Billionaire investor bill gross calls for two rate hikes from the fed as soon as march. Will september be worse than august . Good morning. Welcome. Where less than half an hour away from the market open. Let me take you to the bloomberg and show you where the open is going to be. We think it is going to be a positive one. A ftse that is up by. 5 . A cac that is up by. 3 . A similar number for the dax. Let me take you around the world with the gmm, show you what is happening. These are the markets that are opened. Hong kong is up by. 7 . Singapore, higher. A move in the austrian twoyear, keep an eye on that. The Australian Dollar is up by. 2 . Zinc is higher. Led are hot lead is higher. I am keeping my eye on what is happening in china. Copper, an interesting story. Lets get you caught up. Here is the Bloomberg Business flash. David we have to talk about donald trump. He has reiterated his plan to build a wall on the southern border of the United States and send mexico the bill. He will the port any illegal immigrants. He will the port any illegal immigrants. A range of topics, including a wall was discussed. The second brazilian president to be in peace and removed from office after three gauge three decades of democracy. Be promised more business from the policies to end the countrys worst recession in years. China is showing signs of stabilization with the factory gauge rising in august to its highest level since 2000 and 14. It came in at 50. 4 compared to the estimate of 59. 8. The improved reading showed temporary weakness from the flooding in the southeastern portion of the country. Spains caretaker Prime Minister has failed in his attempt to end a political gridlock. In aas succeeded parliamentary by 180 votes to 107. To block his candidacy. The chamber will look tomorrow evening when the simple majority this is bloomberg. Guy at first glance last month was one of anemic trading. We had a quiet august on the s p 500 index. It felt 1 in either direction for 38 straight days. There is a shift in sentiment where investors are bracing stocks with benefits from a stronger economy. As they prepare for Interest Rate increases as soon as next month. Lets not forget where we are within arms reach of yet another high on the s p 500. We are taking this one all the way back. It shows the picture. Where all the way appear. The question is we are all the way appear. The question is should we be . Bob is joining us on set this morning. Can bee central bankers your friend forever without any consequence, why not . If youre willing to believe that central bankers are not why not . Guy im sensing you dont . Bob i think any rational human being will understand the argument that the fundamentals could cally globally. World. Gative around the bob if you think why rates are negative, that looks like a problem. The markets are not willing to think. The markets are saying weve got a bit of a credit risk on the horizon. If anything, it is one and done. There are so scared to do anything, we get that. People are looking through and saying there is an election. It is in everyones interest to make sure bad things dont happen between now and november. Guy you would not be short at this stage . Bob the way i would express my view. Theres been some pain in a trade. The longduration trade is the right trade. In the world where everything is rally, bonds are doing ok. In a world where that comes under some microscope and people start to rethink where the risk valuations are. Guy we will talk about the duration story because bill gross is pointing us in the direction. Lets do that later. The market is preparing for growth. It is rotated in the last month that volatility has rotated out of telecom and the two banks. And into banks. It is pushing in the direction. Below the surface things are happening. The market is shifting. A lot of sectors have had big drops in big bounce backs. While the market has not within itself any sense of totality cant totality, have not had any retracement. Vote. E had the the world did not collapse. Not only that, central bankers it became a really important Pivotal Point for central bankers to commence that they are there to do more. What we are seeing is a postbrexit sunshine trade. The markets are saying central bankers got my back. We might get some fiscal policy as well. We are not going to get a lot of this good policy. Central bankers are desperate. You mentioned bill gross. He put out a piece recently where he talks about the kind of verbal con job. Con job that central bankers are putting on to us. Con job that central bankers are putting on to us. That is why i think being short risk asset today, as much as the core of me wants to be, doesnt feel like the right trade. If i want to keep a bearish pmi and my portfolio come i think the long situation. It has been a great trade for the last six or seven years. Guy we will talk about it in more detail in just a moment. Bob janjuah is going to stay with us. Jemez factory gauge hit its hits its chinas factory gauge hit hits its highest level. We are in china with a look at the numbers next. It is the market open. We are watching hays after earnings. Day two of a big basing thats a big banking profit call for consolidation. We are going to hear about the uterus chairman thinks what the solution is for european banking in 30 minutes time. This is bloomberg. That is new york. Uy it is 2 41 in hong kong i have a little bit of glee in my voice because when it rains elsewhere in the world and it is sunny in london, youve got to enjoy it and where 18 minutes away from the market open. Lets get out of this part of the world. Heres dating list with the Bloomberg Business flash. He is david ingles with the Bloomberg Business flash. David improvement in spain in the u. S. , the worlds second largest fillers says the Current Operations rose to just under 2. 