From mercedes and. Shares opened shortly. And mission to moscow. With no sign that the kremlin will change its stance on assad. Matt less than half an hour away from the start of european equities trading. Take a look at futures. Basically green across the board as far as European Markets are concerned. The euro stocks 50 futures up a quarter of a percent. The dax up one third of 1 and the cac is a. It is interesting to see the green arrows there especially if you contrast them with the red arrows we saw in asia overnight and the big risk off trade. The s p is battling. Obviously a big feature on that landscape. Lets get a bloomberg first word update. Sean spicer has apologized for saying adolf hitler did not used chemical weapons. It came as [inaudible] ascer said someone despicable as hitlers did not use chemical weapons. Chinas president spoke to donald trump yesterday urging nuclear about the program. Should settled peacefully to be committed to peace and stability on the korean parents a look. Of president trumps top advisers said the treasury is publishing a report. He doubts regime will be criticized for its actions on the yuan. That would be another sign that the administration is backing oil from his tough rhetoric over trade. I do not know but i would doubt that would happen. I think the meetings in florida were good meetings. I would say for some of it. President trump seemed to establish a pretty good relationship. Producer chinas prices surged at the quickest pace since 2008. The price index rose 7. 6 in march from a year earlier beating estimates. That is a slight fullback from february. In germany, police are investigating three explosions that went off near the bus of. He Football Team was postponed until today. There was a letter claiming responsibility that was found near the blast. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt shares in tokyo have fallen victim to escalating geopolitical tensions spread but north korea and syria. That u. S. Jpy is below 110, what are traders looking for next . They are focusing on the 200 Day Moving Average which they have been looking at for some time. That comes in at 108. 70. Still below where we are now. If that line does not give support to the dollar we could be looking at the next major fibonacci level which is 108. The way that momentum is building up you can see it in the option markets as well. People are getting negative on the dollar right now. Guy you can take a look at what is happening here, one of the few markets down here is the nikkei. This one all the way down here. Lets talk about whether or not there is more further to come on this front. For the people that like japan, no. It has such a close correlation with dollar yen and if dollaryen had slower, the nikkei will probably not be too far behind. It had a week feature a weaker finish. At 18,000 500. Some people looking for it to be below and the 4wood fallout from beneath the index. It is 18 five, if they can hold their it will look better. Not looki does healthy. The correlation with the dollaryen is very strong, unfortunately. Matt thank you for your time. You can follow lift Market Insights on the bloomberg at mliv go. Ppi about the chinese numbers, very informative from the getgo. We highly recommend you check it out. Later this morning, we will be speaking to the imf managing lagarde atristine 11 30 a. M. U. K. Time. The interview one of many that you do not want to miss. Coming up on this program, we will talk oil as branch rides the longest winning streak since december on optimism saudi arabia will support an extension to opec output cuts. In moscow as secretary of state Rex Tillerson meets with his russian counterpart. The open is 22 minutes away. This is bloomberg. Matt this is Bloomberg Markets, the european open. Take a look at what i have got to do with jay with today. A rainy shot of the brandenburg day. There is enough news to keep me inside. Getting caught up with the Bloomberg Business flash. A group of u. S. Lawmakers want United Airlines to expand why they dragged a plane a passenger off a plane. A review into the incident in which a passenger was forcibly removed. The carrier is struggling to contain the fallout from the incident after footage went viral. The ceo offered a second apology describing what happened after truly perfect after shares slumped. Tesco profit has edged above analyst estimates. Rising 30 to 1. 2 8 billion pounds in the 12 months that ended to rightwing five. That comes as a boost for the ceo as he seeks to shore up support for the planned takeover of the food wholesaler. We will bring you the interview with tesco ceo at 9 a. M. U. K. Time. Daimler almost doubled, lifted by surging demand. Interest climbed to 4 billion euros. It sold 16 more cars than a year ago. The u. S. Autoing market will shrink this year despite incentives. Its u. S. Sales president said industrywide deliveries may fall. The discounts are at their salest ever but u. S. Auto declined in the three months of this year. That is your lumber business flash. Is on its longest winning streak since december. Saudi arabia is certain to cut its own Oil Production staying below the level it managed it pledged to maintain. With us now on set, the chief Energy Analyst at the pyxis. It will have a meaningful impact on global supply. Every time they try Something Like this the share guys respond. The agreement they had last far we have simply good compliance. There is no reason not to be in that strategy. Patience is a virtue here. You have to wait till march data which will be released soon and this will you see the potential of a drawdown. Theyre missing the big picture here which is the stock drawdowns. Because of that markets are focusing on the u. S. And the markets that focus will move data showsthe recent that markets have reacted to opec and nonopec cuts. Matt i have a chart here on the terminal. Bloomberg users can