Im Francine Lacqua in london. A lot of news to get through. It is ecb. U. K. Election. We cannot talk about polling, anything to do with the various issues at play, but what we can tell you is polls open at 7 00 a. M. In the u. K. And will close at 10 00 p. M. You will have the first indication of who will be the Prime Minister of the u. K. Meantime, lets get on to data. Investors seem to be a little more at ease with some of the key events. We are not seeing huge moves. Financial markets mostly steady, investors avoiding big positions ahead of key events in europe. The u. S. And the testifying of edgingomey appeared oil higher. A nice snapshot of what we are looking at. 46. 04. Il in the u. S. At workerst to the first first word news with nejra cehic. In the u. K. , polling stations are now open for the countrys second general election in two years. 650 westminster mps will be elect did with 46. 9 Million People registered to vote. On the for our special u. K. Election 10 00 p. M. London time you get an analysis of the markets as exit polls are published. In the u. S. , james comey will today public plea publicly say donald trump him for loyalty. Also that he saw a forbearance for Michael Flynn and asked him to lift the cloud of an investigation hanging over the administration. We will bring you special coverage about that hearing on tv, radio and twitter. Luber customers can follow that on tliv go. Have put itatings on negative watch. The sun concerns this on concerns finances will be weakened. The saudi led group of nations could put pressure on Economic Growth and fiscal metrics. Chinas overseas shipment accelerated from a year earlier as Global Demand showed signs of picking up. In may and imports increased 14. 8 . That left a trade surplus at 14. 81 billion. The bank of japan is recalibrating communications to a knowledge it is thinking about how to handle a future exit from monetary stimulus without giving the impression it is on the agenda anytime soon. Officials realize it is unrealistic and unconstructive to remain silent on issues and the boj now wants to make it known it is conducting simulations internally on how an exit can play out. North korea has launched a series of short range missiles that appear to be designed to attack ships. South koreas joint chiefs of staff said the rockets were fired from the eastern port and flew about 200 kilometers. Japans defense minister said they dont appear to be a type that could reach japan. Your 46 arading barrel after the biggest drop since march and american stockpiles rose for the first time in nine weeks. An increase by three point 3 Million Barrels by march. Hewlettpackard enterprises ceo has said she is giving Donald Trumps administration the benefit of the doubt. Bloomberg, she had publicly backed Hillary Clinton last year, said she supports some but not all of trumps policies. Are in favor of tax reform. We think the ability to repatriate cash at a lower tax rate is important. A lower Corporate Tax rate would spur growth in the United States. On the other hand, we are not for the border adjustment tax. That is difficult for companies and work on lot o low margins. A lot of technology companies, that is not in our best interest and by extension, investitures of the United States. Nejra global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Im nejra cehic, this is bloomberg. Francine . Francine thank you. Decision day for the ecb and Central Banks are expect to keep Interest Rates unchanged. Offaces the challenge expanding growth and weakening inflation. Investors will be listening to mario draghi in estonia later. Matt miller is joining us from the capital. Great to have you on the program. This has to be a finely tuned messaging. Inflation will be lower, but growth is taking on the upside. What will the market interpret . Yesterday, we did see the euro react quite abruptly when bloomberg came out with a story that the ecb was planning to lower its inflation target to 1. 5 not its target, its forecast to 1. 5 this year, next from 1. 7 n 2019 across that spectrum. The target remains 2 and the problem is they cant get their, especially on a sustainable level and that is one they want to take a more dovish tact with their outlook. As far as the language in the statement, we do expect them to is noe risk to growth longer to the downside but balance. The first time they have used that phrase since august 2011. Ever since, the risk of growth has been to the downside and now they will push up their forecast for growth. Growth looks better, inflation not so great and that is the conundrum of all the Central Banks around the world. The fed is dealing with that problem and the bank of japan. Francine is it fair to say the markets will start unwinding their unconventional stimulus by the end of the year . The markets still expect draghi to talk about unwinding stimulus by the end of the year, to talk about the taper by the end of the year. But where it economists we talked to thought september was going to be the month he would start that discussion, they are saying maybe october or as late as december before he starts that discussion. The problem is in this sustainable inflation. The ecb is saying the energy cost is the problem with their inflation outlook. We all know wage growth has been an issue, as well. They had no effect on jumpstarting that wage growth, even though unemployment has come down. They want to reserve the possibility or continue reserving the possibility to move hold that stimulus alive into 2018. A question is how quickly they will be able to taper after that . , ourine matt Miller Bloomberg news anchor in estonia for the ecb. We have the investment portfolio manager, head