Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20170608

Exports rise from the factory to the world as Global Demand shows signs of picking up. Welcome to bloomberg daybreak europe. Im anna edwards. Manus we brought her back in. She is allowed inside the building. Good to have you back in the room. Lets get out to matt miller, standing by on location. A big day for the ecb. A huge day for the ecb. Number one, we are expecting at least 90 of the economist we surveyed expecting the ecb to change the language in its statement and no longer say that risk to growth are tilted to the downside but rather balanced. Its something weve not heard since august of 2011 when jeanclaude trichet was president. For me its going to be an exciting day. There were never two words so much focused on in our lifetime. We will catch up for you a little bit later. Got to talk about sterling. The one that maybe just got under the radar, this is the probability of a rate hike in september versus december. What youre going to hear from the federal reserve. Its below the probability of a december hike for the First Time Since march of this year. , all shifting forward their view on when we might get a hike. Anna lets show you where we been overnight in the asian equity session. A slight downward bias. We had james comey, the ecb and the u. K. Election, even the chinese data that showed strong gains in exports also in the mix as well. Flat,und in there pretty we go to 120 if we get a hung parliament, as unlikely as that might be. The polls overnight tell us actually nothing new. Found five and there in the range of 1 12 percentage points. Thats what they were telling us a week ago. Than expecteder majority for make its often the eu brexit negotiations and that could take sterling up to between 130 and 140. We have that estimate from the brokers. Oil down 5 . In the u. S. Ing thats a small moment of reprieve. Anna we were above 48 at one point yesterday. The euro in there because we dont often say matt miller has given us the headlines and he will be back a little later. Lets get to the bloomberg first word news. U. K. , polling stations open in less than an hour for the countrys second general election in two years. Total of 650 westminster mps will be elected with 46. 9 Million People registered to vote. Tune in for one hour special at 10 00 p. M. London time. You will get instant analysis of the market and as exit polls are published. In the u. S. , fired fbi director james comey will today publicly say that donald trump pressure him for loyalty. He will testify that the president saw forbearance for Michael Flynn and ask james comey to lift the cloud of a Russian Investigation hanging over the administration. We will bring you special coverage up that hearing at 2 40 p. M. U. K. Time on twitter come a radio, and tv. Bloomberg customers can follow us on tv. Concerns qatars row with other arab states will weaken his finances, tensions with the saudi led group of nations will exacerbate qatars vulnerabilities. Chinas overseas shipments accelerated in may from year earlier as Global Demand shows signs of picking up. Exports rose 8. 7 in may in dollar terms and imports increased 14. 8 . Oft left a trade surplus 40. 81 billion. North korea has launched a series of short range missiles that appear to be consigned to attack ships. South koreas joint chiefs of staff say the rockets, probably cruise missiles, or front from aboutstern port and flew 200 kilometers. Japans defense minister said they dont appear to be a type that could reach japan. Trading near 46 a barrel after the biggest drop since march as american stockpiles unexpectedly rose for the first time in nine weeks. By 3. 3ries increased Million Barrels last week, the most since midmarch. Thats it crude down by more than 5 yesterday. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the. Loomberg at top here in asia we are basically waiting to see whats going to come out of the u. K. Election and the ecb meeting. A little bit of cautious trend, the nikkei down 5. 10 . By. 3 a, the csi 300 up for a Third Straight session and pretty flat on the asx 200 in late trade. In terms of stocks we been watching in the region, Cathay Pacific doing very well in hong kong. This after jeffries rated the airline to a by come the first broker to do so for some time. Sony optical doing very well also. Woodside petroleum, seeing a weakness in the Energy Players on the back of the moving crew. This chart will show you where you are seeing a lot of these exports from china in the region. You see south korea was lower in april but up by about 10 over the course of may. Is election day in the united kingdom. Theresa may and Jeremy Corbyn theird on security and respective visions for a postbrexit britain. This as they made their final pitches to the nation ahead of todays election. Who do you trust to actually have a strong and stable leadership that is going to deliver the best deal for written in europe . A labor government will be really series about investment, as really serious about tariff free access to european markets to maintain manufacturing jobs. X because brexit matters. Its a choice of this, cuts, closer, or privatization. Quite simply of hope or fear. Brexit is the basis of everything else. We need to get that brexit deal right. Another question is, who has got the will and crucially the plan to just get on with the job and deliver brexit. Nobody can ever say that in the general election of 2017, there wasnt an alternative offer put forward. A summary of some of the commentary and Campaign Speeches we heard yesterday. On set forjoins us this hour. Bob, great to have you on the program. How things have changed over the last six or seven weeks. It was going to be about brexit and it turned out to be about a whole host of other matters. Lets start with your base case around what happens in the next 24 hours. . Bob i think you have basically for scenarios. As the conservatives get a significant majority, lets defined that as 70 seats plus. I think the markets would react quite negatively to that because that would imply that mrs. May has a strong negotiating position for a hard brexit. 