This morning as the u. K. Numbers keep surprising. Will the allimportant Services Sector also show postbrexit resilience . Good morning and welcome. The United States is of course, in joint labor day in its enjoying labor day in its traditional fashion, taking the day off. Let me show you what is happening, where futures are pointing us. We saw a very nice rally last week on the payroll. The ftse was up 2. 2 . This morning, we are expecting to add to that a little bit. We will be opening up around. 3 . Lets move over and see what has been happening around the world. I draw your attention to the story in japan. The bond market is going to be fascinating this week. The austrian front end of the curve is moving this morning, a big move there. We will come to that. But the japanese story, it is not showing up on my gmm because of the volatility. Nevertheless, we are seeing the back end of the curve see yields rise quite sharply. In the meantime, lets get you caught up with what you need to know with the bloomberg first word news with christine harvey. Christine good morning. Angela merkels party has been beaten by the populist alternative for the first time in a state election, highlighting the strength of the backlash regarding her open border refugee policy. Afd had 22 . Theresa may says the British Public has rejected the idea of free labor from europe to the u. K. Enables us to say, the british people do not want Free Movement to continue in the way it has done in the past. Movementant coming in from the european union, but people also want to see the Job Opportunities and the economic opportunities. So, getting a good deal and trading goods and services is important for us. Christine samsungs recall of billions of smartphones is not going to be cheap. The Company Might spend as much as 1 billion after the setting to replace all of the 2. 5 million note 7 phones. Samsung would only say that this is an amount that is heartbreaking. Well, north korea has fired three Ballistic Missiles off of the east coast. Koreas jointth chief of staff. This is time to coincide with the g20 summit. Global news 24 hours a day, powered by 2600 journalists in more than 120 countries around the world. Guy thank you very much. On thursday, investors will future of the ecb. Remainsation rate weak. Speculation continues over whether the central bank will announce an extension to its qe program. It is supporting nearly one trillion euros of government bonds, and is now engaged within the corporate sector as well. Joining us now is jpmorgans cio. Qe 3 from the ecb . Definitely, but it is a question of the timing. The current programs are ending in march, 2017. Ofy have a han a hint what they want to do. Have got to do more accommodative policy to get the inflation rate higher. Guy we could see a change in the rules as well, maybe a dropping of the rules surrounding the bonds that can be bought. Are we going to see tinkering around the edges with the rules . Undoubtedly. Think of the history we have seen lately. Never doubt the creativity of central bankers. There will be changes on the rules and the amount of bonds they can buy, giving the ecb a lot more flexibility. Guy is it working . If they did not do it, would inflation be a lot more negative . But that is the 1 million question. Ultimately, that is one side of the equation, isnt it . The ecb is creating a lot of money. Though, is the demand for that money. Actually, that is where governments have got to come in. They have got to do more on the fiscal though, is the demand for that money. Side to try to generate a lot more demand for loans. Guy what is priced in to the European Market at the moment . An extension of qe is definitely priced in. Is, of the reason for this as you lower the deposit rate, you potentially damage the financial system. Ecbch is of course, why the try to protect bank margins. Guy lets have a listen to what mr. Kuroda said back in japan. Here is what he had to say. Even within the current framework, there is ample room for further monetary easing in quantity, quality, and the interest rate. Other new ideas should not be off the table. But we should bear in mind when conducting Monetary Policy is not its limit, but a comparison between its benefits and costs, as is the case with any public policy. There is no free lunch for any policy. Threeuroda, the dimensions of Monetary Policy. But we have seen over the last few days has been a significant backing up of yields at the back end of the bond market in japan. Let me show you a chart you can find on your bloomberg. The yield is absolutely collapsing in japan, but it is this move here over the last few sessions as the market prices out the possibility that we will be further size in terms of the bond purchases being generated by the boj. Maybe we will not see much theessive buying in future. We have a tale of two central banks. The bank of japan are expected to do the opposite of the ecb. They are expected to cut the deposit rate and do less in the way of qe. If you get that deposit rate cut, you get an increase negative interest rate. The theory then is, it creates inflation, hence that yield selloff. Will it work . Still the 1 million question. Guy the volatility in the bond market is becoming japan is a classic case in point. On onrenced this earlier my gmm. Signal . S this what is Market Positioning looking like . Give us a sense of what this is telling us about how the market feels about what is going on. And tells us a few things. When you look at the percentage moves that are that big, the basis point moves are pretty small. That is because the level of yields is actually so low. When you look at the and take a step back, the message for investors is that volatility is going to go up. When investors look at the market to market in their portfolios, they will start to generate more wildly, particularly on the bond