Transcripts For BLOOMBERG On The Move 20160822

Pfizer is a to be close to buying a rival for around 14 million. Caroline manus, we are looking ahead to the market open. A bit of profit this monday, similar to what we saw on friday, the futures market signaling a down day in europe. All eyes are on central banks, on jackson hole, as we see that it is a day of dollar strength. Today we could see 2 10 of 1 being wiped off the euro stocks 60. Manus caroline, yes indeed. Lets have a look at that risk radar. Betterlar is bid, yen offered. Fischer signaling a 2016 rate hike is on the cards, less than a week to go until jackson hole. Dollaryen, you have movement. Very much this divergent policy, kuroda also indicating that the bank of japan wont hesitate. This is in a newspaper article over the weekend. Bloomberg, a 51 probability of a rate hike, up from last week. Keep an eye on your government notes. They get a twomonth high, oil indicates that it adds to the rhetoric of the bond market. Hedge funds cut their bullish bets by the most in four months in u. S. Securities are headed for the worst month since june, 2015. What do you expect after the longest run in four years . Speculators are not running any risk when it comes to opec. They saw what happened in doha, and they are confident about a freeze. Speculators cut their wages by 26 . You are seeing a Short Covering rally, down 1. 5 . Lets get over to Juliette Saly with your first word news. Juliette thank you. Oil is falling after its longest run of gains in four years as riairaq looks to increase expor. They say they will increase shipment by 5 of the next few days. Oil entered a bull market on thursday amid speculation in formal oh tec opec talks. The bank of japan governor Haruhiko Kuroda says there is sufficient chance thie centralbank will add to its actions. They say the boj wont hesitate to discuss a comprehensive review at its september meeting. Said to be working on a deal to buy a Biotech Company for 14 billion. People familiar with the situation say an agreement could be announced as early as today. Pfizer is expected to pay a premium of about 26 on to close. A spokeswoman declined to comment. Divation did not immediately respond. Japans Prime Minister made an unusual appearance at the real olympics. Shinzo abe popped out of a green pipe, dressed as the videogame character super mario, one of his countrys biggest cultural exports. He was there to highlight the 2020 Tokyo Olympic games. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. This is bloomberg. Manus . Manus thank you. The Federal Reserve vice chancellor Jeremy Fisher has signaled a 2016 rate hike is still under consideration. He says the u. S. Economy is close to meeting the feds goals. Days before janet yellen speaks of the annual symposium in jackson hole. Lets welcome our guest host for the next hour, the senior economic adviser at hsbc, stephen king. Great to have you. Representation what better way to show us . The last week minutes, how close are we . Consumption at 1. 6 , it is interesting they come out a week before jackson hole. Event like everyone at the fed is trying to position themselves for the jackson hole story. Everyone has their own opinions about what should be done. John williams in San Francisco talking about the idea that the structure rate of interest is much lower than has been the case previously, less room to raise rates that have been the case. At the end of last year, the feds brought expectations were for increases. Its not like they are to grappling with unusual data, trying to work out what to do. On the inflation front, i think fischer is right. The difficulty is that the growth rate is still very low in the u. S. , and that is partly because of productivity growth rates being incredibly low. That thesuggests structural level of Interest Rates over the long run are lower than previous, which tells you how much you can move actual Interest Rates. Caroline stephen, is the market right . It is being buffeted by remarks from the Federal Reserve. On my screen, bullish bets being slashed in terms of u. S. Treasuries. We are seeing yields push higher. Some are seeing them fall by the mostly have seen since april. Dollar also seeing strength will that remain for the weekend . Of a going to get a rate hike as soon as the next meeting . Well, these could be famous last words, but i dont think so. I think the problem is you have some people at the fed who are relatively hawkish, who would like to get on with raising Interest Rates, but there are plenty of others who say we have a structural problem, not just in the u. S. That elsewhere, and that structural problem of low growth and productivity is enough to make us wait and see. There was an interesting article by ben bernanke on his blog the other week, pointing to the idea that with the slow rate of productivity, the uncertainty about the future, the best bet to make, perhaps, was to keep Interest Rates unchanged rather than a hawkish position. Yellen, i suspect, will be lesch less hawkish. There is still time to wait and see. Hsbc says they wont raise rates until next year, rather than this year. Manus its interesting that fischer talks about the drag of the strong dollar, dissipating. I find that really curious, that refer to the dollar in terms of its drag. I cut up with she was this a vociferous. The dollar is quite prescient. The dollar is stronger than the Federal Reserve expected. Nothing to do with Monetary Policy, everything with the rest of the world. A global policy, currency war story. Will was that the rest of the world was exporting its deflation to the u. S. As that happened there was stronger dollar, you