Transcripts For BLOOMBERG Bloomberg Markets European Open 20170816

Amazon prime phil 16 billion worth of longterm debt to fund its whole foods acquisition. If amazon can sell fortyyear debt at these kinds of prices, why cant the u. S. Government . Sinks. Ck profit we are going to speak to its ceo right after that market open, archly, matt . Matt absolutely, and interesting results, including an almost 300 million a year loss from a cyber attack. It will be great to get the details on that. Here we see the intraday futures trade on European Equity indexes, up across the board, and some pretty solid gains in futures after we had pretty solid gains in the cash trade yesterday, especially the ftse and the cac. Do quite as well, but it is gaining in futures, so that may even that gain out. Continue tobuttons rise, so investors are going to risk off. This is a threeday chart, so you can see what the trend has been, and it has definitely been one of yields rising, prices falling as investors selloff the german debt. They have been doing the same with treasuries. Guy lets talk about where we stand on the gmm. I think there are just a couple of quick things to say. First of all, europe had a solid day. The other thing is just want to mention, the retail sales story, whats happening in the United States, the data are getting better, and europes are getting better, and the dollar trade is looking may be stretched. Maybe a little bit stretched. By 2. 4 ,arket was down south africa down 1 . Pay attention to that story. Lets get to the bloomberg first word news update. Heres juliette saly. Juliette u. S. President trump has returned to his controversial position that there was blame on both sides for deadly clashes in virginia over the weekend. Crm has faced intense criticism froms and Business Leaders for saying that many sides were to blame for the violence in charlottesville. Comments caught his aides by surprise and dismayed some of his staff. Pres. Trump that was a horrible day [inaudible] pres. Trump i will tell you something. I watched those much more closely than you people watched it. You had a group on one side that was bad, and you had a group on the other side that was very violent, and nobody wants to say that, but i will say it now. The u. S. Ambassador to the United Nations says iran can never be allowed to have Nuclear Weapons and cant use the nuclear deal to hold the world hostage. Nikki haley spoke after morning president rouhani that Irans Nuclear program could be ramped up at the u. S. Continues its threats and sections. President trump wants to abandon the deal, and Congress Passed new sanctions on tehran earlier this month. Britain says it wants to avoid a physical border with ireland as part of any deal with the european union. The Brexit Department said u. K. And european negotiators need to show like stability and imagination to design arrangements in ireland that reserve free movements of people and goods across the border. The u. K. Will publish documents at noon today london time. China has reclaimed its position as the top foreign owner of u. S. Treasuries. That pushed japan into second place as its stockpiles decreased to 0. 1 9 trillion. 19 trillion. This is bloomberg. Guy, matt . Guy juliette, thank you. Lets get back to one of our top stories this morning, President Trumps comments yesterday and continuing backlash to the violence we saw in charlottesville, virginia. Take a listen to his press conference yesterday that was supposed to be about infrastructure. Pres. Trump you had many people in the group other than neonazis and white nationalists, ok . The press has treated them absolutely unfairly. The other group, you add some fine people. People. Ome fine guy this was meant to be about infrastructure. Mnuchin was there to talk about the economy, infrastructure, didnt happen. Mark joins us out of singapore. Yesterday was a crystallization in so many ways. The trump trade is now firmly out of reach for the markets. If yesterday did not slam the lid on it, is there anything left that the market can hang its hat on surrounding this . I dont think there is, but i dont think there was before this. What happened yesterday is not that we have priced out more of a chance of a risk to the trump trade coming through, its that there is a chance to possibly resurrect some hope. We already had pretty much zero pricing in the market, but the chance he was talking about infrastructure might have given the market hope, might have been able to deliver a message of, you know what . The physical stimulus is going to come through, and the market might have started to talk about that again. Instead, we have blasted that hope. We were at zero before yesterday, and we remain there. Guy obviously the president obviously the president went off topic, but when you look at the infrastructure trade, is it definitely off the table . Is it as dead as health care reform, tax reform . Mark i think it is a slightly different situation. It is dead in terms of there is not a premium price for anything to actually happen. I think it is probably less structurally dead in a longterm basis in terms of, i think everyone who looks at the u. S. Economy acknowledges the u. S. Does need some serious infrastructure investment. People who invest in Infrastructure Companies know that longterm, there will be spending to come through. At worst, it might come through later in the administration, but there is hope that there might be a bipartisan agreement to get something done. It just might come through much more slowly. There was nothing priced in for infrastructure, but its not dead. A lineam trying to draw between what we are talking about now with infrastructure and amazon. Amazon can sell paper at not much over where treasuries are. Youve got to think mr. Mnuchin would be looking at this and say, you know what . Be we should do the same. Maybe we should do the same. The u. S. Sells long dated paper pretty easily based on where the market is at the moment. The question is, is that the lesson i should learn from what amazon did yesterday . Mark i think it is probably the correct lesson to