June 8. We are getting data one hour from now. Lets quickly get to the markets. The pound definitely, the story of the day, dropping. I would point to the latest polls by u. K. Government. We have our London Bureau chief joining us to look at what a Hung Parliament could look like, and whether we believe the p olls or not. He vix, down from 1. 8 virtually600, unchanged. Lets get straight to the bloomberg first word news. Reporter in afghanistan, as many as 80 people have been killed and 350 injured in a suicide car bombing. There was a rate on the countrys Largest Military hospital in march. The u. S. Says the first ever test of the Defense System against an Intercontinental Ballistic Missile was a success. This was after a groundbased interceptor shot down a mock weapon over the pacific ocean. This comes amid mounting tensions with north korea. Reynard says soft inflation could make us rethink the path forward for Monetary Policy, should it linger. U. S. Growth looks poised to rebound. Tension between signs of the tentative progress we have seen on inflation could be slowing. If that tension between the progress on employment and the lack of progress on inflation persists, it could lead me to reassess the expected path of policy in the future, though it is premature to make that call today. Reporter meanwhile, larry fink reckons european expansion will outpace the United States this year. U. S. Growth is in the mid2 range and likely, will not happen. That contrasts to estimates made by bloomberg which forecasts 1 7 8 in the european union. Chinas official manufacturing gauge held up in may. The manufacturing pmi held at 51. 2 for a second straight month. That could give policymakers more room to rein in financial risk. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. This is bloomberg. Francine thank you. With eight days to go until the u. K. s elections, the pound has dropped against g10 peers. Mays conservative party could fail to secure a majority. Conservatives could lose 20 seats in the election with the Opposition Labor Party gaining seats. Model does allow for a wide margin of error. We have the chief Investment Officer at ccla. Welcome to the program. First of all, do we trust the polls . People are scratching their heads this morning, as to how serious we should take it. This is a new way of protecting the results. Ugov makes clear there is a very wide range. 3. 10 is the midpoint of the range. They tested this model with brexit and they got it right. We have to point out though, that polls also change the reality. One of the things theresa may has been struggling with is the risk of complacency, that tory voters would not go out to vote. You could argue that the polls will galvanize the vote and help bring the majority home. Francine what happened three or four weeks ago . The tories had a 20 point lead. Is this a bad month, or are there questions about brexit . Is the one area where theresa may seems to be comfortable leading. Polls suggest the country is with her and this week, she is trying to bring it back to brexit. Last week she came up with this plan to charge to make all people pay for their care until their assets fallen to 100,000 pounds. That went down extremely badly. Then, we had a pause in the campaign. We did not have polling during that period. What we see in the polling now, we are not sure if it is the elderly care or the manchester attacks. Francine james, you live in the markets. Do you trust the polls . I am trying to understand what the implications of either might be and how we could protect ourselves. We have to try to figure out what lies ahead for the u. K. Economy. I worry that the u. K. Economy will slow, and we have a difficult transition period. On that basis, i am nervous about the market. Francine ahead of the election, do you have a short position on the pound, or have you changed your Asset Allocation to get away from the u. K. In case . We are relatively short on the pound, for sure. We have an open position relative to the euro. Francine how much weaker can the pound get if we get more polls like this, suggesting there will be a Hung Parliament with eight days to go . What i think would drive the pound lower is the concern over the brexit. The polls can weaken it a bit. We saw a surge in the pound when the election was announced. We could see the pound go down to 1. 26 against the dollar, but the real danger comes when we start getting into the brexit negotiations. Who knows where to go from there. Francine emma, talk to me about what a Hung Parliament could look like. Are we talking about coalitions, or are there parties that get along on the serious issues . You would be looking at what theresa may calls the coalition of chaos. We have labor, and according to the times projection, that would give you a majority. And there are implications of brexit. Theresa may hasnt said she wants a very hard brexit. Labor has sort of different positions on brexit, but basically they would like better access to the single market, which may or may not be compatible with the therir views on the freedom of movement. Ter, what doespe that mean . On june 8, the country votes and on june 19, these brexit negotiations are meant to start in brussels. If we have a Hung Parliament, does it delay parliament, or is there a second referendum . Peter u we have no idea. Conservativese and the labour party are es, myted to varying degre guess is they will continue to open the article 50 negotiations. The question is how aggressive