ended up with lower growth, lower inflation, and that meant that the feds own forecast hasnt proved to be correct. The fed had a working assumption, that the dollar was broadly unchanged in the future. Nexthappened over the couple years was that assumption was basically completely wrong. Caroline [laughter] stephen king will be sticking with us. Great to see you. Well see. Up next, more about central banks. Rajans replacement. We are live in mumbai to break down the new governor of the r. B. I. Later, we hear exclusively from the ceo on how he favors opec freezing oil output. And still to come, europe plans for life after brexit. Renzi posts merkel and hollande. We will give you a preview. This is bloomberg. Manus welcome back. Lets get the Bloomberg Business flash. Juliette saly is standing by. Juliette thank you. Japans biggest brokerage plans to hire bankers in the u. S. , resuming a push to boost its Investment Banking business there. The ceo has been a limiting jobs since shutting businesses in the europe and the americas to say 700 million and spent six years of losses abroad. This comes as he anticipates rising volumes emerging in stock offerings in the u. S. A bankis to investigate whose Compliance Program was described by a u. S. Regulator as a hollow shell. Million forned 180 violating Money Laundering laws by the department of Financial Services in new york. Its a suspicious transaction load between the new york and panama branches and a number of branches were at the center of the Panama Papers scandal. Uber has told investors it wont pay more than 2 billion for its main rival lyft, according to people familiar with the matter. Unsuccessfully sought to sell at 9 billion once while Investment Firm gm valued it at 5. 5 billion. And that is your Bloomberg Business flash. Caroline thank you. Lets talk india. Patel has been chosen to take over the central bank. As a lesser personality and more politically aligned with indias Prime Minister. Lets head out with our executive producer in mumbai. Give us a sense of who this new leader is. Patels urjit . Indias government has clearly chosen continuity over change in promoting him as the governor. Patel gets another threeyear term shot at being the governor. He was the author of the inflation targeting regime that the governor put in place and has been seen by the market as a bit of an inflation hawk. He takes overly, at a time when two important things are happening the inflation targeting regime, and the Monetary Policy committee. That will be deciding Interest Rates from here on. The rba governor would also be an important component. More importantly, he is seen as someone who is conservative, as a recluse, doesnt give many interviews. As good,ave viewed it because the rc bond yields are being pushed lower over the mediumterm. Manus harsha, what can be expected in terms of Monetary Policy . Its right out on the boundary of what rajan set. Re fortically, what is the this incoming governor to cut rates . There are two important factors to keep in mind. Consumer prices have risen to a 23 month high, making room for the new governor to cut rates. Also remember, oil prices are inching upward. To reason the governor had cut Interest Rates was because of the dramatic all in oil prices. Thats not the case any longer. Also betion will increasingly important, because there will be the Monetary Committee deciding rate. Harsha, thank you very much. A great synopsis coming out of mumbai. Lets speak to our guest, senior economic adviser at hsbc, stephen king. Stephen, give us your take on emerging markets. How much do they have their own freedom, visavis the Federal Reserve, or are they trying to work at with the u. S. Does before they do their own policy . Over the last couple years, they have probably had more freedom than one might have originally expected, partly because the Federal Reserve has not done what it set out to do. But certainly, some of the news over the last few months has been more encouraging for emerging markets, thats a much because the fed activity but because Commodity Prices have on boss and out, helping certain countries in terms of trade. You can see some Structural Reforms here and there is well. I think there is a sense that emerging markets have had a traumatic period, partly because of their balance of payments positions, and now looking healthier. On india, one thing worth noticing is that india has an Consumer Price target, odd Consumer Price target, because it is a largely influenced by food. One uncertainty is how much it rains and what happens to inflation. Our economist think the possibility of a rate cut is a consequence of falling prices over the next few months. Manus some of the markets up here the indian rupee against the dollar, local bond index rushing higher, 10 year government bonds at a sevenyear low. There is this expectation that relief departure gave a rally all the way around it in the market. From what we see of patel, what do you think the rest of the world questions inflation targeting, and now he is shackled to inflation targeting. First of all, rajan was someone with a very big personality. He knows that elsewhere in the world he was kind of arrival to the indian political leadership. Patel probably has a quieter affect in that way, he will probably ease tensions between the central bank and the government. But as far as emerging markets are concerned, the important thing is that inflation targeting is slightly different from inflation targeting of the developed world. The problem is inflation is too low, and it can be difficult to get inflation to where you would like it to be, and when you have efforts to do so you end