Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

Plane was shot down by an Iranian Missile. Boris johnson agrees with that view while ron dismissed the theory as not possible. Weekassets and a volatile with futures pointing to gains again today. Gulbis trading back where it was before u. S. Iranian tensions flared. Clearer picture today the payrolls number can show a rebound after a strike at gm skewed results in october and november. December is typically a job losing month. Larry kudlow joins us after the event. Jon ferro will talk to him. 2 30 p. M. London time. We are just under an hour away from the start of cash equity trading in europe. Lets take a look at the futures. They are up across the board after we saw gains on almost all european indexes yesterday. The ibex 35 was down. Everything else had green arrows. A new high on the s p 500. We still see u. S. Futures higher as well after those records were hit. It looks like investors are willing to go further into risk on territory. What you see on the gmm . Gmm, before we get to the i want to tell you whats going on with breaking news. Ryanair raising their full year 2020 guidance to 950 million. Raising their guidance. They are part of that conversation about the 737 max. It will be interesting to see how that develops. How they transpire. Of course, the Airline Sector has been pushed around by a spike higher in oil prices. We see some confidence from the aviation sector. Ryanair raising their net Profit Guidance 950 million. They had seen 900 million. We will cover that later on in the program. Lets get back to the gmm function. We see something flat to positive coming through on the asian equity session. The overall number for the asian equity market is higher on the msci asiapacific. There are some areas of red coming through as well. We touched new alltime highs on u. S. Stocks yesterday. Tech in asia touching a new alltime high for that sector. The focus today will be on the jobs report. Well be back to the data after the adp number. What does that mean for jobs report . Will we be able to talk about global trade . That will be part of the conversation. That will be a real focus. Higher afteroves the central bank suggest they will not stand in the way of gains for the currency. The aussie dollar is up. Retail Sales Numbers beating expectations. On conversation has moved with all of the wildfires. Lets get to the bloomberg first word news. Was the likely cause of the ukrainian jet crossing and around. Thats according to World Leaders from the u. K. , canada, and australia. It was likely an Iranian Missile that accidentally. They are calling for an international probe. We have intelligence from multiple sources including our allies and on intelligence. It indicates that the plane was shot down by an iranian surfacetoair missile. This may well have been an accident. House has voted to limit president trumps authority to strike iran. The Resolution Says congress should be consulted before the conflict with the Islamic Republic escalates. It is a mostly symbolic move. Itats say defense defends constitutional congressional powers. A brexit bill has cleared the u. K. House of commons and puts an end to the parliamentary gridlock that cost theresa may her job. The bill now passes to the house of lords. Johnson wanted to become law before the end of the month so the u. K. Can leave them it you on january 31. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Matt thanks very much. Now, lets get into the markets. Is bloomberg mliv manager here. It is incredible on this friday that it looks like gold is going than it waswer before the u. S. Iranian tensions flared up. Oil even is going to have a loss for a week. In such a week, it is pretty amazing. Thehat do you attribute sanguine attitude of markets . Onk as we discussed wednesday, many markets are interpreting the reaction as being the best possible outcome. We had this big middle east flareup last friday. We help will have the fact that arendt managed to thread of retaliating openly and publicly and not causing any u. S. Casualties, providing an offering for the whole situation, was good for markets. We managed to price out that risk premium immediately. The u. S. Feels they have removed a major threat from the region. It is good for u. S. Assets. We have the escalated the situation by removing that threat. Many people are buying into the narrative that we are in a better place than we could go. Its a very optimistic narrative. This is a dominant narrative right now. It will probably remain dominant into we get another severe flareup and incident. That could be many weeks away if it all. Anna Oil Prices Back to levels from middle of december. Let me ask you about the jobs picture. We will get a payroll picture later on. Would be about to get back to talking about these underlying economies . Does that set the market up to expect something strong . Mark i think this is the jobs data weve had the list amount of excitement for any long time for good reason. We have trade next week. I forgot it was the weekend of jobs data until this morning. That is quite rare in jobs week. This is not the driver of markets at the moment. We have trade, geopolitical events. The other big driver of markets is Monetary Policy. In this regard, we know the fed has an asymmetric method. Theyll be lows to hike rates again. If we get bad data, if we see the close picture slowdown, they made it clear they are willing to act again. We in a positive risk environment. The jobs data doesnt matter that much today unless it is a big shock either way. It will largely be a nonevent. I will not care what the jobs data says. Matt i hope it is a relaxing evening and i case. I want to ask you about trade here. Do you expect a phase to deal to be firmly in the markets right after . Mark we are already starting that conversation. The progress will be a big driver this year. What is quite a positive thing right now, expectations are very low in the market. Im sure it will be like last year. Issues will ebb and flow. Trumpl most likely see making optimistic comments. We will start getting excited about a phase two. We will get a setback and disappointment later in the year. I dont think we will get to a phase two quickly. We will have optimism and setbacks. That will ebb and flow. Anna thanks for your time this morning. Mliv managing editor from singapore. Up next, look at the stops to walk stocks to watch. Ryanair did quite well. We will talk to about that and what it means for the sector. Bloomberg radio is live on your mobile device. They will have the latest on ryanair and other corporates this morning. As is bloomberg. Matt welcome back to the european open. We are still 45 minutes away from the start of cash trading across it europe and u. K. Phil surfing a is covering the u. K. Has for you. Markets reporter is focused on the ryanair surprised today. Lets start with fail. What we know . Bit of ares a tugofwar going on today among analysts about one name in particular, barrett development. In the u. K. , hold builders had big runs last year. Investors realize that the brexit cloud was going to be passed Pretty Simple to we are on the brink of it. Brexit will be behind us soon. The stocks have had a huge run. Analysts are still bullish on the fundamentals. The u. K. Is a strong housing market. Given how far the stocks have run, how much further do they have to go . Barratt developments up 61 last year. That is pricing and a lot of good news. City is cutting stock from neutral. They say the company is in great shape. Theres not that much upside left. Morgan stanley is out with a similar note, raising estimates on the entire sector. They say very development is one of the topics. Ais is a stock that has had great