No more drama. The imf approves greece for 1. 8 billion conditional loan and two years of speculation on whether the fund will join in another rescue. There are 29 minutes until the start of the cash trading, but the futures are managing to reprice everything of u. S. Equities. Pips. Own three the question for markets, we survived the boj, no shock. Mario draghi, destination and persistence procrastination and persistence. We survived both the bank of japan and the open but the politics are back squarely on the agenda as the extension into Donald TrumpsBusiness Affairs runs wider and broader than perhaps we originally anticipated. Trumpt extent do politics the dollar . You go slightly softer in the asia equity session. The Deputy Governor said, you have gone far too ahead of yourself in terms of potential rate cuts. The aussie dollar came back to earth. Deputy governor guide to bob basically said the Deputy Governor basically said the probability of a rate hike in february slips from 46 to 33 . The market has reevaluated and readjusted the scenario. , up too absolutely dealt 16. 51. Essentially, traders needed something more aggressive than a mild rebuke. Some attention to fx, some attention to currency has been paid. They want something more aggressive in the sidelines before they sell that particular market. Abm says their shortterm target is 117. Keep an eye on the commodity complex. Up 1 8 of 1 . That is on your gmm. Juliette saly has your first word news. Greece has been approved for a new conditional bailout from the managerial fund. They said its executive board has approved a new long worth as much as 1. 8 billion. It ends two years of speculation of whether the imf would join in on another rescue and get the seal of approval for area creditors. Greek Officials Say to people have been killed and more than 100 injured after a powerful earthquake in the agency. Sea. Official agean the earthquake happened seven miles northeast of the island according to the usg logical survey. U. S. Geological survey. Japanese Companies Operating in the united kingdom. That is according to the Japanese Foreign minister in tokyo with Boris Johnson to meet officials and Business Leaders and investors as well as british is this present this. Has used its Bank Operations to produce its supply of cash. Bringing. 9 billion, this week to 75. 4 billion, the most in six months. That is after demands driven by tax and Dividend Payments pushed at overnight to a fourweek high. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus . Manus juliette, thank you very much. The prism of risk that markets are looking at. The Foreign Exchange market, mario draghi, donald trump, all stole the show. Dollar, punch to the one to the euro, if you are looking at the dollar falling to a year low after bloomberg reported this is our scoop. Robert mueller is looking into the president business transactions as part of his investigation of trumps ties to russia. Mark cranfield is there for us. The dollar cannot catch a break. Impact the dollar. The question is, are we putting in a lower level here . Are every going to hold here . Where is the next shoe going to drop . Just gone. P has both as far as the market is concerned. He was seen as a positive at the beginning for all things america, good for the dollar, good for equity markets. Now we are going the other way. The Foreign Exchange market sees trump as a negative and the United States are going that way. The dollar is the clearest signal when there is a mistake or perceived as being something wrong in washington, the dollar is the first to get hit. We have to get over that the four nations market has to get past the fact that trump is no good for the dollar. It could take a while is trump has not brought any new legislation for the economy. He has not done anything to boost the economy. Tax reforms could be a long way off. With gettingly do something through congress. A quick win for him might turn the tide. Manus a look back at one of the columns we wrote. The dollar should raise the risk of the dangerous risk of equities. That was on the 19th of january. On the ecoside, it is not that story. , given foc, you think what we heard from janet yellen two weeks ago, you think the fomc next year will make any difference to the dollar . Can it get any kind of baseline . Guest if it does, it will be marginal. Yellen was saying inflation was undershooting so its not getting help on that side. The fiscal site is not coming through and quite rightly. The market is not willing to price in a rate hike by the end of the year. We are less than 5050 chances for another rate hike. The fed next week will focus more on trimming the balance sheet. They might Say Something about that. That will give a small boost if anything to the dollar because they have been expecting for some time. When they start trimming, it will be very small amounts over a gradual. Period. Manus they will take any option they can