up with asset price bubbles. Whate emerging world, really matters is trying to buy into some extra credibility, trying to say that we really are determining inflation lower, we are making a statement of intent, giving us extra credibility. You can do that either through an the Exchange Rate target or something else, but frankly inflation targets in recent times probably work better than the alternative. Caroline stephen, from a credibility point of view, where does the Investor Base c as the most credible buy . There is such a thirst, a hunger for yield, and emerging markets have been doing very well. Chinas borrowing costs have been falling. Where are your clients most interested . There are always questions about china, because there is lots of uncertainty about their impact on the rest of the world. Its the secondbiggest economy in the world, ad that matters in terms of its gravitational pull. It is worth stressing that Stanley Fischer sighted china as a reason why the fed hasnt acted quite as aggressively, the uncertainty. I think the interesting reason is that many of the emerging markets have been really seriously in trouble, becoming suddenly more attractive. Hunt for yield is back in the game, and that is with a country like brazil doing better than people feared, against tremendous economic pain. That has been something which has helped in terms of performance. Manus pimco over the weekend, saying that they have ample room to ease. It would probably look more risky. Certainly, theyre expensive. Im not sure about the risk although clearly there is uncertainty about that policy. As far as emerging markets, the hunt is back on for yield, the pressure in terms of balancing problems is eased to a certain degree. People would hope that the fed and others will be raising Interest Rates by now and they havent done, so central markets are back in the game. Of course there are lots of longterm issues for the time being. Manus politics might be an issue. Stephen king, from hsbc. We are minutes away from the start the trading day. Up next, we will look at the potential corporate movers in todays trading, including a french drugmaker. That could miss out on its pfizer by. This is bloomberg. Anna a beautiful morning here in berlin, but it looks as though stocks could fall on the open. They fell on friday, but a prophet took one eye to be caps on volkswagen. Big news over the course of the weekend, building up since friday. One plant has temporarily stopped production of the gulf model, its most popular model, after a dispute with suppliers. It threatens to reduce their earnings by at least 40 Million Euros per week, according to an analyst, which has been upped by others. This supply your dispute could hit vw. Its really expanding in golf and passat, which were hit on friday as well. Look out for that supply disruption. Also look out for a french drugmaker that could be rising on the open, because the u. S. Pharma giant pfizer is getting close to the drugmaker medivation, which means it will be pumping out billions to buy it itself. They had to rain back; they wanted to buy a previously for 9 billion, but pfizer seems to be skipping it up for 14 billion instead. It looks as though it will be an american turning of the cash when it comes to biotech, and indeed the pharma area. Manus if you look at the whole story, the prism of risk, it is about the dollar. Have a look at this. This is your gmm. Go into column two, and you can see singapores dollar down. The bloomberg dollar index of 4 10 of 1 , new zealand down, euro down, danish krone down. There is one pervasive story. Stanley fischer, the deputy chair of the fed, who has led the torch paper ahead of jackson hole. Futures indicate its down in london. It was supposed to be sunshine today, but its not. This is bloomberg. Manus good morning and welcome to on the move. City ofight in the london and alongside me, caroline hyde. Caroline has the morning brief. Caroline thank you very much indeed. It is fisher, feeling hawkish. The vicechairman signals a 2016 rate hike is in the card. India gets a new central banker, urjit patel, but will his policies be more of the same as the rbi . And a blockbuster drug maker deal. Pfizer is said to be close to purchasing medivation for 14 billion. We looking across the board to the futures market. We could see a little bit of gaining overall. We could see the futures signaling a little bit of weakness into the open. Remember, we saw profit on friday and similar moves are in play today as we see overall movement coming for the dax overall. At the moment, we are just down on the stoxx 600. This is fridays close, up by. 8 . The put the 100, up and running the ftse 100, already up and running. The cac 40 is already on the move. Tthe stoxx 600, just inching ino green territory. We have all of the latest. Reporter good morning. We are seeing markets, the stoxx 600, higher this morning. Closing down in the red on friday. We can see Telecommunications Consumer staples and health care leading the charge. Down, not surprisingly, our financials and energy. I also suffered on friday, also energy today, as we see oil slip. I want to take you over to the dollaryen today. It is the macro story of the week. It is all about the fed and the bank. We had the number two vice chair Stanley Fischer signaling that 2016 is on the table for a fed rate hike. On the other side of this thread, the bank of japan saying thereoda is suspicion that they will ease in september. Thoser, pushing comments further. Finally, lets end on some corporate movers. It is all about the Pharma Industry with pfizer set to purchase medivation for 14 billion. We had sanofi up on the news. This ends sanofis dream of purchasing the bio tech company. The german automaker has a lot of negative press at the moment. It is dealing with an unprecedented dispute with suppliers that will impact the Assembly Line today. Six back streets facing a partial production halt today. Caroline . Caroline that is one we will keep a close eye on. Thank you. Lets take a look at one particular stock that is raging up higher, coming from china. This is syngenta, of course. It is up to the tune of 11 , the biggest move we have seen since may of 2050. 