3 billion euros. The company also forecast growth of 2 to 4 this year. Later on will be joined by the cfo. He will be live on bloomberg at 4 40 a. M. U. K. Time. Masonic raised panasonic raised it sold half in fiveyear notes in a yield of. 9 1. 9 . Twoubishi are the only issuers to sell more than 4 billion worth of bonds in a single deal so far this year in japan. Shares of twitter jumped after the cofounder said the company has to wait has to weigh all options. His comets come amid speculation that twitter is a target for neck position could revenue has been growing slowly and the stock is down more than 17 this year. That is your Bloomberg Business flash. Guy . Guy 16 minutes until the market open here in europe. Lets turn our attention to what has been happening in china. The official reading for factory activity at the highest level since 2015 dividing unexpected momentum. The index rose to 50. 4. Suggestions are that as a result pboc will not cut Interest Rates or the reserve requirements anytime soon. I think people are trying to decide whether this is a blip. Lets find out. Lets join tom orlik. Tom is this a blip or something or can we take a trend on this . Tom i think you are right to question it. People tend to over interpret very small movements in the emi surveys. In this case, there are a couple of reasons we can be a little bit reassured. Firstly, this is a slightly longer term trend if you look at chinas main this is surveys. They are on a very moderate improving trend. Econdly, it is broadbased we havent just seen an improvement in the official pmi, we have seen a range of different measures from an index based on satellite images of chinas industrial zones, to the flash reading on koreas exports which tend to move closely in line with chinas exports, all improving slightly in august. Guy we are going to discuss this further with our guests. How much of a lead indicator is the maccallum number . It has been crashing for a long time. I wonder if this is a indicator of confidence. Macau, people spend money. Is this after an incredibly that run . Always starting to see some better luck or are we starting to see some better luck . Tom i think you are right. In a sense, it went down so far there wasnt anywhere else to go but stabilization. There is also some behindthescenes stories about corporate actions, new casinos opening. That is affecting the number. At the same time, the macau gambling numbers are seen as a canary in the coal mine for chinas economy. That slump seem to register for chinas consumers, as well as the impact of that crackdown on corruption which made it harder for chinas elite to go overseas and spend their money. The rebound now could be taken as a broader sign of return of confidence. Tom orlik, chief asia economist at bloomberg intelligence. You can see what has been going on with that maccallum number. It has been gradually recovering. The loss has been getting less bad but we finally crossed the line. If you go back to late 2014 and see what happened. It was that point that we start to get into this draft and this push that really affected Luxury Companies around the world. Lets get back to bob janjuah. His china stabilizing . Bob is china stabilizing . Bob we expect more rate cuts. The korean data is a bit of a head plate because the keck relations very different year on year. The house relations are different because the calculations are different year on year. Guy i noticed copper has been battered. That is been seen as one of the useful indicators in terms of how much their building, what construction looks like, what is actually happening. I think you have to use as many resources you can. I speak to people in china. I speak to hopefully the right kind of people both in terms of market, in terms of regulators and some of the corporate sectors. I tend to get my feedback from them. Ryan and they are saying . Bob things are ok. There is expectation around the property market. Wrapped around for the devaluation. What is key now for the currency is what the fed does. If the fed does deliver what below once, a couple of hikes, that should imply a lot of Dollar Strength which is probably not what china wants. I would also highlight that weve got a g20 happening in china, so i think they want to be seen as a stable going into that as stable going into that. We may get a repricing of that. Guy people get really hung up on the dollar raise with china. The basket are much more the baskets are much more useful indicator. Are we looking at the wrong number . Bob i think if we go back to ,arch where the u. S. Expected talked up a soft dollar policy, according before the shanghai accord. The idea was china need to devalue weight against the basket. It,e were two ways to do either china goes out and do what it did last august, or china keeps in pegged with the u. S. Which is the most visible sign of u. S. And allows the u. S. To evaluate the devaluation. The fed may do something that raises the dollar. I think that will put pressure back on china. Guy what is the Investment Case . Bob china echo i think it is a longterm Investment Case. China . I think it is a longterm Investment Case. The opening up of the Security Market longterm. It is a medium to longterm story with china. Within that, you have to accept that the demographics are not in your favor. That should push you into certain sectors more than others. Within that, you should accept that china is not going to go at 6 or 7 or 8 . Down to 3 or 4 growth rate if were lucky good within that, there is a lot of debt lucky. Within that, there is a lot of debt. Guy