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tv   Bloomberg Daybreak Europe  Bloomberg  June 22, 2018 1:00am-2:30am EDT

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anna: good morning. i am anna edwards. manus: i am manus cranny live in vienna. these are top stories. anna: landmark deals. after eight long years, creditors strike a compromise to ease its repayment land -- plan. agreement a culinary to boost production. >> given our expectation, i think this'll go a long way in preventing the market from tightening beyond the balance. anna: trying to avoid a trade war. white house officials are said
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to be split over restarting talks with beijing. will they see a truce before the deadline? good morning, everybody. this is "bloomberg daybreak: europe." it is just past 6:00 here in london. manus, you have been in the end all week, tracking the desk you have been in -- you have been in vienna all week. manus: annmarie hordern chasing the ministers around the ministerial meeting or the committee meeting. the saudi minister saying we have listened to iran but the majority want an increase. let's cut to the numbers. "nominal."
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what does that mean for the barrels of,000 extra oil. the issue is this, the iranians left the meeting of the mincey test of the -- of the jmmc. will the venezuelans vote against this deal with the iranians? opec meets today. the number for the market, 600,000 barrels of oil. .hat is what is on the table can they get a deal across the line? anna: let's talk about where that leads? we have the risk radar that includes oil. this strong opposition from iran, we hear you about that one, manus. the broader picture, the msci
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asia pacific is down by .2%. it has been a busy week in terms of news flow. just like mirror image of yesterday. we've got china and korea going higher over in asia despite ongoing concerns with regard to trade. interesting to track where we got on the u.s. junior just u.s. 10 year. -- u.s. 10 year. central banking stepping away from extraordinary monetary policy. despite all of that and the rhetoric around trade, we haven't moved very far in the u.s. 10 year. with oil prices moving higher as we anticipate for the news, a good time to talk about what is calling him a desk what is coming up on the oil story. -- what is coming up on the oil story. we will be talking to christof ruehl. manus: he is the chief economist a -- adia.
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we look forward to the first word news debra mao is standing by. debra: thanks manus. creditors struck a deal in an effort to ease a mountain of debt and could the way for it to exit the lifeline that is kept it away just kept it afloat since 22. athensstice -- just as -- the deal has been seen as a key ingredient as the countries healthy return to help. opec and its allies have reached an agreement in the face of strong opposition from iran to boost production by one million barrels a day. although the actual increase will be smaller as several countries are unable to raise
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output. in a night of drama, the committee reached an agreement despite the iranian oil minister walking out of the meeting predicting opec will not reach a final deal when it meets today. >> [indiscernible] that is a nominal figure meaning once it is to should, what is delivered to the market is going to be smaller. debra: in the u.s., white house officials are try to reach just restart talks with china to avoid a trade war -- restart talks with china to avoid a trade war bloomberg is learned the council has contacted former u.s. government officials and china experts in recent days to gauge the chances for high-level talks in the next two weeks. it sets them up for battle with others in the trump administration who favor a harder line. u.k.'s chancellor has said he is
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no enemy of brexit as he slammed european union proposals for cross-border financial services after britain leaves the bloc. philip hammond confirmed that higher taxes rather than the so-called brexit dividend would be needed to boost funding. named a new central bank governor. is deputy governor investigating the scandal plagued fund. >> definitely not corrupt. example, when they were bought by this is a bank for 2 billion ringgit, this is a bank doesn't need the land desk the
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central bank for 2 billion ringgit, the central bank doesn't need the land. debra: global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . anna: let's get to sydney. a check on the markets. haidi: we are looking better than we were earlier this morning but this malice that plagues is continuing into the end of the week. we are a quarter of a 1% when it comes to the msci asia pacific index. we are on track for seven day low. 4% lower. we've got the likes of everyone from goldman sachs to morgan stanley slashing the expectations. let's take you through some of the market we are watching. the nikkei 325 is up.
