Transcripts For BLOOMBERG On The Move 20160817

Stocks rapid rise is justified. Good morning. Less than half an hour away from the european open. Lets take it to the terminal and show you what is happening. Where do we think we will be opening with the european equities . W. E. I. , click futures. 3 10 of 1 higher this morning. That seems to be the picture across europe, except for the dax, which looks like it will be something of a laggard. Lets take you now to the gmm and show you whats going on. This is what we need to show you. You should probably take away the bloomberg dollar index, up. Which, the of japanese yen, hong kong dollar, new zealand dollar, australian dollar, all down. You are seeing some movement in the bond market. Japanese 10 year is up. Up 5. 6 lk apparently this morning. Take of that what you will. Juliette saly is here. Juliette the bank of england has found enough bonds to meet its weekly target. Yesterday the bank of england posted 1. 1 billion pounds of gilt, coming after they fell shuort of the target. Cisco systems is reportedly cutting up to 15,000 jobs. Willding to crn, they announce the layoffs in the next few weeks. Cisco has been shifting toward softwarebased networking products which requires workers of different skill sets. The ceo declined to comment. Japanese shares climbed on thin volume during wednesdays trade. Exporters gained as the yen halted its advance. Its the second time this year the japanese currency rose above that level. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. This is bloomberg. , thank you. E than the fomc releases minutes from its july meeting later today, coming off hawkish to some officials, as investors look for more evidence that the fed may be ready to move. Havee last 24 hours, two suggested that the september meeting is a live one, and while the market remains skeptical of a fed hike this year, it has risen above 50 for the First Time Since brexit. To be honest, that number needs to be near 90 for ta price in. We have a Senior Investment manager with us. Good morning. The market doesnt believe people like dudley when they say the september meeting is live. The frustration at the fed must be absolutely enormous. Maybe they dont want to raise rates, but there must be the desire to get some twoway risk. If they turn around and say we pull the trigger, the market is way out of position. I think thats right. Investors are still pretty dovish, but most of the data season some kind of activity over the next six months or so. I think investors should be conscious about Interest Rates. Guy why are they not . They really arent. We have a december meeting on the probability function that we have on the bloomberg, i think its 51. That number needs to be 90 to show any kind of conviction in the market. The market is basically ignoring the fed. It doesnt believe, and you can understand why, because of the track record. They have to come to it difficult decision to a difficult decision. We saw that at the end of last year and with brexit. I think investors have a lot of uncertainty, and they are probably expecting that the fed will tend toward the cautious side. That is what history has said. Guy investors have been moving into emerging markets, in bonds and inequities. And in equities. If you go back to the beginning of the year, investors were worried about three things. What was going on in china, the potential for the u. S. Raising Interest Rates more aggressively, and what was happening with brexit. In terms of emerging markets, they have all moved in their favor. Brexit has driven money into emerging markets. China has stabilized as a result of the stimulus. That, in turn has stabilized Commodity Prices. And it pushes back the expectations for rate rises, which is a favorable backdrop. Even if the fed looks to raise rates faster, i dont think it destabilizes the other legs. Guy are we in the process of effectively lowering where we keep the terminal rate . We are having all kinds of conversations out in san francisco, making this point that we are in a different world, and we should abandon the inflation target. There is no inflation in the u. S. Economy right now. Pushing for that 2 target is maybe not the way we should proceed. Rates are likely to be lower. Were living in a different paradigm. Absolutely. And we are seeing discussions around all sorts of things that people werent even talking about a year ago. Helicopter money, money being conned directly into the economy. These things are starting to move onto mainstream discussion, falling into the u. S. President ial debates. Yes, we are certainly in a different world. The expectations of where longterm rates will end up are different. Perhaps we have to think about the lower terminal rate. But i still think the direction is likely to be up. Guy weve got jackson hole coming up. Its an academic exercise, but nevertheless it provides guidance as to where policy is likely to move. What is the message we are likely to get from janet yellen . At the central bankers still believe that i think central bankers believe that higher Interest Rates are a positive. They would like to see rates higher. I think they believe it would stabilize the Banking System, which is at the heart of the financial system. That is what has been driving the ambition to get the rates higher. When you listen to what mark carney has been saying in the u. K. , his thinking has been more around the stability and profitability of the Banking System than inflation when it comes to looking to maintain rates at a positive level. I think that is floating into the thinking as well. Its about the financial system. Guy i take on board your argument about the financial system, and look at whats happening in the eurozone to appreciate the