Transcripts For BLOOMBERG Bloomberg Markets European Open 20170313

Hsbc names mark tucker as the new chairman. The shares jumped the most since december. And the fingers on the trigger. British Prime Minister theresa may is poised to invoke article 50 and start the Brexit Process as early as tomorrow. But is sterling oversold ahead of brexit . Matt guy, we are less than half an hour away from the european cash open. Lets take a look at where the futures are trading right now, pointing to very slight gains, very slight. Is the cac, gain but otherwise the dax is slipping. Im taking a look also at german yields. Let me zoom in on what we are seeing here at the open for looks like climbing just a little bit investors are selling off german debt, maybe the 10 year isnt what we should be focused in on. The short end of the curve looks extreme, very negative as far as the shorter end of the german debt curve. Guy was interesting as well is the relationship to switzerland we will bring you that chart later on. Lets go to the gmm function. I want to deal first of all with whats happening with the bonds with whats happening with currencies and the equity market. Equity market is always a story on friday. Look what happened with the oil story into the norwegian market, which was quite interesting. Lets move on and talk about whats happening in the equity markets. Withritish pound is solid, this article 50 story. The dollar is generally one pricing we saw on friday surrounding the single current the, remember that draghi speaks later on. Will he confirm what is going on inside the ecb, this idea of the sequencing of rates and qe . We have started to see it priced in is that too early . We will hear from him later on. Lets get the first word news update with juliette saly. Juliette guy, thank you. The dutch election has been upended by a diplomatic standoff with turkey. The president spoke out in rotterdam on saturday night after the Turkish Affairs minister was denied entry into her consulate and escorted to the border of germany. Now a spiral of increasingly hostile rhetoric between the countries threatens to overshadow the final stretch of campaigning and influence voting 48 hours before the first of europes big elections this year. Republican and democratic lawmakers in the u. S. Say they still havent seen evidence to support Donald Trumps unverified claim his predecessor tapped his phone. Senator john mccain called on the president to provide proof of his allegations about barack obama or admit he was wrong. Meanwhile, representative alan shift says he didnt see any evidence, and suggested that none existed. Andas stock futures currency forwards jumped after Prime Minister Narendra Modi is bigger than expected win expected continuations for his reform agenda. He won 312 seats in the assembly, up from 47 and 2012. The results of the race in indias largest state were seen as an indicator of modis popularity. The market comes back on tomorrow after a public holiday. The south korean president has remained defiant after being removed from office by the countrys highest court. She returned to her private home yesterday after leaving the president ial palace, to be greeted by hundreds of supporters. In her first Public Statement since the ruling, she said she was confident the truth would come out. Park is facing criminal charges for abusing president ial powers for personal gain. Iceland is back eight years after its banking crash. In a hastily called News Conference yesterday, the government announced that as of tuesday it will list almost all of its remaining capital controls. The move will allow citizens, corporations, and Pension Funds to regain full access to the Global Capital market. The countrys 2008 financial crisis triggered its worth crash. Global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. This is bloomberg. Guy thank you. The euro swissie just called a solid bid. Huge week, huge week for financial markets. The said on wednesday is the dominant factor. Traders have already priced that in, turning to the tightening path. Areurope, dutch elections going to be a big feature, playing into the french president ial campaign, ongoing. Today we have other rate decisions japan, the u. K. , switzerland, turkey, plenty to think about. Macrobring in our strategist from singapore. Fed, but in the some ways the fed is a nonevent the market will probably receive what he wants what else should we be watching . The fed is dominant and we do still care about how hawkish it is, where the dot plot is, and whether the fed is hinting at a possibility of going beyond three hikes. Only a few weeks ago we were wondering whether it was really possible from the fed and now it seems like its a minimum. Offense still has meeting even if it doesnt really matter about this exact hike. That there is a lot of event risk this week and there will be a real traitors market with a lot of volatility. Metco levy ask you about living i saw the bloomberg story overnight, they have historically spurned outperformance and this is what they are saying it would push yields down from here, even though we are at pretty high levels right now why is that end where do you see this going . It depends on the perspective of whether this type is whether they need to catch up at hike rates because the economy is booming or whether they think the economies could correct the inflation that is not running away. We could see it as a flattening of the curve, because they fear the running of one or two hikes wont have sustained higher rates. The fact that the curve has been flattening in the last couple months since the start of the year is a slightly negative sign for the u. S. Economy. They arent quite as bullish as they were before. Guy mark, lets talk about european politics. Marine le pen saying the frank would drop against the euro, a falling currency would help more than hurt. It doesnt seem that the french population is completely on board with that idea. Lets talk about what else is happening at the border in the netherlands. How does what has gone on in terms of the politics and the disagreements