Pound is down today, and the ruble is under pressure. Angela merkel, the german chancellor, appears to be leaking nord stream 2 with the poisoning of alexey navalny. Some suggesting that maybe we could see that project halted or not used, but currently the link between the two providing some consternation in moscow. The u. K. Is preparing for brexit talks to fail and planning new legislation to potentially override parts of the Withdrawal Agreement, as the u. K. Foreign secretary dominic raab calls for a moment of reckoning. It is a week up call for the eu side. Weve got to a position where there are only two points really holding us back, but we cant accept that the eu will control our laws. That is the reason we are leaving. No other country goes into trade organizations into trade negotiations on that basis. Guy is Boris Johnson now basically signaling that he is prepared to accept a no deal brexit . Hes basically sent out on emailed today saying there needs to be in agreement our european friends. If we cant agree, then i did not see that there will be a freetrade agreement between us, and with and we should both except that a move on. Is he moving on . Therese i think cabinet saying that this is where hes at. That reportedly, downing street considers the chance of cyst has the chance of success 30 to 40 . I would say this is the government trying to move the eu a little bit more in the direction of the u. K. , basically saying we need some concessions. But lets think about these two issues. One is fisheries, a very tiny portion of the u. K. Economy. You have to think that a deal would not collapse over fisheries, so it is particularly it is important for the eu because it speaks to their ability to prevent distortions of competition. It is hugely important to Boris Johnson because, should he give in on that went, he will be accused by brexiters of having compromised the very sovereignty that was hard won through the Withdrawal Agreement itself. He is looking for some movement from the eu side, and signaling he is very comfortable with no deal if that doesnt happen. That, ihe really pushes think we have to wait and see, but you have to assume that that is a calculation theyve made. Therese i cant believe guy i cant believe i am going to ask this question again because arrested so many times. Are the chances of a no deal brexit and arising, and how high are they . Therese the government is putting it at a 30 to 40 of a deal. I am certainly less informed than government officials will be, but i think we have 60 chance because no deal would be ruinous. Scottish appetite for independence would likely be fueled by it. The economic consequences might pale in comparison to covid, but we saw that it is not about the aggregate effect area it is about the powerful individual stories that get televised, they get written about the papers, that have an impact on public opinion. Boris johnson attacked by the opposition as incompetent. Be a no deal exit, and we see people struggling because of the octave a deal, you have to believe those are going to cut through in a way that even and 80 seat majority in parliament is not going to be ironclad. For that reason, i still would bet that a deal happens somehow, but the government itself is saying that the chances are less than 50 . Yes, we keep asking the, and im not sure that we are any closer to answering it. Johnson has now put an october 15 deadline on it, and i think he believes that is the only way that eu actually moves to some kind of conclusion. Guy the timing i think is quite interesting. October 15. We are starting to get to the point where Government Support is rolling off. Unemployment could start rising. Kids would have been back for a covid so the lag on the cases could also be starting to come through at that point. It strikes me that midoctober is a very risky point to start bringing in extra elements of bad news. Therese that is absolutely true. At the same time, it is hard to imagine setting a deadline earlier than that because there is far too much ground still to cover in these negotiations. If they were to do a deal, we know it would be a very barebones deal that would hardly in material terms be much better than no deal at all, so he couldnt really do it earlier. Any later is also difficult because the deal has to be ratified by the european parliament, and the extent of all of those channels, so he sort of picked this midway point between the European Council meeting. Whether that is a magical date or not, that just the cap deletion of the latest possible moment they could the calculation of the latest possible moment they could leave it, and what date puts pressure on the eu to accelerate negotiations. We are now in round eight. They are not expecting much to be accomplished this week. But hes just put a deadline on the clock, and i think that will have an impact. Guy we will see. Thank you very much, indeed. Bloomberg opinion columnist therese raphael. Lets bring in chris watling, longview economics ceo and chief market strategist. What do you make of the latest politics, and what do you think it means for u. K. Assets . Chris i just think it is a classic sort of eu negotiation, isnt it . It always goes right down to the wire. Its a last minute thing, and you end up last minute at the negotiating table, hopefully agreeing. I think it is another marker of the seriousness of his intent to either leave or get a deal, rather than sort of keep this thing going forward, as theresa may did many times. I think it is just classic european politics, personally. I wouldnt read much into it. Guy do u. K. Assets look cheap . The pound has given back some of its recent gains today. Where would you put them in terms of your investment thinking . Is there a potential for catchup of u. K. Assets . Good i think is too things going for u. K. Assets. One is in the longterm, they are clearly cheap. Cheaper at the moment on a relative basis if you look at u. K. Equities relative to u. S. Equities. It is about as cheap as its been on a relative ratio in the past few decades. In the euro is cheap, down to the low 1. 