guy: wednesday morning, good morning. welcome to bloomberg markets. this is the european open. the first trade of the cash session coming out. i am guy johnson. what are we watching? apple says customers are waiting for the next iphone upgrade. is simply an income stock now. the market downgraded expectations of fed action. france's top politician. is tonight's debate marine le

pen's last chance to change minds? away fromf an hour the cache open. what are we looking at question mark let's take a look at the fair value cancellations on the bloomberg create what we are looking at and it want to get these numbers straight, we will skip past this because i have not set this up correctly with the fair value line. let's talk about what is happening with the gmm. this is what we are looking at, european equities have caught fire. focus on this column here. the aussie dollar and metal prices have come down. the other movies is british pound story that we are watching carefully. down. data also the options market, the skew on that is fairly flat. the markets are starting to get really hard, to price the story.

they are down by .3 of 1%, the bloomberg dollar index is trading up by .1 of 1%. i will cherry -- show you the value calculations. here is the first word news with juliette saly. juliette: jpmorgan plans to move hundreds of london based bankers to luxembourg and ireland. they are preparing for the u.k. to lose access to the eu single market. u.k.eo jamie dimon warned plays that as many as 4000 could be relocated in the event of brexit. and her war of words with brussels escalates even before negotiations begin. leaked details about

a meeting. he was shocked by his -- her approach. >> she said she will be a really bloody woman and negotiating with the european union, and i must say i fear for this. and the u.s., president trump has tweeted that the government "needs a good shutdown in september after congress agreed a budget deal that denies him much of his wish list. the beale -- deal includes no money for his ball and full funding for planned parenthood. democrats called his threat to shut down the government after successful bipartisan deal shameful. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy. guy: thank you very much indeed. european stocks are going flat and we are very much focused on what happens in washington later

on today. the fed and focus within fomc decision due. futures point to a lesson than 30% chance of a hike. at the moment we are 60% or 70 sent -- percent on a hike in june. poor data put the fed on a different strategy? it is data that is not great right now but ok. honest, the market has downgraded expectations quite significantly so where does that leave us? mark: i think as you say the data is definitely turning softer. across the board, it is clear. the fed will not acknowledge that without the market pricing out the ability of june entirely. they want to keep themselves the

option alley of june. i do not think they will mention that june is [inaudible] and they learned in march early a hike they can go for very quickly at the last moment. they are happy with june and they are happy if it falls to 60% that they do not want to see june priced up and have to talk it back up again. they want to keep it where it is not definite but likely and i gives the option analogy to act either way. guy: i was still on for two more this year you think? mark: it will be a tough one. we are not seeing sustained inflation. there is no reason to leave it will run away on the top side. commodity prices are still not running away as well which makes it unlikely will get that sin boost tire. one of the reasons we thought there was sustained inflation -- that was that assumption that oil prices would pick up. commodities index is quite soft.

hike in june,is a another one in the year is difficult. they will do one more, they would like to go in june. i think as long as -- they can get away with that and give them better room. the next one after is much tougher. factor in what happens with the balance sheet and think about whether or not that is a swap or a rate hike. how about relationship -- how that relationship will work. interesting line on the blog. you guys talking about the idea of bond prices should remain fairly well supported despite the fed exiting from its balance sheet program. you have the fed here and it is the white line to show you this chart. areecb and the boj aggressively pushing their lines higher. as a result of which the cumulative point of view, the markets should remain fairly

well supported. mark: this is a really important thing to look at on a key militant bases as you mentioned of how the aggregate of those four major central banks, the liquidity they are providing and how they are acting. everyone is focus on what the fed will do on the balance sheet this year. stands behindd the world reserve currency, the immediate and direct impact of them reducing their own balance sheet has the most immediate impact on financial assets. when they start to trim their own balance sheets, you will see financial as it's taking a short-term reaction that is negative. as long as the boj and ecb expand at a nickel pace they will compensate for any reduction by the fed in terms of total aggregate liquidity in the financial system. and ultimately, financial prices should do ok and that includes bonds. when there is $18.5 trillion of assets that are chasing safe

liquid assets, mainly bond prices, it is hard for them to be a sustained bond bear market. guy: absolutely. if you were to take the ecb out of the equation, hearts with that change the scenario question mark i am not existing the ecb will what -- walk away. the market has extrapolated especially when you think about these bonds we have been talking about. the ecb has an looking at data that is pretty punchy for large parts of the eurozone. greece is looking like it is a done deal and some respects. the risk surrounding their outlook are fading. mark: the ecb is a more interesting issue. when it comes to the fed they have not expanded their balance sheet much in the last couple of years and the next move will be a reduction. marginal current is less interesting. the ecb is accelerating really quickly. it is the central bank that is going their balance sheets the