with turkey over the weekend play not only into the netherlands vote, handed to the french vote, and into the markets . Price this for me, if you will. Well, it is hard for me to say, because i am clearly getting it wrong. I saw the weekend news and thought it was bad for europe, that for the election, because it should give a boost to the vote. I think the Freedom Party should theell, but this morning euro is resilient and people are still trading with a perceived hawkish statement from the ecb, dominating european Political Risk. I think that Political Risk will come back in the next way for hours, but overall, europe should move beyond this. Again, i think we will probably survive that, but we will have another scale. I want to point out the dutch curve guy and i were talking about this earlier, the dutch are seen as a safe bet. Over thed going back year between dutch debt and bunds, we never get higher than 0. 35 . Miniscule spread here. Does this get blown out in the event of a bad election result, or in the event of worsening relationships with turkey . I dont think a worsening relationship with turkey matters much, however a really bad election result it depends on what your term of bad is. But if the Freedom Party got a majority which is unlikely or if they even managed to form a coalition, that would be quite bad. We have a bit more risk premium in the next 24, 48 hours, but i think ultimately we will move the aunt this week. Guy great stuff as ever. Start as we work our way through the session. Over the last few minutes, the euro has called it did against the swissie, on offer versus the british pound. Reenergized, we will talk about that as one of the big stories of the morning. Remember, there is a headtohead tonight. We will talk about that as well. Plus, thinking outside the bank. Hsbc brings in fresh blood to oversee its overhaul. More info on the incoming chairman, mark tucker. And the bitcoin bounce. The sec dashes hopes. Where do we go from here . That is all coming up. The open, 19 minutes away. Guy welcome back. You are watching the open. Lets talk about what Corporate News looks like a number of m a stories to focus on. Would group agreeing to buy amex foster. Let me see if i can get you some numbers on what this deal is worth. I havent seen a final price but i will come back to that. Juliette saly has the business flash as i figure out the math. Juliette thank you. Hsbc has named his insurance executive mark tucker to succeed Douglas Flint as chairman. The ceo of aia and former head a pretty to will take the head of prudential will take the post in october. He will be looking for a replacement for the ceo. Vodafone says it will add more than 2000 jobs in the u. K. The company says the positions will be filled over the next two years across the midlands and north of england, as well as scotland and wales. The minimum expected to support 2 billion pounds of investment in britain. A trader at Brandon Howard Asset Management left after three years at the hedge fund firm, according to a person with knowledge of the matter. He was a partner in the new york office, focused on fixed income trading within a global macro strategy. Brevan howard plunged at the end of last year from its peak of 40 billion. A spokesman declined to comment, and attempts to reach the trader were not successful. Thats your Bloomberg Business flash. Matt thanks. The netherlands has blocked entry to the Turkish Foreign minister after attempts to hold rallies in support of turkish president in eu countries. With todays until the dutch one hastial election, claimed the incident is a victory for the Freedom Party. I am happy that all this pressure [indiscernible] matt our government editor has details. Andrew, lets clear this up for people who arent aware of why the turkish would even want to hold rallies in other countries. Its because so many dual citizen turks are living in the netherlands, in germany, throughout europe. They go back and vote is that the case . They go back and vote in turkey, and that is why they want to hold rallies in holland . So under a Guest Program from the 1960s and 1970s, we had hundreds of thousands of turks who made their way to europe, and many of them stayed there. What we saw in the last general election, there were about 3 verseas,voters o most of them in germany alone. Only about half of them voted. Turkey has a referendum in april. Powers. Wants more so these votes are very important for him. He wants to go there and appeal to these voters, but at the same time he is playing the nationalist card. Even if they dont let him in, it is a win. It allows him to look strong, to wave the flag, to energize his base. That is the background to where we are seeing turkey try to push into france, the netherlands, and in germany. Guy it all started germany. Ood morning, andrew it they are going headtohead tonight how do they play it . We have seen a major shift right, and its tilting. The Prime Minister has been very forceful, a snap poll shows it is working. He is not leaving votes. But it is also a win for wielder, who has been banging on this drop some the beginning. That they says they will get off the couch, and tonight will be interesting to see them go headtohead. I think overall what we are seeing in the last hour is this tactical shift, this move to the right, which means they will end finish. A onetwo is just unclear who will finish on top. Matt even if he does finish on top, it is unlikely he forms a government in the netherlands, right . Could this hollandturkey spat continue, become more important than the elections . Well, i heard your previous guest, who was pretty relaxed about it. Even if he does finish on top, you are right, he may not be part of a coalition. But he could still have an impact. You can almost drive the agenda more if you are not in government, sniping from the side and moving people to the right. I think the margin with which he wins, the margin with which he places, will be key. It is awkward to have somebody win an the election and then not let them come into a coalition. It will drive his race to the other