Government effort to help trumps candidacy. Will this hamper the ability to connect his agenda . Wci could drop below 40 blocks per barrel if efforts to rebalance the market do not therethrough what it takes to get direction from opec. A look at futures here, we are looking at possible games this morning gains this morning. Stocks continue to rise, i pause a minutes because i want to point out that we had muted trading. 20 below the month average yesterday. This morning trading as light as well. Green arrows nonetheless. You wonder what kind of convictions behind those purchases. Bunds here. At today we have seen a slight gain to 0. 554. Is point if you take a look at the threeday trade, we kind of crescendo there at 0. 58 yeilds continue to retire after going up. 5 . Guy you can see the Market Positioning. Market is generally wellbuilt come all south korea has also bit this morning. Thats what youre seeing bid this morning. That is what you are seeing. The real story is the affects market. Solid fiveyear auction earlier on to Pay Attention to. He aussie dollar is well bid. Look at what is happening with the ran, d relationship with the gcc, how is it being affected by the qatar story . Heres the first word news. Juliette President Donald Trump has rant nominated ready , thes randy qualls managing director at a private equity firm. Expected to play a pivotal role in carrying out the pledge to ease the dilatory restraints imposed on it ranks after the financial crisis. In tillerson is in the gulf a bid to resolve qatar. But something to bridge the gap between the two sides. It puts washington a difficult decision, while saudi arabia is the top buyer of american weapons. Ties withce severed qatar on june 5. Dalton juniors lawyer has of knowledge to his clients received any mel offering a meeting with someone who had damaging information on Hillary Clinton. Hours after the report the younger trump had been told it was part of an effort to help his fathers campaign. The treaty came by email from the former british tabloid marketing executor linked to trump through the Miss Universe pageant. The information it concerned clintons dealings with russia. The confederation of british industrys says u. K. Banks are less optimistic because of uncertainty of brexit. The sentiment fell in the three months to june for the fifth time in the last six quarters tudy ng to the s study. Races like good to describe the possibility of leaving the European Union without a trade deal. The suspension of amory morris reduce his mays numbers as she would struggles to enroll was to the house of commons where she lost her majority. Global news 24 hours a day powered by more than 2700 journalists and analysts in more , this iscountries bloomberg. Matt . Matt asian stocks are higher this morning, ahead of federal sserve chairman janet yellen report to congress tomorrow. Her testimony comes after a strongerthanexpected jobs report which keeps the central bank on track. Raising rates once more again this year. Francisco said John Williams spoke in sydney, australia about u. S. Inflation and interest rate. Atif inflation can get stuck 1. 5 , that would argue for going much more gradually in Interest Rates. We are holding off on doing that for a wow. Of inee a lot of signs the wages, but generally in the economy. ,mplement reports and numbers clearly the economy is strong and continuing to move ahead with momentum. Mark cudmore in singapore. Morning. Let me ask first, trading is going to be muted until this testimony comes out. What you think we are going to learn from janet yellen . Probably not as much as we are waiting for. The problem with this testimony is the question about Monetary Policy are never asked in eighth is a big way that traders or investors want. It is very much about governance, asking questions for selecting showboating. Is unlikely to give anymore since about exactly what the next steps are in the short term. More clarity about what the yet janet yellen is thinking. Minutes, the recent there is a bit of uncertainty about the inflation half. We dont expect that to be clarified today. You are saying the fed is pretty comfortable with the gap between Market Pricing and stocks. Is that fair to say at this point in time . Im not sure if they are exactly comfortable but i am much or if they exactly want to fight against its rights now. They are worried the markets may be right and they are not right. That has been the case for the last couple of years. It is not that they are happy with the fact that the market continues, it is just this is not the time to take up this battle. A nominationave from the president on financial relation and the fed. There has been talk over the last few weeks about Janet Yellens concerns. Financial stability is a big part of the mandate. How significant is it that we finally can somebody at this role may be more bank friendly in terms of future trajectory in the u. S. Economy . You can say the same positive thing for banks operate positive thing, but it is quite marginal. Assetsnot see price change, and you shouldnt. The current incumbent, the fact bank friendly, i dont think that will change much. Aboutwhat do you think the bond Market Reaction to this. Guy and i were commenting on the bund yields we have been seeing but it has really been global in a course of her nude hawkishness from Central Banks. There is not been a lot of conviction kind of the trade. There is not been a huge flow. Mostly algorithms reacting to the news. Shortterm consolidation size and where we go from here is important. We have seen the easy part of the game, what is much more interesting is the fact that european bund yields have made big technical tricks and they are the yields that look out of whack with the rest of the world. If you think we are postcrisis, look at the relative growth rates, and the u. S. And europe do not have a similar story. There yields are very different. The european yield structure has more to go. Perhaps the treasury yield has artie done most of the war move the move. Here,moves must hire from a real panic. I dont mean we will see all yields continue to much higher. 