Transcripts For BLOOMBERG Bloomberg Markets European Open 20170927

Is a december hike a done deal or is the market right that he would be a policy mistake . Riding the rails to a european merger. Siemens agreed to merge their business, is this another airbus mess . Matt we will find out given the test of time whether it succeeds or not. We are less than half an hour away from the cache open, a lot less time between now and then. Looking at gains in futures across the board, this after a couple of days of losses at least for the ftse. The cac and the dax eight at again but they were unchanged. The ftse has been down for two days in a row. Take a look at the bund trade, i have three days of the bund trade here. After the big drop we sought monday and a day after the german election results, we have stakes a little bit of a recovery although it should be tight range and barely budging. Up to basis points this morning, 242. Guide the pound under pressure for a number of reasons, the most obvious one is that comments we saw from donald tusk indicating it is unlikely he is going to [inaudible] and enough progress has been made to migrate to the second phase. He is not completely in the drivers seat. The message that came across yesterday and you have the labour party wargaming the possibility of a run on the pound. We hear from jeremy corbyn. The real story is this turn, it feels tentative, need something to back it but it does appear to be happening in the dollar. The bloomberg dollar index up. 2 of them percent. Yellen on balance hawkish talking about the fact she should not wait for that 2 line to be hit on inflation. The dollar is going to be one of the major themes that branch of the market. We continue with this risk off same, swiss franc, japanese yen trading lower. Lets talk about what is happening with the other markets. I want to focus on what is happening in oil. Oil is one of the big stories, oil, bothd heating rising and brent trading up and the beauty i dashed of uti trading up. Brent begins to on thehem a this is bloomberg talking about that. This is an ongoing story surrounding the energy complex. Lets catch up with Everything Else we need to know. Here is juliette saly. President trump says he is prepared to use devastating military force against north korea, financing new sanctions against the nation, the american later said his preference was for the world to Work Together to end program. Nuclear were totally prepared for the second option, not a preferred option but if we take that option, it will be devastating, i can tell you that. Devastating or north korea. It is called the military option. If we have to take it, we will. Backede the candidate by donald trump has lost the republican primary. And come in senator lugar strange was beaten by judge roy moore. Face a democratic opponent in the december election. Moores victory is a blow to donald trump and Mitch Mcconnell whose efforts to boost strange his campaign tale. The Spanish Government is doubling down on its efforts to hold an independent referendum on sunday. That is as the Prime Minister one Donald Trumps support. He is canceling his plans to attend a European Union summit this friday. His budget minister has pulled his 2018 spending bill saying it did not have the vote to pass. Chinese industrial firms have extended this years earnings surge in industrial profits, increasing from a year really are, the most in four years and compares with the 16. 5 percent pace earlier. It suggests resilience in the worlds second largest economy thenduring even with slowing factory output at investment. Saudi arabia will allow women to status as ending its only country in the world to add half the population from driving. It will they will be entitled to driving licenses next year. It is the most are manic move to open up dramatic move to open up saudi society. Soon holdingay be the worlds biggest ipo. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Is as cableou, this falls below 134. You have theresa may and the comments coming out of her office, a statement been released talking about the fact that she is disappointed with the bombardier ruling, this relates to the Cseries Aircraft and the case that was brought by boeing. She is going to work she says with the authorities to protect jobs and northern ireland. Another factor that could complicate the relationship whether or not she is able to deliver on the industry side of things, it is something that people will be questioning in westminster this morning. Lets talk about what is happening on the other side of the atlantic. Fed chair janet yellen striking a hawkish town saying it was imprudent to keep Monetary Policy on hold until inflation reaches the 2 target. A gradual approach is particularly appropriate in light of subdued inflation and a low neutral interestrate which implies the fomc would have limited scope to cut the federal funds rate should the economy be hit with an adverse shock. But we should also be wary of moving to gradually. Fed chair janet yellen. President trump is planning a 20 Corporate Tax rate and a maximum personal income tax level of 35 . Details are said to be unveiled during a speech which he will deliver in indiana. Lets join mark cudmore, joining us from singapore. Lets talk about janet yellen first of all. She is pretty clear that she has put december on the table. She is talking about the fact that she is not too worried about inflation, she does not understand what is going on so she will crack on. The market seems unconvinced. Is that the right trade . Mark they will regret being unconvinced. The fed was definitely hawkish down to data moved dependence and said it ignore the fact there is no inflation. The economy cannot cope with the rate hike for them not to hike. Janet yellen reiterated that point and yet the move in rates and the dollar has been subdued. In the last couple of hours we getted to see the dollar more of a bid and u. S. Rates tick up but this morning was surprising, i was reading one comment in the news going all these get more of a bid and u. S. Hawkish g the speech and you look at your monitor and go markets are not reacting, what has happened so there seemed to to be a diversions and traders will