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the yen holding pretty steady with inflation's desk inflation numbers coming in pretty riga. -- inflation numbers coming in pretty riga. the kospi,hing looking pretty good. the shanghai comp, we have been poised for a couple of days now but we have seen a turnaround it comes to mainland markets this afternoon. we had 100 companies pledging to buy back shares. that is provided short-term purport just short-term support. -- short-term support. the hong kong banking sector don't pretty poorly. morgan stanley saying that is going to be impacted by any trade tensions between beijing and washington. we are seeming to see a kind of momentum driven selloff as we await whatever the next step is
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in this trade war. manus: it could be a big fix for july after the fifth of july. haidi lun in sydney. for your area finance ministers have struck a landmark debt field for greece. clear the way for an end to bailout. us --john hoeven joins joe satan joins us -- jones hayden joins us. what is the size and scope of this? jonas: -- jones: it affects 100 billion in debt. it is getting greece back into the debt markets. its final program is about to end. it is going to end in august and the euro area officials wanted to make sure that greece is in
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place and able to finance its debt in the years to come. really tensen talks about this and the things that greece would need to do in order to make this happen. yesterday in luxembourg they wheeled to put it all together. this is for the euro group and for greece, they are hoping to close the door on what has been a long and arduous chapter in europe's history. agendahat else is on the for this euro group? we are worrying about trade. surely the finance minister will have a lot to think about when it comes to some sort of unified response to trump's tariffs. jones: this is the big story now. we have the finance ministers yesterday and today. next week eu leaders will become together in the next summit to talk about it.
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today, the retaliatory measures went into effect against trump's metals tariff. next week we might see some more discussion on what else are you can do in terms of coming back against trump and what is going on in the hole protectionist bent that is happening. manus: jones, thank you very much. jones hayden in brussels. laurence mutkin joins anna in london. great to see you. a year ago, greece can to the market. how do you think the bond market are going to take this news? would you buy greek bonds if they come back? the market was expecting a deal, of course certainly wasn't expecting a failure. it is always good to see the good stations get to where they are supposed to be.
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noterms of whether or greece coast market this summer, we are in a situation for the regular investors if the core european bond markets, is this a off index that? i think still, the levels they are and given the size of the greek market, this is going to be a marginal decision for quite a lot of core investors. that if you so wide have capacity to buy in your fund, you can see why it would be hard to avoid it. anna: you can see it getting back on a few radars. christine lagarde not playing the role that they suggested they might do here. they're happy with the expectation for greece and the ability to service the debt.
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long-term they have the reservations. i've got a chart of debt in gdp for greece. how close really we are to the end of the story because eight years on, extend maturities against 10 years. laurence: the end of the story for sovereign debt never arrived. the question is stability. it is certainly the case with these super low interest rates we have had. it is a debt service costs which is manageable even at a high level of debt to gdp. over a horizon mercifully much longer than i would consider coming out at the question if interest rates were to concern to anything like the high levels we see in the 1980's and 1990's, would it be feasible for sovereign's to maintain their debt? there is an excellent thought that say once sovereign reach a threshold can never repay their debt.
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,f nominal gdp is high enough it is not something we can know for now. anna: all we can do is watch. manus: large, let's switch to the other major global story just trade war's. the central bank is this week. their consent about trade wars just they are concerned about trade wars. -- they are concerned about trade wars. u.s.cap that's what kept -- what kept trade -- laurence: it has to be. even think about all the things that have happened which would suggest that bond yields should be higher. now and back below 3% in spite of a more hawkish fed, despite a really strong second-quarter growth in the u.s., in spite of the fact that the ecb is indeed going to wind
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down globally. the stock of qe is going to stop accelerating and yet bond yields 3% andll decibel below bond markets remain quite twitchy that way. for sure the uncertainty around .his tariff battle anna: you set out why yields should be higher. things.s comforting .- is complicating things i've been reading a lot about protectionism and how it can be contagious overnight. a bloomberg opinion piece talking about it is interesting to look at the measures on the table but to look at the response we will get globally in how we could see protectionist commodity would work. -- protectionist's could come out of the woodwork.
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laurence: the of it is retaliatory this is to say we don't believe in protectionism. if we don't do anything, we would do more than. thisre right, there is great consensus. it has been pushing forward. wto, thisnce the consensus that bigger, broader, freer trade is good for the world economy is still a consensus among market participants but clearly the populist mood in the u.s., and italy, there is questioning that consensus. the market, even though we do worry about how much damage will be done to the economy, the truth is it has been a wobbling stock. it hasn't taken rate next off the table.
