And breakup paints. A hard brexit could hit manufacturers profits i is much as 30 . We will speak to the author of that report. Matt let us take a look at futures. A half hour of a halfhour to go and we are seeing a mixed trade. Ftse futures pointing down all morning long. Up now withopening a fluid mix. 0. 2 . Tures up and you see euro stocks unchanged. I am looking at toyota motor. Just coming across with earnings. 4834. Ing profit at theymates at profit are lifting their operating 1. 7ook for the year from trillion yen. A miss on the quarter that we had but a boost in the outlook looking forward. We will see how traders deal with this when u. S. Opens. When u. S. Trading opens. Japanese trading is already closed. It will be fascinating to see what they say about the yen Going Forward from here because as we know what is happening in the autos hector is becoming increasing in the auto sector is becoming increasingly political. The euro is down 0. 3 . Which may cheer up wolfgang short able should label. Currency. This is the function of the week. And will continue to be. It may be his favorite function on his bloomberg. Ppp. Is the that is what they are all talking about. The euro. Let us get a bloomberg first word news. Saide donald trump has the process for coming up for the replacement for the Affordable Care act could stretch into next year. A longer timeframe than previously indicated. The comment came during an interview with bill oreilly. Trump we will be putting it in fairly soon. I would like to say by the by the end of the year, at least the rudiments. From applecompanies to zinga have filed an impassioned brief. Ninthief was filed in the Circuit Court of appeals and emphasizes the importance of immigrants in the economy and the society. Technology the industrys growing opposition to the policy. Indonesians economy. Indonesias economy. President sting the growth target of 7 amid a slowdown in china and Commodity Prices even after the Central Bank Cut rates several times last year. The new England Patriots have pulled out one of the nfls greatest comebacks to win the 51st super bowl. They trailed the Atlanta Falcons by 25 point going into the Fourth Quarter but managed to to31 to score the claim the trophy. It is a record fifth championship for patriots quarterback tom brady. President has tweeted his congratulations. Global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. This is bloomberg. Guy thank you, sophie. A 144 le pen has unveiled Point Program for the government including leaving the euro and holding a referendum on Eu Referendum on eu membership. She addressed supporters at sheoday meeting in l addressed supporters at a two day meeting in leon. The system has as in chains and is not working. That is why once elected, i will announce the organization of a referendum within the First Six Months of my mandate on whether to stay or leave the eu. Guy the french president ial race has been opened by a financial sector. We are live in paris. Early surprises out of what Marine Le Pen deliver this weekend. Surprises because it is following the program she has been promoting since 2012. Ithad a harsh tone to describing france as a country completely defenseless. Ruined by the European Union. It was a dark speech expressing a very negative view of the french situation. Euroever actually said the because she knows that scares some older people. She talked about restoring a National Currency which is the same thing but it is interesting that she plays on the language in that way. She does not want to scare the older voters. What i want to highlight we have here on the bloomberg. A breakdown of the financial situation of the European Union as well as a political conditions. We have trending charts. It currently has the different candidates for the French Election as far as the odds go. You can see that the top two are doing better. Is this a two horse race . For the moment it is. If the election was held right now, it would be those two candidates. And the polls show that Marine Le Pen would be crushed in the second round. Look, there are more than two months to go and it looked completely different a few weeks ago. The surprises keep coming. And they will probably keep coming. Guy great to get your take. A busy week in france. Let us get another perspective, a market perspective. The head of european fixed income at Franklin Templeton joins us. We are trading at 67 basis points. Guest given the French Elections and their volatility, we will see it go wider in the next few months providing buying opportunities for investment for investors. Guy will people misinterpret this . Guest the French Election system is different from many others around the world and many people will be trying to interpret what the first and second rounds mean and it may be confusing for some investors. There is think opportunity here because you think that investors are over concerned about this populous fear populist fear . Guest Going Forward, if we see boom spread widens, there will be opportunity here. It makes the french at it makes the French Election very different from Donald Trumps election and the brexit. There is some probability but in that Marine Le Pen goodwin and that