70 plus, i think the market within her own party, not with brussels. Anna we will talk about that another time. Bob that is a separate issue, the negotiating stance of the eu. The second scenario would be a labor victory and i think markets would be negatively ofacted with the probability those policies with the expansion of the fiscal deficit. That would be negative for sterling. Then you have a third scenario which is a hung parliament, obviously Political Uncertainty would result in capital outflow, so that would be negative to sterling. So those three scenarios, and you have the one which is positive for sterling, which is a moderate majority. Which seems to be the consensus that is evolving today and yesterday, which is a majority of about 30 or 40 seats. I think that would strengthen the hand within the conservative party of people who are going for a region type deal and that would certainly not be negative. Thats not forget we still have a significant currentaccount deficit and we still have a budget deficit. The First Quarter of this year we were one of the weakest economies in the g7. So the economic background, whichever government comes to power, they will inherit a much weaker economic position than six months ago. This is what we got here, the economic outlook. Weve gone from being the strongest to one of the ones with the biggest challenges. We also have the brexit barometer. Whoever comes through that door will have a challenge. Where challenge in our pockets, in terms of our debt levels. We wererious trying to guesstimate the probability of her recession here in the u. K. With it. I think its exaggerating the case somewhat, but having said that, if you break down the various components of the economy, clearly Consumer Spending is under pressure because of the squeeze on real disposable income. Its difficult to see with that negative trend of real disposable incomes and a low savings ratio and the rise in consumer debt, its difficult to see an expansion in Consumer Spending. The only positive factor is the impact of weaker sterling on exports which has been boosted by the recovery in the Global Economy. The offset is if we get uncertainty about how brexit will evolve, thats not going to be great for the export sector user. If we look at investment spending, low investments, qe being maintained, should be poised for investors. I think the outlook for bank of england policy is no change for the foreseeable future. If we have growth, the latest tank of england forecast is 1. 9 growth. I think its realistic to reduce that forecast to 1. 5 or 1. 6 growth for 2017. On that scenario and with inflation peaking at the moment, the bank of england doesnt need to raise rates or change policy. Bob parker stays with us here on the program. Manus tune in tonight, weve specialk. Election kicking off at 10 00 p. M. Instant analysis and how the markets are reacting, exit polls , and theres only one destination you want to be on. Anna the polls open in under an hour, 12 45 u. K. Time. Followed by Mario Draghis News Conference and from 3 00 p. M. U. K. Time, fired fbi director James Comey Testifies before the Senate Intelligence committee. Fbi chiefalty, fired james comey will recount his conversations with the u. S. President in a Senate Hearing today. Details are next. This is bloomberg. Anna welcome back, time here london 6 17. Business the bloomberg flash from juliette saly. Juliette airbus may be thrown out lifeline for its superjumbo. Emirates is said to be in talks about buying 20 more planes as airbus debates cutting production below one a month. The order could be worth 8. 7 billion before discounts, although people familiar with the discussions at the carrier hasnt decided exactly how me planes it wants. Is givingeo says she president Donald Trumps administration the benefit of the doubt. Speaking exclusively to bloomberg, meg whitman who publicly backed Hillary Clinton and lesters election, said she supports some but not all of president froms policies. We are in favor of tax reform. We think the lower Corporate Tax rate with burr throat in the United States. On the other hand, we are not for the border adjustment tax. That is very difficult for on lowes that work margins. So the retailers and technology companies, we think that is not in our best interest and by extension, in the best interest of the United States. Credit suisse investors will buy more than 99 of her Rights Offering raising 4. 3 billion for the banks turnaround plan. Funds raised will be used to complete his business overhaul and could expand his wealth management. In april, Credit Suisse ditched plans on the lucrative operation. Thank you very much with the latest from hong kong. Comeyred fbi chief james will today say President Donald Trump asked him to end a probe into Michael Flynn and repeatedly requested a public announcement that trump himself was not under investigation. According to anna as well as asking what can be done to lift cloud over his administration. Joining us is j. D. Schneider. Now that we have james comeys opening statement, what will the theme of his testimony be . Remarks, butpening he will say more than that, wont he . Yes, and we know a fair bit from the opening remarks. I dont think he will have too many that surprises in the opening testimony. Is going to talk about the end unusual nature of these private conversations in the opening statement. He said he felt somewhat awkward about these private conversations. Also about the war parents of mr. Flynn. Think we will also hear about of repeated acceptance asking him to accept his loyalty from the president. Wese are the kind of things will hear, but these are members of the Senate Intelligence committee and they will ask a lot of questions. That is where it will get interesting. To thewhen it comes down rub of the issue for markets, is this an Impeachable Offense . That