5, 10 basis points before there is any worry. Ise you get 2. 5 , the market going to start worrying whether this is the really big move. Guy this is all fantastic and to be honest it is really important what happens on deck capitol hill. More 30t expect any with class janet yellen. Iet summer markets. Whenever roger has won wimbledon, good years. Investors should be focused on how wimbledon and not what is happening on capitol hill. I have heard of these super bowl indicator but it is even better. We can follow his live insights and those on the team on the bloomberg terminal at mliv. Rex tillerson is getting his first taste of shuttle this policy shuttle diplomacy to end the standoff between qatar and the other u. S. Allies in the region. Qatar has turned to turkey for help in dealing with the Economic Impact of isolation. In an interview, turkeys Prime Minister says his country supports qatar and highlighted the performance importance of trade and prosperity in the entire region. Why we believe that the treaty of qatar has been unfair, we advocate dialogue and we continue to call on all of our to peaceful, constructive dialogue. We hope this will work out sooner than later. We also, of course, tried to prevent such political differences from having big impacts on economic relations on investments and trade. I think we have been successful in that sense. We have had a big spat with russia, a big glass from russian side. Turkey has been cool and avoided a big fallout. Finally we are back on track. Ecrisis level. There was a big crisis with israel. Avoidedpened is that we same applies even more. Omfortably if we have strong ties with all of these countries, we think qatar should be treated in a more fair fashion but we dont want any fallout when it comes to trade investments. Im sure we can manage that. Are you concerned that your relationship will qatar with qatar will one day have implications on you and sanctions on turkey . I doubt it because first of all turkey is not alone in thinking that qatar should be treated more fairly. There is absolutely no ground why turkey should be treated any i think turkey is responsible. We want peace, stability, and prosperity in our region. Far, doing the biggest combat against isis. In fact, turkey, if you put aside proxy wars, turkey is the on a with boots on the ground only country with boots on the ground. Way, liberated 2000 daesh. Kilometers of we work with our coalition partners, all the major players, and containing daesh. Speaking to bloomberg, the rolet turkey is playing, absolutely fascinating at the moment. Is going to be interesting to see exactly how Rex Tillersons diplomacy goes and if it delivers the results. A fantastic function, you end up feed which is great but you also get the sidebar which allows you all the functionality, the charts we are losing using on bloomberg. Give you all other kinds of aspects we are doing here as bloomberg interactive television. Up next, how low can oil go . Below 40 box per barrel. What is going on next. This is bloomberg. Matt welcome back to the european open. I am alongside guy johnson in london. A look at oil prices. Could below could fall below 40 per barrel if efforts to rebalance the market do not bear through. Theres a view of a report by analysts at Goldman Sachs. If evidence of further opec actions are needed to bolster prices, but go to abu dhabi. Tracy, what are the likelihood of declines or a drawdown in u. S. Crude stockpiles . The reason this report from ,he very the goldman analyst one of the more bullish guys when it comes to oil prices. The reason it is interesting is because he points to two factors. Opectiveness of ok policies, but whether or not they will extend those themselves. When it comes to the effectiveness, this is what he is talking about the need for sustained inventory draws and cap reclines. The declines. Last week it was already back up. When comes to further action from opec, it starts to get dangerous for the group here. We had the Saudi Energy Minister saying that opec was prepared to do whatever it takes when it comes to rebalancing the market. They delivered, they said they were going to extend the agreement by my nine months instead of six months. It has not proven to be enough. The danger here is that the market really starts testing the bill for further action. Opec finds itself in a downward spiral when it helps to has to keep ramping up its efforts in the market area guy how far away his Goldman Sachs from the consensus from its view of where oil rose . Goes . Im curious if it is middle of the pack or on the fringes of and. Distribution. Dear sticking to their threemonth forecast which is 47 per barrel. They are cautioning that if the risk is there we could see oil dip below 40 per barrel. Moving parts to that forecast. We saw the kuwait Energy Minister yesterday saying they might include those countries that have been exempt from some sort of good agreement. The fact that those countries had ramped up Oil Production