tv Bloomberg Markets Bloomberg July 4, 2017 7:00am-11:01am EDT
nonsense, donald trump's challenge to china as north korea successfully launches in intercontinental listed missile. its neutral stance bank -- 's central searching for a shared solution. the u.k. chancellor helps to urge u.k. politicians to slot and easier brexit. p.m. in hong kong. welcome to bloomberg markets. let's get a check of the first word news. >> thank you. north korea may be one step closer to its goals of building a nuclear missile capable of hitting the u.s. they say they have successfully
launched an icbm for the first time. president trump tweeted that perhaps china would end this nonsense once and for all. and china willia be meeting. china's official news agency, trade between 33% inand china raised the first five months of the year. further questions about donald trump's travel ban. the state of hawaii is challenging the enforcement of the order. they asked a federal judge to deny. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. >> thank you very much.
those are the headlines. let's look at the markets to show you where we are on the european equity session. the fourth of july is celebrating in the u.s. this is the picture right now. 0.2% at the moment. we have seen north korea digesting the carried out that icbm launch. some strengthening. we have the dollar-yen strengthening. yields are weaker. is a little weaker now. stories, north korea claimed they successfully launched an icbm earlier.
are building a device capable of hitting the u.s. with a nuclear worlwarhead. joining me now are adam cole and gilles moec. let's go to our guests. you hereood to see with me in london. this news out of north korea, does it surprise you that we have not seen more reaction? >> it is the fourth of july, and the souring of the relationship between north korea and the rest of the world is not really news. there is an element of habit. my guess is the market will not concentrate so much on how the u.s. will handle north korea what is themore
relationship between china and the u.s. this is likely to be part of the conversation when we get to the g-20. this is central. as usual, proper geopolitical threats are immensely difficult to price. on the other hand, the souring of trade between china and the u.s., which is more in the realm of market pricing. price geopolitical risk right now. >> absolutely, and particularly hard in an environment of relatively low volatility where most investors are looking for yields. we have seen so many ballistic tests from north korea before. the main question is what this means for the u.s.-chinese relationship particularly with the g-20 later this week. >> let me bring up this chart, financial market stress in the
market before today. stressfinancial market 2014ght 2014 low -- at a low. >> the biggest issue we had is that even though it is unclear where this north korean story goes, there is not a high level of massive tension at this stage. there is more a lack of willingness to cooperate and move forward on a globalized management of the world economy. this is not the sort of thing that is directly easy to price into the market, especially in a situation where we probably have slightly more visibility on where the major economies are going. they might not all go in the right direction. we know china continues to soften. there is a good sense of where it is going, why it is
happening, what economic policy is doing in china. in the u.s., even if we have hesitation on fiscal policy, on monetary policy there is a strong sense that the fed wants to give. europe. thing in the central bank is increasingly transparent of where things want to go. on one end, we have our usual geopolitical tension. the world is probably easier to read right now than it was in 2015 or at the beginning of 2016. >> elsa, would you go along with that? the world is easier to read in terms of the road story we have to the moment -- growth story we moment?t the >> there is still a number of
uncertainties out there. the problem from the investment perspective is it is difficult to take those two seriously -- tradesiously when carry have been doing well, and generally high-yield instruments outperforming. we all know those risks are there. markets are reluctant to price those in until we see some clearer sign of those materializing. >> there are many things we will need to focus on when we get to hamburg and the g-20. the trade story is crucial. this shows the extent of global trade growth. u.s.ed bars are the recessions. this has been the backdrop for the global economy in general
for the last few years german by this. fairly synchronized global economy in a few markets. that has not happened for quite a while. given where we are in a number of areas, we would expect global trade to be higher than where we are. one issue is even though the recovery is there almost everywhere, investment remains lacking in many countries. the les moonves, it has a disproportionate impact on curbing the growth in trade. you consume more, whether it is public or private consumption. a lot of it is produced locally. thisis still missing from ination is a proper rebound capex. >> for more on the north korean
missile launch, we have david joining us from hong kong. -- does this change the conversation around north korea? >> in terms of north korea's advanced technology and their ability to deliver a nuclear missile to the u.s., we can see north korea is making progress as it fired this icbm that it says it can reach anywhere in the world. it could potentially reach the u.s. whether it can actually put a miniaturized nuclear warhead on the tip and deliver that to the u.s. is an open question the moment. i don't think you will find any missile expert ready to say they can do that. in the context of what we have been talking about, the geopolitics, the g-20, the meeting between donald trump and
hamburg, here we s2e july 4, donald trump thatook -- has to face up north korea could turn itself into a geopolitical threat to the u.s. put asays china will heavy move on north korea and end this nonsense once and for all. how do we interpret this? what can china do? they have been nervous about migrant flows into china out of north korea. >> there you have it. you have answered the question. china -- donald trump has said he wants china to do more. but what can china do? the u.s. wants to see china
squeezing sanctions on north korea. 90% of north korea's international trade goes through china. china has taken steps, but we still have a north korean economy that some say is actually growing because of reforms taking place. offa could perhaps squeeze the consumption of oil to north korea. you have the risk of an economic collapse, regime collapse, refugees over the border. you could have potentially reunification in korea and the u.s. looking over at asian from the north korean border. that is a risk china does not want. >> elsa, let's come to you on this. preparee xi and merkel for the g-20, filling the void left by the u.s. on the global
leadership stage, at least in the eyes of some. is there something you can .2, better eurozone growth from germany on the global stage? >> these political issues have been fairly priced in at the moment. it is difficult to turn that into a trade. it is not really a currency a six at least not for month or 12 month horizon. when it comes to international growth, it is positive. but perhaps pressing into much normalization, it is going to be a slow process of normalization. if you think about fair value of the euro which might be 1.25 or 1.27, it is hard to argue we will get closer to fair value
until we see an increase in rates from the ecb. >> thank you very much. you are staying with us. thank you over in hong kong, dated. now a quick programming no. it is july 4. tune in tonight where alix steel and matt miller will cohost the boston pops fireworks spectacular. if you are watching globally and wants a little fourth of july at home, that is when it will start. this is bloomberg. ♪
markets. i am anna edwards. as germany gears up to host the g-20. the german car industry, home to the world's largest carmakers, could germany suffer from a follower of our international over -- fallout international trade? can you give us your assessment of how the relationship between president trump and europe is going to impact your industry? what are your worst fears? >> our hope is that everyone understands open markets are the precondition for mutual success. more we argue that we are selling cars in u.s. and producing more and more cars there, the more people
understand in the senate and house that any kind of restrictions would not be wise. to give you a figure, in 2009, the german automotive industry produced 200,000 cars in the u.s. than we will produce more 850,000 cars in the u.s., and most of them are exported. that means we are contributing to a better trade balance to the u.s. >> german carmakers clearly delivering that message. i was in the u.s. last week. i witnessed at least one german automaker putting forward that message. how are you urging the americans to open up trade policy dialogue between the new u.s. administration and your country, your industry in the eu? someat we heard with
satisfaction was the american trade secretary, wilbur ross, said publicly a few days ago that he would be open to trade negotiations with the european union. if we would do that and concentrate on trying to get away with non-tarriff and tariff barriers, that would car manufacturers on both sides of the atlantic. i think both sides would have a win-win situation, and that would be much better than any kind of interference with markets. >> do you think it is still possible to craft an agreement that is acceptable to the u.s.? it, howeveryou call
the headline is, if we would get into talks which are serious, which have the intention to stimulate markets and not to protect markets, that would be withy helpful, and i think the value chain of the automotive industries, which are so complex, it would always be a serious mistake if anyone in the world would start with section is on -- with protectionism. protectionism helps no one, neither the u.s. nor the europeans. we are for open markets and serious free-trade negotiations. >> do you expect to hear any of those messages from the u.s. trade delegation in hamburg? it sounds as if the u.s.
administration is on very different pages on this issue. >> we hope so. we know we still have to convince one of the other members of the american political scene that the automotive market is a very open market. the market share of american companies on the european continent is higher than the market share of the german car industry in the united states. germanas production of car manufacturers in the u.s. is more and more important for the export of cars out of the u.s. if these facts are known, everyone of substance try to avoid any sort of protectionism in the car sector. >> can i ask you about the diesel market in europe?
is your industry planning for cities to ban diesel cars anytime soon? is that your expectation? towe are trying the utmost avoid any kinds of restrictions because we think in the modern world there are much more intelligent instruments to reduce emissions. at the moment where you have avoid anyans, you can traffic inrching with the flow of legal traffic system. trying to avoid stop and go, you'll also avoided emissions. we are also offering some
improvement of the existing diesel car fleet with software to reduce emissions. with all that package, we think we have much more convincing arguments that any kind of restrictions in the cities. >> we will see how those take all, matthias. on brexit, we have talked about the importance of trade flows and investments, what is your expectation for how much the german industry will cut back on investments in the u.k. as we listen to the latest news around brexit? s> we have real interest a the german automotive industry that the end of negotiations between great britain and the panoramaunion, we have without any kind of terror and non-tariffand
barriers. theope britain stays in open market for the transition. inhave a lot of investments britain. we have over 100 production sites in britain. britain exports so many of its cars and components to the continent that there should be interest on both sides. if britain would stay in the customs union and perhaps even in the internal market, price would be clear, and britain would have to accept the european court of justice rules and would have to accept migration. that is the critical thing that
are this fourth of july. . pretty flat start the weakest performer of the major markets in asia is the hang seng. that's in contrast with the ftse 100 and the dax, who find themselves underwater today. we have seen a slight move toward the safer haven assets because of what we have seen coming out of north korea. i think we have some other data to show you around where we are in currency markets. the australian dollar down by seven tenths of a percent. no change decision from the rba as well. we see some movement into the boon the markets as what we have seen from north korea. let's check in with bloomberg first word news with emma chandra. a long time, north
korea has threatened to develop a missile that could hit the u.s. with a nuclear weapon. now to be one step closer. korea says it has launched an intercontinental ballistic missile. it flew for 500 miles before landing in the sea of japan. president trump tweeted that china "should put a heavy move on north korea and end this nonsense want to draw." the government must hold its nerve and key public spending under control according to the k chancellor. not all members of the conservative party agree though. an unpopular pay freeze on public jobs is under active discussion. in the u.s., the federal appeals court says the epa cannot defend obama era standards. the court says the epa can reconsider a rule that limits emissions from oil and gas wells, but the rule has to remain in place in the meantime .
