Welcome to countdown. President Francois Hollande has been forced into with third major overall of his cabinet. Aftervernment resigned the economy minister broke ranks and publicly criticized his deficit reduction policies. Caroline, is standing by. This reflects retaliation in france. Exactly. The government lasted only 147 days, less than five months. It reflects the big divide among the socialist in the party. Between those who support the policies and want change. French growth has been zero. France had to abandon their deficit target for 2014. Beginning, the president prefer to increase taxes for companies. More recently, he has been targeting tax cuts for companies. Asking french household to do more. He is planning 50 billion euros of spending cuts before the end. Who isnomy minister responsible for the cap never shuffling says this was proof the current Government Policies are failing. We should be. Maddock about trying to cut the deficit dogmatic about trying to cut the deficit. He was trying to offer an alternative. Of my personal responsibility as the economy minister is the proposal alternate solutions. Another path exists. Other choices for france and europe. I have past few years, been tired by the president s actions. Letters to notes and the head of the executive trying to convince him. President ofed the the republic to refuse the excessive measures that is damaging and weakening the economy. More than a cabinet reshuffle, it is a whole ideological debate that is offered not only in france but across europe. What sort of people are we going to see in this new government . Who is out, who is in . Hollandes popularity rating is at 16 . He really has to get this right, hasnt he . Yes. His priority is to form a new cabinet that will reflect his plans for the country, doesnt want any troublemakers. He doesnt want anybody to defy him. About the been talks former paris mayor who is very popular. Mayor. Socialist those who might change jobs you have the interior minister who may return to an economic minister unless the job gets extended to both economy and finance. Ministerthe education also supported and could decide the german chancellor. He doesnt hold any positions. He said last night on French Television that he will look for a new job like many french people. Forhank you very much reporting in paris. Lets talk about markets. Hours in thef two s p 500 made it above 2000 and close to just below it. The question is whether europe will carry through today. So we u. K. Was closed could see it move higher in parts of europe as the u. K. Plays catchup. The markets in europe were very strong yesterday. Comparingthe debate out to them. N. We have for this wonderful story. It was valuations. At 30 timesing annual earnings and now it is 19 times. How many stocks are taking part in this rally and it is much better now than it was in 2000 when it was predominantly internetbased stocks. Yesterdays record 48 stocks were at a 52week high, 27 was the peak in 2000. Earnings,ons based on based on acid multiples are much inducible than looking at overall levels but it doesnt hurt to remind ourselves that even though the s p was over 500, the nasdaq is still 10 from its record. Maybe theminder of comparisons with those days of the tech bubble but the fed is concerned. They have talked about biotech and social media. Same part, there was a lovely line in australia. I would disagree on a personal basis. I am begrudging about this rally. Gravity pulls markets and what you see here is a velocity. It is a velocity that you havent seen since 2000. On march 9,t stocks 2009 until now, you will earned 195 return. The question is is this rally overdone . Take yourself back to do thousand, the same time before 2000 if you owned, it rallied by 32. 6 . The 2000 stockmarket rally was much faster than we have at the moment. In theory, there is more. Traders are buying more downsize protection at a ratio of 2. 2 1. Started 10 years before the bubble burst. In 2000, this bull market has only lasted five years. Will return to this because it is easy to talk about earnings and valuations. Are we on the coattails of what the central bank chooses to do . We will have more on the state of the French Economy in how it fits in the picture of the eurozone recovery. We will talk to the global hell of economics. Head of economics. Stay with us. Welcome back. Time for todays company news. Aazon bought twitch, website focused on video gamers. It is amazons biggest ever acquisition and wraps the marking up a bit entertainment ambition. Twitch was earlier in talks with google about a potential buyout. Expanding its european advertising network, according to the financial times. The company which has offices in eight European Countries will open offices in 12 more in eastern and southern europe. Markets will be able to buy twitter directly from these local sales teams. Aviation is buying 8. 8 billion worth of boeing jets. This is the companys biggest ever order. They will serve asias travel bone. 737 claim from the family. They bought 33 jets from them. The french president will name a new cabinet today after the previous french government resigned following comments made i the economy minister. View, he criticize what he called the president s use of deficit reduction that he said is soaking french unemployment. We will talk to Michaela Marcus on. With this change in the french government, with these comments, where does this leave the french . Do we see a stronger reform agenda as a result of a new government be put in place or a weaker one because of the grievances . It leaves the reform agenda unchanged but what is good news is there will be less critical and dissenting voices within the cabinet itself which i think will help the government in terms of its communication to the french people on what it is they are trying to do and what it is they are trying to achieve. We heard three things from the president. He said that he was going to stick to the 50 billion in spending cuts he is planning to put into place. He was going to stick to the different measures that he had been planning in terms of improving competitiveness and cutting taxation for businesses. The third thing that he added last week was to pursue reforms in terms of housing, perhaps opening hours. The socialt we call levels in france which basically means the levels of the number employees which regulation starts to kick in. These will be the type of things they will push ahead with, but i think the bottom line is this will not be enough to lift of the growth of the French Economy sufficiently. We have heard from the finance minister that growth this year is likely to be around half a point of gdp. The budget deficit is likely to overshoot 4 . The target is 3. 