most but they are the one with really strong data. the qa seems to be working which means they may be tapering a bit quicker than the market expects. that is where the marginal change in the rate of the pace at excelling their balance sheet might be the big impact in what markets are expecting. you get the fed reducing at the same time when the ecb tapered aggressively or cut out their own program, you could have a real sharp impact in financial markets. most likely, the central banks will not do it so suddenly like that altogether. guy: thank you very much or date -- indeed, mark cudmore. more on the mliv blog. analyzing the stock stories as we work our way through the earnings season and we will top -- tap into the central bank and the other asset classes she will be covering. it allows you to join the dots is the way i would put it. we will be speaking to former

fed chairman ben bernanke he coming up at 5:20 p.m. u.k. time . a conversation with the former fed chairman ben bernanke. we will hear from the cia -- cfo ibas.par is coming up. the open 19 minutes away. this is bloomberg. ♪

guy: walking back -- welcome back. at operating profits volkswagen, a couple of things, posner cashve unit flow -2.6 billion which is interesting. they are talking about it to digit billion euro outflow due to the diesel issue. we will get some numbers from allianz. let me get those numbers for you. q1 operating profit, it looks like they are ahead of that. line 36 billion so the top line confirming the full-year guidance, that is the

insurance sector out of germany. both of those numbers will get you more smart analysis as we work our way towards the open and around 12 minutes time. let's get a bloomberg business flash with juliette saly. juliette: thank you. apple fell in extended trading after falling iphone sales and missed forecasts. against 528 million point million. it highlights the need for apple to deliver block a stir new features in the next edition of the flagship device to fend off rivals like samsung. alitalia has filed bankruptcy proceeding for the second time in a bit -- a decade after shareholders voted for insolvency. approvedan are meant and appointed administrators. the move throws into doubt the survival of italy's flag carrier after it feel to send -- fend

off budget rivals. a traitor in complex equity products has left the credit suisse firm. in complex equity products has left the credit suisse firm. equitypany will trade derivatives to more than 100 u.s. wealthy individuals he advised that the bank. and the chief investment officer of bernstein global wealth management plans to leave allian holdings.n it comes as the firm faces questions over the startling may one shakeup that resulted in the ousting of peter krause as chief executive and the removal of nine directors. that is your bloomberg business flash. guy: thank you very much.

let's get back to the banking sector, b.n.p. paribas and its earnings. it beat analyst estimates with that and, for .9 billion euros. >> what you sometimes see is that in somewhere -- what you saw in the u.s., you saw things grinding to a halt. it seems in france things continue and we will have to see how the elections unfold on sunday and that is it. >> you have not seen any more hedging on bond insurance is? >> we have not seen anything that can be linked into the political uncertainty. there isnnot deny political risk, some say, for example, this could have an impact on interest rates, have you planned for that and what do you see in terms of the longer-term impact on interest rates? >> what we do in that situation is we stay close to our clients

and help them in their projects which leads to an increase in loans and deposits and commissions. if you look at the first quarter results you can see loans are up seven to -- 7%, fees and commissions 3%. that kind of trend would continue. that would help to off it -- offset the low interest free environment. if interest rates pick up that would boost the contribution. talk about the banking sector. stake in the german lender. our bloomberg, news reported. does this -- what does this made? did john cryan go out looking for this stake? outm not sure that he went

to look for a new anchor share holder. what it does show is that deutsche bank has a new anchor shareholder that can come in handy. it will present a strong signal to the market, someone out there believes the worst is behind deutsche bank. shares are undervalued. it does give a signal to the market. at the same time like you mentioned, the first time in their history we have two big anchor shareholders, they are state affiliated, who pretty much control deutsche bank and can and exert great influence. we look at shareholder presence they are 33 percent to 32%. they can exert great influence on john cryan and the lord. -- board. hna investing in

deutsche bank? it this is a business that has in -- this is a business that has been in eclectic stocks. han -- hna andor how does this fit into the portfolio? they came in at a pretty intriguing point of time last year. investors feared a big fine imposed by the doj, some hedge funds pulled back and shares plunged to around 10 euros. that was an inflection point. i think hna thought it was a good opportunity to invest into a bank that what they thought is undervalued. said, they are on a shopping spree big. they are allegedly interested in lender.en

it is a prestigious asset to have, deutsche bank, and also they are looking to invest abroad and having a strong relationship with a big tank that can help broker-deals does help for hna. guy: is there a sense that this -- what does the future hold for the relationship in terms of the actual numbers? befor now, hna should content with close to 10%. they would have to file for approval with germany's financial watchdog. if they want to increase to 10%. i would not rule it out. it is interesting to see what the qataris are doing. they're the biggest shareholder so far. we will see if they want to increase their stake to above 10%. it is an interesting mix. i would not rule it out but we are going to be stable in terms

of hna's holding. guy: thank you for the update. an interesting story. joining us out of frankfurt, the deutsche bank building behind him. where minutes away from the european open. we will talk about what impact volkswagen's numbers will have on its performance. we had surprise numbers from vw and allianz. is the market driven by earnings? we are waiting and watching very carefully for the fed. the market open eight minutes away and we will discuss that next. ♪