is the issue, isnt it . That is the issue. Thatt think we will have question answer tomorrow. There are people on both sides who will argue it both ways. Ital experts are arguing outweighs, the fact that he put it in a way to let this one go does not make it an Impeachable Offense. Wheels are have to remember that this is the first step, the first hearing on this. Congress will have more hearings and we are seeing an investigation by Robert Mueller who is looking into this very of broadly. Lot more facts a emerge over the coming months. This is just the start. Jodi schneider, thank you on what to expect from the James Comey Testimony later. We will have specially coverage on tv, radio, and twitter. Bob parker is still with us on the set here. Is this James Comey Testimony from doldrumstion ability to get the rest of his agenda through . Ib i think we will have what euphemistically call a cloud of obfuscation over the trump administration, the russian interference with blasters election, we will have lots of confusion and this will go on for some time. I very much doubt were going to get any clarity. Two important points, the first this distraction, and i would call it a distraction, may delay donald trump implementing the Economic Program and may well delay we were all expecting the Corporate Tax package, the income tax and infrastructure package all to come through in the third order of this year. Dont be surprised if that gets delayed until the First Quarter of next year. That in turn i think would have been removes what wouldve been a potential boost to the u. S. Economy. So discussion about the u. S. Economy accelerating over the balance of this year, i think now that discussion has to be delayed. That in turn takes the pressure to aggressively raise rates. In discussion about the fed raising rates another three times this year, i think that discussion is now off the table. The probability of a september hike falls below a december hike from the fed for the First Time Since march. ,here is real doubt creeping in doubting the ability in terms of tax and even more pessimistic that something symbolically will come through. Bill gross is talking about the risk in markets being the same level they were pre2008 crisis. Do you concur, and what is that due to the bond market . Bob first, i think the market is correctly discounting. We seen a change in the recent weeks from discounting a two december rate increase. I think that is probably correct. A june increase is still very likely next week but the overall theme is that the tightening or in Monetary Policy in the United States is going to be very slow. To rate increases this year and some minor reduction in the fed Balance Sheets. , theu study the fed data fed Balance Sheet is very slowly coming down already. Does this start in earnest this year, will they make a big announcement . Sheethe fed balance peaked at 4. 5 trillion u. S. Creeley meant brothers it was 800 billion. Thats the way the Balance Sheet expanded in the last nine years prelehman brothers it was 800 billion. The latest figure is 4. 43 trillion. I am assuming that by the end of this year we will probably be somewhere between 4. 3 trillion and 4. 4 trillion dollars. The fed is sensitive that if they bring the Balance Sheet down to rapidly, it would result in a liquidity squeeze with economic invocations. It,messages they will do but it will be painfully slow. Manus bob parker will stay with us. Anna up next, will the ecb cut its inflation outlook . The Central Banks governing Council Meets to discuss the euro area stimulus plan. What will we hear about inflation at the same time the year perhaps a better story around growth . That will be the focus of the conversation. This is bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Manus youre looking at a live shot from tokyo where its 2 30 in the afternoon. The dollaryen moving a little bit lower. Anna lifting the outlook comment operating margin of 22. 5 , thats the new range. Outlook uplift in their for this operating margin. Operating profits came in above estimates as well. Perhaps there some evidence for whats been happening in the u. S. And china because the expectation was we would see accelerating cognac cells in the u. S. And china. The company focuses on highend spirits priced at 60 or more in bottle are raising prices china and seeking to write a cognac recover there. Signaling a gradual regrowth opportunity. The chinese rediscovering a taste for expensive liquor, it seems. Lets see whats going on in these markets. There is a lot going on this thursday. Weve got the decision from that ecb, former fbi director james comeys testimony and the u. K. Election happening as well. Flat if yous pretty look at the msci asiapacific index, a bit of a mixed bag there. You have financials outperforming on the upside and on the downside, Energy Stocks providing the biggest downward drag. Lets look at of crude is doing, we had oil seeing its biggest drop since march on wednesday. A drop of more than 5 after u. S. Crude stockpiles unexpectedly rose. So we saw the drop in oil despite some dynamics in the middle east that mightve led to the price doing something else. Just 46 on the nose on wti. A little bit of recovery in todays session after that steep drop yesterday as you can see on the chart. Gold, theshow you past couple of days seeing a little bit of softening in the gold price after earlier in the week it was powering tort 1300 an ounce. Versus 30 shows gold year tips. Climb has been fueled by falling bond yields, the opportunity cost of holding a noninterestbearing assets is on theseting the yield 30 years and thats what this chart is showing. Finally, just want to look at this is showing risk reversal for one week and interestingly, the Downside Risk in sterling versus the yen, according to these risk reversals greater than the euro and the dollar. Anna a new edition of daybreak is available on your bloomberg and your mobile. Story, may day are made him. Mayhem. Mayday or markets are pricing in