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tv   Bloomberg Markets European Open  Bloomberg  January 15, 2018 2:30am-4:00am EST

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guy: good morning. it is blue monday, apparently. we are "bloomberg markets. i'm guy johnson, alongside matt niller, who is back i berlin. cash trading, less than 30 minutes away. ♪ guy: carillion collapses. compulsory liquidation. how will the u.k. government
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respond? how will the sector trade at the open? the rally rolls on. the hang seng trade, a record. oil is trading close to a three-year high. brent, $70 per barrel. the boss said he will double profit in five years by selling more jeeps and ford goes in, planning to invest $11 billion in the electric vehicle. matt: a lot going on in the car sector ahead of the detroit auto show. 30 minutes from the start of european stock trading. futures, up across the board. looking at -- well, that is an interesting picture and it looks slightly different. i am seeing futures that are gaining across the board. the ftse up .2%. dax futures up .3%. i will look and see that we
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would that is there. let's look at the bund yield. i have a three day chart of bunds. i've got to label these better. we had a oucj y -- we had a pick up in yields thursday into friday and we have been holding relatively flat around 0.58%. that is where the bund trade holds. not a lot of direction from that, but you do get a lot of direction from the futures i read to you, guy. guy: just look for the wei screen and the fair value calculations. they are pointing to a slightly negative start this morning. the s&p continues the roll on friday. the equity markets, up by another .7%. the european markets, a little bit more mixed. the aussie dollar continues to power ahead. we are up another 0.4%. that rally is absolutely fascinating and the relationship with what is going on. the bloomberg dollar index is
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trading down this morning, 0.2%. the euro is pushing up and you are wondering whether we start to think about its effect into the equity market. there was a nice word on "first word," talking about the effect the big european companies have. we could see the effects of the stronger euro, which over the last three or four sessions has gone north. ghere is a lot of prancin taking place in the states. take a look at this chart your screen. you'll notice a sharp downturn. a lot of weeping. the commodity story is going softer as oil goes higher, balancing each other out. iron ore is trading down by 0.4%. here's juliette saly. carillion has said it
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will take steps to end the compulsory liquidation. concludedy's board there was no choice but to take steps with immediate effect. talkscision came after with stakeholders, including the u.k. government, failed. ofald trump is an asteroid awfulness. lashed out at trump after he called off a planned london visit next month to open the new u.s. embassy. >> he is an asteroid of awfulness that has fallen on this world. i think he is a danger in a racist. i don't want them to come to the country. i do think he should have been given an invitation in the way that she was. i don't think theresa may should have given him the state visit. i think it embarrasses the queen. it is wrong to have brought her in this way. juliet: president trump told
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reporters he is the least racist person. continues after the remarks he made about immigrants from africa and haiti. stock exchange has been evacuated after the floor on the level one in tower two collapsed. the stock exchange building also houses the world bank's local office. burned foran tanker a week has sunk. 32 crew members are present dead. january 6, there were almost one million barrels carrying a highly toxic and flammable carbon. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. matt: thank you. have starteduities
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the week strongly with most major indexes in the green. but with u.s. markets closed for martin luther king day, the they focus could be commodities. test --ude news to brent crude continues to test $70 per barrel. joining us now from singapore is mark cudmore. talk to us about the ags, versus what we are seeing in other commodities. mark: there's three things to look at in the moderate space. -- in the commodity space. the dollar is in freefall itself. that is the first lens to look at. we have to look at oil prices, which continue to sustain this rally. i got this asset completely wrong because they thought the rally would peter out before that, but it continues to move higher. the rig count is increasing in
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rate,s. at a faster implying u.s. production will come online. i do think u.s. oil prices look come lower, especially within other currencies. the dollar lens makes the move more dramatic. on the other side of the equation we have agricultural prices. wheat crashed on friday. corn has been trading terribly for a while. overall, prices are trading at the lowest level since the early 1990's. it is hard to get sustain inflation in asia. this is a large part of the cpi basket. of the really important components -- the coastal prices are falling in dollar terms. imagine if the dollar was strong, how far it would be trading. these are very strong dynamics for rising inflation. oil is battling against agricultural commodities in at the moment, the agricultural commodities seem to be winning
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the narrative. we are not seeing sustain inflation anywhere in the world, really. got mark cudmore on the mliv, talking about the dollar going up. walk me through the debate, mark. mark: there's the old adage of markets, where if an asset is trading poorly even during good news, imagine what happens during bad news. you do wonder, if anything negative comes out for the dollar, it could get hit. the fundamentals for the dollar are not that negative, but there has been is overriding sense. the u.s. politics have been dominating, and the fact that it looks like we could have a government shutdown this weekend, and that is negative sentiment. the narrative out there is not in line with the fundamentals. the u.s. has had some of the best growth amongst market commodities this year.
