Testimony move the markets later on . Matt, we are counting ourselves down to the ecb. Matt that is right. And and into the open of equity trading in europe just about half an hour to go. Equity Index Futures pointing slightly upwards right now. Important to point out that ahead of the ecb, ahead of the, testimony, ahead of everything that is happening today, investors have been a little bit cautious as far as going in and taking risks. They want to see the outcome of super thursday, if you want to call it that before they put anything on the table. A little bit less will i am could be expected today. That you have a busy day. The main event in many ways in terms of what is happening. U. K. Polls close at 10 p. M. I want to take you to the gmm. That is what is happening today. The yen is up by. 2 of 1 . Pay attention to that. Let me roll the board on and show you what is happening with the japanese 10 year. There seems to be the story that way howwill change the it communicates visavis how the theyre looking at an exit. That is some way into the future. Beyond where the ecb is but the fact that this is going to change and they will say what we are modeling internally what is going on is significant. Lets roll it onto the next one and show you what is happening. This is the japanese fiveyear. The japanese 10 year on the move. The color theyre indicating that this is an outside move. Pay attention to what is happening in japan. Lets get the bloomberg first word news update. Heres juliette saly. Juliette thank you. Polling stations in the u. K. 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 vote. Tune in for one hour special on the election at 10 p. M. U. K. Time where you will get instant analysis. Jamesu. S. Fbi director comey will say donald trump pressure him for loyalty and he sought forbearance for Michael Flynn and asked comey to lift a cloud of the Russian Investigation. We will bring you special coverage of that hearing from 2 40 p. M. U. K. Time on tv, radio, and twitter. Blumberg customers can follow live go. At on the concerns that cutters exacerbate will external vulnerabilities and could put pressure on its growth and metrics. Chinas overseas sit and shipments accelerated as local demand shows signs of picking up. Exports rose in may and dollar turn and imports increased 14 14. 8 percent leaving a trade surplus. North korea has launched a series of short range missiles that up for to be designed to attack ships. South koreas joint chiefs of staff said the rockets, probably cruise missiles, were fired from the eastern port and flew 200 kilometers. The defense minister in japan said they do not appear to be the type they can reach japan. U. S. Oil is trading near 46 about dollars a barrel since the biggest drop since march. Stockpiles rose for the first time in nine weeks. That sent crude down more than 5 yesterday. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt thank you. We want to go live to singapore where mark cudmore, our mliv strategies joins us to talk about the markets today and the ecb. We saw yesterday the euro lose some ground for a moment after bloomberg broke the story that the ecb plans to lower its inflation forecast from now until 2019. What do you expect the market to to a change in the statement and perhaps a better growth forecast as well . Mark what is most interesting about yesterdays report is the euro did not for too long. But by the end of the day it was doing ok. That shows the positivity toward the euro. If you fight positioning is longer and it means the base to change it for driving up course. There is no reason to become much more hawkish. Growth is doing ok and he will say the Downside Risks will probably read be removed but there is no need to set a schedule for tapering. If we do not deliver that schedule for tapering the euro will come off of it after the meeting. Quick question on the euro move, could it be a little bit of the markets lowering its expectation for fed hikes as well . More than that it was the fact that the comey testimony are the initial statement we got leaked overnight helped the idea that there will not be anything much more profound than we have feared, there is no smoking gun which seems to imply giving a little bit of bid to risk. About thisconcerned might be the end of the cycle and that would be a negative signal. I do not have think expectations have changed too much in the last way for hours. Guy lets talk about what is happening in japan. Especially the story doing the rounds that the boj will start communicating that it is modeling internally how it would exit from its currently current policy starts. This is something into the future in terms of an exit but latchedets seem to have onto this. Can you explain why . Mark it is the fact they are thinking about what the exit process might be or how they might indicate that seems to be sending confused signals to the market. The boj is nowhere close to the target. The have not been close for a long while. It seems that a bizarre message that we know that we are getting close to victory in the year or so ahead and we need to think about how this will unwind. The market is surprised. The boj might be saying our qe think ainable and we think we need to think about and even though we have not achieved our inflation goals create it has taken the market by surprise but it is one of those events where it will be more clearly committee kidded that this is a longterm project and not to read too much into the signal that was read by the market today. Week maymeeting next be getting more interesting than we first imagined. Mark cudmore joining us, a macro strategist. Your a great function on bloomberg. Use it throughout the day. Get your launchpad and get it set up, it is worth constantly having throughout the session. Lets get more analysis ahead of us isb decision, with andrew bosomworth. Which words will mario draghi drop today . Andrew we will see the words referring to Downside Risks on Economic Growth being removed, the circumstances, Economic Data have moved ahead of that sentence when it was formulated. I would expect also some tinkering on the wording around the policy reaction function so we may well see the word or lower referring to the policy rate being removed. We may see the word well that could happen out have an outside chance see a sentence referring to extending purchases as things get worse. That is the maximum we can see today. Matt why make the language changes when they are going to lower their inflation forecast . Isnt that the real concern . They cannot necessarily begin to taper if they do not expect to come close to their inflation target . Correct. Hat is we are not expecting any signal on tapering. On the head. Ail the ecb faces a dilemma if on the one hand it lowers its expectations for its forecast expectlation which we and as bloomberg broke the story yesterday it could be as low as 1. 