guy: a gloomy looking start to the day in london. markets are a little positive only up by one -- .1 of 1%. this is the insulin sector we are talking about. the q1 sales line beating expectations, we will keep an eye and see how this one works its way through. we will be watching volkswagen. i did not expect volkswagen this morning but a bit of surprise. it was nice to see. we will work our way through that one. the other one is e&p pair of a paribas.ir obnp

the stock we understand looks like it should open fairly positively but there is a political risk that hangs over this stock. we do not know how the election is going to turn out. the polls so far predict that macron is going to win. we saw a very big monday morning following french banks. you can see it on the chart. is that priced into the bnp stock price? is what is going on in terms of the overall performance with these markets. we anticipate we will see a small bounce today but not much. yesterday a bigger bounce for some of the perfect oh -- the peripheral markets. we are waiting for the fed. is that a market risk that we need to be thinking about this morning or do you think the fed statement will deliver very little? something to think about.

stocks higher and the market open is next. andh vw and bnp paribas novo nordisk. three stocks to keep an eye on. this is bloomberg. ♪

guy: let us talk about where we think we are going to open. it will not be a particularly dynamic start. very much a market driven by earnings. market of stocks rather than a stock market. let us talk about what the headline numbers look like. up by less than .1%. similar story for the ftse. cac not moving. dax not moving. -- it comes to some of these individual stock market. i am told by people who know more about it that vw was not a nzrprise, but allia was.

certainly beating on a number of key metrics. we will watch and see how that open -- that stock opens as well. the political risk and policy risk is still there. andce coming out, remember, the fed tonight. let us libor that. let us show you what is going on. this is the picture, as you can see. just a little bit of a downwards sense of direction for the ftse 100. we said it would be absolutely flat. that is where we will be, but not by much. were the ftse is. the pound has been down overnight. down by .3% on the cable rate. 40 drops a little bit as well. it is softening up a touch as well. down by .1%. not much movement in the headline there. in the meantime, manus cranny has lots to tell us.

manus: such a buildup. have that little bit of softness in europe. when you look at the issues, should you really be that concerned about the mliv? european auto sales at record highs. a bit of a blip in the united states of america, but is it the canary in the consumer coal mine? as for apple, personally, i would like a new battery, but a few people would like to hold off until we get the 10th anniversary of the iphone in q3. stocks are softer. financials lower by .2%. when you look at europe and you talk about the french political election risk, we started tracking money going into french ats in 2015. last week was the single best week on record. 520 -- 562 million euros went into u.s. listed french etf.

with the inflow, the most we began tracking the movement, even the manager of the portfolio at the louvre is holding back, waiting to see the outcome. it confirmed suspected outcomes. now, when it comes to asia, as far as china is concerned, two very different stories here. msci's all world index, and shanghai comp on the way down. cbc says tocbc -- o stop overreacting. the lowest since april 14. keep an eye thing on taiwan. less show you -- let us show you the taiwan stocks. even though apple had a shakedown, what has it done to the equities? the suppliers see that they are going to do better. there is the taipei index. just shy of 10,000. pound inmentioned the

terms of a little bit of a dip. opening.he gilts we are opening a shade lower in gilts. 100 billion pounds in terms of reparations to europe. davis decries that. we are going to have this backwards and forwards discussion from that bloody woman. i'm talking about theresa may, of course. guy: absolutely. thank you very much indeed. let us talk about what is happening with the mov screen. the market is softer. we have the negatives on the left-hand side of the screen. this is index points. rio,e, total, barclays, all off this morning. rio was down yesterday. that is where we are seeing money coming out of. where is money flowing into? numbers, a solid beat.

the market likes what it hears. the stock is trading up. all four business lines seem to be performing. that stock is trading up by 3.84 this morning. the stocks are doing well. alianz trading up. sage.ked to the boss of the market likes what it hears out of that business. talk up i 2.71%. by 2.71 percent. tonight, france gets interesting once again. could a tv show decide france's next president? emmanuel macron and marine le pen go head-to-head. this is ahead of the second round though. let us go to greg viscusi in paris. could this debate change things? there have been some very

sort of dramatic moments in the french presidential debates over haveast, but when they studied afterwards, did they really have an effect on the polls, the evidence is not there. these debates seem to confirm -- affirmed peoples decisions they have already taken rather than change things. that said, this is an election unlike any other. we do not have a two main parties in there. both of these people are seen as either unknown or risky by the majority of the french. they both have a lot riding on this debate tonight in terms of trying to dispel some of the them amongst many french voters. i would never say it has no influence at all. that would be too strong. it probably could have more than it has in other elections. debate 20ver seen a turnaround a french election before. what do youid, think le pen's strategy will be? this could be her last chance in

some way to speak to the entire french population. how does she go after macron? what do you think the talking points are that they are discussing this morning ahead of the debate? greg: i think, for her, she has got to go with a motion. she has to hit them and hit them about him being the candidate of the elite. her main thing is not to get people to vote for her because she is at the limit of her support. it is more to get people who voted for fillon and melenchon to stay away. if she can make macron seem such an unappetizing choice for them that they do not vote for him. isron on the other hand, he going to hammer away more on the specifics. euroas waffled about the and that is a big issue for french people. the french do not want to leave the euro. she has waffled about this. is impossible to understand what she wants to do about the euro right now. really hit hero