basically means that hospital for is currently on par with what it averaged in 2016. You can see moving variables. Analysts pointing out that even if you didnt include nigeria and libya, you would still have to have their increaseoutput offset by tweaks to saudi arabia and russia. That is when you really open up this issue of who bears the brunt of these production cuts. Im not sure opec is in the position or has the political will to dive back into that discussion. These are the questions the oil market is asking right now. You can see how difficult they are to actually answer. Thank you you matt so much for your time. We are minutes away from the open of the equity markets. Up next,here. Sales down in a both food and clothing. What is up with u. K. Retail . This is bloomberg. Leverage has been building up over the last year or so. We are seeing the bond level because yields are at lows. Even with the fed describes it their behind the curve. Five minutes until the market opens. Overnight we had better use for the u. K. Retail sector. The number definitely takes up. Not only is it not delivering inclusion, but also the food side of the business as well. The anr is on my screen right now, showing where we stand. You can see the story there. The price target, 3. 72. Price, not a great deal mass. Matt pearson came out with some music confirming it will sell 22 of it thing when random house to a german company. It has been expected to upload. The question is how much, it billion dollars. The turn of 300 Million Pounds to investors through a share buyback. 25 of this publishing unit which publishers books by george r martin. Writer of game of thrones. The open is four minutes away. This is bloomberg. Guy cash is about to open. Where bloomberg it is telling us it will go this morning. The yen has gone off this morning, partly to do with what is with the yield curves in europe and japan. Not amazing but we will take what we get at this point in time. European equities of by two points. 2 . We are not going down. In terms of some of the stocks, msci this morning. Matt, what have you got . Keep the bondo market at the forefront of everyones mind area 1766 on the bloomberg. A twoyear short position and twoyear treasury. You can see here at a decade of low. The white line is the absolute level. It has not been this low since 2008 and people get bearish. Not exactly the whirlwind to her of the financial markets. Slow and steady, dipping into negative territory. We are expecting a flat start around europe. How mark and see spencer works. Walk us through what we are seeing there. Matt im looking at the headlines here. 275ts rose to a record versus as of march 242,000,000,001 year ago. Record,ising to a reducing its pace of investments on valuation and competition. One year total return, 13 . Not bad. 16 billion divesting. 18 billion and the year ended march 31. Getting a number of Balance Sheet figures here as well as the shareholder return. Interesting thing is the return. One year, 13 . Annual return, 15 . This is not doing badly at all. Lets talk about what we are seeing on the screen. 2. 24 . Selling a chunk of random house. Downside, lets turn our attention to what is happening or moving down this morning. Those are the losers we are seeing. Stillmetro, etc. Its trading. A mild risk on sentiment. Lets turn our attention to the story dominating the headlines. It will be interesting to see if the market has a pop in sterling. Become before the storm could provide opportunity for that spread the british Prime Minister theresa may expects to call on her for opponents to save the we will ask other parties to present their own ideas. To the by the reactions house yesterday, i am not exactly sure where heading for a right now. Good morning. Of course it is important. It is absolutely important. I just dont know what to make of it is. It is confusing at the moment. We got ourselves into quite a pickle because there are several themes running through the political situation at the moment. Were not really getting a clear message in terms of following party politics. Im sure there are number of people who voted for the labour party who do not think brexit is a good idea or like a soft brexit. The position was exiting the Single Market, which means 80 want to leave the Single Market. Message goingbe a back to the speech that they were so liked to retain membership of the Single Market. It does seem that a of Labour Party Voters in the last election, a similar message but they are tired of austerity. 10 , to eightr me two in a half today. There is plenty of scope in virtue in letting the Purse Strings go a little bit. Is there is line more uncertainty now than there was before theresa may held the election. Is that hitting is this investment . We have seen Consumer Spending numbers soft and. Are those going to continue to fall and hurt Economic Growth question mark Economic Growth . Some of the data is suggesting a reasonably meaningful softening in the data. Personally, im less concerned about that because we have been heavily reliant on consumption in the past. Things is those helpful in the long term. That is something that needed to change anyway. I get your point. As the economy is to reliant on Consumer Spending, all it means is more consumers need to the navarro and spend more continually. It is a bad cycle. What replaces that if you reduce the consumer consumption part of it . It would be beautiful if we could have a rise in business exporting countries and to gdp. Lovely if the consumption softened among other