Will punish the market if financial repression finally over and is that that such a bad thing . For ropping the bid actelion. A fascinating deal. We will explore that. We will take a look at where futures are trading. It looks like a weaker start for stocks. You can see that the ftse is indicated down. 3 of 1 as is. He cap cac there is a lot of earnings and equities. It will be an interesting day to see what happens at the open. Guy maybe a slight negative start. Maybe the reason is we had a solid day yesterday. Spain am a the, main European Markets trading higher. Of jewsst a little bit coming out of that trade. The dollar is weak or going into the fed. Index down by. 1 of 1 . Ons generally better. The yields coming down the little bit. We will keep an eye on that and the other thing to watch out for his oil. Giving back a bit of ground. Trading down by 1. 1 right now. Were seeing a little bit of dollar related trade going into that oil story. Maybe some of the exuberance coming out of it. Plus the nonopec transitions we transactions we have seen. Here is the bloomberg first word news. Hsbcs chairman has said he does not expect president elect donald trump to dismantle the regulatory since theput in place financial crisis. Speaking exclusively to bloomberg, Douglas Flint cautioned that returning to an light touch approach was quote could spell disaster for the Banking Industry. You do not want to bash a part of the world where people are able to do things with much less capital that is economically advisable. We are all exposed to each other. One touch regulation of the lowered standard is bad banking i do not will happen. Juliette we will bring you more of our exclusive interview with chairman Douglas Flint throughout the day. Goldman sachs plans to appoint Harvey Schwartz and david silliman. The bank to leaving take a job in the trumpet Trump Administration. Goldman is likely to name zechnology chief martin chave to replace shorts. Interest rates may climb to 3 on 10 year treasuries by next year as deficits and inflation rise under a donald trump presidency. The move that would hurt markets. The chief Investment Officer who called the president elects policies bond unfriendly said the effect could be felt across the u. S. Economy. Benchmark treasuries are closing at two point 5 . Confidence among japans large manufacturers improved the First Time Since june last year. The week improved prospects for company earnings. Sentiment rose to 10 from 63 months ago. With the outlook up to eight from six. If 5. 5 increase in plan to Business Investment for the current year was below estimates. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Bloomberg. Has been 12 months since the Federal Reserve began its liftoff. Since then there has been a lot of talk but no action and while the fed stresses its due to dependency, releases have been topping estimates at the fastest rate in two years. Various measures of inflation arcola sing around 2 , the target while employment figures are trending higher. Unemployment well below 5 all year. Alan greenspan said the Unemployment Rate cannot fall much further. Greenspan the labor force is running out of extra workers. The on employment rate now is under 5 . Unemployment rate is under 5 . You cannot go much lower than the 152 200,000 increase in payrolls a month. It will not continue on because we are running out of people. Lou have special coverage of the fed starting at 6 p. M. London time. The press conference something you want to watch out for. The projections something you want to watch out for. What will those dots deliver for us this time around. What are you looking for tonight . Are all most certain there would be a rate hike. Guy what are we expecting . Guest we will get a couple of hikes next year but the commentary will remain dovish because we are going through this time of uncertainty. That may need to change in the next year now that oil is doing well. The headline will be in creasing. I think at this stage we are erring on the side of caution. Guy you have been onset talking about carrier the way to make money. Is that still work . Guest carrier is difficult. Trump has trumps election has put a spanner in the works. It makes my job easier and is quite a lot of change to analyze and interpret and incorporate into investment strategies. It is not really the best environment for holding positions. We have always got a mix of positions. There are positions that are less valuable than others and we have new ones that were coming on because they offer a premium. But there is a variety of strategies the have done poorly. We can keep those on, things like australian duration which has rebounded very hard. Rebounding from low levels much like that in the u. S. That is a position that is likely to perform well because the us trillion reserve bank will find it difficult to raise rates even if the rest of the world is. What do you expect to hear from the fed today or what would surprise you, what are you looking for . Best if the fed were to less dovish than the market expects and really say that they do want to be ahead of the curve on keeping inflation under control, then that would be a shock to markets, quite a hawkish shock and feeds into one of the concerns i have got with the trump optimism that is coming through in a lot of acid market prices and that is the circularity. Were not entirely sure which of his policies will affect Asset Classes before other Asset Classes and the fed is critical because of the come out with a slightly more hawkish tone i would expect it to be more bullish for the dollar than anything else. We have seen in the last 18 months consequences of an excessively strong dollar. What is going to be good for asset prices and good for the market stability in the short to medium term is the fed managing to get its hike on to suggest that there will