5 for 2019. That suggest it will have to do more on quantitative easing. That is on the one hand. On the other hand it is running up against the limits of its exposure to government bonds. We think it will hit those 33 limits in the first half of next year. That would force it to taper. To how the ecb squares the circle will be key both to its credibility and four asset pricing in the eurozone markets. Way, how do you change the when it looks like none of the Central Banks around the world although they all want to normalize and remove stimulus achieve their targets . Compared toat say your expectations to a few months ago . Comes tohe notion that mind is hawkish mistakes. All the Central Banks globally are facing this problem of where is the inflation, how do they get inflation up and they are facing some Financial Stability inues or capacity issues terms of what else they can do and there monetary toolbox. We might be going into a situation globally, youre talking about japan before where Central Banks have to remove some of the stimulus from the economy at a time when inflation is not really a problem in terms of overshooting targets. That would speak to more deflationary risks. We would want to be in that environment pretty cautious on s that are dependent on strong Economic Growth to maintain relations. That could range from countries that have low growth piles and high debt riddens like italy and japan to highyield credits which need strong Economic Growth. To maintain the evaluate and the valuations. Guy do you sense any frustration at any of the Central Banks that the inflation target may not be the way to go or current my Monetary Policy is turning out not to deliver what was anticipated . Isan is the the doj modeling how it will exit. That exit probably is a long way away. The what about the idea that maybe they are going to the point of saying we need to rethink this, we need to go back to basics, we need to take a look at where we are and why we are here. Are we at the edges of sensing some of that frustration . There is pretty good work on this where if you look at the combination of real Economic Growth and inflate Consumer Price inflation out turns, for decades starting back in the last of in the last century. There is some form of positive correlation. We notice when there is stronger growth there is higher inflation. There is some longterm Secular Forces at play like demographics like productivity and regulation which might be Holding Back Growth and causing a problem in reachinggetting up and those inflation targets. If that is the case, Central Banks might have to rethink what precisely their target is, is Consumer Price inflation to narrow, should they be broadening that to incorporate other assets like real estate or Financial Markets, bubbles which obviously respond to this strong monetary stimulus. Or should they be more content with lower inflation outcome question mark if we are going into a world where real close growth is slow and Central Banks have to be with their foot on the pedal stability and to get 2 inflation that is a world where we could get bubbles. Guy lets talk about financial conditions to wrap up the conversation. Ins chart has got the u. S. Blue and the eurozone and white. The higher the line goes the easier financial conditions are. The fed is tightening but financial conditions are getting easier. That spread is widening out between the fed and the ecb. Fedmany more times can the tightened but not tighten . Conditions getting easier, not harder after the tighten . Answer the fed is moving in into the range on the fed funds rate where it is comfortably away from the zero line where they might start to swing the focus of their policy from the policy rate to the Balance Sheet. We might be going, entering a in which the pace of economic rate hikes starts to slow down. The fed starts doing something more on the Balance Sheet, on don sensing the Balance Sheet. That could potentially put more risk premium in terms of the term premium for Interest Rates into the market that could steepen the yield curve. How that precisely feeds into financial conditions depends on how you collaborate your indices but given that the mortgage arerest rates in the u. S. Run off the long bond yield, that could lead to a tightening of financial conditions there. That is going to have some impact on growth on the economy. This is the third longest expansion in the u. S. Since 1945. It is a mature business awareness of Financial Financial and conditions could be coming upon us. Matt thank you for joining us, we appreciate your time. Andrew bosomworth financial conditions could be coming upon us. There, the head of [inaudible] four pimco deutschland. Meg whitman said she supports some of Donald Trumps policies but not all of them. As you know i was on the other side. As a lifelong republican i endorsed Hillary Clinton but won, i saidnt trump to our employees, we need to give them the benefit of the doubt. So we are. When we think there is something that is not in our best interest or the countrys best interest, i will speak out so i said i thought we ought to stay in the paris climate accord. The next generation of industries around clean energy and others is an important thing for the u. S. It does not impact our relationship. We happen to disagree on this issue. Emily pimco tells me he thinks the president decided wrong on paris but is keeping an important dialogue because it is a important for the country and strategy and company. Mag we are in favor of tax reform. We think the ability to repatriate cash overseas at a much lower tax rate is important. We think a lower Corporate Tax rate would spur growth in the u. S. We are not for the border adjustment tax. That is called for companies that import high degree of their costs and work on relatively low margins. The retailers, a