get for them. Thank you for being with us this morning. Engineering Contracting Company in spain and we got some breaking news coming through for you that. They are confirming they are studying a bit. Bid. Omes from a they are looking at a bid coming in from peppered us. Abertis. Lets revert back to the fx story. The global head of fixed income research. No mean feat. Two jobs for the price of one. Christ, the dollar, 1973, we had watergate, 1986 we had the irancontra for and and then we had the Monica Linsky affair. All these occasions, it was politics. He reare again, the trump extension. How bearish are you on politics further . G the dollar for guest we are bearish, but the most important politics are trump having the weak dollar based around trade. Manus i do not think donald trump set out to transfer the dollar. I struggled to think donald trump went all out to get a Russian Investigation to get the dollar back. Say iswhat i mean to there are two dimensions of trump. One is the stories that come about. In terms of policy, there is an implicit weak dollar posey linked to trade to make America Great again. That is a big influence on the dollar trend in the median term. In the shortterm, the scandals are important. But it does set the trend in the dollar. Manus you think the rate differential argument will rise again, excuse the pond, first of all, can the fed to another rate hike by christmas . And is that rate hike by the end of the year . Guest it is important. Even if the fed what a hike, its not necessarily good for the dollar because it would be about what other Central Banks would do, as well. The fed was heartfelt the block. The fed was the first off the block. Thats why the dollar has been weaker. Manus going back to the argument of positioning in the marketplace, that is what i got for you here. The dollar, the net dollar positioning is fading, the lowest errors in four years. Said,everything you just think the dollar might reassert itself in the latter part of the year. The positioning of the market is the most bearish in four years. Thehat the beginning of unwind or is that in the midway of and unwind . Where are we in the process looking at the dollar . Guest i think we are in the middle of a multiyear downtrend and the dollar. It will weaken this year, next year, and for a number of years to come. In the shortterm, given how fast it has fallen, i think there is the possibility that in the next month or so, you could see a bounce in the dollar because everybody becomes so quicklyon the dollar so that always went a risk that always runs a risk of going down. Paper, 3 billion, tenure the government ratio was the lowest since 1999. I wonder what that says here. Downup 52. 5 of the paper, by 68. 5 paper. People do not seem to want to buy inflation protection. And my overly reading into this particular auction . Guest it summarizes sentiment in the market. They do not think that is inflation. It seems we dont have any inflation anywhere in the world. Manus does that change the dialogue for you . Guest i think next weeks meeting wont say much. It wont have much of an impact on anything, up one the fed adjusts its balance sheet, there will be a yield. Manus the global head of g10 fx strategy, the clock is ticking on brexit. The second round of negotiations and the britain has the transitional yield. This is bloomberg. Manus its 2 46 p. M. In hong kong. Lets go to bloomberg is a splash with Juliette Saly. Juliette toshiba and Innovation Network of japan will hold a Public Offering of their stakes their gear in switzerland, raising 2. 4 billion. Toshiba will sell its stake for whatever 4 billion while the Government Back incj owns the remaining 40 . They plan to sell the entirety of their stakes. Microsoft turnaround plan got back on track in the latest quarter, one might rising sales of Internet Software services. Prospects in the fiscal Fourth Quarter exceeded estimates and adjusted sales rose 9 . Motor phone has top estimates with firstquarter revenue growth. They grew 2. 2 compared to analysts1. 5 . Its a good start to the year in europe. Growth accelerated across africa, the middle east, and asia pacific. That is your Bloomberg Business flash. 28 gaverexit, michelle no ground on the second round of the talks. Branier saidrau britain was willing to accept a transitional deal which would include Free Movement of eu citizens. They cite a senior cabinet minister. We have the global head of fx. Flow on the pine, what caught my eye in the morning was this. Bluebay asset management. You have to go back 40 years to find a country this politically risky. Do you agree . Back in the 70s, the u. K. Went to the imf and we are likely to return their once more. That is if your market thats it. I think those are aggressive calls, certainly not on politics, but lets put it into a chart for you. This is gdp in the 1970s. Here we are now. You think we will be heading out heading back to the imf for a