on the specifics of the euro. expect her to try to go above specifics and talk about emotions, defending france, how about to the people, that's what of stuff. guy: as ever, thank you very much indeed. the rest of the paris team providing a fantastic coverage in advance of the second round. this is the one week risk reversals on euro-dollar. the markets have been swirling around. if this was the move coming into the french election. first round, and then we get the bounce coming out of it. from a market point of view, it of theing back in some risk. let us get the view now with derek halpenny, head of global markets research. is that the right call? how is the market set up? greg: there is not a lot of risk priced for sure. the take away with the accuracy of the polls. that is good, the market, the

reassurance to price out an awful lot of the risk. human nature, there is only going to be some element of risk going into it, but by and large, spot isy from an asset effective, we have -- assets spot perspective, we have gone. where the euro goes post a macron victory, less than a big figure perhaps. guy: the view was that it was worth showing up? your senses about what would happen? do you think they will be staffed in the same way they were? derek: my guess is perhaps not. slightlytum has may be gone in favor of le pen over the last four to five days, but we are talking massive gaps between the two.

60-40% gap. thet of people accused polls in terms of a trump victory and brexit as being disastrously wrong. we were wrong for brexit. within the margin of error. in terms of trump, they were pretty accurate. clinton won that the national -- won the national vote. trump was there or thereabouts. polling is not as bad as people are making out. guy: where do we move on from the french election to? do we move onto a world where we focus on the u.k.? we continue -- to focus on italy? what is your sense of where the market wants to go? derek: on a big event-type scenario, italy is where the risk fly. there are -- risks lie. bute are risks in germany,

not in comparison. it is more about perhaps a weak coalition government materializing after the german elections, which definitely could have problems in terms of we need leadership in terms of the reform needed in europe over the next four to five years. from a populist perspective, it is certainly a five-star movement on the problems in italy, which is pretty considerable. it is pretty far out unless we get a sudden call for an election, which is possible. in that sense, perhaps the wall way --s theme will ever will ebb away. guy: we are focusing on the wrong italian. the data is solid. mistake in the past by focusing on inflation when it should not have done. the data are so solid at this point in time. are we just going to increasingly -- once the lane

which becomes more neutral, and that is probably what the next meeting delivers -- do we then start inching forward our expectations of one qe starts to get rolled off? derek: i think that is inevitable of where the markets are going to go in terms of getting a change and forward guidance if that is what happened in june. it is not so much do we have a isuation where the race justified given the fundamentals? the message and communication the ecb has to get to the markets is also much we need to shift because things are getting really strong and there is upside inflation risks, but is it justified to have a -.4% policy rate given the current economics? guy: what is the price of the euro in that? there is a definite upside bias in people's expectations to were the single currency goes now that we have deflated the u.s. derek: we changed our view a

couple of months ago. we are targeting 114 for the end of this year. guy: with risk to the upside? derek: potentially, of course. you cannot ignore what is happening in the u.s. despite the mixed economic it at we have had over the last month or so. the underlying story is still pretty good and we will have to have the fed going forward. guy: derek halpenny, european head of global markets research. he will stick around. the fed decides today a rate move is not expected, but could we get -- are aboutsay the dots right and we are taking three hikes this year and we need to warm you up for another two? we will talk about that. our interview with david rubenstein, co-ceo of the carlyle group. find out if he is a bear or bull on current market trends. that is worth listening to. this is bloomberg. ♪

guy: 15 minutes past the hour. welcome back. you are watching the open. nejra cehic, over to you. nejra: numbers from sage group, a software publishing company. a are seeing it gained quite bit more earlier, actually, it hit the highest since november 2016 in this session. we are still early in the session. it rose the most since june. we are up 1.2%. it has been one of the biggest

gainers on the stoxx 600. in terms of the biggest losers, g'm looking at dialo semiconductor. showing thus falling iphone sales. dialog semiconductor down 2.9%. it was dropping quite a bit more than that just a few minutes elteland i'll tell -- and significantly down. this after the board has filed a police report regarding suspicions of accounting violation and or fraud against the former ceo. what are your mid-cap movers, guy. guy: thank you very much indeed. of earnings middle season in europe. let us turn back to the fed. the fed is meeting today, yesterday, to contemplate the state of the economy. the recent downward surprise in inflation is --

yearsnotable that of the of inflation, it has not met its target. it is a problem central banks around the world are facing. how do you get that were number? the ecb thinking about -- that core number. the ecb thinking about that. derek halpenny with us still. dots point just a more hikes this year. the work function points us to the fact that june is still largely priced in as a rate hike. do you think the fed 1 today needs to up that number? , they changed the market quickly. do you think they have to today? derek: not today. there may be a knology went of the fact that the q1 figure was quite weak, but i think that certainly, if they do acknowledge that, they equally play it down.