learn. I think it is probably not the time to have that debate, though, ahead of the debt ceiling situation. Thats why it has not come on the radar as hard as it was earlier this year. Once they saw the debt ceiling issue, we might see Steve Mnuchin reraise the issue. Amazon has shown that there is investor demand for superlong debt, and especially with inflation so low again, i think it will remain that way for some time, so i think they may have time to push this farther down the road, after the debt ceiling gets sorted out. Amazing. Complexity is one other fact we should throw on the books is there could potentially be another massive factor in the bond market coming up, the fed and its Balance Sheet and the rolloff we are likely to see coming. How many clues do you think we will get as to when that will start happening . Weve got to bang interesting things to look at from the minutes tonight that we did not think about a week ago. A week ago, we thought, they are never going to hike in december, but they have made clear they want to reduce the balance had the viewraders that it was unlikely we would see a rate hike in december. Suddenly, we have seen good data and hawkish comments in the wake of disappointing inflation, kind of implying that the fed is keen on pushing normalization. I think tonight we will hear more details about how the Balance Sheet reduction will happen, how they will react to any kind of market ructions were reactions to when they start program, and also a look at the chance of a hike in december. Ever. Ark, thanks as throughout the day, we will have plenty of coverage on the bloomberg of those minutes when they come out later. Matt . Want to remind viewers that if you are a bloomberg customer, you can watch the Program Using tv , as well as the video stream. You can follow our charts and functions, and you can message us directly at the bottom of your screen. Next, is there a tugofwar ahead over irelands order border . We are in dublin next. Please give the negotiators the time they need to negotiate. Give the United Kingdom and the government in london every day suggests another proposal. This is, in my eyes, not , and the default could help overcome the main problems, especially the guarantee of the core freedoms of the european union. Lets discuss it. , at the beginning of the negotiations, to put new proposals in addition to what is on the table was not meaningful. Guy that was chancellor candidate Martin Schulz speaking to our producer yesterday about brexit. More from him later in the program. Right now, we want to go to the bloomberg is this flash Bloomberg Business flash journey juliette amazon has sold 16 billion to fund whole foods market. According to a person of knowledge, the longest portion of the offering was sold at a yield of 1. 45 above treasuries. Firstbt sale marks the bond market foray by the Worlds Largest online retailer since 2014. N the activist investor has halted all litigations for at least three months and has agreed to the new ceo next month. Elliott will also support the plan to separate its karen separate its chemicals division. Pearls bird beat analyst estimates. The danish brewer says that interest earnings rose. It benefited from currency shift in russia and asia. And carlsbergs ceo will join us for his first interview of the day at 10 00 a. M. U. K. Time. Companiesng considering bids for offshore u. K. Windfarms. According to people familiar with the matter, copenhagen is also weighing offers. A representative from the corey declined to comment, well representatives from the viva aviva did not immediately respond. Uber is in exclusive talks to line up funding from foreign investors. According to people familiar, funding would come from softbank along with u. S. Equity firms dragon air and general atlantic. The deal is said to hang on the outcome of a courtroom brawl between two of the companys influential board remembers. That is your Bloomberg Business flash. Att juliette, thanks for that britain says it wants to avoid any physical border or customs checks with ireland as part of a deal with the european union. As tensions mount, the British Government is due to publish a document fleshing out its proposal at noon in london time today. We are joined by our Dublin Bureau chief. What exactly does the u. K. Want . Sovereignit was about control of its borders, but if you could enter and exit freely from the new to ireland from the eu to ireland and in the same to the u. K. , it is pretty clear they are not going to have that. Thats a good point. The top line here is the point of board controls are unacceptable. Twohen goes on to outline ways of achieving that objective. Number one, keep the status keep the Interest Rates as they are today, so no need for a border. The second is a more complicated system, which involves things like a trusted trader system. That would mean that if your shipping across ireland, you would not need to fill out declarations. The top line, you are right, they say it is unacceptable to have control over the ireland ireland. Irelands environment. Guy the consensus yesterday was that this was your fantasy. The government would find it unacceptable to have a hard border, and there are all kinds of implications for the peace process, etc. But given the response to the customs story yesterday, what is the feeling in dublin about how realistic it is going to be about not having some sort of your post up there . Anna that guest thats a good point. The proposals do welcome the Irish Language of no border controls. Seen frenchave farmers raise concerns about the prospects of a totally open border between the north and south of ireland. Their point is the u. K. Could ship indeed from brazil, ship it down to the south of ireland in into the eu. It has been made clear that theyre already asked if some kind of frontier control, so we could see a collision course unless these issues can be resolved. Matt what happens next on this issue . Where do we go from here . My feeling is that the border question is not going to be the whole of the talks. After all, we can only really border once we know what the