20s. It has held pretty well throughout these brexit negotiations. Maybe a few cents above where you would wanted to be. The equity market is cheap on a relative basis. At some stage in the next few years, if you are a longterm investor, we are going to get the switch out of growth into value, and that is going to favor markets like the u. K. Over markets like the u. S. Theres a number of things brewing that suggest a u. K. Longterm trade is absolutely there on the long side. It is just a question of timing. The other thing is we all know the exit we all know about brexit. There might be no deal. That is clearly a negative. I wouldnt over emphasize how negative that is relative to what we already know. I think that is a minor irritant on a fiveyear view. You have aws is government in power that has a reasonable majority, and you have concluded that know that uncertainty, people would get on. Think they look good. It is just the timing is the challenge. Guy he talked about the switch from growth to value. What do you make of the price action late last week and the momentum trade that has been u. S. Tech, u. S. Growth . , and fascinating fascinating to observe, as you say, that was is really concentrated in the frothy asked part of the market in the frothiest parts of the market. Actually, tech in asia didnt really get hit. I know overnight it did to a degree in china, but not in korea or taiwan so much. Outside of the frothy parts, i dont think it was two. I just think it is i dont think it was too bad. I just think it is a little bit of shortterm froth coming out of that market. It is the most overextended its been since 1999, 2000. Whether or not the tech trade is over, im not so sure, because the liquidity is still plentiful. Bitcoin i think is a good liquidity indicator. You see a bit of tightening nearterm, but the fed is still doing its thing. The ecb is doing its thing. Central banks are still expending their Balance Sheets. The nasdaq is really a liquidity play. I dont know. I wouldnt jump on it today or tomorrow, but i suspect its it will be a good time to get going on that and next few weeks. Guy chris, we will talk more about Central Banks, the ecb meeting thursday. Chris watling, longview economics ceo and chief market strategist, staying with us. This is bloomberg. Guy live from london, im guy johnson. The u. S. Economy added four point added 4. 4 million jobs in august, but there is still a lot of work to be done to get the economy back to where it was prepandemic. Congress expected to resume negotiations for another stimulus package when it returns to washington this week still with us, chris watling, longview economics ceo and chief market strategist. It was a really positive jobs number. The news somewhat overtaken by tech selloff. Does it make the case for a lot of stimulus or little stimulus . Chris well, i think you could make the case that you probably , but need tons of stimulus you probably need a bit. I suspect that is not the way congers will see it because they want to get reelected the way congress will see it because want to get reelected. It did fall, but still is well below what is considered full employment. So whether or not they can agree which pieces they want to do, you can they can economic argument that you should do more. We will see. The reality is they have done an awful lot already. We can see that in the way the data is playing out. The employment rate was one exam of that. Guy derisk assets respond positive do risk assets respond positively to a little stimulus or a lot of stimulus . Yang ofhe yin to the fiscal stimulus more or less monetary stimulus . I am trying to gauge where liquidity comes from, and how much more there is still to come. Chris well, the reality is the liquidity primarily, most the quiddity most liquidity either comes from the central bank or the commercial banks. Those are the two agents in an economy that can create money. The commercial banks arent really doing it so much at the moment because they are slightly riskaverse, and Credit Conditions are tightening and so on, and the Central Banks are doing a lot of heavy lifting. But if you Jerome Powell last friday, or on any occasion in the last few months, hes been pretty clear that they will keep stimulating as much as they can for as long as they can. Whilst on the limit is high, that is their main focus. They are not worried about asset prices, the size of the Balance Sheet. They are just worried about ting inflation down getting unemployment down. Clearly, what we are really doing is what i call backdoor helicopter money. The government is giving in the Central Banks are giving. Ofbe fair to the ray dalios this world, i think this is a classic third phase of Monetary Policy in a debt super cycle. Youve done qe for the last 10 years and financial assets. Before that, you cut rates down to zero. Now we are coordinating monetary and fiscal policy, albeit not officially. The size of the fiscal package i dont think really matters to the market in the sense that it might have some implications on encouraging, but i suspect that will be more about the vaccine timing. Will keep ond if coming, whatever size that fiscal packages. That is the key here. Guy i think dalio speaks later on this week, so we will hear more from him. What do we learn from Christine Lagarde this week . At the moment it looks like they are sitting back and waiting to see what happens area using their really worried about the currency at 1. 