effects. Nevertheless, this upward bias that exists seems to be being eroded. This desire i dont know what normalized means anymore rates, it seems to be becoming part of the conversation. Isyou think that upward bias going to be eroded significantly Going Forward . Are we in a world where it will stay terribly low for a terribly long time . We talked about lower for longer for a while, but it seems the duration i expect is being extended duration aspect is being extended. One of the risks is higherlevel inflations, or inflationary environment that spiral out of control. That would have been a concern in 2008, 2009. It was a huge bear on prospects of gold. We just havent seen those inflationary pressures. The risks in the system have been starting to receipt because the money multiplier has effectively collapsed. If something happens, which we dont anticipate today, that changes the dynamic, it will bring it back to the table. But at the moment Central Banks will say they dont see any reflation. So we can talk about helicopter money, almost anything, and doesnt seem to make any difference. But maybe that environment will persist forever. What changes . Who knows . But things will come along. Guy lets talk about one factor that could change it, a moment contributing to this inflationary talk, oil. It is halting its advanced after four days of gains. Yousef gallo has more from dubai. Give us a sense of the story. Yousef let me break it down. Several variables are feeding into this equation. That fourday streak, 12 in gains now, brent trading within 15 sense of 49 per barrel. Weekly u. S. Gasoline stockpiles expanded. We havent seen seasonal levels like this in two decades. Wti, we ares for 11 above the 100 day moving average. We are looking forward to numbers from the eia to give us a better sense of u. S. Inventory. A Bloomberg Survey is suggesting that there is going to be an increase of 950,000 barrels per week, and we also have more comments from the likes of sex bank and citigroup about the upcoming informal meeting in algiers, and they dont think that anything is going to come of it in terms of an actual production freeze. Guy thank you very much. Yousef gamal eldin. Ben, do you get any sense from the oil market . Any hints that we will see upward prices . Even then, the inflationary impact a few years down the road wont be that great. I think thats right. I think the shift wont make much difference to inflation. When you combine that with the shift in cable, then maybe that does start to drive inflation. Maybe we throw it into that in the last piece of data. But certainly moving to 60 wont be big. Guy maybe we are getting something. We will talk about that later. That ritchie will stay with us. Coming up, weve got to talk about sterling. Most forecasters see more room to fall, the one billionaire says the pounds decline has been overdone. Then we will be watching admirals ceo, a fascinating conversation. Take a look at where they are anticipating shares to go. The markets got this one wrong. Aen merkel hits the road, series of crises on her Approval Rating as she has the campaign trail. Those stories and many more, coming up on on the move. This is bloomberg. Guy 44 minutes past the hour. Welcome back. That is new york, not quite waking up. Another hot day, the market expected to take up just a little bit. Lets catch you up on what you need to know, with juliette saly. Juliette guy, thank you. Secondquartert profits at 65 to the legal costs. Said net income fell to 391 million euros. Once one of the Worlds Largest banks, abn amro was transformed under state ownership into a consumer lender. Carlsberg has supported firsthalf profits that missed analyst estimates. Interest,nings before taxes, and items folde and the ceo will be on surveillance today. Shares have slumped in hong kong after he reported firsthalf profit that missed analyst estimates. Asias Biggest International airlines saying net income fell to 45. 5 million usd from hedging fuels, which match the gains of carrying more passengers. Atir ceo will be a guest 10 15 a. M. Billionaire Hedge Fund Owner Paul Tudor Jones is said to have dismissed about 50 of his workforce. According to people with knowledge of the matter, the employees affected range from underperforming Money Managers to support staff. This comes as they see more than 2 billion in investor withdrawals. That is your Bloomberg Business flash. Guy thank you. So, has sterling found a bottom . While medium forecasts have the pound falling further by the end of the year, one investor thinks it may be oversold. We spoke to wilbur ross. A personal basis, i bought some sterling. Currencyspeculate in in the fund; the fund is always hedged back to dollars, because our investors gave us dollars and we want to give them dollars back. But on a personal basis, it may be getting overdone i dont quite agree with george soros. Guy so which side of the fence ben ritchie said on . Thats a difficult decision. I think wilbur ross is someone i respect a lot, and we certainly see him as a shrewd value investor. I think his opinion certainly carries weight. Guy in terms of how you see the world post brexit, what is the post brexit period being like . Has been a pretty extraordinary period of time. We are talking, and of june, who would have thought that the ftse rallied as much as that has . Veryw the government flexible for a long. With time. We saw the collapse of currency and yet investors have shrugged most of it off. Even some of the domestic stocks, which did take a beating, have managed to recover quite a lot of their losses. It has been quite a remarkable period. Guy what effect do you think the qe will have . I think the extension of the isi program is they q qe already priced in. We have seen yields tying