a slim majority. The first exit polls will appear at 10 00 p. M. Local time, the first results within an hour and the full picture around three hours after that. So either stay up later get up early to follow all the action. Manus or just not go to bed at all. Parliament, you could see a resurgence of brokers. The fbi director james comey will say that donald trump asked him to end the probe into Michael Flynn, repeatedly requesting a public announcement. Announcement that trump himself was not under investigation. Anna and daybreak focuses on a rant, the company is about revenge for Islamic State attacks in tehran that killed at least to double people. A dozen people. Risking in escalation of the few the that that divided region into increasingly hostile camps. Ecb will cut its inflation outlook because of weaker energy costs. Saying the Economic Growth forecasts will be raised. Anna the ecb meeting is in estonia. Matt is also on tour and joins us now from these dont in capital from the estonian capital. Explain why these words are so significant, mario draghi is not been in this position before. Explain why these words aremat. Mario draghi coming to the end of his six years as ecb president. Hes always said that the risks to growth are tilted to the downside. This time, 90 of the economists surveyed by bloomberg expect him to say that the risk to growth are balanced. Thats a word hes never used it has not been used by the ecb since august 2011 when jeanclaude trichet was president. We are very much looking forward to seeing if he does that. Its really the Inflation Forecasts that are going to move markets. Bloomberg broke the story yesterday that the ecb is going to lower its inflation forecast to 1. 5 . This year, next year, and it 2019. Actually moving the euro, if they do this, it will be interesting to see the market see it as a form of tightening or at least holding all the normalization of ecb policy for maybe a couple of months. Its about credibility as well. Theres a lovely line about a credibility gap that can be created if they dont realistically move on the language or a tiny nuance, they risk of credibility factor, dont they . Its the same kind of argument you heard with the fed. They dont want to be perceived as being seen behind the curve. If unemployment continues to fall, theyre expected to nudge their growth forecast up a little bit. This is a way for them to sort thatke concessions to beating of growth and reduction in unemployment. The problem is they cannot get wages to rise, even with the drop in joblessness. Their little bit concerned about normalization, maybe something about tapering in september. Economists are saying they could push that back until october or november. Anna thank you very much, matt miller, braving the rain there. Bob parker is still with us in the studio. Expectation, do you see that there is this credibility issue for the ecb, do they have to reflect on the better data that were seeing from the eurozone . If you look at the Economic Data coming out of the eurozone in the last three months, it is very difficult to find any evidence of weakness in the eurozone. When you look at pmi, consumption data, industrial production, exports, the eurozone has clearly accelerated inond consensus expectations 2017. What does that mean in terms of quantifying that . Probably means that eurozone growth in totality for 2017 will of 1. 7 butonsensus close to 2 . For the First Quarter we had annualized growth in germany of 2. 4 and its spain, still north of 3 . I find it difficult to see anything which is going to , thate that over Movement Acceleration in eurozone growth. That has to be reflected in the ecb statement today. Bill ist acrylic it a credibility issue versus downside . Bob there isnt any downside. The wordtart to use downside, no one will believe them, because there is it any. I think they have to use the word balance. I think they are concerned. In had a clear message recent months that yes, they are comfortable that the eurozone economy is accelerated. Theyre not worried about the downturn in inflation we just riven by the downturn in commodity prices, particularly oil. I think they will revise their inflation forecast to her projection in 2017 of around 1. 5 . So you almost have a goldilocks scenario. What mario draghi is sensitive to doing is he doesnt want to send a message that theyre going to tighten Monetary Policy sooner rather than later. The big concern is that they send that message, that might reverse the eurozone acceleration and they want to nurture this improvement and therefore any change of Monetary Policy is delayed until the end of the year. And they might be afraid of a strengthening in the euro, perhaps. This is pointing to a model that Deutsche Bank has, the currency correlation model that includes Interest Rate differentials. Is flashing red, suggesting the appetite for the euro is taking on a life of its own that doesnt bear resemblance to those Market Drivers that it should. Bob with a clear consensus one month ago amongst investors and Fund Managers worldwide that the u. S. Dollar was going to appreciate, and that ecb does not change Monetary Policy. It drove a market consensus to be long in the dollar. That was seen in the last two to three weeks is this short squeeze on those long dollar positions. Been justified by the stronger eurozone Economic Data. The ecb i think is quite sensitive at the moment about a further strengthening of the euro. Ideally they want to try to put it ceiling of around 114 or 115. I would not be surprised if we see verbal intervention trying to talk the euro back down again at that level. I think you will see a breakout on the upside for the euro later in the year and in early 2018. We might be having a ,onversation in a years time but is that going to happen this month . No. When you take the fed issue and the bank of japans issue, they are all facing this dilemma. , andis the breakeven theyre all beginning to rollover. There was a phrase he used , tie those strands