run after getting crushed in 2016 when the brexit photo happened. The question now is how much farther it has to go. That should be pretty active today. Anna lets go to you on ryanair. Surprisingly strong holiday time for the local airline. Christmas, they see their fiscal year net profit at the highend of the range, coming in a one billion euros. Previously, their highend was 900 Million Euros. Along with a stronger holiday time, the forward bookings for january to april of this year is 1 ahead of this time last year. One of the negatives they point out is there off chain unit. It is underperforming. Matt thank you very much. Looking at the ryanair surprise. You can get all the latest stock stories from are equities team. Type first go on your bloomberg to rear terminal. Sovereign bonds smashed expectations in the last decade. There will be more joy in 2020, according to hsbc. 2019,had a bumper year in driving a record amount of debt into negative yields territory. Demand has been strong for higheryielding and longer dated europe area Government Debt in the early options of 2020. Joining us now is kristof reader. Is this bonds demand a result of the end of the bull market in stocks . Investors looking for safe havens. Kristof not really. I think there is still a lot of cash chasing a limited amount of safe assets. As we have seen this week with a lot of issuance hitting the european markets, there is still more money chasing spread products as we have now half of the european markets at negative yields. Yes. Investors are clearly looking for alternatives. Anna if supply is going to be back as a theme, as geopolitics andpushed to the sideline supply remains the big theme, what does that do to yields in the eurozone . Still ini think we are what i would characterize as an issue is market. Even though the volume it coming premiumsrket is large, are being compressed. Supply is being soaked up quite well. This is not really an effect of pushing yields higher. What is really required for this is a change of Monetary Policy. In europe, there is speculation this could be coming. Certainly in the u. S. , there is more chances for lower rates rather than higher rates. Other easing of the geopolitical concerns. These are factors that could push yields somewhat higher. Are limits given this global backdrop that we are facing. Matt we are going to talk about europe in a bit. I want to talk about the global backdrop first. Are you concerned about the economy . We are in a time of relatively slow growth. With hotspots in the middle east flaring up, if we get in oil spike, that is a bad newts situation. Christoph yes. Clearly. Im not concerned about the economy with regards to whats happening in the middle east. The only factor that could be a game changer is oil prices. I cant really see how we could enter into an upward spiral of of price and less the street strait of hormuz gets blocked. No party has any interest in that. Sorry. I dont think this will be filtering through into any of economic variables outside of the region. What is more important is the trade conflict. There are also signs that macro sentiment looks set to improve over the coming months. People over the first half of the year should be seeing the glass as halffull when it comes to describing the global macro situation. Anna thanks very much. We will pick up on the conversation around europe. Speculation over a rate hike at the ecb. Could that growth next year . We will discuss that further with kristof. When you are traveling to work, tune into bloomberg radio. Bloomberg. Anna 40 minutes to go until the start of the equity trading session. We are expecting another bounce at the start of trade. The bank of friends governor has stressed flexibility in policy approach two weeks before the ecb launches a review of its methods. He argued for Interest Rates to stay low for longer, but not lower. Still with us is kristof rieger. He is a member of the ecb Bond Market Contact Group contributing to key analysis of europe denominated markets for the central banks. Great voice on this topic. What are your expectations next from the ecb . Suggest withyou stabilization in the macro picture, there is room to have a conversation about higher rates from the ecb. Is that right . Christoph yes, i think what we are seeing since the september meeting is what we have depicted as easing fatigue. Everyone was getting tired of more and more easing and negative rates have a more qe. The resist deep rift in the governing council. Tasktine lagardes first was to mend this rift. It has become clear that the hurdle for further easing steps is quite high. So this easing fatigue is spreading into the new year. I see some chances there that sometime this spring, we could be getting a discussion about normalization. So actually even a rate hike speculation. Also, looking at the experience from sweden which has enacted negative rates in december without causing undue decline in breakeven inflation or depreciation of the currency at a time when the economy was still quite week. Conspires into more they couldng, well, be taking a similar route. Matt is it easier to get out of negative rates than unwinding your Balance Sheet . It looks like quantitative easing is order to end. Absolutely. Especially with Forward Guidance of the ecb linking qe to the first rate hike. I think it would be very difficult for the ecb to execute the exit. Im saying there will be speculation about the normalization sometime this spring. I dont think that the ecb will follow through on this route and that ecbim afraid rates will stay very negative at 50 for quite some time to come. , thist comes to kiwi linkage between Interest Rates and qe and Forward Guidance. The bond buying net asset purchases will stay with us for many years to come. So we take that into consideration. The ecb will be talking about Monetary Policy. People suggest that more needs to be done on the fiscal side. When you are giving advice about what the bond markets are saying to the ecb, when they ask how the markets respond to fiscal spending, what do you say . Interest rates are stay are set to stay so low for so long, there is room for fiscal spend. The discussion about fiscal space in germany will stay with us. Thatnk we need to be clear the zero in germany might go. About 50ese talks billion packages the year are very unlikely to materialize. Keep in mind, we still have the constitutional debt. Any budget needs to follow this rule. Fromu look at the numbers the fiscal space for germany this year, 7. 7 billion. That is 0. 2 of gdp. Clearly not a game changer. Clearly not what the ecb or markets are hoping. Should we get 50 billion or Something Like that if you are getting a new government, yes, this will be an important signal for the rest of europe. This will be very important market mover. I dont think it will materialize. Matt 10 seconds. What is your expectation for balance at the end of this year bunds for the end of this year . Christoph lower yields. Higher yields and to spring. Minas 50 tenure boon deals for the end of this year. Matt we will keep you with us a little bit longer. Up next, we will take a look at what you need to be watching today including airbus delivery numbers, key especially considering what is going on with boeing. U. S. Job data, a very important Economic Data point. Election in taiwan. Plus, eu Foreign Ministers to discuss the nuclear deal and around. And iran tune into bloomberg radio. Matt welcome back to the european open. Let us take a look at what you should be watching today. A few things to note. Airbus is likely to release its deliveries and orders for 2019. Especially with the boeing situation right now. Eu Foreign Ministers will hold an extraordinary meeting in brussels to discuss the fallout and the Soleimani Killing the future of the iran nuclear deal. Europeans still want to keep it. Is1 30 p. M. London time, it the first u. S. Jobs report of the year. Watch for that. Just after the report, and interview with larry kudlow. The Unemployment Rate is forecast to hold steady at a 15 year low of 3. 