global news 24 hours a day powered by 2700 journalists and analysts in more than 120 countries, i'm emma chandra. this is bloomberg. philiphe k chancellor hammond's column on business leaders to help the government make the case to europe for a smooth brexit. says thech, hammond business concerns will be heard as negotiations get underway. from the rbc is capital markets strategist. as the debate rumbles on on how hard or soft the brexit is going to be or clean or dirty or whichever description you like, does any of it change your view on what happens with the pound? if we handed over, guidance on currency markets to central banks? >> quite clearly the very latest on sterling were driven by no expectations surrounding what the bank of england could do,
which is given a surprise andted by the mpc recently connie last week. i think the issue for the impact of brexit on sterling is that we do not know where we are going to lend. it seems the market has some level of confidence in the idea that there's going to be a transition. there is increasing talk about a transition, which to me is a way to try to push things and let's not try to think about the let's not to test think about it too quickly. it's reading what the europeans are saying and it's fairly plain. it is no transition if we do not know where we are transitioning to. on a bit nervous at the markets tend to find some of confidence or seem to that so much on a when noon deal
transition deal can actually be granted unless we know or the europeans know was some level of certainty what the final relationship between the u.k. and europe is going to be. the further point of the is that we are still in lot. anna: does the existence or not of a transition deal -- is that shaping your thoughts on u.k. assets at the moment? >> not really. the key thing is where we end up. if you look at cable, it is very difficult to argue that it is pricing and material risk of a breakdown in negotiations or single market exit with without anything to follow it. if you look at the balance of risk, it is still saying downside. for investors with a much longer term horizon, it's not a bad level to stand at. anna: interesting that we are getting comments coming through from the u.k. government spokesman in london, saying that ,he brexit related repeal act
bring it into the u.k. legislation will head to the u.k. parliament next week. another test of theresa may's government coming next week. this will be the focus with political conversation next week. with the central bank story, the markets have reacted. if you are the bloomberg, you can pull this chart up. 2017 is live for the bank of england. given this uncertainty on where the u.k. economy goes from here, do you think that rate hikes should be on the table? gilles: no. very clearly no. i think what we have is a fairly simple case actually of transitory shock. important inflation goes up and it creates an inflation hump. monetary policy should react to this only if there is a clear that for rounds are
hearing. you would need to see wages accelerate. wages are not accelerating in the u.k. they are decelerating. i do not exactly see the reason why we should get into a rate -- afxcept for two things the bank of england is really sectors and there are signs of that, but for this normally you have macro potential. anna: they enacted some of that last week. gilles: that should not alter monetary policy. for if they think it is time to pay all the investors with a premium to make sure they continue to invest in the u.k. that might become an issue at some point if the markets start looking at the british current account deficit with some concern. we are very far away from that. at this stage, i really don't see the rationale for a rate hike. anna: perhaps of those on the
hawkish side of the bank of england says the second round effects are evidence in their eyes a forecast for inflation to stay above target out of the 2-3 year time horizon. do you see any reason for a hike in the u.k.? elsa: it's interesting that you mentioned forbes because even though she has been the most hawkish member, she was actually fairly circumspect and cautious in comments she made last week ,ooking at the quit rate suggesting it does not show much confidence in the k labor market. mpc, sometimes we tend to interpret them in the market. last week, they said if the u.k. economy stays strong and the second half of the year, that he may be looking to remove some accommodation, but that's a big if. even carmi when he made his comments, he said he would like to see the economy strengthened before removing accommodation.
the key thing is that the bank of england's own model they likely incorporates some kind of curve effect and we are not sure we are going to get that in the second half of the year. that is where the room for disappointment comes from. anna: thank you both very much. elsa stays with us on the program. gilles, thank you for joining us. now a quick programming note for you -- tune in to bloomberg tonight at 8:00 p.m. where alix steel, carol massar, and matt miller will host the boston pops fireworks spectacular, celebrating a little bit of july 4 wherever you are this evening. this is bloomberg. ♪
anna: welcome back to "bloomberg markets." we are live from london. i am anna edwards. sweden's bank has become the latest central bank preparing for higher interest rates, removing the potential for near-term easing. joining us for more is elsa, still with us of course. still interesting perhaps, but also interesting and what it represents for the central banking conversation more generally. going into today, some wondered whether the rba might act. we are not got as much action as expected, but the bank certainly leaning with the flow on the central banking narrative. i would be cautious and interpreting the bank. the headline shows risk bank come on thatbias at the same time, it is still signaling it could use further if necessary and warning about
the currency strengthening. i still see a central bank that is very, very reluctant to remove that accommodation. anna: more or less reluctant than the ecb? compare and contrast the level of reluctance around removing accommodations. elsa: it is funny because the risks bank does not operate independently so to speak. and theoned the ecb governor was signaling no reason for the bank hiking rates ahead of the ecb. both central banks will be very slow in that process of removing accommodation. the riksbank is interesting because growth has been incredibly strong in recent years. a lot of market participants have been looking for a stronger swedish krona. yet it keeps underperforming. one of the reasons that we are still relatively bearish on the swedish krona in the near term is precisely because the central bank is unwilling to deliver that hawkish bias. anna: one generally on the outlook of central banks and
rates, i know one of your colleagues saying that the biggest risk to markets, not the best case scenario, but the big risk is we see a lot of typing from central banks. that leads to a combined selloff in equities and bonds. is that the biggest risk out there? what chance that happens? elsa: it's certainly a risk to be aware of because the implications are very unusual. we have become accustomed to either risk on or risk off markets. bonds and equities move in opposite directions or indeed markets where both bonds and equities are rallying together. the market where they selloff together is unusual, but it does happen. it runs the risk of seeing dollar appreciation, which many people are not position for. it would also put the risk parity strategies at risk because of those are based on the idea of some invest relationship between bonds and equities.
i think it's a scenario that could cause a lot of market disruption and would lead to a stronger u.s. dollar. anna: good to have you on the program, elsa lignos, joining us on the currency markets. the french president emmanuel toron used a major speech attempt to place the country at the center of a new age of enlightenment. youngest leader since napoleon called on parliamentarians to put aside their postmodern cynicism to revive french creativity and offer leadership on a global stage. >> it is up to france to take initiative and i want to do it. in the months to come, thanks to the close relationship i have already established in particular with the german chancellor, before the end of the year everywhere in europe we will launch democratic conventions to reform europe with its core political project, its first ambition to unite people. anna: for more, we are joined now by caroline connan.
we have gone to the post-postmodernism, new enlightenment, channeling his inner philosopher. we have had a lot of enlightenment from emmanuel macron. what was he trying to signal with a speech? caroline: clearly he did not want to give details about the upcoming reforms in france, including the labor reform. he just wants to leave them to the prime minister, who was supposed to give another speech and one hour and a half on that. clearly with this congress and versailles, macro ann wanted to restore the grandeur france. he talked about a new h humanist project to put france on the global stage and replace the confidence of the french people. he did gather to tell them he was going to slash their numbers by one third.
he said he could do a referendum if needed. he said he wanted to introduce proportional representation the french parliament. these would allow smaller parishes -- parties to get more seats in parliament. finally he said he wanted to lift the state of emergency that france has been living in since the terrorist attack in 2015 by the end of this year, but clearly the main point for emmanuel macron was to stand frayove the political and set the priorities for the next five years. anna: the special joint session of parliament fairly unusual. more unusual is what is to come and that is the long to do list from the prime minister. what is on that list? labor market reform we have talked about quite a lot i think, but other things the french administration wants to make priorities? caroline: absolutely.
you know, we had a small reshuffle after the latest elections. the first law that will come into place is from the ethics of politics. withemember what happened fillion who suffered in the polls because of the employment of his wife in parliament. this is something the new government wants to get rid of, limit the mandates in terms of duration and numbers of mandates, and also prevent earliamentarians to hir some members of their family. then you have the labor reform. this is something we should have by the end of summer, by september. this is also the time we should have the first budget of this new government. many spending cuts expected. anna: caroline, thank you, live for us from paris.
anna: live from london, i'm anna edwards. this is "bloomberg markets." now for mark barton with a look at what is moving in the markets. mark: down for the fifth day in six on this independence day where volumes are 20% below their daily average. a few industry groups up, but the main gauge for the stoxx 600 is down for the fifth day. gold rising, bonds rising, equities down. the big news is north korea firing its intercontinental ballistic missile, which brings me to this chart, the blue line
falling to a four-month low against the dollar. you will notice the yellow line. there is a bit of either virgins which is worth noting. emerging-market asia's worst performance since the end of may. you can see it has continued to climb. signal the early warning index, measuring stress and economic conditions with the view to predict weake weakness and local currencies. the reading below 0.5 mean stresses below average. right now we are at .387. and theindicate stress one is below average despite today's geopolitical issues. let's have the moving shares up by 26%. a record move to a record high.
the payments processing company says it has received 11 a approaches and they will comply with roles in the u.k. they must say by august 1 what they intend to bend or whether they intend to bid. crude oil following -- falling after the longest streak this year. opec production climbing to the highest level this year. libya and nigeria exempt from the opec rules. the winning streak is the longest of the year. it is coming to an end. anna: let's talk about the banking sector. hsbc has approached peter hancock to be its next chief executive officer. the incoming chairman mark tucker considers both internal and next trial candidates to leave europe's largest bank. shares are trading lower by this much, 9/10 of a percent. it is the worst day in more than
three weeks. joining me now here on set is bloomberg reporter on this story the lisa martin. it is good to have you here. this is not a done deal, is it? this is one of many names to enter the fray. >> thanks for pointing that out. it's very slo luminary and discussions are going on with internal candidates potentially and also internally. -- external. this could be a break with the past because they have always looked internally and not externally. like 150 years. elisa: exactly. on the one hand, you want to give your existing bench the opportunity to move up, but this is a very complex institution may be looking externally making it that much more, located and riskier. you have an organization that spans the globe with 10,000 employees with very many
different dynamics and regions where it operates. anna: it has such a global footprint, doesn't? do we have a sense of any another names in the fray? do we know any other names coming forward? there are internal ones. elsa: mostly the internal candidates who could be in the running like john flint. these are the names coming up. for a does not begin couple of months, so these discussions are still very much the early stage. anna: hsbc showed glimpses and their topline growth across their businesses. the return of cash shareholders a big game at hsbc. what is the rest of the direction for this business? elisa: the focus is very much on growing that topline. clearly the buybacks have helped the stock value.
it's up 50% in the last year. it's a real winner among the banking industry. of course, the bank is pivoting toward asia and in china in particular. they announced last week the chinese joint venture and that is really where the focused on growth is going to come from over the next several years. anna: thank you very much. quick look at the markets as we head toward the next hour of programming. . you 5 p.m. in london and this is where we are in the markets. down a touch on the stoxx 600. the losses paring back just a little bit. no trading open the united states today. it is the fourth of july. happy fourth of july to you if you are salivating the u.s. or globally. u.s. equity markets pulling back a bit from their session lows. the euro-dollar at 11349. at australian dollar also
0.7604. we include the aussie dollar after the north korea ballistic missile test. what we have heard from the rba, we saw no change in rates from the rba. a quickly had german yields and we have seen moves because of that. nymex crude, quick check on the price -- down by 2/10 of a percent. we got a report on opec production, which actually increased since january. coming up next, leslie binger murray joins us on the program. we will talk about the g-20 and geopolitics, all relevant this week as we head toward hamburg. ♪
trump challenges china as north korea has successfully launched a missile. world leaders meet at the g-20 in just a few days time. the rba fails to follow the hawks as it sticks to a neutral stance. the riksbank ditches its easing bias after last week's roller coaster. the focus on central banks continues. searching for a shared solution. chancellor helping to make the case first move brexit. -- for a smooth brexit. ♪ anna: welcome to the program, everybody. in new london and 8:00 york, i am anna edwards. welcome to "bloomberg markets." let's have a quick look at what the markets are doing this hour. midway through the trading day and we are down on the european equity markets. the stoxx 600 down by a 10th of a percent. pulling away from session was.