8 and that is a real challenge. Is it time to chuck out the roles, the growth and stability rules . As the likes of the italian Prime Minister has been suggesting he just allow governments to spend, spend, spend. I would disagree a little bit a little bit a lot. Not completely, but i think the key point is what europe really needs bottom line is structural reform. I think if you put in place a system where you have a mix of drive little bit for the structural reform agenda will help. What we have seen in the economies that are doing restructure reform, they have done a lot better for it. If we take a country like france, where do we need to see more reform . We need to see it on the labor market, products and service markets, more simplification of the overall economic. Of lessthem, no amount austerity will give us longterm growth potential. Merkelas symbolic to see in spain praising his reform agenda. It is. You see Angela Merkel can she be swayed . We are eager the message in late july when they were pushing really hard to get more fiscal wiggle room. Ically, the message was put in place for structural reform and i will be more flexible around the interpretation of the rules. This is a bargain that was put across during the weekend. And Monetary Policy complementing one each other. He said i am not going to propose flexibility unless you guys really put the structural reform in place. This has been the message all along. This has been part of the european message for quite some time do the reforms and we can be more a flexible. That is not really something that has changed. We are hearing the message a lot more but i think that message has been a fundamental message for quite some time. Is doing withb bond yields being as low as they are in the eurozone and talk of withlation about easing, all of that going on, is that ability ofe governments to deal with these issues . Once we have moved away from mood, some of the pressure came off governments. Those economies that have pushed the most ahead on structural reform agenda are the countries that have been on a program. Clearly, that stick has been very important in pushing forward reform agendas. At the same time, i am a little bit skeptical that further ecb Monetary Policy stimulus will actually lift the real economy. It will help Financial Markets but the question is how much can it really drive afford the real economy . This is where some of the recent considerations we have been hearing, some of the concerns we hear from the bears in the isket that a lot of this qe going into artificially increasing asset prices that has to be a concern. There was a point where investors may start to realize it will not implement more qe even though the tone changed. Downside . Be the if markets continued on with what you were saying . Basically, he is indicating that they would be prepared to pursue a program but probably more focused on the hope that the ecb would go up and aggressively buyout european government bonds. That is probably overdone in this point of time because the message was also that our institutional setup is very different from that of the u. S. , u. K. , or japan and that means it will be more challenging to buy government bonds. Thecan also ask yourself question how much is it worth to go out and massively buyout government bonds at a time where bond deals are credibly low . The only thing you hope is to weaken the currency. The lesson from japan shows is that even weakening the currency very aggressively does not necessarily give you that miracle left to exports. We cannot have a weak currency. There is a challenge out there in terms of quick fixes and i think bottom line is the structural reform is really what is needed. That is also the message in japan. We will leave it there. Much more to talk about when we come back. We will talk a little more about wages and the upcoming u. S. Data. How strong is the u. S. Recovery . What was the real message . Welcome back the countdown. We are set for a big days worth of data. The global head of economics is here. Yesterday was the slowest in sales in four months. It is about housing market. You a fairly spectacular call. Were looking at a number of 24. 5 . A big chunk of that is airline so once we strip that out, we are looking for relatively healthy 1. 3 gain. When we look at the u. S. Economy, even though there is some volatility in the data, we are seeing fundamentally for several months is a recovery that is beginning to look increasingly sustainable. It is coming through on housing. There is a housing recovery coming through. Less fiscal austerity which is a big lift. Also, most importantly, we are beginning to see signs of improvement in business investment. I think that is the driving point. Show us wepposed to are seeing an investment cycle getting underway. Of that is our belief. We see evidence when we look at the survey data so that is beginning to come through. That is one of the coins the continues to falter in many of the euro area economys. Interestinge debates was the wages and the number of central bankers. Where is the visible hand . One of thethis is new ideas that is coming up. Governorasically that corona told us that after a very prolonged. Inflation that people do not get wage gains anymore. Is suggested this to say that wage formation needs to be invisible hand. As auggestion was perhaps reference for wage negotiation the Central Banks inflation target should serve as a Reference Point for wage negotiations. For all of us that have been brought up with the idea that wage mechanism is a way back to