to medications from the fed in the past, but they are somewhat less confident about relying too much on the flow of gdp data specifically. there tends to be a fallback to perhaps jobs data, which year,arks taxation once a and therefore gives a more reliable picture. when you look at jobs, you know, although we did have the weak nsp at the beginning of april, there is not much slack left. that will be the key determinant of their decisions. the dots profile looks pretty good. guy: and wages are picking up? you are starting to see evidence of that an investment starting to slowly turn the corner? there are other factors in the mix here? derek: the employment cost index is a lagging piece of information because it is quarterly, obviously. there is more focused on figures in the monthly payrolls report. because it is a little bit lagging, it is more detailed, and the fed certainly do look at this and the private sector

salary and wages component of 0.9%, which is the biggest increase since the first quarter of 2008, that is telling you something. it is just one quarter of data. we need to see more, but there is evidence of that spare capacity finally starting to lift private sector wage growth. guy: yeah, let us talk about how the core number is in the focus. up inurt number picked the eurozone, which is interesting. up to that 1.2 . around the world, core continues to lag. our central banks overly focused on core do you think? do you think that is the right number? do you think we should be resetting our inflation target?'s number is providing incredibly -- proving incredibly hard to move. there is lots of factors for it and those structural factors are only going to get more and more pronounced. yes, there is definitely an issue at play. bringing the whole productivity conundrum into this is

definitely something that has been debated globally amongst itnomists, and without that, is difficult to see wages accelerating significantly enough to lift underlying price pressures. so there is perhaps something more fundamental. that is about reluctance of companies to invest, and i for one would partly blame, ironically, monetary policy globally, and when you have negative rates, when you have the balance sheet like you do with a fed, ecb, boj, it is understandable for a corporate to go "should i make this five-year decision of investments to gain market share or should i hold back and wait until things are a little bit more normal?" ishink part of the problem the monetary policy stance. we need to see that normalized in order to get comparable. morning, going with this 100 billion charge for the u.k. as a result of it exit exit, talks it -- its brexit

exit. can i take a reasonable position on the pound? the noise is deafening. derek: certainly, we should perhaps ignore the noise. i think the markets are doing that. you look over the last 24 hours, i would have thought coming in yesterday after the bank holiday weekend, sterling would be lower after the news we had in the media the last three days. the markets are taking it for what it is, and that is rhetoric in relations and negotiations. "actually,f lords, we'll you nothing -- we owe you nothing." if you look at the fundamentals, and i for one think this war inflation overshoot and how it is going to hit real spending , my hunch ismy that it is overdone. oil prices are dropping, sterling is strengthening. crude oil and sterling terms, it is coming down as fast as it went up. that means the impact in terms

of producer prices, going into consumer prices may be more fleeting than many believe. guy: great to see you this morning. thank you for sharing your time with us. derek halpenny. corporate news. posted a beat on earnings. joining us now on the phone, from germany, the ceo, stephan sturm. congratulations on the numbers. all four divisions are performing. the numbers look solid. is this sustainable? stephan: good morning. thank you. start to the year is an excellent one. we have increased our net income by 26%, currency adjusted. we have raised our guidance to 19 percent to 21%.

as you can see for the remainder of the year, we are a bit more cautious, but at the same time, rating earnings by about 20% over a not exactly week 2016 is no small feat, and we are pretty happy. guy: you just made the acquisition acorn. can you give us a sense of how you see that developing, how that fits into the store you just told me. where does that fit in, big picture? stephan: we announced the transaction and we find an agreement with the company's management and board. we would expect and hope the transaction will close toward the end of the year or early next. what this is about is that from a position of strength, as evidenced by our q1 numbers, we are preparing the company for the next decade. beyond the small molecule generics that we are currently

mastering, this is about getting to the next level. at the same time as acorn, we have announced a transaction with a company that will get us in. acorn is going to get us a distribution channel in the u.s.. acorn is also going to get us some of these small molecule generics that are still missing in our portfolio. acorn is going to get us some alternative dosage forms that we currently don't have in our portfolio. in particular, i think drops, -- i think, eyedrops, nasal sprays. it is adjacent to our core business that will take us into the next decade. guy: when you think about what is happening in the states, the acorn acquisition is interesting. you just kind of run us through

the overlaps and kind of how it off its together. more broadly, when you look at the key markets that you need to focus on, are you just not listening to the politics at the moment? are you not listening to what is happening with politicians? the noise surrounding all of this is really quite loud. stephan: we are fundamental believers in the fact that we have to make quality medicine more broadly available to all larger number of patients, and therefore, high-quality and affordable prices. that is the answer. rather than the creation of the issue. and therefore, strengthening our footprint in generics, whether it is a small molecule injectables or more complex bio stimulus, that is the solution to constrain health care budgets around the world. congratulations on the numbers. thank you for joining us on the telephone, stephan sturm, ceo of fresenius. -- of

the fc has gone with this story. noise.s a lot of the negotiation is underway. start far apart. david is saying there will be no brexit bill to pay if the u.s. walks away. we are talking about that again. he has been a little more pragmatic somewhat say. of late, on some of these lines. no brexit bill if the u.k. walks away. he is speaking on the bbc. we have gone from kind of nothing from the house of lords point of view to 100. there was an expectation that they you would stick to around 60, but maybe this is just -- the e.u. would stick to around 60. up next, it is a buyers market according to carlyle group. his sector picks.

if fascinating conversation, i promise you. we are going to break down a continuing market action. of thesereak down some market movers for you as well. this is bloomberg. ♪ ba?