is there a better buying opportunity coming up . Bob i think there is. There is a this is a broader global story. There are very few people who are willing to pile into risk. There may be some portfolio stuff going on. Around half the world that we talked to is petrified. Worries that everything is completely wrong to together half is waiting for the list of nominal growth and inflation. The fed is kind of surfing that little ways. Bob guy bob, stays with us. We get bobs take on what is happening and we are minutes away from the European Equity market open. A weaker u. S. Market as forecast Earnings Growth ahead. Apple. Ceo, europes we will talk about those stories next. This is bloomberg. The market open, nine minutes away. Guy 7 53 in london and we are minutes away from the market open. The first one is noble nordic has a new cdo a new ceo. Has delivered some stunning performances. This is the chart i have compared it with an unlikely candidate. This is apple in the blue line and this is no more nordisk in the white line. Look at the match you see, the parallel performance you see coming in from these two stocks, absolutely amazing. In some places unrecognized and apple has really delivered, but no vote nordisk really putting up as well. In an area that is done well. This is the performance under the outgoing ceo, 817. 59 . Many ceos would be happy to leave on that note. What else is happening, at the banking conference. John cryan talking about talking about consolidation is the way to revive profit ability. Seems hard to get rid of this story. There could be merges in the banking segment. A positive story. Haze a positive story. Both stocks, it is going to be interesting to watch those two businesses when we get into the open. A bit of a dream for has delivered. Something quite sensational. Continue to watch what is happening with the postbrexit fallout. Watching that quite carefully. Bob janjuah is still with us. Still with it. That is questionable. Companies are beginning to want to the idea that we are going to see brexit affect. Too early . Bob i think it is too early. I think we wont accept that the heart stores that we were expecting, were told to expect, or perhaps hyperbole were perhaps hyperbole. My view is theres a lot of pragmatism on both sides alternately will come through. I think there will be an adjustment period. Right. Five minutes we will look at the open. That is next. Guy good morning. You are watching on the move. Here is your morning brief, folks. Chinas factory gauge hits its highest levels since 2014. We look give you the numbers from europe, including postbrexit u. K. Numbers at 9 30. John cryan calls for consolidation. Chairman takes to the stage in frankfurt. What would his solution before the european Banking Sector struggling to find stability . Bill gross calls for two hikes from the fed. Will september the even worse than august . So, we are moments away from the start of european trading. My wei is telling me that the stock 50 is called higher by. 2 . We will talk about that in a moment. But let me take you to the bloomberg and show you what is happening. We saw a selloff into the european close yesterday. We are now starting to open up. There goes london, a little bit more positive at the start. We are expecting the continental markets to follow suit. We are only up by. 2 , rising now. 4 . The European Equity markets get going on the front foot today. This is september 1, the beginning of a new month. Let me take you around europe and show you what is happening in terms of the performances of the sectors and stories around europe. This is the breakdown, as you can see, a sea of green out there. The stoxx 600 is broken down into its national constituents. Spain, not far behind. 600,rn europe on the stoxx up. 3 . Lets go to Caroline Hyde with the details. Caroline good morning, guys. We are getting a little bit higher in terms of yields in the u. K. Treasury. The 10 year yields are up about two basis points. So, may be coming out of a haven that has been u. K. Gilts. Prices for yields are rising, all of that ahead of the u. K. Pmi data. We are seeing the best we have seen in two years, 50. 4 is the number for chinese manufacturing. So, we are bracing ourselves for europe. What are the headwinds there . And the United States around 4 00 p. M. U. K. Time. Lets look at how were opening on the stocks. A bit more Risk Appetite after we lost at the end of trade yesterday. Oil prices are sinking lower, and that dragged energy off. Everything will Industry Group is trading higher. Who is winning . The bank are outperforming the financials up. 7 . Materials are also up. 5 , and where is energy . We are up about. 1 . Atp your eyes on all prices the moment. Lets look at the individual movers. A bit of a bellwether for the United Kingdom and europe, and australia, for the hiring sector. We are down 1. 