5 . Way, weekend watch for an election in taiwan. News for that coming out saturday in the evening. Monday, the determined winner. Of ourets get to one top stories. The continuing tension between the u. S. And iran, and in to thatar, what happens aircraft that went down in iran. The iran story is that a meeting of Foreign Ministers is taking place in brussels today. Maria tadeo is in the ground. We have is on the graph. What have we heard so far . The conversation really has shifted because of the information that came out from canada. Justin trudeau overnight shot down,he plane potentially not intentionally by iran. Part of theot European Union, but has a very close working relation with the European Union and they will want to find out what happens , how it wasat plane shot down if it was. Made the decision. Who made that decision. To number one goal is deescalate tensions in the region. They feel at this point everybody should take a breather from this. To stop any kind of escalation on the military front. The criticism when you look at the eu is that it has taken a week for Foreign Ministers to get together. They have not decided anything and they have been very slow when it comes to taking action. The europeans will tell you this is a very delicate balance. They were caught off guard by the actions taken by the u. S. They are not naive about this. Iran has really crossed a number of red lines over the past few months. They have been trying actively to provoke reaction from the west. On the plus side, they waited for the situation to solve itself. We have seen the escalation happen before the eu gets together to call for it. Typical Angela Merkel ammo Angela Merkel m. O. What do you think they are going to be looking for, in concrete terms . That is also a good question. What can the European Union do at this stage . Both iran and the u. S. , and you have to be clear about this, these are the main actors in the deal. They are saying it is dead. We are not going back to the table. Donald trump is saying everyone who took part in that it is not working. The europeans do believe that when the whole situation comes down, the only place where everybody can actually meet and talk in a diplomatic might way will be through the deal. If iran was serious, they would have taken much more aggressive action. They have not done it yet. That is the thinking. Whether that is going to transfer into action remains to be seen. Perhaps on the sanction front. We dont have confirmation yet. Matt thanks very much. The gathering of eu leaders. Let us get back to our guest hour, the head of rates and Credit Research at commerzbank. Europe, we have a viewer who writes in what i think is an important question, especially in light of concern about the performance of the european banks. A viewer asks for your view on tiering. Is it helpful ecb policy for the economy . Yes, it does help the banks. You can run the numbers and see most banks are saving some Million Euros a year on the penalty rate, but it is clearly not the game changer. It also means lower negative yields can stay with us for a lot longer. This is what has been pressing net interest margins. Not just the penalty rate banks pay to the ecb, but the low yield environment. Regard, it does not change the profit outlook noticeably for most of the banks. Let me ask you about the jobs report out of the united states. Anotherions that we get stellar unemployment number. We have had the report that seems very strong even though it did not get much Market Attention because we were all looking elsewhere. Are we going to be able to focus back on the jobs report, back on the data coming out of the u. S. . The main data point for this week. We are looking for an above consensus number after the indications requiring a number above 200,000 to really push treasuries lower, i would say. Also considering yields are at preescalation levels for the escalation in the middle east started. Fore fair, this number is an unusual amount of certainty due to special factors. It could be on either side. In the end, the markets will focus on what the fed will make out of it. As your colleagues have been seeing before. In the end, numbers should not do a lot of damage. Matt i have always heard people joke the margin of error is plus or 200,000, which usually can completely change what we read. What do you expect the fed to do with its number . Not just this number, but in 2020, is it possible the fed also starts to see what it wants in inflation and starts to lean toward the hawkish side . I am surprised the market has not reacted more to some comments from late last year hints thee are clear fed is leaning toward some sort of inflation overshooting strategy. In plain english, this means if will not rises, they raise rates, but if inflation falls, they will cut quicker than we can see. In the end, i dont think the fed will be in a position anytime this year to consider theing rates rather than contrary. We think there will be another insurance rate cut heading into the summer. Asymmetric fed situation we are facing indeed. Anna picking up on that theme, i am looking at a chart that shows headline pc below target. It has been low for the past seven years or so. This is something James Bullard referenced yesterday. He talked about how he would actually welcome inflation above 2 because it has been so low for so long. Do you think this is part of is it part of concerted messaging to reset expectation for inflation in the market . Yes. I think the fed and a lot of other central bankers are quite keen to push Inflation Expectations higher. Even very important strategies currently undergoing, this is a chance to really change the communication in that direction. Especially from the fed, we are getting more indications this is indeed the case. The bottom line is that especially u. S. Real yields have more room to compress by europe. Es, especially and inflation breakevens have no room to rise. Whether this will really follow through depends also on actual inflation, on oil prices, and especially on the economy. Matt thanks so much for joining us. Head of rates and Credit Research at commerzbank. Coming up, todays u. S. Payroll number should give a clearer perspective on the underlying hiring trend after a strike at General Motors in the previous month. And Jonathan Ferro is going to speak with National Economic Council Director larry kudlow after the event. The number comes out at 1 30 p. M. London time. The kudlow interview will be an hour later at 2 30. Knowing shares climb on reports the crash of a ukrainian jet in iran was actually a missile. The plane makers problems are far from over. Anna welcome back to the european open. Equity markets are expected to bounce at the start of trading day. We expect something similar at the start of trade yesterday. Lets get the blumberg business flash. Andivined by clowns supervised by monkeys. That is how one boeing employee described the max 737. It signals growing unease with a jet that had been grounded since march. The communications threaten boeings attempt to rebuild public trust. Ryanair is rising raising its profit outlook for the year after a betterthanexpected Christmas Period extended. Ryanair is set to release Third Quarter results on february the third. Employees and five offices shut down. We are outside the u. S. , but it is not the only one shedding jobs. A few days ago, the news a rival is discussing