bailout . , in the 1970s, there was the oil shocks that decimated economies around the world. You also had rigidity in the labor market. We do not have that today. The other thing you have with the u. K. Today is that there is still Strong Demand for guilt. Itd have as much of that currency in the 1970s. Manus has that even moved . The absolutely defective, the pound is a reserve currency of absolute decimation. Rankedit is not the top currency look at it this way. 60 , ther takes up by euro takes 30 , at the bottom you have the yen at 4 or so. The pound runs at two or 3 . It is still a reserve currency that it is not necessarily the future. Manus interesting. Who would have thought that when they launched the euro . From anotheris different houses, as the brexit negotiations i was not being disingenuous by focusing in on for example, if there is a transition deal, that might change the discussion. I want to put up the euro sterling chart is the more verification is at the european level in the brexit negotiations between margate, etc. , c. , from the present you look at, i think saving the pound against the dollar is the dollar. Guest i agree. Manus i think it is fascination bets safety from piracy in terms of the euro. We are not far off it. Guest i agree. The way to look at the pound is really more the euro than the dollar. Ishink its important there clear traditional arrangement. There is no chart that is a complete deal that can be put together in the pound we have. The other question is, also what the bank of england will do in august, whether it a do go for the rate hike or not. They are sticking to their guns in terms of the rate hike. We will bemorning, talking to the former u. K. Chancellor. That is ken clark on our weekly brexit show. This comes to your screens at 9 30 u. K. Times. We are going to look at the we keep an eye on that. What a Beautiful Day out there. Cannot wait to get outside. This is bloomberg and the open is on. This is bloomberg. Manus its just on 7 54 in london. Stocks to watch everybody. And out will take us through some of the main movers in a while. What you are seeing, a little bit better than the market anticipated of it organic revenue grew to. 2 . Where was the growth 2. 2 . Where was the growth . We have made a good start to the year in europe where our commercial momentum remains robust. That was the word. Keep an eye on acf and aver abertis. But the money end. Put the money in. Bid a bit out there out there. What is the relationship between the euro, the rise of the euro, and the equity markets . That is the question. The correlation has turned negative. That is something we will discuss. Futures at the moment indicated flat at the moment. A little bit lower on european trading to start the day. Manus ogwumike. Will come back. Ack. Elcome b mario draghi has encouraged markets to look for patience. Have a look at the eurodollar this morning. You are seeing a rise. That is the consequence for the equity story in europe. Rising again on the euro. These are the futures for you at the moment. Down. 6 . It lower, vodafone should do quite nicely. A bit ofeeing softness, because you had Global Equity markets making records. We are now at that opening. There you go. They are procrastinating in the u. K. There you go. It went red. Anna edwards is standing by to take us through. The devil is in the details. Anna European Equity markets there. Looking at the sectors on the move, we have well securities down. Telecom moving to the upside. In terms of the earnings story, materials is the weakest sector. Momentum is generally lower against across European Markets. Perhaps some individual interesting stores around the earnings. Lets have a look at what is happening on the guilt trade. It kept pushing up the past few days. Just moving away from that as we see gilts getting a little bit of a bit. Stocks less popular this morning. Weather adding a bit of a boost. How much is that just about the weather . The politics are interesting. We talked to Simon Derrick earlier on. The boe trumping conversation at the moment. There seems to be momentum building toward a transitional arrangements and implementation phase. The trade secretary acknowledging perhaps that would be a good thing. This is a chart we dont often do on this part of the program. The m a story. That has seemed to Gain Momentum as well. We have quarterly numbers in terms of the change in m a volume and deal count. Thirdquarter numbers not going to look as good as the first or second quarter. Really interesting stuff. Lots of private equity deals coming through at the moment. An increase in deals in europe. The first half, average premium was some 22 . That was a drop. A lot of interesting things on m a coming through. Seetis we seeabertis we abertis in the crosshairs with acb. Manus m a is definitely alive and well. Lets take a look at some of the movers. Have a look at this. We have oil services. There,ny at the top