of emerging markets across as a. Thank you both for joining us. How difficult will it be for mario draghi to have this communication where you move markets without saying that much . They are trying to square the circle. Theyre trying to be optimistic on growth, but without tapering to early. Still has why europe a lot of bumps on the road, including elections in italy and some other banks to fix. They are wary of spreads. Now, the ecb board is split into two. The macro data is improving and says you should taper early, but there is Political Uncertainty in italy and macron in france and merkel in germany, they havent delivered anything yet, even though their fiscal plans are strong. Wait untilng to there is a fiscal decision and potentially an electoral result in italy, which means q4. Francine q4 and what does that mean . When you look at the fed we thought the timelines would be different, but the fed is also struggling with low wage growth and inflation. How does that impact the market . Core inflation in the u. S. Has shown some signs of life and in europe, very little signs of life. The levels are different. The good news is if there is anyone who can communicate in these times it is draghi. I think they move in september in terms of communicating. They will probably tighten communication in terms of dropping the easing by some Interest Rates but that tapering announcement is likely to come by september. I concede there has been no inflation on the headline side. In the u. S. , if you look at the toutes the fed is keener move on and by the end of the year, we will get two hikes and also the Balance Sheet unwind. Francine the markets dont really believe them. This is something mario draghi would be thinking of. How does he get the message that the markets believe . Expectation is half the job done. Alberto and you going to the euro which has been strong, moving from 105, the favorite short of everyone to 112. The euro appreciates more and the ecb cannot be as hawkish as they need to be. Hishe end, trump and policies, if there is a delivery on Corporate Tax cuts, you have two fed hikes and a hawkish path , more than the market expect and the ecb can taper more easily in september. Today, we dont expect a big announcement, but these are other unknowns. Problem ofhere is a inflation in that there is missing inflation. I was always told that the Lower Energy Prices shouldnt inflect inflation so quickly and they have. Theis what we are expect in ecb to do, lower their forecast. I we measuring inflation differently than we should or is there a deflationary russia problem . We have demographics that have changed. There is less demographic growth, technology is noninflationary. We share the same car. Jobsobs, you have substituted by machines. Amazon factory warehouse, you are going to have drones moving packages, not people. This is a structural phenomenon. It doesnt mean banks should stay with negative Interest Rates for too long. The normalization you can have it is still good it wont be as strong as a normal cycle because there are structural drivers. Also, people who are out of a job and have gone into the wrong industries for 40 years, into financer real estate, are now not adapting to the new economy. There is a miscommunication of resources. Francine you both stay with us. Thank you both with us for the hour. We will bring you the ecbs policy decision at 12 40 5 p. M. U. K. Time, followed by draghi News Conference 45 minutes later. Users can follow that using tliv. Stay with surveillance. Plenty coming up including investors beware. Ond investor will gross warns qatar in isolation. What the snp cut qatars rating . We are live. This is bloomberg. This is bloomberg surveillance. Lets get to the business flash with nejra cehic. Nejra alibaba has predicted 49 Revenue Growth this year compared to an analyst projection of 35 . Investorhinas largest invest in online media. Air may aribas may be thrown a lifeline. Talkses is said to be in to buy more planes as airbus cuts production. 8. 7rder could be worth billion before discounts, although people familiar say the carrier hasnt decided how many planes it wants. Wes investors will buy more than 99 of the rights offer raising the turnaround plan. This is the second issue since the ceo took over two years ago. Funds raised will complete his business overhaul and expand in wealth management. Partedl, Credit Suisse with its lucrative swiss operation. That is the business flash. Francine you are looking at pictures of theresa may, who is about to go and vote. Her constituents constituency. Polls are closed and these are the rules by electoral law in the u. K. Atcan say the polls opened 10 00 this morning london time and will close at 10 00 p. M. 10 00 p. M. Is when we have our special show, any Market Reaction and you can follow us on the bloomberg terminal and live on television. Jonathan ferro and guy johnson will be doing that throughout the day. Theresa may the current Prime Minister voting. Onto another big event of the day, there are three. The u. K. Elections, the ecb and the testimony later today. Trumpfbi chief will say asked him to end the program into Michael Flynn and requested a public announcement that trump wasnt underestimate investigation. Comey will also say the president repeatedly called for loyalty and asked what could be done to lift the cloud over his administration. For more on what to expect, lets bring in jackie simmons, still with us alberto and bhanu. Jackie, we have the transcript of this testimony. Thatere anything illegal President Trump asked him to do . Jackie that is the concern, there seems to be consensus that on a strictly legal basis, perhaps not. But the