we got confirmation of the north korean missile launch and a little bit of a flight to safety. we saw that with appetite for the japanese currency. a bit more appetite also for some of the bund markets as well. getting a boost from that same news flow. let's check in on the bloomberg first word news with emma chandra. emma: north korea may now be one step closer toward its goal of building a missile with a nuclear warhead that can hit the u.s. kim jong ins regime claimed for the first time it has successfully launched an intercontinental ballistic missile. the u.s., south korea, and japan have yet to confirm that. president trump tweeted that china" could put a heavy move on end thisrea and nonsense wha once and for
all." official to china's news agency, trade between russia and china rose during the first five months of the year. president trump will have his first meeting with present vladimir putin this friday. the two leaders will meet while they are in hamburg, germany for the g-20 summit. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. anna: back to one of the top stories that mm mentioned. claims ita successfully launched an intercontinental ballistic missile earlier, a signal that the nation is closer to its aim of building a device that could hit the continental united states with a nuclear warhead. joining us now is john freire and we will talk more with guests around the market story in just a moment. the significance of this coming
days before the g-20 and it will have the opportunity for all these global leaders to talk about this. north korea forcing itself of the agenda. john: there's a political significance. first of all, there's a practical significance. first of all, they are getting that step closer to developing a missile that can hit mainland united states. they are a long way from being able to hit the lower 48 states, but if you look at how much money and how much capital the north korean regime has poured into this program, it would seem like only a matter of time. yes, politically, this is going to be huge at the g-20. we knew it was going to be a big topic, but donald trump is going to come to the summit with a lot of questions for the chinese president. anna: he is putting some statements at least about the chinese on twitter today, saying
, "china will put a heavy move nd thish korea and e nonsense once and for all." what is china to do given its reluctance in the past for u.s. influence? john: they see north korea is a problem that the u.s. helped create and they themselves are much more a part of the solution than the u.s. is. they have to be careful here. they need to be careful not to be seen by the chinese to be putting the chinese into a corner. the chinese do not like being bullied into taking any sort of diplomatic measure. having said all that, it's also important to bear in mind that both sides need to be careful not to be played by north korea. they don't want to be in a situation where north korea is dictating the terms of the relationship between those two countries. rer that to prevail, the
needs to be cool discussions from this and judging by the president's tweets, he is not in the mood for that. anna: john joining us on set here. leslie ined now by vinjumuri as well as steve barrow. studio us here in the from standard advisory coul. let's pick up on some of the things we were talking about. amid the latest news around north korea, president xi and chancellor merkel get closer together, filling the void where the u.s. has perhaps stepped away a little bit. let's start with north korea. this pushes his way up the agenda. thate: we have known during this four years of president trump's time in office that north korea would be arguably the most significant security threat with the chances
that it will develop an icbm and put a nuclear warhead on the events it is agreed by most experts to be somewhere between two and four years. today's icbm is a very significant move. it comes at a time when president trump over the last few days has begun to change his tune with respect to his exchanges with south korea and japan, less so with china, taking a harder line. he had a better relationship with the head of china. now he has become more aggressive because he is impatient as we know. he has wanted to see more progress in terms of china partnering to really take on this particular threat. now he is about to take a second international trip. the first one did not go so well with the europeans. now he is about to turn up again and right in the middle of what is going to be the return to being at the top of the agenda. he will need to work with china. it's interesting what you said. the head of china and germany are meeting today and this is not what you would expect, two
leaders you would not expect coming together. commonnited perhaps by a search with united states. steve, let's bring you into the conversation. i was watching the markets by the time of news with north korea and that was nervous us of moving the dollar into yen, the usual areas you would see benefit. does this change much for you or has this been progressively building as a geopolitical story in the background? steve: this as a forecaster come you cannot stay -- as a forecaster come you cannot say in this. period of time, it will break this impasse. it's difficult to factor that into a particular forecast. is an ever present threat and may well continue for a period of time. maybe get some strength in the
end or dollar, but that is likely to be very limited. in fact what we will see is i think probably the dollar and the yen actually getting weaker on a trend basis. come that day, if there is a day when military tensions really escalate and we do kind of really hit a significant problem, then obviously all bets are off for any kind of stoller for dollar weakness. .nna: let's talk about there this map shows the g-20 nations. are slightly said in just that this is what unites china and germany at the g-20, isn't it? the trade position with united states. this is no joke as the sister. this is true. about xi writing an op-ed germany being a global ally into the g-20. jimmy taking on a big role. -- germany taking on a big role. leslie: also germany working with france as you.
the 2008ftermath of financial crisis, germany is the form for leadership or management -- for managing the global economy. president trump has worked against the ethic of the g-20, which is multilateral cooperation, by taking on his america first agenda. natural and an unnatural way to see these partnerships emerging. we will be watching germany, france, and china to see what they managed to do and how trump response to that. anna: is this a relationship that benefits these economies? do you think china and germany already see a great deal of trade flow with germany sending equipment and one direction and china and the other? investment between the countries, maybe there's room to develop that relationship further. steve: that's the interesting thing. heard, the u.s. is sort of ice letting itself almost a little bit. more the same perhaps within the g-20 and germany and china might be one example of it is coming
together and strengthening the g-20 in some sense. maybe that's because they feel there's a bit of a challenge there from trump. you saw that for instance after trump announced the u.s. was pulling out of the paris climate agreement. some parts of the u.s. itself saying we are not in agreement and we will redouble our efforts. and interesting point is on trade because when you look at the trend of protectionism, for instance, no significance in concern that trump would accelerate the rise in a protectionism trend. if you look at the data since trump came into office, we have seen the decline in the protectionism trend. -- theres institutions are some institutions that have highlighted the possibility that if the u.s. pushes the protectionist agenda further, others will redouble their efforts to go in some. that might be a difficult thing.
if the u.s. is putting on tariffs, that's a difficult thing. obviously of these alliances like germany and china for instance come closer together, maybe that is a solution. that would be quite positive as well for financial markets. maybe not quite as scared as the trump presidency as we were back in november. anna: lots of people asking questions as to whether it has much of a piece with this protectionist rhetoric. the u.s. talking last week about the deal paris. thank you both a much. both stay with us here in london. a quick programming note -- tune in to bloomberg tonight at 8:00 p.m. when alix steel, carol massar, and matt miller will host the boston pops i were spectacular -- fireworks spectacular. and little bit of july the fourth wherever you find yourself. this is bloomberg. ♪
anna: welcome back. this is "bloomberg markets." u.k. chancellor philip hammond has told business leaders they must help make the government government --to make the case to government. business concerns would be hurt if negotiation's get underway. joining us on set is simon kennedy. good to see you. hammond taking his message to business once again, saying you will be listen to. tone,s a change of increasingly open. simon: certainly number 11.
theresa may sticking by her plan from before the election, but certainly the time from within the government like philip hammond feeling a bit emboldened to stand up and say businesses need to be listened to. the feeling is that perhaps if they are listened to, we will see a brexit based around safeguarding trade and the economy and jobs than perhaps putting them aside and hoping everything is ok while we regain control of sovereignty rules. anna: and fish. act,rexit related repeal we have a bit of an update on the timing. we were expecting this piece of legislation to get to the house of commons. simon: that will be next week and that will come before parliament. it is what is known as the great cut-and-paste bill. it is taking all the eu laws and putting them on the british books. at some point, the government will start to whittle down which ones we don't want. it was originally the great repeal act and now it's a
changing of expectations. anna: renamed by somebody. this could be seen by some as a controversial process. it's due to the amount of power that the parliamentarians will have to adjust things. simon: the power the government has to adjust things. they can make tweaks along the way and the labour party has flagged that. obviously if you have control of the red 10, you can make changes. anna: you do the copy in the paste. simon: we all know editing is like. anna: thank you, simon kennedy. still with us on set this leslie amuri and steve barrow. this and youok at look at the latest on brexit, it
ties in with the g-20 agenda on the trade front. what are your thoughts on where the brexit process had from here? leslie: exactly what you said. we are heading up to the g-20 and we are talking about this is a competition for leadership. we talk about china, germany, france. we are not talking up the anglosphere anymore. we are not talking about the united states -- we are, but not as a potential leader. the united kingdom's voice seems to be lost in all this. interesting moment that brexit is doing exactly what many people feared, bringing the u.k. into a very internal focus and to the extent that it's an international focus that's exclusively looking at this one issue. the fact that donald trump seems now not to be making the surprise visit that people were concerned he might be making after the g-20 to window might help -- london might help, but the global context is being
lost. it's very interesting watching the space now. anna: where do you gauge the u.k. economy right now? we have the brexit barometer here. you can pull this up on bloomberg. it's a measure of all kinds of sentiments indicated around the u.k. we have antext conversation about whether we see higher rates in the u.k. is that sensible given what you see? steve: no. i do not think that rates should really go up. i also think at the same time that if i'm wrong and they do, it will probably be the take away of the brexit rate cut that we got less bond last august. it would just be the reverse of that move. perhaps that's acceptable, but not in terms of some kind of path of higher interest rates. that to me does not seem appropriate. is sortugh mark carney
of talking in those terms, you can also see within the comments a lot of those underlying concerns about the consumer sector and particular. also see the whole brexit process itself. forerms of what it means financial markets, you have the rate hike on the one hand and then you have the brexit uncertainty on the other hand. does one compensate for the other in terms of sterling? know, it probably doesn't. the brexit probably does. point thatalmost the the bank of england governor was trying to make. he was not saying he was going to increase interest rates. if he is wrong about the threat to growth, then there might be more of a case for increasing. steve: it's really just looking at what the bank of england has the balance off. inflation is higher than targeted and probably will run a little bit further. the economy seem somewhat weak. the bank has a certain amount of ability to ignore the increase
in inflation. he is saying that maybe that balance is not quite as dominant as it was and we have obviously seen a number of mpc members and perhaps more in the future saying that trade-off is not really working anymore. i think that would be a mistake . anna: steve barrow stays with us and so does leslie on the program. still ahead on this fourth of july, happy fourth of july fewer somebody. a look at how commodity prices are impacting the cost of the holiday barbecue in the united states. this is bloomberg. ♪
retail beef prices are down from last year's holiday weekend, allowing the most popular independence day meet to complete with pork and poultry. production is rising for a second straight year, hoping to boost poultry and the outputs to the highest ever. a july 4 story if i ever saw one, this being the day were we celebrate over the united states independence. back with me on set in london, leslie and steve barrow. let's talk about the united states on this fourth of july. i was in the u.s. last week and the divided politics is off nothing. . often a theme. witho you see the politics the hel health care bill? leslie: partisanship is an issue, but it's a very divided country right now. the divisions around health care are very start. k.
what is interesting about the health-care debate is that it is now raising questions for republicans who are not supporting the effort to repeal and replace because they are not supporting the bill before senate. donald trump continues to press quite hard on this. he's looking for wins. what we are seeing now is some peeling off of that support. the numbers are around hovering -- hovering around 30%. the tweets over the weekend about the msnbc anchors and then the tweet where he had the video of him wrestling with cnn, i think that spawned a whole series of questions about now where will people go? will this lead to any peeling off? its undoubtedly a very divided time. donald trump is going more on the defensive as he is facing a number of push backs. health care is not going well and it was a ruling that came out of the district court of appeals on the epa's effort to roll back to deregulate methane
emissions without introducing a new bill. they said no you can't do that. you have to introduce a new bill. realizing the limitations of the executive power perhaps. the democracy of the system in place to really constrain executive power. anna: to what extent is this term in washington changing your view on the dollar? i know you think the dollar goes down. is that on legislative gridlock or is that not the story? steve: its many different things. ,f you look back in history going back over the last few presidencies, we have had a tendency to see the dollar go down during up-and-down presidencies. very often that is because of bad luck. there might be recessions or 9/11 or very different issues that have come up. perhaps some of those are self-inflicted, but generally
republicans have presided over weakness and democrats have presided over dollar strength. to some extent that presents the legislative programs that have been put through. when i look at the trump presidency from here, i see similar things perhaps to some of the republican presidencies in the past where we presided over dollar weakness. my view is that the dollar will decline. at the same time, and the relatively short term context, we might see some wins for donald trump. anna: thank you very much. thank you for joining us. steve barrow stays with us. coming up on the program tomorrow, castor nickel, more g-20 analysis for you in that conversation. this is bloomberg. ♪
london that we cannot lay on any better weather for you. let's have a quick look at where the markets are just over the lunchtime hot in the european trading day. european trading stocks down. we saw the losses being pared back in the last hour or so. the north korean ballistic missile test is what in the end it proved to be. appetites for gold and for yen and for bonds. now we turn to mark barton who has more details on the market movers. mark: icbm is an acronym new to many of us come intercontinental ballistic missile. the function gives you a wonderful taste as to how investors are responding to what happened in the korean peninsula in the last 24 hours. equities are lower today and look at the currencies declining against the dollar. you have a move into the haven that is bonds today. gold rising among other commodities.
a busy day for central banks. removing its easing bias, becoming the latest central bank to make the hawkish shift. inflation gaining a foothold in scandinavia's largest economy. headline inflation is the blue line. just below that 2% target. the central bank did hold its benchmark repo rate as expected. it eliminated the chancellor of a near-term rate cut. suggesting the potential for further cuts through the end of the year. 2.8%on shares are up by today. to investment managers building a stake in the swiss chemical maker. they are saying the deal will destroy shareholder value.
