Transcripts For BLOOMBERG Bloomberg Surveillance 20170508 :

Is to forget their local election success. Leave no door unlocked. Ahead of next Months National vote. Good morning. This is bloomberg surveillance. I am guy johnson alongside tom keene in paris. Mark barton is in london. Quite a night. Quite a night. I was at the champselysees having a beverage of my choice. It was a champagne. It was fabulous and the excitement, it was not packed streets but there is busy streets with the usual celebration that you would expect in paris. It went well over 90 for mr. Macron. Guy it is going to be a fascinating story. It does not run out of momentum because people are already talking about kind of how he turns this victory and consolidated into the National Assembly. The challenge is by no means done. Timothy we will have much of that coverage tom we will have much of that coverage. He has to go to june 11 and the beginning of the monetary and elections to see if a macronled government, or if it is a coalition. Guy well see what the next five years will look like in france. In many ways, this has been better to travel than arrive when it comes to the markets. We saw a huge pop that was delivered after the first round. That is not being repeated up to the second round. Mark barton, back to you in london for what the markets look like. Come to theing to markets in a secondary breaking news out of russia. It says it supports extending beyond 2017. Deal breaking news out of russia comes after saudi arabias oil minister says he is confident that an agreement by producers to curb crude outputs and shrink the market glut will be extended into the second half and possibly beyond. That is getting a boost oil today. Those comments with saudi arabia and thing russia does support extending and the other countries, nonopec countries, later this month, meeting to decide whether to extend the output that. Let us have a look at what is happening to markets today in the wake of the macron victory in the front president ial election. As guy said, much better to travel than arrive. The stocks are little changed, and it is at its highest level. Cac 40 from the first round to the second round rose by over on friday, hitting its highest level in 90 years. Euro lower against the dollar. It was up by a quarter of a percent overnight, in the wake of the macron victory. To the fed now on friday, it rose to the highest level. Beyond 2017, the french 10 year yield, little changed by a a basis point. We have seen a narrowing of the spread in the wake of the first round of the french president ial elections two weeks ago. The big move seems to happen just after the result of the first round, which led to the results yesterday in france. Let us get the bloomberg first word news. Angela merkels party picking up she convincingly defeated the democrat in the northern state. The victory deals a blow to Martin Schulzs bid to replace se chancellor in september federal election. Chinas overseas shipments held up in april, edging down from a twoyear high march. Exports rose 14. 3 . Earlier,rom a year increasing 14. 86 , leaving a trade surplus of 38 billion. Chinas export outlook has improved on the covering Global Demand at the threat of a trade war with the u. S. Receding. Theresa mays government has accused countries of watching britain to fail. Is the most outspoken comments so far. The European Commission president , john claude juncker, Jeanclaude Juncker comments, as the conservative party pushes for votes it next months general election. Globalism and 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am mark barton. This is bloomberg three die and tom this is bloomberg. Guy and tom, back to you. Tom guy johnson and tom keene from maison blanche. We are in the fancy party town. The white house. It does not look trumpian. An acclaimede is restaurant in paris. Many of the elite meet to greet here and they have taken the fabulous news that you are enjoying. Last night, we were down at the river seine. I saw the trout guy flyfishing later tonight for tom keene. Tom his walkin was amazing. Ss, histhe surrealne long walk was extraordinary. Guy there was this incredible kind of stiff, summer tom yes guy speech that he delivered the first time around. Relaxed man as he appeared on the stage surrounded by the people that supported him and voted for him. Tom a nice guy gave the right wing [laughter] tom it reminded me of president obamass second inauguration. Obamas second inauguration. Guy it was late at night. If he had gone on for a long time, he may have lost the crowd a little bit. It was short and punchy. Now in london, to give us perspective as we look at equities, bonds, currencies, commodities, it is good to talk to james, the bank of America Merrill lynch, and as work in cross assets. European equities i know you had the Research Report premade friday to have the answer button or the go button on the bloomberg when you saw the election last night. Did this election change the overall strategy of Merrill Lynch in europe . A particularly. I think the key was not the much what happened yesterday, but what happened the first round, and that is when we saw markets react and we saw equity markets rally quite hard. We saw the euro rally and bond spreads come in. There is travel this morning. That is why we have seen a little bit of profit taking. One thing we have been saying all year is that we have to get past the French Elections for people to really start to get more confident about investing in europe, and we have started to see that in the last few weeks. We started to see him close into the see inflows into europe. More thats a computer when i have been in the u. S. Talking to investors, they do not own european equities. Historically, that has been a good thing because europe has underperformed the u. S. We have Earnings Growth which looks to be in the region of 50 percent and europe. You just lifted probably the biggest Political Uncertainty of the year. That opens the door to investors to come back into europe. A bit of profit taking today, but the trend is for markets to go higher. Tom right. And i remember a few weeks ago, james, i was in new york and our people were talking about auto sales in europe and they signaled a more buoyant economy then ill be a political angst. Than all the political angst. What is your call for the gdp in europe and how does that filter in the Market Expectations out one year and out two years . James our economists nudged up their numbers to 1. 