together for me. They are all facing the same issue, a falling over in the perception of where inflation goes in five years. Not worry about this too much because were in a situation at the moment globally gung ho on it,ll why not be a little bit concerned about it . Bob we are now in a situation where growth is accelerating in europe, japan, and i think the week growth data in the states over recent months probably will reverse and we will see somewhat better growth data in the states. We are seeing strong data yet again today out of china, and at acceleration in india. The Global Economy numbers are being improved. At the same time, inflation is subdued. That is a Good Environment for Global Equity markets in an environment where bond deals actually stay low. Bond deals are not a threat to local Global Equity markets at the moment. We will have more on the ecb at 7 30 on bloomberg markets. Lots more to come on the ecb with the actual policies followed by Mario Draghis News Conference. Manus a reminder if you are a bloomberg customer, you have our interactive option which is tv. Join the conversation and you can ask a guest a question if you want. Have a look at dollaryen at the bottom of your screen. In reaction to one of the stories that the bank of japan is said to be conducting simulations internally on how to monetary stimulus and how that could play out. So they are all looking at the options. Cut cuts rate in on concerns about its row with other arab nations. We are live in doha. This is bloomberg. Manus you are looking at a live shot of new york. We have a little clock counting down to the open of u. K. Polling here in the united kingdom. 650 seats are up grabs. Everything from 1 lead for the ,ories to a doubledigit lead it depends on which particular polling option you take. Airbus maybe thrown a lifeline for its struggling superjumbo. Him or said to be in talks to buy 20 more planes just as airbus debates cutting production below one a month. Emirates is the biggest operator in the world. The order could be worth 8. 7 billion although people familiar with the discussions at the carrier has not decided hammy planes it wants. Hewlettpackard ceo has said shes giving president Donald Trumps administration the benefit of the doubt. Speaking exclusively to bloomberg, make equipment meg whitman said she supports some but not all of Donald Trumps policies. We are in favor of tax reform. We think the ability to overseas isash important. On the other hand, we are not for the border adjustment tax. That is very difficult for companies that import and work on low margins. Retailers, a lot of technology companies, we think that is not in our best interest and by extension in the best interest of the United States. Credit suisse investors will buy 99 of a billionsfering raising for the banks turnaround plan, the second sheer issue since the ceo took over two years ago. Vines raise will be used to complete his business overhaul and expand in wealth management. Ondit suisse ditched plans some lucrative operations. Weve had some data from imports roses and by more than expected in may from a year earlier leading to a surplus of 40. 8 billion. Bob parker is our guest. Good news to that extent. These are the export and import numbers. Make sense of china for us at the moment. We talk about it a lot. Last week there was giveandtake in terms of the pmi. What is your take on china right now . Bob i think it is fair to forecast growth as an annual rate below 5. 7 . I come back to the point we have repeatedly made on bloomberg in the past which is the probability of a chinese hard landing remains very low. Growth is on a very gradual glide path to us lower level of growth. 6. 4 . 8, growth could be the number still remain very robust. The second point to make is that the pressure on the Chinese Capital account is passed us. A key indicator is the spread between offshore renminbi and onshore renminbi. Widens, as we saw last january in 2016, that indicates pressure on the capital account and pressure on the reserves. What were seeing is a very stable capital account position. That has a political dimension because the destabilization leads to an easier conversation between the chinese and the americans. Anna i understand whats happening in the gulf plays in here. The standoff over qatar testing chinas neutrality. Been put onhas negative watch following concerns that the route with arab nations will weaken its finances. Of joins us now from doha yousef joins us now. Give us the latest. The chips are starting to fall into place. Countries taking different positions, some aligning with qatar and some aligning with the rest of the gulf. The amount of interview thats invested, just hours ago it was understood there were a littletry to find bit of common ground. There is a list of demands that have been circulating in some reports which include cutting off ties with the Muslim Brotherhood and reducing some of the activities of al jazeera. At this point, youre seeing turkey align itself with qatar and making an amendment to the law to allow it to station more troops there. So a lot happening, but nothing firm on the diplomatic front. The fallout in terms of Economic Impact is still very much in play. Manus part of what we do is try to take the political story move it into markets. Qatari banks are under pressure to meet their deposits and liabilities. The implications of that downgrade, the financial situation in qatar, how will that play out in terms of low . In terms of flow . Youll see it in the credit default swaps and youre seeing it in the 12 month qatari riyadh. This follows the movies movement before the escalation when there were concerns about the countrys Economic Growth. Global ratings pointing out that the fed will weaken the finances of qatar in the shortterm rating has been affirmed. Concerns that it will exacerbate external vulnerabilities. It took me seven or eight hours to get here when its usually a one or two hour operation. Convincing immigration on the way out