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lester they were the middle of the pack. and yet all i hear the everybody talking about how the rest of the world is catching up with the u.s. this year. that's not true. the u.s. is leading this year and other countries are lagging. i think the narrative has gone sutley strange. -- has gone slightly strange. last year the u.s. started the year negative real yields and now we have had a 70 basis point climb in thet wo year yields. -- in the two-year yields. suddenly, the u.s. is positive and people are getting excited about other countries they might tighten. assetb might taper their prices this year. we will have negative yields in major other competitors, like europe and japan. the fundamentals in the dollar are definitely improving. i'm not a longtime dollar bull.
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suddenly, the fundamentals are improving in the sentiment is getting more negative. matt: what happens, then, to the euro? especially when the fundamentals on the euro are strong. on friday, the euro soared to the highest level since 2014. where do you see the euro headed now? mark: that is the flip side of the equation. we know the positioning is very long. it has taken a lot longer than expected. we are starting to see signs, as you mentioned during the intro, strength could be affecting european equities, and that affects assets. yes, it is still a good story in europe, but it is the
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upset for the dollar. this week we might see the dollar bottom out. i think we could see that come with a euro-dollar popping o ut. i'm not talking about a massive turning point, but it could be a turning point for several weeks. guy: mark cudmore, great stuff. joining us with the rest of the team met behind him from the mliv blog. interesting debate about the dollar going forth. follow that team on the mliv . we'll got citigroup numbers, bank of america numbers coming out, goldman sachs numbers coming up, a bank of canada decision coming out later this week. a lot of top live special event blogs this week. we have analysis for some of those big events and still to come, we discussed the coalition hurdles that faith angela merkel and the spd, next. we have that here.
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this is "bloomberg: the market open," 18 minutes away. ♪
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guy: 15 minutes until the market open. look at the bloomberg business flash. ceoette: the fiat chrysler said the company can double profits in five years. he told bloomberg that jeeps
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will grab 25% of the global market. he also said u.s. tax cuts could further boost profits by $1 billion each year. a jump in tokyo trade after saying it is considering initial public offering for the mobile phone unit. the company said listing the options, but no decision has been made. that comes as softbank's founder has been examining ways to unlock value in boost the conglomerate's share price. morgan stanley has been well as, as as goldman sachs. according to a person with direct knowledge of the matter, credit suisse and deutsche bank have been chosen to work on the ipo. company targete a of as much as $100 billion. xiaomi declined to comment.
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executive chairman has called for nasa to be reworked. bill ford was speaking to bloomberg at the north american auto show in detroit. it would not be something we look forward to. nafta could be modernized. we could get some currency certainly in the nafta price. nafta has been in place for a while and it has served as industry well. juliette: that is your bloomberg business flash. matt: thanks, juliette. chancellor angela merkel's next hurdle in the road to forming a government is an spd party convention on january 21. a survey reports that 60% of germans say the spd should vote to start coalition talks with merkel's cdu-led bloc. only 10% were undecided, meeting 30% were against it.
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, let me first ask you about the expectations here. we did have saxony voting putting against the coalition. but they are in eastern state that maybe is not as important as a lot of others. do you expect it to go through? >> i expected to be a very close call. four years ago they had the same procedure, asking the party base. 2/3 voted in favor. now, the spd, having lost a lot of votes in the election, i have doubt. the agreement that was reached on friday really very modest. it does not give the social democrats a lot of what they asked for. they asked for a fundamental recall of the health system. they asked for the united states of europe. matt: you are naming a couple of things that sound are most --
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that sound almost impossible. do you think the paper that came out -- referring to a doctrine the came out for the preliminary agreement -- does it lay out a good plan for germany because the economy already going very well. politicians want to see news that ensures that success is stable over the next five to 10 years. >> it will be stable over the next four years. this agreement love that the next four years and says, how much money can we spend? fouris beyond the next years is a major concern. matt: we do have this incredible surplus -- i don't know if it is incredible. i should not put that modifier on it. there is a surplus and people have been saying it should be used for reducing taxes, really across the board, for the middle
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class, not just for the rich. does that seem to be a possibility. the bracket gap, can we reverse that? >> yes, there is an agreement on that. the income taxes will be lowered. about $10 billion of that money is spent on tax cuts. see it other $15 billion spent on pensions, on increasing mothers, and keeping the pension level stable through 2025. what about education? what about infrastructure? what about digital infrastructure. these are the long-term issues. here the agreement is very vague. over thethe money next three years on pensions and taxes, but the long-term issues are left alone.