in further on corporate bonds. That has come into market expectations. And we have seen the currency we can as well in anticipation. I think the actual effect going forth is probably limited. Guy inflation picks up in the u. K. . What effect will it have . Exhibit a is from yesterdays data, the ppi numbers, the precursor to the cpi, maybe. And we are seeing ppi start to pick up. The Producer Prices are starting to rise. I think what you see there is the recovery in Commodity Prices feeding through. I think it will take some time for the decline in sterling and the tick up we have seen an oil to get to u. K. Inflation. But i think it would be wise to expect inflation to increase, given the backdrop. Guy when it shows the Brexit Effect, and your point is well made about Commodity Prices picking up, todays labor market data was such a lagging indicator that you wont be able to get much brexit news away from it. What do you think that will come through, and when it arrives, what do you think it will do . I dont think it will be that dramatic. I dont think companies are sitting there making radical decisions. That is not what we are seeing. I think they are sitting and waiting, maybe postponing Capital Investment, but probably continuing with maintenance. Probably not rushing out to higher swaths of new people. They probably arent going to moonshot, but it is very much a business as usual approach. I would expect to see a general softening rather than some dramatic fall off the class. Guy more from ben in a minute. Coming up, we are minutes away from the markets. We will take a look at the potential corporate movers in todays trading. Carls bear out on numbers. Well talk about admiral as well. Those stories coming up. This is bloomberg. Guy 7 53 in london, h 53 in lets get you and the stocks we need to Pay Attention to. Markets called a little bit higher. Admiral. The stock has been on quite a tear, a little softer this morning. There seems to be some consternation today; we will talk about that. The admiral ceo will be joining us. David stevens will be coming up after 8 00 a. M. Carlsberg also called up. At the moment the indicators are that the stock probably open down 3 . We will see where we go with that. The danish brewer is certainly feeling the effects the currency story. Its had a difficult story over the last few years. It is very exposed to whats happening in the east, and that continues to have an effect. Lets talk about the reporting season. At the end of the reporting season, ben ritchie is still with us. What are we left on the table for the next half of a year . What have we learned this time at how much anticipation is there Going Forward . I think theres quite a lot of anticipation. The first half was quite difficult, but dont worry, we will pull it out of the bag in the second half. Thats quite a lot of expectation hanging on performance. They do we believe Economic Outlook isnt great right now. You can cut costs for a long time. P l is becoming an increasing struggle. What is going on . I think it is pointing towards sectors were Capital Investment has been lagging, such as energy or mining, and saying it is bottom. Some of the Defense Companies have said, actually, we will see higher Government Spending in the second half; dont worry. Then we have seen other companies pointing to costcutting plans and saying, dont worry, at the end of the day we will come through. Quite a lot of shares came off quite significantly, and investors said, its not a fullblown profit warning, that we are still quite cautious about whether you can deliver that, like pearson. Guy we will carry on the conversation when the stocks open. Ben ritchie will stay with us, from aberdeen. Coming up, the market open. We think we will see a mildly positive open. Four minutes away. This is bloomberg. Guy welcome. Im guy johnson at london. Were moments away from the start of european trading. Here is her morning brief. Death to the fed. Pleading that the markets price in the possibility of a hike this year. Will investors listen . U. K. Job stay. A snapshot of the post brexit jobs market. The u. K. Takes investors on a ride. Well talk to the new ceo, David Stevens. Is that jump in the stoxx justified, and what should we read into todays line in the companys report . Lets talk about where markets are. 22nd away from the open, anticipating a mildly positive start. We sold off into the close yesterday. Lets show you everything things are going to go here at the open. Ftse 100, dax, cac, all poised to open. When we show you whats happening. This was the selloff into yesterdays close. Lets assume in. The ftse rising a touch, not by much. A mildly positive start to the day, up less than 1 10 of 1 . We will see the continental markets fell in the same way. Cac is proving to be an outperform or, rising more than ftse. Lets get the details with elliott gotkine. Nejra elliott the stoxx 600 up, and other Industry Groups gaining. Materials and parts of information technology. Semiconductors are the ones that are declining, semiconductors and Semiconductor Equipment in terms of stocks that most Industry Groups are gaining. Again,nds are trading you can see that borrowing costs and thettle bit lower, yield is a little bit lower this morning. Yesterday we saw the yield rising, and what a difference a week makes in the bond buying program. Yesterday it struggled to buy and now investors are falling over themselves to sell and push the yields higher. That is what we saw yesterday given that we were touching those record lows in terms of field just last week. We can see the yields are lower, perhaps some of that money going back into bonds following yesterdays fall in bond prices. Guy thank you. Elliott gotkine with the market open for equity markets