the stake is part of a growing wave of shareholder activism targeting european companies. we had third point and nestle in the last week. let me show you the chart about how gears have shifted when it comes to earnings. analyst trimming their expectations for corporate earnings and games and gains in macro data may be peaking according to j.p. morgan chase. along long-awaited rebound in inflation. they say it has not materialized. the change as you can see her for months of positive revisions coincides with central banks, giving signs that they are ready to tighten. g #btv 4266. anna: mark, thank you very much. here's emma chandra in new york. emma: for a long time, north korea has threatened to develop a missile that could hit the u.s. with a nuclear weapon. now it may be one step closer.
north korea says for the first time it has launched intercontinental bostick missile. if we for 500 miles before landing in the sea of japan. president trump tweeted that perhaps china "would put heavy move on north korea and end this nonsense once and for all." philip hammond says the government must hold its nerve and key public spending under control. not all members of payments conservative party agree though. one minister told parliament that an unpopular pay freeze on public jobs is now under active discussion. in the u.s. come federal appeals court says the epa cannot suspend an obama era standard. the court says the epa can reconsider a rule that limits methane emissions from oil and gas wells, but the rule has to remain in place in the meantime. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries.
i'm emma chandra. this is bloomberg. anna: thank you very much. let's turn to central banking now. riksbank has become the latest central bank to prepare for higher interest rates, removing the potential for near-term using an inflation gains. the governor weighed in on the decision. >> given our view of the world presently, in our case most likely we will stay put until next summer. and then we will start raising policy rates slowly. that quite a lot depends on what is going on within the eu and that really depends on the numbers being good with in the emu because that would affect us in a positive way. anna: joining us here on set is , a global portfolio manager and still with us is steve barrow of standard bank . give us your thoughts on the change in tone and the timing of a corner and the rate story that
many have pointed to last week where we saw the ecb and the about. england talked was this is a significant turning point for you? regina: it's a reflection of how far we come. the global economy has recovered significantly since the great financial crisis. these extraordinary policies for many of the major financial banks have been in place for quite some time. when you look at the ecb balance sheet and how much it has expanded, currently it is over 4.2 trillion euros. it has doubled in size since july 2014. when you look at economic data come a whether it's the employment rate or business confidence or even just business surveys for investment across the eurozone, we have come a long way. it's a reflection that they are essentially giving the markets prepared, that this tapering will happen. you can categorize it as essentially a soft tapering,
meaning that they don't want to unwind all the progress that they have done. the last thing that many of the central bankers want to do is tighten too quickly. that's before the growth and inflation picks up. anna: one of the central banks we could be talking about is the ecb. we are getting comments coming from the ecb. the ecb must persistent with policy. the inflation outlook is contingent on using financial conditions. it has been very effective with the qe program and the ecb needs patience and persistence. inflation is gradually moving toward the ecb will. goal. seems like a steady as she goes message from the ecb. what is your time horizon? steve: in terms of those comments, very much kind of the mario draghi line. that line and say perhaps we have to look around maybe the fringes in some senses
of the ecb to get some sense of perhaps direction. anna: germany? steve: i would not necessarily say germany. the austrian central bank is speaking today and he will show what is really going on in the ecb rather than praet has come out with. we need to look around the fringes. the things are changing, but it is very slow. the ecb has made mistakes in the past with raising rates to quickly. it obviously does not want to do that again. and terms of the timing, are we going to see a rate hike next year? maybe the tail end of the year perhaps of the earliest, but likely 2019. anna: we have the australian dollar. this is 8575 on the bloomberg. investors and hedge funds are long on the aussie dollar going
into today. disappointed perhaps by what we got. no change in a very start -- and a very short statement coming from the rba. not all of these parts of the world are on board with this rate tightening theme. the rba has got other issues. this some slack in the labor economy and issues around households. steve: it's important to sweden also. i know they ingested -- adjusted policy slightly, but they note as it normally does in that statement that it does not want the australian dollar to go to high. the riksbank saying the same thing. there are some central banks around that are perhaps not so concerned if the exchange rate get stronger, but there are other australians that are concerned. they might tend to lag back a little bit based on that basis that they do not want that first move disadvantage if you are the first mover in terms of raising.
if you are the ecb or the bank of england or the bank of canada, you might be the first. your currency might be the one to get the strongest. anna: it is not driving currency strength. the currency is down 7/10 of a percent. of my favorite line from the story on the rba is at the rb is traditionally comfortable with failing to meet market expectations and it did today with a short statement. regina, in terms of not wanting to unwind the good work, how high do rates then go? with this at germany conversation around the ecb, we saw quite a big repricing around bunds. their coming off such a low base of course. regina: when you look at the positioning before the meeting last week, there was a lot of long positions in german bunds. you saw pretty to move -- a pretty big move within german futures.
the 10 year went from 25 basis points to 46 today. that is reflective of some of the signaling, but also the positioning that we saw. i think it is dependent on tomorrow the fed minutes. there's also the ecb minutes on thursday. you will see additional volatility in the next 48 hours, looking at the changes of languages and both of those statements. anna: wants to focus on what the central banking story in the next four hours. thank you very much, steve barrow, and regina borromeo. for staying with us on the program. -- quick programming note tune in to bloomberg tonight at 8:00 p.m. as alix steel, carol massar, and matt miller ready to host the boston pops fireworks spectacular live from boston's historic as bu esplanade. this is bloomberg. ♪
anna: welcome back. i'm anna edwards. this is "bloomberg markets." the french president used a speech to place the country in a new age of enlightened. he called on parliamentarians to put aside their postmodern cynicism and offer leadership on the global stage. >> it is up to france to take initiative and i want to do it. in the months to come, thanks to the close relationship i have argued established in particular with the german chancellor, before the end of the year everywhere and europe we will launch democratic conventions to reform europe with its core political project and first ambition to unite people. anna: let's bring it to the conversation greg from paris. good to see you.
back to the 18th century and age of reason. trying to signal with the speech? greg: i think he is trying to signal a new style of french presidency. he was not outlining measures. that is the job of the prime minister speaking later this afternoon. he will say what is exactly in the program and when it will be passed. he will get the legislative calendar. macron wanted to market itself out that he is a new type of president. may be going back to the initial idea of what the french president should be when the republic was created. he is sort of a real head of state, someone above the flood of the parties who gives a general direction and lets the government get to work. sarkozy one to be involved in everything. hollande one of the more humble presidency. macron once a 21st-century presidency in the sense that he's a social media and direction indication to the
people. going back to the initial idea that the president sets the agenda and sets the rules and then has the government actually do the work. anna: how much strength does he have at the moment? we talk about he was swept to power in seemingly coming from nowhere. gothe same time, he only 14% of the vote in the first round. does he feel very powerful? is he very powerful at the moment? greg: you really put your finger on it. there two ways to look at the election. he won the second round with 63%. a reforming president one with a huge majority or look at the other number. if you look at the number of eligible voters, only 15% of eligible voters voted for his party in the first round of elections. because of the way the french system works and because of low turnout, it gives him an overwhelming majority in parliament. he has got the power in terms of the rules of the game and his
power and his control parliament. he certainly has the power. whether he has public backing for whatever he wants to the, let's not forget that have the electric in the first round of the election voted for candidates were anti-europe, anti-free trade, anti-nato. is a careful balancing act. you have got the power, but he has got to be careful about public opinion. anna: greg, thank you very much. future of thee euro zone and whether gross story goes from here, regina borromeo is still with us. steve barrow is still with us. come to you, on the french specific story coming a lot of expectation around the reform agenda that has been promised by macron. is this going to be a step change to the french economy? steve: if you look at the economic data, it seems that if
he can do this, he's doing it into an upswing. the economy seemingly looking quite a bit firmer, suggesting there is some momentum that will continue. if you take the view that it is easier to do things when things are good rather than when they are bad, perhaps we can expect some positive momentum. anna: talk about things when they are good and not bad, we have not had a debt crisis in a little while and the eurozone. i mentioned this because it's the fourth of july and a great story by one of my colleagues, talking about how the u.s. secretary back in 1789 forced u.s. states to remain together. is this something we see that is going to happen in europe at any point? for some people this still remains part of the jigsaw around monetary policy that has not been achieved. regina: i think that's and the ultimate -- i think that is the
ultimate goal, but there are steps that need to take place before we have common eurozone bonds. countrytion of specific sustainability as was concerns with the bad loans at some of the banks need to be further dressed. until there is more integration and some solutions to some of these problems, we are not going to get to that point. that is the ultimate goal. we are seeing the steps going forward. as a firm, we are positive in the eurozone. that is why we liked the currency this past year. things are looking positive for the area. anna: thank you both for your thoughts today. brandywineomeo from and steve barrow also joining us here on set. still ahead, the london stock exchange plc ceo tells bloomberg he is trying to bring chinese and london markets closer
anna: welcome back. this is "bloomberg markets." the london stock exchange hosting its third annual china conference in beijing today. at the top of the agenda, market reforms and the eligibility to win more chinese business. tom mackenzie is there and he spoke with the ceo and you by asking him about brexit. >> there's negotiations underway
now and we will be monitoring it very closely. from our perspective at the london stock exchange, we are getting on with building our business. we have seen a large number of international companies come to the market, especially in the last few weeks, companies from relying one world her international investor access and a strong reputation we have. that continues in the fundamental strength of london and the stock exchange. tom: you benefited from a weakness in sterling as well. nikhil: i think the ftse 100 index has companies in it were 75% of the earnings are overseas earnings. people understand that better now given the developments over the last year. always --ally we hope have always been a very international market. allied irish bank coming to london to raise 3 billion euros. the bank of cyprus moving to
london. i think you are seeing a very strong franchise for us. tom: are you or any of your colleagues putting any contingency plans given euro clearing? there's potentially some euro clearing into the eurozone. are there contingency plans in place to mitigate that? nikhil: of course, we are monitoring the negotiations. we have the biggest pool of derivatives clearing liquidity in the world. we clear multiple different currencies in one place, generating huge deficiencies for our clients. we do not think it would be in anyone's interest to disrupt those efficiencies. tom: let me ask you about m&a. the deal did not come off in march. how does that change your strategy at all? how much have you set aside for potential buyouts? nikhil: the stock exchanges a strongly growing exchange market. we have continued to look for acquisitions.
most recently we announced the acquisition of citigroup's fixed income and tax -- index business, which is now underway. with that, it takes are index business to pass that benchmark of $15 trillion. we ca continue to grow our business. tom: one of the biggest listings the saudi aramco. the london stock exchange is very much in the mix according to the people we have spoken to. how confident are you? nikhil: i will not comment on any specific company. their listings from all over the world. the strong regulatory environment that we have in indon and the international a survey senokot that people have in our faculty. tom: for me give you one more question -- let me give you one more question.
where are the opportunities now in terms of finance and how you can capitalize on that? nikhil: it's a huge area and we china china where has led the way in green finance globally. in nothuge opportunities just green bonds but renewable energy funds. green bonds, we have seen the first from china. we had another from the middle east region also coming to our market. you also see the interaction of crowdfunding and peer-to-peer lending with the public markets. we see some big opportunities there, partly with financing on the medium side. anna: that was the london stock exchange ceo, speaking with tom mackenzie from the groups event taking place in beijing. talking about opportunities for the company in china. let's take a look at what is happening in the market for you.
