Transcripts For BLOOMBERG Bloomberg Markets European Open 20240712

It is the end of an era, possibly. Prime minister shinzo abe plans to resign for Health Reasons. He is expected to make an announcement imminently. Jerome powell plans to let inflation and unemployment run there if he can get them in a ship that will likely keep Interest Rates low for years. Tiktok. Battle for walmart joins microsoft making a joint bid for the apps u. S. Asset. Can they fend off oracle . Just under an hour from the start of cash trading in europe. Lets look at futures this morning, even as the nikkei 1. 4 , you know, it had been gaining, the topics and the nikkei had been in the green and both fell. European futures are holding up. We still see green arrows on ftse and dax futures. Take a look at u. S. Futures. Green arrows there as well. Even after alltime highs once again hit yesterday on the s p and the nasdaq and the shinzo abe resignation report pulls down japanese stocks, u. S. Futures holding strong. Atside of japan it remains risk on and to the week. Anna a lot of what we are seeing in the japanese stock with what may do happen to the japanese currency and therefore japanese exporters. S is a globalomic conversation, perhaps the Market Reaction does focus in japan. See, some oft we the overnight moves in the asian section, the japanese equity market sells off, but elsewhere, trend, we need to digest what Jerome Powell says. The asian stock market up by 0. 2 . Maybe allowedmy to run hot or. The market move, or weakness as well as the yen strength. Strength inhe gmm other currencies around the world. Focus on the japanese story. Japanese Prime Minister shinzo abe plans to resign due to Health Reasons. We could see further news on this in the next couple of hours. We are keep an eye on that. This is all according to local media, including nhk, it would end his run as the countrys largest longestserving Prime Minister. Stephen engle, great to have you with us. There werebefore abe a lot of Prime Ministers in japan in quick succession. Abe has been such a feature of the political and economic landscape. He has even had a branch of economics named after him. When wethe latest on hear what from abe . We could be hearing it momentarily. Press going to have a conference at 5 00 p. M. Japan time in two hours time. Senior liberal Democratic Party honchos are going to be meeting right now in tokyo. Perhaps has local media has been reporting, including nhk, shinzo abe will offer his resignation due to health concerns. Those concerns started to swirl when he made a previously unannounced visit to a hospital for medical checkups on august 17. Health issues is what caused him to resign the first time he was Prime Minister in 2007. He reclaimed the Prime Minister ship in 2012 and has run the country since due largely without open dissent. The opposition has been in disarray. That allowed him to become japans longestserving Prime Minister. Colitis is perhaps a derivative of stress and there is no more stressful job than being the Prime Minister of any country. This might have taken its toll. Nhk say they are stunned by this news. The chief cabinet secretary just yesterday said shinzo abe should be able to serve out the remainder of his term as party leader ending in a year. That is his righthand man. Us, just confirmed for markets, which is why this is such a surprise for the equity indexes. Im surprised it is not playing out more in the end. We had a call from j. P. Morgan saying the yen could go to 100 if shinzo abe quits and trump loses. The second part of that equation would take still months to pan out. Who will be his successor . Who are we seeing as a possible successor to shinzo abe . There are a lot of individuals whose names have bubbled up. They do not have the election for another year. There could be a caretaker leader. Whoever becomes the next leader of the lpt would become Prime Minister. You could also look at them and we just talked about. The righthand man of shinzo abe. Since 2012. He would be likely a continuity candidate and could be a caretaker if shinzo abe does step down as we are expecting. Closer to the top, the former defense minister and polls have shown he is the voters top choice. He has backed economic policies. He is more populous populist when then shinzo abe. He also cast doubt on the sustainability of boj monetary policy. We would have to say whether there would be continuity on abenomics. On the geopolitical frontiers aligned with abe to keep ties with china on a steady path. He is far more resistant to change the constitution. The other name, a current defense minister, he urged the boj to lay out a strategy for monetary policy. It is speculative or not to see who they are going to choose for the next year until elections have to be held. Anna thanks so much for joining us. Subject. Ck with the lets go to our colleague who has been covering for us of course the market side of this. Keeper of our Bloomberg Markets live team. Really interesting, we have seen strength in the yen has you might ask act. If anything, throws abenomics into question, we are going to see the end. Weakness in the dollar created a bigger uptick. The euro and the pound against the u. S. Dollar. Stronger than the end the yen. What we are seeing in the reactive to the yen. Essentially creating this high bar for any rate hikes going forward. The dollar is acting as a pressure. I would expect we are likely going to see further strength in the yen. Has beenuse abenomics associated with policies to weaken the yen. The fact we are going to see this bout of political turmoil, uncertainty who the successor could be, that is likely to provide more of a tailwind to the young going forward. I also think its important to know we are seeing some continuity in terms of capping potentially the yen. We still have governor kuroda at the bank of japan. Uncertainty has jolted markets. Matt the concern is that end,mics could come to an is it able to be stopped by some in japan who think they have seen enough of it, or it just sort of weakens without its author in charge, what kind of policy changes are the most concerning for markets . Stage, it is too soon to tell. Movesct the 10 year yield that one basis point does suggest overall it is going to continue to be discontinuity trade. I would not expect governor kuroda to back away from the current consistency within policy. It is unlikely we are going to see a complete departure from. Be nymex abenomics given the time horizon we are going to probably continue to given the uncertainty in the nearterm. Perhaps nearterm continuity. Headline suggesting shinzo abe would stay on until a replacement is appointed as the markets no doubt will hope. Thank you for that. Latestinue to digest the breaking news coming to us from japan. Shinzo abe will step down as Prime Minister. 11 minutes past 7 00 in london. Next, running it hot. Treasury yields jump and jay powell says the fed will move to a more relaxed stance on inflation. Matt we are still 47 minutes away from the cash equities trade. And we are still seeing futures trade higher. We saw the nikkei and the topix both fall dramatically from gains after the nhk News Organization reported that shinzo abe would resign. Futures are holding up and equity indexesct including the s p 500 hit new record highs again yesterday. We even see u. S. Futures continue to post gains. That is partly due to what or thed at jackson hole, virtual jackson hole. We saw u. S. Treasury yields jump after that. Jay powell talking about inflation, saying he was willing to let it run hot. The yield premium demanded by investors on long maturity u. S. Debt compared to shortterm twos increase the most in months. The curve has steepened. Ask your take on powells new plan. I thought it was really interesting the fed would change the way it views inflation and terribly unlikely that inflation ever gets there anyway. Notdnt know if that was me hearing been or if we all could not hear, but i am guessing we are having some problem with the line. You were thinking the same thing. In any case, we cannot hear ben. Was fed story i think clearly