lot of the technology companies, i think that is not in our best interest and and the interest of the u. S. We just make it clear where we stand on issues, very respectful, civil discussion and that is what this country was built on, the ability for civil discourse and disagree without being angry. From that was meg whitman hewlettpackard talking to emily chang. Lets get the bloomberg is this flash. Juliette airbus may be thrown a lifeline for its struggling superjumbo. Emirates is said to be in talks about buying 20 more planes as they discuss cutting production. Emirates is the biggest a 380 operator in the world. People familiar with the discussion say the carrier has not decided exactly how many airplanes they want. Credit suisse investors will buy more than 99 of a rights offering. Raising money for the turnaround plan. This is the second share issue since the ceo took over two years ago. Funds raised will be used to complete the business overhaul and explant expand wealth management. That is your Bloomberg Business flash. Guy and matt. Guy thank you. We are minutes away from the open. Could airbus see that order having an impact on its share price today . Will tim clark announced such an order . U. K. , theypen in the opened 50 minutes ago at seven and they will close at 10 00 p. M. This is bloomberg. Guy welcome back. It is thursday in the u. K. In case you have not noticed. Lets take a look. I set this up by the stoxx 600. Vodafone goes ex dividend as does wpp. Be aware that they will go ex div. You need to set up the index and make a few changes. Airbus is another stock to watch in the open. Tim clark may want some more three 80s, emirates model is based on the 380. They have a lot of the big triple sevens. He has been a big buyer of this aircraft and he apparently may want some more although he would rather have a real engine and gined version. You have Better Weather at the air show. Does rain a lot. Little bitng here, a chilly but i am excited nonetheless because the ecb is expecting to change the language in its statement no longer saying that risks are tilted to the downside but rather balanced. Also touring its inflation point 5 . O one that should be a disappointment to anybody rooting for the economy. They will push up their growth forecast create investors are in wait and see mode. Not really making a lot of risky purchases and the euro is flat against the dollar. We can expect some excitement when the statement comes out today. At 12 45 p. M. U. K. Time. It is fun whenk they are on the road. It adds another element to watching when i was think is one of the best events of the month when it comes to Financial Markets. You get a ringside seat in the dry which will be nice. In terms of the story what we can expect from equities, this is what we are looking at. This is the picture on our bloomberg, the market going nowhere in a hurry. A sideways move for this is the fair value calculation. Not really some big moves out there. We will drift sideways. Event in the next 24, 48 hours and that is what the market is positioned for. The open is next. This is bloomberg. Guy welcome back. Minutes to go until european equities cash opens. I would like to do a drum roll, but i do not think it is appropriate. We await 10 00 p. M. Tonight when u. K. Pulls close. Close. S it will be a fascinating day, but for the moment, the market is sitting tight, as you can see. But, matt, the ecb is kind of the main event. Matt yeah, it is. Interesting for me because i have been to so many ecb meetings now, where they do not change the statement at all. I am excited to hear a change in wording and kind of look for a change in facial expressions as the ecb gets closer. Maybe some normalizing policy p it on the other hand, they do not expect their Inflation Forecasts to get anywhere near their target until 2019. Who knows if they will get more hawkish or dovish . Guy it is the facial expressions i am really looking forward to as well. The markets are open. That sums it up. A little affirming bit, but not by much. You will see a similar reaction across the other markets as well. We are waiting. We are going to drift sideways and not deliver much in terms of a sense of direction today. 7474 is where the ftse 100 is trading. Manus cranny. Manus there is the exporters of the world delivering on mliv blog, a superstorm delivery. Imports rising as well. That is the bedrock of the economy in terms of how china is doing. Oil took a battering. Dollaryen. On the european onsantander story trading the most read story briefs this morning. Really reflecting in terms of taking a big hit on that real estate. Thecapital rate will be balancer. As you get into the china numbers, iron ore imports into china rose by 7. 9 or 67 in terms of value. That is what is reflected. These are the numbers. You talked about them more as you go through programming. You are seeing the imports rise and the exports in the white line rising by a. 7 . 8. 7 puree back by that is the backdrop. The ecb and politics at play around the globe. This is the challenge. This is the inflation, your area cpi in the white euro area cpi in the white. You are looking at a challenge. They have got to move on two of the most watched words ever written by a central bank, balance and accounting. They need to move valley which forward to sustain credibility with the market. For imapa flip today on the shanghai composite. You are seeing financials do better on the shanghai comp. China is in our site line in terms of the Global Growth story despite the inflation question mark. Is philip gross right . That is the question i ask myself. Are the risks in the market at high and aggressive as they were precrisis in 2008 . That is what you have got to think about. I am off to digital radio. Guy you enjoy yourself. Manus cranny, off to dab digital radio. I want to take you to what is happening with European Markets and break it down. And market stocks rising. It is not a big upside. Ups. Stocks are on the what is interesting is utilities are reasonably well bid. Are seeing rotation. Let us flip it to the other side and show you what is happening. This is the downside, dominated by the exdivs. Tp has gone exdividend today. There is quite a few exdividend out there. Interestingalways to keep track of that, and it seems to move the market on a lot of days. Let us go and talk about what the market