7 percent for this year. There was risk to that on the upside, given where the surveys are at the moment. It is just that growth could be stronger than that. Are seeing is that it is not just European Growth but Global Growth coming through to actually help european earnings. Can you sustain the Earnings Growth that was beginning to secede . At the moment, the First Quarter earnings season looks the best that we have seen in at least 15 years, Earnings Growth of 15 this year. We think that momentum is likely to roll into next year as well. If that happens, then european equities can remain something that people can start to invest in again. Guy james, good morning. How fickle is that enthusiasm for europe . We await the national is simply votes. We have italy to deal with. If mr. Macron finds it hard to govern, people will quickly turned their attention to five years hence. Give us a sense of the set up. Is it solid, is it sustainable, or is it fragile . James talking about last night, can cron get him can macron get a majority in the family . Even if in the assembly . He has a big enough number of mps that he can do deals with other republicans, so i am not hugely worried about whether he or not. Ajority italy is something which everyone immediately points to as a straight after this. The italian elections will not happen until the First Quarter of next year. I have made the point that you look at the italian data, that has been improving quite significantly. Whythat is the key because is italy in the situation it is . It has not grown for the last six or seven years. People are going to want to have fact that having just got past the French Elections met somebody else is not going to come from left field to unsettle this. From where we sit, we think the german elections are pretty much a nonevent later this year because youre going to get a grand coalition. The composition of that grand coalition is to be determined, so for the rest of the year, we have a fairly clear run. Good to have you with us this morning. Thank you for your announcements invest far. Stay with us. Plenty more to come from james barty. Tom we will see a little bit more later. Stay with surveillance. Plenty coming up. Theresa may urging her mps to forget last weeks local election and leave no door un knocked on. We will look ahead to that, next, plus industrys message to macron. What do French Companies want from the new president . We will speak to the head of frances largest business lobby group. This is bloomberg. Anchor let us get the Bloomberg Business flash. Akzonobel rejecting ppgs third takeover bid, saying its own breakup strategy is superior through the Dutch Company says its chief executive and chairman met with counterparts from ppg on saturday to rebuff the 29. 5 billion offer. That comes in defiance of pressure from shareholders such as eliot management to start negotiations and raise the prospect of a hostile bid. Aboutave spoken at length the failure to pounce on opportunities in tech stock. Shares fell on friday after the billionaire cut a third of the state after being what he described as too optimistic about the Company Possible that. Speaking at Berkshire Hathaways meeting, the billionaire chairman said he blew it by not investing early in google. Is close tot group buying Tribune Media according to people familiar with the talks. Sinclair would pare back 45 per share for 4 billion from the chicagobased broadcasting company. They said an agreement may be announced as early as today. A spokesman for Tribune Media declined to comment. Emails were not returned. That is the latest Bloomberg Business flash. In the u k, theresa mays government has accused some e. U. Companies of wanting britain to fail. The most outspoken comments over of the secretary. European Commission President Jeanclaude Juncker was claimed to have hostile briefings against the Prime Minister to deliberately influence voters. Meanwhile, Prime Minister theresa may will today order her conservatives to forget last weeks triumph in local elections and renew their efforts to work flat out for every vote in Britains National campaign. Speaking to toward candidates standing for parliament in london and south east england, may will warn that complacency is a risk to their chances of being elected on june 8, and urging to leave no door un knocked on in the search for votes are still with us, james barty, head of global cross assets and the strategy at bank of America Merrill lynch. James, and he read through from the local Election Results last week to the general election on june the eighth . Best conservative local Election Results in decades . Is there a link between the two or is a dangerous . The trends were clear. If you look at what happened at the local elections last week, the consensus took lots of votes. They lost one of their counselors in the u k and that is what the opinion polls are telling us as well, that there is a collapse in the u k vote going to the conservatives, and it looks like the conservatives will win in areas they have not won in a long period of time, so as