regret that. Trump will have to have this narrative of a strong dollar, strong u. S. Rates. If he starts detailing tax time, that is a narrative of fiscal stimulus and also Monetary Policy both supporting a stronger dollar in higher rates. Matt the tax news to me is a little bit, i am nonplussed by it. Saying you will have a maximum rate of 35 but there could be a rate above that is pretty bogus to say the least. As far as the Corporate Tax cut, i find it hard to believe that they are going to be able to bring the actual real rate down that much. Why is the market so excited . Couple ofe is a things. The tax plan might not get through congress and everyone is aware of that and you are right to point out why are we getting so excited about a few of these details . There is a couple of things to note. Expectations are superlow and were making another step of progress toward this tax plan, you have to raise the possibility it might go through congress. Yesterday we have no tax plan and by the end of tape today we have a tax plan. One positive. Another point is it ring in brings in the topic, free patch ration of corporate profits abroad. No one knows if the reaction of to certain taxbe levels. That means investors will need to price in that probability a little bit higher than they were yesterday. These things, they are not like a massive game changer, that will not happen until the tax plan is passed but enough to provide a shortterm boost to the dollar in rates that should last for a few days. Guy shortterm boost that should last for a a few days. Point, this is the inflection phase of the dollar, the dollar will bounce from here or it is unlikely to go down much further. We have been through a very long phase of dollar weakness and people are starting at the margins to talk about that may be reversing and some of the notes i am reading. Have we reached that point . Remain a structural dollar bear. It is still not offering attractive real yields, growth is not brilliant, but they are longterm issues. Point awe hit the couple weeks ago. It is struggling to get much more meant momentum on the top side. We will see a bit more of that today. Lasts a few weeks or maybe a couple of months, i do not know but this will provide levels where a lot of the real money individuals or people who are over allocated the dollar structurally will look to trim their positions. This does shift the story for the next couple of weeks. Over the dollar up 2 last week and the trend is pretty good. Mark cudmore, you can follow his live insights on the bloomberg. Just type mliv. It is a great way to get started and get ready for your market day. Macrons message on europe gets a mixed reaction. The check billionaire running for office saying it could trigger lots of brexit. We are live in paris with the details. This is bloomberg. Matt welcome back to Bloomberg Markets, the european markets. I am matt miller. Alling emmanuel macrons vision for europe not a good thing. He is favorite to become the next check Prime Minister and says the french president should take care of his own country instead of focusing on deeper eu [inaudible] he called for unity in the euro area. A budget can only go forward with Strong Political commonhip, led by a finance minister and strong parliamentary supervision at the european level. Stronge eurozone with a International Currency can offer europe the framework of an economic world power. More, kerley caroline joins us. What are you hearing . Macron tried to be cautious, he did mention the budget but he did not give details about the size and scope of the budget. He did not want to put Angela Merkel in a difficult situation before she forms a coalition. He wanted to talk about the vision and that is different. If you look at brussels the speech was praised in brussels. We heard from the spd, the Prime Minister who said he it was a bold and passionate play against nationalism but a very different approach from the check, saying that the future Prime Minister possibly running for office saying this kind of speech could lead to more brexit, more countries exiting the eu and macron should concentrate on france. We had criticism and journey and germany including from the csu where one member said macron wants to turn the eurozone into and on limited transfer unit stabilityspecting the pact. We will see how he responds when he delivers the budget. How is france responding and how is progress being made, we get the budget later on today , what is going on in france and how is france seeing mr. Macrons speech, how is france seeing mr. Macrons efforts to reform the economy . Already passed the labor reform last week, this was the first test that he wanted to show he is able to pass that kind of reform for the european partners. In terms of the budget what we expect today is he wants to keep the deficit below the 3 target as required by the eu commission. We do not know exact the what kind of spending cuts and details he is going to announce today but we know it will be somewhere in the range of 20 billion euros of spending cuts and at the same time he wants to reduce the tax burden on the french around 10 billion euros. This is a chart of payroll taxes and we do not know exactly if the spending cuts will be sufficient. Is hoping thaton the recovery, the growth of french gdp is expected to be at 1. 