between 5 and 10 of its workforce. Grubhub is not for sale. The Food Delivery Company is pushing back on reports it was looking into a deal. Grubhub says it is confident in its growth strategy. It plays in the market has fallen over the past year area the past year. Grubhub stock is down more than 30 from a year ago. And taco bell, the fast food chain is hoping an attractive pay package will attract top level staff and keep them on board. That is your Bloomberg Business flash. Thanks. Anna . Anna lets talk about whats going on in the gold mining sector. Gold miners completed more than 20 billion worth of deals in 2019, the most in nearly a decade. The torrent of dealmaking may not be over yet. Theus get details of morning call on gold and the gold players. It has been a busy week for the gold price. What about gold m a . Pulled back to where it started before the tensions in the mid east, but when it comes to minors, bank of america has a new call out. They are saying last year was about mega deals. This year is about m a for the mid tier miners. After bigger deals with the largecap players, they had a spinoff of assets the mid tier market absorbed. They are very liquid and that is going to lead to a lot of mergers and acquisitions. They say it is necessary at this point, given that a lot of these firms need to replenish their reserves and bank of america calls it years of underinvestment. They say this needs to happen in 2020, or else mid tier players risk getting left behind. Thanks very much. Dani burger with the morning call on gold. Next, look at your stocks to watch, including ryanair after it raised its guidance for the full year, expect those shares to move. Matt welcome back to Bloomberg Markets. This is the european open. We are 10 minutes from the start of trading and looking at green arrows in terms of equity index futures. Certainly expecting green arrows for ryanair. The airline raising its profit outlook after strongerthanexpected bookings over the Christmas Period extended into 2020. Ryanair is set to release Third Quarter results on february 3. Joining us to talk more about this is our goal Business Editor here in berlin global Business Editor here in berlin. There is a lot going on with airlines. Areooks like ryanair shares going to move at the open. Yes, and a much needed move ryanair. They have had a tough couple of months. It is a Huge Customer for the max boeing plane that has been grounded. That has really weighed on this company. Up, but they moved have had a couple of profit warnings the last couple months, just because they did not get the plane. Today, are hearing preliminary statement saying bookings are looking good. Flight shaming, something we have talked about quite a bit, does not seem to resonate with ryanair customers. That is good news for ryanair and for the industry. Matt it affected me. I have to go to frankfurt so often. I considered ditching the planes. I was embarrassed of my carbon footprint. Anna maybe flight shaming is not so great for us after all. Lets talk about airbus deliveries. The market is expectant, waiting to see the delivery numbers from airbus and boeing. Boeing, clearly other things on their minds, but this will be something the market is focused on. We dont know the timing of when these numbers are going to come. Expect the numbers today. They usually trickle in late in the afternoon. It is a monthly fair. Of 2019, they will get the full tally of where they landed. In thented to get vicinity of 860 deliveries. What we have been hearing is they actually slightly exceeded that. That is good news for airbus. It also means i have leapfrogged and they have leapfrogged boeing. This is not a fair fight at the moment. Is behind on deliveries because of the grounded max. We have 400 planes sitting on the tarmac. If you factor that in, boeing would not look so bad. Boeing does look bad. Even if this most recent air crash was not mechanical fault, we have the emails from pilots saying the plane was what, designed by clowns overseen by monkeys . There is no way you can write more damming emails than that. A fascinating read going through these, and what sort of comes out is the engineers, the pilots, deeply concerned about the direction of the company. A lot of pressure from the top saying, get this plane out. Make sure it does not need the deep checks some customers want, regulators want. Mind tricks to get customers not to demand extra checks. A lot of pushback from within the company. As we know now, they managed to get the plane out, but it led to tragic results. Matt thanks so much for joining us. Our global Business Editor here in berlin. He covers the Airline Industry for us. Lets get the first word news now. Sayederal reserve officials there is a risk inflation will continue to fall short of the 2 target. Richard clarida told the council on Foreign Relations that policy is, quote, in a good place. The fed left rates on hold at its final meeting of 2019 and signal policy is on course this year. Redn is seeking an interpol notice for carlos ghosn according to japanese broadcaster nhk. Aterpol has already released red notice for her husband. It is the latest move to put pressure on the former auto executive after his escape. To arock is adding its way campaign to get the worlds biggest polluters to change. Members of feynman action 100 plus now have more than 41 trillion of action under management assets under management. The network is pushing Corporate Giants to disclose carbon emissions. A brexit vote has cleared the house of commons. It puts an end to parliamentary gridlock that caused cost theresa may her job. The vote no passes to the house of lords. Johnson once the matter to become law by the end of the month so that u. K. Can leave the eu on january 31. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna . Matt . Anna thank you. Let us take a look at stocks we are watching ahead of the open. Various things in the aviation sector, but let me mention a few other companies. J. D. Sport upgrading their guidance for the market. We will watch that. And re, pnm, a value value end seen weaker. A question about a ceo stepping down from a packaging business. Super dry, a profit warning for the clothing business. Matt closer to where you are, ryanair coming out with an increase in its fullyear net profit estimate to between 950 million and 1. 0 5 billion euros. Previously it had been 800 to 900. Christmasying bookings led to a bump in early 2020 bookings. Good news for the airline. Coming up, its the market open. Watch those shares for sure. Futures in general are pointing higher. This is bloomberg. Anna we are one from the cash open, start of cash trading in london. Lets get the headlines. Guidelines after unexpectedly increasing net profit for the year. Risk assets finish a volatile week on a high note. Gold is trading back to where it was before u. S. Iranian tensions flared. A rebound after a strike skews gm results. Matt, what does the futures picture look like this morning . Matt still pretty strong to the upside. 383 stocks gaining, 206 down ri ght now. Not as lopsided as it has been this week. We see futures pointing to a higher open in four seconds. The market is going to spring open, and you can tell us how the trading is out of the gate. Matt springing anna springing to life, even though it is only january. 100 up 0. 2 , euro stoxx up 0. 1 . Ftse hasnt been moved around by geopolitical tensions like other stocks, because of the reliance on oil majors. Some of the oil moves this week have had a different impact on the ftse 100. The French Market up 0. 