far as markets are concerned, the only thing we are looking at is what is the size of theresa mays majority. It is clearly going to be bigger than it is currently. Is it going to be 50 seats, 100 seats . What does that do to her ability to undertake the brexit negotiations . That is why you thought sterling bounce immediately after the election announcements, because it was right. It is going to have a bigger majority, shes going to have longer to do the negotiations. Anchor does it give her bigger leverage are not . James im not sure necessarily gives her bigger leverage with the europeans other than more time to play with because the previous elections would be called by 2020, and that is 2022. In terms of her own ability to marshal her own party, it does give her more leverage because she would be able to ignore that. The factions from either side, the ardent remainders or levers, and she would have got her own mainers or ardente levers, she would not have got her own mandate. She should be able to strike a middle path. Tom so maybe a less hard brexit than some were fearing . James that is what the markets initially target ads. The chances of a very hard wto style brexit has become less of a risk, less of a possibility, and it is more likely that we are going to get something along the lines of her white paper. What would basically say is that it has not really changed the centrist narrative, a hard brexit. Probably outside the customs union, having to try and negotiate some free trade agreement. Those negotiations are going to be in credibly difficult. Tom what does it mean for sterling, the lightning rod during this process . On friday, highest level against the doctors in september, 129. 79. How far to the upside consuming go in the short and medium term . James we have largely gutted i suspect. The market has taken away that tail risk. We have had a nice bounce. The negotiations are going to be terribly difficult. Tom do we read too much into the to and fro that happened next week between the u. K. And the e. U. . Should we read too much into that . Is that just part of the negotiating process . James it is not helpful. I dont think either side covered themselves in glory last week. Some of the stuff that got said last week is going to be difficult to step back from. Once the election is over and done with, that is what we got to. What it does demonstrate, certainly this is what we had from the european, they believe the u. K. Has not really faced up questions the tough and tough decisions they are going to have to take, so negotiations i think are not going to be very difficult. There remain significant risks around those negotiations, and the market tail risk has gone. We can basically say that it is more of a soft brexit. I think that is probably on the optimistic side. Tom thats you and a second. James barty will be with us. Up next, crude control. Oil pushes out. We will discuss that, next. This is bloomberg. Supportsia says it extending opec beyond 2017 after the Oil Ministers signaled out put kurds to extend into next could output curves extend into next year. He will go along with whatever decision opec makes at its meeting better this month. James barty still here, head of global trust asset that bank of America Merrill lynch. Opec on one side, and maybe russia as well on the other side , and writing u. S. Production. Who wins in the near term . Until now, it looks like the rage in production has dominated opec cuts. We are still of the view that as we go through this year, we are going to get rebalancing in the to see and we will start excess inventories come down. What i think we saw last week was more of a technical washout. People have been betting on higher oil prices. People gave up on the bets last week. What we sent from opec over the weekend was renewed line,ination to hold the and that is going to stabilize the market. I dont think we are anywhere near a repeat of last year when the oil price elapsed because Global Growth is much collapsed because Global Growth is much better. The level at which extra production starts to come on board is lower than we thought. We have seen the gulf of mexico production come on. We have seen the shale gas recount go up, but much lower levels. Tom if the price will not go down to the levels we saw last year because of the improving backdrop, maybe the heights are not so good, as one might have seen before . Give me rough figures. Here . Possibly the top we are below 60, 46 today. James it is not possible over the course of the summer, but it does look like we are in a band now, and that the bottom end of the band, you start to run into opec production cuts and probably also some of the shale or death going offline, but perhaps about 60 per barrel, you see too much. Tom there was a selloff in other commodities, iron ore, copper. How do you account for that . James some of that was a bit of a washout, but i also think that you start to see some concerns come through on china. The chinese authorities are starting to tighten policy. I think it is very different from last year because growth is so much stronger. Even if china slows down a bit, i think rose in the rest of the world can support overall Global Growth, and that will help commodity prices. We had a rally on expectations of much stronger growth, and we have now started to wash some of that out, and we are trying to find a new equilibrium. Tom james barty stays with us. , industrys message to macron. We will speak to the head of frances largest is miss group. This is bloomberg. Largest business group. This is bloomberg. Guiding you are watching bloomberg surveillance. Im alongside tom keene. Mark has the bloomberg first word news update. Mark Emmanuel Macron has pledged to unite the nation after defeating Marine Le Pen in the r