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guy: why would we expect a different outcome if we had another election? >> if they were another election, what it means is the outcome would be pretty much identical. the social democrats, losing a few votes. the main winner from the election was the spd party. so, that's clear to anyone. if they are new elections, it will not change anything about the outcome. we will see the same games all around again. that is a people are afraid of. i see another grand coalition, or another minority government. i don't see the appetite on any side to have fresh elections. seems to like status quo. the was market is incredible -- is in gridlock. is the german economy faring view?in yoru vieur
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>> yes, i am expecting 2% this year. threell see another two or years. this resolution might be good for germany for the next two years, but it might not be good news for europe. we needt macron said, to me changes and another grand coalition will not engage in that. they have been very clear. so, a loophole of a commitment to europe in that is the concern, germany will turn inwards and focus on the next three or four years but for europe, it will not be good news. guy: who will replace merkel? what is clear is that she is struggling here, struggling to form a government now. she would be struggling to take more seats if there were another election. the younger fringes of the party are seriously talking about replacement. who could it be? who will be the next leader of germany? euro,t is the one million
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if not one billion euro question. there is no clear successor. ,he governors of smaller states they and some of the federal ministers, but there is no real for better. this --ds on when apple when this point in time will be. the same issues about the social democrats. these are new elections and it is not clear who it be the front runner and the main candidate. thenically, gabriel is most beloved spd leader right now. which is ironic. guy: marcel, thank you very
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much indeed. marcel fratzscher, the president of the diw institute over in berlin. we are seven minutes away from the start of trading. let's talk about the stocks to watch. i will start with korean and i have the short interest chart appear, which in some ways, is meaningless now. it peaked all most a year ago, which is quite interesting. what is the fallout from this story? kia?does it mean for what are the implications? >> they had a absolutely 2017.dous over the second half of the year they lost 90% of their market value. they went into the administration this morning and
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they spent the weekend trying to find essentially a bailout agreement with their lenders and the u.k. government. they have an enormous number of contracts. bank, they must hold a pretty big chunk of the debt. sam: they have about 900 million pounds of long-term debt. potentially, yes, but we will have to see what happens once the vulture start coming around. matt: speaking of altars, sam -- speaking of vultures, sam, i want to talk about vkn. they had rejected a bid from melrose. this is a big, 7 billion pound company. obviously, once a company goes into play, others start looking. what do you hear about gkn? sam: i have come across
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melrose before. they find underperforming theirnies and big mission statement is to improve the company across the board and then sell the company again. carlisle, a traditional buyer too. looking into gkn, this morning, a report late at the russian alphabet. gkn is an under managed organization without focus any the fundamental change of culture and leadership. it is pretty damning. not pulling any punches. guy: william held, how are we expecting that to be playing out of morning? they should have some good results, and also looking at the australian business. matt, that's football, as in the game you play with your
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feet, not as in soccer. matt: thanks joining us. markets will open in just about four minutes. this is bloomberg. ♪
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guy: one minute to go to the start of cash trading in europe. let us get to what you need to know. this is the cable rate. 137.56.rading monique i was just positive come 0.3%. the session gave back a little ground at the end. oil, flirting with the $70 a barrel mark. remember, we came off of a 0.7% move higher on the s&p friday when we were dissecting that data. here in europe, one of the fair is having ag up
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negative start. nothing at headline level. i think we will see a lot of action on individual names and the sector story. we will find out what will come through but we are likely to see some big moves. watch gkn. here is the london market. 7778. that is where we are trading as anticipated. that, let me repeat, sector stories and stock stories will be interesting. let me see we can get some other names coming through. ibex --s market, the there you go. basically, nothing going on there. let us see what is happening here. more interesting at the sector level. energy's trading lower which is
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interesting coming off of the earlier highs. brent, $70 a barrel. financials are almost all negative this morning. industrials look more mixed. we will be talking about the detroit show. staples -- health care is trading softer. the market is absolutely flat at the headline level. matt: although a lot more red on the map the night typically see in front of you. let us take a look at the move screen. we do have 300 and change winners to about 200 losers. pre-two on brent. this is the move screen. i am looking at the index point a dishes. hsbc is there as one of the big losers. andrwise, banko santander perraribas.