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we are not going to get to. away. just get too carried away. -- get too carried away. manus: this is what we've got for you. a no deal brexit scenario can threaten the future in the u.k.. we will bring you the very latest. this is bloomberg. ♪
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manus: it is on 7:30 in vienna. a live shot of singapore. yet seen the hang seng undo all of its losses -- you have seen the hang seng undo all of its losses. a wobble, that was a phrase used by laurence mutkin. markets wobble. debra mao with your business flash. u.s. banks have
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cleared the first hurdle of this year's stress test. all 35 vendors examined could withstand a severe economic downturn. goldman sachs and morgan stanley can closer to the edge. is the third straight year every bank exceeded defense minimum capital demands come a sign that industries increased comfort. the trump administration wants congress to remove the federal charters for fannie mae and freddie mac as part of a plan to release the mortgage giant from yours control. the two companies which have been under conservatorship since 2008 could have their market, and it's challenged. fannie, freddie and any rival would be overseen by government entity with power to approve guarantor, chief regulation and ensure market participants are adequately capitalized. -- share buyback to 2.2 billion u.s. dollars. the comes after the melbourne-based lender sold a
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number of assets. according to bloomberg intelligence research, the proceeds left the strongest capital position among australians banks. airbus may pull its investments amid caps off events. the aerospace giant says if the prime minister fails to broker an exit deal, it would lead to severe disruption and interruption of u.k. production. the company employs 14,000 people in britain where it manufactures wings. anna: debra mao in hong kong. for more in the u.k. story at the moment, brexit and the like. laurence mutkin joins us. still with us. let's talk about the u.k. a little bit. on bank of england hanging their every hawkish word. 's reviseof england
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guidance around their balance sheet. this chart that illustrates it. there are talking about how they will only start selling bonds once the interest rate gets to 1.5%. laurence: why now? away.1.5 or 2% is so far it is not a this again question. the reason they put it in now is precisely because it is so far away, that an adjustment you can make without scaring the horses. way, it is still another sign of a normalization which is not a bad thing. the fed is reducing its balance sheet. ecb is going to stop expanding its balance sheet. it suggests we are getting for the way from these crisis measures. anna: were they pretty hawkish yesterday? laurence: we had a vote for an immediate hike.
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it is hawkish versus an extremely dovish baseline. it looks like they have pretty --h baked in august rate august rate hike into the cake. probably not another rate hike after that until next year. is the probability for august. when did you make of the other nuanced change that caught my eye, where they are prepared to start reducing the balance sheet. that has changed. from 2% to 1.5%. is that a technicality which mark is that telling us that when they are going, they will be going fast? laurence: more a technicality at this point but a signal. they are moving away from unconventional monetary policy. andreas: super slow in terms of rate hikes. we expect two guess we spoke to
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hsbc -- we spoke to hsbc recently. are you more optimistic about the data than the bank of england is? laurence: the data -- we're so subject to the new slow about brexit and the effect that has on the mr. confidence. just on domestic confidence. -- on domestic confidence. markets arething really bad at. we are not very good at that. the data don't look that great. q1 was a disaster but the economy is not looking that good even discounting that. how question is very slow? they don't want to wait until next year. they want to get rate hikes and while they can come even if it is only very little.
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manus: we saw global central banks delusion in terms of what would happen after lehman's. is there a floor after sterling? does sterling have a nice floor underneath it? true --: if it is sterling is even more uncertain about brexit. at the moment, whatever happens sterling reaction function seems immediate. we have a little bit of alps because of the greater prospects of a rate hike. otherwise, sterling is free stuff. anna: large, thank you for your time. just laurents, thank you for your time. laurents will continue the conversation on the radio. but coming up here, manus. manus: we are right in vienna and we have mr. christof ruehl
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joining us. he is the head of research for adia. we will talk opec and the global economy. this is bloomberg. ♪
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anna: 1:30 here in london. nose at 110. let's get a check of the broader market action. guy: that is the yen story tells you the market is quiet. it is the final friday before we go into the final week of the half. that is significant for markets are now. clearly, manus is going to talk more about that in a moment. 1%nt is trading up by around this morning. the oil story is the web story this morning.
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i don't think you can take your eye off of china. some suggestion in may be pushed back into the us tariffs start to kick in. because that tells you the way the chinese see this. it is designed to protect the stock market but it is also starting to organize the chinese currency which is weakening again this morning. we continue to see this constant weakening of the chinese currency which really plays into this tariffs narrative. it will reassert itself. he voted for rate hike and that continues to be theme. we are going to get pi data out of the eurozone from the key countries. watch those. what does the second quarter look like? we will pay attention to that. equities global yesterday were off. particularly in europe.