be a moderate hiking cycle, but doing it in such a way that they do not cause excessive dollar appreciation which really upsets the Global Financial stability, basically. Att which would because, more hawkish tone in one sense . Do you expect them to indicate in some way trumps policies are causing an upward risk, upward bias . Just yeah. They might talk about the one side of trumps policies that are inflationary that might caution against the pace at which inflation has been increasing or could increase. I think all of these things are relatively unlikely given that things are still trundling along. Ee have not had a blowout in th participation rate. It could improve. Some of his policies are designed to allow women to stay and reenter the workforce more easily. There is some room for the fed , it is aght waitandsee approach. The Airport Administration has not been inaugurated yet. There is still a lot of people to be confirmed in their positions. I would be surprised if they are on the hawkish side. There is the possibility step away from the optimal control thesis that yellen has been pushing and take a more cautious tone. Guy the labor market is tightening. The philips curve is going to work and we have seen evidence for that. Levers, early earnings and the trajectory is undoubtedly up in the united states. The fed has fulfilled its s picking many, pce up toward target. The idea you could run a hot economy, we are in that phase right now. Guest the Unemployment Rate is low but so is the participation rate. You read the research that the fed has written themselves and it looks like maybe three quarters of that is demographic and you want to get this people back in the workforce but there is still a quarter that is not. Perhaps more cyclical and can come back into the workforce. We have been talking about the outward gap in the u. S. That would close material in the last couple of years and inflationary pressures should be tilting. We have been talking about it for 18 months. Guy it is one of those things that you will know when you see it. By then it is a must too late. Guest you come to the end of the road and you are getting help from inflation from oil at the headline level which and creases Inflation Expectations which has a self fulfilling action to it. There are elements that are putting upward pressure on inflation but i think that when you have had inflation running low and with such negative pressures, a lot of those negative pressures still exist, to which debt, demographics still apply by a lot of pressure to inflation and dictations. It is quite possible to let things run just much like the bank of england did post crisis and probably will in the next two years because it may be assisting in permanently changing expectations. Guy jerry fowler joining us this morning. Coming up we will bring our interview with the chairman of hsbc. Find out what he thinks about bank elevation consolidation in europe. U. S. Rate hike a foregone conclusion and are there still trades to be done . All that still to come. We are 18 minutes from the market open. This is bloomberg. Matt welcome back to the European Market open. 15 minutes to go before we see equity markets start to trade. Looks like they may move to the downside this morning after a pretty decent day yesterday. Lets get the Bloomberg Business flash. Is in talkstelion with another party after Johnson Johnson and it talks for a deal. It was worth over 27 billion for the drugmaker. It is now in talks with sanofi. Clothingorlds biggest retailer is reporting higher revenue. Consortium including kkr and Morgan Stanley has offered 5. 5 billion u. S. Dollars. The move sets up a potential bidding war with tatts corp holding. Failed for the explantime this year to to regulate ors that he could unwind its business without wreaking havoc on the broader Financial System. The lender is banned from buying nonbank companies are setting of international. If wells fargo does not, with an acceptable socalled living will by april, assets and its brokerdealer and nonbank units will be capped. That is your Bloomberg Business flash. Guy and matt. Guy thank you. The hsbc chairman Douglas Flint has told lumber got there are too many banks in europe. He spoke exclusively to Francine Lacqua. At itynt yes, looking from mars, why do have some a banks and the Business Model has ome less often because profitable because of lower rates and lower margins which is has it has. Assuming youre not going into risky places, then you need to tie up the cost space. Either much more technology which is happening or consolidation. Consolidation is difficult because crossborder consolidation has not been particularly successful. Jerry fowler still with us. In terms of the risk reward and as you look around the world and work out how different investment stack up, where do european banks said . Got veryropean banks cheap and are rapidly raising some of that cheapness. Those reasonable rooms make money out of european banks in a variety of ways. If you are tactical you could treat them. That is not our style. We have much more strategic views. On a strategic time from there is opportunity to sell up the downside and you could receive premium given that the banks in europe are very volatile and well protected by the political and Financial System in europe to some extent. What i worry about in terms of the longterm out outlook is you are getting a deregulatory push that is more specific to u. S. Banks which includes the dollar repatriation. If dollars are taken out of the market, the cost of dollar lending goes up in optional markets and that is a risk to any bank that needs access to the dollars in that system. To provide to their corporate clients and trade. You think european banks need to fund the working capital of multinational corporates which are priced in dollars, the axis that historically