things. Unrealistics very for that to happen in a smooth fashion. I do think that is something i would expect to occur. Moment,eeing at the remember a function of consumption. Reasonable to expect imports Going Forward. That will have a positive impact on gdp. The Political Uncertainty here, i can understand why businesses might say we really dont know what is going on here that maybe we need to show an investment plan. It is kind of middle of the range. That is selling you that arenesses somewhere relatively positive. See, but iy that we dont see any reason to be particularly panicky. Im surprised you care about the politics as much as you do. I timidly and. Wement it looks as if dont really understand where the parties stand on the wage debate. We saw the pay cap stories surrounding that. What we do know is that Central Banks around the world are sounding more hawkish. Pricing in theo possibility of a rate hike for the bank of england. We had a guest on talking about august being the most likely date that we now have for the bank of england to pull the trigger and take away some of that accommodation. Something fantastic news to me. Not expecting it nor do i think it is right but i do think it up and have some virtue to , which iemergency think was a catastrophic mistake. They can potentially do one or two more than that without it being damaging. Those sorts of changes in terms of mortgages are not hugely damaging. Partly the reason i care is because if the fiscal policy is going to take over for Monetary Policy, the has it roots in politics. That a Brexit Debate or is that the fact that we have come this far and austerity is more important to this country and its population then brexit . I remember when the debate is happening in the referendum. Cared about the immigration story but it cared much more about the pay story. That is resonating at the moment. A bit of both in there. Or is austerity fatigue if you are a Public Sector worker. Seen your income decline for a long time. Gilts . Not a huge amount. 1. 5one. 8 . , at the moment we have inflation depending on which you look at. That is telling you still that there is not a lot of normal growth priced into the future. More nuancede after a material repricing. I think that is going to be key. Not seem to add. I think i still think they are a vote short at this stage. It is a real positive that this bank is now being have. Actually lets look at the whole picture, mental stability, economic data, policy which is appropriate across the whole gamut. What do you think a rate race for the bank of england would do the pound and inflation . That is the most direct and obvious impacts. Thats the main reason that i described the move in august of last year as being a catastrophic failure. Pretty small, but we know that we are a fairly small open economy with high import penetration and highmargin a propensity to import. Me thatretty obvious to having seen a decline in sterling, that was just going to that just added to the inflationary. They were trying to fight off the inflationary. Because competition in the itail section is so high in think that has actually made the problem worse. Anbe one more, that increase in sterling but think that is not going back to 1 . Exactlyeresting to see what the conversations are happening within the bank. It would be interesting but . Wouldnt it . Guy if youre are a bloomberg customer there are a number of ways which you can see what we produce here. This is the landing page. The tv, radio, event coverage coming up. We get the foreign secretary of the ua answering questions. The speech coming up by the Prime Minister. ,ou get the recommended video talking about qatar. You can also open a direct channel. Dig into the Market Positioning ahead of the fed share. Janet yellens semiannual report to congress. That is next, this is bloomberg. I am matt miller in berlin alongside guy johnson in london. A quick check in on the markets. Equity trading is tame this morning, as it was yesterday. Are waiting to see what janet has to say in front of congress with her testimony starting tomorrow. We see gains of the above the board. The broader European Index rising one third of 1 . Things aing on little tame. Rising the most in almost eight months. This is after the second course of profit after tax was a coming in as a beach as well. The numbers pushing this stock higher today. Selling a stake in Penguin Random house to 1 billion to strengthen its allens sheet. Pearson saying after the sale it will return capital to shareholders through a share buyback. U. K. Homebuilder actually rising the most since september 2016. Of more than 6 . It is its outlook for the year is unchanged. It also expects to pay its dividends in line with prior. Guy markets a little risk on. Marginally higher if youre looking at equity markets ahead of Janet Yellens report to congress tomorrow. Friday the central bank on track this year. Trillion dollar Balance Sheet. Listening im trying to understand what i will hear from janet on. What the central bank is trying to tell you right now, we have really moved to a next a new stage. We are exiting the last 10 years because we do not know the president us anything. Now we are starting to understand, reprice fundamentals. What messages are she going to communicate . The potential to be quite important. Generally i have no idea but i am trying to work out what seems to be a new paradigm to me in terms of Central Banks. Exactly what is it that is too. Ed, nothing in spite of the shortterm breakdown, in spite of the term of the fact that