7 this year will be enough to deliver this budget. Much,thank you very talking about macrons speech yesterday and the reactions. In saudi arabia we have got new plans to lift up ban on women driving ending its status as the only country in the world that has such restrictions. It is the most are manic move so far in the governments bid to open up the saudi economy. Fromore, we are joined dubai. What impact is this going to have to allowing half of your economy to drive must be a pretty interesting experiment. Absolutely. This is about setting the tone, anyone who had doubts about the speed of saudi reforms which includes investors, if you take a look at valuations in the markets, this is the answer, they are serious about reforms and tackling an issue that has been very sensitive and very controversial. In terms of context, there are a million drivers who in each saudi household, it would have each household would have a dedicated driver to ferry around the women based on needs. You have a million jobs that could be at stake. This is an important chunk of the saudi economic story. They have been coming down off the back of some of the other reforms that have been kicked into motion. The line in blue is the reference for what has been happening with brent crude prices. Think along the lines as well in terms of a more productive labor force. In terms of perhaps new car purchases, perhaps now instead of paying money to a driver you keep that money and spend it on other things so think along the lines of consumer confidence. This means going back to the drawing board and starting all most from scratch how you approach investing in this country. It is a fascinating story. I need to ask about what the reaction to the rise in oil is like in the region and what your sense is where we go from here. Seems to be driven by this idea that we are reaching or heading outrd balance, we have data on stockpiles. What is the next driver on the last story that will take oil to the question mark yousef a couple take oil to the next level . Is on the basis of an Industry Report that came out, suggesting a drawdown in stock inventory. You mentioned the eia data. Read asetting a better to what the refineries have been up to. Analysts joining the bandwagon over the last 48 hours, saying above 60 a barrel, that is their call in the short term but we are watching closely what is happening with the kurdish independence about and a possible intervention from the turkish side, and escalation of sanctions. Thank you very much. Joining us on what is happening in saudi and the oil market. Siemens ration agreement to merge businesses. Will antitrust businesses take the toll on the deal, is this the formation of another airbus as well . Monday foggy morning in london. The market open is seven minutes away. This is bloomberg. Matt we are minutes away from the open. Lets get some stocks to watch. Siemens merged their rail business. It is a 5050 merger of equals. I love it when german countries say in a press relief they believe it is a merger of equals. You can compared to airbus. Guy you can. We will see. We will talking to the boss of those businesses midday u. K. Time, looking forward to that conversation. Maybe we will get in at two to that question. A couple things to watch out for. Keep an eye on the european sports market sportswear makers. This is after the numbers came out. Keep an eye on adidas. Take a look at wei. By. 2 . A foggy london. This is bloomberg. What did we do before phones . They save us from getting lost, getting hungry, and getting nervous in places like this. Now phones can save us money too. Introducing Xfinity Mobile. With unlimited data for just 45. Thats the lowest price out there for one line. And you can get the same price on up to five. See how much you can save when you get unlimited on a new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Guy we have got about one minute to go into a cash opens in europe. Let me show you what we are taking. But for their planning is not exactly a riproaring start to the day. At least a positive start today. Looks like equities open on the front foot. Keep an eye on siemens. The big stories are mainly macro , what janet yellen has to say on the homicide, so we are anticipating a little bit of a move with the dollar. That will have an invocation at the margin. The oil stocks, isnt it, matt . Especially after what we saw yesterday. Take a look here at this chart in the bloomberg, g 9299. The white is the price of oil right now. 52. Is wti, crude at the green in stockpiles in the u. S. You can see them come down pretty drastically as the price rises. Guy absolutely. Here is the market and the open. Ftse 100 tracking back up towards the 73 level this morning. It will be interesting to see the driving factor behind that. Expecting similar performances elsewhere around europe as well. We will see the cac and the dax open up as well. The dollar is a big factor into the mix today. The oil story is not to be ignored. We get data later on today, and there will be a tliv on your bloomberg. Follow the release of those numbers. Let us find out what else is happening. Manus cranny come over to you. They do not want to halt anymore at the start. It comes through for macron today. Could be kicked that against macron end up as being for brexit or is for that desperation of some brexiteers out there . Oil bid as matt said. That will drive into these markets as well. New york. You have the bulls back there in the bull market. Brent has a golden crust. Let me take you to the eurodollar, because that has been the most part of the conversation on daybreak. This is the eurodollar onemonth risk reversals. From credite in suisse this morning and said a series of small pluses. The macron labor reform. More power of europe. The german political capital. How much capital will merkel have . We had a conversation with ing. Any drawdown on the euro is an opportunity to load up, walk in, and reload. They still call above 25 games to 2070. These are the gilts opening on december futures. Equities higher. Gilt yields of 1. 35 at the bottom of your screen. Were the next piece of the brexit story goes. Moderately positive journey on the back. Hard brexit following according to Credit Suisse this morning with michael osullivan. I am off to Digital Radio with carolyn have care. Thank you very much indeed. Looking flow into it. Let us talk about with the individual stock story is taking us this morning in terms of money index points. Hsbc. Siemens checking up around 1 . Et on the upside as well. Bid this morning. Some of the oil stocks bit as well. Certainly on the front of this morning. I want to show you what is happening. Galapagos on the upside. Trading up by 7. 