon is part of the supply chain infrastructure for lvmh. I wonder if those logistics stocks are really important in a day where a lot of people are doing more shopping on amazon than they are on main street. Yeah, more is being shipped through amazon, the more you need to warehouses, make them much more efficient. Also there is the social aspect to that because the more warehouses are animated, the less you can rely on labor practices in these warehouses. The Companies Still have a responsibility to the workers they use. You have on the right, unilever. That is another big trend going on in industry is companies begin to see the imperative creating a more sustainable and equitable world. There is lots of really exciting ew Growth Trends and sustainability is another side of technology that people dont often talk about. This is a huge opportunity. Matt but more and more. Andrew, it has been a pleasure having a conversation with you today. Thank you so much. Andrew perry head of equities at hermes asset management. He is joining us on bloomberg day break. You can catch that on your iphone with the Bloomberg Radio plus app or Bloomberg Radio. Com or the bloomberg, type tv go or radio go to get that program. Up next, brazils president pushes investment amid chaos in his country. Will it work . This is bloomberg. Matt welcome back to the European Market open. Im matt miller here in london for the week. We want to get to our top stock stories now. Just about 41 minutes into the session. We go to nejra cehic. Nejra starting with eriksson ining after a 5. 6 stake was bought for a billion dollars. This was a company cut the junk by moodys just a month ago. The c. E. O. Trying to engineer this turnaround. Shares gaining on that news. This is an activist investor that as all of them do tend to be very strong in advocating for change. Class b shares is what they bought. That could help them gain a seat on erikssons board where they cant challenge management directly and advocate for that change. One of their founders is legendary in the investor space in europe said he believes a significant potential in eriksson but it is fundamentally a good company. They tend to buy companies that they think has a strong core. Nd lower here down 3. 8 . The market reacting to numbers we got out. Cash and carry sales rose. The real market Second Quarter sales were down. Anglo american, i put up here, just to show you the wider picture here that were seeing in commodity producers in miners today. The worst performing industry. We see a lot of metals decline on the london metals exchange. Matt lets get go to sophie in hong kong. Sophie in u. K. , the pound surrounding the outcome of the general election heightened after a poll showed theresa Mays Conservative Party may lose its majority by 16 seats. Sterling underperformed all of its g10 peers after a poll in the types showed the torreys may lose 20 seats at next months election while the Main Opposition Party could gain 28. Chinas manufacturing gains held up in may buoyed by an improving global outlook. It remained at 51. 2 for a second straight month. The u. S. Says the first ever test of its Defense System against an Intercontinental Ballistic Missile was a success after a ground based intercept of shot down a mock weapon over the pacific ocean. The test comes among mounting tensions with north korea. The u. S. Economic outlook is looking worse because of uncertainty over tax and infrastructure policies while europe is looking stronger according to larry fink who says u. S. Markets soared after trumps election on bets he bring about tax reform and Infrastructure Spending. That has not materialized. There is a belief in the marketplace that were going to grow mid twos the Second Quarter. From what i hear from businesses, this is not happening. Sophie global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt . Matt thanks very much, sophie. The brazilian president michel temer has headlined a conference in sal paulo. He fights for his future temer said he has no intention of stepping down. It comes as the countrys central bank is expected to cut rates later today and signals there could be more to come. R for more, the head of Maker Research joins me now. Hanks for your time. Let me get your take on whats going on in brazil. As an investor, should you be running scared here . I think you should be concerned. I dont know if you should be running scared. The situation is that the economy as everyone knows by now has been in a deep recession and has started to recover and inflation is subsiggede, very low, below target. Inflation expectations starting to come down. We expect a 100point basis rate cut today. This political crisis made its wave matt dont we need temer in power and his presidency not marred by scandal if he is to push through the reforms that are necessary for the economy . It would certainly help if he were not marred by scandal. The other reality is that the political system in brazil has lost a lot of legit massy and credibility. Of wave with temer is part that long saga. There is very likely to be some kind of interim solution until the october 2018 president ial election. The next election. It is very difficult to have an early election. You have to go through constitutional reform just for that. He is an interim president and because of these allegations. Anybody else who comes in wont have the mandate to do a very unpopular Social Security reform. There is going to be further delusion of the Social Security reform. It is probably going to go ahead. It is almost certainly not going to be enough to solve the fiscal problem that brazil has. There is going to be one step in the process and then more steps. Thats what the market is trying to think through as well as the position of the general Economic Policy framework. Under s improved a lot temer. Plus the world is a much better place than it was in 20152016. The fear of an uncontrolled chinese under devaluation defla shock in the rest