recently but we have seen is falling unemployment still, price rises are entirely absent. And none of them have an executive event. They have to get that model time to apply. Shortterm its in inflation should be looks through. Another explanation is they have woken up to their responsibilities with respect to financial stability. How that is taken so long is beyond me get in what happens in 2006, 2 dozen 7, 2008 is beyond. That suggests, if that were to be the case, that would be something slightly different. We are looking at the amount of debt that has been built up and where this has snuck the financial system. To borrow a phrase from the former governor, it is only when the tide goes out that we see who has been swimming naked. A slightly different outlook for. Entral banking matt do you expect an increase by the fed and a very gradual reduction of their 4. 5 trillion Balance Sheet . What effect does that have on bonds . So far we have seen a big rash of trading but its not a loss of conviction behind the move. We have not seen contagion in terms of other markets beyond debt markets. That is absolutely true. Ive been wrestling with what this Balance Sheet means for quite some time. I dont think thats being qe in reverse. What they have announced is zero, youre talking about bonds that they get an actuation the day before they occurred. It is likely after the debt ceiling and Government Shutdown type situation that supply will probably be used to get balances up. Maybe the early stages, but a lot of direction. It will depend on what the treasury chooses in order to fill that funding. I think it seems unlikely there are going to go along. On the ascension that maybe it is a fiveyear story because that is roughly the average debt issued at the moment. I think the liquidity stories more interesting and is likely to be more impactful. That is to say that the withdrawal of liquidity from the system has been flush with access equity which i dont believe is serving an economic purpose. That is where the impact is likely to be at i have to say, eventually emerge local market currencies. Guy thanos emerging markets is going to be an interesting knock on effect. Aberdeen Asset Management is going to stay with us on Bloomberg Markets. To 2. 5 thousand jobs. Shares are higher because of the savings investors that will bring. All the action next, this is bloomberg. Matt welcome back to the Berlin Bureau here at number. This is the european open, i am matt miller. What is going on in the markets right now, the broader index here in europe. One of the reasons i hold this up is to see how it was doing. As far as the winners are concerned, the second biggest gainers among the stoxx 600 members. Ams ag which is a pretty Small Technology solution company, 5 billion euros company, is the biggest winner. Thyssenkrupp, a lot of industrial equipment. Going to cut two and a half thousand jobs. They think it is going to save 400 million euros. That is one of the reasons you see the big stock here is a gainer. If i switch over to index points , hsbc and glencore are on top. Astrazeneca are losers. Astrazeneca, novartis, some of the big losers of the day. Guy lets talk about what is coming up next. It is an outlier in terms of story surrounding the Central Banks of the moment. It was for European Assets could be one of the net results of this. What you may end up seeing is continuing to be a big funding currency. Bureau benefiting. The euro benefiting. Its the story in more detail coming up. This is bloomberg. Is britain really heading for Cross Party Cooperation . Theresa may will ask for ideas from the opposition in a speech today. We get the view of Professor John curtice. Email expose. Eldest son was told the material offered on Hillary Clinton was part of the russian effort to hamper the campaign. Oil outlook. Goldman now thinks wti could drop below 30 a barrel as efforts to rebalance the market do not bear fruit. What will it take to get further action from opec . Welcome to Bloomberg Markets european open. Im matt miller in berlin, alongside guy johnson at bloombergs European Headquarters in london. Guy lets talk about where we are with the markets, 30 minutes into the cash session. Lets take a picture of where we stand. As you can see, not exactly great movement. The dax, a little bit of a better bid. You have just been revealing the changes in the management structure. This market in germany is trading up by 0. 6 . The cac is up by 1 3 of 1 . The markets calm in advance of testimony by janet yellen tomorrow. Matt European Assets are looking bullish, particularly when funded in yen. This as the bank of japan decouples from the ecbs policy of tapering its Balance Sheet. I have a chart here, where you can see that decoupling illustrated. The bloomberg library. You can see the japanese curve is flattening, while germanys curve, europes curve, is steepening. Is james athey. They are increasingly looking out of step with other developed markets and Central Banks globally. They have this yield curve control policy that is in play. Are sitting the prize, and you are not in control of the policy, but they announced a buyback by 11 basis points last week and nobody showed up, so nobody is willing to take on the bank of japan. In that respect, the policy is going to stay for now. Us theyation data tells are going to stay for now because they are still dealing with inflation. If you look at the tokyo cpi, maybe a declines again next month. The picture really does not any sort of flexibility with respect to easing off that policy. Everyone else