76 . The Franco German deal looks like it has got the thumbs up in the market this morning in terms of the terms being negotiated on what individual shareholders will get. Let us talk about the downside. Socks on offer. Salafi, roast, novartis trading lower. Down thisding morning. We saw the disappointing 19 numbers on the outlook. Depending on whether or not added assets are trading down. Matt. First, i am glad that you pronounced siemens and adidas directly. It is definitely nike, which is probably close to the way you would se say it in greek. That is the way phil might says it, and it is his company. All of that kind of stuff. Anyway. We should probably talk about the fed. Att janet yellen struck hawkish tone again, saying it was imprudent to keep Monetary Policy on hold until inflation reaches 2 . Gradual approach is particularly appropriate in light of subdued inflation and a low neutral real interest rate. Which implies the fomc will have only limited scope to cut the federal funds rate should the economy be hit with an adverse shock. But we should also be wary of moving to gradually. Too gradually. Matt President Trump is planning a Corporate Tax rate, lowering it to 20 . They say maximum personal tax rate of 35 , and then they go on and say congress can put a higher tax rate on wealthy people, so there is not really a maximum tax rate. Dont know why that phrase is even used. Joining us now is the cio at i am less convinced by the tax plan than i am by yellens, the possibility that she raises rates in december, only because she seems so determined and of course, tax reform has proven historically difficult over the last three decades. What do you think . Can actuallyen follow through with her word, where donald trump has to fight congress and the senate and all sorts of obstacles in order to pass some of the tax reforms that are being announced later today. Clearly, janet yellen is focused on the economy, the fundamentals behind the economy, and those are supportive of another rate rise at this stage, where Donald Trumps campaign and also basically peppered with all sorts of political issues, so it is harder for him. Guy buying dollars at the moment . The dollar has a lot of support because of the higher rates and shopper u. S. Economy. We have seen a bit of a reversal this year about a very Strong Performance last year. Sort of the main other currencies that have benefited have been the euro and some degree, the sterling in the last couple of weeks. Is going to get that support again. Will she be there to kind of see some of these rate hikes . The fed has four past in. The market is not anywhere close to that. The market is saying that we see the dogs, but you do that, youre making a policy mistake. Is she going to cause a recession . She revised it down recently. That is the end goal. Get theret takes to is very slow. If you look at previous hiking is in the last three decades, hiking cycles take two by 300 basise points. This has been two years and 100 basis points. Very slow. We will see another couple every three to six months. Matt dont you think there are pretty clear reasons for the lack of inflation reaching its 2 target . She says it is a mystery, but is this just your way of getting out of trying to have to hit that target . Mouhammmed yeah, it is a mystery. Inflation is a very difficult thing for Central Banks to control. One of the main drivers, and you would have seen this published earlier this week, about how parts of the u. S. Are in deep recession, so although the inflation a whole has picking up, there are parts of a bigs. Where there is divergence. That is deflationary in nature. There are pockets that need to be addressed headon, and they need to be addressed more structurally rather than through the Central Banks. Guy we talk about this incredibly so process slow process. Are we going to see volatility picking up . We have two process is underway. Were going to figure out whether that looks like paint drying as janet yellen would have needed to believe, or whether it will not. We have the rate sort of you and how that will affect positioning. Volatility,pate the which has been nailed to the floor in the equity markets and bond markets are going to a, behaved differently, and b, start to rise . Mostmmmed this is the choreographed exit from easy Monetary Policy, whether it is in the fed or the ecb or the bank of england. Guy qe crushed volatility. Why should qt not do the exact opposite thing . Mouhammmed it will cause a spike in volatility. They are choreographing it so well and managing it so well that it will not lead to the surgeon volatility. There will be other reasons. Some we cant speculate on, some that will be unknown at this stage. Matt youre going to stay with us, mohammed should hear mohammed should hear 112. 71. Around dollaryen has at least brief gone above that. You can see some Dollar Strength there against the japanese yen. You can see it against the currencies as well, up 2 . Coming up, spains Prime Minister wins white house support as he works to block cut an separatists. He says this weekend, referendum on independence is your legal and it will not go ahead. We will see if he is right. This is bloomberg. Matt welcome back to Bloomberg Markets european open. 12 minutes into the session, let us check in on some of the movers. , a company we are keeping an on. The markets up across the board. Units, theheir rail French Company up 7. 5 . Siemens, less than 2 right now. They will both contribute their rail car units. They have a 50 stake each. I think siemens is going to get a little bit more, so this merger of equals looks to be controlled by siemens which will hold the chairmanship as well, a slightly higher percentage of else tom. Rship than alstom. Ministerspanish prime may have won donald trump support for his effort to stop the catalan separatists, but his political problems are deepening. Pulled hisminister 20 spending bill, saying it does not have the votes to pass. Plans to attend e. U. Summit as he works to prevent what he describes as the illegal catalan referendum on independence taking place over the weekend. So what us, mouhammmed choukeir. In risk int europe seems to be be emerging. We dont know what because glenns of sarin what that means for your. We have mr. Macron yesterday talking about a superhighway to a superstate in europe. And then we have the catalans trying to keep their country, the spanish trying to get the country together. At the margin, has the kind of european trade started to lose its attractiveness . Mouhammmed there is also the surge in italy, for the populist parties