Is long europe and along french financials still. To buy Christian Dior. Is this another bet on global reflation . Just a halfhour away from this tuesday open of the european session. I just want to point out we are looking at gains in futures once again today. If you expected another pullback after the big games that we saw in european, Global Markets yesterday. You might be slightly disappointed this morning, ishough the ftse move mispriced down, so maybe we will see a drop there. Also, look at the bonds right here. Not a lot of change from yesterday. This is a threeday chart, so you can see on the second day of this chart, the big game that we had in bund yields, the big drop , but not a lot of movement. Although 08 t yields continue to fall a little bit. It will be interesting to see how things shake out in other asset classes. Guy plenty to talk about this tuesday morning. Lets talk about what happened yesterday and rolled into today. Massive monday. A fair way to describe it. You stocks up by 4 . Cash outperforming, germany doing well. The point i would make on this is we have been decent volume. There have been a few lowvolume rallies of late which arent a ringing endorsement. But yesterday was a decent volume and that tells you a lot. The other thing i need to tell you is, the dollar is back on the front foot this morning and definitely worth paying attention to. Lets get a bloomberg first word news update with juliette saly. Juliette in france, Marine Le Pen is stepping down as head of the National Front party in order to be the candidate for all the french people. She is set to face Emmanuel Macron in an election that is seen as a battle between nationalism and globalism. While macrons critics say he has no clear policy, supporters argue he would be good for europe. More europe is needed, not just for monetary union, which is a pillar of european integration but to ensure citizens that europe is about growth and jobs, something europe has not been doing very well recently on. Juliette in south korea, a u. S. Nuclear powered submarine has arrived as part of its schedule to conduct briefing patrols in the pacific. The arrival of uss michigan comes and mid amid heightened tensions with the north. Rex tillerson is to discuss the and denuclearization of north korea during his meeting with the Un Security Council on friday. Chinas nonperforming loans have stabilized in the pressure from capital outflows has eased. The economic recovery takes hold , according to the countrys deputy central bank. He was speaking at the forum in new york. Economic to maintain growth and also work on the leveraging process and making sure that our lending and broad money supply has been growing consistently with the leverage aspect. Juliette global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt . Matt donald trump is to call for tax cuts for individuals and 15 accordingrate to white house officials. Trump plans to make the public his broad outlines of what he wants for the change in tax code. The details are likely to be left for later negotiations among congressional leaders and officials from treasury. Lets bring in mliv macro inategist mark cudmore singapore. Lets talk about first what trump has to do tomorrow to pacify markets, to move markets. What are we looking for . Have been trying to debate that on the desk and after the failure of the healthcare bill, it will be hard to provide a big impetus for markets. Markets want to see a deal that is signed, sealed and delivered before they react after promises were failed to be delivered earlier. If he announces something particularly special an interesting. Just and the sizing he is still following his campaign to miss a 15 Corporate Tax. I think shortterm, we can get a little support, but it is a hard stretch to sustain. The bar is very high for him to surprise markets in a massive and sustainable way. Guy that is the baseline. Probabilitybout the of him delivering something significant here. How ready is the Administration Im not talking the white ready is the administration to deliver on tax mark mark i dont want to speculate too much, but you have to think they are focused on this and certainly the reports coming from both sides of the house wants tax reform. I think after the health care failure, trump needs to deliver something on tax as soon as he can. To mean in they summer. It may be difficult by the end of this year, but he needs to get on it and he knows that. I think he will be trying to deliver something that markets will get their teeth into. Aboutou have been talking the e. M. On your blog this morning. This chart stood out to me. The emerging market currency index, which is the white line and the bloomberg Commodity Index and the spread has widened. Each way will this one break . Which way does it move . Mark hard to know. In emerging markets are trading well. Global growth is picking up and it is a good story. Valuations were low after a multiyear negative market for emerging markets. Back into emerging markets. Shortterm, i am worried. Emergingmarket currencies are trying to break into a higher range than they have in two years. I worry that with commodities trading so poorly, can this virgins sustain . Divergence sustain . Also, china is talking about import tariffs, might bring a nafta deal back into focus to threaten the mexico deal. Turkey has rallied after its own story. But those idiosyncratic stories are still there in the longterm and ken retain market narrative again. Matt quick question on france because i noticed one of the polls has macron up only 20 points. Basically 10 points if you give them up to Marine Le Pen, could change the picture a lot. He is being grilled for the hubris he showed in his acceptance speech after only winning the first round and Marine Le Pen is looking to broaden her base by stepping down as leader of the National Front. Is there a chance that things