could actually mean that if gosee the spread significantly wider from here there could be an opportunity. Guy your theory is that people will misinterpret the first round when Marine Le Pen is likely to do very well. A big bread widening at that point. Going into the mechanics of the second round, it becomes harder for her. Or maybe just before the first round. I think that is when you want to look and see where the spread is and that could present an opportunity. Guy you want to be long in, short out. How wide will it get to the run up . Guest that is difficult to say. It depends on what information how theut of france and polls show. It could go significantly wider than it is or stay where it is. It comes down to politics. Is not theolitics only thing we need to be watching here in europe. The Economic Data has been picking up. Is that focused on the core . We see strong numbers even out in the periphery, it in spain for example. Guest you have to look at the underlying fundamentals for the longerterm. That is the case. This year we will probably see politics and the Central Bank Continue to drive markets with what their policies are and how those progress. However, i would say the growth in europe is doing well, inflation has come up some. That we think the inflation we are seeing is transitory and we will see it cap off and come back down. Guy david will stay with us. Remember, if you are a bloomberg customer, you can watch the show with tv go. You can follow all of our charts and functions. There you go. A little bit of a pause. But the streaming is pretty good. The quality is excellent. Coming up, turbulence ahead. Ryanair is cautious about missing year and targets. Year end targets. We are going to talk to mark bristow later on. The ego of ryanair. Obamacare is up in the air, its replacement could stretch into next year. We will discuss the implications of that. All of that is coming up. This is bloomberg. Guy welcome back. Ryanair reports a drop in thirdquarter earnings this morning and says it is cautious about reaching full year targets. Ryanair regained its losses. Let us start off with the numbers. This is a capacity story at the moment. Guest absolutely. Issue of the terrorist attacks of north africa, egypt and tunisia has prompted have capacity into portugal driving down yields for ryanair and lowering ticket prices. 13 15 decline in ticket prices in the third quarter. It is already down 17 . It has been a tough winter. Guy Michael Oleary usually talks about tough winters being good for his business. That is not always true. Easyjet is not looking quite as good as ryanairs scenario. It is about unit costs. Ryanair has upgraded the guidance for lowering costs down to 3 . Easyjet will increase. They are forecasting flat costs. It will be interesting to see how the shares react. You could interpret todays results they could be wellpositioned to benefit from here on out. They were 1 higher than brian air thought would be possible. Phasing into their load strategy. An interesting time for the european carriers. Matt the load factor. On easyjet, 86. 2 . Even though they are doing better than the same reporting period from last year, they are nowhere near that this year. Will they take capacity out or will they not need to do that as travel picks out . Picks up . Capacity is picking up. To get worse,ng better for consumers. Prices will decline again. For shareholders, that means lower revenues. That will last for the next six months. How that bears out for the next winter, especially with the added factor of the rise in fuel will be interesting. Before we see any capacity coming up, we will probably have to wait until next winter. Europeand, the consumer has had a very tough time for a very long time. Unemployment is coming down slowly but the european economy at least is picking up. Do you like consumer names in europe run a credit point of view . Names tome consumer offer value. In the consumer sector. We are focused on the industrial sector. Guy why them . Guest they tend to be less leveraged. Deleveraging in fact as we go forward. From their metrics, they show they will continue to do well. You do not have like the banks where we are not as optimistic because debt is very tight. Room to seell some some spread conversion in the industrials. Wittywarren buffett has a quote. He famously now has started to put money into airlines after decades of shunning them. What do you think about the sector . We do not have any airlines in our european fixed income accounts. Most of them are not investment great. We do not tend to invest as much in highyield. Plane makers . Buy it is more of a global phenomena and as opposed to just europe. Guy david is going to stay with us. Another company that has posted earnings this morning is ran gold. We will speak to is randgold. To its ceospeaking coming up, mark bristow. This is bloomberg. Guy matt welcome back. European market open is nine minutes away. Randgold resources will probably be one of the stocks that moves today. The mining firm also increased its bullion outlook for the sixth consecutive year. Bristowoined by mark from cape town. Six years running and you are planning to continue that because i see you are looking to