in the polls. European, geopolitical risk was the main topic earlier this year. That cited him the back of the election results, but also the economic recovery we are seeing in europe. We are seeing a strong recovery across europe in the for fall countries. Unemployment started to drop dramatically, but these geopolitical events are here to stay for some time. Because of the dispersion. Outlook in other countries. Some people are benefiting and some are not and it is up to the politicians. Matt isnt the Catalan Independence vote the most concerning . Everything that they do seems to play into the hands of the independentists. It seems like it would be catastrophic if they vote to leave and then they cannot. Could be revolutionary for a country that has a 10 gain in the equity index. Mouhammmed the other challenge with the catalan referendum is its legitimacy, by the Spanish Government. If those are against the independence, they do not show up because they throw it is not legitimate, we could get the big when the other way in favor of independence and that could swing the political perspective. Economic fundamentals in spain have been in proving. Improving. There has been a recovery. Is doing well, and so are the underlying corporate. That is really our focus. The geopolitical events will always be there. Way ofd europe has a muddling through, and that has been the history of the crisis we have been through. Europe managed to keep the eurozone together and come to the financial crisis. As you look at that fundamentals, how strong are they . Pmi in the 60s right now. How strong are they . Are we still underestimating as actually the fact that the soft data is going to turn into hard data and turn into a much stronger europe than even now we envisage . The worlds kind of invested in europe. Allocated toover europe. Are they still underestimating actually the potential for the european economy . Mouhammmed tattoo that categorically, europe is our highest conviction area and has been for some time partly fundamentals. Se the pmis are strong. Yet employment picture is improving. Growth is improving. The big thing is inflation. The central bank has averted deflationary risk, creating some inflation. If we see inflation picking up to 2 , this recovery could be and and could be here could be here to stay. The european economy would enjoy that for some forever love time. Matt when you see the ecb getting ready to announce its tapering, can the weaker euro help him along the way . Can the german election help him along the way in some kind of perverse way . Banks oftencentral talk about the currency is not something they are trying to control, but clearly, it has implications on the economy, and a weaker euro has benefits in terms of stimulus, if you like. He will be looking closely at that. They dont want to be left behind. If the u. S. Increases the rates and the bank of england from mark carney recently, to start the rate hiking cycle, the ecb does not want to be left behind, so they will be looking for the exits. Guy stick around, mouhammmed choukeir. He will stay with us. Up next, corbyns corporate backlash. Nationalizing plans. Nationalization plans even. Is labor really ready to rule . What are the risks surrounding it . We will have a conversation about the u. K. , brexit, the Labour Party Conference. That is a next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. In the german capital of berlin alongside guy johnson our European Headquarters in london. We are seeing stocks up pretty much across the board here in europe. Let us get deeper at the midcap movers. For that, we go to nejra cehic. Nejra some sizable moves in the midcaps on percentage terms. This, up 15 . This after a middle Eastern Construction Company is said to be putting together an offer to on septemberorting 26, saying where it got the information. We are seeing carillion moving on that. Oohoo. Com moving down. Revenue growth expected around 80 , up from 60 . It is raising its revenue guidance, but investors clearly seeing something negative in these numbers as the stock is 500, and looking at plus this provides an Online Platform for contracts for different products. Business continues to trade strongly, up 4. 5 where we are on plus 500. Matt, guy. Guy the Bloomberg Business flash. A company and al merging. It they create a european transportation giant aimed at countering competition from china. Siemens all caps rate is making transit cars in exchange for a 15 stake in the of company. We will be joined by the ceos of siemens and alstom. In late trading after quashing any hope of a quick turnaround at its ailing domestic operations per the World Biggest sportswear maker said it expects north american sales to decline again this quarter, following a 3 dip in the region last quarter. The Congress Business will drop in the current period. Twitter will list its 140 character limit in an experiment with a small group that may expand the social media platform. It will it users send tweets with as many as 280 characters. It may engage in more conversations, helping to itself into a destination for live events and discussion. That is your Bloomberg Business flash. Guy the pound hit its lowest level in nearly a fortnight after donald tusk said he did not see enough to progress to future trade talks. Came after a meeting in london with Prime Minister theresa may. Talks over brexit and the over inbill continued brussels. Jeremy corbyn will tell the Labour Party Conference in brighton he is ready to give his keynote speech at 12 15 u. K. Afternoon. John mcdonald or actually the previous evening, John Mcdonnell was talking about the fact that may be the u. K. , under a labour party government, may see a run on the pound. Mouhammmed choukeir, still with us on set. Government at this point in time is an interesting proposition inasmuch as it seems to have a you nanjing factor attached to it. They would potentially nationalized and greinke fia in and have the international investors. The direction of travel on brexit seems to be increasingly towards a significantly softer brexit. Do the two compensate for each other in investors minds and one nobody seems to be looking at this as a factor at this point . Mouhammmed it is impossible to price at it and in terms of whether labor can get into power and even if they do, what the impact will begin in the points you mentioned. The big issue is consumer credit. That was discussed in the labour conference as one of the things theyre concerned about, the surge in consumer credit. 