or how singular will be u. K. s position be in the event of a Hung Parliament . We know what the conservatives stand for. There is a broad expectation that does translate. We had an awful lot of that. Abouty, the people talk there being a Hung Parliament, i dont see that happening. Where are you on that issue . There were expectations at the beginning that the lib dems would capitalize, but we have not seen that at all. National polling does not really work, you have to poll the 100 key seats. It is also true that in 2015 we did see some local polling and it was not very good. So, it all will hang on the 100 marshall seats. Democrats have changed a little bit. They started recalibrating their systems, but because the election was called early, they are not their area, basically. Francine emma peter dixon and james bevan stay with us. Reporter Deutsche Bank has agreed to pay 41 million amidst Federal Reserve allegations. The fed says the company fell short in complying with the secrecy act, which requires lenders to help federal agencies prevent illegal transactions. Ireland has fired the starting gun for the initial Public Offering of allied irish bank, selling 25 of the nationalized lender. The government wants to sell the stake and Share Offering in london and dublin the terms to be set in the june. The sale could raise about 3 billion euros. And Manchester United premier League Season has not stopped the club topping the list as the worlds wealthiest club. United finished sixth in th englishh premier league. The value has risen to 3. 1 billion euros. The combined value is some of 30 billion euros. That comes from three teams, united, madrid, and barcelona. Francine the fed governor lael alterrd says she could her path forward for Monetary Policy. U. S. Growth looks poised to rebound. I see some tension between signs that the economy is in the neighborhood of full employment and assigns that the tentative progress on inflation could be slowing. If that tension between the progress on employment and the lack of progress on inflation persists, it could lead me to reassess the expected path of policy in the future, though it is premature to make that call today. Francine still with us, james bevan, peter dixon. Peter, how do you view lael bra inards remarks . Peter i think what she is saying is that maybe the federal is aves current path little aggressive. The markets might be more or less right. I still think we will get two rate hikes this year, possibly one in december. The question is, how far do rates have to go until we get some level of normalization . I still think a couple more rate hikes on top of that over the course of the next 12 to 18 months is a reasonable assessment, even if inflation is holding slightly below the feds target level. Given what the economy and labor market are doing, the u. S. Economy can handle the rate. Francine we are also saying live pictures of jeremy corbyn, the leader of the labour party, speaking i believe, in westminster, where he is morning of the impact of five more years of the tory government and the impact that could have on nhs and the Education System in the u. K. We have to mention it because a lot of people will be watching for his demeanor after we had that poll we were talking about with emma rossthomas, which could lead to a Hung Parliament, if we believe the latest yougov polls. We will keep watch on that. James, back to fed polls. These are the feds funds futures. The market does not seem to believe what the fomc keeps on telling them. I think there is a lot of ambiguity as to what people believe regarding the u. S. Economy itself. People talk about 2 . And we had Larry Summers from the wall street journal here last week. When one thinks about what is driving the u. S. Economy, the underlying economy seems perfectly fine, but the government is shrinking back. The real issue for investors is, will we get the tax cuts trump has promised, or will he not . If we dont, we are talking about 130 in round figures for s p 500 figures. We have to determine if the s p 500 is within this outlet. Francine what is the timeline . Will we get it this year . I think we will hit the limit in 2018. , asmarkets will be prepared long as they get it to 2018. If it turns out not to be possible to get those tax cuts through, then i do think it is correct that the fed will because just because the economy will look weaker. Do you agree, peter . I am not all optimistic we will get the tax cuts through, particularly after the political take th difficulties of the last few weeks. For that reason, i think you are quite right to highlight the risks to the market. That is something that will impinge upon the fed. It is not the story that Lael Brainard is telling us. Francine what exactly is she telling us . It is just wage growth, right . She wants to make sure they are ready for another hike. It important, but the demographic shifts in the states, implying to me that we will see a long period of relatively low wage growth and real growth. Then of course, we are referring to the u. S. Cpi in global trade. What goes on in china will have a huge impact on inflation. Francine peter, do you believe we need to accelerate . Do you think the fed is behind the curve when it comes to interestrate hikes . Probably not. You could argue they are being cautious implementing the second rate hike. But in terms of rate hikes, i think they are on the money. If they deliver one next month, i think we will be quite happy. We need to look at the