theyre secondquarter earnings. He raised their outlook for the mining equipment. That was below the estimate. You have that operator coming in on the downside. You have a Nordic Company coming in with numbers hitting the take. They delivered the same level as last year. Their earnings was below what the market wanted. Lighting on the downside there. We caught up with the ceo. J just they just missed on their overall numbers. Have a look at the buy side on the bid side. Vodafone not exactly rolling away. The euro. I have been talking about it for the past couple hours. Mario draghi advised of the ecb would discuss the possibility of tapering in the autumn. When does autumn begin . The small matter of president trumps business transactions coming under investigation in the u. S. May also play a part in the move. Lets get the highlights in the ecb statement. A substantial degree of monetary accommodations is deleted for underlying inflation pressures to gradually build up in support headline and inflation developments. Also unanimous medication in no change to the guidance. Also we are unanimous in setting no precise date for when to discuss changes. We only have to wait for wages and prices to follow course to our objective, to move towards our objective. The last thing the governing council may want is actually an unwanted tightening of the financing conditions that either slows down this process or may even jeopardize it. There, theo draghi head of the central bank committee. Is with us. Exchange, something right in their face. They didnt get an aggressive enough point, did they . They got some attention in terms of the euro. This is the Bloomberg Euro index back at 2015 high. The fx markets, did they need something more aggressive to move them . Bilal absolutely. Past, theook at the ecb has talked about volatility sharp moves. Arkets the market is expecting a september announcement. Manus that is autumn. Bilal we spent time yesterday on wikipedia to see when autumn starts. It starts in september. Is it the first of september . Bilal i guess wikipedia is not reliable. We think it will be september. Manus in terms of what level of to you get in 2018 level of 2018, what level . It would mean a rapid wind down of qe programs. Given his comments yesterday, given the data, we probably will be more confirmation of inflation picking up. Xe. Us lets have a look at f this is the forecast for the euro going through the end of the year. This is a bit anemic to me, given the momentum there is in the market. Second quarter next her, which is aggressive according to you. Is that underpricing the market . Bilal i think so. I think we are in the midst of a major in the euro. 120 is not so far away. Evenyear we get to 130 and 140. Manus 140 by the end of next year. Do we stop off anywhere along the way . Bilal we always will. It wont be a straight line. Typically, there is 5 correction and so on. One shouldnt miss the fact that there is a trend in place. Over the last four or five years up until this year, the euro was in a clear downtrend. When you step back, there is a clear trend. When youre in the midst of it, it didnt feel like a trend. There was a trend. Manus this is a multi in the same way you give me a multi trend. The dollar, this is a beginning the momentum positioning, when youre talking, they want to scale back in . Is this the beginning of a significant repositioning for them . Equity money came in at the first half of the year. If you have the equity story and momentum story, it is a multiyear buildout. Absolutely. People are generally underweight from a Bigger Picture perspective. Investors want to buy. At the moment, the challenge is that the euro is on the high, so nobody wants to buy. There will be this kind of support. Investors. Erterm more speculative shortterm investors are already short euros. Longerterm investors are the way to reenter. If i look at the risk and reward, my risk is italy . Bilal the risk is italy. Greece is not relevant for the fx space. Be question is, how will elections affect currency markets . That is too far away to focus on. Manus always great to get your input and thoughts from nomura, where you are the head of global strategy. Everything you want is tv if youre a bloomberg customer. The chart, the functions. You can have a look at everything that is going on throughout the history of the show. You can send a question to the guest as well. Next, we are going to check in on some of the movers. We have an interview for you. Ceo. Ve the investec this is bloomberg. Is a 14 a. M. In london. Welcome back to the market open. Two words are driving markets. Bids and beats and sentiment. That is what is hanging over the market. There is this like a belief in the markets as you go to close or trade, because risks are rising in terms of the political nuances in the United States of america. You have this extension of the investigation into donald trump, and that is holding over the market. The question is, what happens next . The ftse holds it the ground. Vodafone gets a little bit of help there. The dax down. 2 . Juliette saly is standing by with the business flash. Juliette. Juliette toshiba and Innovation Network compression of japan will hold an initial Public Offering of their stake in lan dis. 60 stake. L sell it the companys plan to sell be entirety of their stakes. Pay safe has received an offer. Operated lues the operator at 2. 