question. This may not have an effect on big, bonds, but there is a big trade relationship between the netherlands and turkey. Dutch companies have been among the biggest investors in turkey over the past decade, and we will have to see how that plays out. My suspicion is once the votes are done, they will be walked back. But there is a lot at stake for sure. Guy final question tactically, how does le pen do this . Seen i think we have in whatever country you are, this is an opportunity to score some easy points, especially for someone like le pen, who has been going on about this for months now and who had here is concerns about turkey. This is a nobrainer for them to come out, score a couple wins. And even people who arent defined as someone from the right are making that shift. If you have a nationalist card to play, you will be pulling it out. Guy great coverage. Thank you. Andrew barden on the netherlands. We are minutes away from the cash open, next. We will take a look at some of the movers in todays trading. This is one. Watch woodbury, amex, hsbc. All of those stocks are on the move. The open, nine minutes away. This is bloomberg. Matt we are minutes away from the open. Lets get to your stocks to watch. I in taking a look at hsbc this morning. The bank has hired mark tucker to succeed Douglas Flint as chairman, and possibly to put in a replacement or Stuart Gulliver. That will be the major task, and investors are looking to him to do it, but there is a lot more to do at hsbc. Those shares havent really moved in the past six years, so he is going to have to focus the business more on asia. The question is guy, given an interesting that this Hong Kong Shanghai Bank Operation still has headquarters in london, even though it is asia focused . Guy youve got to remember, the regular tree umbrella on which it operates is something that it pays a great deal of attention to as well. Its not just where the customs ers are, its where the regulations are. Lets talk about would group. It has a confirmed deal with and next boston that it is putting through. We are just slightly north of 2 billion. Is how the mathworks. The math works. Bovis this morning is now in table. An offers on the it looks like they are firmly in place, the stock could pop north of 10 on the back of this. We still dont know exactly how to set up is going to work, but redrow is confirmed it has made a proposal. The u. K. Housing market is something to Pay Attention to, a lot going on surrounding it in terms of government. Yeah, its scale thats going to be important. Matt and an Energy Company based out of essen, watch that. They forecast 2017 net income more than 1. 2 billion. They are already looking for 1. 28 billion, in line with the forecast. They didnt come out with 2016 adjusted 1. 12, and they are going to propose a share dividend. All of those things could affect the share prices that start trading this morning. Coming up, the market open. Futures unchanged right now. Five minutes away from tax trading. This is bloomberg. Guy one minute to the cash open. Lets talk about where the fair value of the European Markets are. They are pointing to a gain on the ftse. Cac 40 called up about 1. 6. The euro stoxx in average of around 1. 1 , 1. 2 . That is where we are in terms of cash. Lets talk a little bit about what is going on. Matt im looking at a chart volatility 90day compared to s p volatility. Oil is now four times, 4. 2 times more volatile than stocks right now. You can definitely expect to see some of the commodity movers shift the index a little bit this morning. Weve had big price moves in metals. Weve had big price moves in oil as well. Keep your eye on those commodity companies. They are heavy traders. Guy lets talk about this open. Lets find out what this monday morning is going to look like. This is the picture. The Market Makers are not going to take this too far. Theres too much action further down the road. Weve got draghi later on today. Ftse 100 opening up 0. 2 . Cac around the same sort of levels. We are expecting the dax to underperform a little. Not by much, just on the margin. The cac 40 opening up 1. 1 . We continue to float around that 5000 level. What is moving the markets . Lets find out. Manus good morning to you. These markets are going to be a little touchy. You have the federal reserve, the swiss bank, the bank of japan, and the u. K. All in play. Extent will they shift the markets . Buy frenchng saying banks and institutions. Out he did point expected the s p 500 to draw down before the end of the here. These valuations are too high. French banks are something that interest him. It is getting off the election sweeps in the netherlands. These are the latest polls over the weekend. This war of words between the dutch and the turks in terms of allowing turkish ministers into the netherlands to campaign, will it lend to the right . Will there be a flight to the right . Polls,ilders, the latest he was up over in the mid30s, so that has dissipated. Will this recent hubris between turkey and the netherlands and to his story, or as mark ruta expected some strong rhetoric . Lets have a look at sterling. Article 50 could be triggered as early as tomorrow. That is if the house of commons goes with the simple bill for theresa may. This is starving down for the longest losing streak since the middle of the summer last year. Negativityent is the priced into starving . A lot would say that cable still has the propensity to break 1. 