2015. Why . The u. S. Security officials seem to say, ok, chem china, you are clear to purchase syngenta. That pushes that stock higher as well. Also, watch u. K. Gilts today. We can seek yields coming down ever so slightly for u. K. Gilts. This is the u. K. 10 year. We are at 0. 594. So, yields pushing slightly today in the united kingdom. But we have to be watching the oil markets. That will be driving sentiment across the equities today. Oil stocks have fallen in asia and in europe. The ceo of the italian firm hopes the informal opec meeting will lead to an Oil Production phrase. Oil production freeze. He told bloomberg why he thinks a middle ground will be reached at the end of 2016. Are going through a stabilization and a balancing, the equilibrium between the balance of supply and demand. I hope really that they can find awise decision to have solution. Men do what they do best. Lets bring in our guest, stephen king. One would not expect the ceo to say that. One thing that is certain is is. We are going into this gathering and there is a great dear of expectation that reminds there is a great deal of expectation that reminds me of doha. Nobody is taking any risks this time. A freeze could be on. What does it mean . A brief itself would be very good for the oil markets. Itself would be very good for the oil markets. The difficulty is enforcing a freeze in a credible way. Youve got the saudis and the iranians having a poor relationship, frankly. The saudis have a tremendous shortfall of oil revenue, which has given them a large budget deficit. Traditionally, saudi has been the swing producer. Will the others themselves cut back . You got this difficulty really. It is a political difficulty, not just an economic difficulty. Manus the very future of opec could will be at stake here. Saudis onetook the theent and then bang, market was on fire. All are producing at super high rates. The question is this. Do you think opec will continue as a lasting forest . Academicather question. Oil prices collapsed in the mid1980s. Everybody thought opec was finished. Then, Global Economic conditions changed. In particular, china came onto the scene. Chinas tremendous growth in the 1990s and beyond was helpful in driving Oil Prices Higher and higher. As they went higher, people began to think that opec mattered again. Now, the Global Economy is softer than people expected. China is showing signs of growing pains. The u. S. And the rest of the developed world want to live in the world of nominal gains that people have assumed. All of those things eat away at the demand for oil. Because of the fiscal positions many Oil Producers find themselves in, they want to produce more oil. So, it is certainly true that oil prices are higher than they were one week ago, which is encouraging for the Oil Producers, but they are still a long way short from where they would have liked to have been, and a long way short from where countries had assumed they would be when they made their fiscal budgets. Caroline this feeds into global asset prices and equity decisions. Give us a sense of the correlation when it comes to oil prices and risks out there. You will see just how much world stocks have tracked oil and the lumps and bumps we get within it. The blue line has been wti crude. World stock prices. And if you are looking today, we see oil lower by. 4 and indeed, the stoxx 600 is struggling on the day and oil and gas, as the sector that is underperforming. How long will this continue . Is it always going to be correlation when it comes to equity markets and oil . There is certainly a correlation, but sometimes the correlations which is, which is liquidity is unpredictable. If you treat this as a barometer of the World Economy if it is soft, then the world pressure is weak you can see why the correlation might come through. On the other hand, there are reasons that the oil price my ight collapse, giving a boost to oil consuming nations of the world. The correlations are not perfect, but at the moment, i would regard weakness in oil prices perhaps as an indicator of weakness in nominal activity, worries about high u. S. Rates knocking down global growth, all of those things not helpful for oil or equities. Caroline stephen king, great to have you with us. I am glad to say, you are staying with us. We will be talking about the german chancellor. Can the whirlwind tour boosted sentiment before next months summit . Ma sectors phar consolidation back with a bang. Plus, flirting with parity. It is not a great time to take the pound on holiday, but how much worse could be Exchange Rate get . We will take a closer look. This is bloomberg. Caroline welcome back to on the move. It is a pretty flat day on the stoxx 600, but there are some big individual movers. Glow to your bloomberg go to your bloomberg and type in stoxx 600. Who is the upper former . It is all about syngenta come up 11. 