relationship is between the block in the u. K. I think we will see something in the order that will agree to general principles around the irish border. Ultimately, the shape of the irish border will depend on the. Eal of the theresa may strike but this will not be resolved for three or four years. Guy can i ask you a longerterm question about the relationship between the u. K. , ireland, and irelands relationship with the eu . I have a charge appear that shows irelands journey. Pretty much in line with france, and france has a big liquidity advantage. It has been an amazing journey to see. My question is, does ireland see itself now as a core country, and how does that wherewith britain postbrexit square with britain postbrexit . This we have talked about idea of an irish exit from the eu. The irish are the keenest supporters of eu membership, more than any other country, so that idea that ireland would somehow follow the u. K. Out of the eu is nonsense. Trying to act as a bridge between the two sides. It has got sympathy with the uks position in terms of trading relationship. In a way, it is a difficult job. It is trying to straddle two camps. They wante. U. The u. K. And the eu to have the strongest possible trading links, but they want to keep merkel outside. Much, ourks very bureau chief in dublin. We are minutes away from the start of cash trading in europe. Next, we take a look at the movers in todays trade, including mollermaersk, which reported a big miss on its secondquarter pretax profit and its adjusted net income. The open is eight minutes away. Guy minutes away from the market open. Keep an eye on air berlin today. Another interesting investment by mr. Hogan. Not exactly working out. Condor said to be interested. Lufthansa, this could work in its favor. It is going to see a it will be interesting to see how it works its way through. Carlsberg could open positive this morning. Looks like the costcutting program is ahead. The question is, why are they raising guidance . It looks like the akzonobel may have found an agreement with elliott to call it truce call a truce between these two businesses. Bet yeah, elliott made backing down after some unsuccessful litigation. We will talk to the ceo of mollermaersk in a moment, but the company missed estimates by a mile. Big loss of almost 300 million. They are looking for profits of 500 million. Almost as loss was sizable, and part of the reason was a 300 million euro hit from a cyber attack that had been reported earlier, but also from downgrades in the value of some of its ships. Guy welcome. One minute to go until cash opens in europe. We are looking at european markets to open up by around. 5 . Stockis going to be huge movers today. Air berlin mugs like it will be a huge story not only for the market, but for germany. Hold . Oes the future who will take it over and who will complain the loudest about their consolidation . That is a story to watch out for. European stocks look like they will open higher. Story. The ap moeller matt that is right through the shipping center and Airlines Come up maybe not good news today, but from the periphery of europe, we do have good news. Here is one chart. G btv 9141. It shows an upward revision for the italian economy. You can see something similar for the spanish economy. Also, really going gangbusters. The peripherals, you showed ireland earlier, are becoming as strong as the court. Guy let us take a look at where we stand with these markets. London market opening up shy of the 74 level. , dax, aex, up. The breakdown, fairly interesting. Absolutely. Let me check out the imap here on the stoxx 600 to see which groups are moving around the most. You have got, obviously, all of the 11 Industry Groups on the stoxx 600. The s p has 10. The stoxx 600 has 11. One group that is not classified. You can see the big gainers are energy and materials right now, and really leading the charge behind them i. T. And telecoms. Maybe not in the defensive way the telecoms often behave. Energy and materials, the beginners today. It does not look like you have seen a real hit from mollermaersk, from air berlin, from that shipping and Airlines Sector right now, because the losers well, the smallest winners of the bunch are really health care and consumer staples. The defensive players are the ones that doing quite as well as the rest. Guy let us take a look at some of the individual movers and get a sense of where the individual stop names are going. Is market likes what it seen. It is up by 4. 5 in excess of 4. 5 . They are trading higher. Downsideow you the because it will lead us to our next conversation. Ap mollermaersk down by 3. 06 . As i said yesterday, when you have got that kind of look at the individual stock value, and then look at the percentage change. Youre talking about an absolute number. The company has reported an unexpected loss. The shipping business kept its fullyear outlook despite the impact of cyber attack possibilities. We will talk about all of this now with the companys ceo. Good morning to you, sir. Surprised by the numbers you posted this morning. What lies behind them . Guest we, in the Second Quarter, significantly improved the underlying business. It is almost three times what it was in the same quarter last year, driven by very healthy fundamentals. We did use, we did take this impairments in our oil thinker business, which drives the reported loss, but i isnk the main story for us actually the positive developments in our container shipping business. Though,e impairment, 732 million, is a pretty massive number. Have you got everything with that . How is the outlook now for the fleet . Soren so we made an impairment of more than 450 million in our oil take a business, and the rest in our container business. We look at all of our assets every quarter. You get the outlook and make the right down if we think we have to. It is basically it is based on the outlook for the business, so i think it reflects the reality. Matt you have the 300 million to 300 million in losses due to the cyber attack. That was not in the quarter he reported, but in this current quarter. Are