and gilt. Lets talk about one u. K. Company, admiral. Higher waiting for the stock to open to get you a price on what is happening. The company has seen a rise in firsthalf earnings, which provides a report of 139 million pounds, now for 186 million. Revenue is also up and the dividend has been raised. There is a line people are paying attention to, the solvency line. The admiral ceo David Stevens joins us. The market seems to have set up and Pay Attention. Whats going on . We still have a very strong what we saidsion, six months ago is that the solvency process that said the requirement provisionally had completed at the end of 2016 and we had a fair amount of capital and plant to pay down that capital, over two or three years. At the end we would have our own internal model, giving us longterm capital requirements. Our estimate was between 150 million in 200 million to pay out. The yield curves had moved pretty violently post brexit and we are amending the estimate to say that what we know at the moment as well at 100 million to 150 million. I dont think it is that big a deal in terms of change to the underlying economics, the company has paid out as of today three times the value and launched in 2004. We paid dividends equivalent to three times that market valuation. Just just to be clear, this is a result of what has happened post brexit and what has been going on in the bond market. Yeah, exactly. Is the yield curve. Other things might drive the yield curve, but in this case it was brexit. Guy what do you anticipate Going Forward . The yield curve has moved significantly, it we saw the frontend of the u. K. Curve go negative we have seen a flattening out. What you anticipate Going Forward . The bank may still cut rates. What do you see in the future . Well, we are relaxed underway. We only have 180 of solvency will which is a strong position capitalized. There on a number of things that move the yield curve but we are very confident that whatever happens there will be Access Capital to pay out. How much, we will constantly review and recalibrate every six months. Guy do you think the market understands your talk, the Business Model . Im going to show everybody at home a function of my bloomberg is thel what it shows market price and price target. The price target is 17 pounds and the price of the stock at the moment is 22 pounds 54. There is a massive spring their between where analysts. Price Going Forward and with the current price is. The stock is opening down nearly 7 , but give me a sense of what. Re you are doing if you like of the history of our share price has shown moving Movement Movement of hands down. I dont comment beyond that in terms of the share price we basically focus on delivering the maximum value to our shareholders are doing the best for our customers and the share price will be whatever the market is. Not the are plainvanilla casualty business, you do different things, you have different aspects, and i am wondering if thats what the difference. Well, we are an unusual business. Ratioe a strong combined and we use that to negotiate the terms with insurers that provide the bulk of our capital and that delivers a good return on equity. That is not a typical pattern for an insurer. But i think the market has become pretty familiar with how that works and the understand the model and they appreciate the model and the fact that it generates substantial cash. Guy Going Forward, i things changing in the market and make your business more favorable . One area people are focused on will that area get easier you, do you think . We dont see a substantial change in the shortterm. It is something the government constantly reviews, but the reforms taking place to date havent materially impacted the volume of those claims, and that is not necessarily the case that it will change going. Guy include questions. A few quick questions. Feelu think you will weather effects coming through, we will see Employment Data today heavily lagging but we will nevertheless see that number beginning to roll over . Inflation is going up at some point, pdi going up, walk me through the effect you think it will have back into your business. Speculating that there might be some post brexit recession, one thing i would say is that the current Insurance Market proved pretty resilient to the last election. People really hold on to their cars. The rate of growth slowed but it never went negative in the market as a whole. There is some sort of effect whereby people cut back on Discretionary Spending which often means cutting back on driving cars they will keep their cars but drive less its an unusually less recession sensitive sector than the average sector. Post brexit recession is not a big worry for us its a big worry on the country but not for us. Guy the stocks are settling down, i know you dont comment on the share price, but do you think that is an overreaction . I never comment on the share price. Guy ok, fair enough. Let me ask you the last question negatively. Negative rates. Mark carney says he is not in favor but others are. Where do you stand . I think we have a company it happensou if we will make the most of it but i dont have a strong opinion. Guy fair enough. Thank you for taking the time to talk to us. David stevens, Admiral Group ceo. David didnt want to talk about it, but other certainly are. We spoke to paul krugman of the effects of Monetary Policy on the economy, and despite unprecedented experiments, the effects, he says, have been limited. I think theres an accumulation of evidence that Monetary Policy is pretty ineffective. He came into this inking Monetary Policy was an effective and then along came qe and turns outates there are all these other things that Central Banks can do but doing very much. Ritchie