5 . The 33 billion deal gets teh u. S. Ahead from regulators. It looks like the biggest regulatory hurdle has been jumped. The u. S. National Security Officials say this deal is ok. We are seeing metals producers on the downside though today. Seeing metals into some weakness today. Lets dig into some of the bigger pictures today with the first word news. Kuroda says there is sufficient chance the central bank will add to the unprecedented easing. In an interview, kuroda said the boj will not hesitate to act after a company of review at the september board meeting. Is nearing a deal to purchase medivation for 14 billion. Pfizer is expected to pay a premium of 46 on the companys friday close. Medivation representatives did not immediately respond to phone calls and emails. Japans Prime Minister has made an unusual appearance at the closing ceremony of the rio olympics. Out, dressed as the videogame character super mario. He was there to highlight the 2020 Tokyo Olympic games. Global news 24 hours a day, powered by 2600 journalists in more than 120 countries around the world. This is bloomberg. Manus thank you very much. Now, while some analysts see the parying with the euro, for others, it is a reality. Even gone above the pound. Our guest host for this hour, stephen king. John, travelers are already getting a pretty tough feeling. This is the last time, the pound, butw to the it is already happening at the money changers. Exactly. According to travelers going to europe, they are getting a glimpse into the future, what some economists might say. It is important to note that this forecast from hsbc and ubs is not a place until 2017. Of median estimate bloomberg analysts are saying the pound will strengthen. So, depending on how negotiations surrounding brexit monthsin the next few and couple of years, we will get some idea of where the pound is going from here. Caroline not great for travelers. It is better for exporters. But is there any sort of upsi de for a weak pound . It is funny you should say that. He british Tourism Industry is experiencing some sort of a boom. His nose confidence is talking the National Business theidence is bucking national trend. China, they are seeing a lot of visitors from there. And lets not forget, the british staycation is just way too expensive for them now. They are going to the yorkshire moors, and they are having a nice holiday there. For business accommodation providers, it is a real boom. Manus lets find out whether he is off to greece or the mediterranean. [laughter] manus stephen, the very essence of this was how to join the euro. In a weird way, you are right. It will not be particularly pleasant for british holidaymakers. I personally would try to do what i still could do. I dont trust the weather at the yorkshire moors. Overall, i think the bank of england would like the pound to be softer. The u. K. Has a massive current account deficit. The obvious safety valve in these circumstances is a weaker pound. This probably would mean eventually higher inflation, all of the things that eventually have a rather unpleasant affect. It is worth noting that the retail sales figures from july were very strong, much stronger than was expected. Of course, foreigners have come on holiday because the pound is so cheap. Caroline will be investment still come, stephen . I know you have written a lot being the highest worldwide really, 7 of gdp. Will people still want to invest in the u. K. . Acids are cheap, but they are worried about where the brexit go. Tiations wil will assets are cheap, but they are worried about where the brexit negotiations will go. Exactly. They want to sell to europe as a whole through the single market. There is uncertainty about terms of access through the single market. Many of those japanese and American Companies might choose to go elsewhere in europe and that would not be good news for fundingg britains payment. Manus are we just enjoying a little bit of a healthy daze of the less messages of good data before the reality kicks in, in terms of the economic surprises when article 50 is evoked . I am not sure how citibank measures worth, probably not the hsbc. Way as ubs the data over the last three months have come in stronger than people expected. The problem is not so much what happens with retail sales, it is what happens with Capital Spending in the company intentions over the next year or so. What is encouraging is the pmis in the u. K. That suggests that something is happening in the u. K. Manus certainly, not if you go to heathrow, which will have to do in a couple of weeks. And stephenohn king. We are productivity personified on countdown. Says there. Kuroda is a sufficient chance there is more bank of japan easing to come next month. This is bloomberg. Caroline welcome back to on the move. We are 22 minutes into the trading day and it is all about Central Bank Trading policy. Federal reserve officials indicated they are considering a rate hike this year. The bank of japan governor has suggested the other side is open to increasing easing as early as next month. Kuroda says there is sufficient chance the boj will add to its unprecedented easing. Lets bring in our guest for the hour, senior economic adviser at hsbc, stephen king. Give us your sense on the boj. Will they still be looking to stimulate . Yes, of course. The yen is stronger than kuroda would have expected one year ago or so. So, there is no doubt the bank of japan wants to be seen to be doing something to try to offer some degree of stimulus. The problem of course, the boj has been doing a lot of things under kuroda, but not much of it has worked. The economy has not been completely transformed. This is worrying for the rest of the world because you have to reach the point where you have to admit you are reaching the outer limits to what Monetary Policy can achieve. Many would argue that japans weakness is not to do with