the most fascinating story we have this morning even though it came from yesterdays the shinzo abe resignation, the possibility of resignation, was reported. Lets get the Bloomberg Business flash. For that we go to laura wright. Walmart and microsoft committed their offer for tiktok. A deal could come as soon as this week. Would meets the bid the expectations of users and satisfy the concerns of the u. S. Government. Bayers settlement in roundup weed killer is in jeopardy. The judge is challenging bayers truthfulness. Bayer says it remains optimistic about the deal. Another sign of Strong Demand during the coronavirus pandemic. Dell and hp have posted results that topped wall street estimates. From consumer devices, dell jumped 18 . Your Bloomberg Business flash. Lets try again. Ben, really good to have you. We want to talk about Global Equity income area first, your thoughts on whether it matters how hot they fed lets the u. S. Economy run. We have not managed to touch the inflation target for a while, so talk of allowing us to go over it might be an intellectual challenge. How do you interpret the fed . I think it is healthy for , equity markets through history tend to react and perform worse when rates start to go up. The rates staying low for a very long time, it takes that uncertainty. The development of reality here, indicated they are looking at policy and what causes inflation, and i think this is more like moving to where the rest of the world is already. We need to give it more time to see, it is not just us that can create inflation. If we leave conditions in place, maybe it is possible for the economies to create inflation. It need to look people to make it happen. People to makeer it happen. Will that make it easier for customers to hold dividends . We have seen a huge drop in the second quarter, Something Like 300 billion in dividends falling down to 100 billion in dividends. Do you see the fed policy making it easier to pay out . 400 down to 300, a massive drop. It does help with regard to financing. In terms of financing, the bond market, one of the things this year, despite the crisis, bond markets have stayed very open. In the depth of the crisis, people worrying about all kinds of fallen angels not getting financed, Large Companies with debt, and we are seeing those markets are open. From an income dividend point of view, the debt market needs to be open for companies to be comfortable paying out money. That definitely does help. Of thathe wheels market. I think it does help dividend payments. To stabilize. Anna let me ask you about the future of dividends and income investing. We have seen a flurry of interest, incredible interest in tech stocks in recent weeks and months as we have recovered from. He depths of the march selloff a lot of enthusiasm for tech which is a sector that does not always pay dividends and prioritize that kind of return to shareholders. Is this something you spent time thinking about . Yes, it is a big area of conversation. It is not new. 2000 was a bit like this. There was a lot of discussion then. What you will find most interesting if you get to the back of our report is it shows the top 20 pairs per quarter. In this last quarter you have samsung, Companies Like apple, in the top 20 pairs in the world. That has been a big change. One of the things over the last 10 years of running this report, originally it was Companies Like statoil, Companies Like chinese banks in that top 10. We are seeing those drop away partly because they have not increased, some have cut, and tech is rising up. This idea tech does not pay dividends is not completely true. Generally it is not right for early stage tech to pay dividends. We have seen more mature companies, intel, broadcom, cisco, paying dividends. It is one of the reasons in our report the u. S. Has stayed so strong. The u. S. North america dividends have been pretty flat over this period compared to the rest of the world, partly because they have to sell a bit of tech, but are paying big dividends. Matt i think viewers that look at the henderson reporter going to stop start with the back end and go to the executive summary of the front. Thanks very much for joining us. A topic that i think is one of the most important and least talked about for investors. Coming up, donald trump is officially accepted the president ial nomination at the Republican National convention. We will discuss that next. Xt. 3 24 p. M. In london, in tokyo, getting further news on shinzo abe. The japanese ruling party has confirmed shinzo abes resignation. Domesticen speaking on broadcasters in japan. Shinzo abe has told the leadership he is stepping down. He also says it is important that his successor continues on the current path. Also fiscal stimulus is the reason we are not seeing more reaction in japanese assets, but we are seeing markets in terms of equities reacting. At least we did when they were opening down by 1. 4 area 1. 4 . President donald trump accepted the nomination. He promised the creation of 10 million jobs and further tax cuts. Economy a key talking point with the creation of these jobs. What will create those jobs . This idea of more jobs will be a battlefield going into the election when so Many Americans have been losing their jobs. Wantslion jobs means he to make America Manufacturing superpower. I thought that was interesting. After the last election we saw a lot of Foreign Investment into manufacturing including from china. He has been very tough on china. Balancing that Foreign Investment into the u. S. With his own plan will be interesting creates thee economic firepower to build those jobs without tax cuts. Matt well, he is promising tax cuts and that is one of the ways he wants to try to win this election. Thank you very much. Bloombergome back to markets. This is the european open. Futures riseseeing on European Equity indexes and u. S. Equity indexes even after another record high hit yesterday. U. S. Commerce secretary wilbur ross is blasting china again for its Coronavirus Response saying beijings decision not to cut off travel to the u. S. Was deliberate. In an exclusive interview ross touted trumps record and get his thoughts on the future of relations if trump is elected. In terms of china, a lot has been accomplished. , wehe enforcement side really have been forcing quite vigorously. The actions we have taken on huawei, the actions we have major telecomtwo companies. Most recently we have been working very hard on the semiconductor art of thing because while china does have technology, we still have the best Software Design and the best fabrication equipment for semiconductors. Trying to avoid them taking unfair advantage of our technology. , while protecting things like steel and aluminum help take care of todays world, technology is tomorrows world. That is a big deal. Very recently be put on the since list 500 companies 2017. A lot of those are chinese companies, but that is because they are the ones that seem to be doing the most to violate sanctions, to violate human alsos, and most recently, to create problems in hong kong. Series. Has been a big of course then you have the tariffs. Section 301 tariffs, imposed on china. The cumulative effect of all of thanis enormously greater the longterm cumulative effect of everything pretrump. Speaking of china and technology, we have the tiktok issue pending. Various companies expressed an interest. Oracleft, walmart, and expressed an interest. What are the criteria you use in deciding which of these make sense from the u. S. Point of view . The fundamental idea is we dont want detailed personal information on all of our teenage children who are the main users of tiktok. We dont want that information to become part of a chinese ourbase to infiltrate country. That is the principal objective. Microsoft should be or oracle or someone else, that is for the private sector to decide. Aretiktok people essentially operating in the u. S. And a couple of others, nonchinese customers. There will be no particular impact on chinese apps as a result of whatever we do with tiktok. My own personal preference would be to have