Listening . We are going to speak to the banks chief global strategist, peter oppenheimer. Matt where a halfhour away from the european open. Take a look at where we see pictures we are a halfhour away from the european open. Take a look at where we see futures trading. As today, although today, the dax is underperforming. We will see what happens in the cash market. Take a look at bunds. I have a threeday trade up here. You can to the yield over the well, yesterday was a big drop. We dropped at one point, five basis points. When youre only looking at 45, there is a pretty big loss. You see an unchanged trade but really coming down. Just barely inching above that today. A lot of pressure on yields and a lot of pressure on the euro. Guy absolutely good yesterday, a risk obsession that was driven by north korea. You saw some the Technology Stocks getting battered. Today we wondered whether that is going to reverse. Janet yellen speaks later on. We have seen the dollar bounceback as we have seen european liquidity stocks coming into the market at what are we looking at . Overnight, in terms of fx trading, vrable bounced back a little bit. The ruble bounced back a little bit. The yen is treading higher, up by. 2 . The election story factors in their. Factors in there. Lets spend that off and talk about what else is going on, the commodity story is very interesting. You have the kurdish story in the oil market. You have what is happening in. 7 . R which is up by the number Commodity Index is trading up. The Bloomberg Monte index is trading up. Keep an i on what is happening with oil, the geopolitical story. N their in there a lot of people saying the curve is wrong when it comes to the oil market right now. Lets get a Bloomberg Business flash update with juliette saly. Juliette the us has discussed for a five ways to deal with north korea according to h. R. Mcmaster. He said some of the choices are uglier than others. While mcmaster says the threats of pyongyang is much further advanced than anticipated, officials dismissed ri yong hos comments. The bank of greeks bank of greece plans to start determining whether they will need fresh capital before the end of the bailout program. The results of the test may be ready in early may. That comes as mario draghi said yesterday the single supervisory mechanism may frontload stress tests. Holddent trump is set to dinner guest in washington that he expects the tax reform bill will pass next month pretty didnt offer any specifics on the bill but the schedule is seen as aggressive. Both chambers will have to adopt identical budget resolutions before the house can act on tax legislation. The president of the Federal Reserve bank of minneapolis has back janet yellen for a second term as the fed chair. His comments come as resident donald trump continues to wake you he will nominate for february of next year. Of think janet yellen is the next one job i think janet yellen is doing an excellent job. I cannot think of anybody who is better equipped to leave the Federal Reserve over the next four years better than her. She is a rare economists with excellent leadership skills. Juliette in iraq, millions of kurds have voted in a referendum on independence. Felt. Percussions will be more than 30 million kurds dispersed across the border between syria, iran and turkey. Brent crude climbed to a twoyear high. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Guy. Matt. The mario draghi says European Central bank will keep as much stimulus as needed when policymakers decide to add just there 2. 3 trillion euro bond buying program. Speaking in brussels, the ecb president 22 uncertainty but the mediumterm outlook for inflation as he presented an upbeat picture. Our Monetary Policy has one mandate which is to ensure price stability. It is defined as an inflation rate which is close are below 2 . Today that means we are not there. Matt joining us is christian nolting. Christian, literally nothing christian, literally nothing surprising there from mario draghi. Seems to be all by the book. That is what should expect from a central bank president. Will we get any curveballs echo just curveballs . Are they going to do the perfect job of bringing no news to the Mark Christian scioscia blanks news to the market . Say jockeyedwould mark christi heed column in next meeting is saying what he is doing is tapering. I dont expect him to give us a surprise that the market reacts unexpectedly. Matt we see a little bit of pressure on the euro due to german elections. Socgen season going down to 117 in the nearterm. Does that help draghi out . Christian if you think through the weaker currency, it is better for inflation on the other side of the super euro this year was bringing down the inflation rate. A weaker currency certainly helps for the ecb to start tapering and exercise the tapering idea. Quite heavy with the euro result. Guy do you think december is going to be on . What is the fed going to do that go going to do . Christian i think the markets always underestimates central bankers to the upside and downside so i think the fed is moving in december. We probably get two more rate hikes next year. The Balance Sheet reduction is similar to a rate hike condition. If we get tax cuts come through this week, the president is going to talk about it tomorrow. Nevertheless, it is meant to be a big policy announcement tomorrow. How does that work with the mix in terms of the dollar . Christian i dont think it is happening so fast. It would take some time before it takes reforms to come in. It is a very important topic for the market. It is priced out somehow. If you look at the earnings we think the tax reform is coming. Look the earnings from we expect 8 , if you get tax reform in place, the starting next year, that means earnings are going up which is positive for the market. There would be a positive surprise and that would be strengthening the u. S. Dollar. Matt do you expect real substantial tax reform out of the u. S. . I mean, reagan, 