you comfortable that that is the upper range of this number . And will that hold you back from being able to reported profit in the Third Quarter . Soren well, no. We believe that the 300 million rate is what this will end up costing us in terms of lost business and extra cost for rebuilding and so on. We still are maintaining our guidance for the company and for the container shipping business of an improvement of more than 1 billion compared to the same period last year. So that, i guess, is in a way a testament to the relatively strong fundamentals we now have in container shipping. Guy can i pick up on those strong fundamentals that you talk about . How much of that is down to the consolidation we saw in this industry in the last year . Do you expect those fundamentals to improve going into next year with more consolidation . Soren first of all, i believe that what is helping us right now is that the Global Economy, frankly, is doing quite well. We are finally out of the draft of the financial the grasp of the financial crisis. That has meant a strong rebound. The demand is around 6 of our this year. The business is growing with twice the speed of global gdp. Supplyside, we have a relatively benign capacity demand is meaning outgrowing supply and has been since the Third Quarter last year. I think that is the fundamental that is driving prices higher. Our freight rates were up 22 in the Second Quarter year on year. I am looking at relatively positive fundamentals. Actually, the best since 2010, for the next few years. Guy the backdrop is kind of fundamentally driven because of global trade. Can i ask you a consolidation question from a different angle . Do you think that would encourage further consolidation . 40 you think that would make consolidation must likely or do you think that would make consolidation less likely . Soren as you point out yourself, the sector has consolidated quite a lot in the last three years. I think many, including myself, have been surprised with the number of transactions, and we industry that an used to have 20 carriers that could call themselves globals to now 11. I would very much expect that consolidation would continue, and that we would see a situation within the next decade of maybe even half of the number than what we have today simply because the economies are scaling in the industry such that the Bigger Companies are more competitive from a cost point of view and also from a Service Point of view. I see consolidation continuing. The incentively, to consolidate from a financial point of view becomes smaller if everybody is making a lot of money, and that may delay things, but in my mind, it is inevitable that we will see more consolidation. Maersk participate in a consolidation . Soren we have one transaction we still have to close, which was our acquisition of hamburg. We expect to close it in the Fourth Quarter of this year, and we need to integrate that and deliver on our Business Case before we can think about doing anything more in this sector. Guy can i ask you a slightly strange question . The u. K. Is trying to figure out whether or not it can have a frictionless border with the rest of the e. U. If it were outside the customs union. You are a guy who ships stuff around the world, out of the u. K. , into europe, vice versa. How Much Technology and spending would be required to make that happen . Do you think it is a viable option . Oh, medicine is probably a question that is a little bit that is a area oh, question that is a little bit outside my area of expertise. From an International Shipping know, we are, you used to dealing with all of the countries, basically, in the world. We are present in more than 120 countries. Whatever the u. K. Is doing in terms of how to run it, i am sure we will be able to adapt to that. I am sure the u. K. , no matter what, will develop solutions that are digital and based on i. T. I think it will be possible to handle this in a very smooth way. Guy i only ask because you moved a lot of stuff around the world, and i guess when it comes to the nuts and bolts of it, that is what were talking about. Thank you very much indeed. Soren skou. With us now, mouhammed choukeir, talking about the fact that the Global Economy is do you see that reflected in what you are doing right now . Mouhammed that is certainly a tailwind. They are quite high and continuing to rise. It is a big tailwind. Guy our asset prices ahead of that or behind that . Mouhammed they are reflecting the strong earnings backdrop. Q2 numbers were up 10 . There is a strong corporate backdrop. The geopolitical uncertainty, all of the issues that we are currently immersed in globally have not been reflected in the fundamentals. The fundamentals are quite strong. And i ask youk i askedas i asked guy as much as i ask you. What is wrong with airlines here . Especially in europe, with the kind of growth that we are seeing. Consumer spending boosting the German Economy. You have air berlin going bust. I mean, why would an airline, especially in germany, be going bust right now . Mouhammed i think this is a specific to the companies and or the Business Models they are adopting. There is a lot of competition in that stage. Aviation is an industry that is growing. Berlin airlines is operating within an economic backdrop that is thriving, as we mentioned. This is very specific about the competition in that space, whether it is how tickets are priced or how the airline delivers its service. Guy there is a lot of capacity in europe at the moment, almost reflecting what is happening. There is tons of capacity coming through. There has been a huge downward pressure on fares. So, load factors. You look at the load factor out of an Airline Might miner, incredibly high. The pressure on laces remains. You have also got to be kind of looking at the oil price and thinking about what is happening there, whether the hedges or working or not. I suspect the capacity story, like the shipping story we talked about what is happening in the other market. The economy is going really strongly. That is not going to work. Mouhammed choukeir will stay with