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i'm gonna just go back to doing what i was doing. find your awesome with the xfinity x1 voice remote. guy: hold the line. apple says customers are waiting for the next iphone upgrade. les dates numbers a confirmation that this is now an income stock. the fomc in focus. sharpening grated expectations will yellen & co. look straight in tonight's statements? france's top politician. marine le pen's last chance to change minds and france. mr. macron's election set to lose. a lot of stocks stories going around, so we need to focus on that. this is the european open. at a stop about where we stand. as we sit here at bloomberg's european headquarters, let us sift our minds through what is going on quite easily. this is the mov screen on your

bloomberg. from a startek 600 point of view, siemens, and nestle, and told how down this morning. and total down this morning. trading down on the back of its numbers. airbus softening up a 1.1%. on the upside, two companies we have been focusing on this morning. it is up by 5.63% this morning. we have been talking to fresenius. a fairly optimistic outlook there. roche is adding a little bit of weight. it is the pharma sector that is really adding to the mix on the upside this morning. you have novo, fresenius, roche, yer, scheier, anheuser-busch. and some ofarmas the financials that are adding to the upside when it comes to european equities, which to be honest, losses out there this morning are in eighth

fairly -- in a fairly balanced market. let us turn our attention to the bigger picture, the view from 10,000 feet. carlyle group co-founder, david rubenstein, he says they are looking right for acquisitions. rubenstein, he explained why he thinks there will be a shift from a sellers market to a buyers market. right now, it has been a very good time for the last five or six years to sell things. more assets have been sold the last five or six years by private equity firms that have been bought. prices have come down a bit into the latter part of this year and because of attractive financing, i think you'll see a fair amount of acquisitions. >> why would they come down? the economy is beginning, it seems, to accelerate of course. we also have this prospect of

tax reform, which would include not just the big corporate tax cut, but the inflow of cash from the bp creation of overseas -- of the repatriation of overseas profit. david: i think there are probably some sectors where prices might come down but there is a very important factor going on. investors are willing to accept lower rates of return than they were a few years ago. historically, investors wanted net internal rates return of 20%. they are happy today to take returns of 15%, and therefore, that enables people to pay a little bit more and please their investors. that phenomenon is going on. >> would you say some sectors have become overbought? which ones specifically? david: in some areas, you see more acquisitions done in other. health care prices, they went up for a wild. it is a very -- for a while. it is 20% of our gdp. increasingly, when health care legislation eventually has

changed or whatever we have has changed somewhat, i think you will see more activity in the area. >> health care is one. what else? david: energy, i think energy prices have gone down a little bit. now, they are attractive to people. i thought breezes -- i think people see it settling about $50 per barrel but it will make it a pretty attractive acquisition in the area. >> are these areas in which carlyle is prospecting and actively trying to commit capital or do you feel you want to wait to see this correction in prices that you anticipate later this year? david: i think there will be some correction. i do not want to overstate the correction. we think that right now, energy is attractively priced. we think that is an attractive price. we are not likely to get the same rate returned that we might have got years ago because it is harder to do that. to mr. rubenstein. remember, if you are a bloomberg customer, you can watch the show using the tv function.

this is the landing. you end up with. tv, radio, and coverage. you can factor in all of those, but let me click on the interactive tv because it gets interesting at this point. not only do you get the video stream here, but what you then get its functionality, so tv is the function we are looking at here. you get some of the headlines coming across the table or the conversations we are having. you can then also access some of the market data as well. you get breaking news from earlier. you can access some of the charts or other functions. there is the. go function we were using earlier. you click on that and that then activates on your bloomberg. that is the theory, anyway. you can click on that and it will take you to the dots function. it is fairly straightforward. there is a great country down here which is the answer to the question little blue box there. you can ib the team.

get involved. interactive television. up next, trouble at iphone incorporated. shares drop off for apple sales. what is apple? is it an innovation company or income company? details, after the break. ♪

this is the open.