side. Guy does that signal the back e nd, though . Volatility,ck up in from a historical perspective, tell us we are nearing the end . Know, the reality is we are probably not nearing the end. When you look at global yields in six months time, they are likely to be lower. But the journey then becomes a lot more rocky, a lot more bumpy, because he dont have that yield protection. Guy mr. Garside, stay with us. Up next, air force, shunned. It did not take long to get heated with an immediate tarmac bust up. We are on location next, this is bloomberg. The market opened his 20 minutes away. Is 20 minutesopen away. Guy 17 minutes until the market open. Welcome back. You are watching on the move. Here is the Bloomberg Business flash with christine harvey. Christine barclays is close to the new person to oversee the investment talks. This would fill the vacancy from the top management team. Hanjin has had its first day of trading since filing for Court Receivership last week. This came after they deemed the structuring plant insufficient. Is nearing as debt level that could trickle a downgrade that could trigger a downgrade. This could mean a downward position of its rating. Softbanks 32 billion purchase will add to its debt load. Bloombergur business flash. Guy a tense start to the g20 summit. We saw officials clash thoroughly after landing. Overdent obama pulled called extremely productive talks with his chinese counterpart. We are now joined with a guest from the summit. Guy, as you know, this is president obamas last g20 summit, and his last tour of asia. Deputy of now is the National Security advisor for international economics. Thank you for joining us. I know you have a very busy schedule. Not have a great start. With some rocky confrontations. This affect the talks . The president addressed that yesterday with his press conference. But the start of the bilateral what istion symbolized happening in the relationship we build with china, finding a way to Work Together on big things and to make them happen. This signals the two biggest economies in the world are willing to address a major global challenge. The bilateral meetings where frank indirect. We talked about issues where we have a common interest, and issues where we have differences. But when you look at the outcomes that came out of that, outcomes that cover issues like overcapacity and innovation policies such as nondiscrimination, you can see we have reached a number of important outcomes that will chinese open the market to competition. Reporter you are also the lead. Is the tpp essentially dead . The president is committed to getting tpp done this year. The key thing is when we are in asia, our allies look at tpp as a deal good for the United States. Like vietnamntries and malaysia to raise their standards in a way that will make them more competitive, and also create a level Playing Field around the world. Give them a sense of, whether the United States is going to walk away from a good deal. The president said he will continue to work with congress to advance the agreement. Reporter what will happen to the u. S. role in the asianpacific if the tpp is no longer . We are on the other side of the pacific. People will continue to look to us to see our leadership role. Tpp is part of that leadership role. We dont expect tpp to fail. Tpp is such a good deal for the American People in terms of economics, but it is also a National Security priority for us. Reporter just earlier, you mentioned the glut we are seeing. Anything concrete out of the g20 . As the know, the leaders are still meeting, but i can tell you a number of the leaders have brought this issue up because it is an important issue, not only to the United States and china, but it is a global issue. Our hope is we will come out of the g20 with a clear process for addressing overcapacity and a timeline. This is one of those issues that needs to be solved. Of or capacity is not just a trade issue, but a global issue. And overcapacity is not just a trade issue, but a global issue. Reporter wally, thank you for joining us. Guy . Guy great stuff. Joining us from the g20 summit. These guys are out there talking about trade. Great, fantastic, but the battle is not being fought with trade. It is being fought with Monetary Policy. Everybody is trying to still demand forom one another. Is this a sideshow, therefore . It is relevant to the u. K. , but elsewhere . It is essential. 2. 7 ave g20 growth that this year. It is the lowest in a decade. So, ultimately, what the world needs is a lot more trade. Any of a lot more economic growth. Then, what you have is a greater amount of economic growth. Then, everybody can have an increased slice. Guy that is globalization. That is great. That is what we should aspire to if we feel globalization is the way forward. The problem is, many countries dont feel globalization is a good idea, as a result of which, we see political backlashes. We can see one in the u. K. We can see one potentially in the United States with donald trump. The will does not believe in globalization anymore. It doesnt. But that globalization has been coupled with slowing economic growth. Ultimately, you need that globalization powered by increasing economic growth. Dealss what these trade are all about, trying to lower trade barriers, encouraging more trade. And from that, more economic growth. Guy you put workers in the northeast of england out of work. It then feeds back into the political system. It is hard to get back to the kind of situation we have at the moment. That is fair. Affect comes on back on government. The government has to increase productivity to get out of this malaise. The first way is to invest in education and the second is to invest in infrastructure. Right now, governments have this golden opportunity. We have bond yields at generational lows, multicentury lows. They can