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weighte big and they the index. you do see some oil weakness coming through. take a look at the winning side of the ledger. we do have chrysler as one of the big gainers. fiat chrysler is up 30% in 10 trading days. more than 30%. bloomberg had an interview over the weekend so there is a lot to talk about their with fiat chrysler. takeover speculation is up. glencore is a gainer. miners are on the wind side of the ledger. you do have an oil producer on the winning side of the ledger. total. a very heavy company on the stoxx 600.
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let us talk about the u.k. construction group, carillion. it says it will take steps for compulsory --. benedict bring in hamill. he is our editor for global business here in peru -- here in berlin. why could they not get a bailout that was speculated earlier? they went into the compulsory liquidation after a weekend of emergency talks in the government and the different stakeholders and the government decided it did not want to bail them out. they needed about 300 million pounds to keep that going. the government took that harsh decision to not keep them going. it is not a tradition in the u.k. to bailout. it said -- this is up to you guys to figure it out. you have to find a white night
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-- white knight. this is difficult because carillion is inside the u.k. economy. they are inside with the schools and construction. the u.k. government does look at thancompany more closely they might a department store chain for example. guy: what are the implications? what will happen next? what does it mean for the banks? and what does it mean for the projects that it does? benedict: the government needs to figure out how to avoid an unruly breakdown of this company. they have some major construction work on public projects. the hs to high-speed rail network for example. this is something they do not want to see unravel. how do you stabilize a company essentially in freefall.
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and what about the pensioners? they will need to draw their money. will they have to take a haircut? issue, willthird they have to somehow find a white knight for carillion? carillion tried to purchase bell for a couple of years ago and it did not work out. unlikely belfour would come back for them. matt: what about airbus? newslion is a big breaking but what about airbus? 1109 orders inut 2017. up from 2016. they have pulled ahead of boeing. benedict: this is the annual order and delivery tallies that they came out with this morning.
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owing is still ahead in terms of deliveries. they still get to carry that mantle of being the biggest playmaker, but in terms of orders, they have just north of 1000. if you look at the breakdown, that is the story. they do well on the smaller planes. they struggle on the bigger planes. is there any point asking questions? fabrice is leaving. you wonder if they are the guys that can answer the questions on what happens next with the 380? enedikt: you will have to work hard on your interview skills. a bit of a lame-duck situation. ahy is leaving and
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fabrice is leaving. the big question that you might want to ask and i am sure it is at the top of your list is what will happen with the 380? that you lose the order they are still hoping to get. would john leahy leave without getting that order? that would be a blemish on his record. matt: thank you so much. covering a lot of noise for us here on bloomberg tv. meanwhile, the euro is at its strongest level since -- against the dollar since 2014. trading just north of one dollar 22 cents. it is the best-performing major currency in the last 12 months but is that a problem for the european exporters? -- airbus isone
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one that comes to mind. peter joins us now. what do you think of the currency moves that are closely related to equity markets as well although stock markets have done fairly well of late. the currency move is justified on fair value. the euro has traded for a number of years substantially below fair value metrics. the euro is extremely strong. up, globally so. if you think about it globally, investors, corporate, are always short the euro. the fact that the euro has been trading since 2014 at a substantial discount to purchasing parity, those kinds of metrics have had to do with a lot of terrorists in the euro area. now, they have dramatically decreased and we have the eventuald of an
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normalization of monetary policy from the ecb, with the emphasis "eventual," it means the upside to the currency is substantial. we think that we can trade up towards the 130 level but we would also expect that to put pressure at the corporate level for the exporters and we would think it also means that there on some of pressure the relatively weaker economies in the euro area then on the stronger economies. a food exporting countries such as italy, there are some downside risks to that country on a relative basis if gets to 1:30 -- guy: you can see the rate change has picked up significantly. the delta has picked up significantly. how do you prevent the runaway
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euro? exporters build in euros and sell in dollars. how does the ecb deal with an accelerating picture? if that were to come to fruition and this carries on, what does mario draghi do about it? rate: the interest differential has not been a major driver of the currency. and i don't inc. it should be in the next six months. what hasdriven it, caused the highest delta is because the interest rate in the euro area shot up on the front end. the market has repriced its expectations. guy: is it right about that? peter: it is wrong. but it has happened -- guy: does mario draghi want it back? it is over interpreting what is happening in germany as well. does mario draghi put the brake on it?