inflation and we have to be careful about this. There is a bit of shock and horror. It is actually not such a bad idea when you think about it because if you want price stability, at the end of the day, price stability and inflation needs to come back to weigages. You end and up in a situation where youre still losing purchasing power for your consumers and that is what japan has been experiencing. That is what he is pushing against now. He made a speech in conjunction where he talked about people having to this is a new labor market, isnt it, where we have to get used to lower wages. He went on in the speech to say very clearly that gdp is a Reference Point is no longer the Reference Point. You have to look at the employment market, the labor market and that has changed. He also highlighted this idea that perhaps we have seen a downward shift. Also, talked about that being a structural shift in the wage formation process. Suggested there was a real risk that the bank of england could undershooting its own weight forecas wage forecast. When were looking at Central Banks, we are increasingly focused on the wage component and a little less on the headline inflation number. I think when we look ahead to the next u. S. Employment report, it is that wage number that will be key. Janet yellen also spoke very much about those wage numbers being crucial to what the fed does next. Thank you for joining us today. The global head of economics. Up, ukraine celebrates its Independence Day last sunday and other countries president will meet his russian counterpart, president putin. Angela merkel downplayed it. We will tell you their agenda coming up next. Welcome back. London anda. M. In time for a check on how the foreign traders are doing. You are seeing the yen gained for the first time in seven days. This is yen gaining. The consensus in the market is that it felt too far, too fast. Some of the strength indicators are over bullish or oversold and in this case it was decidedly over bullish with an indicator at 78. 4. Petro poroshenko and putin tension todding some the markets in terms of what can happen on the geopolitical front. You are seeing the dollar, lower generally this morning. That probably manifested itself in the first instance. That is where i decided to show these examples you see. Mosttors have solve the amount of korean debt in almost six months. The dollar on the move. The top stories. These are the top headlines. The president of ukraine and russia met today during a summit of the russian led. No separate this this options are expected between them. Talks come after ukraine accused russia of sending tanks across the border. Petro poroshenko dissolve the parliament. Frenchpresident president Francois Hollande will name a new team after he fired the economy minister yesterday who was critical of the governments austerity measures. It exposes a water risk within europe which is a backlash on spending. Drama breaking bad captured american televisions highest honor by taking home five emmys. The show about a High School Teacher turned drug kingpin ended its run last year after five seasons. It built a massive viewership around the world due to netflix. Turning to geopolitical tensions, president putin is met to meet ukrainian president Petro Poroshenko today. An agreement is unlikely to occur. Ya. Are joined by martin thank you for joining us. It seems like the Russian Foreign minister had a separate bilateral meeting between putin and president poroshenko. Meetingextent could a move emergingmarket asset today . I think expectations are very low. Markets have already done that because of the risk. There may be some potential. It is very difficult to see a breakthrough in these stocks. What is it leave us in terms of the russian investment story . We have seen the longest gain since 2005 just in recent days. Soleast, people are talking we saw these meetings in berlin where we had the leaders of ukraine, russia, france, and germany getting together to find some solution. Has that meant we turned a corner in the investment story around russia . I think they have been relatively good for two weeks, since the beginning. Investors areng in a position for a deescalation. It is still the summertime. A lot of people have sold russia. To see a lotting of buyers because there is a lot of Risk Management not to buy into russia. It is not a good outlook. If you look at emerging markets, right at the start of the year, that has played through. There has been a recovery. We have the fed a potentially going one direction in terms of rates and we have the ecb potentially moving towards quantitive easing. Is it fed tightening or is it ecb easing . I think the ecb expectations have been dominant. U. S. Yields have come down the mainly because of european causes. The liquid a trait is still on. If the fed changes and start the hike earlier, that probably will be be bad news for urban markets. As long as the ecb is on the way for qualitative easing, there is that possibility. The emerging markets. It is almost 20 , almost a bull market. Is that misleading looking at an index like that . I think the first month of the year and most of last year since 2010, the emerging markets have been week. It is a bit of a rally. I think it has been on and off earlier in the year since midjune. It has been a pretty solid rally. Driven by liquidity expectations, not so much by sentimental. Central banks,e what are the fundamentals we should watch for . Is it about chinese growth, striking trade deals . Is that very much the center of where emerging markets go . It is not a growth story at all. Global growth has been disappointing. It is mainly the quilty liquidity. The picking up of chinese growth has been helping but that is also not that convincing because chinas data has been disappointing. It is primarily a liquid with the story liquidity story. Growth and change, it is not really there. We need to assess how we look at the emerging markets. If that indicates it is not growth, who is structurally changing the most . You have new government in india. We have turkey going to a president ial structure. Who and where do you look at the most pot