tiktok acquired by one of these american companies. That would have the fringe benefit not only of helping from the National Security point of view, but creating more competition in the areas of facebook and social media. That is the healthiest thing. Competition is a very good thing. That is what makes american industry thrive area thrive. Anna that was wilbur ross speaking to our colleague. Lets get the bloomberg first word news. It could be the end of an era for japan. The ruling party has confirmed shinzo abe planes to resign for Health Reasons. Speculation the nations longestserving Prime Minister might step down. He is expected to speak at a News Conference. Another night of unrest. Urfews underway in kenosha when number of states sending National Guard troops to help assist local officials. After boycotting games in solidarity, nba players have moved to resume the payouts. Hurricane laura better louisiana, one of the most powerful storms to ever hit the state. Caused whatoads and could be 15 billion of losses. It was downgraded to a Tropical Storm after having lost half its power. Sources have told us the u. S. Government is paying 750 million for 150 million test kits. The test was given emergency authorization wednesday. Global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt thanks very much. Abesmore on shinzo possible resignation. The japanese Prime Minister will likely step down due to health problems, prompting japanese stocks to slump in the close. We will discuss this is bloomberg. Anna 20 minutes or so to go to the start of the European Equity trading day. On thatime to reflect yesterday during our european session, but also the latest news coming out of japan, confirmation about the resignation of shinzo abe. More reaction from japan and elsewhere. Futures in your a point the upside. Lets get a Bloomberg Business flash. Microsoft is teaming up with walmart to purchase u. S. Assets of tiktok alongside a competing bid from oracle. It would meet the expectations of users and satisfy the concerns of the u. S. Government. Bayers settlement is in jeopardy. The company is accused of her necking on the agreement. Reneging on the agreement. Bayer says it remains optimistic about the deal. Lead a tesla factory in nevada was the site of an attempted hack. A russian man has been arrested and charged. Thanks very much. Chinese conglomerate foci and International Posted a sharp drop in firsthalf profit as the coronavirus and Economic Uncertainty weighed on earnings. Optimistic about her recovery saying a covid19 vaccine is developing which could be made available as early as october. He spoke exclusively to the Bloomberg Markets coanchor tom mackenzie. The interim result does not reach expectations due to the impact of covid. It is about two aspects. First the virus impact on tourism. It has an impact on our retail. Second, the Economic Uncertainty has hurt our financial investments. Fortunately we are recovering quickly. Business is very resilient. Our Balance Sheet is healthy. We believe the recovery will be quick later on. 20 expect profits to return to prepandemic levels . I believe that will be soon. We think it will return to normal next year. As you look ahead to the end of the, what parts business, parts of the portfolio do you think are going to outperform, which areas of the business will remain challenging . The Broader Health care business will develop more quickly as we have invested in research and development for 12 years. In terms of fighting against ,oronavirus, our Detection Kit our ventilators have been well developed and especially our vaccine cooperation with germany is making progress. Talking about challenges, our tourism and retail will remain under pressure. The virus has not been controlled well overseas. I believe a vaccine is the ultimate weapon against coronavirus. We optimistically estimate vaccines can reach markets in october, november, or the end of the year. By that time i believe our businesses will rebound rapidly. Working with germany to brand Covid Vaccine to the market, what is the timeframe to get a working vaccine available for chinese citizens . So far, all data is satisfactory. We have started Clinical Trials in china. We hope china will get the vaccine at the same time as germany, the u. S. , as well as hong kong, macau, and taiwan. Optimistically, the vaccine should be able to be used commercially in october or november. How are you thinking about pricing the vaccine . We will definitely consider the cost, but more importantly, profit is not the only purpose. It will come to negotiations from all sides including the government. It will be an issue but it will not be the biggest issue. The price will be affordable for most. That was the fosun chairman speaking to Bloomberg Markets coanchor tom mackenzie. ,ack to the japanese News Japanese Prime Minister shinzo abe stepping down. Shinzo abe will stay in office until a successor is chosen. Close inump into the tokyo with the nikkei finishing down 1. 4 . Spending most of the day in the day in the green. Joining us now, the vice chair at Goldman Sachs japan. Good to have you on the program. Big question for investors is whether what has become known as abenomics carries on after shinzo abe leaves his post. Right. Place,ly without abe in isen that the potential going to come from within the same party, the liberal Democratic Party, it is unlikely any successor will pursue policies that are going to vastly differ from the current direction. I. E. We continue to expect aggressive fiscal and monetary easing particularly in the situation we are in right now in japan where the coronavirus has obviously not been stamped out. Theres a lot of lingering economic repercussions that need to be dealt with. It is very hard to see that change. The bigger question for the route will be the economic reform agenda, will that continue . New successor is chosen, will that person be able to push through reforms that need to be executed . That is part of the bigger question longerterm. The ldpat chance does have if they lose abe as Prime Minister . He is the longestserving Prime Minister of japan. Great iwith him a would guess a great social power. He is the longest Prime Minister japan has ever had. The landscape is such that the aresition parties completely fragmented and extremely weak. The current Ruling Coalition comprised of both the ldp and party, they have a majority of both houses of parliament. It is very unlikely you are going to get a shift to the other side of the aisle so to speak politically in japan. It is just a matter of who is going to replace from within the party and again i think the market will be looking for stability because that is certainly what shinzo abe brought. Those reforms pushed through largely because he was around for such a long time, very stable. He could control the bureaucrats or make them do what he wanted them to do. Speaking of the economic reform agenda, which aspects of that do you think might be in question . The toughest areas for example to accomplish or make progress, headway on, our deregulation across distribution, health care, a range of services. That is the area that has been toughest to attack because of the vested interest in the country in protecting those areas. That is not to say they are impossible to attack if there is Strong Political leadership. The fact shinzo abe achieved progress in distinct areas from corporate governance, economic theory we have been focused on for some time. Not that any of these have achieved perfection. We certainly see the correct direction for these agenda items, which frankly have not budged for many decades. , the nexting to be will be deregulation, broadly based. Matt great to get some brief time with you. I would love to catch up as soon as possible again. Next we are going to talk about the new bigmoney status symbol starting up as back. A account for all percentage of all ipo volumes. This is bloomberg. Anna looking back to the European Market open. Europe point higher. U. S. Futures also pointing to the upside. Especially these coming out of japan overnight. Shinzo abe, the japanese Prime Minister, we have had news overnight that he is stepping down. Confirmation coming through from the ldp party he intends to step down. This all has to do with his health, so we wish him well. The Ulcerative Colitis he has suffered from for many years seems to be something preoccupying him at this time. A question for markets as you are just hearing is what happened with abenomics. We have European Equity markets pointing to the upside. Around japan we have the japanese market, falling 1. 