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peter: i think there will be a reality check. they could come from the corporate sector. and the upside of the euro is problematic coming forward. or it could come from the management policymakers. if you look at what ian said on friday, i think it is trying to signify that they qe is at an end. i don't think they will be signifying that interest rates will be going up this year. there is a lot of potential for them to push out interest rate hikes. --: petr cech well, the head peter chatwell with us. up next, fiat chrysler has been racing ahead of late. today but the% stock has been on a tear. thinks they could
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really go on a tear. that is up next. this is bloomberg. ♪
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♪ welcome back to the european open. i am matt miller in berlin. minutes into the trading day and markets are mixed to down. look at the individual stock stories. .> starting with gkn
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last week it rejected a proposal from melrose. today, we have seen it touch of another record high. melrose coming out today and confirming it is starting a series of shareholder meetings to discuss the proposal. is key to boeing and airbus. and on top of that, carlisle is said to be weighing a bid for gkn also. i am also looking at fiat chrysler. it is unchanged now after moving higher. a two have sergio give hour interview saying the company could double profit. he also had a warning for automakers in general, adapt or die. and on the downside, i'm looking at mezzo as the worst performer on the stoxx 600. as a worst performer on
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the stoxx 600. it has been warning of weaker than expected profitability in the mineral segment. that is pushing the stock down ahead of the results in february. guy: one sector that is trading soft is the crude manufacturing drillers. oil is trading near its high in more than three years. we are getting close to the $70 a barrel level. calls for theq opec cuts to continue. what is the relationship between oil and inflation? and between oil and the dollar? -- i have ignoring the bloomberg commodity index chart here. all saw the movement on week on friday.
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a sharp like lower. that was the agricultural side of things. peter, when you are building your models to figure out the inflationary story, how big a fact are commodities? we all got buried excited about the inflationary impact. would you build a model now and how would it feature? remember how much of a lag exactly. the wti future will have a significant impact on headline inflation. that is the trade-off that we look at. the outlook for brent is significant. that and wti. it is a story of opec winning the battle. we have more of a forward-looking outlook. producers, the shale
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you look where the dollar spreads are at the moment, we have a nice outlook. iny had the ability to lock some very attractive forward wti at the moment. the possibility for shale producers to increase their supply over the coming months is pretty decent. that the market is trading up and we are doing well but i am not sure if we can factor in long-term settling at the moment. brent scale up or. it is trading at 5619. matt: interesting. we talk about the affects of oil on inflation and we were talking this morning about the effects of the agriculture including wheat. and commodities falling going to your grocery store
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bill. these things do not go into the fed's important number to look at. move thatevels do not much. certainly, not in the direction that the central banks around the world want to see them. or do you see inflation getting to a central bank target? peter: i do not see the core. but i do see the potential for wage growth in the u.s. it is more looking at the headline to gohe up in the u.s. and for that to translate into the firming up of wages. that is why friday's cpi in the u.s. was so interesting. we had a bit of upside on the core and that suggests monetary policymakers that there is less of a risk of there being further
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downside to prices going forward even if headline and energy turns quite weak. guy: we are seeing companies we will raiseing minimum wages and give bonuses and more broadly paying our people a little better. are u.s. companies going to have to start paying their people more? is that something we will see in europe? has closed.ap and then you look at the wider metrics. and you figure out that there are a punt of people out there that are not doing anything right. and the potential labor pool is much bigger than we think it is. peter: agreed. that is the main reason i think that wage growth has been pretty much sideways. it is not accelerating by any measures on the phillips curve which would have you believe
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that it should be. this is why the outlook for inflation over the medium-term horizon is still pretty subdued. this is why i do not think anyone has got any evidence that suggests we should be ratcheting up our expectations of where the funds should be. what i think can be delivered over the next 3-6 months in the u.s. is just faster and more rate hikes than the market is pricing for this year. i am not convinced that next year we should be pricing much in terms of rate hikes at all. i think a should just bring them right forward into this year. matt: peter is going to stick with us. to go throughws with us this morning. i want to show you how european trading looks on the world map.