2 . Euro fairly flat and the dollar fairly flat, as is the british pound. With geopolitics slightly more on the back foot this morning than other days this week, perhaps we can focus on the jobs report later. For the moment, markets opening in positive territory and taking many sectors with them. Prices, Energy Stocks still doing well, and health care, financial staples, consumer discretionary. Most sectors across europe to the upside, as we see markets perhaps trying their best to focus on fundamentals, economic fundamentals. Jobs report later today and the trade picture next week. Matt and we, while we see big swings in equities, four to one is what we look at in terms of winners to losers. Theoil majors are adding most points to the stoxx 600. Bp, total, royal dutch shell. Roche adding points to the index. On the downside, lloyds, siemens, mondi falling this morning. Some of the actual news making a difference in terms of what is taking points away. Peter oswald will step down as group ceo of mondi. , the Companies Taking points away from the stoxx 600. Anna and in terms of aviation, in focus after we got the update from ryanair. We dont have an opening price on ryanair yet, but we have an opening price on easyjet. Up 5. 6 , the biggest gaining stock on the stoxx 600 this morning. Back to the big picture around markets, opening higher after a volatile week for european stocks, the biggest outflow in 20 weeks according to bank of america. Investmentgrade bond funds saw record inflows, so clearly the riskoff mood we saw earlier in the week writ large there. Rate talk to john, head of strategy at ubs, joining us on set. Lets talk about the week that was. Are we back to where we started this week, in a number of Asset Classes that reflected your lyrical tensions . Could we put geopolitical tensions to one side for the moment and focus on the underlying economics . John weve obviously had some shocks during the week and who knows what lies ahead. There was a lot of momentum at the end of last year for various reasons, that has carried over to a degree. But you talk about the volatility, some indicators we think are showing signs on an underlying basis that some optimism may need to be tempered going forward. For us, a process of leveling out going on at the moment with volatility, and that makes sense to us. Anna i just want to matt i just want to point out, you mentioned ryanair is the biggest percentage gainer on the stoxx 600. The stock is up 8. 5 now, after raising guidance due to strong christmas demand. Just want to keep people uptodate on ryanair. Shares this morning. John, i wonder what you think about the movement in the price of oil. It is curious that we now have contracts trading for less than even on friday before all this started. And maybe it is a good thing. At a time of fragile economic growth, you dont want a sustained spike in oil prices. John no, especially if it comes about through worries about supply, which is obviously what drove the spike earlier in the week. As you said, it is interesting it has fallen below previous levels, and that tells you two things. One, the market has quickly moved to take an optimistic outlook on the situation around iran, to think this will fade away again, and therefore it is back to fundamentals. In other indicators, we think the markets have an optimistic skew on a lot of things. The other thing, underlying all this the fundamental picture is becoming more mixed, which is why arguably the fundamental level for the price of oil is a little lower than it would have been had the earlier optimism now starting to get reflected in data. For us, assuming geopolitical tensions stay under control, we think the oil price is likely to stabilize around these levels for now. Anna interesting to think about the relationship between the oil price and the u. S. Economy and other economies around the world. Typically, one of our colleagues on the markets lifelong wrote about how spikes in oil prices often precede recessions. Fedjames of the st. Louis yesterday played down the risk to the u. S. Economy from geopolitics and oil spikes in general, saying it is kind of neutral for the u. S. Economy to see a spike in oil because of how it plays a role as producer now, in a way that has not done in the past. That is a change in thinking. John absolutely. In energy balance. Of course not entirely independent of the Global Oil Supply and the balance, but there is less exposure now to oil price because it is much more of a two way risk for the u. S. , i suppose. If you get a spike that is brief, it doesnt have significant implications. I you get a supply if you get a supply issue for a length of time, that is a different situation. With the u. S. Close to full employment, earnings picking up and accelerating, there is a fair amount of insulation from many shortterm disruptions, but we think if you saw it sustained, in light of an economy we think will slow down, it will become more serious, more quickly. Matt what are you expecting in terms of risk assets this year, john . Are you expecting investors to keep pushing for higher highs, or to seek safety more and more in demand for bonds . John i think at the moment, the story going into this year is one of optimism. Clearly, some risks, geopolitical or to a defree around issues like degree around issues like brexit for example. End thisthe s p will year not far from where it is beginning. It is not going to be a straight line. The first half of the year will see deceleration in growth, particularly in the lead and that will to centralbank response is not priced into the market, in our view. But as a result partly of that easing, and partly as a result of tensions we think are still biting in the u. S. Around tariffs and so on easing, in the second half we think growth reaccelerates. It might leave levels not far from where they are now, but movement in the interim. Anna john will stay with us. John wraith, head of u. K. And european rate strategy at ubs. Lets talk about what you need to know in the aviation sector. Around boeing, the Company Released internal messages in which Company Employees discussed deep unease with the 737 max, which caught the attention of capitol hill a great deal yesterday. Dani burger is here with details. Dani you probably wouldnt feel great about a plane described as being built by clowns and overseen by monkeys, but that is how one boeing employee describe the 737 max, just one of many messages boeing released in a batch of hundreds of pages yesterday. One of the selling points for the 737 max was that pilots wouldnt need much additional flight time training. All they would need is a simulator. Well, those messages show there were glitches in the simulator, and a lot of pressure to avoid further flight training. Even one chief technical pilot on the 737 max described what he said was jedi mind tricks they were using on regulators. This increases the high hurdle the new Ceo David Calhoun needs to face to regain Public Confidence in the 737 max. One regulator,t he representative from oregon, called these messages incredibly damning. Matt thanks very much for that. I want to quickly bring you breaking lines on the developing story. Civilis holding a Aviation Organization press conference right now, and they say they are certain that the ukrainian plane was not hit by a missile. Tehey also may ask russia, ukraine, france and canada to decode the black box from that plane. That would be a very interesting move, if they give the black box to international investigators. But they are saying they are certain that the Ukraine International Airlines Plane was not hit by a missile, as Justin Trudeau has said it probably was. Up next, we look into the upcoming u. S. Payrolls numbers for december, out this afternoon. In. Put your guesses what do you think the number will be . The whisper is 170. This is bloomberg. Ben bernanke gave a speech out there that i