20 . When do you think we get more from the central bank . Chris great question. I think really, they are worried about the currency strength. They must be. It has been a strong move, and it could easily keep going. I think what i am looking for, i dont think they are going to change anything in this meeting, but whether or not they Start Talking about it as a concern because you look at their headline inflation, it is remarkably low. We are not far off zero on some inflation measures. Clearly theyve got to act and do more. What can they do is the question, and what will they Start Talking about . How dovish will they seem in few meeting this quite a stumps hitting after the ecb knowng, so i think we will more from that policy meeting, but also those speeches. Guy have a great week, chris. Thanks for your time today. Chris watling joining us from longview. Coming up, we will count you down to the european close. We will follow that up with a conversation with james berman from ccla investment, the chief investment officer. This is bloomberg. Guy live from london, im guy johnson. German chancellor Angela Merkel rethinking her sustained support for the russian led nord stream 2 gas pipeline, a potential response to the poison of russian opposition figure alexey navalny. Induced his medically coma as he shows signs of improvement. For more, bloombergs gregor we white bloombergs gregory white. See is are starting to an increasingly frustrated Angela Merkel. Do you think nord stream 2 is on the block here . Gregory it certainly looks like. They said they cannot rule out the possibility that nord stream 2 might be stopped to punish russia if rez or if russia doesnt cooperate in the investigation. Certainly that is a tougher call on that front. Guy how would that work . Would they stop production . That would certainly please the white house. Would they not use it . That would seem a strange response. How exactly will this happen . Gregory it is not really clear because the pipeline is nearly built. The total cost is about 9. 5 billion euros, and it is almost all the way to germany at this stage. Saying thatave been they are going to finish it by next year. The German Government could simply cut it off with regulatory pressure stop backing it, or not use it once it comes to service. Exec a what happens there is unclear so far. The government hasnt specified how they might actually do this. Its just been a political statement that they will have to consider. Guy merkel increasingly frustrated with putin. What are relations between the two like right now . Gregory very frothy at this stage. Tried forn merkel had many years to bc sort of bridge between russia to be a sort of bridge between russia and europe, to connect with the russian leader, but it has been very difficult, and in the last few years particularly, with the attack last year on a russian in has beenhe murder that blamed on russian secret services. Detentions in the first the tensions and the frustration level has been really quite high. Guy are there other implications . German business, what is its view of the situation . German business often looks east for new business opportunities. As i say, germany normally pursues a very mercantile approach to foreign relations. Is there Economic Cost to be borne here . Gregory there certainly could be. Cutting off nord stream 2 would be a substantial shift, a real turn and a real signal of the relationshe freeze in , and that would certainly make it harder for all kind of other economic projects. Certainly if youve got the highe coming up very profile thing like this is no longer something we want to be doing, you will have german business thinking twice about investments in russia. Guy is there european support for this . Would there be support coming through . Im assuming there would from the United States. Would this be a united approach to russia . In the last few minutes, the u. K. Foreign secretary dominic raab summoned russias abbasid over the russias ambassador over the navalny poisoning. Gregory the nord stream 2 decision would be one up to germany, but clearly determines have tried to marshall support from europeans, and merkel has been quite clear from the beginning that it has to be a coordinated european response, so exactly what they will do, we dont know yet. The u. S. Obviously is a wildcard because trump has commented on it, but reluctantly, and doesnt seem to have much appetite for punishing putin. On the other hand, nord stream 2 has been a project the administration has long targeted as something they want to stop. Guy we will leave it there. Thank you very much for the update. A quick look at european equities as we head into the close. Outperformance coming from the ftse 100. That is largely down to the currency, which is significantly weaker today. The dax and the cac 40 up nicely unlike volume. Nicely on light volume. At the moment, the indications are that we did see a fairly weak open for u. S. Tech. This is bloomberg. The big events are back. Xfinity is your home for the return of live sports. Guy 30 seconds until the end of regular trading in europe. Light volume with the u. S. Out for labor day. The stoxx 600 tracking toward session highs. Just about every sector in positive territory. The currency market is having a scene if you impact on the session. We have seen weakness in the pound which is providing reason for the ftse to outperform. The ftse is up over 2 , whereas other european markets are still up strongly around 2 . We are getting outperformance from the ftse 100. That is very much a mechanical process in terms of what is happening. The pound getting hit as we see Boris Johnson talking more and more about the idea that a hard brexit could be in the offing. Nowsee the cable rate 1. 3164. Largely positive on whether trajectory is for the stirring leg for the sterling rate. You basically have a mechanical process or your translating the revenue stream, particularly the large multinational that exists within the ftse 100. Lets see what effect that is having on the main markets around europe. Largely positive. Every sector in positive territory. The ftse 100 up 2. 31 . The dax and the cac 40 just shy of 2 . The auto sector having a strong day. Angela merkel meeting with leaders from the auto sector in germany tomorrow evening. Itll be interesting to see what happens with tesla tomorrow. I do not think it is graded as an auto stock. A very strong Sector Performance today, howbeit also on light volume. The auto sector is leading the charge. The car sector is up, the Health Care Sector up, utilities up. You can argue you do still have a defensive bias attached to these markets. Interesting to see oil and gas trading higher. The saudi pricing of its latest batch of crude sales indicating downward intentional within the crude market