9 billion pounds. A mobile company is challenging a u. S. Treasury department fine for violations of sanctions against russia. It says the oil company broke ukraine related sanctions. The violations are said to have occurred in may of 2014 now secretary of state Rex Tillerson was ceo. Vodafone has topped estimates h his first order reagan firstquarter revenue growth. Ceo said the comey psy good start to the year in europe. Said the company saw that start to your in europe. That is your booze that is your Bloomberg Business flash. Bring theant to viewers part of the reason why you are seeing that moving european equities. And europeaning stocks reassessing their propensity to drive higher. You want to focus on the yellow. That is the correlation between the Euro Currency and the equities, back in the negative zone. We are back at. 6. This relation is important. That is your equity overtone story. We will have another conversation. We will go to johannesburg, joined by the ceo of investec. That and much more. This is bloomberg. Manus it is 8 20 a. M. In london. Lets focus our sights on south africa. The first interestrate cut in five years. It was a surprise. Probably wont be enough to break the rounds. Joining us now from johannesburg is stephen koseff, the ceo at investec. Great to see you this morning. About that blind side from the central bank. They came out, cut rates. Most of the markets werent ready for it. Were you surprised . Do you think this is a beginning of a new run to the downside in terms of rights from the central bank . Rates on the central bank . I personally wasnt surprised. Some of my people were. You have a weak economy. You have inflation in the range. I think the economy needs help. I think that is why the government was correct to cut rates. As long as inflation remains moderate within the range and the rand remains within range. Manus you talk about south africa. It is key. More than 50 of your business comes from that part of the world. How are you diversifying risk . Things are slowing down. Tell me what you are doing and seeing on the ground in terms of south africa and the economy and the business community. I think we still see a reasonable level of activity for our business, but we know retailers have seen a big drop off in their revenues. Confidence is not that great. We grew up in an emerging market. Markets can be volatile. We are used to the volatility. We always stay long look at it he. Long liquidity. We are not seeing a lot of space at this point in time, but Economic Activity is week. Manus indeed. The point of, if you are diversifying are looking to diversify, do you have an acquisition plan . Stephen no acquisition plan. We are not acquiring anything at this point in time. Manus i think we have covered that one. Return to the bigger issue. I am reading an article from the former minister in south africa. He says it is time for jacob zuma to go. He talks about democracy. I think the president should move aside. That was his words. Would you agree with that sentiment in terms of it is time for you my to go, to rehabilitate the economy, the Credit Rating . Gordon is a politician, and that is for the politicians to deal with. What i believe in it that we need to reorient the economy. Fix some of the issues around the structure of the economy. You cant run the economy if you have it is up to the politicians to choose. We have a chance every five years to vote. That is our job. As opposed to the currents policies we see coming out of the current government. Manus lets talk about one of those. We started it conversation with the rate cut from the central bank. There has been a move to change the mandate of the reserve bank of south africa. The socioeconomic wellbeing of its citizens rather than inflation. Your interpretation of that . Do you have any words of wisdom or critique on that move . The individualk who made those comments is not an economist. I think we are quite happy with the current, as business people, we dont want inflation to get out of hand. We went to protect the currency. Discipline from the central bank has have the country in good standing. That is the appropriate policy. The current policy of the central bank using inflation, affecting the value of the and you can afford lower Interest Rates. It is the right approach. I would not agree with that statement at all. Consequence stephen there are other ways to uplift the economy. Manus how does it become business from . What is the policy you