4 . Some movements in fx markets. The yen around 0. 4 . Not as Much Movement as one might expect. Shift in fx markets. The policies will continue. We also talked about the importance of the reform agenda that shinzo abe has in place area in place. Obviously when shinzo abe is gone it will no longer be abenomics. They will try and continue the same policies, but maybe it is going to be a different thing. That is why we saw the topics and the nikkei fall into the close. That is why we saw the yen strengthened against the dollar, even though before this news came out, the dollar weaker against every other currency was stronger against the yen. That has been the case lately. We have seen real dollar weakness against the euro and the pound. But Dollar Strength against the yen. That turned around as soon as this came out and it is interesting to watch, you know, j. P. Morgan says if shinzo abe bows out and trump loses, you could see the yen go to 100. Y ¥100 withnly bu a u. S. Dollar compared to 107 before the news. Lets get the first word news. Another night of unrest after the Police Shooting of jacob blake. Of states are sending National Guard troops to kenosha. After boycotting games in solidarity with testers, nba players have voted to resume the playoff. Yesterday hurricane laura battered louisiana, one of the most powerful storms to ever hit the state. It left chemical fires, wrecked buildings, and because what could be more than 15 billion of insured losses. It was downgraded to a Tropical Storm having lost about half of its power. The u. S. Government is buying nearly all the rapid covid tests Abbott Laboratory has produced. Million for 750 about 150 million kids. Officials believe it could help ease delays in testing. Global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Matt thanks very much. Coming up, the market open. Futures are still pointing higher even after stocks turned down in japan on the imminent resignation of Prime Minister shinzo abe. We continue to see u. S. Futures rally as well. It looks like everywhere else is a risk on friday. This is bloomberg. Anna welcome back to the European Market open. We are just coming up to the top of the hour. Just coming up to the start of the European Equity trading day. Weve got european futures pointing to the upside. European equity markets point up by 0. 3 . As we got plenty of news coming through overnight from japan. Going to get to matt miller who can perhaps fill in some of the gaps from our european headlines. Matt . Matt yeah. This is possibly the end of an era. We are expecting Prime Minister shinzo abe to resign for Health Reasons. That sent japanese stocks tumbling into the close. And the yen up against the dollar. Hes expected to speak at 9 00 a. M. U. K. Time. Also, lower for longer fed chair Jerome Powell plans to let inflation and employment run higher in a shift that will likely keep Interest Rates low for years because inflation just isnt there. And the battle for tiktok. Microsoft joins up with walmart to make a bid for the video sharing app u. S. Assets. Can they fend off oracle and seal the deal . Will they challenge amazon if they do . Lets take a look at European Equity indexes. The live cash trade just kicking off and if we pull up the global macro movers screen. You can see the left hand column shows you equity indexes as they open up. The ftse gaining half a percent and the ibex and the dax up a little more than the cac in paris. Interestingly, we continue to see a spike in coronavirus infections, especially in france and in spain. That is not holding their equity indexes back. So it doesnt look like investors believe there will be another lockdown. Anna . Anna yeah. So focus on the virus. And focus on what we hear from jay powell yesterday. Focus on what weve heard overnight from japan. Lets go to the japanese story and still breaking the details and yet to hear from the japanese Prime Minister himself. But it seems as if Prime Minister shinzo abe is stepping down. Japans ruling party has confirmed the resignation though abe will stay in office until a successor is chosen. Stocks slumped to the close in tokyo. With the nike 225 finishing the day in nikkei 225 finishing the day. Professor, very good to have you us with. Sayuri shirai. What do you think is the significance of the reform agenda that shinzo abe was trying to push through here . Do you think that the reform agenda continues even after he leaves office . It seems as if we have a problem to in reaching professor sayuri shirai. We will try to reestablish contact there. This is a story that we said its been moving the japanese equity markets. Weve got japanese equity markets as we said down by 1. 4 and Big Questions of where this leaves abe nomics. Janet henry. Global chief economist who i think is with us. Janet, ill come to you with a similar question about the significance for the economy of shinzo abe stepping down. Do you think that abe nomics continues after he abenomics continues after he leaves post . Janet well, obviously, its very early days to make a call on that. But he has been quite significant and obviously tried to deliver policies both on the fiscal and encourage it on the monetary side that would make a material difference to the outlook for the economy. So as much as this is breaking news, i think at this stage, the most likely course of action is that we continue more or less on the current track. Thats certainly nothing to suggest that its going to be a significant diversion. But inevitably markets might be a little bit nervous that any successor might not be quite as keen on supporting such such supportive measures but early days. Matt janet, whats your take on abe nomics . Abenomics . What will shinzo abes economics be and how will history books judge the policy and its success . Janet the difficulty that japan faces obviously is that its been suffering from a lot of issues that we now see in pore advanced economies. For several decades. And not just if we go back to the late 1980s and early 1990s the full act of the impact of the financial bubble but subsequently a lot of it has obviously been associated with an economy thats got very deteriorating demographics, has suffered from persistently low inflation against a backdrop of high debt. And as much as abes policies have been very significant, and hes tried a much more aggressive strategy, both on the fiscal and on the monetary side and then made attempts to try to tighten fiscal policy, to try to address the debt, what weve seen is that every time the Global Economy takes a turn for the worse, that japan gets dragged down from it. So, you know, as much as i think the history books will treat him well in terms of trying to deliver some transformational changes, it shows what happens in an economy that can still be quite export dependent and has still got a number of domestic challenges. Anna a lot of focus for the japanese economy, is not having a currency thats too strong. What is it do we think that successfully weighed down or has weighed down on the japanese currency . Has it been abenomics or has it been corona nomics if such a thing compists because we do have continuity at least now for the b. O. J. . Janet yes, we do. But i think that the japanese economy is a very homogenous economy. The japanese bond market is all owned domestically. So a lot of it by the bank of japan inevitably. So its always tends to be a risk off kind of currency. And so i think even against this backdrop and overnight, and the response to the fed has been another move, risk gone, lets all get excited again and even more convincing knowledge that we are in a lower