think was kind of a last hurrah for the central banks. He argued Monetary Policy will be able to do it the next time. I think thats pretty unlikely, given that in recessions we usually cut Interest Rates by five percentage points, and Interest Rates today are below believei just dont that quantitative easing and that stuff is worth anything li ke another three percentage points. Matt former u. S. Treasury secretary Larry Summers, dismissing the optimism of fed bernanke. The former fed chair said that the central bank could likely fight off a next recession despite low Interest Rates. You can watch more of that interview this evening. Today marks the return of bloombergs wall street week. Definitely tune in. Anna staying with the u. S. , todays payroll numbers for december will provide clearer perspective on hiring, after skewing from a strike at g. M. Lettalk about the u. S. John the u. S. Economy with john wraith of ubs. What are your expectations for the jobs report . The adp number in the middle of the week looked strong. Tone for set the something positive . John it was strong and it might mean there is some upside expectation, but correlation has not been great, with a lot of volatility in recent months. Is about right0 for overall payrolls. More interesting to us is where we go next. There was job creation last year, the weakest year in several, but enough to keep the consumer performing ok. But there are underlying signs of cooling demand. Retail sales, people think they will be quite weak going into yearend, telling us the u. S. Will slow in the first half of this year. Matt why do you think that is . Do you think that workers are not really earning as much as whenshould be, unemployment is the lowest level moree 1969, or are things expensive than they should be considering how low inflation is . John more the latter. The issue of the level of unemployment, wages, is a live one, but the point for us is about the tariffs. There is optimism about the phase one deal, but we think it is somewhat too little, too late. Q1 weaknessfebruary will be pretty much bakedin in the u. S. It led to a slump in imports, particularly consumer goods as an impact of the tariffs. We havent seen the drop in imports replaced by a similar pickup in production in the u. S. If supply is falling, it either tells you it is a prediction of weaker demand or a response to it. Think the number soft,ear week will be a sign of cooling momentum. The manufacturing number was well below 50 in the u. S. Anna this is the timescale in which we start to see manufacturing weakness, pushing into the services sector, retail, the consumer psyche . John the retail employment was for a nonrecession year the weakest on record last year, so it is already weakening. That softness in manufacturing is partly about making less things because there is less demand, so we think that is telling you that the consumer is in some form of retrenchment. This is relative cooling that will bring the fed back into play in our view, so there is a story there. Anna what does that do to the feds thinking . We heard yesterday that rates were appropriate. John clearly at the moment that is their mantra, partly because they believe it and partly because if it were not the right level they would be acting. As Larry Summers said, there is not much ammunition around, so if they need to act, we think they will go in early. We think they could cut three times this year, and that is not priced in at all for the markets at the moment. If you start to see underlying Warning Signals some through more strongly in the data, we think there will be more rapid response. Anna john is the second guest this week to talk about that level of response from the fed as a possibility this year. Matt absolutely. There have not been many, but we are hearing more. John wraith of ubs will stick with us. Right now, the Bloomberg Business flash from leighann gerrans. Leighann good morning. Ryanair is raising its profit outlook for the year after strongerthanexpected bookings over Christmas Period extending into 2020. The carrier targeted earnings in 1. 05 billionon to euro range. They will release results on february 3. Holiday woes for u. K. Retailers continuing. Superdry says lowerthanexpected sales could wipe out annual profits, but full year earnings will be in the upper range of guidance due to Strong Performance outside the u. K. Anna thanks very much. Up next, we bring you stocks on the move including a discount numbers in the u. K. , disappointing this morning. This is bloomberg. Matt welcome back to Bloomberg Markets european open. 23 minutes into the trading session and a mixed picture, cac down and ftse up. Top individual stock stories, for that we go to dani burger. Dani the biggest mover on the upside by far, ryanair. Saw strongerthanexpected Christmas Period, and easyjet gaining as well. Superdry losing more than a fifth of its value with a weaker holiday period. The sales were so disappointing, it might wipe out entire fiscal year profit for them. European discount retailer also missing estimates for sales growth. Morgan stanley says the u. K. Market was a disappointment for them but there estimates are change due to better cost controls. Anna Boris Johnsons brexit legislation has cleared its final hurdle in the house of commons as mark carney opened the door to more stimulus in a speech yesterday. The bank of in glynn governor said the equivalent of 250 basis points of bank of england governor said they had the equivalent of 250 basis points of room. Do you think mark carney still has room to act, as a parting shot . John he has one last meeting in about three weeks, and clearly he could vote for a cut or other measures, longer commitments and so on. I think it would be a little bit of a surprise if he did, breaking the narrative of the moment. His wider point for us was sort of preaching to the converted. We think the u. K. Needs to see a significant pickup of data in a rate cut byoff the middle of the year. We think they will cut rates in may, partly as part of a wider slowdown we talked about. Matt we talk about the u. S. Consumer. The u. K. Consumers wrong is the u. K. Consumer strong . Have they been stockpiling money because of uncertainty that it now going to spend, as we see light at the end of the brexit tunnel . John consumers, in terms of bigticket items, a bit like investments for businesses. People are not making those commitments or have not because of all the uncertainty around brexit. The question is what people do during the transition period. Because it is so short and we are repeatedly hearing from the government they have no intention of asking for any extension, the chances of a big rebound in investment or Consumer Spending are limited. The Unemployment Rate is low. The labor market is strong. People have the ammunition to spend more, if they feel significant relief from recent political and brexitrelated developments, but we dont really think they will. The data will be interesting, if retail sales and Consumer Spending over yearend dont show significant signs of a rebound, it tells you the outlook is a little weak. Inflation below target, growth a little subtrend, and in that environment there is a growing case for rates to be shaved by the middle of the year. Anna thanks very much. John wraith, head of rate strategy at ubs. He will continue the conversation with us on bloomberg radio, at 9 00 u. K. Time. Justin trudeau says there is evidence the boeing plane was shot down by an Iranian Missile and the iranians are speaking out at this point. We will get back to that story. Anna welcome back to the european open. Anna edwards in london alongside matt miller in berlin. The session started positive, losing a little momentum perhaps . Matt