20. This is eurosterling. Were just breaking a little bit out of that current trend. The fx keep an eye on markets. Im off to digital radio. Im going to be in the netherlands throughout the week. Matt have a great trip, manus cranny. Heading to the netherlands where all the action is politically. Theyve got their elections coming up on wednesday. Lets take a look at the stoxx 600 in terms of which stocks are moving the most. It is indeed the minors, the metals, the oils, all moving to the plus side this morning. , rio, glencore, arcelormittal, bhp billiton, almost all of the percentage are the minors and the commodities companies. Ill move it down to index points to see who is moving the next the most. Hsbc right here at the top. As far as losers, youve got these oil producers. Bp, total as well. B. N. P. Paribas, banco santander, ubs, and many more. Guy we will come back and talk about some of the other stocks that could the on the move as well. I want to show you this chart. This is threemonth risk reversals on eurodollar versus where spot is. It gives you an idea what is going on and the repricing we are beginning to see into the euro both in terms of the risk reversals, which is Something Interesting given where we are politically, and also spot, given what is happening from a monetary point of view. Bilal hafeez joins us now. There seems to be a repricing friday on the back of some comments that seem to be coming out from within the ecb that maybe they were rethinking the sequencing surrounding tapering, how they would work it with the qe program. Is the market starting to price in ab exit from the ecb . Bilal i think we have seen an improvement in euro area data. Euro area growth is similar to u. S. Growth. Inflation is picking up. From the ecb perspective, the risk of deflation is much lower. According to draghi. That means the main issue at the moment are the french elections. They signaled essentially that they are fairly happy with the macro picture. There are some risks and this year will be a question of moving the markets toward unwinding their qe program. Matt unwinding the qe program is going to be interesting. Then winding down the Balance Sheet will be something to do over the long slog. If they follow in the feds footsteps, i guess, but will they raise rates first . Bilal that is an interesting question. So far, listening to ecb speakers over the last three or four months, theyve indicated they will do tapering first, then raise rates. From the perspective of what theyve been saying, it seems like they follow the fed playbook. However there could be a case to raise rates as far as we have seen in the euro area, Financial Institutions have been hit by negative rates. There could be a case on that front. Our base case is they will taper first, then raise rates. Guy interesting how the policy versus politics story is breaking out. Nicola sturgeon is going to make an important speech come a we understand, ahead of article 50 being triggered. We will bring you that as the news breaks throughout the morning. To return to this kind of story of politics and policy, which is the most important . Weve got the dutch election coming up, the fed, that could lead through into the french election, then weve got the ecb and draghi. Balance those things out for me. Perspective,he fx what weve learned from last year onwards is that policy is becoming as important as macro. From our perspective, we prefer to focus on macro. We cant really ignore the politics. E were to get Geert Wilders a larger share, that would dominate. Matt so where does the year ago . Hand, youve got the ecb getting more hawkish, may thinking about raising rates. On the other hand, youve got the political turmoil, the uncertainty, brexit, etc. Where do you see the euro trading . Bilal we are very bullish on the euro. We are expecting eurodollar to head toward 1. 15 or 1. 20. Heart of that is a euro story. We have a fairly benign view on european politics. After last years experience, we are also very bearish on the dollar as well. We think that would help the euro go higher. Guy lets talk about the safe haven of europe, the swissie. This chart really sums it up. This is the german twoyear. This is the swiss twoyear. That was the big reprice that we saw january a couple years ago. What is interesting now is the swiss twoyear is trading in yield terms north of the german twoyear. Is this a slightly odd scenario . What is going on in your mind . Fact that the swiss twoyears trading north makee durban the german it more of an opportunity to buy the swiss . Bilal part of that is safe haven demand. S p themselves have been intervening so much over the last year. The scale of intervention has been larger. Paradoxically, they are making the situation worse for them. Importantly for the swiss franc, not only do we have the rate support, if you look at switzerlands current account, if you look at the trading goods and services, it is improving despite strengthen the swiss franc, which tells us that from a policy perspective, they dont need to be fearful of swiss franc. Matt all right i just want to point out that chart one more time. It is a fantastic chart. That mayantastic story get lost a little bit today in the concerns about the netherlands and turkey. Intervening, then adding to their own problems because people go and buy the swiss franc. Stay with us. Bilal hafeez there. And a fixed Income Research at nomura. The search for a successor. My finding a replacement for ceo Stuart Gulliver will be at the top of the agenda for mark tucker. Plus the u. K. Parliament votes on whether to allow theresa may to trigger article 50, but what would that mean for markets . And turning to china, why bitcoin traders are looking east after hopes of an etf were dashed in the u. S. This is bloomberg. Matt welcome back to the European Market open. Im matt miller in berlin. Guy johnson alongside me in london. In london is where we see a lot of big stocks moving. A lot of those big miners are the big gainers and losers. Guy they are adding weight to the market. We will see what happens with the pound. Weve also got some m a. Will be talking about one of those stories. Amex foster is being bid. What is interesting is the wood group is also bid as well on the back of this. This deal. Likes heres all the Resource Companies and what they are doing in percentage terms and index points terms, adding weight to the market. Lets get some of the other deal news and what is moving. Nejra. Nejra you want to look at those homebuilders. Ive highlighted bovis. This is after it rejected a takeover bid from its competitor. This is after dismissing an earlier offer from redrow. Bovis said its new ceo search is progressing well. Seeing that stock moved significantly today. Yztare also seeing ar move. Weve heard today that the ceo is going to leave the company four months earlier than planned. This is a company that makes baked goods. Ta also named an interim cfo. That stock down 8. 