european equity markets trading weaker this afternoon. it is the afternoon here in europe. not weaker by much much us down a touch on the ftse 100. the hang seng had a tough day. a stronger performance out of australia. a real mixed tag over nature. dow jones futures suggesting a flat open for the start of yesterday. that happens on wednesday. it is closed tuesday in the united states for the july 4 holiday. coming up on the program, the u.s. president donald trump and russian president vladimir putin are set to meet at the g 20 summit later this week that takes place in hamburg. what will be on the agenda. we get a preview of the anticipated needed. meeting. this is bloomberg. ♪
as north korea says it has successfully launched an intercontinental missile. world leaders meet in the g-20 in a few days time. failed to follow the hawks as it sticks to its neutral start. this is its evening bias. rollover and central banks continues. searching for a shared solution, the u.k. chancellor urges business majors to help the government make the case for a smooth brexit. 2:00 p.m. in london and manic high p.m. in new york and 9:00 p.m. in hong kong. i am anna edwards in new york. let's look in the markets now. paring some of the loss is a little bit since we saw, initially, nervousness around the north korean intercontinental musick missile testing. -- intercontinental ballistic missile testing. that was the story of the
morning. into the afternoon, that is still a story but not quite as much. gold is stronger, up i one third of a percent. let's check in with first word news. here is emma chandra. >> a potential game changer in the dangerous nuclear standoff. north korea claims it has testfired its first intercontinental ballistic missile. if that is true it brings kim jong-un's regime closer to bringing a missile that could hit the u.s. with a nuclear warhead. china is calling for restraint and president trump tweeted that china should move on north korea and end this nonsense once and for all. president trump will have his first meeting with russia's friday in putin germany for the g-20 summit. in moscow, putin is meeting with china's president xi jinping,
strengthening economic and diplomatic ties in recent years. according to china's official news agency, trade between russia and china rose 13% the first five months off of this year. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. anna: thank you. back to one of the top stories. north korea claiming it successfully launched an intercontinental ballistic missile earlier. the nation is closer to its aim of building a device capable of hitting the continental united dates with nuclear warhead. joining us now with analysis is john fraher, bloomberg executive editor of international government. the significance of this coming today before the g-20, the increased focus on north korea pushing that item up the agenda. that one of knew the most interesting conversations at the g-20 was going to be trump and couldn't but what is at least as interesting now is what's going
on with trump and the chinese president. trump has put more pressure on china to deal with this. today's incident, coming on the fourth of july, underscoring, as it does, the sense that north korea can hit mainland usa, that could be an extremely important issue for trump. anna: and from calling on china to act on twitter, china would put a heavy move on north korea and end this nonsense. that was what we were talking about. this at a time when the united states is planning a missile defense system in south korea which is not popular with the chinese or the russians. issues one of many which the global leaders are not necessarily going to see eye to eye. the united states is playing a different role in the g-20 as we have seen compared to others. john: that is right. you will see germany and china
performing different roles as well. historically, the u.s. has always been a consensus builder. coalescedas always around the ground where the u.s. is occupied but now, under trump , america is coming to this g-20 in an extremely isolated position. this is going to be like no summit we have seen in the post-cold war era where you have a u.s. president arriving at the g-20 and the main people on the opposite sides of the debate going to be china and germany. historically, two countries that with thatch to do that we have little to do with apart from trade but there is a partnership in berlin. writingso, xi jinping about how germany was a global ally in the run-up. anna: if you look at their trade positions with the united states, they do coalesce. john: that is true.
people like xi jinping and other chinese leaders don't use words like allies at a whim. those words are very carefully used. but yes, donald trump sort of looks at the world through the lens of trade. it is interesting if you stack up a list of countries according to the size of their current accounts and trade deficits with the u.s. you will see china and germany are high up. and that is how trump will see the g-20 as well. these are the countries with whom i need to strike a better, fairer trade deal. what he says about trade will be very interesting. in washington to say, you have a trade war in the white house. whether he takes that language or takes that g-20, it remains to be seen but it is quite difficult and divisive. that is also speaking of
the visit of the south korean delegate. thank you very much for your time today. john fraher joining us there with analysis ahead of the g-20. office in from his london, mike bell, j.p. morgan asset management. into your language and your world, when we head towards the g-20, we see this missile test for north korea. are you surprised by the way the markets have not taken this more seriously, as another incremental step on a road we knew we were on. mr. bell: we have learned over the last few years is that the market is not too bothered about political noise unless it has to do with potential collapse of the eurozone. north koreaof launching a nuclear missile strike against the u.s. are extremely low. rightore, the market is to be looking through this. it is an interesting news story
but the likelihood of it actually leading to nuclear war is extremely low. it would be wrong for the market to react negatively. that is what you are seeing, the market essentially looking through. anna: how are you analyzing the traders? north korea is one of the items on the agenda, as we were discovering with john fraher. the latest noise out of the white house, are you in the camp that says this materially threatens to undermine international trade relationships? or do you think americans will do details -- do deals on trade and this will look better for america compared to the current one? mr. bell: we are much more interested in terms of the trade side of the picture than we are worried about what might happen in north korea. thatnk the key thing is any protectionist measures out of the u.s. will be negative, both for global growth and
trade, but also for the u.s. we think it is in the u.s.'s best interest to try to maintain as free trade as possible. it will be interesting to see whether that changes and i would say that is one of the greatest risks facing the global economy at the moment. if we see a move away from the trend of globalization that has been so supportive for global growth over the last few decades and towards a more perfectionist world. our hope and expectation is that you don't see a dramatic move towards per section is him -- protectionism. supported for risk assets as earnings continue to grow. anna: to what extent does protectionism threaten the global growth story. is china the country that is most at risk from it? canada,: well, mexico, and china would be pretty
heavily exposed to any trade protectionist measures from the u.s. other countries have less exposure. broad-based texas measures out of the u.s. so the have the u.s., likelihood of seeing dramatic barrier split ups is hopefully slim but is not something you will rule out entirely. anna: and at the end of the g-20, china making the trip to germany for this. how do you look at the growth story at the moment? we have some pmi's earlier this week that to look too bad. is that the underlying case? we haven't fallen off a cliff in china. is that the good news in 2017? mr. bell: i think that the view for china is that what we are going to see is an economy that
slows down as a result of tightening. so you have an increase in shy bulltes into -- in has led to aat slowdown, you haven't seen that speed through entirely. we would expect a slowdown in housing, and expected slowdown in construction associated with that. it might have a knock on effect of demand in the commodity markets, and it could lead to chinese growth slowing to a , butr that is so specific nevertheless, the assumption is the economy continues to do well so we don't foresee a harsh landing, just a slowdown in chinese growth as opposed to a crash. anna: thank you very much, mike bell of j.p. morgan as it management. the bloomberg,s russia and china urged the united states and south korea to hold major exercises and to also
urge north korea to freeze its nuclear program. we saw pictures earlier on of the russian and chinese leaders meeting together to get some joint comments out of them. the news agency says china and russia both proposed the theoyment in south korea, -- both opposed the deployment in south korea. the bloomberg overnight, in the alix steel, carol massar, and matt miller will host a fireworks spectacular live from austin's historic esplanade for a little bit of independence day wherever you are in the world. this is bloomberg.
anna: welcome back, live from london. this is bloomberg markets. chancellor philip is urging business leaders to help the governor make the case for a smooth brexit. in a speech, he said it is incumbent on all of us in business and government alike to go on making the case for a brexit outcome to protect jobs and prosperity. joining us on set in london, mark gilbert, bloomberg gadfly. you spoken about where the bank of england goes from here. thatis brexit contest context, that is one of the interesting things about last week, with respect to what mark carney was saying. epa was wrong about some of the negative things that could happen to the u.k. economy and the weakness that could follow. then there might be chance to talk about a rate hike. do you think it is interrupted? trying toink he is
get a two-way market going in interest rates. i think it follows on from his own chief economist saying it might be necessary to remove some monetary accommodations later in the year. you had a couple of members who were still on the committee voting for increases. but if you look at what the data is showing, particularly on wage growth, there is no sign of inflation. in fact, because inflation is running faster than wages, in real terms, people are seeing their income shrank. this is against the backdrop of what brexit is doing to .anufacturing contracts we are going to see services pmi's tomorrow which are going to show a downturn. this is not the time to be raising interest rates. anna: it is not a scientific coal, we have had about four guests on this subject getting the same view. what is different to make? we had the bank of england suggesting he was also trying to create a two-way market in terms
of where the interest story goes in the united kingdom. markets didn't believe him then. markets -- i got this chart here, on the bloomberg. this is the probability of a rate increase in 2017. now jumping up to 57% or so. mark: we are over the 50% mark by the end of the year and this is a result of these comments and the mpc members we talked about, discussing a rate increase but the wage remains. unemployment is down. but the reason carney was unreliable three years ago is because he said we might need to raise interest rates. we are way through that level. that theno sign falling unemployment rate is causing wage increases of the kind that would stoke inflation but the rising inflation is mostly through the week apart.
but the u.k. inflation outlook is elevated for now but the bank putnglish should be able to up with that provided inflation is an coming through. anna: thank you very much, mark gilbert, not on the side of the hawks. we will see how many there are the next time we vote. still with us from his office in london, mike bell of jpmorgan. .ome into the conversation what was your assessment of what we heard from carney last week? mr. bell: he is basically saying that if he is wrong about the outlook and maybe rates will go up but i don't think he is wrong. i think the economy is slowing. backee the bounce you had upwards after the initial fall post-referendum. it seems to be a dead cat bound but we are now seeing that confident come back down. you see house prices slow meaningfully. real wage growth, you were just
talking about that, about to turn negative. strange environment to put interest rates up, given that uncertainty. that is even before you take into account the increase in uncertainty that is going to come around over the next two years because of the brexit negotiations. anna: the other side of the argument, you don't see, would suggest inflation is the raiment of the bank of england and it seems to be running it into the relative desk irrelevant horizon. there might be evidence of pointing tofects evidence of secondary effects. i guess you have seen those, then? mr. bell: it is interesting, if you look at the number of people quitting their job in the u.k. signal of how a tight the labor market is and how confident people are to get a pay raise somewhere else, it has been falling so that suggests to me you are seeing a
pickup in wage growth in the u.k. in the near term, relatively low. i would swivel and change my opinion if you started to see meaningful wage growth come through in the u.k. seemse moment, that unlikely. the bank of england should be able to look through external pressures that are causing inflation to go up. and focus on the domestic side. what they are worried about is seeing a bit of a recovery in the bank of england agent scores for investment in tension. it could be that with global growth looking quite healthy, u.k. businesses look to invest more. that perhaps offsets some of the weakness and slowdowns in consumption. if that is the case, we get a meaningful investment and maybe you make a case for a rate rise. if you did get one, it would not be the start of a major hiking cycle. it would be a one-off move. trying to see an environment
where we see a long protracted rate hike. anna: some have suggested an argument around unwinding the emergency cut that would put us at the time of the brexit vote but i see your point. guilt investors are trying to figure out where fiscal stories are going in the u.k. a lot of political pressure is piled on the government to remove a cap they put in place on public sector pay increases. is there going to be slack? will the market look favorably on the government for loosening the reins? do they still have to keep close control over that deficit? >> to be honest with you, the gilt market will be driven more by what is going on in europe and the u.s. you have seen u.k. gilt yield's trading stuck between german bond yields and the u.s. 10 year yield. the market wouldn't be particularly happy if there was a meaningful fiscal stimulus from the u.k. in the gilt market
that i think that any changes are likely to be relatively small so that wouldn't have an impact on the overall 10 year bond yield. but more important is we are seeing a move towards this quantitive tightening in the u.s. as the fed is shrinking its balance sheet and also the ecb beginning to taper at the beginning of next year. those factors are likely to put upward pressure on u.k. government bond yields more than the fiscal positions in the u.k. anna: mike bell, j.p. morgan asset management joining us and staying with us. getting you a few breaking headlines from the french prime minister who is putting flesh on the bones of emmanuel macron's vision. he is setting up a government program saying the french economy remains fragile and the government does not have a blank check. he's given us details around tobacco prices. coming up on bloomberg markets, cross asset strategist at ubs
anna: welcome back. this is bloomberg markets. i am anna edwards. let's head over to mark barton for the movers in the european section. >> appetite for risks diminished today in the wake of the firing of that ballistic missile by north korea. stocks went down by 4/10 of 1%. in the news today, fourth-quarter sales growth itting estimates by plus .2% is benefiting from the ability to raise prices. another growth, increasing post-brexit with a decline in the pound. those shares are up by 1% today. the cost of hedging against german equities, surging kleins
in tech and telecom shares holding the longer streak of gains since 2013. one month implied volatility for the benchmark has risen to a three-month high relative to the measure for europe stocks index. russia's ruble had its worst quarter since the oil price collapse at the end of 2015. the best-performing currency in emr posted the steepest loss among major currencies. i thought i would show you that putin jinping and meet in moscow. anna: sweden's bank is the latest major bank to prepare for higher rates but as the cost of money climbs, is the global economy ready to sustain a simultaneous tightening cycle? this is bloomberg. ♪
part of the trading day in europe. as a result of that intercontinental ballistic missile test out of north korea and out of that, we saw nervous markets early on. the ftse down and the dax down but we are covering a bit from some of those. backup and positive territories. that was considerably weaker, the hang seng. individual stock names moving things around there, a mixed session in asia in general. -- the jones features dow jones futures suggesting a flat start but that doesn't happen today because today is july 4. we will show you currency markets again. we see the movement to safety assets. that was one of the stories, putting the euro-dollar in there for you. we also have moved into the yen and we saw some movement to gold. the australian dollar losing out because of it being dumped by the risk asset.