check this a 30 day, it shows correlation between oil and highyield debt. It makes a lot of sense if you think of the shale plays, the smaller guys who are going to make enough money to pay you back on their junk debt when the price rises. This this chart show you that the shale guys are going to cash in every time saudi arabia describes decides it will float the balloon of expanding its cuts . Guest most definitely. Everson saudi arabia made their plans to cut, it has a lot of u. S. Producers who are underwater. If you look at their cash flows they have been negative for many years now. It has a lot of these producers get in and take the opportunity to hedge. We do expect that this First Quarter you will not necessarily see a strong increase in hedge volume but seeing the price rise has incentivized some of the producers to get back in. The problem is does the saudi opecan decision or decision help . It is difficult for those ifducers to hedge especially your front prices are high. There is a big question. We do see the high correlation and that incentivizes the money flows for them to raise capital and to pump oil because of the hedging to justify that. Talk about the hedging. This is the branch curve. Brent curve. This is interesting. Tot would opec have to do push this curve into a downward sloping story . And how long would it stay there . You tend to stay there for long time so what would opec have to do . Guest you have to have patience because the markets are rebalancing. Believe the markets should go into withdrawals in the Second Quarter and beyond. By discipline i am not saying 100 of compliance. But across the board and nonopec for support to that. We are likely to see the curve as soon as markets start seeing which they are starting to see anyway. The markets are confident that this is here to stay. Even if you see a liquidation, [inaudible] nature for ag that while because prices have to be high enough to incentivize the bit players to justify their Capital Investments in the market. The total back and is at 45. It may not be enough to justify. We need to have that conducts nature until they start making increased investments. Matt can we talk about the supply side all the time but i wonder what you think about the demand side especially, tesla has a bigger market cap then ford or general motors. No gas used in driving that car. Everyone is out with plans to create their own noninternal Combustion Engine. Is the demand going to stay strong . That that is ae rising threat from nonfossil fuel technology. It is not a looming threat. Happen at large volumes are long scale. Nearterm we do not see that that is back in demand growth so significantly. Higherwas significantly than the average of the last decade. I do agree it was this year we are expecting Strong Demand and this year we have seen this lpg,d being driven by because of the petrochemical demandside driving demand growth. We see strong growth and it does not have to be 1. 5 or 1. 8 Million Barrels a day of the levels we have seen in the last two years. Even over one Million Barrels will remain a Strong Demand growth. Near to medium term, we remain quite confident. Displacement of demand growth. Guy what about displacements of targets around the world . The market is fracturing off what is happening in the United States. Talk to me about where cargoes are being question around as a result of what is happening. What hasis happened since the opec meeting, oil got produced in the runup to the meeting. They were trying to take this political clout into the meeting and produced excessive amounts of volumes of crude oil. They are reaching different parts of the world. Once there is cheap storage in the u. S. And the u. S. Was importing large flames of cargoes when they realize that if opec was to cut back on production it does depend in the short term of their crude oil processing. They put a lot more in the shortterm leading to u. S. Storage. The rest of the world if you see asian storage, they are coming down for sure. Guy it is more of a blip in the asian storage story. We will cover that event. Matt if you are a bloomberg customer and if you watch on tv, you can watch it on your terminal. , it is is a function important because of you click into one of these streams, the video or audio stream for radio you can click on a blue link at the bottom which will allow you to send in your own questions, be part of the conversation. You can ask what you want about oil, what you want about energy and it would bring you closer to us. We would feel closer to you. Throughout the morning we will bring you some of the biggest names in Global Economics including the imf christine lagarde, the European Mission wto plus Roberto Acevedo ad jeanclaude trichet, number of massive interviews you do not want to miss. We are eight minutes away from the open. We take a look at the movers in todays trading including daimler after it revealed a big beat in firstquarter earnings overnight. This is bloomberg. Guy lets talk about some of the stocks we are paying attention to. Pretty much in line with expectations. What is interesting given what we will see later on in terms of data on wages is that they say their passing on less inflation and their rival. We will talk to the cfo of this business at 9 00 a. M. U. K. Time. Well. Oker accusation as acquisition as well. Matt it is interesting but it is interesting that u. K. Investors are so obsessed with supermarkets. Isy have 482,000 employees the eyepopping number for me. Another eyepopping number, 4. 24 million, that is what dime i made in earnings before taxes in the First Quarter. The almost doubled sales of the class, big margins there, definitely watch the stock at the open in frankfurt. The open is coming up. Guy lets talk about where we think european equities will go. Called negative. I dont believe that number. 100 positive. 2. The cac positive. 