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german mark and down by 1.44%. what are we going to see today? at the moment the ftse is called up by 3/10 of 1%. maybe we could see the dow pulling out of eight days of declines into positive territory. it is called higher. anna, back to you. opec and its allies have reached an agreement despite opposition from iran to boost production by a nominal one million barrels of oil per day. .t divided iran's oil minister he walked out of yesterday's meeting at the saudi oil minister who warned his fellow producers about anxiety. spoke to reporters last night. >> given our expectations of demand supply that the exit will
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go a long way in preventing the market from tightening beyond the balance. joined by mr. christof ruehl. to understand what is happening here in vienna. great to see you again. have the past three days been for the world oil market? christof: it has been very important. it was a milestone. rebalancing inventories have been drained. whengned has helped pit you compared to what happened eight months ago when everybody talked about putting a floor talk isices and now the having a feeling on prices. indicating -- the alliance will continue. manus: the alliance will endure. talk to me about our latest
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report, one million barrels of nominal oil coming back to market. how about 600,000 in real barrel terms? what does that mean? is that good news? putting a cap. christof: it is good news. if you think of it as a founding. yet it an official announcement -- you have an official announcement that more supplies will be coming on the market. that is a very different picture from 1.5 years ago. with the indicated is just what that indicated -- what that indicated his markets where you have movement. manus: the other big thing -- supply. about the rosesp --
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underselling the high risk for hurricanes, the likes of venezuela in voting. you would say that supply is a huge risk. christof: there's always the possibility that we have supply disruption somewhere. the oil market has low capacity. thehere is always possibility of another venezuela or financial cast tacitly. -- financial catastrophe. on the other hand what we are seeing is that there's a lot of talk, low prices, reinvestment, plummets. manus: is that the risk? christof: i don't think so. this market has built and stabilizes. -- built in stabilizes. another one in oil markets -- we
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all know what this means. little rates fall. -- rental rates fall. [indiscernible] the price goes up for consumer. what they want to do is manage the market and take up these hikes. manus: let's talk about the spikes in the bandwidth. 2011 to 2014 we saw this $100 oil. do you see the prospect of a return to $100 oil? in april we had a oilt press rally -- price rally. what we are seeing is [indiscernible] stabilize production and to avoid these spikes.
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there wasned behind-the-scenes. she'll was developed. -- sale was developed. manus: two big subjects, trade wars at how concerned are you ahead of global research of audio -- idea. >> i don't think we have a big problem. can adjust. noise thanays more bite. the problem is, the other thing in an international system come all these agreements are, some and complicated. -- agreements are cumbersome and complicated.
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these rules enables other countries like china to grow. that is not always the case. manus: if you don't the word trade war, how about the possibility of fx wars? if the chinese want to show slacker, maybe you on -- maybe yuan. specificallyking euros in europe -- u.s. and europe, china is a good example and that brings us back to oil. china is 20% of the global appellation. -- population. the wonder they want to expand. then the problem with it that as long as you don't have full coverage ability and you see that in oil markets.
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the attempt of establishing a futures contract in an oil benchmark. .t must be very tempting manus: the biggest have arrived early and he doesn't care about anything to do what is going on here. finish your thought. christof: and musty very tempting, you look at global oil markets. discussion lot of but it just shows that even if ,ou have equal liquidity [indiscernible] that is one thing to have a futures contract but it doesn't translate into an oil benchmark as long as the yuan is not convertible. comment.e brief everybody's talking about an inverted yield curve. how concerned are you?
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christof:urve ¿ probably short-term. seen is to say we have read -- what is expectation driven -- the other one is inflation risks. things like that. the fed has come up on the side of saying we have to watch down the road. it is not the kind of conversion . manus: it is different this time, christoph. thank you so much. the global head of research joining us here. you want a stone head of research, the trucks and stalin's -- the trucks and trolleys. anna: we must let christoph go sitting get a hold of his viennese artist. manus on the ground checking the
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story. anne-marie is on the ground checking the oil story. nigeria's oil minister emmanuel ibe kachikwu will be joining us shortly. ♪
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anna: welcome back, everybody. this is "bloomberg daybreak: europe." i'm a to go to malaysia for some of the breaking news. the prime minister speaking at a bloomberg interview talking about currency markets and the ring it. he was asked where he thinks the fair value is. he likes 3.8 to the dollar. we see it moving a little bit stronger. the ringgit coming down in the chart in response to this interview. that is an interesting level because that is the level it took in 1998. capacity conversation.
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-- fascinating conversation. up forlet's get set today's trading. opec ministers and allies are meeting today to debate whether to restore oil. the word on the street is nominal increase of one million barrels. on sunday, turkey holds its first round of presidential elections. daybreak middle east is live on the ground and sunday, also marks the historic summer. both women be allowed to drive in saudi arabia question mark let's get to annmarie hordern. anna: annmarie hordern is joining us with the nigerian petroleum minister. >> it is d-day here in vienna for the opec meeting and i am joined by the nigerian julia
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.inister, emmanuel ibe kachikwu thank you for joining us at one million barrels a day was the recordation. will all of opec agree on this? we know that iran says they don't think they can reach an agreement. most of the countries are aligned around this. we should have reserve issues. when you look at what we are aligning around, it has got into 2.8 million barrels so some of the effects of got an so we are taking it back to what we have agreed upon. >> the one barrels is not the real barrels that would hit the market at how much will hit the market? things --one of the 1000 barrels.