no change from the rba to central banks. a quick word on the tobacco sector, we heard that the french prime minister has been setting out the story for the french government. one of the things he said the government will lift tobacco prices so that a packet of tigger it's -- of cigarettes would cost 10 euros. at the end of the trading day in london, this is one of these names that makes tobacco products. let's check in with first word news with emma chandra. >> president trump tweeted china should do more to end north korea's "nonsense." this after north korea launched its first ballistic missile. the regime closer to reaching the u.s. with a nuclear warhead. the justice department wants
critics of president trump travel ban to leave further questions about it to the supreme court. the state of hawaii is challenging the enforcement of the order and the justice department asked the federal judge in honolulu to deny the request. the venezuelan opposition alliance will hold an unofficial vote to gain support for a national unity government. antigovernment protests have been going on for months and they have spread into poorer neighborhoods. the president is preparing for a constitutional convention that critics say could give him more power. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. anna: thanks very much. breaking news on the banking sector out of italy. rescue wings european union approval, the approval paves the way for 5.4 billion euros of recapitalization.
this is following eu comments came through in an email statement on the decision here. junioris saying creditors have contributed 4.3 billion euros. this is a long-running saga, months of talks between italy and the other parties involved in the european commission. that is resulting in the italian rescue, winning the eu approval. they had sought it for many months. he tried to persuade investors of the viability of this model. let's leave the banking story there for a moment. people return but some are concerned around europe. sweden has become the latest central bank to prepare for highest interest banks, removing the potential for inflation gains. the worldur view of presently, in our case, we will most likely stay put until next
summer. then we start the policy rate slowly. to a depending on what is going on within the emu and that depends on the road numbers be in good. anna: more about central banks there and still with us is mike bell of j.p. morgan asset management. we talked about what we saw with this move in expectations around the bank of england last week. we also saw the movement expectations around the central bank. where are you position now that's where are you positioned now? -- where are you positioned now? mr. bell: probably in september, they will announce the tapering program starts in january and they taper down by the middle of next year, doing no more qe. what that means in the market is
it makes us cautious on eurozone government bonds. because of the risk of a reduction from the ecb but also because we are going to get market starting to worry at some point about the upcoming italian elections. we are cautious on the outlook for our peripheral and core euro and -- eurozone government bonds. mr. bell: around italy, breaking some headlines there across the bloomberg. the italian rescue is one of approval from the eu after months of talks. investor concern around italy focusing on the banking sector but there are other issues. are you concerned about what is going on in banking? byhave you been heartened these long-running issues by italy and in spain getting further towards resolution in the last few months? mr. bell: i think it is very good news what is going on across the eurozone inking system.
we have seen many years after the u.s. the europeans are finally getting to grips with the banking sector recapitalizing. italy was one of the last few remaining places in the eurozone where they needed to take that action. clearly, they have difficulty doing that, given the directive -- the resolution director. he found a way around that with the italian banking system that puts the europeans and the italian system in a healthy place. our concern is that the market is probably over the next 12 months, given that we will have to have an election by may, at some point, that will lead to taking political risk. our core view is that that is a dip that should be bought because actually, that is a very low chance of any government forming in italy that would be anti-euro and take italy out of the euro.
we have the potential for a short-term increase in volatility around european assets as the markets start to do that. actually, the banking system looks much better in the earnings outlook and the growth outlook looks pretty healthy. anna: so you like the earnings and growth outlook. before we get to the italian election, we have german elections and we have had french elections. we heard the prime minister of france setting out details of the legislative agenda in france. a lot of expectation around labor reform. is that where markets should focus? to see a step change in growth in france? >> that is definitely the key. if you can finally deliver on labor market reforms in france it could unleash quite a significant boost to potential in the france medium-term. in the short-term it will not have a huge impact but that will policy thatcant
many have tried and failed to deliver. this swellcron has of support and parliament behind him, that would be a big positive for the medium-term outlook for the french economy and for europe as a whole. a healthy france is good for the rest of the eurozone. we are positive on that. it was notable in mario draghi's speech, that he says the political winds have been blowing against europe for much of the last year but they are finally becoming supportive, becoming tailwinds as opposed to headwinds. that is very much argued that with the political risk having fallen, we have one more hurdle to get over in the shape of italy. once that is out of the way, we should have a clear political outlook for the eurozone and investors should get back to focusing on improving growth fundamentals that have been accelerating quite nicely. anna: we will see whether we get that. mike bell of j.p. morgan asset management, staying with us on
>> hsbc has contacted former american international group chief peter hancock about becoming the banks next ceo. that is according to persons familiar with the matter. hsbc is still considering other candidates. their current leader is retiring next year. the u.k. payment processing company worldpay took a luminary -- luminary approaches from j.p. morgan. j.p. morgan has until august 3 to say whether they will did on world trade. is expanding in islands, planning 120 stores by 2020, bringing the stores to 3000. that would create 5000 jobs. at is your bloomberg business flash. anna: thank you very much. after months of talk, formal approval from the eu to receive a 5.4 billion euro capital injection from the italian government. joining us to talk about the banking sector and more beyond
is karen only, european equities strategist. good to see you out there. let's talk about the banking sector because there has been a lot of news from the periphery of the eurozone. ,ver since the financial crisis lots of people were asking when these problem children of the banking sector were going to be dealt with. as we spoke to mark bell about, it seems the momentum has been building. >> yes, and i think, really good from a spanish perspective that you let the market take a hit. holdersolders, some 81 coming out of this bank credit instrument, actually suffering some pains and it happened quickly, within 24 hours, but you have a national champion ready to help. anna: in italy, slightly different, the government stepping in a bit to support because they don't want to disturb or upset the retail investors ahead of the election. a different mechanism being used. do we have to divide the banking
sector into those parts that to be dealt with through the eu mechanism and those that require some others? flex ability on behalf of europe or is it a problem for the banking union? >> your hope is that things move in the direction of consistency across the board. in italy, retail investors support of banks when they needed them the most. the government doesn't want to let them down ahead of an election. that will be great for the antihero party, to rile up these retail investors. anna: so in terms of the banking sector, reformers is the one reason to buy or maybe just the growth story around the eurozone. >> it is interesting, look at italy, for instance. cheap,till underperforming by 50% or so in the last decade. if you look at a number of countries, even france, banks,
need higher oil prices because it moves the inflation outlook higher which helps draw you in the mood to increase rates, which helps the banks. so europe and the eurozone is all about higher inflation, oil prices at least stabilizing. doing a little bit higher, that will really help. anna: it is about oil being the solution, higher oil prices are what we need in the eurozone. oil prices were supposed to help the consumer. >> in the last five or six years, while the consumer has applauded he week oil price it has rich the heart out of the european earnings. price,re the falling oil twice the percentage as u.s. rates. great for the service pmi but not for profits. you had a big impact between the pmi for the full cycle and european profits. anna: where does this story fit
into your strategy at the moment? do you see a higher oil price generating that kind of profits and fire under mario draghi? >> we have only just begun. anna: we will try -- >> is the oil prices that had a big fall. banks have had a lot of npl's. the prophet disruptors are settling down. if oil prices go up a little bit, it does help. , a 60, towards year end little it higher than it is now, fingers crossed. but if it just normalizes of it, it doesn't have to take off, but if it just normalizes a bit, profits could come through after a six-year void of nothing >>. lots of people talk to us about the renewed interest in the eurozone growth story now. anna: is that going to be
expressed in that profitability being achieved by eurozone corporate? >> we talked about the prophet gap in the u.s. and the return on equity's and the gap is what you would normally see in a recession but here we are, eight or nine years on from the financial crisis and profits are sticking closer. close to the trough. we have escape velocity. if anything starts to go a little bit right, if you have financial leverages, we haven't had debt pickup and between 04 .nd 08 we had buybacks we have had zero since 2008. a lot of things we look at is if they just get going a little bit, you see the profits come through. i would call it is capable a study on the prophet side. maybe two thirds of the sectors are lagging from r.o.e.. if you get things a little bit
right, it could come through. it could be a falling oil price. we don't get tapering. and it doesn't start to go up by the end of 2019 and early 2020. and if we see european corporate making more money, we see them doing more buybacks. >> i think buybacks,, all of this, it is about confidence. there has been profit growth in europe. the last chance before qe is taken away. very low bond yields. , return ofmoney profits, a little more confidence, the banks getting better, and i think all of that should trigger -- it is a circular effect. profits go up and you think profits are up now. ?nna: what about the u.k. i know jpmorgan was a little more positive on ftse 100 but --
>> i think the currency trade is .esterday's news for an direct investment falls a lot because of brexit. we don't see the currency moving that much slower but i select that as yesterday's story and the u.k. pmi's are falling and the earnings are starting to roll over relative to europe. it is really about energy and bank flow. if oil price takes off than you are going to want the ftse 100. anna: what about the 250 and the smaller ones? this is a peck to the domestic story? but as you have heard, you got a record low savings so everyone is spending everything they make. delinquencies have gone up. leverage levels are high. real incomes are rolling over. domestic's, that is not a great backdrop and you have political uncertainty. we are more modest than the u.k. we prefer continental europe.
anna: great to see you, always. karen olney, european equity strategist. if you have a bloomberg terminal, check out tv . you can watch the regular programming but you can also take the chart and the graphics that we have used. you can interact with the show directly as well. go to tv on your terminal. you can even send a message at the end of the show and we can ask your questions of our guests. we are live from london today to our bloomberg viewers worldwide on this fourth of july. this is bloomberg. ♪
what are your expectations around treasury yields? going into this year, a lot of people have high expectations and they have been pared back. what are your thoughts? mr. bell: we have moved our expectation down but it is still higher than where we are at the moment. you will see the 10 year yield moves up to somewhere at 2.5-3 percent range over the next 12 months. we did have that higher than 3% but we brought that down a bit now. the expectation is that the fed will put up rates faster than the market is expecting. to pressure on government bond yields from here. >> and where do you see the credit markets going from here? i know you prefer credit to government bond. what would job be called? mr. bell: really, just because you have an extra yield. our viewers have seen most of the spread tightening in credit already.
most credit markets look pretty expensive. that is not to say that we think there is a selloff but it means we will get more tightening. our viewers that have probably just earned the yield in credit at the moment, that will be higher than what you get out of government bonds. that may allow you to offset some of the losses you have seen as yields move up in government bonds. but we would say there is not going to be fantastic returns from credit going forward over the next couple of months. certainly not the kind of return that you saw when you want to be buying credit when the overweight quite it was -- the overweight credit was at the beginning of 2016 and there were good valuation opportunities because of the concerns around the oil price. most of those gains have been had now and we will make decent but not great returns. >> and what about the equity markets? this is 65% probability of above trend growth globally.