and back into doha about what im doing and why im here. The activity in the airport on the way in, very quiet. You can see some of the streets behind me, there is definitely reduced activity. In the past it was kind of a business hub. Bob parker is still with us. Just a minute or so left to talk about this. Does this have bigger worrying implications for risk, or is it contained . Bob my view is it is contained. The key question is what are the implications for the oil price . There were some discussion two or three days ago saying this dispute between saudi arabia and the other countries could lead to an upward movement in the oil price. The answer to that as we well seen is absolutely not, despite the dispute, Oil Prices Continue to trade lower. Thats why i think the important point is the oil prices driven by what is happening in america, not what is happening in the middle east. Manus bob, thank you so much for being with us this morning. Snapshot, you a quick the last moment we can talk about these holes. Here is how the u. K. Markets look. This is dollar sterling and europe starting as we go to the general election. Anna the poll set to open in just a few minutes time for the u. K. Second general election in two years. Weve done a lot of boating here votingu. K. A lot of in the u. K. This is bloomberg. Manus the ecb is said to be ready to cut inflation projections as it raises growth forecasts. We are live in estonia. The u. K. Votes. The polls are now open. Britains second general election in two years. Comey testifies. Him, i needt told loyalty. And made in china. Exports rise from the factory to the world. As Global Demand shows signs of pickup. Youre welcome. It is bloomberg daybreak europe. Anna it has gone 7 00 in london and 8 00 a. M. In germany. We have industrial output numbers coming through from germany. April industrial output rising the number is stronger than was expected. Output increasing in april. Versus an estimated 0. 5 percent gain. All this on ecb day. Manus Business Confidence the highest since 1991. That is the backdrop. You can understand why the European Central bank may be more aggressive in terms of his. Itch on that road trip lets talk about the futures. We have our equity markets up and running very at london, paris command frank for it showing slightly stronger innings. The comey testimony versus what happens with the European Central bank is critically important. Also the china data. The china data has rebalanced the markets. Into a slightly better bid. The export machine to the world, they rise and make and that runs the outlook brightens the outlook. Anna the Asian Session was sort of hohum. Down. 2 of 1 at the close. There is the sense that we are waiting a little bit for james comeys testimony will the ecb and the u. K. Election taking place today as well. With all this data coming through, we have the euro in there because it is ecb day. Matt is on the ground in estonia. Ruth we thought we would talk more about the euro. We talked about the euro with bob parker. The correlations are breaking down, some of them are flashing red so you have no gross warning that the worlds market, the risk in the market is the highest since 2008. Oil battered and bruised down yesterday. Absolutely. We are still below, we are still on that 46 level. Inventory surging the most and american imports from saudi arabia dropped to the lowest level since 2015. There is a bit of a Health Warning with some of that data. A quick look at the bond markets on this ecb day. O. A. T. s thered for you. The u. K. Polling stations are open for the countrys second general election in two years. A total of 650 westminster mps will be elected with 46. 9 Million People registered to about. Tune in for a onehour special and the u. K. Election at 10 p. M. London time where you will get instant analysis of the markets as exit polls are published. Fired fbi director james comey will publicly say that donald trump pressured him for loyalty. He will testify that the president sought forbearance for Michael Flynn and asked me to of the russia investigation hanging over the administration. We will bring you special coverage from 2 40 p. M. U. K. Time on tv, radio, and twitter. Bloomberg customers can follow all of that on tv lythgoe. On lythgoe. On leave go. Said tensions with the saudi led group of nations will guitarscutter vulnerability and could put pressure on its growth and metrics. North korea has launched a series of short range missiles that appeared to be designed to attack ships. South koreas joint chiefs of staff said the rockets, probably cruise missiles, were fired from the eastern part and flu 200 kilometers. The defense minister and japan said they do not appear to be a tech that could reach japan. U. S. Oil is trading at 46 a barrel after the biggest drop since march. As american stockpiles rose for the first time in nine weeks. Inventories increased by 3. 3 Million Barrels last week, sending crude more down more than 5 . Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. More cautious trade in asia as therose the we await comey testimony. We have that strong china data. Up for a third session, up. 4 of percent, japan closing down at. 41 and the share market in austria closing flat. In terms of stocks we halfing watching Cathay Pacific doing well in hong kong getting an upgrade from jeffries, rating to a buy. This is a stock that has a it wasof downgrades, and revealed that was not the stock that muddy waters is shorting. That plunged before being suspended. Petroleum reflecting the downturn that you have seen in Energy Players. Also china import data coming through in that was better than expected. , youu look at this chart can see chinas year on year exports to the likes of the u. S. , japan, eu, and korea. Korea is the yellow line and it was down in april. It is not shown on the chart. It is up 10. 