is doing and going to do after the ecb decision with skin jacob sent,s cio of a bank. Steen jakobsen. Euro yesterday, but it quickly recovered, and it looks like everyone is kind of sitting on his hands right now. How do you expect the ecb to act, and what do you think the market will do in reaction . The rule has been to sell the euro ahead of the ecb. Ahead of the recent meetings. At the ecb,rall, you have bundesbank, who calls and watchingtes, the inflation, and you have the majority, led by mr. Draghi, continuing to say let us wait and see and be patient. At the end of the day, there is still enough incoming uncertainty in terms of the at theand the likes French Election will happen again this weekend, so i think the ecb is in a very slow moving forward phase with their policy. Guy the market extrapolates, though . They will see maybe a change in language, and price that in. Probably has priced that in already. You try and figure out when that happens. How does draghi keep the market in the right place from the ecbs perspective . Steen by reading what the market things, of course. Basically, they think he will be announcing some sort of lead into tapering. The economicby outlook. Everyone things it is like what the fed that will talk in september. And they wantber, the summer to go that way. That is what they announced an preannounced. It is all about communication for the ecb and the fed. They seem to believe they can talk themselves into anything, pretty much. Communication for the boj as well. Do not leave them out. They want everyone to think they are looking to normalize someday as well. All the federal banks want to get back to normal, and the fed wants to continue raising Interest Rates, but none of them can get inflation up. What do they have to do to get inflation to target levels . Andre we going to be living a world where 2 is not possible . Steen if you look fundamentally it comesflation rises, from demand going up. I think the ecb and the fed has been very disappointed that the support to the credit market has not helped. What it has done is increase the amount of credit being bought, but it has not increased it comes from the fact that the economy is confident enough to go ask for more money, and they actually get more going. That ishave seen since improving enough to create inflation. Is a chart, a little bit outdated, but this is velocity of money. It tells you everything you need to know. Steen it is very difficult to increase the inflation when you have velocity of money. Teen is going to stick around. Bit of information from alibaba, being delivered. It is saying it expects these are punchy numbers. Nice if you can get those kind of figures. Let us talk about what is coming up. Doha withg to be in the latest on that story and we will leave you with a shot of what is happening in the u. K. It is thursday. The u. K. Is going to the polls. And sevened one hour minutes ago. They will close at 10 00 p. M. Tonight. This is bloomberg. Matt welcome back to the European Market open. I am matt miller, standing by, waiting for the ecb rate decision, coming out at 12 45 u. K. Time. I want to take a look at the markets. We are looking at green arrows across the board. The cac bouncing back and forth between green and red. Very little change as investors sit on their hands, waiting for this decision, for all the data, and for all the events on this thursday to pan out, so they can make more informed decisions on risks. Right now, i want to look deeper than the indexes into the individual movers prefer that, we go to nejra cehic for the midcaps story. Nejra i am starting with the cleanup on m a news. Provider ofgest hotel and restaurant linens has reached a tentative agreement to this company for 2. 9 billion in cash and shares. The tentative deal comes after berendsen move higher. It is hitting its highest since october, 2016. Ohoo. Com moving. This is moving higher after it boosted its sales growth. It was upgraded. A lot of things playing into this. Up 6. 2 at the moment. I am looking at remy cointreau. They are at their highest since 2013. A forecast higher profitability after earnings rose at the fastest pace in five years. A lot of this on accelerating sales in the u. S. And china. This did beat estimates. Remy cointreau up 4 . S P Global Ratings have efforts to isolate qatar by a saudiled up of nations. It is of course a downgrade. Yousef gamal eldin has traveled by a difficult route to the capital, doha, and joins us from there now. Talk me through the deescalation process. How much progress are the kuwaitis making . Yousef they were trying to figure things out. Visit to wrapped up a the united arab emirates. It is not clear whether they have made any tangible progress. There are reports of a list of demands floating around that includes cutting links to the Muslim Brotherhood and ending what they described the support of global terrorism now. In terms of quick fixes, it might not be. The uae minister of Foreign Affairs told bloomberg in an interview that it is unlikely to happen. Qatar is in a state of denial. The u. S. Is close to the pulse of this story, so we understand donald trump has been on the phone with some of the leaders in this part of the world. It is not clear where we go from here as the chips fall on the table. Turkey is taking sides. The unclear variable is china. Guy, matt. Saudiyousef, the idea for and the other countries that have cut off qatar is to leverage the economic blow in order to get the royal family to capitulate to its demands. How bad has the economic blow been so far in these last couple of days . Yousef i mean, it was a real has of getting your appeared what was usually a one to two hour trip turned into a seven or but alone ordeal, convincing immigration to let me through. Flights are delayed. As much as it is quiet, there is a sense of relative normalcy. Having said that, the latest move from s P Global Ratings, and some of the key in the heat is on. Indicators, show the heat is on. There is a desperation of external vulnerabilities and pressure on growth. This follows a similar moodys move that came before the escalation. S has put concerns on this. We are watching the credit default swaps. Interesting what is happening on the qatari equity. What a rebound. Opportunistic buyers in this market. Up over 2 as we speak. Some of those valuations, arguably attractive. It