open at least three new projects in the next five years. Mark bristow yes, i think the ast six years have been significantly strong in growth but we are forecasting an increase in production next year. The most important thing is the growth in cash and dividends without compromising our to invest inlity our own future. All of the aspects of a successful strategy demonstrating that we are able to invest in what is always going to be a busy market. Guy can i talk more about that . Is this cycle going to be different do you expect . You expect miners to say yes, we can invest in our business is, we have enough cash wew but this time around, will not invest as aggressively. Will be this different for everybody . Isk bristow the industry growing and that is driven by the fact that we did such a bad deliveringging and value through the super cycle. The points i always highlight is randgold has done well but other companies in the 12 miners did well in 2016 as far as shares go, but there thatnly two gold miners has improved since 2005. Looking atery well the shortterm performance but this is a longterm game. What we have demonstrated is last year we increased our dividend and we said we were comfortable with our profitability. We had a fairly aggressive payout ratio. This year, we delivered on that. And we have announced some. Ignificant projects a significant new project with significant new commercials. And likewise, another project if it continues the way that it is in the next five years, we are toll forecasting gold prices have a much stronger cash position in a years time. That wewe would argue are in a stronger position than much of the industry. We have never cut capital. You can see the industry is undercapitalized at the moment. It is an unchartered horizon for our industry. Guy your stock is about to open. The market open is about to happen. Mark bristow, thank you for joining us. Mixed open for european equities. It will be interesting to see what happens with currency markets. This is bloomberg. Guy good morning and welcome. You are watching bloomberg markets. I am here in london. We are moments away from the start of european trading. Matt has your morning brief. Matt france in focus this morning. Maureen le pen declares her candidacy with a problem to hold membership ifn eu france does not get a better deal. Can she win in the second round . Finance minister wolfgang membership if franceschaeuble blast the centrk for a euro that is too low for germany. Back as hedraghi hit faces european lawmakers this afternoon . Breakup paints. A hard brexit could hit u. K. Manufacturing profit by as much as 30 . We will speak to the author of the report. Guy let us talk about where the markets are going. Five seconds to go until equities kick off this monday when. We think it will be a fairly flat session. Not much direction. Marketing stocks up a touch on the ftse 100. That was anticipated. Cac and theting the dax to be flat as well. The bundt spiked. And the dax to be flat as well. Theftse 100, unchanged. Man is when you look at the equity market we had a little bit of a bump from donald trump on friday afternoon. It has carried through in asia and in the u. S. Investment banks has been exposed. A mixed complexion. Up 0. 7 . Industrials, unsure. The german manufacturing orders. 5. 2 . Giving navarro fuel to the fire they that the euro is in support of germany. The frenchgerman spread. You have mario draghi speaking to the parliament this week. You have a lot of paperwork coming to the market in the 10 year space. Austrian, netherlands, ireland, and portugal. Of paper. Ht the spread is widening but nowhere near where it was a few years ago. Is italy. St risk and even there, the desire to bend the euro only stands at around 5 . Gilt is opening down. We have to see what happens in terms of the amendments proposed for the triggering of the article for brexit. With anna and was i this morning. Saying terrorism could unseat their numbers. Italy flooded with capacity. Down the 17 . Resources, is up 3. 94 . Dividend up 52 . Ou cannot deny that, a buck in your pocket. Ubs reporting higher and stronger gold prices. Stock up 3. 79 percent. I am off to Bloomberg Radio with caroline. , and join me there if you are jumping in the car. And join me there if you are jumping in the car. Matt Deutsche Bank purchased old page advertisements in all german newspapers. There you can see what the Deutsche Bank looks like in frankfurt. Here you see the newspaper. In any case. I wanted to show you how big this is. In every major paper in newspaper basically apologizing for serious errors. Legal cases that date back many years cost the lender its reputation and trust in addition to about five billion euros. The ad goes on to blame the problems on the misconduct of a few employees. Interesting it is not often that you see a bank, not since the financial crisis, coming out with interest such aoften that you massive apology but people in germany were genuinely angry on thursday. The men on the street with whom i have spoken outside of the Deutsche Bank, everyone knew about this massive loss they were boasting. And they were not happy. Guy inasmuch as the german germanake do not have the people do not have