let us get our top stock stories. there are plenty of interesting ones out there. nejra cehic, over to you. nejra: starting with novo maker ofthe biggest insulin, basically saying its efforts to cut costs are starting to pay off and it reported higher than expected sales and earnings. we are seeing a gain of 5.4 percent, hitting the highest since october 2016, rising the most since november. it also set a 2017 outlook which was lifted by currency gains. price pressures in the u.s. rising. the comments mark a departure from previous comments by novo other makers of diabetes medicine. hugo boss down 5.5%. sales beat. the gross profit margin was a miss. it's at its earnings rose and the turnaround took shape and the company kept a tight

grip on costs. it did reiterated targets for 2017, but we have seen a drop, the most since november. finally, i'm looking at the u k grosser sainsbury's showing it is coping with a brexit-fueled squeeze on industry profitability. it did report annual profit that net analyst estimates. profits steady. this as our -- speaking to bloomberg's daybreak they wereo'byrne said looking to cut costs and simple by the business. >> what we are trying to do is see how we can supply the business more and how can we focus on just doing things that are value-added for our colleagues and customers. in a large business like ours, complexity creeps in over the years, so we have to focus on simple vocation at every level in the stores, in our supply chain, in our warehousing and in our head office. nejra: those are your main movers. thank you very much indeed.

let us get a bloomberg first word news update. here is juliette saly. juliette: thank you. jpmorgan plans to move hundreds of london-based bankers to expanded offices in dublin, frankfurt, and luxembourg. the head of investment banking said that comes as a prepared to the u.k. to lose easy access to the e.u. single market after brexit. before the june referendum, the ceo warned that u.k. employees, as many as 4000 could be relocated in the event of brexit. u.k.'s prime minister has vowed she will not be pushed around in brexit talks with the european union as her war of words with brussels escalate before negotiations even began. theresa may said european commission president jean-claude juncker is learning she can be "bloody difficult" after the details of a dinner meeting between the leader alleged he was shocked by her approach to negotiating brexit. president trump has tweeted that the government "needs a good shutdown in

september" after congress agreed a budget deal denied much of his wish list. the bill includes no money for his mexican border wall, only a small cut to the epa, and full funding for planned parenthood. called his threat to shut down the government after a successful bipartisan deal sour and shameful. hastal management founder warned that ballooning assets in china's wealth management products are another sign of a looming credit crisis in the nation. he has been sounding the alarm for some time that debt burdened >> chinese banks need to be restructured. >> what you start to see when liquidity dries up is all of a sudden, people start going down, companies start having problems. this is the beginning of the chinese credit crisis. nejra: global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy. guy: thank you very much indeed, juliette. apple shares fell in extended

trading after reported iphone sales, down from the same period a year earlier. that number was less than analysts had estimated. onto theirholding iphones longer and waiting for the next iteration, the iphone eight, expected this fall, 10 years on, which bloomberg has reported will entail a big design overhaul. apple has been the best performer on the dow this year. it is the world's biggest dividend payer once again. this is a company that kicks out a lot of cash. let us talk about apple. mark hawtin joins us now. so many ways to break this story down. let us start off with the upgrade. the market is expecting a loss from the next generation of the iphone. is it -- is the market ahead of itself? is it going to look anything like the upgrade cycles running the iphone 6 where we got near 40% pickup in sales?

mark: i think the market is ahead of itself to liken it to the upgrade to the six does not work for me. one of the major factors about the six upgrade is that it was a major formfactor upgrade. we went from very small screen sizes from iphone 6 to having big screen sizes. when they not access went to the six, which became available. this is very different. i'm sure there will be different major design changes, but on off to -- but not enough to drive that cycle. guy: we are over our skis a little bit when it comes to the eight. are we over our skis when it comes to the share price? there are an awful lot buys on apple. the white line is the share price, and you can see that very steep climb. both the price targets have kept up with it. we are at 160 now. there are very, very few buyers out there. is the market wrongfooted?

mark: i do not think it is wrongfooted. i think apple makes sense as a pension fund holding, as an it is tight name, but definitely not a growth stock. if you look at the consensus analysts in terms of their forecast, they are forecasting revenue growth of 6% this year, 9% next year, and 2% the year after that. guy: yep. ink: so i think that general, the stock tends to run ahead of a new release, and then actually on average, if flat lines for the three months post-release. we have had a decent chunk of the prerelease run, but maybe a tiny bit more to go for. most of it is baked in. guy: you raise an interesting question. is apple now like microsoft? a really well-run company that kicks out tons of cash and if you want something to stick in your back pocket for the next 20 years, it is a great company se attributes are

exactly what you want. it is a cash flow stream they will give back. it is -- is that the way to think about apple or is something to change? it will have to be quite a change to justify anything kind of a significantly raising here. mark: it is hard to do anything other then iterate on the iphone. anything else they have tried to do does not make -- does not really move the needle to be honest. that is exactly how you think of it. actually, i think it is either an income stock or training stock. there are those who have traded effectively. if you think about it, the share price now is only 10% above where it was at the previous peak two years ago. if you are buying a long-term growth name, it does not work anymore for that. guy: let us think about the wider universe. how does it compare with google? how does it compare -- when i think about the other companies in the space, how does apple stack up? ad is google, alphabet, better bet if i want to think about long-term?