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you can get this on your bloomberg. you will see a picture that for europe today is really not a good one. down for the most part. indo see some slight gains the republic of ireland, slight gains in the czech republic. but you can see that italy is flashing down one third of 1%. spain and the u.k. are little changed but on the downside right now. the trend in europe is to equities that are pulling down indexes that are falling across the continent. guy: ok. morning ouries this corporate. we are watching carillion in the u.k. we are trying to figure out what is happening in the german political story as well. peter, give us your thoughts on what is way to happen in europe
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this year. are we underplaying the politics? are we under doing what could be a story in a way that was not last year? peter: political turmoil, in italy with the general election. it is significantly far ahead. guy: we don't have a german government yet. and we could have further elections coming from that point of view. and in the u.k. peter: i think the election in the u.k. would be a more interesting possibility. i don't inc. it would be in the german coalition's best interest. the trajectory for both of those parties is still downward. i don't see how they can of votes.heir share so i don't think they will go to election there.
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political risk in the u.k. is also -- is always elevated. matt: but around the rest of europe, probably not a huge threat from politics. with the exception of italy in which case there is always a threat from politics in italy, right? peter: yeah and if we are going to talk about the countries that have a perennial threat from politics, let us not forget about belgium. the ability for belgium to sustain a government over the long-term is quite questionable and there are signs, if you read into the detail, that some risk in belgium is underpriced at the political level. from airbus, they are stating the obvious that they will have to shutdown the 380 line if there is no deal from the emirates. tim'sg that fully in
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court. i am going to talk to him later on to get more detail around that. peter, let us get back to europe and the risks around europe. matt? matt: i feel like this is a fascinating headline. everyone was saying that this was a possibility and the case but to have leahy openly admit this -- we are talking about products that are billions of dollars -- billions of dollars of products have already been sold and if they are going to close down this line, what does that mean for those holding these planes? will they continue to maintain them? will they continue to make parts for them? are they going to stop making comfortable planes? guy: very few people are ordering it.
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they don't think it is very economical. they would rather fly the triple heavies like the 777. the 380 was built for a model that in many ways does not work. you look at the number of big heavies coming into heathrow. you have to go to west london to appreciate how many three 80's fly in there. people increasingly want to fly point to point. airbus made a big bet on it. boeing went to a different route. it went with the dreamliner and the more fuel-efficient aircraft. some airportsys, it works for an some airports it does not. tim clark has been the biggest buyer and no one else has been interested. -- clark wants a new version a new engine version of the 380. john leahy has said he is
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leaving that we will talk to him about it later. matt: fascinating story. peter, we appreciate your time. we will talk more about a pound in peril. this is bloomberg. ♪
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♪ we are 30 minutes into the trading day. let us look at the headlines. , thelion collapses construction giant enters compulsory liquidation. how will the u.k. government? respond chairs are suspended --how will the u.k. government respond? chairs are suspended. crude is nearing a three-year high. and soaring suvs. she are chrysler boss says he will double profit and ford goes invest $11ging to billion in electric vehicles. will the f-150 get a battery
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driven power source. welcome to the european open. i am matt miller in berlin alongside guy johnson in bloomberg's new london headquarters. guy: the gas factor is down. there is no denying that. what this big red line down here is, is the financials. the banks are acting as the on the european story this morning. they are down right 0.4%. goldman sachs and merrill lynch -- the comparisons will be fascinating. are very tough and those across the atlantic will be tough as well. tliv's fromot of some of those bank names. let us get a bloomberg first word news update. sophie: you can --
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sebastian: shares of carillion has been suspended. the company agrees to compulsory liquidation. the company said it had no choice but to take these immediate effects -- to take these immediate steps. ofald trump is an asteroid awfulness. he called off a planned london visit next month because he did not like the deal to move the u.s. mission. been well, the president is dealing with -- meanwhile, the president is dealing with continued follow after bulgur remarks regarding africa and haiti. the stock exchange. it had to evacuate people because the floor collapsed. dozens of people were reported
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to be injured in the incident. saudi arabia's sovereign wealth fund is considering borrowing from banks for the first time as it seeks investors in the kingdom and abroad. local andad international banks and could raise $5 billion this year. a spokesperson declined to comment. the iranian tanker that burned for more than a week has exploded and sunk. afternoonwn yesterday creating a four square mile of an oil spill. it collided with a bulk carrier on january 6. it was carrying almost a million barrels of highly flammable product. global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you so much for that. sebastian with your news.