would want to see to convince you that politics is moving forward for the business agenda . The most important thing for me at the moment would be, what are we going to do with the way state run enterprises are run . How are we going to get them to be run a more commercial grounds . And that they dont become a burden on the state. I think that would be number one, lets fix the structure of state run enterprises. Lets move to a model where you ceos, and theth ceos appoint people to run the business. That would be the first step. I think there are areas that can make a difference. There are many places in which can become more business friendly. We can take some jobs coming out of china, the low type steel jobs, and not have too much burden of regulation. That should compete effectively. Manus those are the policies from central bank. That is your message to government, which brings me to the credit downgrade. Stephen monetary discipline is important. Manus those are the lynch pins of any economy. We had credit downgrades on south africa. From where i sit from a market perspective, i look at the bond present, do you think they will move there with another downgrade, or when can south africa emerged from its downgrade cycle . Challenge think the for agencies at this point, because they still see you have monetary discipline. There is fiscal discipline to we need to continue to demonstrate we have fiscal discipline and managing discipline. The problem is the economy is not growing. About 18 months ago, we traded the Ceo Initiative where ceos tank on a number of projects to help assist the government in terms of getting the economy going. Those are taking time to get executed. We need initiatives like that. Frame tohe policy become more business friendly. There are lots of things in the country that are not business from a. Manus lets give it to another burning issue. Your business is in south africa. You have a strong business presence in london and they united kingdom. Im looking at what john carter said yesterday afternoon. Deutsche bank are preparing for a hard brexit. This finds the pants off of me. This frightens the pants off of me. Be worst is always likely to worse than people can imagine. That kind of line from a very significant ceo puts fear in me. Brexit, how are you beginning to prepare . Are you preparing for that kind of scenario . Stephen our bank is mainly a u. K. Bank. Our what manager is a u. K. Wealth manager. They are not been affected by brexit. The area where we could be affected is in our bank. As i mentioned, we havent irish branch. We have an irish branch. That is the key effect. What we are more worried about his what it is going to affect the u. K. Economy if we have a hard brexit, and what kind of a shock to the u. K. Economy will that generate . The pound has taken most of the heat. Mediumterm, i think a hard brexit is going to be. Ifficult for the u. K. Economy you get a lot of unknowns. One needs to be reasonably defensive, mainly because of economic intent of a hard brexit. Prevails, butense we have to be defensive in terms of the way we conduct our business activities. Structurally, the only thing we have to consider is, do we treat , apply for a banking license in ireland . Manus great to have a conversation to this morning. Ceohen koseff, investec joining us. Are shapingw things up in the trading day. The euro marching higher. Stocks trimmed their gains. Green. Holds in the the dax down. Paysafe up over 8 . Lets turn our attention back to the u. S. We have this investigation into russian meddling, and it has turned its attention to trumps business infections. Business transactions. The president said this was a redline. Robert mueller could be fired. It sends the dollar lower. Joining us now is kathleen hunter. It looks like the twists and turns, that this is a new redline. President donald trump said, this is a redline for him in terms of where Robert Mueller is going. Kathleen i think it is interesting. Says he is crating a redline for a special prosecutor. That in and out of itself is unusual and problematic. The idea of a special prosecutor is he is supposed have independence and latitude to look at and follow the investigation. When you think about you when i come if we were being investigated by the fbi and send you can investigate this but not bad, that is not how an investigation works. I was reading a good story on the way in. This this be reminiscent of watergate come up where trump will try to fire an official . There are some he twists and turns in this. How serious with the fallout be if trump tried to remove Robert Mueller . Kathleen i think the fallout would be serious. We have a story this morning that quoted a republican senator , and he said that he didnt think it would be a good thing for trump to fire Robert Mueller. He said he didnt want to comment on it that much, because he couldnt even believe there was a possibility that these conversations