Monetary Policy at all. It is much more to do with demographics and competition. All of these things matter more than what you simply do with Monetary Policy. Whether this will be effective is the question. Manus some would argue that negative rates in europe have been much more efficient in a transmission mechanism. So, it has been much more effective. But if it proves on in consequential in japan, it worries me that europe could do more of that same. They might not have much room to maneuver come the next recession. What are the alternatives out there . Negative rates are things that the boe and Federal Reserve have not been keen on. Uncertain on how it feeds through into the credit system. I think he was the debate between the relationship between monetary and fiscal policy. I think the central bank will be increasingly thinking, how can we give guidance to governments on what they should do without fiscal policy without us losing our independence . That is a big part of the debate. Caroline all eyes therefore, on the comments coming out of that meeting at the end of the week. If you are a dollar holder, china for example, pimco, you are looking out at the moment because you are bringing more money in negative rates. How much money can you make piling money into shortterm japanese stocks . You are getting positive again at 1. 24 on a dollar hedged three month japanese bill. These are crazy times, stephen, and it is all about being a dollar lender, not a part of war. I always get nervous when they talk about these free money schemes. There is always a risk that comes through at some point, but nevertheless, we are into very experimental monetary policies. Because they are experimental, they suffer from two flaws. The first, you are not sure how they work. The second, it might not be credible in the eys of tes o of the public. It will not work the same way that a typical Interest Rate cut will work. There is always a little bit of risk. Stephen king, more to come on bloomberg. [ clock ticking ] time. You only have so much. Thats why we want to make sure you wont have to wait on hold. And you wont have to guess when well turn up. Because after all we should fit into your life. Not the other way around. Everything is cool when youre watching a screen everything is awesome, when youre sharing a meme a voice remote, show me angry kings you know whats awesome . Everything apps that please, more selfies, endless hours of the best tvs brand new apps, shows to go, awesome internet thats super whoa. Everything is awesome xfinity. The future of awesome. This is on the move. 30 minutes into the trading day, the start of your trading week, lets see how the pictures are shaping up. This is about the dollar, the yen, about individual names that are moving. What has called your attention . Syngenta is absolutely soaring this morning, up more than 12 . The company has gotten the nod from u. S. Security officials to its 43 billion takeover. Chem china got its approval. Second, the stoxx 600 mining index. They are all down today, as metal and oil is continually under pressure. Stanley fischer, the number two at the fed, thing we could see a rate hike in 2016. And finally, tell eperformance, the French Company is purchasing a comapny for 1. 5 billion. Of course, that is if we get regulatory approval. Caroline great stuff. Thank you, some key gainers to watch. Lets move from corporate now to politics because european leaders are ramping up their post brexit game plans. Angela merkel and french nde arent Francois Holla off the coast of naples today, a precursor to septembers eu summit. Our germany government editor is joining us now. We have a bit of a whistle stock tour going on with merkel over the next few days, but talk about the symbolism of the meeting up the coast of naples. They are going to meet on an italian Aircraft Carrier that has been used in the refuge rescue and monitering operations in the mediterranean. This refugee crisis has been facing europe since last fall. It is docked at an island that has a very special place in italian post war history. It is the place where an antifascist or proeuropean manifesto was drafted during world war ii, during the fascist period when mussolini was in power in 1941. So, yes. Heavy symbolism. Clearly, they hope this will infuse this meeting. Manus Angela Merkel has more than one dozen meetings lined up with eu leaders across the span of this week. This is all about, currying favor with her neighbors in terms of getting the consensus, all ahead of the g20 summit in china. What is the rationale behind these talks . Is it brexit, or is there more to it . I think it is mostly brexit, manus. The point is, we dont have real signals yet from london, from theresa mays government, on what the u. K. Wants. So, we are in this limbo situation. Things will presumably get into gear in the fall in terms of the diplomacy, but what merkel is trying to do here, or what the government says she is trying to do is seek out these countries. There are 27 other nations in the eu. She is trying to a picture first of all, of where they all stand. There is going to be a negotiation between ultimately, between 27 countries and the u. K. , although the negotiations will be led by the european commission. But there is going to be a lot of different strands here. Mantlekel, having this as the primary leader of europe, wants to get an idea. Of themnviting many to berlin as well. Manus thank you very much. In london is set the deputy director. Thanks for joining us. Meetings having this ncoitalian fra relations. What is the reality of this meeting . These are three key central nations, and they see themselves as