is still to be seen. Guy yousef, great work. Yousef gamal eldin joining us out of delhomme. Bloomberg out of doha. Bloomberg goes the extra mile and the extra mile after that when it comes to getting into doha. Still with us, steen jakobsen. Mideast think the situation is escalating. Im concerned to see that turkey amdeploying troops i concerned to see that turkey is deploying troops into qatar. They are trying to defuse it, but there is movement going on, and turkey has committed fully to qataris. It is an interesting thing. As the market place it out so it out, so far, it is nervousness, but not in geopolitical scale as to what can happen. Matt the biggest concern is after the saudis cut off qatar, they are trying to get back at their arrival, iran. You have a terrorist attack in tehran. The iranians kind of say blame saudi backed terrorists, in their words. It seems like the situation could escalate very quickly. How much of a concern how much is that concern being priced into the markets . Steen first of all, i think it is important to realize that these tensions have always been there. It is not like we have seen this escalating to any situation. The qataris have always been at odds with the rest certainly with the uae as well. Iraniane, the classic context has always been there as well. For the markets right now, the tocern is that you want see the middle east be a united front. You have seen much from the gulf state in terms of introducing bankruptcy law. There is a. To all of this progress there is a full stop to all of this progress. The saudi bond market issuance we have seen, the bonddenominated governance of the sovereign bonds from qataris and the others have lost a bit of its appeal in my opinion. The first fallout would be exactly that, that the International Trading with u. S. Sovereign bonds with the middle east will start to take a hit. You are we witnessing talk about this being a localized issue, and it is a pretty big localized issue. It involves the energy markets. Arent we witnessing the Financial Markets increasingly discounting the gulf as being important . Have you seen even the slightest of concerns being raised in the gulf 10 years ago, 15 years ago . The markets would have been all over the place. We would be worried about the impact that would have on the global economy. We now have the u. S. And shale. Whole have solar, wind, a bunch of other energy options. Are we downgrading the gcc, the gulf, as being as important as it once was . What are the implications of that . Steen i think it is massively them fortune for the markets massively important for the markets. You are seeing this lack of emotion. Just exactly what you described. The oil sector is that huge risk right now. Anyone who is oilproducing, solely a oneshot pony, the world is going to electrification. , e is a huge drive we will see Energy Consumption go down dramatically, especially gasoline and diesel, 70 of all world consumption of oil. There is clearly a drive undermining this. On top of this, you have of course the u. S. , as you say, with shale. On top of that, trump having implemented that you could have the pipeline coming down from canada. To 2is another one million Million Barrels per day coming down the pipe. The greatest risk we have and the economic risk, is oil is not going up, but going down, beinge these are brought to the forefront. Guy steen jakobsen. Let me talk about tv. It is kind of a onestop shop in so many ways. You get the video stream. Manus, earlier on. You have this sidebar that gives you who is on air, what function we are using, some of the headlines our guests are making, there buyers their bios. You can look at the charts we have got. You can pull those out. You have the functionality, the imap. You also have this little button down here. You want to get involved . You have a couple of ways to get involved come over bunch of wasted one is to press the button, which gives you direct access to the producer and production team. You can ask the guest of question. You can contact us directly, actually. A great function, tv. And we can make this product better, make it fully interactive, and talk about what is going on in these markets. We believe you a shot of what is happening in the u. K. The polls are open. They have been open nearly an hour and a half. They close at 10 00 p. M. Tonight. The open intes past london. The administration has laid bare the chaos sweeping around the Law Enforcement agencies and their vulnerability to political manipulation. They arether and looking at whether or not south investable. Lly what do you see . Steen i see him at the end of his reign. He has been challenged by the leadership. We have seen him on the ground with local politics and we have a classic democracy working, and we see that the democratic with andis fighting getting mayorship in the hot inspired. We have seen in your johannesburg. Zuma is abandoning the presidency. Want so what assets do you to play in, then . Is it all about the rand . Steen i think that is where you are going first and foremost, also because the stock market is very much a global index. If you want Global Growth, you are short of the south african rand. In the u. K. , the currency goes in the opposite direction of where the market goes, the whole economy goes, so the south african rand is massively underpriced in value. We saw it earlier, and we have been running around, 13 plus for a time. If zuma is out, you can see 5 or 10 . Guy there is the terror that it goes the other way, like zimbabwe. Have azimbabwe did not strong constitution. South africa has a strong constitution. I am saying that on my own the half. If it was not for the south african constitution, zuma would have done and even worse job than he has already done, because the constitution would keep him in check. It is also the investigation pursued by the constitution of course. The huge differences they have a classic constitutional framework that supports the democracy. Guy and independent central bank. Steen absolutely. Aboute need to talk plenty more. The emerging markets story is fascinating, but the u. S. And said our front and center. , what is happening in the states today. The comey countdown. We will preview the live event. A testimony, six hours and 33 minutes a day. 33 minutes away. This is bloomberg. Talk. Paper talk taper will the ecb start its march towards the exit . Election day in the u. K. The polls have been open for 90 minutes in the second general election in two years. They will close at 10 00 p. M. Plus, countdown to comey. Will the fired fbi directors testimony move the markets . Good morning, and welcome to Bloomberg Markets european open. I am matt miller, in estonia for the ecb meeting. We will be getting that out at . 