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i want to quickly talk about something that we talked about in the last block and that is airbus and its plans to deal with a gigantic 380 that has not seen gigantic orders. the coo earlier said they could reduce production of it to about six a year and now john leahy has come out and said we are going to shut it down if we don't get any more orders from everett -- from emirates. the question is, what will 380 four which they had such high hopes five or six years ago? it does not look like it has much of a future -- is this a question of throwing good money after bad for tim clark? guy: it might be. well no, tim clark loves the aircraft. is a newhe wants
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engine. a more efficient engine on the aircraft. leahy same way as john put new engines onto the 320 ano body which became incredible seller. and then they put new engines onto the 330, and older airframe. with newnditioned it engines and i think you wings as well. that sold very well. virgin picked those up. asia haser over at air gotten those. and now tim clark is pushing for the 380. the question is what anyone else purchase those? and the wider question is what will happen to those that have been in operation and will depreciate? tim clark will make that judgment regarding the resale value going forward.
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and that has been the argument that i think he will go through pretty carefully at the moment. later.ll join us remember that he is leaving and is being replaced. at airbus. he is currently one of the chief operating officers there. he has sold so many airplanes over at airbus. 9:30 a.m. u.k. time we will be talking to john. a trillionthen dollars. -- more than a trillion dollars. guy: and that is at list price. i think he sold one to a saudi prince. at list price. let us talk about what is happening in the u.k. in more detail, the carillion story. we have some details coming in from another large construction company in the u.k. saying they do not expect an adverse
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aircraft -- an adverse effect. u.k. opposition labor leader jeremy corbyn and nicola sturgeon have been talking about it as well. they have also said they have been talking about what is happening with the eu. they said they will oppose theresa may's story. economists surveyed by bloomberg expect data coming tomorrow will show the u.k. inflation rate is marking its first decline in six months. peter is still with us. one bankre pricing in of england rate hike this year -- right or wrong? peter: probably right. the premise of the rate hike that was delivered last year was that the fx move will have a sustained impact on the inflation.
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and if they do not deliver another one, i think they will suffer another loss of credibility. and also, the data this week -- there is a chance that what will riskialize is the upside to inflation could well be being delivered into the u.k. economy bywer than is being priced consensus. for what it is worth, we were expecting that inflation would go higher than it currently has done. well over 3%. close to 3.4% year over year. the fact that it has not yet happened and we have negative basis -- starting to materialize, it could mean that inflation will stay at their current levels for a few months rather than going straight back down. screen here the ilb on the bloomberg.
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this gives you a look at the breakevens worldwide though i have limited it to g7 countries. the u.k. monopolizes the largest breakevens up at the top. is this really a concern for the bank of england with these numbers at 3% for the 10 year? 3.4% on the tenure? it is -- on the 10 year? it is not completely out of hand, is it? peter: that is why i didn't believe they needed to put it up last year. type of the wrong inflation which this is, it is driven by the depreciation of sterling. ais type of inflation is not sign of the economy being overcooked. it is punitive for consumers. i am not convinced that i'm making the cost of money more
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expensive is going to have a significant helpful impact on the u.k. economy. it is not significantly pushing sterling up. i think all it is doing is preserving sterling at these levels and reducing volatility. but i am not convinced that the bank of england has much power to get inflation down. as theflation does fall fx appreciation drops out of the headline of appreciation, you could see the bank of england patting itself on its back but i think it will be purely coincidental. guy: what is the right trade on gild? peter: the right trade will still be selling it. something -- purchasing something that is not
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u.k. on the longer end. sterling denominated european names or other good-quality agency names in the longer data. could be out in the tea or 30 year sector. , withg at the breakevens the long and breakevens up in 3% levels, what i would expect is that as this sterling depreciation washes out of the u.k. inflation numbers, the market will be focusing on the underlying weakness of the u.k. economy, the poor position of the consumer and the only sector that we have performing decently is a manufacturing sector and it is still a very small section of the economy. and that is why i think the
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inflation expectations in the u.k. will be backing out. matt: peter, thank you so much for your time this morning. he will be joining guy and myself as well later on on bloomberg radio. next, adapt or die. ergio has a blunt warning for carmakers. that is up next. .his is bloomberg television ♪ ♪
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♪ we are 44 minutes into the equity markets session here in your. european equities are going nowhere in a hurry. let us talk about the car space. ford is amplifying its investment in the electric car sector. of bloomberg, the auto chairman show, bill has more on the autonomous sector. >> connected vehicles are starting to happen. vehicles talking to one another and to the infrastructure. all of these driverless technologies are starting to happen. a lot of the pieces of the economy are going in, even as we are sitting here and they are
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all about making vehicles safer and more pleasurable to be in. we are not going to wake up one switch.we will hit a it will be incremental. look, we think the payback on this is going to be tremendous when we get there. i think it will change our business model in a way that we think will be really amazing. >> even if it means you're going to sell fewer vehicles? bill: we think the profit per vehicle could be quite remarkable on this. the up time will be higher. it will be replaced at a cadence that might be quicker than current vehicles. i have seen and we have our own projections on sales and they are all over the map. we won't know until we get there. about our emotional connections to our cars? your family is the darling of america. will that all go away?