losing a little steam right now, but still close to high on the dax set in january 2018. Right now, 13,514. Ande get to 13,005 and 59, 13,559, that would be a record close. In caseer to look for, you want to see a record close since dax, the highest january 2018. Stoxx 600, the broader european benchmark, we can see it broken down by industry groups. Travel and leisure stocks doing the best, followed by utilities and health care. Bank stocks having a rough time, followed by retail and telecom. Lets go to leighann gerrans in london. Leighann a missile was the likely cause of the ukrainian jet crashing in iran according to World Leaders from the u. K. , canada and australia, who say it was likely an Iranian Missile and probably by accident. They are calling for an international probe. Intelligence from multiple sources, including our allies and our own intelligence, the evidence indicates the plane was shot down by an iranian surfacetoair missile. This may well have been unintentional. Leighann the u. S. House to limit president trumps authority to strike iran. The Resolution Says congress should be consulted before conflict with the Islamic Republic escalates. It is a mostly symbolic move. It is theiry institutional power constitutional power but republicans say it endangers national security. Members of Climate Action 100 now have more than 41 trillion of assets under management. The group is pushing corporate ties to disclose c02 emissions. This is bloomberg. Anna, matt . Anna thank you. More on one of our top stories, tensions between iran and the united states. Guests Research Focused on Foreign Policy and international security. It development overnight, seems the u. S. Intelligence Services First flagged that they were thinking it was most likely that this aircraft was taken down by a missile, inadvertently perhaps by the iranians. Does that in itself, the suggestion from u. S. Intelligence, does that damage, risk the relationship further between the u. S. And iran . I actually dont think this in and of itself damages the relationship between the u. S. And iran. It certainly adds to the toll and tragedy of what we have seen over the last two weeks, but this was not the u. S. Shooting rann an iranian plane or i butting down a u. S. Plain, this was a ukrainian plane shot down, with a passenger manifest of canadians, ukrainians, iranians and other nationalities. There seems to be a suggestion it was shot down by an iranian surfacetoair missile. The u. S. Is in a position where doing the right thing and doing something that would deescalate tensions is easy and straightforward. It can offer condolences, can offer Technical Support from the National Transportation safety board and can kind of stand back, and that i think will contribute most to deescalation at this still dangerous moment. Matt you say that there is fairly substantial evidence that it was, that the plane was downed by a missile. The iranians are saying right now it is impossible that is the case and are denying it outright. If it were the case, though, do you think it would be a case of the plane being in the wrong place at the wrong time, a dangerous neighborhood as donald trump said yesterday, or is there any reason they would have shot it down with intent . Id be very reluctant to speculate at this stage. I dont see, from where we sit this morning, a reason it would have been shot down with intent. It seems more likely it was, listingthe tension, the missile attack on the u. S. Bases had just happened, and it would be standard procedure for most countries to put air defenses on alert after that. What seems possible, and there is a lot we still dont know, we dont have confidence, i want to avoid leading into this too ach, but if it was a missile, mistake is a much more likely cause than any kind of intentional shootdown. Anna looking back at the more certain events this week. We saw iran retaliating for the death of kassem soleimani, the attack on kassem civil money by the soleimani by the united states. Is that retaliation over, or will we see iran returning to more covert, deniable methods of attack on u. S. And u. S. Assets . Jacob i think that the open Military Form of retaliation is probably over. It was signaled, we are launching these missiles, this is the target, this is the retaliation. In the event that no one seemed to have been killed, the u. S. Accepted it as retaliation and seems to have taken the steam from immediate military retaliation, but certainly they will be asymmetrical pressure from iran, both politically in iraq to try to force at american troops but also through other proxy forces around the world in the months and years to come. I dont think we have seen the end of it, but i think we have seen the end of specific attacks directed by the iranian government, specifically for retaliation. But i think there will be more complications that will be harder to disaggregate from the many existing issues in the u. S. Iran relationship. Uld like tocans wo see regime change in iran longerterm. Is there any likelihood of that . The people there are certainly under economic stress, but is there any desire domestically, a substantial desire domestically for regime change . Jacob again, i wouldnt want to speculate. I dont think it is necessarily productive for us to try to guess about the domestic politics of a country like iran, which american analysts have often gotten wrong in the past. Its within the realm of possibility i suppose, but one thing we have seen over the last couple weeks is that there are things the iranian people can still be unified about. Feeling directly attacked by the u. S. , if the u. S. Seeks regime change, as you say, killing Iranian Military leaders is probably not a step towards that. It might serve other strategic purposes, but i do not think it contributes to regime change, if thats the goal. Anna jacob, thank you for joining us. Ideasparakilas, lse associate joining us with the latest on geopolitical tensions. Week get back to markets and stocks on the move this morning up next. Easyjet the airline, rising in tandem with ryanair this morning. Even if ryanair is outpacing gains just a little. Thel get the latest on upgrade from the irish airline. This bloomberg is bloomberg. Anna 41 minutes into the trading day, which started out positively but now we are flat on the stoxx 600. Cac 40 down 0. 2 . Lets talk about retail. U. K. Retail holiday sales were hit by this shift to ecommerce. Furtherd spencer, evidence of the tough climate. The latest report confirms fears u. K. Retailers would suffer from discounters, the rise of Online Shopping and political turmoil. A very different story, when you talk about a different slice of the retail environment. Luxury u. K. Department store joins us now. Good to see you. Let me ask about your experience. We painted a picture of a sector under pressure. What is your experience over the Christmas Period . Any retrenchment in the amount of money u. K. Consumers are prepared to spend . 15 sales growth in the month of december. Fantastic performance for the brand. Anna that includes tourists as well. The u. K. Story . 