us. He is going to stay with us. , we will carry on the conversation surrounding what is going on in washington and the Brexit Debate as well. There is a lot of European Data to factor in today, including wage data out of the u. K. This is bloomberg. Guy quarter past the hour. We have been trading for 15 minutes. This wednesday morning, as you can see, we are looking at a market that is reasonably positive. Germany up by. 7 . Markets on the front foot. Of these other things to think about it when it comes to these stories surrounding the markets right now, but i guess you are focused on the fed today, the minutes, what is happening economically with a lot of data coming out, and probably ignore what is happening in washington and the brexit story. Negotiators need to show flexibility and imagination to divide the postbrexit arrangement. Sayss Brexit Department comprising the e. U. s only land border with the u. K. Ireland also plays an important economical. Here is a chart i made yesterday. Ireland, the periphery. This is the journey you go through, as you see. I remember the snowy days as they announced the financial crisis in terms of the details of what was going to happen next. I will tell the building fell over quite promptly. The yield spiking higher. Ever since then, they have come back in. Now, this is over germany. This is ireland and france over germany. The blue line is france. In terms of the journey that ireland has been through, it has been an incredible one. Do you worry that may be brexit story could upset the Irish Economy . The irish are committed to what is happening here. Yes, there are plenty of problems that could overtake them. Not overtake them, but take the edge off what has been an incredible journey. Mouhammed the market is telling us that brexit is a nonissue. Be navigated quite successfully on both sides, and then you demonstrate that in the chart, but clearly, there is a lot at stake, whether it is in ireland or the e. U. The announcement made overnight is thin on details. Guy it feels like mouhammed it is going to be thin. Side ofnly hearing one the negotiation right now. We saw that yesterday with the customs announcement. Today, with the irish border announcement. We need to hear the other side. Are they going to be open to this discussion, or is the door closed and we need to be tough on this . Matt we have heard from the e. U. A response to yesterdays kind of request or paper that said there needs to be a transfer period. You have got to negotiate the exit before we start to negotiate the trade. The e. U. Has been steady about saying that. The u. K. Does not seem like it is listening. ,y question, mouhammed is about the pound. There was an interesting story saying all of the sort of Institutional Hedge Fund clients are neutral to the pound and have sold it. And only real money still holds it, but the trend is down. Where do you see the british pound . Mouhammed the british pound has had almost three phases in its Development Since brexit. The first phase was off of the brexit vote. The next phase was a decline in the pound where the scenario of hard brexit started to become highly considered because of speeches by theresa may. Now, we are entering a period where the pound will continue to face pressure. That is a period of deadlock and negotiations. The initial response from the e. U. Has been we cannot do a piece mail deal a piecemeal deal. The u. K. Government clearly wants to negotiate in a certain way. The europeans want to do it another. If that impasse continues, that will put a lot of pressure on the pound. Guy stick around. Thank you for spending time with us this morning. We are going to talk about what is happening out in the United States and in europe. Interestingly enough, the health of the european economy. Plenty of Economic Data to watch out for. We need to talk about the old ecb building. We need to talk about what is happening in the United States as well. This is bloomberg. Guy welcome back to the open. Lets talk about some of the top stories we are watching this wednesday morning. President donald trump defended condemn whiteo supremacists for the violins in virginia, saying he needed to gather the facts. President trump said there was for the both sides violent clashes that erected. Pres. Trump you had many people other than neonazis and white nationalists, ok . The press has treated them absolutely unfairly. In the other group also, you had fine people. Guy the contentious press conference was notionally about infrastructure. Look who was there. Gary cohn, mr. Mnuchin. They were going to talk about Infrastructure Spending and maybe try to put the agenda back on the rails on that front. Is still withkeir us. When you look at how you position yourself in the United States, do you put the president in one box over here and you put the economy and the fed and Everything Else in a Different Box over here . There is too much volatility in that box for me to worry about, so im going to focus on what is going on with the economy, on the retail sales numbers, what is happening with the fed trying to normalize policy is that how you play the United States . Absolutely. Focus on the fundamentals, and that will help you navigate the uncertainty, whether it is political or otherwise. Clearly, the Trump Presidency is controversial globally and within the u. S. The u. S. Economy is doing exceptionally well. The Federal Reserve is talking about continuing the normalization albeit at a slow pace. Earnings are very strong. It is a robust picture. There are challenges in investing in the u. S. Right now. It is valuations, not donald trump. If you are struggling to find value in the u. S. Market, it is because of elevated valuations, rather than a president causing a lot of uncertainty. Matt why has the u. S. Stock market continued to march along unfettered . We have a great chart that takes a real historical look at the s p 500 here. It is 2851 in the btv library. The blue is the s p 500. Those White Pyramid are days without 5 s drawdown. Up can see they are getting back to pretty high elevations historically. We can feel it also