is heading higher in rates. Japan is not. Crossyen,re is which is a popular trade to purchase various currencies across japanese yen. Guy currency manipulation . That really does depend on your definition, doesnt it . It is a very clever sense of getting that appreciation of the currency, but it relies on the actions of others. In that respect, it is not japan doing anything to extensively we can its currency. Two westoo weaken its currency. Guy donald trump has an issue of germany exporting bmws. As matt has demonstrated by traveling to the united states, where bmw does make cars in the u. S. Actually, the water is not quite as clear as the president first made out. Japan . He not for i dont know. Abe might have been the first leader to go out there and see donald trump. They presumably had a conversation then. I dont know if there was some agreement that he would not focus on the currency manipulation on japan, in exchange for supporting the region with dealing with north korea and the china issue. That is a Conspiracy Theory i have conjured up myself, but it does seem to fit. Germany is not manipulating its currency because the ecb is independent, but it is a happy accident that it is using the asozones broader weakness an advantage here. Destabilizing and it is dependent upon labor. I do have some sympathy with that observation and actually, i think chancellor merkel and Wolfgang Schaeuble both speaking after trump, sort of agreeing and saying, the euro does look a bit too weak. The whole currency manipulation story is one that cannot end well. We should get back to managing domestically is best we can, global this integrated world. I still think you have to look domestically first and foremost. Matt even with the boj policy change, well the change in tone, i should say, to some extent, do you see the following through with a much more dovish stance Going Forward . Do they join the rest of the Central Banks in the world to a sort of less dovish, even hawkish, slant . That is a really interesting question. And wonder ifs that is a nice short at the moment, not because we have any particular information that suggests they will change their stance, but it feels a bit like a bit of a free option. I think interestingly, as the politics is shifting over, that could have an impact. Kuroda and abe have been a joint team in power for quite some time now. Right now, Popular Support for abe is declining quite rapidly. I dont know if that changes the situation and there is change afoot further to milan and that would raise the possibility of shifting. They are going to get nowhere. Guy so, how long should kuroda be staying . There is talk of whether or not he should go soon. To some degree, they come as a package. Hes not really a central banker anyway. I think that would be interesting. Im not sure what the right stance for the boj is because really, it should be the government that steps up. Any to deal of demographic issues and cultural issues with respect to women, pregnancy, employment, and what that means with respect to immigration. Gdp is going to be under pressure as far as the eye can see. Gdp per capital looks better in japan than it does in other places. If i was a politician i would think the gdp per capita is part, if not most of, the story. James, you see the possibility of being short jgbs. I wonder about the rest of sovereign debt, especially as other Central Banks have taken a more hawkish tone. We have seen a selloff in a pickup and yields, but it has not been very dramatic. From peoplerecasts who are sure, for example, from treasuries, where do you see rates going . Yeah, it is really difficult. You constantly are bombarded by ney, which is moe out there. The map does support this and history does support that. Making ol full predictions about where bonds will sell off to proves to be a thankless task. Over the next six to 12 months it will become increasingly obvious that we have let a lot of the post crisis paradigm behind us and this is a somewhat new world. Therefore, we need a level shift higher in yields globally. Some not about hiking cycle up to 4 . We will month the Interest Rates are levels where we used to. But the asymmetry does not seem to be there anymore. What we are seeing is something a bit more normal, symmetrical. Bonds are not price for higher nominal growth, either. I think 260 is top of the range in u. S. 10 years. As the fed Balance Sheet process kicks in, i think we could push on to 310. Guy james athey, thank you very much, indeed. Hes going to join us on bloomberg radio. We are not quite done with james just yet. He will join matt and i on London Digital radio at the top of the next hour. We will let him get another copy and get another coffee for the next conversation. Eakened prime, a w minister tries to reset her position after last months disastrous general election. Jonathan curtice joins us next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Lets get to our top stock stories with nejra cehic. Reporter a bit of breaking news for this steelmaker, it is to cut up to a 400 million euro savings. Steel makers have been coming under pressure. The stock did rise to the highest in over a year last month and we are up 2. 6 today. On the downside, i am looking at the u. K. Retailer, marks and spencer, a fresh drop in quarterly clothing revenue. Clothing and home sales show no improvement, but also it missed estimates for food sales, dealing a blow to the ceo, who thebeen looking to revive company. How much of this is down to the consumer and how much is down to the product line . Nevertheless, they are down 1. 