5 . It looks relatively good with our pretax profit in line. Hays are saying the increased uncertainty in the u. K. Market and the big disappointment, guy, was the dividend, coming in slightly lighter than what we had hoped. Lets move on to the next set of numbers for you because he want to keep a keen eye on that. The biggest insulin maker in the world. The ceo will retire at the end of this year. 16 years at the helm. He hands the reigns over to an insider, the executive Vice President at the head of development. He will take the helm january 17. Next, i want to bring you the german juggernaut that is sap. Flat, but we have seen calls for it to follow her as sales were missed for the first time in three years. We saw it fall some 7 after hours. Keep an eye on the competition that is rife within the Cloud Computing software business. Guy thank you, caroline. One stock that is worth mentioning, and caroline was highlighting what is happening with commerzbank again today. This time yesterday, we were talking about deutsche considering looking at commerzbank. Remember, the markets were short on this stock. This positioning story is in here as well, not just an mma story. Commerzbank on a three day basis, up nearly 9 . So, not a bad start for the returns for the desk really, for the commerzbank ceo. He spoke yesterday at this conference. We will see what he has to say ultimate later on. Lets turn back to the bull market and its relationship to the equity market. Bond sales this year for the bluetooth companies in the u. S. Are about to exceed 1 trillion as investors seek refuge from negative Interest Rates. Investors are embracing investmentgrade debt, which gave almost 10 this year, according to the Bloomberg Barclays bond index. This makes it the busiest august in at least 12 years, making five years for investmentgrade debt sales over 1 trillion. And it is interesting. We are going to go in a couple of directions, one of which is the equity market, and the other of which is what is happening in the european market. First of all, that is the reason why u. S. Equities are doing what they are doing . Yes, and corporate buybacks. The other thing to mention, i think it was two years ago when the u. S. Corporate sector went into negative cash flow. That worries me. Obviously, as a new macro guy, id of the central bank will not let anything that happened. Corporate credit is probably a good place to be. I have kind of been noncorporate credit for eight years with lots of reservations, but ultimately, court copper its backstop effectively by the Central Banks. But yeah, i think the gross issuance versus stock buybacks would be a very interesting picture to show. Guy therefore, given that story, the ecb is out there buying corporate credit. You wonder why. Is it actually having the right affect. Were going to talk about ecb policy over the next week and try to understand what the qe program is going to look like, and how they are trying to force money into a system that does not appear to want it. And yet, it is finding its way into buybacks, etc. How messed up is this . So, i am independent. This is my view personally. I think it is crazy what they are doing. They won market in europe that did not need any help, corporate credit, is getting help. It makes no sense. We have situations where companies are issuing debt from the ecb. Those companies are putting that cashback on deposit at the ecb. That is just nuts. I think, why it is happening, i think mr. Draghi had to deliver something. And i think he sat there thinking, if i dont deliver, they will think i am wrong and i have to deliver something. Tricklesthe money into the sector. There are many factors coming together. Lets look at the u. S. As a kind of leader in all of this. Trickledown is dead, but we know it is dead. What is happening is the inequality issue with getting worse and worse. And guess what . You know, we have election season in the u. S. , where inequality is going to drive the results there to some extent. But more specifically in europe next year, with france, with holland, and with germany, we have elections coming up, where this inequality, or the suppression of the middle classes, is going to be the driving factor. It was the driving factor in the Brexit Debate as well, as much as they want to highlight the immigration issue, it ultimately was the middle and working classes saying, we have had enough. Guy we will carry on conversation with bob janjuah in a few minutes time. A bit of a change today on the euro stocks thaxx 50. We are also paying attention to general raleigh and unicredit. There is still not government in madrid, but can b the pmis offer a little glimmer of hope . We will also talk about john betweend the merger commerzbank and Deutsche Bank. And the former bond king, bill gorsross, recommends the fed raise its raise twice. Is he way off base . All of this ahead. This is bloomberg. Guy welcome back. Is still going on in frankfurt. What does he say in the world as we work our way forward . A different banking story here in europe. Ubs changed its model very aggressively, went down a different road than many others. Certainly a row that deutsche certainly a road that deutsche has decided to go down. We will hear from them a little bit later. He is taking in german now, but he will speak in english ultimate later when we have some q a with him. He will get a take on what he sees happening. I just wonder what a different world we would be living in now seatel weber was in the excepted. Draghi i think it would be an interesting discussion to have. Here is the bloomberg first word as. Bloomberg first word news. Donald has reiterated his pledge to building a wall at the border of the u. S. And send mexico the bill. He says he plans to support any illegal immigrants. Earlier, he met with the mexican president , where a range of topics included the wall in the discussion. Lma rousseff has become the second president to be impeached within three decades of democracy. She will be replaced by her deputy, who has promised more business friendly policies. Asia, china is showing further signs that the economy is stabilizing. Highest level since 2014. It came at 50. 4. In at 50. 