get shakier than markets are expecting . Mark i think we probably will narrow a little bit. This is often a theme in the second round. It is different in france for the expectation is that the supporters of candidates will move behind macron in an anti Marine Le Pen vote. There will be narrowing, some attacks on macron and a market commentary. Analysts point out the risks. The more people repeat the risks , it gets in the narrative that there are risks here of Marine Le Pen winning. I dont think people people going to the second round complacent. There is an expectation macron will win, but not complacence. Going into the next round, i think we will put a little of those hedges again, some risk rhenium into the second round. Matt mark cudmore, bloomberg and live macro strategist. You can follow insights on the bloomberg at mliv. Coming up, we will be speaking to s. A. T. s ceo in his first interview of the day after the companys sales topped estimates at 7 40 5, 5 minutes from now u. K. Time plus 45 minutes later wrong, we speak to the covestro in an interview we dont want to miss. An exciting day as more earnings continue to roll out. This is bloomberg. Sap has topped sales analyst estimations. The new version of its flagship suite of rogers. Were joined from the Companies Headquarters in germany for the first interview of the day. Take you so much for your time this morning. You beat the estimates with sales. You guys have talked about the license sales in canada and mexico. I want to ask specifically about the u. S. Always interesting to what is going on in my home country. How are u. S. License sales going . Absolutely. First of all, let me say i am pleased to report an outstanding start to the year. We really enjoyed outstanding growth across all the pillars of our business. Software licenses were up 13 . Cloud new bookings close to 50 and you cannot have these numbers without a Strong Performance in our main markets. The u. S. In particular, did remarkably well with double growth in Software Licenses as well as the cloud. We are off to a strong march. Both across mature and emerging markets which is good for sap. Matt that is your established market and your established products doing quite well. What about the new s4 suite . How many people are running it testing andn versus what is your goal for getting customers up on the s4 suite . A remarkable First Quarter as well, we were up in significant double digits. We now have more than 5800 customers and we are seeing more go live. This has a sales fortifying effect as live customers come back as references, spreading the news to other prospect. We see our growth accelerating. It is one of the key reasons our Software License business is growing so much as our analytics portfolio. More importantly, it integrates growth across our entire portfolio, including our cloud solutions. You can also see this from the fact that our order entry from deals above the five euro mark from 17 of total 27 ins in q1 2016 to 2017. That is what i call a cross fortifying effect across our entire portfolio. Guy it is guy in london. What will a 15 u. S. Corporation tax rate mean for s p . It wouldl, of course mean a lower effective tax rate as our business is growing in the u. S. Any lowering of the Corporate Tax rate would be beneficial to sap. We had a good performance in q1. We have remained lower than in q1 of 2016. Lets see what the future brings. There is still a lot of time that needs to pass until we see entirely clear on the u. S. Tax reforms, but any reduction to the Corporate Tax rate would benefit sap. Guy would it change the way you invest geographically . Luka guy lets shift to paris. Offered to buyas. 26 stake in Christian Dior the family will offer a mix of cash and Hermes International stock. We have our guest joining us from paris. Why now . That is a very good question. Is, no an easy answer family has currency in their pocket that has gone up greatly in value over the past few years. A shake hermes. A stake in hermes. They can swap that. The backdrop has been pretty good in the luxury industry. Been difficult in early 2016. Things seem to be doing well. Im not quite sure, but those are pretty good reasons. This is a company that makes dresses, shoes, sunglasses, and perfumes. By this transition transaction as a measuring stick, what is the outlook for a Company Valued so richly . These are iconic brands. I dont think they sell cheaply. One analyst was commenting the price is very high. Lvmh is going to pay for the Christian Dior couture business. They never sell at a huge discount. The backdrop has been pretty good. It has been optimistic in the recent Conference Calls we have heard. The outlook looks pretty good. Where does that take us . I think the expectation among investors is bernard is also always looking for investments by. There is speculation that comes up regularly about a lot of closely held assets that might come on the market. That has been his mo for decades. Think, lvmh, can that get much bigger . You can add collections. He is not done making deals. Matt thank you very much for your time. Fill in paris covering this. It is an iconic name. It is a massive amount of money, more than 13 billion for a 26 stake. We are getting french headlines crossing right now. Manufacturing and Business Confidence here. Business confidence in line with estimates at 104, but Manufacturing Companies beating versus 105. 