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one thing we will be looking at [indiscernible] others will have the ability to become the slack. anything that iran or venice will asking for a note to get this deal through? >> largely the issues of sanctions, whether or not this has been powers. opec is not a political party. with what they are going through. oilhere d.c. the price of is mark when it was $75 and going up to $80, where do you think is a fair price? nigeria, we you ask
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need all the money we can get for development. everybody is aligned around the mid-60's. once we go past that, everybody starts getting shaky. google what is nigeria's current crude production question mark -- >> what is nigeria's current crude production question mark is security worsening in that region? >> it is improving. we're going over 2 million barrels. we have kept that for over a year and the yen a half. alignment. still issues whether we are doing it right or not. you're producing more, that means security has improved? emmanuel: absolutely, yes. >> what is the refining
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situation at the moment? emmanuel: not very good. [indiscernible] ,ngoing conversations consultations. by the end of october, ritz financial models and hopefully byin to recant refineries december. [indiscernible] at refineries. about 2020 we're going to have a movement. opec since theo meeting is so imminent this morning. i was at the last jmmc and we had a trump tweeted that set opec is artificially impacting
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prices. are you expecting any of that today? emmanuel: we had a good look at this. we all agreed to try and model its ability. taken away be barrels, adding barrels. [indiscernible] though --e impact d.c. the impact though? -- do you see the impact though? >> it is america first but again it is nigeria first. >> talking about the expansion of the group, the 24 nations, can you see that becoming permanent? emmanuel: i think so. we're working on that because we must move away from the issue of
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trying to respond to fundamentals and certain numbers. sharing fundamentals and how to respond to market on a more permanent basis. i expect that to happen. >> with a be called opec? opec?ld they be called i'm interested in the details. thank you so much. .hat was emmanuel ibe kachikwu we are hours away from this opec meeting that we have been waiting all week for, manus. indeed.e are you and i will speak and the question is what will venezuela and iran do. great work over the past three days. america first, nigeria first and all others too.
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that goes to the heart of something. let's talk about stock markets. stock investors have little doubt who would cough worse from a trade war. shares have been hammered. now they are the cheapest ever relative to those in the united states. china's surplus with america means it has the most to lose. joining us now is shanti kelemen. good to have you on the program. i have this chart witching cap slates what we were saying that u.s. stocks are the prices ever relative to china. for good reason, is that what you tend to buy? shanti: we are tinted by the u.s. because dish we are tempted by the u.s. because it is improving. in china you see rates and growth slowing down. in the u.s. have a market that is 25% technology that can grow at 30% a year. that is go to trade on higher valuations.
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china does have a lot of tech but it also has a lot of banks with a lot of nonperforming loans. a lot of issues. " do you buy u.s. tech or u.s. small-cap? do you buy u.s. tech are you a small cap? part of u.s. small-cap has sold very well this year. we have seen the dollar reverse and get stronger. they have been quite good. it is hard to pick between the two. u.s. tech is a little bit cheaper valuation grounds. anna: in terms of u.s. tech, the changes in taxation rules, quite interesting with a court ruling that could be tax on internet retailers. not bad great deal. compete on price anymore, they compete on convenience.