how does that turn itself into equity earnings. warily putting that? -- where are we putting that? mr. bell: across the world it would put itself into growth equity earnings. 10% earnings growth on obama basis for 2018. what is interesting is that if you look at earnings expectations next year, you would think a have moved higher since the u.s. election. actually, they are going to come down. expect forward earnings haitians increasing as we move from looking at yesterday's earnings to looking forward into the future. the 2018 earnings are still 5% higher than the next 12 months order. upside for u.s. stocks over the next 12 months. and we think it is greater outside the u.s. look at places like europe and you get a similar growth rate. higher operating leverage is higher earnings
growth and that should mean the european equities are going to outperform the u.s. even though they are both in positive returns. anna: thanks for your time today. we appreciate it. quick work desk with word on the french prime minister, saying the french will have to stop increasing the number of public employees. they say the government won't increase spending in 2018 and they will have to cut taxes by 2022. the french prime and it are says that as it by raising taxes. lots of comments coming in from the french prime minister, putting more flesh around the french growth story. this is bloomberg. ♪
mark: here are the top stories we're covering. geopolitical tensions in the forefront of investors' miinds as north korea says it successfully test fired and intercontinental ballistic or so. goldnd the yen gaining -- and a young gaining. chinese president xi jinping is meeting with russian president vladimir putin in moscow ahead of what could be one of the most tension-filled g-20 summits in years. what is at stake. and monte paschi's rescue package has won e.u. approval. how the $6 billion package may save the world's oldest bank. u.s. markets are closed today.
about 90 minutes left of the session in europe. look at where european equities are trading this tuesday session. unchanged. investors digesting the intercontinental missile launch from north korea earlier, forcing a move into haven assets, such as the yen, the gold bonds. equities were down earlier. biggest gain in more than two months yesterday. in the wake of the missile launch from north korea, the bottome blue line at the half of this chart, falling to the lowest level in four months against the dollar. the down for is rum south korean bonds. renewed tension in the korean peninsula. this even as the cost be share index, the yellow line, has continued to climb high.
u.s. rates rising. south korean foreign exchanges are among reasons for the divergence. what the upper half of the chart shows is the city early warning signal index measure. it measures stress in -- and economic and financial variables . 0.5 means stress is above average. a reading below 0.5 means stress is below average. shushingee the 0.387 the one now -- stressing the won now. hosting china.is the countries will sign more than 10 intercontinental pacts. this chart shows russia inward foreign benefit -- for directed
investment from china. the blue bars, which supplant the red bars, which is russia outward foreign investment to china. the chinese investing more in russia than the russians are investing in the chinese. oil today falling for the first day after the longest winning streak. the key news in the last 24 hours -- opec production in june climbing to the highest level this year. libya and nigeria pumping oil. they are exempt from the opec oil production cuts. as we have been talking about in geopolitics, north korea risking serious escalation with other nations around the world, including the united states after the country claims to have successfully test fired and intercontinental ballistic missile.
this would bring north korea closer to building a device capable of hitting the continental u.s. with a nuclear warhead. bloomberg's stephen engle reports. >> north korea announced its hwasong intercontinental ballistic missile is capable of hitting any place in the world. north korea said it tested an icbm, reaching as high as 2000 kilometers in altitude before hitting its intended target in the sea of japan. the north says the icbm "caused no safety harm to neighboring countries." obviouslynouncement intended as a warning to the united states. and icbm is categorized as a guided missile, usually equipped with a nuclear warhead, with a range of no less than 5500 commenters, which is approximately the same distance
to alaska pay the west coast of the continental u.s. is as little as 8000 kilometers from north korea. south korea, japan, and the u.s. have strongly condemned the test. mark: for more headlines, let's check in with bloomberg's first word news. emma chandra has more. moscow, russia's president is meeting with china's president. the countries half in strengthening the economic and diplomatic ties in recent years. trade between russia and china rose 33% the first five months of the year, according to china's official news agency. meanwhile, trump will have his first meeting with putin friday, according to the kremlin. an aide says the leaders will meet while they are in hamburg for the g 20 summit. the federal appeals court says the epa cannot suspend obama-era admissions standards. that really could set back administration's plans to roll
back pollution rules. the court says the epa can existingrules, but the rule has to remain in place in the meantime. in the u.k., the man best the family of a libyan man convicted of a bombing has started a campaign to clear his name. he was convicted in 2001 for the bomb that took down pan am flight 103, killing 270 people. he later died of cancer. a lawyer for the family presented evidence to eight scottish criminal case review commission. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. mark: thanks. story ofhis developing monte paschi. the european commission finally approving italy's plan to rescue pavingld's oldest bank, the way for a $6 billion r jens -- injection. joining us now is our italy
chief. why did this take so long? >> a couple of reasons. first of all, the european central bank had to formally establish that monte dei paschi is a solvent bank pay that is a requirement to get aid such as this. and they also wanted to make sure that they could find a way to remove this massive amount of bad loans. about 26 billion euros. ,hat they can get rid of that potentially, to private investors. they have a preliminary deal to do that through a vehicle set up about a year ago to help banks get rid of their bad loans. mark: monte paschi bowing to carry out this restructuring. what exactly does that entail? dan: we should get more details on that later on. we will have a press conference in rome with the italian finance minister, padoan, as well as the
bank itself will probably put out a statement either later today or tomorrow, detailing the cost cuts. we expect the branch network will be cut back, that there will be reduction in the personnel. but the exact numbers, probably, we will not get until at least later today. mark: is that it, worry is over when it comes to the italian banking sector? optimistics the scenario. we saw a week ago the deal to wind down to banks in the o, there region of venet is state aid involved in that as well. the government officials have said that they believe this is a turning point, this combination of paschi and the regional lenders up north. we will see in the months going forward rather investors will buy this optimistic scenario.
joining us now is take of now, morgan stanley's chief u.k. economist. we had construction pmi data today, which showed a slowdown in construction activity, mirroring yesterday's manufacturing pmi. is brexit really starting to bite now? think so.l, we in fact, although in the first two quarters after the vote to leave, the headline gdp numbers were in line with trend, there was weakness in business investments, which we think was related to brexit. that weakness has spread to the consumer, because you had rising inflation as a result of a weaker pound after the vote to combined with falling pay as cautious firms hold back on pay awards. that has taken real pay growth into negative territory.
despite three quarters of falling disposable household income, consumption growth has bytinued to grow, helped savings falling to a record low and by very strong consumer credit growth. but now, we have had some real warning signs. before the pmi's, the disposable income track fall into negative territory. k consumer confidence indicator, which is pretty reliable, dropping sharply to post referendum lows. we think the consumer squeeze is upon us. that is likely to be exacerbated by the actions we are seeing the bank of england taking at the moment to curb strong consumer credit growth. so we think exit is starting to bite. -- we think brexit is
starting to bite. mark: is a more cautious mark carney warranted? inthey see a pickup investments and and sports to counter a slowdown in consumer spending, do you think the more hawkish rhetoric from the governor and rum those three who voted for a hike last month, is it warranted given what you have just told us. ? jacob: i think there is a fascinating split. what we would characterize carney as still broadly on the side of the doves, although the framing of the position in the than inas more hawkish his mansion house speech. he says there is still time to look at the data unfolding. there is no need for urgency and action. whereas on the other side of the time, theyow is the
are saying. what has happened is that rank of england believes full employment is 4.5%, and we are at 4.6%. there is not much to spare capacity out there. as we get closer to full employment, their ability to tolerate above target inflation is diminished. in that sense, i think, if the continues, we would get a hike from the npc. probably not in august, because we think we only have three hawks out there. you need five in order to get a vote for a hike with an eight person committee and carney being a dove. we think though broadband has not spoken yet, that is a sign his views have not changed. before the election, he was on the side of the doubts in the committee. before the member, select committee happens, we would push on the dovish side,
given her bearish views on brexit. so we do not think the numbers are there for an august hike. after that is dependent on how the economy plays out. but with the consumer squeeze, we think, tightening, we expect ticking upt to start a little bit, removing pressure do a hike.to the other thing interesting to note is we are getting this tightening of a countercyclical buffer coming back, tightening in the mortgage lending criteria , and more warning noises on consumer credit, which i think in designed to reign consumer credit growth. if they can deliver that at the margin, that reduces pressure on them to raise rates. mark: when we went in, we started this interview with philip hammond, the chancellor, who talked about the finances.
he seems -- we know he is peddling a softer version of brexit. given what seems to be a push within the cabinet for a loosening of austerity, is this something that will play out? i know physical prudence has been the watchword for seven or eight years, but are we entering a phase where the government will be less austere, and that might lead to higher pay packages for public workers? jacob: yes. i think that we are going to have some loosening in fiscal policy in august, the first fiscal event. int means no loosening fiscal policy until the second quarter of 2018. so it is not imminent. we do not think it will be large scale either.