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bill: it will not go away. i arek as long as you and around, the fund of owning a vehicle will still be there but we may not want to drive it every there -- every day. if you live in an urban area, you may prefer to have a vehicle seamlessly take you to where you want to go. even that vehicle -- we are focused on how to personalize that. when you get into that av, it is uniquely your av. >> will a child born today have to learn to drive in 2034? bill: that is an interesting question. they may not have to but they may want to. there is a drive -- there is a joy in driving. not everyone finds that. >> we have to talk about nafta. .ig negotiations are coming
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have you spoken to the president to get a sense about where we are on nafta? bill: i have not. is there a danger that we will pull out of nafta? bill: nafta could be modernized. we could get some currency into nafta. while been in place for a and it has served this industry well. ford? badly will it hurt interest-rate was built around nafta. it depends on what you mean, too. there is a continuing. there is a blowout and there is a modernization which is something we would not be opposed to. was built industry around the notion of nafta and i think we have to be very careful with how much we tinker with it. >> going back to the electric vehicles, what will happen to
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oil and cobalt? what are the fx on other -- what are the effects on the other industries? bill: we have been in business for 114 years. and there have been tremendous shifts. my greatest hope and my greatest focus is on making sure that ford is on the forefront of all of that to make sure we are around for another 114 years. matt: that was bill ford in an interview with dave west. -- passed greatest away today. he was a winner in formula one racing and nascar racing as well as indy 500 racing. as well as long-distance racing. he developed the gurney flat inch encouraged safety
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racing. he also invented the practice of spraying champagne on his fellow podium winners. he is a longtime ford racer and i'm sure he will be missed. sergio from fiat chrysler says the company could double profit in five years by exploiting the potential of the branch. brand.he jeep equivalent to 5 million deliveries per year. joining us now is the editor of that story. chris. there has been speculation as to what is going on over the last couple of days. it is up more than a third in value since the beginning of 2018. is it just that fiat is a successful story as far as the balance sheet, as far as profit, as far as --?
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third of its value has been gained in just a few weeks. marchionne is pushing his targets and he is confident in reaching those. i thought they were fantasy land targets when he first presented them of few years ago. he is getting to a point of put up and -- or shut up. on the other hand, you have speculation that fiat is always in play because marchionne is at the helm. we have had stories of the chinese sniffing around or other swan song stories. niedermayer is always talking about google purchasing it. chris: they do not want to be in the mass market for a long time. marchionne has been an incredible dealmaker for the
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family and for the fiat investors over the last 14 years. the question is, what will he do before he leaves? that speculation is building into the stock as well. plus, the fundamentals on how fiat has done well. matt: there is a lot more to talk about. i could talk cars all day. chris is a bloomberg editor covering the car industry for us here in berlin. stocks to watch on this treating -- on this trading day. this is bloomberg. ♪
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matt: welcome back to the european open. i am matt miller in berlin. we are looking at equity index as -- indexes that are pretty much down across the board. 0.2%ain, we have a drop of and on the cac in paris as well. body coat hitting a record high in today's session trading in the final quarter of 2017 better than expected. it also received profit. on the downside, i am looking at money supermarket.
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performers onst the stoxx 600. it seems to be because of a note from barclays which is cautious on the shares. and you can see that corel yen suspended still after it filed for compulsory liquidation after talks over the weekend failed to deliver u.k. government support. the focus is turning to a short and orderly breakup. this is a company that employs 43,000 people worldwide and has contracts in many sectors. talk about the implications of that. speedy higher is one company weighing in. stock is down sharply. it was down to of percent at some points. brilliant is a big company -- is a big -- carillion is a big customer for this company.
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that is our stock of the day today. stay with bloomberg television. france while lacqua is up next is up next lacqua with "surveillance." this is bloomberg. ♪
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francine: downward dollar. pressure on the currency continues. will we see a government shutdown on friday? the strong as level since december of 2015. chinese gdp. and hope in hthe city. the financial services sector has a chance of getting a good brexit deal. ♪ francine: good morn


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