a stake, i am wondering why this is. Is there some sort of sense within Deutsche Bank that it represents the country and as a result of which it is a flag carrier and it has to do this. Orm a business point of view operational point of view, it does not make a difference. Deutsche bank will not be bailed out. I am wondering the logic behind this. Matt the germans do feel that Deutsche Bank is a national treasure. And so many germans have Bank Accounts with the Deutsche Bank. They are following the health of the bank even if they do not own shares. But they are also paying fees now. A bank account at Deutsche Bank without paying fees. That is something people are not used to here in germany. A bank account at Deutsche Bank without paying fees. They are essentially paying for these mistakes in extra costs and fees that they have not seen before. Guy fascinating how the whole thinking story has not been separated from the state or the people. They are essentially paying for theseit feeds back into what is happening with the stories surrounding the euro as well. We will talk about that later. Let us stay with banks. We saw what happened on friday. We caught up with the director, gary cohn. He weighed in on the administrations review of doddfrank. We will attack all aspects of dodd frank. Care about deep, liquid, transparent and orderly markets. He was standing outside of the white house. He seems to be in the driving seat when it comes to the regulatory story. He was standing outside of the white house. David joins us now. If the u. S. Banks get the regulation and get an easier road in front of them, why would i be interested in owning european banks . Guest first off, we have to see what the deregulation means. But i do think that the mode of david joins us now. Traffic travel is clear. They will be deregulating in the u. S. And increasing regulation in europe. I talked to the cfo of Deutsche Bank about this on thursday. He made the point that they are active in the u. S. And that is why they have paid all of this money to stay active in the u. S. What do you think about the regulatory negotiations . Has already told the fed to quit negotiating on international agreements. Will this turn into a trade war of sorts . Guest again, i think you have to look at the longerterm and thewhat the how regulations change in the u. S. And how that affects banks and see what aspects turn international. Until we know more of the details, it is difficult to say. Guy when you are looking at european banks, how are you breaking them down . The italian Banking Sector has been through a difficult phase. It is a play on the italian economy. It has to pick up for the banks to do better. How are you breaking europe apart . How different does the picture look like . Banks we tend to look at and look at the national champions. They are a different kind of bank in the way they run their Balance Sheets and their size and the smaller banks. That is how you different cheat the Banking System that is how you differentiate the Banking System in europe. Guy david is going tuesday with us. Obamacare is up in the air. President trumps says its replacement could stretch into next year. Mario draghi faces european lawmakers later this week. Surging inflation is becoming a bit of a problem especially in germany. Debate the brexit trigger. All of those stories. Coming up next. This is bloomberg. The welcome back to European Market open. 11 minutes into trading. Mixed tradeat the we have on our hands as far as equity indexes are concerned. Again on the ftse. On thecall that a gain ftse. Down 0. 4 being weighed on by volkswagen. Although it is not a massive lawsuit, volkswagen is being that bought 500 volkswagenw is suing for cheating it allegedly and wants about 12 Million Euros in return. It will be interesting to see how it will be interesting o see how that one plays out, the court case surrounding volkswagen is not that well understood. It will be interesting to see how these test cases go. Vw is down. You can see that here on your bloomberg. But you also have daimler being hit this morning as well. Conti is down as well. s is down. Siemens is down. This may be a stretch. I wonder if there is a Wolfgang Schaeuble comment in here. The german carmakers would not be able to do business in the way they currently do if they did not have a cheap euro. The finance minister is coming out. Maybe there is a line between the two. Matt i will make it a shameless plug between Francine Lacqua and tom keene. There guest will their guest is someone that a lot of people listen to in the auto industry. That is a great point. He may be coming out and talking the euro up. It is definitely not what german exporters want to hear. He is joining the ranks of Donald Trumps currency team, and that cannot be good for german stocks. The u. S. Appeals court yes . Guy go ahead. Matt please, bring in davids take here. Guy you spoke about european industrials early on. Would you like german industrials if we had a 172 handle on the Deutsche Mark versus the dollar . Charlie what he guest what he has been talking about in terms of the euro being too weak for germany. Areauro is for the entire down at this it level. If you are going to be in a currency union, for some it will be too high, and for some it will be too low. I think this will benefit german manufacturers. This is not all down to the currency dropping. There was a time after the euro was created when we had wage growth that was almost flat or negative in germany. Guy you can go on your bloomberg. You can still find synthetic Deutsche Mark is still there and it is trading at 180. 