can be occurring in the white house. By not commenting on it, he sent a message. That is what republicans are saying. Manus a democrat from rhode dont think that is politically survivable. I dont care how much Collateral Damage he has to do in order to put himself into a position to have somebody fire moller. It is a tenuous situation. Was a scoop by bloomberg. What does all of this mean for the Reform Program from trump . Lots of guests have come in and said, look, he is getting so caught up on this side of the fence that he is got to double down in terms of delivery. Health care has gone to the wilds of the west of ireland. He has to deliver on tax, pull something begot of the back. Kathleen i think pulling a rabbit out of the hat on tax reform is becoming more difficult. Lawmakers, i think it is eroding confidence on capitol hill. It is not quitting incentives for democrats to want to work with him. Manus im going to pull up his Approval Ratings now. Is trumps approval poll average and this is his disapproval poll average. It is getting tougher for him. Kathleen you can see the gap there. It is getting wider. The terms are not that far away. Midterms are not that far away. Those are coming for her than we think. The lawmakers are going to be concerned about their seeming concerned about saving their own skin. Manus that is the beauty of politicians, me myself and i. Thank you very much, kathleen hunter. The very latest on the twists and turns on capitol hill. A reminder, if you are a bloomberg customer, you get tv. The charts, everything we put together. Questions. That is my last guest. Join the conversation. That is what we want you to do. Click onhing tax any thing you want. Good things come in small packages. That is what we are told. This is bloomberg. Manus welcome back. Lets get to Juliette Saly standing by with your first word news. U. S. , thein the special counsel investigating possible ties between the Donald Trump Campaign and russia is examining a broad range of transactions involving trumps businesses and those of his associates. Fbi investigators are looking at russian purchases of trump properties. Greece has been approved for a new conditional bailout from the imf. They have improved in principle a new loan worth as much as 1. 8 billion. It adds to speculation on whether the imf would join in another rescue. Greek Officials Say to people have been killed in more than 100 injured after a powerful earthquake. Many have been said to be hurt after an old building collapsed in a popular tourist destination. Earthquake north koreas economy is now growing faster than its southern neighbor, helped by military spending, including the testing of nuclear weapons. ,ccording to the bank of korea and expanded from a year earlier. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Manus thank you very much. As been more than a year dont forget your nichols. Recession, the midcaps pulled back harder than most. , global headarri of small and midcap equity strategy at j. P. Morgan. Fund somewhereon has an allocation. We are going to take some risk off the table in terms of the headline risk. This is a manifestation of what goes on in the real economy. To a still want to belong with a run like that . Eduardo that could spook some people. What take a look at history can digest. Decemberok at japan 1997, it looks like the markets today. Low Interest Rates, low yields. After 20 years, before midcaps with the clock you had to buy. You double your money in the small midcaps. You get no return on the topic from hundred. That chart may continue for no 20 years. Manus that is a heck of a call. This is the real economy. Small to mid caps are the real economy. To what extent do you look at the European Equity, small to mid caps, versus the u. K. Lets start with your. We have a whole host of data. Exposure to europe and the global perspective. Eduardo every year in equity investing is important to get the important stuff right. Thingsar, there are two to understand. One, is not a year of recession. We are still talking growth. Equity markets are going higher. Two, the world is running two separate races. There is the race of countries that have recovered were equity markets have rallied come equities are expensive. Hat is the u. K. , u. S. That is not where you want to be. There is the race of those countries that are still at an earlier stage of recovery, delivering much better growth, trading and cheaper valuations. That is where you want to be. Manus in terms of the u. K. , there is the story this morning 1970swe are past on the and a bizarre scenario with the imf offering a bailout. You have certain areas you want to be exposed in the u. K. Run me to your thinking. Eduardo as you mentioned, small midcaps are the domestic economy. When they are slow, you want the domestic cyclical exposure. Those perhaps have already run and are no longer cheap, and therefore exposed to the domestic slowdown. You want to