1986 digit tax reform . Legit tax reform . Is obamacare being tough to be used for refinancing . Refinance, probably not for many years, maybe the safer one or two years to get the taxes lower and see if theres the positive effect that we expect. There is a big change probably but it would be positive for the markets. Positive. A positive effect on consumer spending. What kind of growth the expect . Christian up from this year. Positive. A positive effectnot a massive d increasing growth. Growth whichonized is not the worst environment so tax reform in the u. S. Would help bring growth further up. Guy a quick question about this chart to get your rate on it. European stock volumes are the lowest since 2000 and the tech bubble first. There is no trade going on. Is that because they think the Market Correction is coming . Why is this happening . Cyclesan normally late comes to some euphoria in the markets. Investors seem to be calm or cautious. Guy which one is it . Christian cycles i think both. GeoPolitical Risk keep people from investing. If you look into the sectors in the u. S. , you see a massive sector dispersion. It is showing quite low volatility, but if you look from tech energy, it is actually high and higher than recent years. Guy you can see this on this chart which we will talk later. Andical versus defensive that is what is providing the momentum. Pitching, very nice to seepitch. Christian, very nice to see you. Up next, we are live from the Goldman Sachs conference in london to discuss the outlook for stocks. Peter oppenheimer, the glee is going to be joining us. That is next. This is bloomberg. London. 4 in 15 minutes to go until cash starts trading here in europe. Lets talk about those equities now. If this continues until december, it will be the first year the benchmark has not had a monthly loss in total return terms since 1928. That is basically when the data started. Goldman sachs says u. S. Stock valuations and Profit Margins may have the cash may have peaked may have peaked. Joining us now, peter oppenheimer. You. Morning to you. If im getting worried about earning stocks, what am i looking to rotate into . Peter what are we looking to rotate into echo did you say . Guy where am i going . Peter two things i would say, first of all, in a world where weve got these extraordinarily low Interest Rates and high valuations across asset markets, equities are still the relatively best asset classes. In the context of the u. S. Equity market being relatively flat which is our view, given its higher valuations and peak margins, other equity markets are likely out to outperform e. M. Euro. We are not looking at very high return to their either but prospects are for continuation of catchup. We have been seeing that in recent months. Any tax you baking in reform into that 2600 target . Think our expectation is we would get some tax reform between next year but may need tax cuts, but we would be expecting relatively moderate moves around 25 . I think that could be supported. It is worth noting that we follow companies with high marginal tax rates. They surged after the elections with the expectation you get a substantial tax cut it since then, there reversed that outpouring quite sharply. There started to pick up again on a relative basis test they have started to pickup again on a relative basis. I dont think youre going to get major widespread tax reform of and in itself that would drive the markets a lot higher. We have high profits and Profit Margins. Relatively low returns. Is theow important actions of the president and congress to your model, to your outlook for u. S. Equities . If they did nothing, would that change the way you view the future for equities . Peter if they did nothing on tax reform, or there was no tax cut, i think that would be a modest is a modest negative. The most when thing is the economy, the Global Economy which with low Interest Rates continues to be pretty supported for equities. Of the 90 of the countries that we follow, they are growing above trend at the moment. This steve first time we are seeing Global Growth this is the first time we are seeing Global Growth around 4 . It is the real key driver for equities. The problem for the u. S. Is rates are likely to rise more than the market is pricing. Valuations steeper in the u. S. Than they are in other markets. It is a little bit more catchup in profits then you see in other equity markets which should give them a bit of an edge. Like . Peter, which do you im looking at a chart here on justoomberg, working 35 1435. 1435. The stoxx 50 is down at 18. The big european blue chips if you will. That combined with the fact that a lot of people expect the road to continue to gain strength expect the euro to continue to gain strength must mean the european stocks are better by. Peter i think they are it look again, the main thing that is driving all stock market is coordinated Global Growth. I dont think youre going to get stuck markets moving different directions. If the u. S. Were to have a major correction or people were start to scare, it would have a negative effect for all major markets including europe. But on a central forecast where forecast wheres. Equity you have the u. S. Equity Market Making relatively modest gains, i think europe can outperform. You are right that the evaluation is lower. That is quite typical. Even if you take account of that, there is more of a catchup in terms of profits, partlyeven if you take account e sectors which are very big in europe the banks in particular and also the commodity sectors are seeing something of a rebound. Guy do you not worried that the same drivers that are working in the United States are heavy focus on Technology Stocks and a relatively small group providing the heavy lifting . The same thing in the emerging markets. If i look at a broad e. M. Basket and i take out south korea and it bunch of other countries and a bunch of other countries, the picture doesnt look quite so rosy. Are you worried the Global