4. That production cuts were caused over the summer because of flooding. Spains Prime Minister has failed in his attempt to end the political gridlock. Rajoy was defeated in the parliamentary vote. That, as socialists joining the antiestablishment group. The chamber will vote again tomorrow evening when a simple majority will out. Global news 24 hours a day, powered by 2600 journalists in more than 120 countries around the world. This is bloomberg. Guy lets take you back to axel weber, speaking currently in frankfurt. If you want to follow this on your bloomberg, you can go straight to it. It is a conference largely about disruption and axel weber continues to address that issue. We will bring you the headlines from the ubs chairman. This time yesterday, we were hearing from john cryan, who urged more consolidation among european banks. That came after his own firm, apparently, held internal talks about a merger with its biggest rival about a possible deal. This is according to people familiar with the matter. Bob janjuah is still with us. How overbanked is europe . If you pull up the page that shows the number of employees, you will see that since the crisis, there has been next to. O adjustment since th particularly in europe, there are way too many banks from what we need. It is not just investment banks. It is retail banks as well. Think, employs over 1. 5 Million People in europe. Guy what should that number be . 2 3 they should perhaps be2 of that, but that requires serious consolidation. What consolidation really means is we need a pretty savage capacity cut. Now, the Investment Banking side of it gets all of the headlines. It is on billing, that process is ongoing. We know that from 2008 and 2009 to now. This sector is a lot smaller. But i think also within retail, you can go to our most any street in germany or france or spain, and you can kind of see five banks on the same high street. It is crazy. It makes no sense. But there are so many vested interests involved. Consolidation would also require opening up books. Guy and that is all you will say on that matter. Reading through the lines, i think that is fairly straightforward. Given all of that, can draghi deliver any kind of real change in europe . When the transmission in europe is 80 banking there andtoo mabnny banks, therefore, getting into work is difficult. I actually think his policies are stopping reform. Because if you allowed that assets to carry with think i nee Interest Rates, you dont have to reform. If you have a central bank willing to provide you with liquidity . Guy but you have to regulate at the same time. But what we have learned from all center banks post lehman, they dont want to go bust. That is what they are really scared of. A more austrian style outcome could have been adopted where we wouldve had to take the hits. But we want to take any hits, that is the policy globally. Yes we want to toughen up and that is happening. The regulatory side is tougher now and will probably keep getting tougher, but ultimately, failed institutions are being kept alive by Central Banks. We are avoiding reform. Guy how do we get out of this . How do we force change . He kind of referred to the fact that when the adjustment does happen because it will have to happen at some point it will cause pain. There will be a default cycle. Ultimately, hes of the by this. Createdost lehman was in a default cycle. Guy politics is too important, though. If you start to crystallize some of these problems, there will be big question marks in germany, and elsewhere. A bankingnt have union in that environment. And Monetary Union without fiscal, political, and a Banking Union is unstable. Guy unstable or stable . I think it is unstable. It is sustainable for as long as we are willing to spend, which is kind of the case. But going forward, lack of look at japan, right . Which is ahead of the curve in this context. If the central bank allows the default cycle to be extended over 20 to 30 years, you get no reform and you end up with a no growth economy. Difference between europe and japan is we have a positive demographic in europe. That is called immigration. So, you know the attitudes to immigration across europe are heartening. If we had a block on immigration from outside the eu, the eu population will decline in an productivity. Ve but of course politicians do not worry about 10 years time. Guy thank you. We will talk about bill gross in just a moment. Up next, hike now and hike fast. That is the message from the billionaire investor, bill gross. This is bloomberg. Guy welcome back. You are watching on the move. The billionaire bill gross is recommending that the Federal Reserve raise Interest Rates twice. Expectket does not that degree of monetary tightening by the end of 2018. You know, lets raise Interest Rates by 25 basis points in september and six to nine months from now, lets do it again. Come on. Lets realize that capitalism cannot do well. It can survive, that it cannot do well with 0 Interest Rates or negative Interest Rates. Is still withah us. How far down the curve do need to go to find safety at the moment . The front end is clearly going to be quite jumpy, and we have seen that certainly in august. Is the long end of the u. S. Curve the way to go . I am generally comfortable with the long end of most curv es. You can probably make a argument being, exposed to the russian Government Bond curve as well, perhaps, but that is kind about their. But for me particularly, the u. S. The dollar naturally wants to strengthen over a cycle. As a non dollar investor, i want to be in a strong currency, not a weak currency. And b, just to carry, right . Curves used to be steep, but the reality is, if i can own two something on my third year, that seems pretty decent. Guy you have done incredibly well at the long end of the curve. You just kind of wonder whether at some point you want to crystallize a little bit of that. Yes, but here is nothing. If this half of the world is worried about a bad outcome, you want to remain with that duration. People have there will be a period of payment in the bond