184. Would be a reason to buy but after that, where would those industrials be . Guest if that was the case, the industrials would have a tough time with their exporting and they would be in a different place for credit. But i dont think that will happen in the near future. Matt sometimes, i hear redenomination risks as a euphemism for European Union problems. Do you think we will continue to see germany standing firmly behind the European Union . I almost feel like their verbal or against the there verbal war against the ecb is not good for unity. I believe the European Union is a political project and germany is one of the main architects of that project so i cannot see them stepping away. With they like the euro to be at a slightly different place . Publicly, they may say that they think that is too weak but there economy is benefiting. For all ofps policy europe. Germany is a large constituent of europe but they are not everything. You will perspective, see this back and forth. And it is probably not that productive. It will not change how the ecb reacts or how the currency does. You were mario draghi, you are going to get a question on this at some point. You say we set policy for the entire area and germany is important but we are going to ignore them. Guest i think you will say that if we look at overall growth in europe and overall inflation, we should be accommodative at the moment. There will be some discrepancy in that and germany is an outlier. If we want europe to rebalance, we want germany to have slightly flatter inflation and the rest of europe to rebalance. He is getting what he wants in the long run but he will have to take some political slack. Matt will we see any kind of taper before the end of the year . Anythingdont think will happen until after the german election. I think that would make it to political if you did it before the french or german election. That is one of the reasons we had qe pushed out to the end of the year so he does not have to deal with it until september or october. Runs a massive surplus. It has no reason to issue debt. How do you as an owner play that story Going Forward . Is there an expectation that pressure will mount on germany . You look further down the curve, what you see in terms of issuance . There is legislation saying they cannot have more deficit. I think the Political Landscape will change in september and you may have a broader coalition meaning there may be more scope to do more spending. And that may be where you see some change in that thought process. Guy if you are a bloomberg customer and you want to watch the show, you can do that on go as well as tv the video stream. You can follow our charts and functions. You can also go on to Bloomberg Radio at what as well. Obamacareoomberg in the air. What will this mean for insurance stocks . We discussed that next. This is bloomberg. We discuss that next. This is bloomberg. Starred in the uks this morning. A beautiful day. Let us talk about what is happening with the markets. The underperformance we are seeing this when he from the German Market is what i could be extrapolating. It does feel a little bit like these euro comments from Wolfgang Schauble which mirror the navarro comments may be gaining a little bit of traction. Just on the margin. But you can see the underperformance coming through. The industrial names are definitely down this morning. Let us get a bloomberg update. 97 companies have impact have filed an impassioned brief regarding the executive order on immigration. It emphasizes the importance of immigrants in the economy and society. Rose thectory orders most in 2. 5 years making a surge in investments. Gained 5. 2 for november suggesting the strong run of europes largest economy is set to continue. The far right candidate for the french presidency has promised a brexit style referendum on eu membership unless brussels offers to reform. Marine le pen says the european experiments have failed. Who could find satisfaction in inaction in the face of a chainsthat has us in and is ruining us because of its malfunction. That is why once elected, i will announce the organization of a referendum within the First Six Months of my mandate whether to stay or leave the eu. Global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. This is bloomberg. President donald trump has said the process for coming up with a replacement for the Affordable Care act, obamacare, could stretch into next year which is a stronger timeframe then he previously indicated. The comments came during an interview with fox news bill oreilly that aired yesterday during the super bowl pregame show. President obama President Trump we will be putting it in pretty soon. By the end of the year, at least the rudiments. Still with us is david, head of european fixed income at Franklin