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shanti: that is a big reason for its. they know this was going to come and it is something that has been priced in. seems only fair to some extent. reasons we are shifting to online shopping is it is more about convenience. ease of doing business than that is necessarily the price point that we can get. oftentimes it is cheaper. manus: one of my favorite stories is what happens with recession. we had a cracking interview with david rosenberg. the fedit dies because put a bullet in his head. are we talk months away from every session in the united states of america? shanti: we don't see any signs of recession. we got strong manufacturing data
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and pmi coming out there today. we got low unemployment. we got a growing economy. pretty low inflation. the only thing that worries us at coots is the yield curve flattening but we are a ways of going negative. we don't see a recession coming. we will look at the data again tomorrow. anna: you like the united states versus china. your thoughts on china? shanghai composite down 90% now. they are threatening to get -- down 19% now. they are threatening to get into a bear market. how much is this a normal market? activity type of stopping them some enough to much just put you off? shanti: with china yet to be aware of the regulatory risks. to some extent around the world
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all governments intervene with policies to support different indices. challenges happens to a great extent. china has shown itself and its regulators very competent over the past five or six years and how they have managed the issues it had with bubbles and getting liquidity into the market. don't know what they will do next. they are capable with dylan with those issues. -- they're capable of dealing with those issues. anna: shanti, think is a much. i have been obsessing over the divergence. the u.s. standing up pretty well. where is the chinese markets question mark -- chinese markets? oil very much on your mind. manus: i think christof ruehl as he put it, a tremendous change. oil price cap's in here in the market. question is iran and venezuela,
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how they vote? anna: we will discuss thoughts of greece and the trade debt and how this falls into his end of the world fund. this is bloomberg. ♪
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manus: good morning from vienna. i am manus cranny and this is "bloomberg daybreak: europe ." anna: i am anna edwards in the city of london. these are today's top stories. manus: landmark deal after eight creditorso area strike an agreement on payment turns. opec and allies reach a preliminary accord to boost production by one million barrels of oil a day despite i ran walking out. given our expectations of supply and demand, this will go a long way preventing the market from tightening beyond the balance. manus: trying to avoid a trade
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war. white house officials are said to be split over restarting talks with beijing. will we see a truce before july 6 when the tariffs kick in? anna: good morning. this is "bloomberg daybreak: europe." we were hearing from the nigerian oil minister, they are billed -- that building a consensus at opec will be a big challenge. manus: it is. getting everyone on board will be hard. was there lastn night and the iranians left a technical meeting in terms of advice to opec. they are definitely in anger mode. the view on the ground is you see a nominal increase of one
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million barrels of oil per day. as the going to be taken most over compliant. strategist just had a conversation with us and he said it is significant you are seeing three major producers talking about adding supply. that is how far we have come. will iran and venezuela vote against this when we get to the opec meeting later on? anna: let's look at where we are on these markets. you choose in europe pointing honestly higher. about the asian equity session, there are the futures. up i 1/8 of a percent. the cac getting more momentum. greek debtring the deal ensures the remain -- return to financial stability. we have a deal on the table between greece and creditors.
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some of the maturities, some of the mood music adding to positivity. here is the picture in the asian session. pretty flat, paring earlier losses in the asian trading day. the hang seng in china managing to do that. by shanghai composite, down 19%, threatening a bear market. we saw a cut to the reserve requirement ratio for the banks in china. we didn't see that today. people asked when that would come. will they save that for july? on u.s. 10 year yield, it has been busy with the trade conversation and the news flow extraordinary policy, and yet 2.9% is where we started the weekend will end. 66.30 as we wait to see if they reach consensus in vienna. this man is waiting in the us for therto joins
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next half hour. we will talk about greece, trade, and the potential end of the world and how you protect yourself against it. manus: indeed. what a great title. the first word news from hong kong. area creditorso struck a deal to easy repayment terms on some of the nations loans in an effort to ease its mountain of debt and clear the way for it to exit the lifeline that has kept it afloat since 2010. the compromise comes after months of talks and just as athens is set to end its bailout program in august. it has been seen as a key ingredient in the return to economic health and foray back into financial markets. opec and allies have reached a preliminary agreement in strong opposition to iran to boost production by a theoretical one
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million barrels a day. the actual increase will be smaller, as several countries are unable to raise output. the committee reached an agreement despite the raining oil minister walking out and predicting opec won't reach a final deal when it meets formally today. overwhelming majority, one million barrels easing -- 2.8, whether it is a nominal figure, what is delivered to the market will be smaller. of-- has said he is no enemy exit as he slammed eu's proposal for financial services after britain leaves the bloc. during his speech in london, philip hammond confirmed higher taxes rather than the so-called brexit dividend would be needed to boost nhs funding.