market. Ultimately, the bond market will be price and destroy that will reprice and destroy that optimism very quickly. Sustainableds, a recovery is not sustainable, i think. Ultimately, Interest Rates, which are driving the price is now, would stop it from the other way. But we have learned of her history is Interest Rates dont need to move that much anymore. What we have learned through history is Interest Rates dont need to move that much anymore. But, lets not forget. We were told we need to deliver , cut theirre, blah, blah blah. The more debt you have, the lower the Interest Rate moves needs to be. Guy so, people who are watching right now, they have had a decent i run in their equity market portfolios. You have set on this program, i dont believe this, but i am not willing to back out of it yet. It depends on what drives your while you are investing. If it is for shortterm gains, you can play with your momentum trade. At some point though, you have to make the choice. Do you think we will get some inflationary take on, in which ore you want to have assets, if you are worried about the opposite outcome. Gold seemsly, to be the place. People are talking to me more and more about gold. Guy we will leave you on that note, bob janjuah. Thank you very much. Guy welcome back. You are watching on the move. Here is the picture across europe. The ftse is up nicely. The germans are in and the th italians are out it seems. T00 ithat by. 6 . The cac in paris is up by. 7 . Ryan chilcote has the details on the stock stories moving these markets. Ryan the swedish maker of medical devices is one of the best performers with shares up by more than 2 . Commerzbank, back in the news again today. We had that magazine reported that Deutsche Bank had considered, or was considering perhaps, purchasing commerzbank for some kind of merger. That ceo then deny that. After the market closed, we learned the two banks actually met. You can see the shares rising on the back of that news. You mentioned yesterday the prospect of a short squeeze their. Of the short squeeze there. We might be looking at a short squeeze, indeed. Finally, hays is the worst are forming stock on the stoxx 600 the worstperforming stock on the stoxx 600 right now. They announced a dividend that missed estimates, the second since june 27to 27th iday since brexit. Guy let me take you back to what is happening in frankfurt. Axel weber is currently on his feet, addressing the audience at the conference. Yesterday, we heard from john cryan. Interestingly enough, axel weber is addressing a range of issues within the Banking Sector, but he is also reaching back into his more comfortable world of central banking, saying the wo rld is using Monetary Policy to solve economic problems. He has also said that the world is really failing to accept they world cannot accept that Monetary Policy is not working. The central bankers that are running the Central Banks appear to be telling us they still have many tools in the box and that Monetary Policy is working, but axel weber is a little unconvinced. Lets turn our attention to Something Else the world is grappling with right now, and that is what is happening with the brexit. May says she is willing to leave the eu Single Market if demands on immigration are not met. We are done with the Single Market if we cannot fix intereuropean migration. They decided there was no need for a parliamentary vote. What was the top line, anna . Anna i thought there were a few interesting nuggets yesterday. One of them was that there would be no parliamentary vote on brexit. Many people have concluded that for themselves, but they were reporting, suggesting there could have been. She says parliament has prerogative power. Anybody in scotland or Northern Ireland who thought they might be able to hold the government in westminster to account on this, that is not going to be the case either it seems. We have interesting comments putting up on your screen. Theresa may saying, the model they are going for is going to be unique to the United Kingdom and not a united shelf solution. Not canada, not canada plus, not norway, but something more the u. K. Espoke for the the deal must mean controls on the number of people who come to britain from europe, but also a positive outcome for those who wish to trade goods and services. That does not sound like access to the Single Market is on the top of the wish list. Immigration is being seen as something of a red line. You are getting these first clues as the u. K. Government goes back to school. Guy we have been talking as well to a number of businesspeople and getting a political view on this as well. What is the business perspective on this week . Caroline brian was talking about hays ryan was talking about hays. Hays,ked to the cfo of and he highlighted the sensitivity of u. K. Business. At least, if you operate in 33 countries. He said the operating profit of 181 million pounds, if you translate that all, that would have been 207 million pounds. He is demonstrating that if the pound stays where it is, this could be a big upside for businesses that do operate internationally, his business and others. They were negatives, of course. You talked about more uncertainty within the u. K. , banking and construction continued to be weakness. Saysf the upside, he outside london, they are not seeing any changing behavior from those looking to hire people. He also says there is no sign of any contagion from the brexit story from the u. K. Economy into other parts of europe. Guy fascinating stuff, anna. Lets bring in our next guest, the author of a book called the crisisadlock that could be solved and why it will not. David marsh, good morning. Did you learn anything useful