still with us. Has Monetary Policy run its course . I dont think so. There are tools that are open but at th the question is if they use them. Creation,mes to money i think it is a question of where you decide to put that in the impact it might have on inflationary trend we have seen purchases of Financial Assets and the question of whether you trade that money directly into the economy its that rubicon that has yet to be crossed the which is certainly an option and one that is perhaps coming closer. The factle talk about that we are moving toward a fiscally dominated environment. If you were the new chancellor, looking at what has happened with the yield curve, you can borrow money as far as the eye can see for virtually next economicand that makes Infrastructure Investment that much easier to do. Do you think that is the take away from the shift we have seen in the yield curve, that we arent you worried about these huge deficits, about whats happening with the budget, that now is the time to spend and develop a project . I think it comes down to the i dont think it actually changes the economics, but it certainly changes the politics. For a government that has talk about fiscal prudence in conservatism to decide to significantly raise the gdp ratio, that would be quite a different game. Governments have let the Exchange Rate to the heavy lifting because they see it as external. We have generally see politicians referred to do that because it is seen as extraneous and iir own activities, suspect that the politicians would probably prefer the Central Banks to do that lifting for them. Guy tell you think brexit has revealed an opportunity . It certainly has done, and it will give them the opportunity to set up the framework. I think there is certainly some sense in doing that, but whether or not politics is able to enable that is a more challenging question. Guy a genuine pleasure to have you, thank you for taking so much time to see us. Ben ritchie, aberdeen. Coming up, lowering the outlook. We will speak to the companys ceo. Then, ill go merkel hits the road. For Approval Rating taking a hit as she had the road. And the hawkish tones be enough to convince investors to move higher . We look at the meetings of the july meeting, later. This is bloomberg. Guy 16 minutes into the equity markets and, shares lower equity markets session. Shares are lower. Now is the ceo and president of joining us from finland. Good morning. The stock is down 10 this morning. Is that john leahys fault over anin airbus . Of course, there are other problems like delivery delays. The outlook is looking a bit more craze. With all the incidents that have taken place we have seen some that is also, and reducing revenues. Guy ok. So we cant completely lay the blame into what is happening down there to the 350. Do you think that is a permanent lowering of where we will see demand . Do you think the effects of what we are seeing in europe are going to have a meaningful, longterm impact . At this moment, i wouldnt forecast any longterm impact. We saw earlier in the year some cancellations, of a rebounded very nicely during the winter. Course this latest incident has renewed some of the concerns. Guy so youre lowering your capacity outlook, 8 to 7 growth outlook. How is that going to read and operating profit . Tell us what your operation profits are Going Forward. We have given our guidance and we said that we will Group Profits from last year, so we still continue to improve, that is the most important one stop the second part is that we are not that confident on the speed improvement you want to see higher speed improvement and therefore we are launching a review of our activities to see what opportunities we have to improve cost. Guy but as it stands at present, my sense is that you and the operating story will be slower than you would have done a few months sto. Shortterm, that is the picture. At the same time, our growth we areies are ongoing, investing quite heavily into accelerated growth and it means that we are spending today that more because we want to grow in the future. Guy do you think brexit will affect consolidation in europe . I dont see that really affecting the business. Depends the only thing we have seen so are is more interest on u. K. Because of cheaper sterling. Guy right. But you are one of the few remaining companies in europe that hasnt been part of this process everyone is watching to see where you anticipate your business kicking in. U. K. Cost change of heart change that consolidation in terms of where you think you will fit in . Do you think the aig story im just curious, because you really are one of the few missing pieces left. We might be a few missing pieces less, but it is the owners who have to make up their mind to see if we are going and investors backed. On the other hand, any speculation related to brexit, i think it is too early to say anything about. We hear so many schedules on the final impact of brexit, so it might be really far out. Guy thank you very much aching the time to the us Bloomberg Finnair ceo. And maybe a down, little shortterm uncertainty the u more on that story, next. This is bloomberg. Guy welcome back. Lets get you caught up with the bloomberg first word news and juliet sally. Juliette thank you. New york fed president William Dudley says a september rate hike is possible. He warnedn fox, investors that they are underestimating the likelihood of increases in borrowing cost, and we will get more insight at 7 00 p. M. U. K. Time when minutes of the july policy meeting released. The bank of england had enough bonds to meet its weekly targets. Yesterday they had just 1. 