6 after that lackluster performance. Finally, i am looking at randstand, the recruiting company, down 1. 8 . Matt thank you, nejra. Now i want to get over to Sebastian Salek with your bloomberg first word news. Reporter President Donald Trump has nominated Randall Qualls to be the top banking regulator. He was a senior treasury official in the george w. Bush administration and is a managing director at a private equity firm. Regulatory ease constraints imposed on banks after the financial crisis. Meanwhile, Rex Tillerson is in the gulf sfates and will shuffle between capitals this week, temping to bridge the gap between the sides. This puts washington in a difficult position. Saudi arabia is the top b uyer of american weapons. Has therump jr. Knowledge to his client received amessage last year from person who had potentially damaging information of Hillary Clinton. Tthis came by email from a former british tabloid journalist and executive linked isstrump through the m universe pageant. The confederation of british industrys says u. K. Banks and life insurers are less optimistic about the outlook because of uncertainty over brexit. Theresa may has been forced to off one of her lawmakers after she used racist language. The suspension reduces mays numbers as she struggles to win votes in the house of commons, after she lost her majority after last months election. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Guy thank you, indeed. British politics, front and center. Lets stay on that theme. The british Prime Minister theresa may is expected to call on her political opponents. May will say that social and economic reform is needed to make a success of brexit. Mays appeal for help is unlikely to find a favorable response, judging by the action in the house yesterday when theresa may made an address upon the g20 eating. When i spoke to Jeremy Corbyn last week he indicated he was ready for another general election. The cooperation is not exactly foremost in his mind, lets put it that way. We did very well in the election. We did not win a majority, but we put forward a credible economic alternative to this government. This government does not have a majority. It is in a very strange deal with the Democratic Unionist Party and it does not look to me to be very stable. Guy you think things could change quickly question mark . Yes, and i think at some point we could have another election. Guy he called for election yesterday in the house. Joining us now is jonathan curtice, an expert on british politics. Did the british people vote for Cross Party Cooperation . I think that is difficult to argue. We have a Hung Parliament because only slightly more people voted conservative than labour, but it is also because the electoral system did not work in such a way as to give the conservatives a majority. We should not be surprised about that. It has become a lot more difficult to win big majorities these days and that is something somebody should have told the Prime Minister. The task she set for herself during this election was always an ambitious want. Guy that leaves her in a difficult position. Jeremy carmen blames we could be seeing a midterm election, going back to the polls, asking the question again, maybe hoping for a different outcome. A, what do you think the likelihood of an early general election would be . And what would the outcome likely end up being . Be surprised if Jeremy Corbyn wants an early election. Dont be surprised if Jeremy Corbyn wants an early election. He is in his late 60s and he reckons he is on a roll. The labour vote rose quite dramatically and he reckons in an early general election he would win, and therefore, gets the jump to be Prime Minister. Dont expect the labour party to do anything except try to bring this government down. Whether they will succeed is another matter. The minority government can often survive for quite a long time. We had a whole period from 1976 through march, 1979. Eventually that government lost a lot of confidence, but it took two and a half years. Along the way, expect the government to lose votes. The great repeal bill will provide a lot of opportunities for arguments. We already see an argument about whether or not we should or should not pull out as part of withdrawing from the European Union. The government will have to concede on that, for example. Expect plenty of government defeats, but remember the government can stay in office unless it loses a vote of noconfidence. When will that happen . It will depend guy this is the government, not may. Dont expect theresa may to call another general election. I think it is a case of once bitten, twice shy. The question is, does the government involuntarily lose a vote of confidence in the house of commons . That depends partly on by elections and whether the conservatives lose seats. A defense partly on whether the concert of internal divisions over brexit cause one or two more divisions. And it could get down to such boring things as, does davis davis get stuck in the fog at the airport on the day of a noconfidence vote. Will the government fall early or after a considerable amount of time is difficult to forecast. It could be down to circumstance, ill health, b ielection losses, all of which is unpredictable. Matt would the u. K. Public look for Jeremy Corbyn because i now regret having approved the brexit, and think he is a way out . Well, it is certainly true that whatever party voters remain much more of a programming vote. One of the things that happened is remain voters