for longer world as if anyone doubted that, i think in the short term. Still shows that what happens in japan domestically still you can still have one country having a touch of risk off if it looks like you could potentially have a different course of action. But as we said the bank of japan is not going to change course as a consequence of the change in leadership. It seems like the most likely outlook from that. Matt so the bank of japan continues to make asset purchases. And pursue yield curve control. Meanwhile, in fiscal terms, the debt to g. D. P. Ratio of japan for anyone whos not involving the economy closely is pretty shockingly high. 250 and a different story and they have this sort of army of domestic bond holders who are willing to lend continually willing to lend to the country at very low rates. How long can that continue, though, janet, and how hard is that how hard does that make the country to grow its economy . Janet thats a good question especially when we think of this world globally people are already asking the question, how long can Central Banks backstop a government for . When really japan has shown and japan is quite unique. It is quite homogenous and you got these domestic purchases of the bonds, it shows it can continue for a very, very long time. If inflation does not pick up. And when you look at japan, the Government Debt to g. D. P. Ratio is over 200 of g. D. P. And the bank of japan holds about half of that. Now, as much as the debt burden, in europe, and in the u. S. Are growing, the Central Banks do not at least not yet mold 100 of g. D. P. Worth of government bonds. So i think yes, it ultimately it can mean that it inhibits growth as indeed anywhere inhibits growth. If you have a high debt stock even if Service Costs are quite low. But ultimately, how long a central bank can keep going will ultimately depend upon what happens to inflation and flfer whether bond holders think a higher risk premium as a consequence. And japan certainly hasnt had inflation. Anna as we find a replacement for shinzo abe to take its course what will you will be listening out for or focused on from a new prim minister . Any new pleered, dealing with a host of global events that are that are not entirely within their control. Ut what will be the focus . Janet well, over time, that will become more important. But i think the near term outlook for just about everywhere is about covid developments. Weve even heard this from the fed. Remember, the july meeting. When the fed initially put into the statement the nearterm outlook depends on what happens regarding the pandemic. And of course making the nod that congress will need to do more. So but also, you got a committee in the u. S. That doesnt necessarily have agreement. So i think what we will be looking for from japan, is indeed what weve been looking for elsewhere. When youre at the zero band or negative rates as you are in the case of japan, Central Banks can only do so much. The rest has to come from governments. Fiscal support mr. Need to come through. And particularly where you got a lockdown, and its important to remember not the pandemic, its a lockdown that is cauching the economic damage, what is the fiscal support that will need to come through and over time how will it need to become more targeted . Japan has had a history of zombie institutions in recent decades. If its ever going to get to a higher Growth Profile and higher productivity growth, those fiscal support measures will need to become a bit more targeted to try to support productivity. So as always, we get back to areas of reform, in addition to what will still likely be a need for additional fiscal stimulus. Matt janet, thanks very much. For joining us this morning. Well keep you with us. Janet henry is the global chief economist for hsbc. And we have a lot more to talk about with her. Remember, this abe news doesnt erase the fact that Jerome Powell kind of changed the rule for the fed yesterday. So well talk about that as a as the e. C. B. , saying credible inflation goal will be part of the hsbc policy review. The problem is they havent been able to meet it for zoom time now. And thats kind of the same problem for the u. S. Central bank. Well talk about Central Bank Policy next. This is bloomberg. Bloomberg. Anna welcome back to the european open. 13 minutes into a European Equity and a positive trade to futures that suggested we would be higher. But after that thats mixed. Were fairly flat across the European Equity markets. Treasury yields jumped after that announcement from Jerome Powell on inflation yesterday. From the fed chairman. The premium demanded by investors on long maturity u. S. , compared to shortterm notes increased the most in some two months. So certainly we saw a response in the bond market. Janet henry, hsbc chief economist is still with us. Lets talk about what we heard from jay powell, janet. Allowing inflation to run higher, allowing an economy to run hotter, does not mean that inflation will run higher or the economy will be hotter. Do we need to hear a bit more next month from the fed around how they actually stimulate as toward more growth and more inflation . Janet we need to keep listening to the fed. I mean, in terms of what we got yesterday, it really confirmed what we already knew as powell had flagged and all we would be doing is codifying what was already their reaction function, having undershot inflation for so long they were willing to overshoot moderately for a period over time. But i think whats quite clear is that there is a bit of divergence of opinion on the fomc as is usual on a central bank. And theyve been quite clear not to give any state specific, calendar specific. They also know that there are huge constraints about stimulating the economy. When youre already at that a lot of support will need to come from the fiscal side. So yes, we may get a little bit more in september. But to be honest, i think weve had most of it for now already. And only over time might they become a little bit more confident about giving us something specific date wise or magnitude wise. But actually, a lot of what we got yesterday thats got less attention is what they said about the labor market. About their reaction to unemployment which is clearly going to be less important in the coming years if it doesnt show up in inflation. Matt you know, i was really excited about this. This change in in structure. Especially after i saw joe wiesenthal from bloomberg tv in the u. S. Made an analogy like if the department of transportation set a speed limit that fluctuates depending on how many accidents you have, on the road and theyre willing to tolerate more accidents because the idea is to have cars going as fast as possible. But the bottom line really, janet, after you take out all the wonkiness of policy is they just cant achieve inflation at the levels they want to. So how much does it matter if you say were willing to let inflation run hot, were willing to let the labor market get super tight if neither one of those things is going to happen . Janet well, Inflation Expectations as you said are still reasonably well anchored. Also to some degree, sometimes Financial Markets have quite short memories. You know, this is the first time weve actually had a change in the longer term outlook since 2012. And if you go back to 2012, what they said at that point in time is basically were going to keep rates on the floor until unemployment is at least at 6. 5 . And until projected inflation is for the next two years, its 2. 5 . It wasnt and we never got there and they kept lowering the limit. But the truth of the matter is Inflation Expectations have still been reasonably well ampingored even though over the st five years, core p. C. E. Averaged 1. 