Equities are being driven by technology, regardless of whether that e. M. Or to falter which would represent some called it a concern for equities. Test some correlated concern for equities. Peter that is true. Not in the same way as we saw in the late 1990s. Gap is less now. I think it is understandable that technology is doing well. We are positive of the sector because while we are getting this coordinated cyclical glut in Global Growth, this has been a long Economic Cycle but one of the weakest ones in history. Because inflation is very low, number growth nominal growth is very weak. That means people are prepared to pay a premium for things that are generating better growth. Technology fits into that category. We like your growth. We like counterbalancing it with the value. With peak value. The our companies we have high dividend yields but finally, a. Ecovery in cash flow prospects if you can find companies with a recentdividend yield, a thats a decent payout ratio, i think with a that drop of very low bond yields and Interest Rates, those look for the good guess those look like a pretty good investment area as well. Those look like a pretty good investment as well. We like the defensive stable blowing defensive, stable growing areas. Positivelittle less with general cyclicals which have benefited a lot from the synchronized global recovery. Matt when we have, peter, high valuation and returns start to come in a little bit, but you think these levels are going to hold steady, is that a good scenario for m a kicking off to kick off . Pickup inare seeing a m a come although the recovery that we have seen is much less than in other cycles. Broads partly because caution. Consolidation and a lot of dont make sense that italy because of disruption dont make sense particularly because of disruption. We are starting to see a pickup and i would expect that to continue so long as Global Growth remains reasonably robust. We do expect the weight of Global Growth to slow. Rates to pick up a little bit which would slow market return. M a is going to be an important theme. Question. Inal, quick european stock volumes are at a low. European stock volumes are at levels that we havent seen since the tech bubble. They are incredibly low. I have a vix that is nailed to the floor. What does this tell you about investment sentiment. Investment sentiment . Investors are cautious. They see a cycle that has been very long. They see a cycle that is been supported significantly from an asset market perspective by qe. We are finally started to see some graduate gets gradual exit of that. Gradual exit of that the low volatility in volumes also reflect the fact that you volatility,very low inflation at dictations. People dont seem dont to the catalyst for major change and without that you probably get low volatility, relatively low volumes. Relatively low returns as well. Guy peter, always great to talk to you. Matt . Matt i want to give you a couple of stocks to watch. A few minutes from the open. Ne of them is nestle that company is aiming to boost its profitability by boosting businesses like that care and coffee. Like that care and coffee. This is bloomberg. Guy minutes until cash equities open in europe. Not expecting fireworks at the getgo. See interesting stock moves, nestle for instance. Punched,es, box basically the fair value points to a slight slide in europe. Janet yellen speaks a little later on today. A risk off sentiment pervading markets yesterday. Today, we will wait and see what the fed chair has to say. Matt i just want to point out oil right now. Take a look at this chart. 504. Is g btv the 50day moving average crossing above the 200 day moving average. Supported by a lot of fundamental news. An oil trader saying they see the end of lower for longer, it is all over the mliv blog. As could move energy at the open. The ftse 100 opening a little flat. Exactly around for 73 level. Drifting a little south of it now, but not much. Someformance from a of the other stocks, but the sector inn is at a stock level. ,s anticipated, a marginally slightly softer open here in europe. Stock story is interesting, what is happening with gilts is interesting. Nejra cehic . We talk about the demand for the safe haven, the 10year treasury yield steady, but if you look at the 10year gilt yield, it is edging slightly higher. We are up one basis point, 1. 30 5 is where we are on the 10year gilt yield at the open. Money edging out of this rather than into the haven. Equities, we talked about risk off, marginally lower on the stoxx 600, down. 1 on the benchmark overall, digging into the industry group. A mixed picture here. Financial and tech stocks underperforming, materials underperforming. Interesting, given we are seeing metals on the rally. Outperforming on the upside, health care and energy, energy perhaps not a surprise given what we see with oil. I want to talk about the dax. Following theain german election yesterday. If we look at the relative strength index, we are at 67 on this. It is approaching the 70 mark, which signals the dax could be overbought. It last picked up on may 3. It has to drop below 70 for that to be a sell signal. Moment, still some legs higher to go for the dax index. On europeans chart stock volumes. This is stoxx 600 volumes at the lowest the tech bubble. Make of that what you will. Guy thank you. Lets talk about individual stock movers. Swiss drug makers look to be under a little pressure. Bfs ass softening up, well. A little softer, i think they have lowered their target to 1600. Stocks trading on big volume this morning. Wpp, that is a big cap stock, trading down. 2. 5 2. 25. Oil stocks seeming well bid. Tullow again on the move, to the upside. Weir trading higher and if i flip this over to index points, you can see Royal Dutch Shell bid, as well. Of the integrated and supply chain operating strongly in the energy space. Oil certainly making a run for the upside of the recent range. Matt . Matt i would say bloombergs mliv blog really helpful a