powerful and at the heart of it. From Angela Merkels perspective, it is important to shore up and stiffen the wells with renzi. In france, elections are coming up and hollande is in a difficult position and there is fear across europe, from the commission sector in particular. Angela merkel could be seen as the political consort to the mission. There is real fear that wells will not be stiff enough that wills will not be stiff enough. There is hope that theresa may could keep their resolve, that there could be some preparedness to bend in some other european countries. She is shoring up Central Command of structures first. ,aroline give us a sense, max of when this could kickoff because we are waiting for article 50 to be connected. Enacted. Ticle 50 to be when will this be triggered from your point of view . I dont think we will have any clear idea on when article 50 will be triggered for some time. David davis has been appointed to be the secretary of state for the newly formed Brexit Department here in white hall. Skeptic, afound euro supporter,o bexit but he has taken a very cautious position as to where he will stand. That being the case, they will be a lot of frustration in the european capital. You mentioned the german and french elections, but we also have an italian constitutional referendum coming up. It will be a lot of frustration coming up in the european capitals as we tried to work out what brexit looks like from londons perspective, but there is a potential advantage for the u. K. In holding off as long as possible to see if a better deal can be done down the line. Manus who is theresa may going to lean towards as the bulwark support . For her where does threesome may lean for the bulk of her support where does theresa may lean for the bulk of her support . None of them with the perspective really, that britain should have everything that we want, have our cake and eat it. That being said, i think a sensible strategy when dealing with other european leaders is to look around and see who you can take off. We can already see a slight emergence of tension between some european leaders, be it poland or the netherlands. And that to me, that provides theresa may, with the best opportunities to start and reach out and build alliances that might lead to a deal we can get on board with. Caroline max, talk about on board. They will be on board a ship, renzi, merkel, holland. E there is concern about the refugee crisis and the deal they made with turkey. Where do you believe these negotiations might go . Eurozoney, can the help with refugees within the crisis . Max there are 70 things going o there are so many things going on here. The refugee crisis is a good example of the complexity that is europe. They are trying to hold together the different strands, trying to Reach Solutions that are practical and democratically possible in terms of the political consent of the european populations. The deal with turkey is the absolute cornerstone of the European Unions attempt to resolve the deal with the refugee issue. It is controversial itself because of the approach that takes, but that is falling apart before their very eyes. That whole Foundation Stone of what they hoped would give them some breathing space, is crumbling away. That is really problematic. It is particularly problematic for Angela Merkel as she heads into next years election cycle in germany. She has a very antiimmigration party biting at her heels. Situationlar to the here in the u. K. There will be a sense of pressure on hollande, renzi, and merkel as they meet today. They can rely on delivering the solution because they cannot rely on anybody else to do it. That is our guest. Up next, the 14 billion drug deal. Details on the potential deal and buy it could spell trouble anofi. That is next. This is bloomberg. Manus it is on the move. London anda. M. In 9 43 in berlin. The agreement could be announced as early as today. For details on the deal, we are joined by manuel. My question to you is this, caroline has just sent me this chart, or oliver the producer. Lets give him a shout out. Price, the sanofi bid and this is the pfizer their price. What do you make of this deal . That is a great question. What that remains to be seen. That remains to be seen. Sanofi first of all, prompted medivation, while they were quietly enjoying themselves. And in the end, pfizer came out with an offer and outbid them. The price, whether it is too high or not, they made it clear a while ago that they wanted to grow. So, medivation represents a rare and unique opportunity out there. Certainly, they have a blockbuster profit cancer treatment. Give us a sense of what synergies medivation can be made with pfizer. I am sure there will be regulatory hurdles to jump through. Yes, caroline. As you said, this represents a unique opportunity for pfizer to grow in cancer. It means they will grow in a blockbuster treatment, which is for prostate cancer. While they would have to share the revenues, medivation has a Longstanding Partnership agreement, pfizer just saw a great opportunity in this company. Besides that blockbuster drug, medivation will give access to earlier stage cancer treatments, which are very promising as well. Manus so, sanofi outbid. Medivation is off the table. Where does that leave sanofi . Will they be chasing a decrease in oncology assets . What is next for sanofi . That is the question because that is a serious blow to sanofi. They really wanted to boost their presence in cancer and medivation represented a great target for them. So now, the ceo will have to find another. The problem is, there are not that many sizable revenuegenerating cancer treatments