yesterday from chequers . I think the mist is starting to lift on what the brexit plan will be. Swissnot going to be a plan or albenian plan. It is quite clear we are not going to just go along. There will be some immigration controls. People do in europe do except that. I went to poland recently and they are totally in line with the idea that they will be controlled on immigration from poland to other european countries. They know that. Guy well, Angela Merkel well, Angela Merkel is changing all the time. Immigration numbers are down in germany, and that is not because of her controls, but because of other peoples controls. They do want a cap on immigration. Guy that is external immigration. That is not the central tenant of the european union, which is free movement. Clearly,her point is, they will be access to the Single Market. It will be quite an elaborate contr compromise. This will be like a third dimensional chess square, because you have a lot of moving targets. Every month, as the gets nearer to the french elections, Angela Merkel will also be in trouble before her elections. Theresa mays maneuverability will get bigger. Think britain is delaying article 50. I think the prospects will be relatively bright, actually, for a success on negotiations. Guy you are convinced that a deal can be done that allows migration control from within the from the eu into the u. K. , at the same time, allowing access to the Single Market . Yes, and we will be continuing to make some contributions. Guy how much will that cost us . There will be some refinement on that. We cannot get away scott free without paying anything. We will be like an associate member to the club. Guy like norway . Something like that, but we will not be paying as much per capita as norway. I think theresa may will be thrown out of office if it is Something Like that. We are not paying for the entire roof to be renovated, just the kitchens. Guy why wont she get parliament a vote on this . I think she knows that if she were to do that, she will be held hostage. She will give them a say. There will be a debate. People will be able to vent their feelings, but she will say, we have had a referendum. She does not want to give the labour party the opportunity to derail what she is doing over some tory hot heads. She has had enough of being given the run around. She is in charge now and though she would like to say, though she was a reluctant remainer, she would like to get on with. There are other Labour Party Mps who know many are in favor of bridge and leaving in favor of britain leaving. The labor people dont want to show they are too far out of line with public opinion. Guy you brought up the french elections and the believe is may article 50 will be triggered sometime around that period. If you look at parliament, we still do not know who the exact run of the riders are. If you look at the pollings, if he were to become the select candidate, the kind of friend or enemy what he be to the u. K. s negotiations . He is a world leader. At the time, he was thought of as the number two rather than the number one. He has obviously matured over the years and like all of us, has gotten a bit older. He is much more calculable than sercsarkosi. Tooink sarkosi still has much baggage, political and legal to get into the final round. Think he will do it dont forget, france has historically been a country of the right. People would rather have the voice of experience. And some sort of accountability than la penne, who has been doing very well. , and assumingthat Angela Merkel decides to go for number four put those two people together and they are a dominant force in europe. Yourselfu preposition to be ready for the outcome if you are the u. K. . It might not be Angela Merkel. At the moment, she is sitting pretty. There is the danger for her, ive a coalition of the left against her. With the far left party at least. But lets assume that Angela Merkel does still come in with a new coalition. I think she would prefer to have a government of the right and france. She would prefer to have juppe, somebody the germans that they can get on with. She did not have a great time y last time. The problem is, france has moved to a very antieuropean stance on questions like sharing sovereignty within the monetary unit. This has been going back 50 or 60 years. When the french and germans say they want a united europe, they want different things. The french want a europe where they are running the show from a political and economic point of view, to put Frances National interest first. Haveny would like to everything in the control of Central Banks, which is not really convergent with what the french would like. They have two different narratives about your. Is,e, solid fellow that he he still has a different view of europe compared with germanys. Guy great to see you this morning. David marsh, managing director and cofounder of the omfif. Up next, dilmas political demise. That story, next. This is bloomberg. 9 45 in5 in london and frankfurt. Lets go to italy and show you the pmi data. This is manufacturing data. The actual number has come through at 49. 