3 Million People are perennially into that. The other thing to pick up on your point about donald saying the weaker pound, traditionally, strong means good and weak means bad in terms of a currency, but a weaker pound can have benefits to some corporations in the economy. Matt mouhammmed choukeir, cio. Joining us on Bloomberg Television and Bloomberg Radio as well. Tune in for that on daybreak europe, live at 9 00 a. M. On Bloomberg Radio. Com and you can also just type radio go onto your bloomberg terminal. Up next, the tax plan cometh. President trump is expected to unveil his overhaul during a speech tonight, but how much of an overhaul is it, and is there any chance it will pass . This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Guy taxing time for tom. A percent Corporate Tax rate. But will congress back it . Getting on with it. Said chair janet yellen says the central bank should be wary of moving to gradually too gradually. Is the market right that it would be a policy mistake . Writing the rails riding the rails to a european merger. Siemens and all some agreed merge. Agree to i am at miller in berlin alongside guy johnson at bloombergs European Headquarters in london. Guy. Guy let us see how things are shaping up 30 minutes into the trading day for equities. This is how the picture looks. Oil stocks, mining stocks rising this morning as a result of which you have got the ftse 100 doing a little bit better. Dax is doing the best, which is interesting, trading up by. 4 . The alstom Stephen Siegel interesting. The bum by the eight story bombardier series is absolutely interesting. The United States slapping that. Ariff on the Cseries Aircraft that is an issue that goes back to brexit as well. This is meant to be a washington that is going to be brexitfriendly. Does not feel brexit friendly in terms of the trade deals of what we have seen announced. You can understand why theresa may may be voicing concern is morning. President trump announce his longawaited tax overhaul at a rally in indiana. He is expected to propose the top rate of 35 . According to people familiar with the matter, Corporation Tax cut. Kathleen hunter joins us from our Congressional Team on set. Good morning. This sounds great. We are going to get some tax cuts, but then i look at health care and i think getting the stuff done is trickier than maybe first anticipated. Absolutely, yesterday, we saw this lastditch effort to pass and Obamacare Repeal bill folder in the senate yet again. Said that iflways health care is supposed to be the low hanging fruit, if that was hard to do, touching form is going to be exponentially more difficult. Kathleen yet. Obviously, tax reform has been difficult for every president since reagan. Why do we continue to call the and thena maximum rate always add a cost to that saying congress can add to that. It is like nobody knows what a maximum means . Mouhammmed it just means that nobody wants to be responsible for being the one that sets a rate higher than that. It is a fair amount of people wanting to take credit for lowering taxes. No one wants to take credit for going higher than the 45 . I think that does not sell as well if you are giving a speech. Guy how much trouble as Mitch Mcconnell in right now . Seems to be quite a lot. The more primary is something that will cause the republicans a few issues. Then he has got all the issues surrounding legislation. I kind of how does he progress from here . Mouhammmed he is in a difficult spot kathleen he is in a difficult spot. Their candidate in the alabama primary Runoff Election lost the kind of an insurgent conservative, which you know, who does that sound like . Guy it is interesting that trump that the other candidate and this guy looks and feels like him. Kathleen exactly, and the is trumps i, support going to be enough to convince people that this guy is not necessarily the establishment. We saw it was not. What that it portends is that there will continue to be a lot of division was in the republican party, but these divisions we have seen playing out in congress in terms of their inability, republicans inability to pass legislation, that will be translated, and we will see that in the states, when we start seeing primary contests and the division playing out elector early and not just legislatively. Matt i have a chart here, kathleen, showing the blue line is the s p 500 index. The white line is companies that have the highest tax rates. Election, this is normalized from the election day, november 8. Postelection, the companies with onh tax rates rally higher hopes that we would get this kind of tax reform and it would pass and hold. Since then, they have not caught up. How much are corporations, investors, counting on real tax reform that goes through . Kathleen i think, you know, willially, at it definitely be encouraged by the fact that the proposal coming out today would significantly cut the Corporate Tax rate down to 20 . Ist is something that there a fair amount of agreement on, even during the Obama Administration when there was talk of tax reform spirit that is something the Obama Administration supported. There is widespread support for that on both sides of the aisle. That will not travel on its own. There is going to be a much more broadbased overhaul of the tax code is what were talking about, and that is really what investors and lawmakers are most interested in doing, and that suddenly then becomes a lot more complicated. We can look at the Corporate Tax rate issue in a that you. You have to look at it tied to these other things. You veryleen, thank much indeed. Kathleen hunter joining us from our politics team. You can watch this show using tv. Here is the upside. You normally get to watch the show, but also the sidebar here which brings view all of the are talkingts we about. It allows you to break into the functionality and use the charts. You can break those out and get on theecks and bios guests and the video stream and button that allows you to message the team as well. Up next, crude outlook. Oil is advancing on signs of unexpected declines in stockpiles. More data later on. The eia numbers are going to break. There is a tliv on your bloomberg that will cover the data release, top life. This is bloomberg. Matt welcome to Bloomberg Markets european open. I am matt miller in berlin. Gains across the board really for all European Equity indexes. Let us get the stocks story, the individual stories, right now. For that, we go to nejra cehic. Nejra we seem to be seeing these individual thoughts moving news. Y on m a let me start with the creation of a european transportation giant aimed at countering competition from china. Yes, siemens and alstom agreeing to merge their male businesses in a deal that brings together former archrivals from germany and france. Alstom gain 5. 