108 we see french confidence rising a little bit higher than had been anticipated. A couple other numbers coming out. Three versus a one. The french numbers coming in higher than the estimate after yesterday. We saw the massive rally in the as Emmanuel Macron cannot came out victorious with Marine Le Pen after the first round. Things seem to be firing on all cylinders for now on the french market. Guy lets talk about stocks we need to watch. It was a massive day yesterday. , recentlyories abundant around europe. Ppg, the u. S. Company, looking to consolidate within the sector , raising over 29 billion now is the offer. The possibility of going hostile is something we need to be there in mind. Be interesting to management int will they admit we have got to talk to this company as well. Fresenius is buying akorn as well. I was getting excited with akzonobel. Classics were the future, and now we are here. Investors making a specialized classics. It had an excellent First Quarter. Werests say estimates beaten and guidance was raised. We are going to speak to our guest soon about this. Profit beat and you should see some move on the open. Guy i want to talk about one of the charts on the day. That is the outperformance we are seeing from airbus. Look at what has been happening. The me show you this chart. This is the attack in the blue. You can see the expansion we have seen over the last few days. Look at the outperformance you have seen from airbus. Defense spending coming from government. It is an amazing outperformance. This is in advance of the paris air show. It is the open. This is bloomberg. Guy we have a minute to go threadhe european open looks like we are going to see some continuation. Looks like we will not open up as strongly. Not a bad performance 5 . Idering we are up nearly im looking up because currencies have been so important to watch. Here if you want to access it yourself. Nd little bit higher today the euro may gain a little bit. A lot andout cable the dollaryen. It is interesting to watch some of these other pairs. European go. We are trending around the variety points to a fairly more positive story. Opening a little bit more , but i guess after a day after incredible performances, probably a fairly exceptional performance along these markets. Have come off a threemonth low in shanghai. Market have a look at this relationship. Etween the s p 500 this is the inverse correlation between the s p 500 and the shanghai composite. What happens in china does not transfer itself to the rally. Another 25 higher in Global Equity markets in two years. Be the lastt to guy. Politics is no longer an excuse to be outside of the market. Afterrkets are much more seeing their way through. Is the election losing 5 and before that the french exit. The 10 day200 of gilt markets these are the june futures market. Unchanged attely 1. 6 . Guy lets talk about where we are with these markets. Point of the setup. The markets seems to like what it is doing. Well. Ending higher as on the downside, lets talk about what is going on there. Erickson you can never tell. Sap is also softer as well. Political story. It was a rally driven by the french election. The european earnings kickoff this week. Some really big names and we will be talking some of the senior leaders. I guess more upside in french financials. Now out of the way. What is it . It is discrepancy in america right now. Trading at 11, 12 times. I think you had clear reasons why there was a gap. With bad debt, but i think that is fully reflected in starting tol risk diminish. I think all those things together you should see a reconvergence not getting to the u. S. By any means. Are getting some interesting earnings as guide pointed out. Erickson is down because sales failed. On the other hand, you have for volvo with a gain in sales because of infrastructure spending. Europeansee the economy supporting the gains that we have seen . I think the european economy. S moving along consensus is probably 1. 51. 7. The numbers have been very strong this quarter. There is some Capital Investment for some companies. What is the political discount . I think a lot was removed yesterday. Biggest. Siemens is our rallied. Why the banks i dont know how much macron makes a difference. I think the political discount maybe a little bit, but most of the cap wiped out yesterday. Mostly like . Mostly wiped out . Does it matter who wednesday german election to the markets . If you get someone from the far right or far left, that really worries the markets. Netherlandsce and you dont have that risk as much. Food and beverage is a safety sector. I think youre looking at four times book value. It is not a cheap sector like you get with the rest. Great companies and wellmanaged companies, but very rich. If you start to see higher they arerates, i think Bond Investors forced into equities. Still plenty more to come. Market braced for chumps spending reforms. What will that mean for the Investor Base a rally. Rkets enjoy we will break that down. On the show his views european politics and brexit. That is more to come. This is the open. This is bloomberg. Guy the europeanck to market open. Lets check in with how the index equities are doing. After thee changed big gains weve had yesterday. He ftse up interesting point to make about the dax. Yesterday, it reached an alltime high. The ftse for the close to its record high. The cac is still welloff from the alltime highs it hit back in 2000 and still off the it hit in 2007. We are talking about 6600 or around the 6100 level for those years respectively. The cac had a bank update, it is still pretty far off from the highs its all a decade or two ago. Or two ago. Decade guy petting a little bit of weight to the market. Lets talk about the upside. We will see much of Christian Dior folderstian then. He is still with us. Some seamen positions siemens position. A cleans up a longstanding problem, but i think in terms of management, it brings together dior could tour your could tour i think that has to be a good thing. Where is this business im looking at headlines overnight out of china saying they are. Ulling back where is this business getting the most of its sales growth. Is it the asian area . Yes. I think the recent results did comment particularly on chinese whethers driving demand it is in paris, sydney, or tokyo, they are spending. Great company, great ret