5 . They have not lost control yet. And they are acknowledging even though this is in some ways people get nervous about this, the idea of Central Banks and governments working together, i think importantly they have made an acknowledgement that a lot of the heavy lifting has to come from the government. Its almost like to say the government is in there, too. With and not just reliant on monetary instruments. We stand ready to manage that over the longer term with the help or irrespective of what the government is doing on fiscal policy. So i wouldnt write them off yet. I still think that they can over time manage those expectations. Anna ok. And so janet, our Inflation Expectations are are Inflation Expectations well anchored or will we see a drift upward in Inflation Expectations . One assessment the bond Market Reaction was the bond markets were saying jay powell wants higher inflation. So that what we saw priced into bond markets yesterday or what were you seeing in bond markets and now significant was that around inflation . Janet well, i think, you know, theres still this expectation, particularly if we do eventually reach a stage where the pandemic is largely contained. And we go into something thats a more confident recovery. In the coming years. That will be this view that Interest Rates are on the floor for now and a point at where we get yield curve control and get things quite flat for the next few years. But then at some point higher rates might be expected to come through. So it still is a kind of bond market view that this will be pushed back for some period of time and eventually might be able to help the higher yields to actually come through. So i think thats still seems like a reasonable course of action. Seems to me the inflation outlook is very clear for the next few years. But then economically and politically, much further out, some of these potential risks on the inflation front. May materialize. Im not worried about them at the moment. So much labor market slack thats going to stay there. For the next few years. But the bond market may start to think a lot more uncertainty further on down the road. Matt we hope that slack leaves the labor market sooner than later. Janet, thanks so much for joining us this morning. A real pleasure to talk to you. Janet henry is the global chief economist for hsbc. Shes going to be continuing the conversation with me on Bloomberg Radio at 9 00 a. M. U. K. Time. So if you want to hear more from janet you can tune in in the city on d. A. B. Digital radio. Find bloomberg. Or you can go to the internet and google at Bloomberg Radio. Press the live button and listen in. Coming up, the last resort. French Prime Minister john kastek the country is ready to act if the virus continues to spread just days after macron said a new National Lockdown would be too painful for the economy. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. Right now 23 minutes into the trading day. But we are seeing equity indexes lower with the dax following half a percent to 13,032. Coronavirus cases continue to rise in europe. With germanys daily infection rate nearing a fourmonth high. Thats after Angela Merkel said further steps to ease the lockdown are not yet justified. Meanwhile, french Prime Minister jean castex says france would institute a new National Lockdown as a last resort just days after president he newly macron said the Emmanuel Macron said the damage from such measures would be too high for the economy. Joining us is bloombergs maria tegedo from brussels and following the issues very closely. So france is starting to step up measures. Its not going to a full lockdown yet. But it is starting to step up measures to control the spread of the virus in major cities. It is. And starting today, if youre in paris, and the paris region youre going to have to wear a mask and this is coming two days after said they would do the same. And this is the two biggest in the country. Now making those compulsory. When youre out on the streets you have to wear a mask. And this is the case, weve seen the number of cases really increase this week. Yesterday we had more than 6,000 in the space of 24 hours. But interesting when you mention the french Prime Minister jean castex saying he doesnt really foresee a lockdown happening. What they need to do is be much more strict on the measures to contain the virus. And this is of course following that macron has repeated this in many interviews now. And at this point, you cant halt the country twice. The damage this does to the economy is big. The economy is w wants to recover and get to normality but that means stepping up masks and also means youre going to have to do more testing. And the Health Minister saying what they are targeting doesnt mean theyre there yet but want to target one million tests very week. Anna spain is insisting schools will reopen even if concerns continue, maria. Whats the latest there . Yes, anna. A number one issue in the country especially for an economy thats so service driven and need to get parents back to work and get kids back to work. The government is saying schools will open no matter what. Many concerns about this. And regions that already have cases jumping. And whether or not theyre able to do this is still a question mark. If they dont this is going to be a big issue for the government. Matt maria, thanks very much for joining us. Maria tadeo. Anna from brussels. Coming up on the program, the fed takes a more relaxed line on inflation. Paving the way for a low rate era. We were just talking about all of that with janet henry at hsbc. Well hear from the st. Louis fed president James Bullard next. And matt, worth checking where we are on equity markets and started off in positive territory but we seem to be retreat egg. Matt yeah, we are. Turning lower across europe right now. And in terms of u. S. Futures, still seeing gains. But were starting to lose some ground. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Matt welcome back. To Bloomberg Markets. This is the european open. 30 minutes into the trading day and we see markets turning lower. Both in terms of the european cash trade and u. S. Futures. Here you see the stoxx europe 600. The broader european benchmark down. 6 . After gaining at the open. So what is moving which Industry Groups are weighing on the index . Why is it moving down . Well, if you take a look at the g. R. R. Screen, the group ranked returns, youll see that pretty much everything now is falling. Tech is leading the losses. And retail is down as well as consumer staples. But the only gainers now are banks and shoornings. So Everything Else is falling as these markets turn lower. Anna . Anna yeah. And really interesting to see that banks are on the rise, matt. Because the Banking Sector that reacted very positively to what we heard from the fed yesterday and the potential for a steeper yield curve and a bit of inflation. The fed announced it is taking a more relatched approach to inflation by allowing it to run higher. The shift in strategy is likely to keep Interest Rates low for years to come. St. Louis fed president bullard said the move should make up for past misses. As in any endeavor like this, its a very Large Committee as you know with many opinions. So i dont think you want to get into precise mathematical formulas here. But the spirit of this is that the committees judgment, it would be wise to allow inflation to be above target for some time. To make up for past misses to the low side. And then markets having expected that, will ten cement ir expectations at 2 inflation. We missed our target to the low side for quite a while here. Almost a decade depending on how you measure it. And we think that that is because the effective lower round is kind of pulling the average inflation down over time. So this is a way to make up for that. And make sure that you get credibility for your 2 inflation target. Matt what would you be comfortable with in terms of an overshoot . You know, this is close to nominal g. D. P. Targeting which ive which ive advocated. Price level targeting using this family of policies. Average inflation target is kind of more practical version of those ideas. And if you want to stay on the price level path that was established from 1995 to 2012, you know, you could run 2. 