swung to the labour party strongly. Leave voters switch to the conservatives. The labour party certainly has a pretty strong remain electorate. But of course, the problem the party faces is that on the other hand, many inside the party would like to get back the socalled traditional working vote, where labour did not in thise much progress election and that is much more proleave. The labour party is trying to keep together a coalition of what is a predominantly middleclass, proremain vote, but also wanting to get back in more traditional working class, more proleave vote. In in this election and that is much more proleave. The the conservative party, they have this predominantly proleave vote, which is not necessarily the kind of vote that big business would like the conservatives to listen to. Dont be surprised if during the bothfew weeks or months parties reveal internal divisions over brexit, which does mean that at the end of the day, neither will give the electorate a clear message as to where they stand on brexit, as voters might like, and therefore dont prasm that labours dont presume that labours position of brexit will take them to an early victory. Guy where do we stand on the red lines . That was a big one for the Prime Minister. What about immigration . These are the two areas in which the Prime Minister has been most forceful. Looking up be in a position where she has to water down those red lines . I think trying to suggest we would not be involved in the European Court of justice was perhaps unwise. Zeroone issue. We are either in or out. On immigration, the crucial lesson of the Eu Referendum is that the levels of immigration the eu has been experiencing for the last 10 or 15 years are higher than the eu public is willing to tolerate. And there is many a remake vote that would prefer emigration to be lower. I think the reason why at the end of the day, it was the central concern of leave voters. There is then an argument about whether that requires us to be outside the Single Market and should the you could government have conceded that point straightaway. Government have conceded that point straight away. Dont expect them to be pushing the government. I dont think one thing that will emerge out of this process is the current divisions will longer apply to the u. K. Want to getsor, i your take on how these brexit negotiations go. In the now less than two years that they have, do you see any possibility of a brexit and a trade deal being finished and ready to roll at the end of this negotiating period . Or, do we have to go through some sort of transition period, or even fall back on wto rules . Think point one is the progress has been sufficiently slow, so one must have doubts about whether we will get much further, having sorted out the size of the divorce bill, and the position of crucial topics. I think therefore, we are going to need some transitional arrangement. If we end up with no deal, and that would be because in the end the negotiations failed to succeed either because we dont reach an agreement with the eu or the governments negotiations are rejected by the house of commons. On the other hand, i think there is now much less actual wish inside the house of commons for us to reach a position weather is no deal. No deal will happen by accident rather than by design, but clearly it is an accident they cannot be ruled out because when two people dead together to negotiate, there is never any guarantee they will keep negotiating. Given the governments position, there is not any absolute guarantee that whatever they come back with look at the support of the house of commons. Guy is brexit a big enough force to fragment the current political structure in the u. K. . There are things happening in the house that you wonder where they end up. In one sense, it has not fragmented. We have this remarkable situation. It looks like it goes back to two parties. However, the kinds of people who are voting conservative and labour are very different than the postwar period. We have got this in our message divide, with around 3 5 of Younger Voters voting labour, 3 5 of older voting conservative and secondly, the market situation that around 1 2 of University Graduates voted labour. Labour party is now the party of the University Graduate in the u. K. Those are very, very different social basis for the party support. That does create tensions. Take rates tension between the big business support for the conservatives and the kind of workingclass support for the conservative party picked up in the election. A great tension between those parts of the labour party that want to reconnect with the working class. Guy so briefly, where does that take us . That takes us to two parties that are currently very divided. Within which, there will be internal arguments, the outcome of which none of us can predict. Guy thank you, Professor John curtice, joining us from the university of strathclyde. Up next, it is surveillance. We will be joining deutsche banks cio christian nolting. Matt miller and i are now going to join the radio team. We will carry on the conversation with james athey from aberdeen Asset Management. Is bloomberg. Tom the future of the fed is awaiting Janet Yellens testimony. Regulator. Theresa may marks one year as tory party leader, but is forced to suspend an m. P. From racist language, reducing already slim numbers in the commons. The u. S. Secretary of state Rex Tillerson of the qatar crisis. This dialogue is the way forward, we are told. This
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