in the market, mouhammed. There has not been any real correction. Every week, we hit new highs. Why is that . Obviously, we are in a low volatility regime. Our Research Shows that lowvolatility regimes persist. You can expect volatility to remain low. The reason for that is because the upper economic backdrop is supportive and earnings are supportive. The second point is, although we have seen a very strong bull market, it is not the biggest bull market we have seen in history. To give you context, the average lastsarket in the u. S. Around six years and goes up 25 on an able basis. This one up around 15 annualized. The scope for it to continue , all coming from a higher place right now, but it is by no means over. It has beened, great to see you this morning. Thank you for sharing your thoughts. Mouhammed choukeir. Candidacy is falling flat in the lead up to the election. Plenty of data in the eurozone. We will be monitoring that. Will it have a political impact in terms of what is coming up in germany . We will talk about that. We will talk politics. What a jet going on with this election. A rainy day in germany. It looks as if it will be sunny in london. This is bloomberg. Got you outnumbered. The dinosaurs extinction. Dont listen to them. Not appropriate. Now im mashing these potatoes with my stick of butter. Why dont you sit over here. Find your awesome with the Xfinity Stream app. Included with xfinity tv. More to stream to every screen. Matt blame on both sides. President trump the finely defense is controversial reaction to the violence in charlottesville. Does this put the trump trade even further out of reach . Primed. On the online retailer giant cells 16 billion of longterm debt to fund its whole foods takeover. Amazon can sell fortyyear debt, why cant the u. S. Government do that . Sinks. Profit the ceo tells bloomberg consolidation in the sector will continue. Good morning, and welcome to Bloomberg Markets Bloomberg Markets european open. Guy . Cut in thatweird piece of film. The ship seems to accelerate really quickly. Let us talk about where we stand in terms of the markets. Stoxx 600 up by around. 6 , pretty much the average around europe. Look, to be honest, really interesting stock moves this morning. Merck, one of them. Air berlin is a fascinating story. It was a great question you asked about why it air berlin is trading down today when the news came down yesterday, and why an airline in germany at this point in time is doing what it is doing is under pressure . Let us get an update with sam so sebastian salek. Sebastian they cannot use the nuclear deal to hold world hostage. Irans Nuclear Program could be ramped up if the u. S. Continues its threats of sanctions. President trump want to abandon the deal. Congress passed the sanctions on tehran earlier this month. Britain want to avoid a customs check with ireland as part of any brexit deal with the european union. The Brexit Department said u. K. European negotiators need to show flexibility and imagination. The u. K. Government is due to publish a document to flesh out the proposal at noon today, london time. China has reclaimed its position at the top for an owner of your treasuries after increasing its holdings for the fifth straight month. Chinas holdings of u. S. Bonds rose in june. That pushed japan into second place as the stockpile decreased. The two countries account for more than one third of all Foreign Ownership of treasuries. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt thanks very much. Biggest also go to returning germanys social democrats to power may not be Angela Merkel, but a feelgood economy in germany, one that is proving to be more ego a terry and then the economies of its european peers. Schulz pitch is a hard sell at a time when germans are happier with their Economic Situation than in any of the last five election cycles. The German Economy grew 0. 6 in the Second Quarter, and was upgraded in the first quarter, given by domestic demand, consumer spending. So where are we in the election . Joining me now to discuss that is alan crawford, the head of political coverage here in europe. He also wrote a book on Angela Merkel. Let me ask, first of all, if schulz is doing the right thing, if he is pursuing the right strategy. Happy that germans are doing better, with the exception of air berlin. Why doesnt Martin Schulz goa different way . Go a different way . Alan he is hammering away at this idea that come yes, germany as a whole is doing very well, but not all germans are participating in the boom, so he is banking on trying to appeal to those disaffected germans top perhaps in a similar way that the labour party in the u. K. Was pretty successful at appealing to angry voters who had not shared in the perceived success in the u. K. Matt it is true that the median german does not have an income higher than that of the median earner in other european countries. The Poverty Level is higher than a lot of people would believe, but there seems to be so many other issues he could hammer away on. The refugee issue, not one the spd can naturally attack merkel on. The diesel issue seems to be one i feel like is a free pass. It is a softball right down the middle. Schulz problem is the fact that his party has been in government for the past four we haveth her goal, so seen this time and again that with the spd candidate, they have to bring coalitions with coalitions two with merkel for three terms. It is difficult to create this distance. He was full of praise for the economy minister, and her role in this. Berlin event. R he finds it hard to be overtly critical of merkels role. That is why he is focusing on specifically social democrat issues like inequality. Guy if you look back at the tenure, anyone who has gone into coalition with her as a junior partner has suffered it. You just laid out what is happening with the latest grand coalition. You could see it from the previous administrations as well. Does that mean that anybody that intoa merkel wants to go coalition with her next time may be able to extract the higher price . I. E. , it has not worked out for us in the past, so