had free levels, at 50 basis points in the cross currency basis web and there is a reasonable chance that has just settle at a higher level if you take trapped dollars out of the optional market and put them back in the u. S. It is one of a series of competitive risks that impacted nonu. S. Banks rather than u. S. Banks. Do european banks have the right Business Model . Erry it is a good question and that they are still enter me intermediate in business. It will allow corporates to issue bonds. In europe the lending is direct to the bank. Direct from a bank rather than securitized. There is a element that banks could be facilitating of transactions. It is hard to say they have a poor Business Model when they have negative rates to contend with and that is one of the headwinds, the negative rate environment is not likely to change anytime soon whereas u. S. Banks should all Must Immediately benefit from an expanding deposit versus lending rates. At least give them some stability from contraction. While european banks are doing right well and my there are questions round the Business Model and concerned about capital, it is hard for them to perform with a little bit of a steepening curve area curve. Matt does that have to do with the european culture . Not sure. M real specialist in european banks and i have a conversation about what we should do for our macro perspective. It is usually a fairly short conversation. Our conclusion is european ranks require stockpicking. There are good banks and bad banks and there is a lot of dispersion between the two. We prefer not to put our typical multiyear strategic trade in european banks at the moment and to actually leave that to the stock pickers because there is quite a lot of differentiation in the European Markets. We do have a macro position in area thereu. S. Banks is a yield curve in dollar traded at the long and but rising rates trade and the do regulation trade and that trade has made one and 50 in the second half of this year and the managers [inaudible] did a good job of waiting through a fairly turbulent First Quarter to access that quite superior return on trumps election that made it a very useful macro strategy. In europe, it is hard to trade from a macro perspective and you do need to go into a lot more stockpicking. You have to look into this banks from the bottom up. Next, we take a look at the movers in todays trading area including actelion. The rug Company Wants to say independent drug Company Wants to stay independent or maybe they have another better. We are nine minutes away from the open. This is bloomberg. Matt it is five minutes until the open. It 50 5 a. M. In berlin. Some 50 5 a. M. In london. I am matt miller alongside guy johnson. Lets look at the stocks that are on the move. An interesting swiss biotech that a lot of people have been trying to take over for years. Johnson johnson went in with a bid of more than 250 per share. More than 27 billion and the main shareholders said no, that is too low. It is possible that they have drugmakers, other have been circling around this country for a long time. You could see them trying to take it out again. Notfounder says they do need the money. Guy it will be fascinating to fi canther if sano change their mind and what price they need to deliver. There is a long way to go on this one. Johnson johnson walks away. We will light wait and watch. It will be interesting story for the pharma sector. That is the story for the market open. Tes away frominu the open. Guy good morning. Welcome, you are watching Bloomberg Markets european open. I am guy johnson. Matt miller is in berlin. We are away from the start of european trading and matt have your morning brief. Matt going to be interesting today. Int will the flm see deliver 2017 . Alanivering greenspan and jeanclaude trichet. Plus, president ial pain . Treasuries topping 3 would punish the markets. Is financial repression finally over and is that such a bad thing . J j one play. We have been talking about this deal. Is the way clear . Guy we will watch that stock very carefully. It has cooled down sharply. Let us take a look at the european open. The ftse is opening unchanged. We are anticipating the market is going to be a little bit more skeptical and cautious. 6962 is where we are. C eur on the back foot. Im watching antillean, waiting for it to open. The boj unexpectedly increasing its super long bond purchases has put downward pressure on yields globally. 10 year yield down on treasuries and german bonds. Nejra it looks i be same is happening in the gilt market. Down three or four basis points. Very much following the trend of what is happening in global debt market. Moving over to have a look at what is happening on the stock gets hundred and the sector breakdown. Down 36 of a percent. Stoxx 600 and the sector breakdown. 0. 6 . Really, pretty much every Industry Group here is in the red. I want to bring your attention to this chart, looking at european sector rotation. Great story on the bloomberg today. I encourage you to take a look at it, talking about how Cyclical Companies among the beenst gainers, have downgraded, where defensive shares have been upgraded, causing those recommendations to converge. This rotation is what he is looking at in that story and what this chart is showing. Atthree stocks im looking today, big moves expected in the pharmaceutical sector after johnson and johnson said it ended discussion for a potential deal with activity in, narrowing actilion. According to the wall street nofi is ina talks with actelion. That stock pretty much unchanged at the open. 8 ast is down by nearly we speak. We will come back and do analysis on that story. Its out of the going to be able to do that is fantasy going to be a is too early to declare lasting rebound in wall streets trading revenue. I think there is a bit of over two bri