out there. Thank you very much indeed. A great list of corporate to be digging into. Now, lets get into the autos. Another crisis on the horizon potentially for volkswagen. It is not even on the horizon, it is now. The german carmaker is having to halt production on its most popular model, the volkswagen golf. For more, we are joined by chris ryder. He is just back from holiday. It is a relatively small supplier, but it is causing great damage already to volkswagen. Talk to us about what is going down at the moment in germany. Right now, they have shut down production of the golf and the passat line in germany. A number of plants are affected. It is unusual. Volkswagen is known for squeezing suppliers. It seems like they have gone too far with this one supplier. The damage could be as much as 100 Million Euros a week. That is what some analysts are estimating. Manus what does that say about volkswagens strategy for management . Is this an endemic problem for the auto producers . Well, the timing of the it is unusual that a small supplier like prevent, which is two units of this bosnian group, that it would bring volkswagen to its knees so quickly. It does raise questions about how volkswagens has gone with supply relations. The timing of this dispute on the diesel pricecrisis is incidental. They have to save money. They still have billions to pay on that dispute. It seems like they are squeezing suppliers a bit too much and a b it thin. Mabye, this disupte is in relation to cost cuts. But it also might help volkswagen at a difficult time when demand is you know, demand is tough. The summer months are usually a time of shut down for many factories in europe. It is unusual. I have not seen this i cant recall seeing a supplier bringing a major carmaker like this to its knees. Caroline this is all to do with wanting a bit of compensation for changing up its own plan for a key contract with vw. The contract now goes out the window. Interestingly, daimler uses have a, and they too court battle that has been going on for a while. How much could this escalate and affect other carmakers . That remains to be seen. It remains to be seen how far this will go. The two sides are in talks again today. Courtsman politics, the seem to be on the sides of volkswagen. There is indication that the german courts might allow volkswagen to send their trucks to the facilities to pick up the parts themselves. This is interesting. These are germanbased actors. The one thing that is interesting volkswagen does not just did this for one type of factory. Pute continues, is it located only on the volkswagen brand . It is really an unprecedented kind of dispute and the effects are still playing out. Caroline we will see how the top today. We will see how the talks go today. Week ofnext, after a big gains for crude, a supply business sends oil lower. Etails, next. This is bloomberg. Manus welcome back. Is on the move. It is 8 52 in london. Agenda leads is on the move s the pace. This is on the back of chem china being granted the authority to tdo the 43 billion deal. 4 billion has been added to the market cap. Days5 of an average volume over the last three months has traded through on the agenda. On syngenta. We have traded up to levels we have not seen since may 27 of last year. Chem china clinches u. S. Security. They are getting the nod to do the deal, to purchase syngenta. They have cleared this transaction. They have removed the last major hurdle really. So, a real relief rally there on syngenta. Caroline . Caroline you are right, manus. Chemicals have outperformed today, but on the downside, it has been miners and oil stocks. After entering a bull market last week, oil traded lower this morning. We are up 1. 7 on brent. Lower. 1. 7 we have more from dubai. We have a great chart, as usual. Dig in to what is going on in terms of bearish bets with oil. Brent is really struggling to cling to the 50 a barrel. A loto of that has to do with the supplyside of the situation. Iraq is increasing their exports to the tune of 5 . Now, the reason they are doing this is because they have reached an agreement with their kurdish counterparts to be able to tap three key export now, the reason they are doing this is because they have reachedpipelines. That is coming as a result from efforts of the new oil minister. L output isiraqi oi that 3. 4 6 Million Barrels a day in july. Is there more to come . We have seen that all of these opec members have been bulking up their production and exports ahead of the informal talks next month. And the other supplyside of this equation that has been driving the market this morning, caroline, his nose from nigeria. The is news from nigeria. They said in a statement that they will seize hostilities thesehey will stop hostilities. If that story gets additional traction, it could be the source of additional Downside Pressure for crude. Caroline all eyes ahead of that opec meeting. Rampat chart, showing the up in supply. Manus we have had the biggest weekly slide in two months. The syngenta deal seems to be giving a real good term to the smi. The dollar is bid. That is your message this morning. Look at column number two. The danish krona, down. 4 . The dollar is demonstrably stronger. There is one tone in down and the deputy chair has indeed proud of the talks. Caroline up next, we are talking in the pulse. This is bloomberg. Francine the advice chair is the latest official to signal a hike this year ahead of janet yellen speech at jackson holy this week. Sufficient chance that the bank of japan eases as september is meeting arrives. And pfizers 14 billion ambition. The giant is said to be close to a deal. Welcome to the pulse,