5 in the afternoon, u. K. Time what is us talk about going on. There is a bunch of things about to happen. They had not happened yet. Happenedthing that has has been speculation that the boj will change its language regarding how it will manage an exit or how it is modeling an exit. European markets firmed up a bit. The u. K. Dividend in names like what a phone also , ongoingaily mail, wpp exdividends today. It is thursday. No clear sense of direction. To be honest, the real sense of direction came from the jgb market. We have the u. K. Election. Polls close at 10 00 p. M. Tonight and we are watching what is happening in the united states. Will he say that trump himself was not under investigation . According to the third remarks, he will say the president repeatedly called for loyalty when they dined alone at the white houses in january, as well as asking what could be done to lift the crowd from over his administration. For more, let us talk to stephanie baker. We have learned some of what he had to say. What is the most surprising thing to come out of it thus far . Confirme he did tolds assertion that he the president he was not personally under investigation on three separate occasions, and now trump is using that. His lawyers came out and said the president chose indicated. However, when you read through this written testimony, which reads like a film script, what is so, you know, surprising, is how comey felt under repeated pressure and pushed back, tried to tell the president that the , ands an independent body trump continued to push back, asking for him to drop the investigation into flynn. And then the alternate, you know, charge of dismissing comey when he refused to do so, so i am not a lawyer. In a legal sense, does this amount to obstruction of justice . It is unclear. Politically, it is are you damaging for him. It certainly shows abuse of power. Lawyers will be debating whether this amounts to instruction of justice, and hopefully, we will get more details when comey testifies later today. Are we going to hear about the body language . Are we going to be hearing about there is a difference between saying i wish he would lay off the flint investigation, and i really wish you would lay off investigation. You can try and order the fbi to do something, and that would amount to a real abuse of power. Do comeys notes go into that amount of detail, stephanie . Stephanie they do not, and it is unclear how much more we will get from him. I think if you look at this, if this had been the play of events and comey had not been fired, i do not think there would be much of a case here. The real issue is that comey was fired after all of this. I think that is where the senators will be probing, and will be probing for further details. Whether or not comey will weigh in on that issue they will be asking him if you thought this was objection of justice, why didnt you raise this before . Now that he has been fired, it does look much more like obstruction of justice that it did following these interactions. Guy the Trump Administration knows this is happening. In the past, it has not had its ducks in mind in terms of in line in the response it will have to how will this pushback work . I am wondering how organized it will be and kind of, the lines of attack it will take in terms of pushing back against comey and what he will say. Have strong is the administration going to look at this . Stephanie they have hired new they willdo that, and focus on the fact that trump personally is not under investigation and going to be hammering that point home again and again. Will we get a tweet from trump during comeys testimony . They are trying to keep him busy so he does not meet. We should be watching his twitter feed very closely. Areink they will they starting to get their act together in terms of responding. It is the timing of the release of this testimony which is interesting. A came after these two intelligence officials testified, and there were a lot of questions. They got a lot of pushback from senators questioning them. They were not very forthcoming in their answers, and i think what comey wanted was this to be released, for people to read it carefully. Some senators are preparing very thoroughly for their questioning, so i think we are going to get really specific russians from them. It will be interesting to see what he is willing to say and what he is not willing to say. Specific questions from them. It will be interesting to see what he is willing to say and what he is not willing to say. Matt i want our viewers to know that you will be able to catch everything here on bloomberg television. At 2 40 pm u. K. Time, you can follow this on bloomberg tv and on tv in your terminal, or probably the best way to follow along is by watching it on tv, and then on your terminal, using tliv. Live is a great way to follow these important events. Guy still with us, steen jakobsen. Is this an important event for the markets . Steen i do not think it is market moving in any sense of the word. Obstruction ofs justice, we are looking at one to two years down the road before anything actually happened in the legal system in the u. S. The u. S. Legal system is famous for being very slow. This is not on the radar. There are far more important states with the ecb. The markets have expected so much from the Trump Administration give most of that has been priced out. Has too much been priced out, or are we at the point where, it will take a lot of time, but it will distract as well, and effectively, that means this administration gets nothing done. I am wondering where pricing is visavis expectations of delivering real policy and how the white house is going to manage that . Because in their area, i think this is important. Steen i think you are making the premise that this is for and against trump and the markets reflecting that. I do not think that is the case. I think we have strong policies. First, reflation trade, which has disappeared. Thiss been