bigger issue is how appropriate was a for the president to be asking the fbi director do not come to go away. Put this in the box. It is more a question of appropriateness, rather than legal, but that is part of the debate right now. Francine we are talking about obstruction, all of that, but it moves the markets . What are you looking after . Is it the tone, the allegations . This is bakedof in. We have a sense of what comey is going to say in his testimony. Unless there is a huge divergence from that, people will be looking for body language, looking for extra clues if there was obstruction per se, if that crossed the line, but we have to see what comes out today in his testimony. Francine we also heard from just Jeff Sessions might resign because of disagreements. President trump is apparently frustrated according to sources, will he fire him . Jackie officials have said he is not there yet. The question is, do you want this extra disruption in a chaotic four months that he has been president. You want sessions out now . It looks bad, it is a further distraction and an impediment to getting through a lot of other plans and reforms. I would be surprised he would want him to leave now but time will tell. Francine quickly on theastructure, we heard president was on script, on message. Does this get factored into Economic Growth . No enough,dont therefore we cant factor this into projections because there are so many other distractions, nothing has moved the needle on tax reform and in the structure. Big question mark. Jackie on top of this story and the Trump Administration. . Will he tweet over it . And is that with the market is looking for . I think the issue here is, does this make the trump reforms less deliverable . Does it put more pressure on them to deliver something. The easiest thing they can do is a tax cut, easier than tax reform and that is what we expect. When it comes to tax reform, much harder to do and requires more consensus and infrastructure. There is a longer process. It reduces the impact. Francine i know we want to get on, but if this goes badly for the president , does he become more protectionist or do we isolate the two cases . Bhanu i dont think the risk of that is high in the near term. Mexican negotiations take years. The trump trade in terms of reflation and small caps, breakevens and in terms of the dollar, has already been given back. The part of the market that may suffer if this begins to go further is sectors like financials and i. T. Because the surface the sectors that have recently benefited from the trumpflation. Most markets have given back to the gains. Small caps are where they were. Broaderthink this has a read through into emerging markets and even within the u. S. , a lot of this is in the price. Francine yesterday we spoke to bill gross and he warned the u. S. Market risks are at the highest since the Global Financial crisis. Bess told investors to cautious about the high cost of treasuries. Bill treasuries are the most attractive of the developed market, in comparison to the tenure bund, 25 basis points. 190 basis points and relative to year, 205 basis points. More attractive on a yield basis, but still, i would suggest they are overvalued pricewise and under yielding and investors should be cautious of how much they want to own relative to cash. Francine alberto, this is how you measure things right . Marketed about what the expects and the fed is telling us. The concern is that treasuries are telling you one thing, which is growth is not going to be that great equities are telling you Something Else. Who is right . Alberto i think it is treasuries this time. The equity market is in a separate world. The only reflation trade that has an corrected. We have been fading the u. S. Reflation trend. There are a lot of risks to the Trump Administration reforms. Reflation is more live in europe where boones are at 25 basis points and direct low and growth is accelerating. In the u. S. , we see growth hitting bumps. We could see treasuries going back to 2 or even lower. You shouldeans is still be fading the reflation in the u. S. , looking for higher bund yields and a higher eurodollar exchange rate. Bhanu i cant disagree with any of that really. I think the fed is in a different place today. China allows Global Financial conditions allow the fed to be in a different place. You dont see the wage growth, 4. 3 ,employment rate at you could argue the employment population ratio is providing the wage growth and the ratio is still recovering modestly. The fed wants to normalize and given where margins are in the u. S. , there are one sector doing well, the i. T. Sector has driven 50 of the gains in the s p. It is more likely japan closing the equity market. Francine if you look at the markets, a little more stressfree and you can see this is the measure, markets are the calmest since 2014. Treasuriesby more because yuan is stabilizing . Has reserved pickup, china has indicated they will buy more treasuries. In either direction, i dont think china is the swing factor for treasuries. Treasuries of these levels are getting expensive. The in has come in a lot. The twoyear is quite expensive. There flattens more than bowl flattens. Francine that is bhanu baweja and Alberto Gallo. Both stay with us. , decision day at the ecb. For look at what we can expect, we will speak to the former ecb board member. E will ask her about inflation in the meantime, these are your markets. Investors avoiding big moves ahead of the ecb and james comey testifying and u. K. Election day here in the u k. Oil edging higher and 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. 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