5 inflation for quite a while. You could do the calculations yourself. But the idea would be that, you know, were going to try to make up for past misses. But its going to be in the judgment of the committee and there are definite opinions around the table. Is it symmetric in terms of time . For example, youve missed now on 2 for years. Would that mean you run over 2 for years . Yeah. I think thats an adjustment that the committee will have to make. And one thing about price level targeting for those viewers that know a little bit about it is that it does depend when you start dohring the targeting. So if you start measuring, you know, from a few years ago or many years ago or something in between, youll get different answers for how to stay on the price level path. So i think were just starting on this endeavor now. Were doing a soft version of this. But i think this will provide a better commitment to the idea that we want to make up for past losses as best we can. And using the judgment of the Committee Going forward. Why this isnt a return to 1960s fed policy making trading a little higher inflation for a little lower unemployment and that didnt end particularly well . Yeah. E of the things that the new framework acknowledges is that the committee is going to try to make up for shortfalls of employment for maximum employment as opposed to deviations. The deviations language is a little bit of technical jargon that we replaced here. You know, we like unemployment to be as low as possible, for as long as possible because thats helping the most people in the society, and were already keeping track of inflation on that side of the mandate. The inflation side of the mandate and making sure inflation doesnt get out of control here. So i would say its quite a bit different from anything that was going on in the 1960s. Matt naffs that was jim bullard speaking to our michael mckee. Later today we will speak to the former new york fed president william dudley. Thats at half past 12 00 london time and at 1 00 p. M. Robert kaplan the dallas fed president joins us as well. So you definitely want to continue watching Bloomberg Television. Joining us now is Colm Mcdonagh who is Insight Investment head of e. M. Fixed income and i got to start with these fed changes. What we heard from jer openly powell yesterday. How does that affect your world . Colm it affects every fixed income asset class. And changing, an interesting discussion about the change in policy and what they are looking to do and whether they will actually be successful or not. But lots of other Asset Classes like global cost of capital changes. We see higher yields that will alter some of the dynamics. Anna does that make some of the emerging markets fixed income look less attractive if you can get higher yields back in the United States once again . Colm yeah. I think thats going to be an interesting dynamic. Emerging markets is a very big asset class in terms of not just one particular type. Weve got a lot of Investment Grade names. A lot of high yield names. So theres been a huge flow of capital into some of the Investment Grade names over the last couple of months because people are searching for that extra yield. And a pickup over treasuries. I think if we were to see material rise in yields in a dynamic would shift around a little bit. The high yield space slightly different. What people are looking for is that excessive yield thats not going to be so treasury sensitive. If we do manage to get some growth thats going to be good for that part of the sector. Ultimately what the fed is trying to do is what every central bank is trying to do which is to engineer some type of growth. And if you are going to have a slightly higher inflation target to achieve that it makes sense a little bit. Because otherwise we end up in a low Interest Rate world and we do get some imbalances that take place. And acknowledged by a number of Central Banks and even korea that remains on hold and acknowledge this policy for a long time is creating Financial Market imbalances which they want to avoid. Matt you know, another developed World Development that will affect your world sincerely is the likely resignation of shinzo abe. Abenomics has impacted the region significantly. What do you think about this Prime Minister leaving his post . Colm i would argue whats more interest from an emerging market, developments from china than japan. The world has really changed a lot in the last few years in terms of the sort of poles of economic influence so argue in asia china is much more importance to the emerging markets than what happens in japan. Clearly something were watching from a geo political point of view but what happens in china from an emerging market perspective is more important than what happens in japan. Anna interesting. And the relationship between china and other parts of the emerging markets. And do we need to once and for all stop talking about emerging markets as if it is one sector . Banish the term because such diversity of performance when it comes to containing the virus and comes to the debt loads that will be left for emerging markets. Some doing very nicely here. Or doing much better than some of the developed markets and others. Needing to be bailed out and its such such a misnomer to talk about emerging markets as one asset class . Colm we think so. Something many people have been talking about for years and you cant treat it as one asset class. Youre right. This covid economic shock has really thrown into sharp light the differences between different parts of the emerging market universe. And also some pretty interesting comparisons to developed markets. So it is early days but when we look at some of the economic rebound taking place the observations we make is asia in particular has had a better outcome to this from an Economic Perspective than what weve seen in europe and in the u. S. I think thats pretty sharp relief some of the investment allocation decisions that are taken globally. When people can invest in maybe singlea or doublea and triple b names, in the eamericanning market spacethani think people are beginning to distinguish between the developed markets versus emerging markets and absolutely right. People make a big differentiation between asia and compared to latin america which enters into this crisis a slightly weaker space and will emerge in a slightly weaker state. Last number of months have been fascinating in trying to understand exactly as you say which ones are going to become winners out of all of this and those that require support. But i think what weve seen is the exit policy from this is really going to determine our surprises over the next maybe 12 to 18 months. Matt thank you very much for your insight this morning. Colm mcdonagh from Insight Investment. Hes the head of e. M. Fixed income. Were going to talk about President Trump next delivering an unequivocal law and order message at the Republican National convention. As curfews are placed on several u. S. Cities after protests. This is bloomberg. Anna welcome back to the European Market open. 43 minutes into a European Equity session that is progressively deteriorating in terms of risk assets and their story the stoxx 600 down by. 9 and european stocks started to the upside but u. S. Futures also look mixed. The nasdaq down. Theres been some volatility in the nasdaq where people are aware of. At the end of an era for japan. Prime minister shinzo abe is resigning due to Health Reasons and ends his run as the countrys longest serving premier and ruling party confirmed the move after a meeting this morning. Abe is scheduled to speak at a News Conference at 9 00 a. M. London time. Thats in around 15 minutes time. Joining us is peter chatwel, Mizzou International head of multiasset strategy. Peter, very good morning to you. Peter good morning. Anna a surprise to many in the markets given weve had assurances just in the last 24 hours that this was not going to happen. Still we are where we are. So the news, how does it affect the markets in your view and how are you expecting this to play out in terms of abenomics and the role it plays in j. G. B. s . Peter you think about what abe achieved was great stability. But also really important economic change. And i think most importantly a big turnaround in