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>> as the prime minister said, taxpayers will have to contribute a bit more in a fair and balanced way to support the nhs that we all use while delivering on our fiscal commitments. hasalaysia's prime minister said the ring gets fair value is inn as the peg established 1998. asked in an interview with bloomberg where he saw the saidncy's fair value, he 3.8, more than 5% stronger than its current level against the dollar. he discussed the appointment of the new central bank governor. -- when -- was bought by the
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central bank for 2 billion ringgit, what was wanted was to give money to the government. >> global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more .han 120 countries you can find more stories on the bloomberg at top . deborah, thank you. let's get the latest on the market access with haidi lun. we are off session lows of the day but it has been a pretty turbulent week for asian aesthetic stocks. seven sessions out of the past eight have ended lower. there seems to be momentum in the selloff that had been started by raising rates and a high u.s. dollar environment. now the trade war concerns seem to be accelerating that. 2/8 of ai off by about
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percent. the yen has been holding pretty steady, safe haven demand. about 4%. topix fall the tech sectors responding to the tensions and tariffs being slung from washington to beijing and back again. we had pretty weak japanese inflation for may, underscoring the trap the boj is in not being able to exit that extraordinary monetary policy soon. concerns over baking stock in japan with issues over the 0% policy weighing on profitability. he spoke about the disappointment chinese investors had in not getting the rrr cut. we are down about .1% there. if you look at the premium investors are paying for u.s. stocks versus shanghai, we haven't seen that gap ever be
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ins wide, more than doubled the u.s. than on shanghai from a price-to-book ratio. around the region, it is a sea of red and we see more markets across asia on the cusp of coming into the bear market territory. manus: it looks like the bears will have it before the week is out. breaking news on sharp. eye, they are announcing a cell of shares. up to ¥216.2 billion. sharp using the proceeds to buy back preferred shares and for our entity, a court -- r and d according to the japanese finance ministry. a little reaction there, sharp announcing the sale of shares. let's turn to our main story of the day. it is the white house officials
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trying to reach talks with china to avoid a trade war before the tariffs on chinese products take effect july 6. former u.s. government officials and chinese experts have been contacted to gauge the chances of high-level talks in the next two weeks. of -- isolio manager with us. alberto, july will be a big -- the sixth of july could have aches significance. how concerned are you and your company about the reality of a trade war? is it numbers or sentiment that matter more to you? alberto: it is both. anduld say we are concerned positioned for an escalation. generally, we have seen a shift
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toward populism in the u.s. and now in many emerging markets, as well. when you have regimes and governments that overpromise to their electorate -- electorates, it is easy to blame any shortcoming on foreign countries and foreign enemies. of thersening geopolitical risk environments is likely to create downside to global growth. inthink the worst effect markets continued to be the emerging markets both in seenies and index, we have a repricing of equities in asia the past few days but also of emerging-market debt across hard currency issuers in the last two weeks. year to date, emerging market debt is around 7%. these are areas that continue to be vulnerable both because of the with all of federal reserve liquidity in dollars and because of geopolitical risk. anna: what has been oversold?
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ofngst all of that selling asian equities or emerging-market equities, and moves on fx and bond markets, what has been oversold? where are we throwing the baby out with the bathwater? alberto: i still think it is early. i think emerging markets come from 10 years of being a crowded trade, first in debt and then in equity. there are some countries where short-term has become interesting. emergingure where market spreads and yields are close to record lows, we are not in a rush to pick up any so-called bargains. there are a lot of flows that have to come out and a lot of complacent money is in emerging markets. anna: too early for bargain-hunting. about the flows. we have created some great
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charts through the week. one is about money going into the shorter end of the u.s.. perhaps money tracking tips in the dollar ascending a little bit. are you seeing that flow materialize? are you seeing money repatriate to the dollar on the risk of an escalation of trade rhetoric or war? alberto: this year is all about divergence in growth. it is the opposite of what we have seen during the expansion. year, investors were in a goldilocks environment of synchronized global growth. now we see the u.s. outperforming, taking growth out of emerging markets and europe with trade policies. with growth going to the u.s. from other countries. u.s. equities outperformed, the dollar gets stronger and there is a flow onk into u.s. assets, dollar
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dollar cash from other countries. it also means the fed is the only central bank that convincingly normalizes policy. it is a bit harder to see the bank of england, the boj, the ecb, normalizing policy at the moment, which could leave countries without much buffer before the next crisis. anna: the other big news flow andnight surrounds greece the agreement reached with creditors extending maturities, giving a grace period. do you think the saga ends here or does it never end? alberto: it is a good deal. it is a 10 year extension. the market expected something like seven to 10 year -- seven to eight years. ofgives greece 22 months cash without going back to the market. want toeal world, you give small countries in europe some flexibility. the eurozone currency union needs fiscal transfers.
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you cannot have a fixed exchange rate without independent monetary policy and fiscal transfers. we have seen that. the french mechanism would have been the ideal situation. where you haves an automatic change in the interest rate if there is a slowdown in growth. that is not on the table but having said that, the creator -- creditors said they would be amiable to new measures if recession occurs. overall, it is a good deal for greece who has completed a lot of reforms. the eurozone remains fragile because core european countries need to focus on growth and that is the missing point so far. manus: if that is missing so far, are you concerned in any way about the timeline from the ecb that they have given to us terms of qe -- the end of qe and the rhetoric holding rates
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through 22019 -- to 2019? alberto: i am concerned the ecb is missing the exit train. that is also the problem mario draghi has been highlighting his many press conferences. core european governments need to focus on reforms and on growth. we have seen europe continuing to grow, growth is positive, but losing momentum in the first quarter. this momentum is not coming back. we are two thirds into the expansion and we need court european countries to redistribute some of the gains they received from having a much lower exchange rate and negative funding costs on their debt. if that doesn't happen, the risk is europe could find itself in a relatively fragile position should a slowdown occur in the next two or three years because the ecb will still be a very low interest rate.