65 . The Swiss Insurance company dropping the most since june 2016, down 3. 7 now. We got some fullyear 2016 numbers. Total business volume beat. The combined ratio missed. It raised the dividend. Some analysts are calling the stock higher but it is down at the open. Matt thanks very much. Hsbcs london shares are trading higher this morning. Actually the leaders as far as index points. That is after europes biggest bank named mark tucker to succeed Douglas Flint as chairman. The major task is to find a successor to ceo Stuart Gulliver, who has led the bank for more than six years. Lets get more with bloomberg gadfly columnist misha. First off, let me ask you what tucker brings to hsbc. Hes had experience at a couple insurers before this. Hes got a very strong asian focus. I think that is going to help hsbc. Despite the fact that it makes around three quarters of its earnings from asia, hsbc still thinks like a london bank. This is the kind of focus that will do well, the kind of focus that will do well for hsbc. Guy he used to play professional football. Lets talk about substitutions. How big a job is replacing mr. Gulliver . I think it will be less it will be a huge job. Gulliver has been with the bank for years. Hes also an insider. Coming in will be really difficult. He comes from an insurance background. Hes had experience with banking. But hes definitely an insurer. Hsbc is an institution. Coming in will be hard for him. Guy yeah. Its going to be an interesting job to pursue and certainly one were going to be paying attention to. Up next, a big week for brexit. Will mps sign off on allowing theresa may to trigger article 50 . Were going to discuss that next. This is bloomberg. Matt welcome back to the European Market open. Im matt miller in berlin. Guy johnson in london. Right now we want to get to the bloomberg is net . For that we go to sebastian salek. Sebastian thanks. Values it at deal 2. 3 billion pounds. Shareholders receive three quarters of new wood group shares. Tucker toamed mark succeed Douglas Flint as chairman. Tucker, the ceo of aia, will take the post in october. His first major task will be to find a ceo. Vodafone says it will add more than 2000 new jobs in the u. K. The company says the positions will be filled over the next two years. The move is expected to support 2 billion pounds of investment in britain. That is your Bloomberg Business flash. Guy thanks very much indeed. I want to find what is happening with eurodollar at the moment. We were wondering whether or not we would get some sort of action surrounding the euro as a result of what was happening in the dutch election. This isnt the chart im looking for. What were seeing at the moment, is that the euro is beginning to fade. It was above 1. 07 later. It is backing off that fairly sharply. Pay attention to that move. Weve basically been pricing the taper friday into monday. You saw that through the asian session. Now you are getting london liquidity kicking in. Looks like london liquidity is causing the euro to sink a little bit. U. K. Lawmakers also front and center today. They are going to vote on whether to accept amendments to the draft law granting Prime Minister theresa may authority to withdraw from the european union. If the law is back, one option is for theresa may to signal this week, possibly as early as tomorrow, that she is going to trigger article 50. The timing is interesting. Two people saying they could wait. A number of people saying they could go. A statement shes due to deliver to Parliament Tomorrow would provide an opportunity to deal with it. Still with us, bilal hafeez. One to come back to the euro in a moment. Lets talk a little bit about what is happening surrounding the pound right now. Is the pound has the pound factored in as much bad news as is required at this stage . If so, once the article is triggered, is it better to travel than arrive if you are short sterling . Bilal my sense is that a lot of bad news has been priced by the pound. Mostnse also is that people are expecting article 50 to be invoked sometime this month. I think a lot of bad news has been priced. For me, the bigger issue is data. The data is weakening. Itself, thebrexit longerterm question is whether we have this cliff edge problem. Do we fall into wto rules are not . In order to understand that, we have to wait for the french and german elections to pass and try to understand that position in relation to the u. K. What do you expect from the bank of england . Theres a meeting on thursday, i believe. Are they going to have any response, if we see article 50 triggered before that . Think thisense is i weeks meeting they wont really say anything. This meeting, they arent going to provide any updates to the Inflation Numbers and all those sorts of things. It is not really a meeting that is very conducive for them to come up with a big statement. I think they wont really comment on that. This is in line with what most people are expecting. There is a bigger issue around the fact that inflation has picked up in the u. K. At some point they have to talk about whether they think there is a transitory effect. Guy they could end up with a stronger inflation number that theyve got to reference. At the same time, the data are clearly rolling over at the moment. It has started to turn quite south. How do you deal with that conundrum . Are the rates appropriate now . Bilal this is a big question for them to answer. In hindsight, it looks as though the massive easing was a bit too much given what we saw since then. But listening to what carney has said, it does seem like they will view this as a transitory effect. They will be willing to accept higher inflation. Guy real rates in the u. K. Are incredibly negative. Is the gilt market expensive because of that or is the gilt market about right given what the data are telling us . Bilal at this stage, rather data is, i think it is fairly priced. I think as the year goes on, it will look as though the gilt markets are overpriced. Inflation risks are high. Theres all sorts of prospects of foreigners selling gilts as well. Theres been allocation since 2012. With the prospects of brexit and the cliff edge coming forward, that would lead to a selloff in gilts. Matt what is your forecast for the pound . Bilal by the end of this year, we expect moderate strength in the pound. 