>> on hold. shares in shanghai drop on the news. tsipras's meeting with hollande and merkel in doubt. balancing the books. the british chancellor will announce later that he will legally commit the u.k. to a budget surplus when times are good. good morning everybody. you are watching "countdown."

let's talk about what was going on overnight. it is a passive index. the fact that they decided not to include china doesn't sound a big deal but it is a massive deal. if china was included, it would have dominated this index. this is an index that is tracked by billions of dollars of money around the world. shanghai went down on the news. this has been an epic rally. the fact that we have not seen foreign money chasing domestic money into this market, i think is highly significant that the moment. . the twitter question for the day. would you put new money into china? if msci says they are

comfortable, would you put new money into china? would you change the rally that we have seen. the five-year charts that i will show you. they are absolutely amazing in terms of the rally. that is the shanghai stock exchange over the last five years. greece is the other story we are focusing on. are we going to get a meeting a little later on between alexis tsipras and angela merkel and francois hollande? that is the big question today. we also talking about the chancellor george osborne expected to commit the u.k. to a budget surplus when the times are good. when the sunshines as

politicians like to say. let's go back to the top story we have been talking about. chinese stocks fall the most in two weeks after the msci decision to not allow mainland shares. david: good morning. the index opened about 1.5% lower. it went down about 2.2%. some people may have been disappointed or may be disappointed that perhaps they didn't get the go signal. there will be a review in a years time. msci said they are working with regulators to iron out some of these issues. the decision to include in the

emerging market index looking outside of this regular review cycle. at this point in time the outstanding issues, things like access, tax treatment. also some operational issues to be worked out. right now, i think we know that they are working to get to that point at some point. it's also down to some domestic issues as well in china. you are talking about substantial gains we have seen. it has outperformed just about every single market i can think of in the world. i think the trade was more compelling if you talk about it two years back when valuations were so much cheaper on the chinese. 5100 still, so not a bad day.

dollar-yen plunging. it is hard to see the real rate in japan falling much further than where they are at the moment. guy: let's talk about the ipo we saw overnight. the biggest ipo we saw in for years. -- saw in four years. david: massively oversubscribed. 33% 34%. what beijing wants to do, that is where you're going to make your money. they wanted to diversify their power mix and try to reduce their reliance on things like dirty coal, for example. i also want to mention take a look at the seven other trading

debuts in china today. very small companies, but each one up 40% to 45%. guy: david, great stuff. thank you for the update. let's run you around the world and show you what has been going on. in terms of what happened last night with the snp, -- s&p. it has been rallying of late. the airline stocks pummeled. the airline stocks, over the last few days have been absolutely battered. you tend to get big price moves. the s and p not doing very much. tech stocks continued to be very

much in focus. i think we are pausing a little bit. david was mentioning what is happening with dollar yen. karoda was talking to the japanese parliament and saying that the effect of exchange rate is unlikely to fall any further. many people expect the japanese authorities to have another go. we have seen the yen going up. this is aussie dollar. what we saw was a drop on some comments from glenn stevens. he is talking about the possibility of another rate cut coming through. he is concerned about what is happening with the economy.

he is concerned about what is happening in the sydney housing market. the currency industry dropped, but has bounced back since. the big story is definitely what has been happening with the msci. msci holding back from adding chinese mainland shares to the main benchmark indices that we have from msci. this would have been an absolutely huge deal if they had included. it is a really big deal to a certain extent that they haven't included as well. a strategist from lgt capital partners joins us. how long will it take for the chinese authorities to deal with the concerns that msci has?

>> i honestly wouldn't know. i do have confidence in your reporting that it will happen probably before the full annual review sometime next year actually. guy: in terms of what this means to the rally, what do you think about that? the chinese stocks have been on a tear. if we had seen foreign money coming in, how much of a difference with a have made? mikio: there are two sides to that. to the narrative that china is underrepresented in the global asset allocation indices, where the big money is allocated and invested, that is a story that is really positive for chuck -- that is a problem for china. it is not just the msci, but how

global pensions and money is invested. in the short term, i don't think it matters that much. their main problem with the market in china is that it is very expensive now. even half a year ago, and i am on the record with you guys, shares were still reasonably priced. downsides were limited. now you see some that are the 30's and 40's in terms of p/te. guy: we are looking at a situation where the chinese authorities seem to be actively encouraging this rally to take place. the regulators are going to allow maybe market trading to be rolled over if there is a problem. you look at commentary in the newspapers about the evaluation looking fair. they are not backing off this

one. mikio: the argument about valuations, you can always find the metric looks attractive to you. based on a comparative global situation, the a-shares are fine, just not cheap. you did mention the apparent determination of the authorities to keep the rally going. that may well happen and it probably will happen to some extent. there are a lot of technical ways to make sure that funds keep flowing into the market. as an investment proposition, right at this moment i think it is better to be on the safe side. you don't have to be bearish but at least be cautious. you should expect the next few months to be quite volatile in the chinese a-shares market. they are still priced as a discount, even to japan.