how yen assets traded. The yen itself got itself well above 100. Against the dollar. That was a major move. J. G. B. s also generated Capital Appreciation for those holding the asset class. But i think most most significantly it was the performance from Japanese Equities that really turned around under his tenure so far. So i think its only rational to think that with abe going, and beyond certainty about who is going to replace him all of those Asset Classes have volatility and introduce a risk premium to them. Matt its funny. I hesitate to use the word ironic peter because ever since Alanis Morissette not sure im using it correctly but it seems a little bit ironic you see the yen strengthen when the longest serving Prime Minister is going to suddenly and shockingly leave his post. But of course thats what happens when you have a safe haven currency like the yen. J. P. Morgan said it could go to 100 if abe bows out and trump loses. What do you think . Peter i think i would disagree. We would disagree with the read of the situation. So i think one has to remember that with abe going, it doesnt mean that the b. O. J. Is changing and doesnt mean that the three arrows are being broken up. Much more likely that there is a continuity candidate, you know, would there be a replacement who is likely to not want any of those three arrows to remain in place . You know, it makes their job much easier to provide the conditions for Economic Growth for an improved outlook for investment. I would assume that this is what every politician would want to be able to have as their as their goals. So to continue with that is the most likely outcome. So i would be very surprised with that outlook for dollaryen unless the outlook for dollaryen is really premised on a structural weakening of the dollar rather than a real strengthening of the yen. Anna you mentioned the three arrows. The aggressive monetary policy, Fiscal Consolidation and the growth strategy. So well see whats what the new leader brings. And on that subject, peter, weve got the Japanese Party saying they will pick the next leader using a fast track nod that will exclude rank and file members from the election so perhaps that makes things a little more predictable in terms of narrowing down who is possibly going to follow here. What will you be looking for in the new leader then . Will you be looking for clues that they will carry on with some of the reform agenda that shinzo abe put in place . Peter yeah. I think thats a super important point which is that what abe was looking to achieve, he made really Good Progress on, was not just those three arrows. But it was a number of structural changes trying to in ease the participation the workforce. And also structural change in some of the international policy. Now, given that these were widely viewed as popular policies, i dont see a reason for that to change under the subsequent leader. And i think thats one of the things that we can be feel reassured about with the party using that fast track leadership. Matt you know, were showing or we just showed a chart, the b. O. J. s Balance Sheet at 120 of g. D. P. And we have debt, total debt which is like 250 of g. D. P. And not talking about this chart. But the debt to g. D. P. Chart. Peter, is it possible that a new leader can change that . Or does it not matter . Peter hasnt mattered for many years. This is something that some of the ratings agencies continue not to understand. But when when over half of that debt is held by the b. O. J. , then one cant really say that its its truly a meaningful figure. And the next leader, i dont think we will be able to change that trajectory. This is this is i think a direction which we will continue to see in other developed economies that debt levels will move toward. This inability or this difficulty in inflating away debt. I think is very wellknown. And i think the the u. S. Economy and the fed have a much better chance of doing that than has been the japanese or the european economies have a chance of doing. Anna ok. Peter, thank you very much. Thanks for joining us. Good to get your perspective on this breaking news story. Peter chatwel. Mizuho International Head of multiasset strategy. And talking of japan, japans Prime Minister shinzo abe talks about his resignation and about in about 20 minutes time and a little earlier, at the top of the hour and anything from the top of the hour we will bring you that live of course here on Bloomberg Television. Up next forget the dot. Com bubble this time is even bigger. And thats the macro view and also his thoughts on what is driving markets around the japanese story. And why European Equity markets sold off so aggressively. This is bloomberg. Nose matt welcome back to Bloomberg Markets. This is the european open. Almost an hour into the trading day and looking at equity indexes that are falling, the dax down now. 8 . Over 100 points is the drop. And we started out the day just 53 minutes ago on a pretty positive footing. Let bring in bloomberg and live currency and rate strategist. And were wondering, what has turned stocks around . Of course, asian stocks fell at the end of the session because of the expected resignation of japanese Prime Minister shinzo abe. But ive also noticed the euro keeps powering higher. Right now up to almost 119. Is this a problem for european stocks . Good morning, matt. This is going to be a problem for european stocks. Very soon. Particularly for europe and above 120 levels and hold on there. The way i see the equity markets, broad equity market underperformance in europe is what if you think about what the markets are discounting two quarters ahead, the markets are clearly saying more faith in the u. S. Economy turning around than in the euro area economy turning around. And thats how i see it. And of course the euro plays into it and euro keeps sliding from 122 and above you will start hearing from lagarde and other e. C. B. Officials trying to jaw bone the euro lower. Because that will bring about unwanted monetary tightening which they do not want at this stage. Matt and anna . Anna and so yes. Ven, do you trace a line between powell yesterday into stronger european currencies today and european stocks moving to the downside . Because weve got those risk assets that the european stocks selling off quite aggressively today. Well, i think there was some it being unwound. I wouldnt read too much into yesterdays moves, anna. Because i think that we have got some curve steepening as well. Going on globally. Which is going to hurt which is going to hurt stocks. Because you need to kind of discount start discounting stocks at a higher discount rate than youve been doing so far. Anna, matt . Matt all right, ven. Appreciate you joining us and i want to encourage our viewers and listeners to check out your column. Forget the dot. Com bubble. This time its even bigger. Im seeing more and more comparisons to the late 1990s and i think its really timely. So a great story there on the bloomberg terminal. Check it out. If you want, if youre a client, you can bioven ram and look at his news stories. Thats it for the european open. Stay with Bloomberg Television because surveillance is up next. And we are awaiting imminently japanese Prime Minister shinzo be addressing his expected resignation. This is bloomberg. Businesses are starting to bounce back. But what if you could do better than that . Like adapt. Discover. Deliver. In new ways. To new customers. What if you could come back stronger . Faster. Better. At comcast business, we want to help you not just bounce back. But bounce forward. Thats why were helping you stay ahead and adapt with a network you can count on, 24 7 support and Flexible Solutions that work wherever you are. Call or go online today. Health reasons, ending his term as japans longest serving Prime Minister. Japanese stocks lower, we will hear from Prime Minister abe imminently. Trump accepts the president ial nomination, and makes his pitch with a highly partisan law and order speech that paints joe biden as a socialist. Good morning and welcome to bloomberg surveillance. Im annmarie hordern