1. 25,ect to move towards maybe 1. 30. Much of that is really a dollar story. When the dollar weakens, all boats rise. We have a fairly bearish view on the dollar. Guy very quickly, were starting to see the euro rolling over. Youve got the big move friday, the european Political Risks, london liquidity. When you have expected this kind of move . Bilal i think the market has swung from one extreme to another. The market was expecting a terrible outcome in terms of European Election results. We have dutch elections coming up. In that sense it does make sense. Guy stay with us. Plenty more still to come. , hes going to stay with us. Up next, what could be the implications of a Geert Wilders win. Were going to discuss that. The dutch elections feet through into the rest of Political Risk. The euro turning on offer now. This is bloomberg. Spat turkeys diplomatic with the netherlands intensifies as riots break out in rotterdam. With 48 hours until the dutch election, will the euro react when liquidity comes on stream . Thinking outside the bank, hsp c names mark tucker as chairman. What will be the new mans biggest challenge . And, finger on the trigger, british Prime Minister theresa may is poised to invoke article 50 and start the Brexit Process as tomorrow. Is sterling oversold ahead of brexit becoming a reality . Good morning. Im matt miller in berlin. Guy johnson at bloombergs European Headquarters in london. Guy where 30 minutes into the equity session. See how that trade is shaping up. You want to talk about the commodities in just a moment. Commodities are a big part of what is going on in the european space. Weve got European Markets generally bid not by much. Act sliding a little bit. Php, angloamerican, all adding to the upside when it comes to the ftse 100. Hsbc the biggest index point gainer. Rio, glencore, bhp, anglo, all part of that story. Bovis also part of that mix as well. As i say, you look at where the oneht is, bp is probably story we should exclude from this. We are seeing the commodities playing a big part in this. Matt absolutely. Im looking at the glc of screen on my bloomberg. York,wn at 38. 49 in new 51. 35 the global benchmark, brent crude. You can see the oil weakness persists. Were still hovering below 50. Metals are rising a little bit. Platinum, all the Precious Metals gaining. That is why you see the metals, the miners rising today for the most part. Oil falling. Guy lets talk about what weve got in terms of the other factor in all this, the dollar. That is a story surrounding the commodities. Big day wednesday. Not just the fed, weve also got the dutch elections coming through as well. We will see how that result comes through and what is happening with the turkey politics. But the fed is important. The fed is front and center in all this. Lets get back to bilal hafeez, head of fixedIncome Research at nomura. Let me show you this chart. The german curve is steeper than the u. S. Curve. Theres something wrong here, isnt there . Bilal i think there is. I think part of it is the fact that weve had this huge move in the front end of the german curve. We are in an environment now where if we are likely to see tightening by central banks, then the curve has to flatten. It is an anomaly. It cant last as long. What we need to see is more hawkish talk by the ecb. Guy lets talk about the fed in detail. The wirp function on my bloomberg tells us that 100 is now priced in for the meeting this week. What comes after that . Withnet yellen continues the tone shes delivering at the moment, the market is likely to get a little more sequential in terms of how it prices in the rate hikes. At the same time you could argue the data is not does not 100 support that move. I agree. Bilal what she was at pains to say is that we are in a different regime. Was one year. Now she is saying we are past the worst. Deflation risk is much lower. Weve had lots of issues around the world. So we want to move to a sequential tightening environment. The problem for the market is to think whether it should price through the dots or not. What she has kind of implied is that you should. And that means that the market is underpricing the fed in that regard. Eternalarket is pricing rates of around 2 , which you can see on the chart there. Top , great function. The feds terminal rate is around 3 or so. Whetherhe question is she will be even more hawkish and say, the market has to price to the dots or not. Strategy much has your investing in fixed income changed over the last month or so . How much do you think mario draghi and mark carney are going to have to react to the sort of new fed landscape here . Bilal good point. Weve been surprised by the timing of this fed shift. We also were surprised by how consistent the message was from all the fed speakers. This sort of signaled some kind of changing Communications Behavior by the fed, that they will be more consistent going forward. But essentially to us it suggests that we are much more likely to see a sharper move higher in yields than we were anticipating. Part of that i think is to do with the fact that the stock markets are stronger. In relation to other central banks, to the extent that the fed is going to allow higher yields than before, it makes it easier for those countries also to move rates higher as well. The u. S. Tends to lead the way. If the u. S. Has higher yields, other countries can have higher yields as well. Matt let me ask you a quick question. On thel bloomberg. You can plug in the different variables. Where do you have the neutral real rate . Bilal in my view, i think the neutral real rate the fed says the rate should the around 1 . Our view is it should be closer to between zero and 0. 