a-shares, i think caution is advisable. guy: what is the market pricing in at the moment? how much expectation is built-in of further stimulus from the chinese authorities? is there a lot of stimulus expectation baked in? mikio: i think there is a huge amount of stimulus expectation implied in these numbers. i'm sure that most mainland investors don't really look at these things in a calculating way. they are mainly doing the momentum and buying stocks because they are rising. that is a fine reason to invest just a different philosophy. when you look at the numbers and the implication, it doesn't by a huge stimulus and it doesn't by a rapid and very strong near miraculous turnaround in earnings. that is not going to happen that quickly, even in the best case,

especially if we have share capital increase is coming in. if you have some fundamental preferences in your investment horizon, you would probably -- anyone who because is about that. it is a momentum play. as long as people buy it, it will rise. it is a risky proposition. guy: mikio, thank you very much indeed. coming up on "countdown," greece has three weeks ago before the bailout expires. a growing number of german lawmakers will vote against any increases to the aid package. we will see what they are up against at leaders go head-to-head with greece in brussels today.

♪

guy: good morning and welcome back. it is 6:16 a.m. here in london. 7:16 over in brussels. the global stock index provider msci has held off adding china's mainland stocks to its benchmark indexes. it says it will work with the securities regulator to overcome obstacles to inclusion. msci said there decision to include the stocks could come at any time. the greek prime minister alexis tsipras is scheduled to meet angela merkel and francois hollande to meet over the deadlock financial aid story. but the talks are in doubts as greece's latest financial plan has failed to convince some. the u.k. chancellor uses annual

speech to commit the government to tough new public finance rules. that will require it to run a budget surplus when the economy is expanding to guard against future financial crises. let me take you back to that second story i just mentioned. the greek prime minister alexis tsipras due to go head-to-head with its -- with his german and french counterparts later today. but it could be thrown off course as yesterday's budget proposal from athens fell a little short of the targets. angle merkel and francois hollande aiming to break the deadlock. but we have less than three weeks ago before the deadlock -- before the bailout expires. hans nichols has been following the saga. do we know that this meeting is taking place -- is taking place and doing it will come out of it? hans: we don't know what will come out of it because mr.

severus -- mr. tsipras has apparently backtracked on what the numbers should be according to an eu official familiar with the matter. they seem to have some sort of agreement or at least knew where alexis tsipras was heading. agreement was the wrong word. apparently, this new proposal which was quickly rejected by brussels, makes new demands. they want access to some 10.9 billion that was left in the stability fund. that was what was left from the money meant to save the banks in some disastrous scenario. then you have the -- a want to allow greek banks to finance themselves and to buy more short-term government debt a little bit more easily. and crucially, a new request for new funds from a separate

bailout mechanism, the european stability mechanism, which be about 6.7 billion euros. that is what we have, a three page document which was pretty quickly rejected by brussels. this meeting looks like it will take place on the sidelines of this brussels summit. we also had mr. showing the -- with my one man saying that he thought it would be daft to play the blame game looking into the past and greece is to look at what they will do to stay in the euro long-term. here's a quote from one of merkel's key lieutenants. she says, "we want greece to stay in the euro but whether this is achievable depends entirely on greece. " the conditions have to be met." we had mr. ueckjunker address

brussels. they really just need to agree on the percentage, on these primary budget surpluses. once they figure out a number there, and that can be done at the political level, then they can do the technical work. the problem is that they seem far away from a number. that is really the challenge. guy: what i have just heard you say the message coming out of germany from the parliament, the finance ministry, the chancellery are different things. you and i were talking about this last week that they are not exactly seeing eye to eye. hans: we're getting evidence that the risk is widening. the question really is how much political capital will angela merkel be willing to spend if and when this has to go to the buddhist tag -- have to go to the bundestag for a vote.