8. So, some soft numbers coming through when it comes to the italian pmi numbers. We will come back to that data in ultimate later on. Bit laterta a little on. My also want to take you to what is happening in frankfurt. Lets talk about what is happening with axel weber, who is now in conversation. Move through the comments he has made. He said it is impossible for the markets to price in brexit. The pound has certainly priced in something, whether it is brexit, i dont know. He is also saying, interestingly enough, he is talking a lot about Monetary Policy, saying the world is using Monetary Policy to solve economic problems. He is also saying that Monetary Policy is not working. We discussed this earlier with bob janjuah, suggesting the world might have looked very different if this man had been in the seat that mario draghi now occupies. Lets talk about the emerging markets as well. We have been talking about europe and the United States throughout the program. Michel temer has taken over as president after Dilma Rousseff was impeached. The senate found her guilty of violating the countrys budget laws. For more on this, lets go to our bloomberg reporter. Rousseff is out and we have a new president , michel temer. What are the challenges that he faces . Well, he will face many challenges from now on. Temer will have to build a Strong Coalition in congress, basically to build a lot of reforms that are supposed to take brazil out of this deep recession. Brazil has high inflation, high unemployment, many of its main conglomerates are having a hard time getting access to credit right now, and it is just the scenario that is going to be the focus of those traders, the analysts and investors that were talking about politics up to this point. So, building a Strong Coalition in the congress, in the lower house, and in the senate, approving reforms that are supposed to give the basis for brazil to regain growth are temers main challenges from now on. Guy so, that is the objective from within the political circle. He will probably make changes that will be very unpopular with the nation. Give me a sense of his popularity in terms of where he stands right now. Well, that is also a very good point. Temer is not very popular at the is moment. It will be very hard for him to build the support necessary to change things, to pass reforms. He has about the same level as approval that rousseff had five months ago, in april, which is about 14 to 15 . People who either consider his government to be good or very good. He will face a lot of opposition in the streets. Resilience are not a brazilians are not externally happy with this outcome. Everybody sees this transition as greater matter to the country. As traumatic to the country. People have to build this coalition within congress. He will have to pass many measures that are seen as not popular at all and he will have to convince the brazilian population that they are necessary in order to regain growth, to regain the confidence brazil lost in the last few years. There seems to be a tough road ahead of him. Guy we will leave it there. Thank you. Randng south africas against russias rupel has become one of the trendiest currency trades out there. Ryan chilcote joins us for more. Walk us through what is happening right now. Guy this is the rand versus the ruple. Pay attention to what begins on august 10. You can see the rand weakening against the ruple to a tune of 8 . Traders are smelling blood, which has got socgen saying, you should stay with them. You could end up with a gain as much as 10 . The reason is mostly down to Political Risk. This is a chart of fiveyear cds. Effectively, a measurement of risk. Spiking ine is cds south africa on the back of those elections. And then, you see them diverge. There is a lot of Political Risk right now in south africa, but also much in russia. That is why it socgen is confident you should short the rand right now. Guy as we break out from that conversation, lets bring you the french manufacturing p mi, 48. 3. So, soft again. Up next, saudi has promised not to boost output past capacity and over flood the market. This is bloomberg. Guy welcome back. A quick check on what is happening with the oilc markets. Crude is higher today, up by. 3 . Lets get some details on what exactly is happening here. Editorrgs executive joins us now, Tracy Alloway in abu dhabi. Blockbuster the news from saudi and what effect it is having talk us through the news from saudi and what affected is happening in the oil market. Reporter yesterday, we did have that drop down below 45 a barrel for the first time in three weeks. The is turning around today based off of comments from saudis oil minister, promising they wont flood the market by boosting capacity. Investors are hoping for some turnaround in the downward trend in crude. Even maintaining the status quo from saudi arabia could be disappointing, given they are already maintaining production at almost a record pace. So, we have a lot of nuts and bolts moving particularly ahead of the opec meeting. Guy walk me through the rest of the month. Give me the timeline. Reporter sure, i spoke about the opec meeting. That is a big deal for oil markets. But there is a whole host of macro political and economic events that should make the future interesting, starting with the u. S. Economics, and then the president ial debate. For investors is obviously going to be how those events spark market volatility, and whether it ends up being the good kind of market volatility or the that kind. Guy Tracy Alloway out of abu dhabi on the oil story. Data hitting that will be relevant to those Central Banks. We have german final pmi manufacturing that a coming through, 53. 6. The italian number and the french number have both been weaker. We have a series of pmis still out from europe to come, and we will be watching at 9 30 for the manufacturing number out of the u. K. That will be a central story for which is coming up next. This is bloomberg. And august rebounded china. The month pmi hits a 2014 high. How sustainable is the stabilization . Monetary policy is not working says the ubs chairman. Is the ecb policy putting pressure on germany . We discuss with the resident of german banking cooperation. Life after the brexit vote more postreferendum data. We get pmi data. Im ott did pmis