replaced by everongoing theme, which is that investors are moving from actual investors to being active investors to being passive investors. This includes comeys and the Central Banks action. Money is going into passive investments. Volatility is going down and the ability of any news to upset the present trend is very difficult. As long as this inflow to passive continues, in my opinion, the market will go higher, but it is out of control in terms of valuations relative to what trump will and can deliver, and in terms of what the topline growth can do in companies. Yes and no. Economist, ofl course. Keep an eye on the passive versus active as a far bigger driver of market risk both on the upside and downside. Continue toinitely see new records. The valuations are very high. A guest say these markets are riskier than they had been since pre2008. And another said the leverage in some cases is worse than it was prefinancial crisis. Are things getting a little risky . Is it time to take money off the table in the u. S. . Steen i love that question. Of course, you know i have no answer for that question. Biometrics, the u. S. Equity by all markets, the u. S. Equity market is expensive. As long as the passive part of investors the moms and pops of the world we can continue seeing the market have another rally. I will say we are inside the next 2030 s p points from the peak of what should be the top and whether we see this credit impulse from china, which is negative, the tightening we see for Central Banks in terms of rhetoric, is going to have a material impact. But for now, i do not see anything upsetting the equity market. Certainly, you are right that it is very risky. Hence, in my portfolio, i keep an overweight of fixed income, because being on fixed income is a free put on the equity market. Guy let us talk about the fed into the two that youre one of the things that usually ends the u. S. Expansion is the federal reserve. This chart, you and i have kicked it around. The blue line is the u. S. The white line is the eurozone, the e. U. The higher the chart goes, the easier financial conditions are. The u. S. The fed has tightened in this phase. Financial conditions are getting easier. You and i keep this around. It is having no impact. when ision you posed a hike not a hike . Steen that is what you will get in june. The monetary condition is not changing. Points. At the end of the day, it does nothing to the work that goes through. Guy so the fed has got a free pass here, basically . Steen they communicated themselves into that pass. 34fed continues to talk hikes. They will have to go in december. That is a maximum of two hikes. The market is far more focused on what is going to happen to the Balance Sheet in the u. S. Than the actual nominal steering rate, and for good reasons. The steering rate will have a bigger impact on the future of u. S. Monetary policy. This is flat, flat, flat, flat, flat, getting flatter . Steen it will get much flatter in my opinion. We getting into a situation where recession or or the probability of recession continues to increase. We have not seen anything to replace the lack of growth we need in the u. S. Productivity remains at best hard to measure, but also very low in terms of how we do measure it. China of course is slowing down. The only sort of great music europe, and the Business Activity great news is out of europe. We are seeing a significantly flatter curve. Should the fed be forced to cut rates, they will be so by announcing a japanesestyle fixing of 10 years at one point or 1. 25. 5 you need to do so much additional, new stimulus in order to get real impact on the economy. The we are carrying on conversation. We need to talk about what is happening at the banks. Big news in your. That is the story we will carry on him at getting analysis on with steen. Santander taking on popular. Great, ways, that was because the system works. Anyway, we will have more on that story, next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. I am matt miller in estonia, waiting for the ecb meeting to take off, or at least for the conference to kick off. It is 12 45 p. M. , u. K. Time. Investors sitting on their hands, waiting to see how the results come out before they really wad into the markets. Major indexes in europe are moving more than. 2 . Let us go to nejra cehic for a look at the individual stock movers. Quite a bit matt, going on below the surface of interesting stock soars to look at your picture fact rising the most since september 2016 to look at. Rising the most since september 2016. There seeing it as one of best performers on the stoxx 600, up 6. 2 at the moment. Im looking at euler hermes , with a third of the global market. Already controls this company. According to people familiar with the matter, allianz is exploring a plan to buy the shares it does not already own and take euler hermes private. It hit the highest since june 2015 at one point in the session. It is up 1. 9 at the moment. They have not commented on what the people familiar have been saying. The stock moving nonetheless. Auto trader down almost 4. 2 . One of the worst performers on the stock exits fullyear revenue was a beat. Adjusted profit was also a beat. It is confident of delivering growth in the coming years, but the market has seen something negative in these numbers. Auto trader says it sees 2018 numbers flat to marginally down, so that is slightly negative and might be feeding into the losses here. Guy thank you very much indeed. Let us get a first word news update with sebastian salek. Pollingn in the u k, stations open for the countrys general election in two years. Mitotal of 650 west nster mps to be elected. You will get instant analysis of the markets as exit polls are published. In the u. S. , james comey will today publicly say that donald trump pressured him for loyalty. He will also testify that the president sought forbearance for Michael Flynn and asked him to lift the cloud of a Russian Investigation over the administration. We will have more on that hearing on tv, radio, and twitter. Bloomberg customers can follow all of that on tliv. That is from concerns the countrys row will weaken its finances. The s p said tensions with the saudi led group of nations will exacerbate qatars external vulnerabilities, and put pressure on its fiscal metrics. U. S. Oil is trading at 46 per barrel after the biggest drop since march at stockpiles unexpectedly rose for the first time in nine weeks. Inventories increased the most since midmarch. Thats same crude down by more than 5 yesterday. Global news, 24 hours a day, powered by a more than 2600 journalists and analysts in more than 120 countries. Guy thank you, sebastian. Santander, seeing no time cleaning up bageled rs balance popularsanco Balance Sheet. It has a few concerns according to view bang people familiar with the matter. Still with us, steen jakobsen. I want to talk about this chart. Btis is how the junior de reacted and the senior debt reacted. 