7 percent, hitting its highest since 2011. Siemens moving higher as well, up 17 . If you look at for tom for tum, we are talking about a 9. 5 billion deal in what could turn into europes biggest utility acquisition. Matt, guy. Much, nejraery cehic, with your individual stocks stories. Bloomberg first word news. For that, we go to ad load low. President trump says he is prepared to use devastating againsty force north korea, announcing new sanctions. Hes had his preference was for the world to Work Together to end pyongyangs need to their program but said he would use force if all else fails. Pres. Trump we are totally prepared for the second option, not a preferred option, but if we take that option, it will be devastating. I can tell you that. Devastating. For north korea. That is called the military option. If we have to take it, we will. In alabama, the candidate backed by donald trump has lost the primary. He was beaten by roy moore. The chief justice will now face anemocrat opponent in in election. His victory is a blow to trump and Mitch Mcconnell, whose boost stranges campaign failed. The Spanish Government doubling down on its efforts to contain an attempt by catalan separatists. On a wons murray Donald Trumps support for his stance during a visit to the white house. He had canceled his plans to attend the European Union summit this friday. His budget minister has pulled his 2018 spending bill, saying it did not have the votes to pass. Saudi arabia will allow women to drive cars, ending its status as the only country in the world to ban half the population from getting behind the wheel. Women will be entitled to driving licenses starting in june. It is a most rheumatic did so far dramatic bid so far. They may be holding the worlds biggest ipo. Global news, 24 hours a day, powered by more than 2700 journalists and analysts say more than 120 countries. I am ed ludlow. This is bloomberg. U. S. Industry data yesterday showed an unexpected decline in stockpiles. We get more data a little later on today. Prices hit a fivemonth hiatus week as well as turkey tries to shut down shipments through its territory following the referendum. Brent is up over 10 in september alone. Jefferies, he joins us now. Let us start off with the product story and what is happening to ship the curve and what is happening with the correlations, jason. This is the brent curve. We have moved into backwardation contango. This tends to be sticky. It tends to stick around for a wild. Is that what is going to happen this time around . Jason i think a lot of the move we have seen has been more related to what is happening on the Refined Products side. A lot of that has to do with refinery interruptions on the gulf coast and latin america, so as a refining system comes back online, i think that the structure could start to flatten out a bit. It does not think it will flip back. We are not short crude oil. Backwardation is telling you you are short crude oil. Guy i have another chart which points to the lack of a correlation between energy stocks. Is that why we are seeing that relationship still there . Jason that has a lot to do with it. Also, when you flip into backwardation, this is the correlation of the contract. The twelvemonth strip has more relationship to how the equities move. It has not moved up fast. Jason, what about the demand side of the equation, we talk about supply all the time. It is rarely mentioned. It just does not change that much. Jason i think demand is one of the reasons we have seen such a strong move in crude prices recently. Demand for refined product is very good right now. We are looking at Global Growth this year of about 1. 7 . That is very strong relative to the fiveyear history. The growth in the Second Quarter was pretty close to 2 . I do think that very strong underpinning has been very beneficial in the price move. This is the first time we have seen synchronized Global Growth in a number of years, and that does underpin oil fundamentals. Matt i have actually a chart here. 9138. It shows iea crude demand worldwide. Here is the white line divided by supply. You can see the blue line is just the brand price. What is underpinning that demand, and do you expect it to continue . Every car story i do recently is investingautomakers in electric cars and batterypowered cars, but what is driving crude demand . Jason your point is well taken, but i think that is going to be more of a longerterm effect. I think in the near term, the demand growth is very widebased. Are seeing strong growth where you would expect to see it in places like china and some of the other very strong south asian economies, but u. S. Growth is very strong right now. European growth is very strong right now. To seeingme back single nice Global Growth in gdp, and that is underpinning demand for Refined Products and hence crude oil. Guy a slightly sideways question the saudi story this morning my first reaction is that is fantastic news. My second reaction is, this is the saudis again having to face up to the reality that their world is going to change and they need to change their label force labor force and rethink the way the economy is going to work, and they need to think about their future. One of the ways to do that is to change the nature of the economy , and that is to allow women to drive, which is fantastic news, but that kind of Second Derivative story surrounding oil, every time i hear news from saudi at the moment, my reaction is this is negative longterm. I take your point about demand. I take your point about the fact that u. S. Economy is doing all right and the european economy is on the front foot. I think about saudi and the reforms and changes it is trying to make and it tells me the saudis know the direction of travel here, excuse the pot on the driving. Jason i think we are dealing with different planning horizons. 