if you want to do this again, you have got to get us more if you want us to go into coalition with you, i. E. Better seats at the table . Alan that is a good point, guy. We saw what her second term that are partner allies. They were crushed at the end of her second term. They returned no members to the bundesbank. They were obliterated. Fromke to former members the ftp, and they said they are very reluctant to entertain any kind of coalition with merkel. I think i take that with a large pinch of salt, but the critics can drag bigger concessions. Merkels party will be in a er position. It could be a longer period before we form a government here. Negotiationmore necessary. On crawford, our european Government Team leader, and Angela Merkel biographer. Up next, we will talk the Business Impact of trump doubling down on his controversial comments after the violence in charlottesville. And speaking out against the left his have counsel as well. This is bloomberg. Matt welcome back to Bloomberg Markets european open. I want to get straight over to the Bloomberg Business flash. Sebastian salek. Sold 16 amazon has billion of unsecured bonds to whole foods market. According to a person with knowledge of the matter, the longest portion of the offering, a 40 year security, was sold for yield of one point akzonobel has said it has come to an agreement to call a truce over their standoff. The activist investor has halted all investigation for threemonth and has agreed to back the swearingin of a ceo next month. Elliott will support access plans to separate its chemicals division. Has reported ak net loss after booking an impairment in its tanker units. The Company Posted a net loss of 269 million. Analysts expected a profit. The company set a Ransomware Attack will hurt earnings in Third Quarter. He beat a danish brewer said profits raised. Costss as they reduced and benefited from currency shifts in russia and asia. Aviva and China Resources buildings are among companies considering bids in a wind farm. According to people familiar with the matter, copenhagen Infrastructure Partners are weighing offers. It were presented of declined to comment. That is your Bloomberg Business flash. Guy. Guy thank you. Air berlin has filed for insolvency. The filing put german jobs at risk just weeks before Angela Merkel tries for reelection. Seeill be interesting to how the german wings story fits in with that. Let us get the details with Tracy Alloway. She joins us out of abu dhabi. The question says what went wrong. Did jim hogan make this garage . Pinpointed it there. Hot on theome heels of air italian filing after it pulled it financial its financial support. Been in ar berlin has relatively weak financial state for many years now. It wrapped up Something Like 2. 7 billion euros worth of losses over the past six years. How much does this actually transform the landscape of European Aviation . You pinpointed it. We have a loan coming from the German Government that will keep air berlin flying for the next three months or so. We have some speculation that it may end up being bought by another airline. Lufthansa. , that could the have save it over the course of the longer term. About theme ask sector. How important is this to the sector . Howmuch does this reflect what is going on in the Airline Industry . Back toeah, let me slip the role of james hogan. If youre going to pinpoint a major theme about this latest development, the theme has to be the departure of james hogan. He was the architect of this strategy where they were buying up minority stakes in european carriers as a way of finally i in connecting passengers and trying to catch up with some of the regional hub gulf. In the so far, it looks like that strategy was not successful, and that is why it is kind of being unwound right now. We also saw them selling a stake in a swiss regional carrier called darwin last month. That strategy is now in the course of being unwound. Guy yeah, the capacity issues are going to be one to watch out for. The capacity staying in the air at the moment and i will be something ryanair expects to get very peeved about. Tracy alloway, thank you very much indeed three Tracy Alloway joining us from abu dhabi. Donald trump has returned to his controversial opinion that there was blame on both sides in the deadly clashes in virginia over the weekend. He has faced in tents criticism for saying on saturday that many sides bore blame for the violence that arrested intercultural. That was a horrible day. I will tell you something. I watched those very closely, much more closely than you people watched it, and you had a group on one side that was bad, and you had a group on the other side that was also very violent. And nobody wants you say that, but i will say that right now. Us bring in our Global Business reporter, stephanie baker. Is Business Community already walking away fairly quickly from the trump administration. We have seen that devon waited over the last couple of days. He was there offensively to talk about infrastructure. Mnuchin was standing next to him. The event got hijacked by recent events. How was the interface between business and the presidency going to develop from here, given these kind of events that continue to carry on . Stephanie i think what you have is ceos that joined his soiness council, and in doing, have de facto politicized their roles, and now, they face a very difficult decision about whether or not to continue on with that with those positions, given the fact that he has alienated many of these companies customers and employees, and they have to w eigh that versus being close to policysident and shaping going forward. They are under tremendous pressure to step down. You have a Twitter Campaign called quitthecouncil. Many people were shocked by his comments last night he quitting , withsupremacists, kkk the counterprotesters. Even some of his supporters are wondering, you know, what he was going on about. Think there was disbelief we have seen many points where we thought this was the turning point. This feels like another one. It is hard to see how people will not be able to