of the world, collapse in commodity prices, those things are not completely off the table but are much more of a tail risk now than they were then. In that context, i think you have to think brazil has taken another beating as it should because of this political crisis but much less of a beating than it was before. Thats what makes sense. Matt do you stay there or take the money and run . Might as well take it off the table. Some people have done some of that. Att 69, almost a 7,000. What were thinking here is that the economic recovery will probably continue to gather pace. It will take a bit of a setback because of this but it wont go off the rails. The policy environment will be much better than it was. If you believe that the world as a whole is stable and that the brazilian policy is not going the wrong way and that is our view of it, you should look to get back in. Thats our kind of our take on it right now. I think if underlying question here is, is brazil going to solve its issues . My answer to that would be a very qualified yes. It is going to take another step in that direction. It is still going to face major structural problems and still going to face a major underlying fiscal imbalance. It is going to keep brazil high yielding economy. That of course is what the world needs in todays low growth. Matt as long as the ultimate answer is yes. Youre going to stick with us. P next, as Angela Merkel indicates a pivot away from the u. S. , the chinese premiere is hours away from a date with the chancellor in berlin. This is bloomberg. Matt welcome back to bloomberg markets. The european open. Im matt miller here in london for the week. Take a look at what markets are doing. 52 minutes into the session. I have a breakdown. You can see the big red is in basic resources and oil and gas as well as banks and retail. Thats why were pretty much down across the board. We do have gains here in london it is a ftse is weaker. Here is the m. O. B. Screen. You can see the big losers. Socgen. The rest of them are you know, o, glencore, b. H. P. Billiton and total and Royal Dutch Shell there as well as some of the ther banks, b. N. P. Paribas and u. B. S. You look at the gainers, you see nestle, roche. Not really gaining quite enough to bring the stocks 600 up which is currently down about. 06. 2 3 of 1 . Lets talk a little geopolitical action here. Meet premier li will with Angela Merkel this afternoon as she continues her pivot away from the u. S. And towards asia after yesterdays meeting with modi. Li meet with may need the relationship s much as merkel as he tries to maintain chinas ambitious targets. Economists warn a slowdown in growth is coming from china even as the p. M. I. Data held up for may. We got that out this morning. Pretty positive surprise. What do you think about china . Ok, we got a big sigh of relief with the p. M. I. And a move in assets in asia. Does the chinese growth, does the landing look like it is going to be a smooth and soft one . Our team in hong kongs that been concerned about the slowdown in china for the second half for quite sometime. It is a very legitimate concern. The economy has been motoring along q 1, about 7 growth or close to 7 growth and they do need to slow things down a bit. I guess the underlying concern in the market rightly is whether the chinese will be able to modulate the growth rate and fine tune this tightening. I think in the end, if there is some overtightening, they are going to ease up and accelerate again at some point because the growth target is very important. 6. 5. Inflation which has been rising sharply, they are bringing that back under control. They are doing a much different kind of job for china and for the World Economy than they were doing in 2015. Remember back then we were quite concerned, everybody was concerned that Growth Numbers were not correct and the economy was growing much more slowly and there was going to be an uncontrolled evaluation. Were in a different place now. They have clamped down on the capital count and put to bed a lot of fears about devaluation and generated credit growth, maybe too much but they have regenerated credit growth. Matt that is a concern, too much credit growth. How it ends is a very open question. I think the underlying issue is that what they are seeking to do, it looks to us like they are trying to slow down g. D. P. Growth and slow down credit growth and continue the growth cycle for longer rather than let it get out of control and have a bust sooner. Matt what does that mean for investing in the whole region, not just china but emerging markets around it . Emerge markets in asia and around the world, as long as they are capable for modulating the growth rate which we think eventually is what is going to come about from this, then china will be pulling the rest of the World Economy the rest of emerging markets in particular along with it together with this synchronized global upturn for the First Time Since the g. F. C. That has to be the base case. There are tail risks around that that it overheats or they overtighten. Those are tail risks rather that the scenario of 2015. The world is in a significantly better place. Nothing has been solved but it is an improvement. Matt less panic. Thank you so much for joining us us. Quickly, we want to mention more german Economic Data is out. Yesterday we got the inflation figures out, stronger than expected and now unemployment figures out in line, 5. 7 but at an all time, a post world war ii record low. So like arnot said, the world is a better place for the germans as well. Stay with us. Up next it is surveillance. Join me on bloomberg raid yes day break live. This is bloomberg. Sterling slumps as new polls suggest theresa mays conservatives could lose their majority. Blackrocks larry fink says u. K. Equities are at full price. Willwith cpi figures, M Mario Draghi left feeling deflated . This is bloomberg surveillance. Im Francine Lacqua in london. We are starting out with the