80 yearis have an ratio. So that 70th year plus may be does not look so good right now and they want to do something about that, but it takes decades to reform and economy. They are in the very early stages of that. What we are looking at, the equity markets and what could happen if yo happens in 40, icy oil demand growing through that entire period, even with deep penetration of electric vehicles. Guy it is a timeframe sector. Can i come in shortterm as well . I want to we laid it to both of those stories. The biggest factor for a lot of investors into Energy Equities is the dividend. 7 . Something along those lines . How do i think about that dividend . Is it more secure now than it was yesterday because we are moving up in terms of the oil price . If iecure is that dividend am thinking for Retirement Planning further down the road . It is a duration mismatch story. It is such an important fundamental part of owning an equity. This duration factory is something i need to think about. Jason it is critical, and i think that is part of the reason why shell has done so much to restructure. It has moved to being able to fund its full dividend with no script in effect at the 50 oil price. That price is going to continue to push down as the Company Continues to bring on new high return projects and continues to whittle down its cost structure. I think we are now faced with a company that is yielding close to 7 , that is covering that with free cash. If the market becomes convinced that that 50 price is now a nearterm floor on the oil price, i think the stock works very well indeed. In my mind, fully covered Cash Dividend is not compatible with 7 yield. Matt if i look at the bloomberg integrated oil the next, i see we have had pretty good performance since the bottom at the end of 2013, beginning of 2016. But this is, you know, 20 companies. We are talking about shell. What are your picks here . Ourn show would be one of top picks globally for the very reasons i just outlined. I think yield impression that it can lead to equity market performance. The other would be chevron. It is a company that is transitioning into a very high priest cash flow profile. This is being generated by very Strong Production growth. I mentioned shall can fund shell can fund their full dividend. Brent. There is a gap between wti and brent right now. It is going to close. Does that mean i see a more shortterm outperformance of u. S. Energy stocks . Agree with youdo that the wti brent differential is going to close. We are faced with wti not really having a place to go because the gulf coast is shut down and that dynamical change and that will close the gap. It probably means that you get some pullback in brent here. Wti,nk probably so, but 51. 52. I think that is the direction you go. That is still a very good price for u. S. Producing companies. I think you are going to see those companies when they report the Third Quarter having significantly hedged their future production answer to talk about their plans for next year a verye based upon certain revenue. That is probably not good for oil prices. Be interesting to see how the curve affects the positions for jason gamel, thank you very much indeed. Soon to come, will die lead the competent will dison leave the competition in the dust . That conversation, next, right here on bloomberg. Says he will build an electric car by 2020, best known for vacuum cleaners. Investing one billion pounds to develop the car, plus the same sum to create solidstate batteries. Is it one billion pounds or 1 billion . Joining us now is bloomberg tech reporter jeremy khan. What is going to be the difference between dysons efforts and literally everybody else within the . Jeremy that is a good question, and i do not entirely know. Yesterday, sir james dyson promised his car, when it hit the market in 2020, is going to be radical and different, but he did not say how it was going to be different, except he is planning on using solidstate batteries, not the type of battery you find in most electric cars on the market. If he can crack solidstate batteries, that might give this car a Real Advantage over others. Guy is being in the u k a decision and tear . Jeremy he claims it is an advantage. He was asked yesterday if he plans to manufacture in the u k, and he hedged. He said we will manufacture in the best place to manufacture for us, but he hinted the biggest market for an electric car was probably the far east and it might make sense to manufacture in the far east. Dysons current products are made in singapore, malaysia, and the philippines. The manufacturing does not take place here. Guy how can he work with others . This is a crowded space . Jeremy he says they will go it alone and not work with an existing car company, but he is going to work with a lot of auto suppliers that supply others. There is a real question about how he will compete against the likes of tesla, toyota, volkswagen. Basically every car manufacturer looking at electric now. He says when we went into that can cleaners, that was a crowded space, too. We were not the only vacuum cleaner maker, and he thinks we can do the same thing. Guy that will be an interesting rubbing. Jeremy kahn joining us on the dyson sort. Up next, bloomberg surveillance. Matt and i are on bloomberg Digital Radio. This is bloomberg. Francine yellen strikes again. The fed chairs says it would be imprudent to wait for 2 to raise rates. The president and republicans plan to set out the longawaited overhaul. Will it live up to expectations . The new president s is not enough progress has been made in brexit negotiations to warrant the start of trade talks. Im Francine Lacqua in london