5 . In our view, there are structural issues that the u. S. Faces, whether that is democratic demographic issues, the aging population, still a big question mark about productivity as well. Than are more cautious even the fed is on that. We go for Something Like 25 basis points. Guy ok. We will talk more about this. Bilal hafeez, head of fixedIncome Research at numeral. Hes going to stay with us. If you are a bloomberg customer, you can watch this show on tv. The terminal offers you a bunch of factors you can plugin. Weve also got the upcoming events. You can dig into the charts. Coolu want to send us charts, we will gladly use them as well. The team and get your voice heard on the program as well. We are always interested in your feedback and questions as well. Matt we are absolutely interested, especially in charts. Speaking of charts, bitcoin has bounced back. That is an amazing chart. Bitcoin, sec rejected first it plunged. Why the recovery . We will talk about it next. This is bloomberg. Guy 8 40 in london. Lets figure out which stocks are on the move. Lets go to nejra cehic. Nejra a lot of moving on m a news. Amec Foster Wheeler here, shares up the most since 1995. John would group agreed to acquire this company in a 2. 2 billion pound deal. Amec shareholders will own about 44 of the combined group. The share price where it is now, that is actually higher than the bid price of about 564. Does that mean the market expects a higher offer . Then angloamerican. Commodity producers are the best performers as an Industry Group on the stoxx 600. Were seeing a lot of the metals move higher. Goldman sachs says be patient. The bank is sticking to its field that tightening supply will lead to higher prices. Says the come or go or stay long rather on copper or deputy i. Hsbc up 0. 9 in london. The bank named mark tucker to succeed Douglas Flint as chairman. He will lead the search for a replacement for Stuart Gulliver, an outsider overseeing europes biggest bank. Mostw shares the rise the in hong kong. Still up 0. 9 . Now lets get the bloomberg first word news with sebastian salek. Sebastian the dutch election has been upended by a diplomatic standoff with turkey. Protests broke out in rotterdam wasr a turkish diplomat taken to the border. Hostile rhetoric threatens to overshadow the final stretch of campaigning and influence voters just before the election. In the u. S. , lawmakers have said they still havent seen evidence to support Donald Trumps unverified claim that his predecessor tapped his phones. Senator john mccain called on the president to provide proof or admit he was wrong. Meanwhile, representative adam toiff said he didnt expect see any evidence and suggested none existed. Indian stock futures jumped after Prime Minister Narendra Modis bigger than expected when in state elections increased expectations for continuation of his reform agenda. Modi won 312 seats from the assembly. The results of the race in indias largest state were seen as an indicator of modis popularity. The countrys markets reopened tomorrow after a public holiday. Ousted south korean President Park geunhye is remaining defiant after being removed from office. Private hometo her yesterday after leaving the president ial palace to be greeted by supporters. In her first Public Statement, she said she was confident the truth will come out. Park is facing criminal charges for abusing president ial powers for personal gain. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt thanks very much. Bitcoin suffered a brief setback from its recordbreaking rally when the securities and Exchange Commission rejected the listing of a Bitcoin Exchange traded fund. The Digital Currency has now almost fully recovered from the 18 drop. Lets get to robin, our fx editor in hong kong. Are investors just not fazed at all by the sec decision . Just the swings and roundabouts of a country that is not regulated in a country, and we also see major swings, up 11 , down 15 , and sometimes when you are writing a story, that makes it difficult. When you start writing the story, it is up 5 . By the time you are done writing the story, it is down 3 . It is a fairly volatile currency. I think investors are just looking at it as more of a Risk Management tool. In china, there are suspicions that people use it to get money out of the country. Im not sure that this decision lets not forget, the case is about four years in the making. Im not sure that it will have a huge effect on people who really need the Digital Currency for the purpose is that they do. What are the challenges . What are the boxes that need to be ticked . Weve got a great gadfly piece on the bloomberg talking about the fact that the bitcoin teams have got to think much more outside the box in making that happen. Where would that take them . That is a very informative piece that talks about getting funds to invest in them since the irs does recognize bitcoin as an asset class. , whichlook at china accounts for a huge percentage of trades on the currency, accounts for a huge percentage of demand, even china is looking to crack down heavily on the currency. A pboca newspaper citing official saying that the government should think about cracking down, saying they had found some cases of money laundering. This is all a alleged. Indeed decide to crack down a lot on bitcoin, then it could have some effect. Longterm, im not really seeing the currency dying out. As long as there is demand, as long as countries like china have capital curves which stop you from picking up currency like bitcoin, we will see. If as the gadfly commentary suggests, it is more widespread in the u. S. , then it will probably be there for a long time. Guy robin, thank you for a much indeed. Robin ganguly joining us on the story. Theres also a story talking about the problems surrounding blockchain right now in getting g execution and the debate about how to take the situation forward. Bilal hafeez is head of fixed Income Research at nomura. Clearly we are moving towards more digital currencies. The blockchain, bitcoin, whatever else it ends up