react. They must feel compelled to react. Matt stephanie, we showed pictures of people who left the council. Who is still on this council, and do we have any indication that those remaining are really committed to standing with President Trump . Stephanie yeah, you have pepsicoss ceo. She is still on the council. She came out with a very strong statement critical of what trump said, but she has decided to remain on the council. You have the ceos of lockheed and boeing and United Technologies that remain on the council, and they also do business with the government, so the thinking that is going to their minds is more complicated. , we have got seven executives that have stepped down from his manufacturing cil,sel, and you coun and there are debates about where do they go from here. Guy stephanie, we are going to leave you there. A conversation we will continue throughout the day. Let us take a look at where european markets are. Plenty of stocks that are worth focusing on this morning. Air berlin is certainly one of those. Mollermaersk is coming back to little bit. Akzonobel finding Common Ground with elliott. We are getting more traction. The dax is up i. 8 this morning. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are focused in pretty precisely on germany, the election, the economy. We have had a lot of strong data in the last couple days. We had strong gdp data. And the Election Campaign is starting to heat up in its first week ahead of this september 20 fourth competition. Joining me now to talk about ,hat is Marcel Fratzscher president of the German Institute for research. Thanks so much for joining us this morning. Let me ask first about Martin Schulz chances. We talked to him a little bit he did nott i, but want to spend too much time with the media. It seems like he needs to do more right now because he is so far behind Angela Merkel. Arcel Angela Merkel is fired it is hard to see there could be a fundamental change. Martin schulz is fighting. Twodifficulty is the parties form a government. Germany is doing so well. The economy is booming. Everyone has a job. Employment is at an alltime high. It is very hard to find issues to disagree between the two of them, and that makes a bit of a boring Election Campaign because germany it is in a very true germany is in a very privileged situation. Matt you have this massive influx of refugees. Re should bee the opening on the right. Is the afd able to profit from that . Marcel it is true that inequality has risen. This is an issue. A lot of people on the fringes are marginalized, are frustrated. We have seen them lose in terms of support. They were at posted 20 last year. Big influx of this of refugees that germany had. Now, they are about to 7 or 8 . They might not make the threshold of 5 . It is a close call. They have been losing support. Many on the far left have also been around a percent or 9 . You have these two parties, and the competition will be that there will be seven parties. They will be very difficult to form a coalition. Guy good morning. Guy johnson from london. How would the liberals improve the German Economy . They are seen as being kind of proeconomy, but given the German Economy is doing pretty well right now in aggregate, how do you think they could improve it . Marcel if the liberals struck out of parliament for years ago for the First Time Since world war ii, that was a big shock. The liberals will be in parliament this time. They might actually form a government with the christian democrats, with Angela Merkel. They might be back into power. The liberals always have stood for business, always been in support of lower taxes. Germany has a huge problem with investment, both public and private investment. Too little investment in infrastructure. So the liberals might play an Important Role in improving and enhancing private investment your that is very important to productivity growth, which has been laggard in germany. If you look at the outlook for the future, the policies needed to be more probusiness. Guy do you think the liberals may end up taking the finance ministry . Big, bighat is a questions. The finance ministry is really on policiesicular, for europe. Everyone agrees europe needs to reform. Needs morey union reform through the french want more solidarity. The germans want more rules. The current finance minister has been very influential and important. If the liberals take that post, they would have to have a good person filling that role. It is very crucial not just for germany, but for all of europe. Matt i have lived and worked in the u k, in the u. S. , and now here in germany. I am floored by the amount of taxes that german people pay in income as a part of their income. Is there any room for that to drop down . It is so much more than brits and americans paying. True. that is you might argue less than the scandinavians or the french pay, but taxes are very high. Both of the parties are promising tax cuts, but it is very margaret very moderate. They had increased social spending massively, particularly on pensions. There is really no room to cut taxes are a much because low Interest Rates and a very good labor market are the two reasons why tax revenues have been high, but that is nothing here to stay. Interest rates will keep rising so that will take the room for the government to cut taxes, so yes, tax cuts are on the table. Matt it looks like merkel has a great chance of winning this election without offering much to her constituents or to her coalition partners. Thanks so much for your time. Pleasure seeing you, Marcel Fratzscher. This is bloomberg. Track your pack. Set a curfew, or two. Make dinnertime device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. Introducing xfinity xfi. Amazing speed, coverage and control. Change the way you wifi. Xfinity. The future of awesome. You look at both sides, i think there is blame on both sides. Thecine trump plays charlottesville blame game aga in. More quit the president s advisory council. Yesterdays lowerthanexpected inflation figure. Now we get the latest reading on the u. K. Wage growth. Broadcast battle. Why europes tv