1 7 , after an attempt last week fell short of the Central Banks target. Systems is reportedly cutting up to 15,000 jobs worldwide, 20 of its workforce. They will announce the layoff the next few weeks as it shifts its business toward softwarebased networking and product. A spokesman declined to comment on the report. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. Bloomberg. Guy thank you. A 6 fall in firsthalf underlying revenue, but there is little sign yet of the brexit impact. The stock is up massively this morning, nearly 10 . The sense was that it was a lot worse. Is the stock telling the story this morning . Absolutely, this embattled Construction Company even though revenues have come down, profits have come back into over 100t year million and this year at about 7 million. More importantly they have reinstated the dividends which says that they are much more uncomfortable with their cash position. Factthey talk about the that there is no Brexit Effect that. D i can unde understand they have the potential to be a huge winner, assuming that the government goes out and spend money on infrastructure. Thats the big thing. Shirley ryan was speaking to the ceo and he was saying it is difficult at the moment to assess how brexit will affect it because they arent sure how the government will respond, and the pending recession they are well positioned to benefit from projects like heathrow, from the there are an array of programs with huge governments billions and billions. The question now is whether theresa may goes ahead with it. She wrote the thing saying that she is a supporter, but it comes after delays to the program, so it is still a little bit of the air. Guy thank you very much,. On bloomberg overturns the campaign trail. That story, next. This is bloomberg. [ clock ticking ] time. You only have so much. Thats why we want to make sure you wont have to wait on hold. And you wont have to guess when well turn up. Because after all we should fit into your life. Not the other way around. Everything is cool when youre watching a screen everything is awesome, when youre sharing a meme a voice remote, show me angry kings you know whats awesome . Everything apps that please, more selfies, endless hours of the best tvs brand new apps, shows to go, awesome internet thats super whoa. Everything is awesome xfinity. The future of awesome. Guy welcome back. Half an hour into the equity market session; lets talk about how the markets are shaping up in europe. Story, we are watching whats happening to the dollar, 10 year corporate movers today is were the real story is. Lets get the details with elliott gotkine. Elliott three of the stocks that are sticking out this saying itsdrugmaker had showed very strong advocacy, and it is the biggest gainer on the stoxx 600. A Radio Company doing well, but even so, rbc said there was a pretty solid result and as a result we have the shares rising by 5 , still partly owned by the dutch government. And shares are declining on the stoxx 600 by some 7 after its solvency ratio declined in the first half, a measure of the risk the insurer faces, declining as a result of the dividend is paying out to investors. Investors are deciding that now , downgood at time as any. Y more than 7 guy interesting to hear that there is a yield curve effect in their store. Wilbur ross says why he is behind donald trump and highlights the importance of trade deals. Plans way mr. Trumps will balance the books, i am not sure they will ever be exactly balanced, it has been a long time. But the trunk plan calls for stimulating the economy and thereby generating more revenues for government. Freeing up that bondage we are agreement, thede deficit in trade is over half 1 trillion in the year. In,e could just cut that thats 250 billion per year more taxhe economy, productive revenue, more jobs. Guy wilbur ross. To politics in europe. Although merkel is returning to the campaign trail for state elections with public support eroded by terrorist attacks in the eu. For more we are joined by the codirector in europe, with the iw president joining us in berlin. Let me start with you. The economy is going fairly well but the terrorism and migration simply will not go away. How difficult a story do you think this is going to be . Election next year, it is very open. Likely that is very it will increase, so the very faruro vidal alternative shows what the government can look like. It is wide open not clear what it will look like. Overlso the disagreement how to ensure that wages are adequate these are the issues that she will have to debate. Guy is that all we are looking at . Stables is remarkably are remarkably long time, and it has been the bedrock of european stability. Does that start to come into question . I dont think so. There will be more fragmentation but you are still looking at the main parties getting a big chunk of the vote. If they want to go to the grand coalition again, they probably could. I dont think we are yet the stage where it is becoming destabilize but it is having a big effect, 65 of germans disapproving of merkel. But i think there are no real signs guy shes still going to run. I think so. I dont think there are any alternatives in her party, because other parties are having a worse time. The fact is she is the only person that can pull this together and she still has pretty good Approval Ratings in terms of european leaders. Economy, which normally is the bedrock of the run into these elections, not generating the kind of response you would have done . World, germanyhe has relatively good wages, decent wage growth, low unemployment things look all right, and yet we still have significant question marks surrounding have the government is performing. Its more social, about inequality. People are worried about the next one or two years years ahead. Theyre asking what will happen to my job and wages with