ofause of the positioning the conservatives that the party -- of the conservatives, the party of fiscal conservatism. be a 5hink there will billion loosening in fiscal policy in the autumn statement here they may do a little more in terms of increasing spending, but then we would expect them to raise taxes alongside that. and that would mean that the next fiscal impact would not be significant. so we do not see a fundamental change in course. the more interesting in or me is the conservative party is ,undamentally split over europe with one faction prioritizing sovereignty, control over
borders, courts, and laws, and the other faction prioritizing economic benefit, staying in the single market, staying in the customs union. nothink that the e.u. will offer the u.k. a have your cake and eat it access to the single market deal. the government will have to choose. that is the point of maximum political risk for the u.k. mark: jacob nell there, morgan stanley's chief u.k. economist. time for the bluebird business flash, a look at the biggest business stories in the news. in the u.k., world play -- will play storing -- worldpay surging. jpmorgan and vantiv have until august 1 to say whether they will bid on worldpay. removed theral bank
near-term potential other rate cut. bank said that inflation has been slightly higher than expected. still, the head of the riksbank is cautious. stefan ingves spoke with bloomberg television. >> one concern is raising the rate to early. and that respect, we are dependent on what other central banks are doing around us, not the least the ecb. mark: sweden's economy one of the fastest growing in europe. related bloomberg business flash. still ahead, hsbc is setting its sights on the former head of american insurance company aig. why peter hancock is getting interest for the ceo job. this is bloomberg. ♪
mark barton. hsb said to have approached peter hancock to be its next chief executive. that as mark tucker considers internal and external candidates to lead europe's largest bank. shares going a little lower. joining us, bloomberg banks reporter stephen morris, who broke the story. cuts an outsider, but he is from the hsbc cloth. stephen: he was a banker at jpmorgan for close to 20 years. he claims to have invented the derivatives business there. so he is a banker. but most recently, he run an insurance company. he did not end in the best way, but his reputation is still somewhat intact. the new chairman of the hsbc would have crossed with him when .hey were at aig and aia
mark: it would be a bit of a shocker to nominate an outsider, wouldn't it? stephen: hsbc is more than 200 years old. all of its ceos have come from inside the bank until tucker. to say that they would take a second outsider, it would be a big departure for the bank. mark: who are the internal candidates that hsbc is interviewing? candidatesternal would be the head of the year. operations, the head of the retail and wealth banking division, which has been driving results and is expanding. they are looking to make expansions in asset management. the boss of the investment bank is closed to the existing ceo's stuart gulliver. so they probably have their
shoulders to look out for as well. mark: it is a good time for the first time we have seen topline growth in its retail and investment banks. it is a better time for hsbc. stephen: exactly. this time last year, internal candidates were probably trying to keep their heads down. but their strategy is starting to come good, and hsbc is big on their culture. they are an old colonial english style organization. they like to pose people around the world for 20 years and then bring them back. mark: and those legacies internal staff are keen to reserve. stephen: exactly. a lot of staff have seen -- seemed to be loyal. mark: great story. stephen morris on the hsbc scoop. still ahead, a shifting global
landscape. we will look at how germany and china will move into who serve the u.s. -- in to usurp the g-20 friday.t the we have had that man right there meet with vladimir putin today. putin meets with trump this week in what could be better big meeting at the sidelines of the coming in the wake of the missile testing from north korea, which is moving markets. markets closed in the u.s., they continue here. this is bloomberg. ♪
tension in asia by announcing it launched its first intercontinental ballistic missile. russia and china what both sides to dial it back. they propose that kim jong un's to scale back on tests. thatturn, they propose south korea and the u.s. should pull back on joint defensive drills. -- says that qatar has funded terrorism and is too close to iran. in the u.k., the chancellor of exchequer says the government must hold its nerve and hold public spending under control. but one minister of his party told parliament that there is
active discussion. alliance willthe hold an unofficial vote. antigovernment protests have been going on for months, and they have now spread into the poorer neighborhoods of caracas. isnwhile, president maduro preparing for a constitutional convention that critics they will give him more power. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. mark: thanks. china's president is meeting with a few years he and leaders ahead of the start of the g 20 summit -- g-20 summit. statements,ers gave that they were urging north korea to freeze its nuclear program and urging the u.s. and south korea to halt major exercises. i want to bring in bloomberg's henry meyer. what else came from that
meeting? henry: north korea was by far the dominant theme. the latest missile test. russia and china have a similar view on this. they are concerned that the situation is getting out of control. trumpticular, that donald may be tempted into some military action. that is why they issued this joint call to urge restraint on both sides. this call, what can both leaders, either leader, due to may be calm the situation down? china, as we know, has the closest relationship with north korea. undoubtedly, it has to use that influence to try and persuade
pyongyang to restrain its behavior. on the other side, we know that vladimir putin will be meeting with donald trump in germany later this week. that is also an opportunity for them to discuss this crisis. undoubtedly, russia and china theire trying to exert efforts in common to prevent the situation from getting any worse. meetingat has to be the of the week, whether it is official or not official, on the sidelines of the g-20, the and trump.ween putin what are people there saying about the meeting? henry: it is much anticipated. the russians are playing down the expectations. i think from their perspective, the main thing they are hoping for is that there will be some personal chemistry between the two leaders, that they will hit it off, and that will enable
them to start laying the groundwork for cooperation, which has remained elusive in spite of donald trump's campaign promises. there is such a storm in washington over the alleged ties between his campaign and russian hacking. see. have to i think the expectations are not very high. mark: bloomberg's henry meyer, thanks a lot. next on president she's -- pre sident xi's agenda is a meeting with chancellor angela merkel. op-ed aboutote an how the relationship between china and germany is gaining importance. for more, i want to bring in wolfango piccoli, copresident of teneo intelligence. as henry was saying, some sort
hope instry is the best the meeting between trump and put in -- putin. wolfango: trump gets to me put in and the significant pressure thelay, and you look at agenda -- there is not even an agenda for the meeting. notlready, the staff is particularly positive. on top of that, if you look at syria and the issues and so on, there is still a wide gap there. look at sanctions. this meeting, in my view, will not make any significant changes. mark: one person said it could be the defining moment of presidency.
wolfango: i think there are more important issues on the agenda. for trump, the key delicious -- the key issue remains what he can deliver at home. happens, it is a significant, but not to a great extent. when you look internationally, much more important is what is happening in north korea. and the implications of today's intercontinental ballistic missile launch, which was, doesa said it this make relations between china and the u.s. more frosty, given what trump has been saying in the last week or two? wolfango: two things -- it is still to be confirmed if it was an icbm. not,es are saying it was so let's wait and see. we have seen in the past that north korea basically is making claims that are not actually
true. secondly, we should expect more tests. the north koreans like to propagate for a winter of two weeks before and after the summit between -- a summit between the u.s. and south korea. so more is coming. can increased pressure and worsened -- candace increase pressure and worsened ties between china and the u.s.? i do not think it will. certainly, there will be pressure to act on this. we have already seen a china last week.ctioned we could see more banks and so on, but it is clear that without china, you will not solve the matter. therefore, chinese cooperation, even if it is willy-nilly, remains a must. does this issue get resolved when it comes to u.s.-china --es, south korea wants to go the diplomatic route. talkd have xi jinping
about this negative turn in china's relationship with the united states. how is is going to play out, then? of north in terms korea, it is likely to be more of the same. we could see increased u.s. pressure on its partners internationally to adopt more sanctions targeting korea, specifically on the economic front. whether they will follow or not is still it question. on northpressure korea. but we still do not know what is the plan of the u.s. administration towards china and asia as a wall. to see anycult significant change any time soon. mark: in the meantime, xi jinping is meeting angela merkel. the rhetoric is very different. forhis op-ed, he is calling a closer relationship with germany and shaping a global order.
the u.s. has been put aside from its own decision. how realistic is this notion of china being part of this reshaping of what is being called a new global world order? wolfango: it is realistic as long as the other side is willing to follow the chinese agenda, which i do not think they are. from the chinese point of view, it makes sense to exploit this window of opportunity. that is why you see the op-ed about germany-chinese ties. but from angela merkel's point of view, there is still concern about he met jerry and practices, concerns about takeover by chinese state companies. so it is an important partner, china on the global stage is only willing to accept ordering to an agenda. commitment to the
international committee -- community, dealing with issues like climate change and so on, the commitment is still a question mark. when we so what happened trump came to europe for the first time when he was at the nato meeting. he was quite outspoken. that was the first time he went off script, even though he was giving a speech. telling his fellow nato members to put up more money. give us an equivalent flashpoint that might have been at this week's g-20. when and how might trump go off script, played to his domestic audience? wolfango: i would look at two things. first, trump will go to poland as well. i would like to see whether there is a clear comment about nato. the line of this, doing his first visit, is an vigorous. they corrected later on it will be important to see whether isre is a commitment when he
on the ground. in terms of where it can go wrong is protectionism. that is where things could go wrong. the expectation about the g-20 are low. if you look at the g-seven in italy, the communique was to hide all of the areas of divergence and conflict. more of the same. best or worst case scenario, we see a conflict over protectionism. mark: miracle was saying we had to -- merkel was saying we have to have inclusive win-win solutions. merkel, it is an important meeting, because she has an election not far down the line. it is an opportunity for her to show she is it local leader. but as you are pointing out, there are significant divergences this year. ae g-20 has lost momentum
long time ago. it was important when it we were dealing with an acute financial crisis, but since then, it has struggled to deliver, and it is difficult to see that delivering. mark: does the g-seven even matter? what matters when it comes to g? depends from items item. what we will be looking for at the meeting of the g-20 is the opportunity for merkel and macron to show that europe is back in business, meaning the franco german engine is starting, and europe showing it is up for business. important in this regard will also to see whether they you -- in the e.u. and japan will be able to finalize a trade deal at the g-20. if they are able to do that, europe has a winner. mark: you're saying g-2. wolfango: from the european
bid will make it through a six-month revelatory review. the british government has already rejected his proposal to editorialsky news' independence. you may be able to unlock your iphone using your face instead of a fingerprint. apple is testing an improved security session -- system that lets users login or offense again payments by scanning their faces. the feature is said to be part comingdesigned iphone out later this year. microsoft is reorganizing its sales and marketing operations. according to a person familiar with the matter, that will mean thousands of job cuts in areas such as steel sales. microsoft wants to attract more customers in areas like cloud computing and artificial intelligence. that is the latest bloomberg business flash. time for the bloomberg quick take, where we provide context and background on issues of
interest. today, we look at the u.s. supreme court and how the introduction of neil gorsuch is already altering the playing field. >> u.s. supreme court justices are supposed to be better from pressure of election cycles and clinical divisions, but in recent years, some decisions by the highest court have become more polarized, and its approval rating is sliding. a year-long vacancy on the court highlighted this divide. here's is a situation. in the last year of its presidency, -- his presidency, president obama nominated judge merrick garland to replace antonin scalia or, who died in february of 2016. but republican senators broke with tradition and refused to hold confirmation hearings for judge garland. judge merrick garland more than three months ago, but most republicans refused to even meet with him. >> in this bold move, the gop
was betting a republican president would win back the white house, and the debt paid off. on april 7, the republican-controlled seven -- senate confirmed neil gorsuch to fill skill he is vacancy. he has quickly delivered on trump's promise of maintaining a supreme -- conservative concede -- conservative supreme court. nominees by republican presidents have control of the nine member court since 1969, leaving to controversial 5-4 decisions that led to recessions on corporate campaign spending and limited class action lawsuits. the opponents, presidents can influence the nation long after their terms and. that is why, presidents have selected justices who -- whose convictions are not likely to shift.
toi will never forget that whom much is given, much will be expected. >> here is the argument. where once major rulings are the products of unanimous votes, the number of important decisions 5-4 decisions are rising. and this low turnover of the court has meant that the court the makeuping behind of the country. and lifetime appointments mean justices can still work after strokes or other mental impairments. some reformers believe one solution is term limits for justices. in a 2015 coal, americans favored a 10 year term limit. but mandatory term limits would probably require a constitutional amendment, a high bar to clear.
before there is more compromise in washington, change seems unlikely, and the highest court in the land could continue to face challenges to its public approval. you can read more about the u.s. supreme court and all of our quick takes on the bloomberg. still ahead, m&a has not taken a holiday. clariant is now under pressure. meanwhile, worldpay could get latest bid, next. this is bloomberg. ♪
germany. set to be a busy week for the president. he will also meet with the has been inier, who moscow and is in germany right now. trouble brewing for a deal in the chemicals business with takeovers 6.4 billion in jeopardy. -- has no strategic rationale. now is bloomberg steals reporter. it was not a deal that was much loved, was it? >> one of the reasons is because seen as a takeover target, aich the company has been for wild. you bought shares in it, and now you find that you are getting stock for it, not premium for your stock.
one of the interesting things we are noticing is companies are trying to do these deals and running into investors who may be do not want to agree with them and are becoming increasingly vocal. for years, we have had people saying the activists are coming, and now they are. mark: what is also happening is this record run of consolidations in a mystical companies. ruth: which is in line globally. last year, we were talking about monsanto-bayer, and it has filtered into these companies. investors are saying hang on, we may be do not like these terms, and we are going to make sure you listen to us by firing stakes. mark: payments processing. today, we are talking about worldpay. . record move upward what is it about payments processing that is so sexy now? ruth: nex is also in this space.
they did an ipo afterwards. one worldpay decided to list, there was a lot of competition because they were companies looking at -- because there were companies looking to acquire it then. it has been a topic since it listed in london. it is so interesting also -- observers have noticed worldpay is listed as a corporate broker by j.p. morgan in the u.k., by jpmorgan is also coming in to acquire this company. i think one of the reasons is this space is so active. global banks looking at it do not know which side to go with. so it is a busy july 4. mark: and a trio of potential deals is not and there. started replacing top management day does this open the way to make a fresh takeover offer? ruth: that is something we are hearing. i think they need to get enough investors to back the bid, and
then it goes through. but something that stands out is private equity has so much money right now, and they are looking for places to put it. they're looking at listed companies, unlisted companies. it is such a busy time in the market. mark: it is. july 4. we should be at the beach. very busy on a tuesday here for m&a. coming up, the "european close." volumes down roughly 20% below the normal average this time of day. the stoxx 600 unchanged. it was lower earlier. i will leave you with their currency board on this independence day holiday in the united states. this is bloomberg. ♪
♪ mark: top stories covering from the bloomberg and around the world, the central bank takes a hawkish turn and where should investors be putting their money? the biggest been political risk factors that could send markets on a wild ride through the second half of the year feared from north korea to brexit and disagreements on international trade, which could drive markets the most. oil winning streak may be in jeopardy as opec production climbs in countries like libya and nigeria. what will come first for oil, $50 per barrel or $40 per barrel? have a look at where european and these are trading, 30 minutes away from the end of the tuesday
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