Templeton. You are focused on europe. I wonder if you see any signs coming across the atlantic that markets there are shakier or less confident in the stability of u. S. Policy. Guest i think we have seen a lot of policy statements come out at the beginning of trumps presidency and we need to look at the longerterm and what is going to happen with tax reform, and spending. Those are the things the market is more focused on. Guy how does it work in terms of treasuries, the relationship with european governments and that relationship into european credit . If you are a u. S. Investor, how are you seeing this fit together . Guest for u. S. Investors, they tend to look at the absolute yield and they look at germany and they say that is low yield compared to two treasuries so why should i bother to do that. I do think on a hedge raises it is becoming more interesting. You take out the currency risk. Some investors are starting to look at longer data bonds in europe. We have a slow growth economy and relatively low inflation and a and an accommodative centralbank where as in the u. S. We are heading the other way. Matt are there any benefits from trumps policies for european exporters. The Wolfgang Schauble conversation as side, do we european economies get new buyers here . Guest with the trump policies with how theys work out, it is difficult to say. We have to focus on europe and see how donald trump impacts that. Guy thank you for spending so much time with us. Up next, we will talk about the metals market. This is bloomberg. Guy welcome back. You are watching bloomberg markets. Fascinating monday morning. Let us talk about where we are with the markets. I want to show you what is happening here with this spread which has just gone back to 2014 highs. Less dramatictly from this point of view but this is a significant spread widening that we have going on here. Here. N see it we are not back to the highs we earlier. 12 and nevertheless, a significant spread widening. Let us talk about the equity markets. Us move on and show you this new function. What is moving. The industrials. Let us do this via the stoxx 600. Matt we are seeing there is a phenomena and you pointed out earlier. It is interesting. You can see it here on this green. A lot of the biggest movers are german. Conti, volkswagen. Adidas. The germans really dragging us down and that may have something to do with Wolfgang Schaubles comments over the weekend regarding the euro is too low although i would argue that a higher euro would be a problem for european exporters and not just the germans. You can see the biggest winners and losers. Hexagon in sweden putting out some numbers that did not please the market. Reallydgold resources has impressed at the markets. That is why you see big gains there. Place to look at Commodity Prices. A broad swath of them. Gold up again today. Guy let us we know a bit about gold markets but let us talk about to those that no more. Matt and i spoke to the randgold ceo, that bristow and he had to the and he had this to say about the production outlook. Last few yearshe have had Significant Growth although we are forecasting more growth next year. The most significant thing is the growth in cash and dividends without compromising our longterm ability to invest in our own future. All of the aspects of a successful strategy demonstrating that we are able to invest in what is always going to be a cyclical market. Market bristow joint mark bristow joined us there. 52 upside to the dividend. We expect to see pretty good results and strong cash flow from a number of minors. Minors reinstating or upping their dividends. Continue tould they do this unless they see increased output Going Forward and higher prices or is that the case . Minors arehink really starting to focus on profitability and cash flow. They got very scared. They had a better market in the last five years or so where they had spent too much money and focused too much on growth. Now, they have been cutting back and cutting costs and they want to demonstrate to shareholders that they can produce good cash flows. Guy all dogs can learn new tricks. George quite a lot of these ceos are new dogs. We have had a big changeover in management. Mark is one of those exceptions. A number of companies where the ceos have changed and the new ceos mandates are to cut costs and generate cash. Guy previously, the incentive was different. Are these guys incentivized to deliver upon this . One thing i have always been nervous about is volatility. If you can say he is is a bigzed, that ticket in the box for this sector. Guest at this point in the cycle, the ceos know what they have to do which is to generate cash and not spend it all on capex or m a. Where are we in the cycle as far as pricing is concerned . Gold price going back to the late 1990s. We almost got to 2000. E have come down to 1223 are you comfortable here . Are we underpriced or overpriced . This is a lot of money for an ounce of gold. George were pretty comfortable. Side trading on one we have janet yellen on one side looking to raise rates as the economy strengthens. On the other side, there is a lot of Political Uncertainty particularly in europe with statesns but also in the with