2 in may. A strong rebound of exports to korea. Juliette saly standing by with the data. Lets talk about another central bank. Cutting the inflation outlook. Is matton the ground miller. Journey us now. Never were two words so much talked about. Take it away. Matt the European Central Bank According to 90 of the economists surveyed by bloomberg is expected to change its language when talking about the risks to growth. They have always said since mario draghi has been president the last six years that those risks were tilted to the downside. They will now say according to the economists we have spoken with that the risks are balanced and if they do that it will be the first time they have used that phrase in regards to risk and growth since august of 2011. A very important move as they get ready. Market participants say to think about tapering further from the 8 billion to 60 billion and starting on the path to saving that out. After todays meeting, when will they Start Talking about a real taper . Economists have been saying september but now if they reduce their inflation forecast, economists may be looking for a mention of tapering in october or maybe even as late as december. Lowering their Inflation Forecasts could push that talk of taper back toward the end of the year. See it is interesting to how they will balance the slightly better picture for the economy with that pulling down the inflation forecast, very careful, cautious, not wanting to tighten conditions in the eurozone too much too quickly. Matt absolutely. Expected to lower their inflation forecast just 1. 5 by 2019. For 1. 7 ,en looking 1. 6, 1. 7 in 2019. The reason is they will say energy and they have been saying that over and over again that Wage Inflation has been a real problem for not just the European Central bank it for Central Banks around the world. Aey will balance that with stronger growth forecast. They had been saying and they have been saying up till now 1. 8 growth this year, 1. 70 year, 1. 6 in 2019. Economists we talked to expect them to boost those growth thecasts in order to offset weaker inflation forecast going forward. Manus stay dry there. Matt miller there. Lets bring in our next guest. Fromel krautzberger blackrock. This is the issue, inflation. For credibilitys sake, for mario draghi he needs to acknowledge this and terms of perhaps resetting our expectations, doesnt he . A development that is robust and if you look at the forecasts a year ago everybody had core inflation higher. That has failed to materialize and if you look at some Core Measures so you take out some things which are still impacted by oil prices like transportation costs, like package holidays, the trend looks even more boring. They are trending near the lows. You mentioned before that we might get a bit impatient. They should almost enjoy the situation at the moment. Core inflation is low. A time ofeurope needs robust growth to make up for what come some people called the lost decade. A you are looking starting to sound like our last hour. Michael the scenario everyone was afraid of was that the ecb one day because of a bounce in inflation may be given by oil. When the economy is not robust ,nd we get the opposite Economic Growth is probably slightly above potential at the moment. Inflation very mild. I would also argue with mario draghi, we have a very patient hand. If you look back over the past 10 years there were two moments when the ecb were a bit too impatient. Im am very sure that they want to make sure that this time they stay patient a bit longer. Manus youre talking about the trichet missteps. The euro is on the march, money is flowing into the euro, this is the story that we look at this morning. This was written up by Deutsche Bank. A flow showing but and analysts are getting worried. Why are they getting worried . Anna going back to a model that Deutsche Bank has in this case, the correlation model so it in lutes interestrate differential and relative performance of equity market, all these things that should link to the trade. The euro seems to have taken on a life of its own ignoring some of those more fundamental moves. Michael the euro is kind of two ourng at the moment in france we run a neutral position, if you put a pistol to my head i would say there is the probability we get a bit of correction. I think mario draghi will make those changes, that you imply before and they will take out the market has been well prepared for that. Without preparation the market might shoot up but the market is very prepared. You will speak about the low core inflation as well. Those things that are happening in the oil market. I think there is a good chance that we might correct here. Anna do you think he will try hard to sound dovish from what you said . At least he will try hard to balance it to not make those changes to look to hawkish or not to imply any immediate action on those. Is tuned in for your call. If he errs on the slightly dovish side and gives us a bit of a flicker on the downside with inflation, what does it do to exposure to bond markets in europe and in the German Market question mark what will that do, there is the german curve, 10 year yields and germany. , wheree is a dovish tone does that take us . Michael i think that is a good chance that the curve will flatten a bit because you spoke about breakdown in correlations and have what has been interesting is that the curve in europe has steepened a lot. In faith inflation is falling and normally it goes in the same direction. If we get a dovish town that could flatten the curve and it could have spread markets a bit, the market has been nervous about italy. There is the timing of the elections, quite uncertain. It could help those markets. Anna thank you very much. Fromel krautzberger blackrock international. We will continue the conversation on the subject area on the subject. Manus we will bring you full coverage and terms of Mario Draghis News Conference, the ecb policy decision. 