they will have to take it to the full bundestag for a vote. differences are widening. how far those differences are hard to say. some are saying that angela merkel is losing support within her party. remember, she only lost 29 votes last time so she has a fair amount of support to lose. guy: my sense, i read the papers this morning and looked at the different angles and try to figure out where we are. my sense is that the last 24 hours has seen a significant hardening of positions on both sides. is that a fair reflection? hans: that seems fair. what we heard of the weekend, with jean-claude juncker expressing his disappointment. then we had mr. juncker

addressing last night. he seems to have been the most pessimistic. it seems to be the eu commission who seem to be the most flexible. now that juncker is both publicly and privately expressed in his disappointments, that seems to be fueling a lot of this negative sentiment. we have not really heard from the imf in the last few days and we haven't heard from the eurogroup on what they would need to do for a deal. i think the pessimism is largely to do with jean-claude juncker. guy: hans, good reporting. hans nichols joining us from berlin. we will have plenty more on this story coming up. a little bit later, i will be talking to michael fuchs, one of angela merkel's key allies in the reichstag.

if you want some insight into what is happening in germany right now, i suspect we will be talking a little bit about the relationship between angela merkel and wolfgang schaeuble and the parliament as well. he will be joining us a little later on bloomberg television. let's go to little further south. the russian president vladimir putin heading to italy today where he will meet with his italian counterpart. asked -- sanctions against russia are expected to be extended next few days. let's find out where we sit on this. italy is a really interesting case because putin has friends there. he is very close with mr. berlusconi. j there is quite a strong undercurrent -- there is quite a strong undercurrent of socialism

running to the body politic in italy. >> i think it is unlikely that the russian president could convince the italians to go against everyone else. but maybe this is about setting the ground for the future. it is extraordinary how much ground the russian president has covered in just a year. when you're ago he was in milan and that's when i asked him what he thinks about the allegations that he is violating the minsk agreement and he shrugged it off and said everyone is accusing me of something. that's where he met merkel four hours of talks and met the eu leaders. it was all about ukraine. this meeting today, he is meeting the italian prime minister and it is a celebration of russian exports. a much more normal trip that anything the russian president has made for a very long time. business and politics are going

to be right in frame. not just with his trip to milan but also going on to rome, meaning italian president meeting the pope, and then maybe even going over and seeing his buddy berlusconi for a late-night visit. it is inappropriate for them to meet before 9:00 p.m. one of the things that i think the russian president would take heart to this morning. pew research center has a poll out yesterday where they did 11,000 interviews across the european union, russia, ukraine. they asked the public's of nato countries do they think their country should come to the aid of a nato countries is attacked by russia as article five compelled them to do? 38% of germans polled said their country should come to the aid of other nato countries. in other words, not that many. 58% said that in no circuits --

that under no circumstances should germany support that. guy: we will talk about fico only come back. ♪

guy: welcome back. i am guy johnson and you are watching "countdown." withstood about what has been happening in the foreign exchange markets. let me start off with what has been happening with dollar yen. a decent drop, or a decent rise depending on your point of view. the has been gaining on some comments by the governor of the bank of japan. he has been talking about the effective rate of the yen not really falling any further. he is talking about the yen really being cheap. some people are saying that they expect the japanese bank to have a go at weakening the yen.

he has seen a little bit of yen strength coming into the market. the other one i want to show you is what has been happening with aussie dollar. we had these comments from glenn stevens, the governor of the rba , saying that he may institute another rate cut. he is concerned about the demand story in the australian economy. he is concerned that the government may be tightening fiscal screws a little too much at the moment. he did make some comments about the city housing market which he thinks is getting a little concerning, but nevertheless initially we saw a little bit of witness. but -- a little bit of weakness. some too late, we have seen the story reverse and have seen it trading up on the day despite those comments coming through from glenn stevens. the global index writer msci has held off of adding china's a land stocks to its indexes.