do in the u. K. In the small midcaps is six is invest in those companies that have exposure to international. Or those companies that have nothing to do with that and are still cheap. You go to greece and spain in terms of some of the periphery you say there. What is your most out of consensus call . All of that makes logical sense to me in terms of recovery. Eduardo the most out of consensus view today is, you have had a year where equity market started strong. We got to april, and most of the , were movingtegy into the fiscally we get part of the year. The april 2 today you have sell side. Our view is different. To tie in theing next pullback in the market and try to get in and out, that can be a costly mistake. On key is to keep the eyes the finishing line and keep your mind on what is important. What is important is this is not a year of recession. We have growth. Stick to the great stick to the traits it working. Stick to the traits that are working. Manus emerging markets are not necessarily crucify just as badly. If i look at emerging markets, we are up 23 so far this year. You have a strong this rally since 2015. Emerging markets are performing very well. Apply . See a quid pro quo i think emerging markets on the periphery are all in one basket. That is all a good place to be. Look at what you have seen in the ftse 250, up 60 . But that the msci of spain and the small index, down 40 . If you in the periphery of europe, you still have early days of a recovery. Growth as opposed to 10 in the u. K. It is a good place to be. The emerging market is giving you the same kind. Both emerging markets, periphery is where you want to be. We started the conversation with a potentially bullish outlook. There are two big issues. One is the potential for trade wars and the second is the exit. Is brexit. How big are those two collateral risk strategies . Eduardo i think you touch on an interesting point. Anyway, the market today is perhaps be having is that there was no tail risk. Volatility is that a low. Volatility is at a low. The rules of engagement in global trade may be changing. Mind,nt is, with that in this is perhaps one of those times in history where it should be trading at a premium. It is maybe more of a domestic story that gets less impacted by any change we may see in global trade. It is a safer bet. Manus what risks do you think are the most to the midcap story . It is the shift from Central Banks that you could be in a new zone conversation on rates . Not new rates, we are coming to the end of potentially of julie in europe. Qe in europe. Of that has a pleasant minus in your world, hasnt it . Eduardo it is interesting. For the last several years, we had concern about Interest Rates and are they going high. Interest rates are not what we should be concerned about. Interest rates are only going to go significantly higher. Economy strengthens to withstand that pressure. The economy is strong to take higher Interest Rates. There will be a point at which we worry about rates. Were not there yet. Manus that is why you are the global head of small and midcaps. Good to see you this morning. Thank you so much for joining us. , global headarri of small and midcap equity strategy over at j. P. Morgan. Up next, we will get into the conversation. We will break down the numbers. This is bloomberg. Back to theme market open. Their First Quarter revenue. We have Bloomberg Intelligence on the spot. How . Why . Europe. Mobile data demands of love them to increase revenues on the Global Demand side. Manus there is a bit of competition in germany, a little bit about around europe is a. Erhan to an extent. We see a bit of wheat revenue trends in germany. There is an impact of that as well. Away brexit is never far from anybodys mind. Lets talk about the performance in the u. K. How did that deliver . Do you think there is anything in the report . Is there weakness coming from brexit . Erhan brexit will affect the enterprise, but the mobile sector remains more resilient. The main problem is to address the issues they face with billing systems, and this is slowly progressing. The stock is up 1. 5 this morning. In terms of competing in the rest of europe, do you think the company has it right . Erhan i think they are positioning the right direction. The European Market is moving to convergence, they are trying to catch up with the incumbents. The smallerk at competitors, they are improving and can become a threat. Anna thank you very much. Taking down the vodafone numbers. Stay with bloomberg tv. We have the former u. K. Chancellor. He joins francine. Francine more russian revelations. The dollar drops as the investigation into trump s links with moscow is centerline in. Officialsesident says will reassess stimulus. Ers message to britain as talks end with heated divisions. This is bloomberg surveillance. Program, later on the we will be speaking to the former u. K. Chancellor and outspoken proeuropean, ken clarke