being, when you look at what is on your screens and you think about how they are going to evolve from here, do you feel we are at a step change moment . Bilal i think we are in a step change in terms of the Online Technology that moves money around the world. In terms of bitcoin specifically, i think what happens is that countries dont give up the issuance of currency that easily. The essence of bitcoin is that it is decentralized. Nobody controls it from the center. Countries have always controlled their currency. Guy before matt johnson, you can change the structure without necessarily having to change the currency. Bilal i think that is where the step change come from. The Underlying Technology behind how transactions are recorded his revolutionary. That is how the financial world will be changed. Matt when you look at fx traders, bloomberg launchpad, do you see bitcoin . Are they paying attention at a major bank like nomura . Bilal not really. As weve seen by the sec ruling, it is not really traded by big investors at this stage. Bee it to be authorized to regulated in a way that would allow investors to invest, then i think it could be something that could be seen. At this stage, it is too small. Guy just a couple of quick questions. One of which is, the data becomes realtime. How big of an advantage would that be . Second one is, in a world where we may need even more negative rates, a nonphysical currency allows you to be much more creative from a Monetary Policy point of view. Bilal i think theres a few different things. If it is realtime, it will make a difference. The question is of liquidity. What type of players are involved . Do you have a large range of different investors in the bitcoin . In terms of negative rates, theres been some discussion around this in academic circles, removing paper money. You move purely to digital money. That way, you can force people to suffer negative rates. The problem with negative rates is you can take money out and you dont have to pay negative rates. Bilal thanks so much for your time. Bilal hafeez, head of fixed Income Research at nomura. Great to get your take on everything weve been discussing. Oil is one of those big things. Guy absolutely. Were going to talk about oil. The story coming out friday. What next . This battle between what is happening with shale and what is going on next in terms of the opec story is something we need to be talking about. The supply glut is something maybe people are beginning to get their hands around. That is next. This is bloomberg. Guy welcome back. Lets talk about the crude complex. Wti trading losses. My screen telling me 48. 44. That is after u. S. Drillers boosted their rig counts to the highest level since 2015. Will kennedy, managing editor for energy and commodities, joins us now. This reality is becoming clear that opec is trying something, but the shale guys are responding really fast. Back muche is coming faster than opec would have wanted or predicted. The real issue for opec right now is stockpile. The thing that really unnerved the market was this 8 million barrel gain in u. S. Stockpiles. They are sitting at a sort of 20 above the fiveyear average and they are not budging. I think investors are waking up to the fact that despite the opec cuts, theres still too much oil around. Matt how much of this is due to a drop in demand . Are people actually using less oil . Will absolutely not. Demand has been fairly robust. Their estimate for Global Demand this year. This is really a supplyside issue. If you look at some of the numbers coming from the u. S. , between october when opec first agreed its cuts, and december, production rose by 7400 barrels a day. That negates a huge amount of what opec is taking out of the market. Talk about what the shape of the table looks like. Weve got this much flatter shape. Looks like it is coming up a little bit. Will that help the shale guys . If the backend comes up a little bit, they can sell more. Will i think youve hit on a real issue there for opec. One of the things, as soon as opec agreed its cuts and oil prices rose, we saw producer sending production forward. That is oil that is going to be in the market. Sell thee they get to oil forward and lock in their revenue, they will take it. Any strength at the back of the curve will help them. That said, i think that backend does reflect some concerns that although shale is buoyant now, there is a risk that other sources of oil perhaps in deepwater outside opec, there isnt the investment coming to the market. That may lead to a supply crunch. Guy always worth taking a look at that brent contract. We will give you the table. Will kennedy, managing editor for energy and commodities here at bloomberg. Up next, it is surveillance. The United States has now shifted to summertime. As a result of which, the Bloomberg Radio schedule and Bloomberg Television schedule will be affected. If you are listening on bloomberg dab digital radio, you will be hearing surveillance as well with tom keene and Francine Lacqua. A sort of double whammy of surveillance. Always a good thing. That is new york. It is waking up only four hours behind us. Plenty more still to come. This is bloomberg. Francine a fed hike on wednesday is priced in, but attention now turns to the speed of policy tightening. Back to the commons. Theresa may will be hoping tory mps fall in line as she looks to quell a revolt from within her party over the brexit bill. And diplomacy needed. Hostile rhetoric between the turkish resident and the dutch administration. Good morning. This is bloomberg surveillance. Im Francine Lacqua in london. Tom keene is in new york. We lose an hour in london so i have the pleasure of tom keene first thing in the morning. Donald with Angela Merkel tomorrow at the white house and we have to look at the dutch elections. Tom over the weekend, the theuage from a distance in dutch elections involving turkey, really extraordinary. Headlinest makes the in europe today. Francine we will have plenty more on that. First lets get to the bloomberg first word news. Heres emma chandra. In the u. S. , lawmakers