President Trump and we are not sure what he will do next. New government, in policies, etc. And also we have inflation. Inflation is coming back as well. Where the real rates rise is the real question. Importantis the most number if you are an investor in the Mining Sector . The price of resources . What is happening with the dollar . What is the first thing you want to look at in the morning . George i am focusing on the companies. On their results and what cash they are generating. What we have seen and if you look at the lead indicators, germanif you look at factory orders this morning, we are seeing a lot of good growth around the world. Pmis are showing Industrial Production should start accelerating globally this year which is important for mine rs. Matt what about global of people. Labor problems. Cutgold had labor problems in production last year a little bit as far as the strike is concerned. Have laboru negotiations going on with type with copper miners. Issues thatlot of go beyond the currency and come down to the nittygritty of the company it self. Are those widespread problems . George we have seen quite a number of labor problems. Kind of ongoing in this global industry. They are becoming more focused because the supply side is tightening. As we start to see a lot of these metals copper, with the labor disruptions. As that moves into disruptions deficits, moves into it will cause disruptions causing prices to rise. Guy where is the sweet spot in the Mining Sector . Itrge i think we still see in the base metal producers. Price levels have recovered from they ares lows but not excessively overboard. In the mediumterm which is what we look at, further progression in prices Going Forward. The supply side is still relatively tight and demand is accelerating. On the bulk side, it is a good prices havee where already moved and it is difficult to see the prices moving up further from here. Cash flow should continue to improve. An interesting space for an income investor. Thank you. Is 137 words long but subject to amendments, theresa mays bill. This is bloomberg. Matt welcome back to the European Market open. Lookt to show you a gloomy rre. He brandenberger to we have not seen the sunshine here in weeks. The dax is also looking gloomy , youvolkswagen, lufthansa name it, there are only three gainers on the dax. Is one. Ank it could be because of comments out over the weekend from Wolfgang Schauble. Your think there is an alternative theory because we did get factory orders out that they were better than expected. Guy it is a weird one. A volatile theory. But it tends to move inversely to what happens with the ip data. But i think it is the euro stuff. If you go back to the Deutsche Mark. A difficult number to digest for the germans. Matt absolutely. Wolfgang schauble coming out over the weekend saying the euro is too low almost joining ranks with Peter Navarro from the trump camp on currency issues. Let us get a Bloomberg Business flash. For that, we bring in sebastian. Toyota motor has raised its proper forecast. The carmaker says operating profit will probably be 16. 4 billion. Even with a weaker yen boosting repatriated profit. 97 companies have filed an impassioned legal brief condemning President Trumps immigration executive order on immigration. They emphasize the importance of immigrants to the economy and the culture. Posing is posting a drop in thirdquarter earnings. 100 2s were expected at Million Euros. That is your Bloomberg Business flash. Matt u. K. Lawmakers will begin a line by line debate today over legislation that would allow the Prime Minister to formally start brexit negotiations. The Committee Stage of the bill allows members of parliament to make changes and Opposition Mps have proposed more than 250 amendments. Guy it will be a big story. 58 of top u. K. Business leaders are already feeling the effects of the vote to leave the eu on their businesses. The report says a hard brexit could hit supply chains. Hitting manufacturers why is much as 30 . Joining us now is michael. Very nice to see you. Is supply chain story interesting. It is a long story that you need to think about if you are managing a company. Six months time, will that supplier work for me . Is my supply chain going to be fully functioning. Are we starting to get the affects of the brexit vote into that supply chain . Although a large number of uncertainties remain. For the last 40 years, executives in the u. K. , european and Global Companies have designed their supply chains. What they are acquiring versus what they are producing, who from and where they start a set of rules that have been relatively clear that now they are up in the air. Whatever the ultimate form of the u. K. Brexit is, is going to have a Significant Impact on the supply chain decisions of not just u. K. Companies but european and Global Companies as well. Guy this 30 percent number is the worstcase scenario, right . If we moved to a hard brexit, additional analysis suggests without fundamental changing to pricing, the impact on net profits across five major sectors which are automotive, food, aerospace and other industrial goods could be up to 30 impact on net profit. Proactivelyll move or reactively i get