1. The dax. 5 up. Looks like a reasonably positive start. A negative story overnight, the yen trades through 110. I asian nikkei asian stocks had a difficult time as the yen showed some strength. People playing in piling into asset. Ven you can see that on the vix, otherwise known as the fear gauge, protection against falls in the s p 500 futures. Here you can see the chart over the last few years. As north korean spikes, the vix back up. Guy yesterday in the options at the end, a little returning to markets. This morning, we expect a positive start. Market makers not pushing on the accelerator too hard at the moment. We have generally been in a risk off environment. 73 71, we will see how the cac opens up to get a sense. Expected to be a little firmer. Lets talk about what we can expect throughout the day. How the guilt is trading gilt is trading. Manus if you check in on the shanghai composite, we are down commodities on the lower end of the index. You have the ppi numbers just coming back, 7. 6 down from february. Still the highest pace of inflation pushed through the since 20 2008. Looking for reasons to pull back, looking for reasons within the geopolitics to hesitate. But the risk is this, that the chinese continued to mirror whatever mention comes from the Federal Reserve. One year ago, we are an estimate underestimating the propensity for china to disrupt Global Equity markets. In 2016, that led to the rest of the global index after the start of the year. We have hit record highs, however syncopation with the Federal Reserve, it still has the propensity to knock the consumer and that knocks the overall Global Demand situation. You want to protect yourself . Is the ftse 100 a protective measure for you in the light of european risk . The cost of hedging yourself in the u. K. Bumping along at the average price. It is the euro stoxx 50 that is costing you a pretty penny to head yourself against. Prism, the equity premiums for hedging in euro stoxx 50 pretty much hitting levels we havent seen since exit. That is the skew on that. We will also talk about the inflation data and what is going on. Are we being paid less . 2 is the number in inflation growth. Add in the bonuses, 2. 2 , but the onion flavor and rate stands at 4. 7 we expect. What is full employment in the United States . Guy, matt . Guy lets talk about what is moving around these markets on the upside. You have oil stocks, rallying. We have a spike coming through right now. Mh royal dutch shale, lb seeing. Allianz rising as well. Lets look at the downside. Is key is lower b. A. T lower. Seeing a bit of a battle at the moment. Went ex dividend yesterday. I wanted to check, because that near 4 drop is something to Pay Attention to. Some of the miners are losing a little brown. Glencore, billiton all down. A little bit of a drag on the market right now. To,stock to Pay Attention we will talk about later on. Look at the numbers, surprisingly strong out of daimler overnight. We will be talking in more detail about what is happening with nine more a little later on. Lets get back to the bond markets. A big feature of the next hour. Our next guest recommends selling french bonds. A narrowing of the french but seeing things offset by a selloff incorporates. Lets join Francesco Gaza rally at Goldman Sachs. What should we do a what should be be doing with our . For a backdrop, there is an unstable situation in the fixed income markets, yields are too low and spreads are in a very unstable place. You look at france and italy, they are too wide for a monitor tech monetary union. Something has to give and that is where shorting france comes into play. I think it is a good compromise between those who dont like the level of yields, 90 basis points on the 10 year bond is low, but also fear that we could see the risk quality if emanating from france picks up as we go into the first round of these elections, and therefore spreads could widen. Youooks like a place where could still hold some short positions and in a way, have it right in two scenarios. One where core rates selloff or spreads widen. If wouldnt be hit by france this geopolitical situation escalates or the u. S. Slows, and that will give it to any fixed income security. Risenhis is the 10 year, over the past few days, increasingly a four way race. That is the tactical story. If theically, i wonder French Economy will change sufficiently over the next five years to justify tighten spread over germany. T is it we should see in the candidates are saying about what they are going to do to the economy to justify wounds. The German Economy is roaring. Zero output gap, should have higher inflation, it is working. Struggleh economy, i to see what the policy formulation being put forward is going to due to significantly change the story. Francesco there is a fiscal factor that works against france versus germany. If you look at debt or deficits, france should trade wider. Growth in france and germany, there is a level affect but in terms of changes, things are progressing ok. And then there is this Systemic Risk premium, which obviously france has weakened, people are uncomfortable with the project as a whole and that could change with the elections and with france, maybe taking a more proeuropean tone. That may be followed by germany later in the year. I would think about these three factors. What does that mean in terms of spreads . If we mapped them, we get to some fair value in the range of 30 to 40 basis points. A twot context, this is sigma and event easily. It reflects the political anxieties. France has been held as a core market by asian accounts primarily, and as bonds role in their hands, they dont bring investment into the market, but they parked their funds, their euros into primarily short dated german bonds. We see the spread between euro volatility one month and one week rising. That hillary threw together for us, we are at a record high as far a