influx of refugees . They are worried about pensions, because they have a gigantic demographics problem with the working population shrinking massively. Inequality and wages and in income has been rising. Germany has the highest degree of wealth inequality in all the euro area. It is very much a social issue that is dominating it, because the labor market is doing well and its really this insecurity about future prospects that is driving the debate. Guy given that massive income the story that exists, do you expect them to continue to climb or do you think it will cap out it has sort now . Of reach 15 in the polls and level off the question whether it could be taken to the next stage it still has a difficult position, people are still wary of these rightwing parties in germany. I dont know if it can have a break through, but it will pick up strong performance. Guy do you think there will be a relationship between what happened with the french elections and how Marine Le Pen does, whether she has a strong showing in the first round or second round and how that relates it to the afc stories in the back end of the year . Of all obviously have an impact on where europe is going it will impact what europe as a whole can do about the migration crisis, what germany can do, it has to do with france. That might have a knock on effects that they are still different stories and i think front nationale is far more advanced. Guy the brexit story, people are questioning where europe is next. Although merkel has been at the head of europe for so long now will stop to what extent is she being affected by the . Brexit has not helped the German Government. Britain is considered a very important partner, if not the most important partner, in europe and free trade in. Ompeting with a Single Market that certainly is not a positive development for the german 8 ofy, germany exports its exports to the u. K. , so germany will pay an economic price for brexit. Regards, an important partner will be missing for germany, and politically that certainty has not helped the established parties. Germanyin any way feels that one of the few countries in europe where there isnt a strong antieu movement communicating in the same way. Has it changed the political discourse, marcel . Yes. If there is a positive element of the brexit decision, its that germany is slowly waking up and realizing, look, we have to do something about europe, we cannot continue the way we have so far. The German Government needs to ,ake a more proactive stance the european Single Market is not complete and the euro is not sustainable the institutional problems need to be tackled in germany has a prime responsibility it has the biggest responsibility in the most stable government and that is one element that is getting in the discussion book one should emphasize that europe is not a winning topic in the election. These parties are trying to shun it because they think they cannot gain votes of european issues. Guy local elections tend to be protest vote driven. There are surprises that can come out of them. Do you think thisll be one of those cases . The thing to watch is the spd performance. If they dont perform in these elections, they will look to replace their leader or find someone new. I think that is the place to look. But for the most part in germany, local elections are fairly stable as well. Guy thank you very much, always a pleasure to see you. Raoul ruparel. Marcel out of berlin. Up next, carlsbergs crunch. How currency headwinds impacted it. We will take a look. This is bloomberg. Guy welcome back. London looks lovely. Tomorrow it starts raining, but at the moment, fantastic. Ftse barely budging. Lenny walked you around the markets more broadly. 600 down fractionally, coloryen something to keep an eye on. And the u. S. 10 year i think is interesting as well. Youve got to be aware of the fact that we are focusing on a rate hike this year. Take a look at the w. A. R. P. R. P. Ion the w. I function. Lets get the Bloomberg Business flash. Juliette thank you. Abn amro Second Quarter profits are up on legal costs. The statecontrolled dutch lender returned to the market in november and said that income fell. Once one of the Worlds Largest banks, abn amro was transformed to a consumer lender. And their german competitor have confirmed they are in discussions about a potential merger. A tie out would create the Worlds Largest supplier of industrial gases. However any potential merger is likely to face strong antitrust scrutiny. Cisco systems is reportedly to cut up to 14,000 jobs worldwide. According to crn, the networking equipment giant will announce the layoffs in the next few weeks. Spokeswoman declined to comment. Syrian air hedge funds owner Paul Tudor Jones dismisses 15 of his workforce. According to people with knowledge of the matter, the employees affected range from underperforming Money Managers to support staff. Seenuts, as they have more than 2 billion in investment withdrawal. And shares have slumped in cathay pacific, firsthalf profit that missed analyst estimates. Toy say net income fell 44. 