that. The uncertainty is that we are not going to be clarified we are not going to be able to clarify those uncertainties. Still going to be defensive on european continental dishes decisionmakers. The companies have to plan for that uncertainty. Is really finding understanding what the key you spoke earlier today. Exchange rates. Terrorists tariffs. Immigration laws. And very specific issues in terms of customs. Being able to move product, intermediate and finished across borders. Ist theresa mays proposal only 134 words but there are 250 amendments or post by the opposition. Willuch in that minutia help you better forecast u. K. Manufacturers Going Forward . It is not as much u. K. Manufacturers. Over three quarters of the u. K. Economy is affected. It is the impact of immigration and other elements on that that will impact on the services side. The current bill and how that plays out will be one signpost among many but it is not going to resolve the fundamental uncertainties. As a result, it will be critical that Companies Look into understanding what is the impact on their business of these four are five factors. It looked like stone got a special deal. Expect the car industry to get a better deal so their supply chain will be less affected . In terms of what is going on behind the scenes, there is no visibility. How hard is it to make predictions at this stage on what could be a broader deal. Sector by sector. Especially when you put your when you put yourself in the executive position. Take the automotive industry. It is worth about 60 billion pounds, 4 of the u. K. Economy. Automobiles produced in the u. K. Highlighting that it is not just finished products that intermediate projects. Products. If we think about engines, ignition systems, those are all part of an integrated supply chain. Communication costs, transportation costs have gone down. In the last 40 years, companies have built an integrated system. There is a european automobile industry. If we take just a simple item there areve chain forged parts, ball bearings from spain, germany and china. When they come across the channel, they come across tariff free. And when they go back across, they go back across tariff free. Frictionless. When something leaves the port, it is checkfree and you can drop ship something in the u. K. And it arrives in france without customs. Matt it is easy to understand the problems when you talk about Automotive Manufacturing companies. But what about Services Companies . We are ready talk about passporting with financial services. What about the other industries . The data is north of 75 of is in services. In the great and the Greater London area, 90 of our economy is service driven and that and the key to that is individuals whether it be architecture, engineering, accounting. Or businesses like ourselves, business consulting. Very dependent on individuals and immigration laws. Michael, come back and see as again. You sound like a man that has much of the detail. Much. You very up next, as a u. S. Iranian tensions increase, what are the key issues to watch . We will get an inside look at that one. This is bloomberg. Guy welcome back. The immigration been, missile launches. Weak relations with iran has become increasingly strange. Strained. This is an interesting situation for the iranians to figure out because the politics are moving incredibly quickly. They probably did not expect this to happen. What is your read on what to run is seeing . Seeing . N is officials arenk throwing back the same kind of hardline rhetoric donald trump has been throwing at irans economy, there is a huge amount of uncertainty regarding precisely what it is donald trump wants to do practically speaking with the iran deal. We have been reading the tweets. In the past, he said he would like to rip it up but paul ryan said last week that it is here tuesday. The easing of sanctions last year is likely to be irreversible. But there is a big question mark over exactly what he wants to do with the accord. Now, then that, for iranians to an extent are slightly biding their time. They even said we will not allow this inexperienced politician in their eyes to decide strategically what he wants to do. Matt we will guy we will leave it there. Come back and talk to us. To bect the iranian story a big one for quite a while. Bloomberg surveillance is coming up. Francine lacqua is up first for the furl first hour. Matt miller and i will be progressing to the radio room joining you for the next hour live on Bloomberg Radio. We have plenty more to discuss particularly what is happening in the German Market which is happening which is having an effect on the euro. That is coming up next. This is bloomberg. Francine after a weekend of clashes with the courts, the president warns socalled sanctuary cities that defunding them is a weapon he could use. Pen declares her candidacy with a promise to hold a referendum on the you membership. We have the latest from paris. And as theresa may brexit plan faces another hurdle in the commons, a new survey suggests more than half of u. K. Businesses expect to list their prices this year. This is bloomberg surveillance. We have a
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