equity fixed rate in the longer term. The growth rate for the u. S. Economy clearly has slowed down. That is something that many western european economies are going to have to deal with. Many people in the market can 4 or 5 the days of Interest Rates. Francine we will also be hearing from dallas fed president later when he speaks to tom keene at 1 00 p. M. U. K. Time. After the trump rally, are u. S. Equities overpriced . We hear from larry fink and why he reckons the success of the white house agenda will determine where markets go this year. This is bloomberg. Francine you are watching bloomberg surveillance. The ceo of blackrock thinks u. S. Equities are probably fully priced. That is after markets soared in the wake of Donald Trumps election with investors betting on infrastructure spending. Larry fink says where we go from here depends on the white houses agenda. We are trading high relative to other parts of the world. And depending on the success of the trump agenda, will probably determine the equity markets for the remainder of the year. Still with us, james bevan, chief Investment Officer at ccla Investment Management and peter dixon from commerzbank. James, do you believe equities are now fully priced . I was talking about 2400 as a year and target for s p 500. We are at 2400 already. We are very dependent on mr. Trump delivering on deregulation and cutting taxes. Francine where do we go from here . Correction, or where does it go next . Low growth, low Interest Rates. People will pay very high prices to participate in equities. If you really believe in zero Interest Rates, you should pay 100 times for the earnings. You need to but risk into the equation. If we believe the u. S. Economy is thecover, the 2700 upper limit. Francine peter, are we feeling a lot better about the World Economy . Is growth, for the first time in a long time, upgraded . From a european perspective, we are a lot more comfortable. We are on slightly more solid footing. My sense is, we are nine years on from the financial crash in 2008. It normally takes that time for the economy to find a bit more momentum after that crash. We are getting there. I am a little bit more confident than i was. Of obviously, that pace growth will depend on where you are. I think we are on a Slower Growth path. Francine do you worry about the memos and leaks from the Trump Administration . I dont worry much about that. The not interested in administrations views. My big worry for the moment is what is going on in china, the slowdown. Francine there is a china block coming up, james. You know what i want to talk to you about. President trump tweeted four hours ago. From this. Alight people are wondering what this means. There are about 100,000 retweets in less than 30 minutes. Do you care about this . Does this impact what the markets think. He has an extraordinarily confident team. And the people he has appointed below him are very strong and capable people, that i do think washington itself is a swamp. Francine peter, do they need to take away that twitter account, these able people james was talking about . They probably do, but they have taken his fun away in the past. Francine do you care about this . Funt just a little bit of or intrigue, or is it worry ing. In this particular instance, no. But there is a wary this could turn into something more dangerous. We could start to see tweets that we do not want to see in public, which is a different dynamic. Francine i know we are talking about china next and i know james has a great question for peter on china, but do you think geopolitics need to be taken more seriously by the market . When i look at the volatility of markets, it reflects relatively low economic relatively. But i think that is a mirage. Francine do you think peter, they should look more at geopolitics . I think the problem is, geopolitics is a symptom. I think the markets ignore it by default. They should pay more attention to it, but because they cannot price it, they ignore it. Francine james bevan and peter dixon stay with us. We will be asking about china and what happens when there is a shift in policy there. From chinapmi data holds steady. This is bloomberg. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Tthats why at comcast,t to be connected 24 7. Were always working to make our services more reliable. With technology that can update itself. And advanced Fiber Network infrastructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Francine you are watching bloomberg surveillance. I am Francine Lacqua in london. Best get to the bloomberg first word news. In afghanistan, 80 people have been killed and 350 injured in a suicide car bombing. Worst attack in the capital since a raid on the nations Largest Military compound in march. It comes during the first week of ramadan. The u. S. Says the first test of its Defense System against an Intercontinental Ballistic Missile was a success. That is after they shot down a mock weapon over the pacific ocean. It comes amid mounting tensions with north korea. In the u. K. , the pound has slumped after a poll shows Theresa Mays Conservative Party may lose its majority in next weeks general election. Sterling has been strengthening. We have increased security risks suggesting a bigger release. The u. S. Fed governor has said soft inflation could cause her to rethink the path forward for Monetary Policy. That as the Global Economic outlook brightens and u. S. Growth is poised to rebound. I see some tension between signs that