5 million usd. And cathay pacifics ceo will be a guest on surveillance at 10 15 a. M. That is your Bloomberg Business flash. Guy thank you very much. Yen is preparing to open the most expensive casino with his career in macau. Revenue has tumbled. Speaking to bloomberg, he addressed the environment. Ip, the demand went away. The customers went away. I dont think that the government took aim at the operators, at least that is not my opinion. That is not the impression i have. Think that the policies of Central Government in beijing in effect of reducing Consumer Spending the highend louis vuitton, chanel. It fell into that category. Who are moreoney aggressive spenders seem to have been constrained by the atmosphere is Central Government , and that has certainly impacted the amount of activity that these operators brought to the table, and then they have shrunk and disappeared. Firsthalf profits missed analyst estimates, but the company maintained is for your outlook. We are joined now to go through the numbers. Cost cutting has always been transforming in some way. Give us a sense of what they told us about what the process looks like. Its about six or eight months ago, 2 billion krone of cost, of which one billion more goes into the business. Then they get rid of over 2000. Mall brands guy you can see the effect the plan has had on the share price. It has gone pretty much up. You can see relative to where we have come from that the performance has been solid. What is the market worrying about Going Forward . Russia seems to be a factor. I think they are still talking about prices in russia coming through. What is happening with the currency story, which has been volatile for so many businesses . It will probably be in dollars or euros, and with russia you have to pass that to the consumer and the economy is not that strong. That will be a very big factor and i thinkd stop they are on track to get the price is going i think they are getting their although they could do with some changes as the currency, who knows . Guy good luck with that. The industry is changing and clearly they have to do what they are doing because of some the industry is consolidating pretty hard how does that read into what they are doing . A good time toy do exactly what they are doing because they will probably repair their balance sheet. Not putting the volume means that it will be easier to make sure you dont lose volume and the one area they really need to do is to push and the top cities in the world, they werent in the top 50 cities. And that is what we need to see Going Forward how will i doing on that . Guy thank you very much. Duncan fox from bloomberg intelligence. Stay with us for more on carlsberg. The ceo will be on surveillance this morning at 10 30 u. K. Time. Up next, will investors by what the fed hawks are selling . We will look at the july minutes later today. Maybe we will get clarity. This is bloomberg. Guy 52 minutes past the hour, welcome back. A quick look at the stocks on the move. Dow up strongly, dividends back. It really depends on what the u. K. Government does next. The sovereignty going to 180. Thats an effectivt of payout. Admiral group is down quite strongly on the back of that, what a run it has had. Looking pretty solid as well. The cost cuts continue, the profits beat estimates. It is trading at 18. 12. Lets focus on what we are getting later on the day. The fomc releases minutes to its july meeting later this evening. Comments are on the hawkish side from some officials, and officials will be looking for more evidence that the fed may be ready to move. Both Dennis Lockhart and William Dudley have suggested that the september meeting is one, and while the markets remain difficult, the odds of the fed hike rose above 50 for the First Time Since the brexit is nowhere near Market Pricing in separate hikes later in 2016. Lets talk about this with richard jones, joining us now. Hawkish. Im struggling to interpret it, but the market maybe the media have taken that view. Richard i think as we have gotten to extremes in terms of dovish pricing, after the brexit vote, we have seen 10 year u. S. Yields plummet, and they are trading within a range now, and i think people are getting excited that the december meeting is 50 , but that is not the Market Pricing in a rate hike in 2016. As far as investors are can turn into 2017 story. Guy you can understand the frustration of the senate and of dudley. Ways, the biggest threat is that the fed does something. The market is so far away from pricing that and if the fed were to pull the trigger, the shockwave with the massive. They know that, which means that the likelihood is it will be even lower. Nevertheless, there is no to weigh risk. The fed will do nothing in 2016. Richard what drives that is not complacency, it is skepticism. I think investors are a lot more skeptical about lets look at the second half of 2016, u. S. Growth prospects. You could say that investors are more skeptical than a lot of the hawks of the fomc i wouldnt say that is complacency, that is skepticism. Guy i have always been taught that labor markets are lagging watchtors, and we will things carefully but todays data nt richard what i usually focus on is earnings and unemployment rate. Both of those are mostly prebrexit. It will be interesting to look at todays data. The most important is probably tomorrows retail sales. Guy absolutely. Richard jones, joining us from bloombergs first word. Stay with bloomberg. Up next, the polls. Francine lacqua will be talking 9 40. Oming up at jon ferro and i will be carrying on a conversation on the radio. We will take around where the fed sits right now ahead of those allimportant minutes later on. And we will be breaking the u. K. Data that will be coming out on the employment front at 9 30 a. M. London time. Ftse down by 1 10 of 1 . Admiral giving back some ground. This is bloomberg. Hohes woiithongestc . Estc. Thlais hotas hkeca hyson at y llseg ca hke cwistomin biness rnte fid , p cth bou e. Juais hotas hkeca hyson at y ddstus azetomimed ag y wiourofr eie esr a adylr onheesev. Or upde its restn i, w c u doe t eth dvery. Oding uc pwiwiro fi hthatpsroui francine anything is possible even a rate hike in september says fed dudley. Will economy coming up in 30 minutes. Wti we talked to former opec president chakib khelil. Francine welcome to the pulse. Live from bloombergs european headquarters. Im francine lacqua. We have a ea