mark: i think up a fight google, facebook, and amazon are real disruptors, whereas apple is no longer a disruptor. google is the example you cited. that is 17% growth year in year out. it is a very different animal. guy: what are we expecting their? >> as ever, it is going to be complex. how much more capital they will need, are we going to see a delay in the launch of the three? they have a tradition of mixing their targets in terms of new car launches. givenan anonymous asked the share price and the value of the company. i have no problem with the quality of the product, but it is a very different question when it comes to the share price. guy: which is the more important? getting on from an engineering point with the three and what comes after the three? what is the next project? burn?it the cash it is hard to separate the two. the market can only think of one thing at one time and you wonder

which one it is going to be as we work our way through the numbers. focuses most on the moment at the launch schedule. the step up that is required from the three is substantial. $7 billion in sales last year. they are forecasting they will do $35 billion in 2020. that is an honest move and that relies on the schedule of lodges. that is the key driver. if that falls away slightly, there will be a secondary focus on cash burn. guy: give us your two cents worth. this company is disrupting the center massively, valued at a level that puts it on comparables with the rest of the car sector. it is up there as one of the most expensive car companies on earth. when you take a step back and look at tesla, what goes through your mind? mark: will go through my mind is absolutely fantastic company, roger price. guy: we will leave it on that note. directorin, investment

. let us talk about what is going on out there. the company stores are fascinating. politics is still intruding, as we can see with the pound. an intense meeting between theresa may and jean-claude juncker, a reminder of how tricky brexit negotiations could become. some do not think the u.k. prime minister is up to the task. unsurprisingly, i think we can put the labor. labor peer in that group. haslinda amin. >> she said today she will be a really bloody woman in negotiating with the european union. and i must say, i fear for this. at the moment, they seem to be lining up in front of each other, preparing to play a game of chicken. they are prepared to drive headlong at each other, daring the other two blinged or to turn ink or turn away

before they reach a head-on collision. this is not a sensible way to conduct a negotiation, which is as complex and important both european side and particularly to help they can reset before they seriously get underway and risk doing huge damage to the european economy, but i am afraid that if there is a crash, britain will come off worse. haslinda: some say there is a sense of complacency that will end in humiliation. juncker has come out to say that, you know what, britain cannot expect to get out of this better than it was before as a member of the you -- the e.u. how do you read that? >> he is right. if you have an organization like in whichean union, there is huge trade and other privileges on its members, you cannot unilaterally tear up your membership card, leave the club, and expect to sort of come around behind, to the back door,

in order to use the facilities as you choose and as you wish as if you had never left in the first place. peter: and i think the problem on the british side, and i regret having to say this, is that i think they do not realize the europeanip in union really entails. and in particular, they do not understand what the rules of the single market are. mrs. may and the british government could have taken a very different approach from the beginning. they had a choice. goy could either, you know, for a clean break or walk away from the whole of the european union, or they could find a way to remain and to retain a close partnership with the european union. to do the latter would be leaving the european union, but staying in a single market. and that was an option. the british government, which they unilaterally chose to take off the table right at the

beginning of this negotiating. haslinda: all indications so far suggest a hard brexit. can a hard brexit go hand-in-hand with solid growth? peter: look, i do not believe that there is going to be some overnight disinvestment from the u.k. economy. what you are going to see is a study, incremental, cumulative affect over very many years. and the price that britain pays will be in future opportunities of investment and growth rather than a rapid this investment taking place -- disinvestment taking place in the meantime. guy: senior labour party figure lord mandelson speaking with haslinda amin. right now, and you can see this on your live screen on your bloomberg, we have this man brexithe parliament's negotiator talking about brexit.

if you want to listen to what he has to say, as i say, live on your bloomberg. we will take you back to the conference later in the day. we will be speaking to the former fed chairman ben bernanke at 5:20 p.m. u.k. time. looking forward to that conversation. i know tom keene is as well. 20 more to -- plenty more. that is ahead of the fed decision. this is bloomberg. ♪

guy: welcome back. you are watching the european open. i want to take you to the eco-screen on my bloomberg. we are getting german data coming through on unemployment. we are through -50. the pratt number was -30. -- the prior number was -30. mario draghi dogs to a question last week. that was quite interesting. gap inlear the output europe is substantial, but is being eaten up quite quickly. it is interesting to see how about gdp it is at this point and whether or not that output gap is being eroded quickly and what that means for monetary policy. germany clearly near full employment at the time. i want to show you the move screen all my bloomberg as well. let us go back to the stoxx 600. what is moving the market this morning? siemens, s&p, bhp billiton. nordisk.side, novo

the from a suitable stocks this morning are well bid. up next, it is bloomberg surveillance. francine lacqua, and joining tom keene. i'm going to join anna edwards on bloomberg dab digital radio. ♪

francine: the market season no fomc responded softening economic data without reducing expectations? iphone sales slump as consumers wait for the next big update. can apple deliver the blockbuster new features it needs to fend off rivals? brexit gets bloody. theresa may says that jean-claude juncker is finding out what a tough opponent she can be. o the gloves appear to be off.