12 45 p. M. U. K. Time. There is one place to go, tv. Recountmes comey will his conversations with the u. S. President and his Senate Hearings. We know a bit about what we are going to say. The details coming up next. This is bloomberg. Manus it is 7 18 a. M. Here in the u. K. A polling station to the north of london. Lets get the Bloomberg Business flash. Here is juliette saly. Juliette purpose may be throwing a lifeline for its superjumbo. Emirates is said to be in talks with buying more 20 more planes. Emirates is the biggest a 380 operator in the world. The order could be worth 8. 7 billion before discounts all the people familiar with the discussions say the carrier has not decided exactly how many planes it wants. Hewlettpackard ceo said she is giving president Donald Trumps administration the benefit of the doubt. Speaking exclusive to bloom to Bloomberg Meg whitman who publicly backed Hillary Clinton said she supports some but not all of trumps policies. We are in favor of tax reform. We think the ability to repatriate cash overseas at a lower taxsaid rate is important. A lower Corporate Tax rate would spur growth in the u. S. On the other hand we are not for the border adjustment tax, that is very difficult for companies that import a high degree of their costs and work on low margins. The retailers, a lot of the technology companies, we think that is not in our best interest and by extension in the best interest of the United States. Manus juliette Credit Suisse investors will buy more than twinighters. The this is the second share issue since two years ago. Funds raised will be used to complete the business overhaul and expand wealth management. Credit suisse ditched plans to list part of its lucrative swiss operation and that is your Bloomberg Business flash. Anna thank you very much. Juliette saly there. Will fbi chief james comey testify tomorrow. Manus according to repaired remarks he said the president repeatedly called for loyalty when they dined alone at the white house in january as well as asking what could be done to lift the cloud over his administration. Gross warned that market risks are at their highest since before the 2008 global finances financial crisis. He told investors to be cautious about the high price of treasuries. Treasuries are the most attractive of the developed market bonds. In comparison to the 10 year bund at 25 basis points. And relative to a 10 year [inaudible] that is 205 basis points. The more attractive on a ill basis but still i would suggest pricewisevervalued and under yielding and investors should be cautious in terms of how much they want to own relative to cash. Billhat was built gross speaking to bloomberg. The global search for a yields, u. S. Treasuries may be the most attractive developed investment and developed bond markets. Are they the least bad . You can always about this one away. Michael at least our european funds has the flexibility to invest in u. S. Next and come so i will not hide here. You have an interesting chart on the probability of fed rate decemberwing that the probability is higher than the september probability. 9201 if viewers want to click on it. Michael what i find most interesting is not that one is overtaking the other but how love the aggregate probability is. After pricing half a hike june. That is baked in. I would be on the side of the gross saying that the market is getting too expensive despite the fact that rates have been higher in europe. Despite the optical illusion that u. S. Rates are cheaper i would argue they are slightly more expensive relative to where we are. Anna where do you think the fed hits, wheres your view for how many more hikes we get . The question of why we start to hear something substantial on the Balance Sheet. Somehow they suggest the recent the fed hike move to december is because they will be talking about the Balance Sheet in september. Michael that would could be the case but i would see it the opposite way around. There is a highly is higher likely likelihood in september. Posit december for potential reduction of the Balance Sheet discussion. We will see. What argues for that position is the fact that since the last hike when they wanted to tighten monetary conditions, monetary conditions have loosened, the dollar is weaker and lower equity markets up. They have quite a bit to do. Manus this is the u. S. Curve, this is the 3d version. You want to look at it. We have seen that flattening off. Does that continue given the backdrop, half of a half of a rate come now for december, what does it do to the shape of the curve . Michael it would probably continue the mild flattening but it would be a bearish flattening sell offhe fund would more than i implied. If we get more rate hikes priced in. Probably what is interesting, the curve has flattened a little bit that not as much as inflation markets have given back some of the gains so i would say if you want to play reflation, maybe use reflation of the u. S. ,e fund not necessarily the backend. Anna for investors what is the significance of james comey testifying . Is it that we get more of a gauge of how long the story runs in washington or how long of a distraction it is . Michael we have already learned some of the remarks he will make so i do not think we will gain amazing more hard facts today. Theill be much more optimism of what trump can do has come down and that is a contravening factor. I would argue the market is a bit too pessimistic on some things like tax reform. We will see. Going from over if yousef to overly negative. Fromel krautzberger blackrock joining us over the past 30 minutes. Anna that is it for daybreak europe. The european open is coming up next. Daybreak europe is live on london dab digital radio. Manus will be heading there from 8 00 a. M. U. K. Time this morning. Manus it is voting day and the u. K. In the u. K. This is bloomberg. Guy good morning welcome and welcome. The first trade of the cash session coming up surely. I am guy johnson, i am in london. I miller is in estonia and seems to have found in an erect. This is what we are talking about. Start toward the exit . Beene u. K. , polls have opened for 30 minutes and they close at 10 00 p. M. U. K. Time and the