81 is a trigger for the first time. Learned something, and this is good news. What does it tell us about the future of the eurozone and its ability to actually make changes that are meaningful and start to make some breaks with the past . Foothills of that, but we are moving in the right direction. Steen i think there is a good part to this story and the battle of your the negative part is that we are still worrying about bailing out banks so longer after the great financial crisis peaked in intensity. Europe is getting back together. We have a far better Emergency Preparedness in europe. The ecb is a far better during the course of the past five years. They increased the ability to monitor and now owns responsibility of deregulation. I think this is a classic example of what should happen. The senior debt survives. It is positive. I think too many people are negative on europe, especially when i talk to american investors. They see that europe is a failed state and never will work. But i think there is, as you incrementalrightly, progress on the regulatory side and its ability to whether future storms to weather future storms. Matt that certainly would make me shy away from that junior debt in other banks. You really did not see such a bonde effect across coco yesterday. Do you expect this model to be used more often now . Clearly, there are other peripheral banks that are in some trouble. Do you expect us to see other countries using the spanish model for their banks . Steen absolutely. If you ask me where the next ones are, what other risks, it is monitoring the situation casebycase, and some of these toks had specific exposures specific groups of businesses they are exposed to. I think this is the modus operandi. It has been deemed to be successful in the first test has been successful. Certainly, there are a number of banks in europe that need to go through the same process, absolutely. Matt how much further do european banks have to run . Clearly, investors have been buying these banks for a while now. Santander is already up 40 . I am talking about the healthier banks, not the ones in trouble. Santander up 40 over the last year. They have done well under ana bo tins leadership. Do they have a long way to go still . Are reachingk they the altitude at which they need to operate going forward, but we came into the French Election, this whole cycle, we came into and a very high level anticipated nervousness about what direction europe would take. We have been surprised in economics, politics, and the fact that brexit has not had an impact. Overall, the cyclical stocks in europe have done extremely well, and included in this has been the right call, justified. Right now, we have cruising altitude in terms of the level of valuation. Guy is the transition mechanism working in europe . Spain is doing good things right now, and the economy is working. But it is patchy. Demand needs to increase. You need to see Lending Demand from customers increase. I think the banks are doing a better job in terms of repositioning the Balance Sheet and becoming within the regulatory framework, but that comes at the cost of doing business, lending business, and andmodel of taking money in lending it out, so as long as velocity of money, Lending Demand is not up guy that is a demand story you are talking about. Steen it is also because the force of the bank has been the focus of the bank has been on regulation. Method ande have the all these things coming through, which is very difficult to navigate, and we all have to comply, obviously. It is a huge tax on these banking organizations. To some extent, that is taking away from they had the ability to lend. They say they will lend, but getting back into the business of being there for the sake of creating more credit growth. Matt where do you see the most opportunity here in europe . Well, still in the cyclical story, i think we are underestimating the progress that can happen under macron in france, and germany when merkel gets reelected. I think the brexit fallout will be very small both of the u. K. And europe, when we ultimately, one to two years from now and get the results from that, i think we will be in a better place. We had green shoots in manufacturing. We are looking to the incoming changes of how you produce robots and automation. It is better equipped than any other Geographic Area in the world through the fact that we have traditionally been outsourcing much of our production to the far east and we can take that back and do it in automation. I am very bright on the broad back from broadspectrum. Cyclical will outperform. Guy steen jakobsen, the cio of saxo bank. The polls are open in the united kingdom, and they have been open for nearly two hours. They will close at 10 00 p. M. Tonight. Tune in for our special on the elections, tonight at 10 00 p. M. We will give you instant analysis. There is a great story on the bloomberg today talking about the eight professors that are going to be in a room today. They are going to produce the exit poll. These are the guys that are going to crunch the numbers and give us that number as a comes out at 10 00 when the polls closed your last time in the 2015 election, it had the tories 10 shive. It will be interesting to see how that works. We will talk about that 10 shy. It will be interesting to see how that works. Up next is bloomberg surveillance. It will be an a and mean. London dab digital radio. This is bloomberg. Francine crafting policy with language, with no inflationary pressure, markets look to mario draghi for a better outlook. The ecb meets in estonia. Comeyfbi director james in washington after saying the president asked for loyalty. After plummeting stockpiles. Qatar continues. This is bloomberg surveillance