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the u.s. has proceeded with a very strong fiscal stimulus, building momentum and increasing gdp. many countries in southern europe need stronger growth to be able to withstand a slowdown in the next three years. manus: alberto, thank you. alberto gallo, algebris inventments portfolio manager. some breaking headlines and we had the story overnight. they are concerned about hard brexit risk and the implications. anna: that is where the headlines tap into. we take that story on. we talked to u.k. radio, saying they need clarity from the u.k. over its brexit plan. they are considering developments in the u.k.. they can't continue without clarity on brexit and airbus --s as a point of series serious decisions, they will stop stockpiling stocks. this is an interview airbus is giving.
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a release by the company. the thinking has got to the point they felt they need to speak out. coming up, two big interviews. the eu ambassador to the united states, david o'sullivan joins us at 1:30 p.m. u.k. time. manus: just after midday u.k. time, the former reserve member talks about the stress test for banks. this is bloomberg. ♪
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>> giving our expectations of supply and demand, this will go a long way in preventing the market from tightening beyond the balance we were looking for. manus: opec and its allies have
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reached a preliminary agreement in spite of opposition from iran to boost production by a nominal one million barrels a day. iran's oil minister walked out of yesterday's meeting and saudi arabia's energy minister warned his fellow oil producers about rising consumer anxiety and that is really what was most pressing at the palace yesterday and the day before. think of it. it is not just the united states at his ring the bell in terms of prices. you have china and the india market all warning in terms of prices. the question today is, iran walked out of the meeting last night where they didn't have a vote. they have a vote behind me and venezuela does, as well. this could be a fracturing moment of opec. anna: the nigerian oil minister saying it would be a challenge to reach a deal but there are questions about where opec does
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next because we have seen the axis of saudi and russia holding together. alberto gallo, algebris inventments portfolio manager still with us. how are you watching this opec meeting? are you so expose you are hanging on every beat, or are they missing the demand story as a result of tensions around trade? what is your focus? alberto: we have been looking at higher oil since last year. at the moment, we are not positioning for a higher level from here. we think the risk is still on the upside and the reason is that both opec and non-opec countries need a sustainably higher price of oil despite the complaint from development its. there is disruption in some producing countries like venezuela that could get worse. regime is faltering, there was dark condition for the
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venezuelan population and it is not clear for how many months the regime can stay there. there is the potential for geopolitical risk to push oil higher and that is not necessarily priced in at the moment. manus: and this is one of the things we have had. i have had the global head of research from citigroup saying we are not prepared for any supply shock from venezuela or hurricane season or investment and another country losing production. tie all of that back to global theets for us, in terms of potential for higher oil prices and the inflation story that goes with that, if at all. if that ties together for you. alberto: it ties together in something that looks a bit like the withdrawal of liquidity from the federal reserve, still not enough to withdrawal liquidity
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completely because either central banks are still easing, then you have higher oil prices and slower growth outside of the u.s.. it looks like convergence with the u.s. growing faster than other countries in the world and still positive, but slower growth elsewhere in the world with higher inflation. it means the central bank policy outside the u.s. and europe and the u.k. and japan are harder to manage because you still have high unemployment in europe, you still have spare capacity, higher oil driven inflation but not wage inflation we need. it is not good for markets outside of the u.s., which is a big oil producer. anna: this is a bigger picture question. we have touched on oil, trade, greece and factors this morning. how much do you spend time
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considering tail risks? you have this end of the world fund, a tale risk fundm how much time do you spend worrying about this? alberto: we are at the end of a cycle of good markets. central bankers 10 years ago came together and said i am going to give you 360 days of sun instead of 200 days of rain. and markets got used to the calm, the good weather. no one carries protection. very few investors carry protection. a lot of investors so volatilities so when you have five days of rain, you have hurricanes. volatility is bipolar. there have been it crashes a year ago and markets -- anna: alberto gallo, algebris inventments portfolio manager. he will continue the conversation on bloomberg radio.
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manus: enjoy the radio. i am off to the hallowed halls of opec. we are in vienna. this is bloomberg. ♪
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guy: welcome to "bloomberg markets: the european open." we are live from london. i am guy johnson. matt miller is off today. the cash trade is less than 30 minutes away. drop in vienna. opec and allies agree to pump an extra million barrels a day despite opposition from iran. the opec ministers are arriving. we will take you to vienna. a landmark deal to extend maturity on greece's debt is agreed.


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