86 of our customers are u. K. Domestic. In times of uncertainty consumers respond to assured of are product quality and innovation. We have seen that over the last seven years, and i think this year people genuinely did feel rather uncertain, around the election, around economic and belittle turbulence around the world. People were nervous, but were constant in coming to fortnum. Matt how elastic is pricing . You have wellheeled customers in britain to begin with. But when you sell to overseas customers, does it matter if something costs 10 or 20 more or do they just want fortnum and mason . Ewan consumers around the world are sensitive to price, but price and value is an equation of quality, innovation, product design. Were a very democratic shop. You can buy things for as little as a few pounds to of course many thousands. Commodity, and most people can afford to buy a high quality tin of tea. Anna let me ask about event shopping. A a lot of people in retail tell us because of competition from online, you have to make retail more of an event, an experience. You have been innovating in that. How much of the business is around retail, and how much is around hospitality, cafes, dinin g . Ewan over the last five years, goneetail business has three fold and the Hospitality Business has gone sixfolds. We have a restaurant in the royal exchange, i was there this morning and saw dozens of people coming and engaging with the brand, the business, in a way that is different from just retailing. Being able to try food, drinks, really engage in the depth of what our brand is about. So a vital part of business. Matt what was the best seller over the holidays . What are your new perennial bestsellers . Clearly you are known for tea, but also in the past you have had different, interesting kinds of tea that people take to, for glutenfree beer for example. What are the Current Trends . Ewan the latest innovation is sparkling tea. Nonalcoholic, vegan friendly, lowcalorie and it drinks like a classic bottle of champagne. Thats been fantastic this season, and in the new year when people are more sensitive about alcoholic intake,t hat will be great. A brandnew category. Anna what a culture clash that ise in one glass. Thank you very much for joining us. Fortnum and, ceo of mason. Lets turn to australia, the wildfires ravaging the flora and fauna, and affecting the economy, and the death toll rising. An area larger than the republic of ireland has been destroyed, 1 billion animals lost, 200,000 dead. Razed, 25 people australia is forecasting a return to surplus for the year ending in june. Lets get some analysis on this story. Were joined by bloombergs opinion columnist daniel moss, who is in singapore but has been following this closely. Daniel, you argue the government has room to spend more. Goinge they so averse to into deficit to tackle something so devastating . Daniel they have a lot of room. Aere is what might be called surplus fetish in australia at the moment. This goes back a couple of decades. No federal government has been seen as having a viable Economic Program unless they wrap it around either a Budget Surplus or a commitment to get back to surplus in x number of years. Now, why is that a particular Sticking Point right now . Number one, we have what the Prime Minister calls a National Emergency. Wouldnt it be great if the Economic Strategy rose to that occasion . The government is forecast to produce a Budget Surplus this year, the first since 2008. They have been heading that way and will get over the line this fiscal year. This is a government that is wearing this as a badge of pride. They campaigned on this. Its tough to say, with a National Emergency going on, but you are not prepared to deploy every resource. They can borrow for a little 10e than 1 for a period of years, so go for it. Matt a basic question. Is this caused by Climate Change, or simply something that happens in australia . If it is a Climate Change issue, is the morrison government willing to admit that, or do they push back against that narrative . Has historically, fire has been part of the australian continent for a long time. Certainly before you and i came down the pike. What is different about this, the summers are getting drier, hotter. The bushfire season is lasting longer, and getting closer and closer to the coast where most urban settlements in australia are. Comes australias gdp from 0. 2 of its landmass. Think about that. The government has to get over this psychological thing about deficit equals bad, surplus equals good. The Prime Minister has said it is not a focus for him at the moment. That is not the same as embracing a deficit. Anna is it only the government that is going to respond here . The rba, theyre limited in what they can do. Whats the assessment of how much damage this is doing, awawy from away from the devastation to lives and the fauna, an assessment of what this is doing to the economy . Familiar with all the procession of imf officials and central bankers who come through these studios and say there is a role for fiscal policy. Monetary policy in australia has been doing its part. Three Interest Rate cuts last year and is likely to be a few more. In terms of impact, according to modeling by goldman sachs, a 0. 3 impact on gdp over two quarters. The reason it is not more is that there is an increase in federal spending. They should do more. Gtermthe lon repercussions of how australians interact with the land, how the country is settled, what happens to the agricultural and resource industry in the center of the country, that is a far more fundamental thing than whether gdp misses by a couple percent. Matt absolutely. Dan, we hope they can somehow get this under control and can spare the further loss of lives and property. Ourel masur, moss, Bloomberg Opinion columnist joining us out of singapore on this devastating episode. Coming up, deescalation in the middle east, the prospect of stimulus from the boe and a potential jobs rebound. We take a look at what is impacting markets with our strategist out of berlin. This is bloomberg. Anna welcome back. 54 minutes into the trading day, and fairly flat on European Equity markets. Taking a step away from geopolitics perhaps, waiting for the jobs report later. Mark carney opened the door to more stimulus in the u. K. Governorof england said they have the equivalent of 250 points of policy space. Richard jones, joining matt in berlin. Good morning. I received a couple notes, saying they were a little wrongfooted by what carney said yesterday. It weighed on the pound as well. Richard you, matt and i talked at the beginning of the week how in the last month or so we have had a few weaker than expected, quite important data prints from the u. K. , and we wondered when the bank of england had to address this. Mark carney definitely picked that up yesterday. Saying the bank of england would have to act decisively if the data continue to stay weak. As a result, the pricing of bank cuts this rate year, now 5050 for a cut as early as may this year. The interesting thing, carney was speaking at an inflationthemed conference and didnt have to say anything specifically about the u. K. Economy, but he did. Hes done this before, trying to get messaging to investors about what the bank of england will do at its next meeting. They may not cut rates the next time, but they are leaning in that direction. We have the bank of england speaking today. Matt how does this affect the pound . Richard i think that if we get in earlier than expected bank of pound, rate cut, the cable could get down to the 1. 28 level we saw in november, perhaps even more if the rhetoric is more dovish. Did catch people yesterday, and it is the beginning of messaging that the bank of england will act decisively to deal with the weaker data we talked about. Matt Richard Jones is pumped about this. I can tell this has lit your fire. Richard jones, mliv strategist in berlin. You can follow him on the mliv blog on your bloomberg terminal. Up next, surveillance as anna and i head off to radio. This is bloomberg. Justin trudeau says there is evidence the downed boeing plane was shot by an Iranian Missile. Tehran dismisses it as not possible. Todays payroll numbers could show a rebound. In theolatile week markets. Global trading back where it was before u. S. Iranian tensions escalated. Welcome to bloomberg surveillance