invest in those very important areas, education and infrastructure. Guy nicholas gartside, thank you. We are minutes away from the European Equity market open. We also have gilts opening up in london. Nine minutes until the start of trade. We have u. K. Services data out today that will be very much in focus. Plenty of corporate moves as will we need to be focused on. A very interesting meeting between Deutsche Bank leaders, a story to focus on as well. We will be doing all of that as we work our way towards the open at 7 50 in london. This is bloomberg. Guy it is 7 53 in london and 8 53 over in frankfurt. It looks like it is going to be a broadly positive start, a very strong friday. Six minutes to go. Lets talk about the stock we should be paying attention to. Mr. Draghi is basically buying out the bits he does not already own. The stock is called a little bit higher with the consolidation of the telco sector in france. Endere focused at the back of last week on the german Banking Sector. Senior management at germanys isgest bank, deutsche, talking about the strategies, what they now need to do. That message is coming from john cryans office. We do not know if we will have dramatic steps from this man. I expect he is paying attention to what is happening with mr. Draghi this week. , and everybody else in the Banking Sector, must have their fingers crossed this week. Absolutely. When you look at the issue of european banks, it is negative rates. There is no doubt that as that rate goes more negative, it is punitive for the financial system. To be fair, the ecb recognize that. When they went more aggressively likelihood is a lot more qe and a lot less in terms of negatives. Guy what is happening in italy i, the Banking Sector cannot fail. That economy desperately needs a functioning Banking System. Germany, in many ways, is in the same position. It is. You will see a lot of the entire Banking System in europe. There is likely to be a lot of consolidation. There are elements of banks in europe that need a little bit more capital, and that is critical for growth. If we can get more growth in europe, that will help banks as well. Guy nick is going to stay with us. The European Equity market is about to open, likely to be called flat, i think. Four minutes away. We will see you in a moment. This is bloomberg. Welcome, im guy johnson at bloombergs European Headquarters in london. Moments away from the start of european trading, here is your morning brief. Who will succeed a lot of your putin . We asked the russian president that question in our exclusive interview. Says new ideas are on the table. Mark carney faces british lawmakers and what will mario draghi say . And we get data from across europe thismark carney faces brh morning as the u. K. Numbers keep surprising on the upside. Will the allimportant Services Sector also show a postreferendum resilience . We are waiting for European Markets to open in we think it will be a broadly positive story. There was a solid rally at the back end of last week post payrolls with European Markets up over 2 . It will be interesting to see act 9 30. Oes lets show you the rally this was the picture on friday, very nice equity market rally, a mild list as we digest with happening. A bit of the selloff in the few minutes before the ftse but it looks like we are seeing a mildly positive start the in. Ion lets zoom its not going to be the riproaring rally we saw at the back end of last in. Week, plenty to digest this week that will keep us busy. Let me show you the imap, the national breakdown. A little softer, but nevertheless we are probably positive but only just. Lets think about where the market is this week, plenty to morning, a mild dropping yields, but remember that we have sector data out at 9 30 u. K. Time this morning. We will break it down for you on bloomberg radio, and allimportant number for the Brexit Debate and also for what happens thursday sorry, wednesday with mark carney. Lets move on and talk about whats happening in terms of the russia story. We have been focused very much on this over the last few days, a gas giant losing 80 of its value over the past decade of Vladimir Putin says he is happy to leave the company in longtime help. He spoke to our editor in chief in an exclusive interview. Let me give you an example. You recently made changes on the political side within your administration but if i look at a company like gas problem, in dollar terms, its worth less than a fifth of what it was 10 years ago and it has fallen from being the top 10 companies to the hundred 98. You have had the same manager running it for 15 years. You have given him another five year contract. What i am saying is that you are not as tough as the Business People running the oil side as you might be on other people. Why have you put up with this . You are famously efficient man. [speaking russian] it is clearly undervalued. Yet. Ve no plans to sell it this is because of the peculiarities of the russian economy, in russian energy. It is part of its energy system. One of the functions is to winter, toautumn and supply the big energy companies. Today ts valuations the upset doesnt worry us or bother us. What it will be worth in the coming years this bite shale gas in the United States. I planned gas will always be cheaper and it is increasing to traditional countries. For the pasteports few months. They are rising. This will be the case in the future. Why . Because in the new future, despite the development of alternative energy, it will still have an environmentally friendly demand with no other source of primary energy in the world. Energy there is other but there is a country that is open, and that is our country. We carry out all the functions and of course there are issues and problems, we see that. We are taking all the steps to resolve it and there are interests on the world market.