-- china's mainland stocks to its indices. msci said the decision to add the stocks may come at any time. shares have had quite a rally as of late and you would have seen foreign money chasing after that rally. greek prime minister alexis tsipras is shed jeweled to meet -- alexis tsipras is scheduled to meet angela merkel and francois hollande. the talks are in doubt as greece's latest plans have failed to impress creditors. other institutions have had their ratings cut by standard & poor's. they are less likely to provide aid in a crisis. barclays and rbs also had a

long-term rates reduce -- long-term ratings reduced. we have some fifa news for you via the bbc. presidential elections will happen on the sever 16 in zurich after -- on december 16 in zurich after sepp blatter resigned. there is expected to be a news conference in paris at 10:00 today so we make it a little clarity at that point in time. we will bring you all the reporting you need on that story. a little later on here in the city of london, u.k. chancellor george osborne speaks of the annual mentioned houston or. he is asked -- mansion house dinner. let's get more from our host the executive chairman of capital economics. the chancellor would like to in

-- to legalize a plan to make sure that we run surpluses when the sun is shining on the british economy. >> i quite like the idea principle. i think the difficulty is that one would not want to see the chancellor tied in knots. your he said he couldn't touch the main tax rate this parliament. in practice, i think it really is about gestures and about politics. i suppose the point is that if this goes through in this government sticks to it, that at some subsequent point that if we got a government of a different stripe, they would have to change the law. it does make a statement and i guess it is a bit of a barrier. guy: you talk about the wiggle room. we have had these rules in the past. labor party had these golden rules and they really weren't held in any realistic shape or

form to be true. you talk about the wiggle room. as an economist, will you look at this and go this is just politics? roger: i think it is mainly politics but it is politics in more than one respect. if it is written to law, it is not just about the politics outside the conservative party but also inside the conservative party. if you can't raise the main tax rate, it really is putting the pressure on government spending and making it perfectly clear to his own spending ministers that they have to keep under control. the wiggle room, i think, will be needed if we entering a recession but the rules to allow that. guy: he will reinstitute something we haven't seen for 150 years a committee of commissioners for the reduction of the national debt. it last met 150 years ago.

how much of this is -- is this dressing up or a new kobe are -- a new obr? roger: my suspicion is that this is just dressing up. it is trying to make the most of the government posturing on this issue. we all know he is trying to reduce the national debt. guy: the labour party is looking to elect a new leader. if you are looking to become the new labour party leader, would you commit to this or how would you position yourself? roger: it depends on what the detail is. it will put labour in a bit of a bind.

it will be -- it will play in the sub -- play in the public's mind that it is the same old labour. guy: let's talk about what else is going to be discussed at mansion house. we will hear that it is time to end bank are bashing. -- banker bashing. roger: i don't think it was ever good to do anchor -- and -- to do banker bashing. i never liked this atmosphere of clamping down on thinking as an industry indiscriminately. but the fact of the matter is tanking was a complete mess -- banking was a complete mess and it created an even bigger mess for the economy. it created mega recessions and financial collapses. i am actually very much worried

about the whole banking levy because it is so arbitrary. i would like to see him talk about how they are not going to increase the levy year after year. it should be about making sure they know, and the whole system knows the way they should be operating. i think many banking reforms have been necessary. the separation of different sorts of financial activity within a bank, i think is the right thing to do. i'm in favor of a complete separation of investment banking from commercial banking. guy: you talk about the levy. do you think it is replaceable? there is a huge amount of money generated from the banking sector now. should bankers expect that levy to come down? roger: i doubt whether this is

the time when it come down. the key point is assurances that it will not go up. that this is the high watermark is what i would like him to do. coming down, that does depend on being able to raise the money in some other, more palatable way. guy: we're also going to hear from doster -- from the governor of the bank of england later. roger: i think he put his foot in it at the mansion house last year. i have been following these mansion house dinners for longer than i care to it bit. -- care to admit last year it was the governor who made a splash indicating that interest rates. he had to backtrack

subsequently. i suspect that he will be on his guard this time. i don't think he will be talking about interest rates. guy: do you think the bank of england should make it clear at the moment that their focus should be on what is happening at the market. he talked about how he will continue to be examining a different benchmarks work and what is going on in the city. do you think that is where the bank should be putting most of its time? roger: relatively safe grounds. if i were in his shoes, my ambition would be not to have headlines tomorrow. guy: we will talk about greece

next. roger will stay with us. reminder, you can weigh in on the stories and get more on twitter. i am @guyjohnsontv. would you be prepared to put fresh money to work in china? would you like to be following that index? the a-shares have rallied quite aggressively over the last year. is it time to trace that rally or back off -- chase that rally or back off? next, we will show you the big stories that are making headlines on our website. the london housing boom that wasn't. ♪

guy: good morning, welcome back. you are watching "countdown."

the global stock index provider msci has held off adding china's mainland stocks. chinese shares dropping on the news although they have been rallying as of late. they say the inclusion of stocks could come at any time. great prime minister alexis tsipras is scheduled to meet angela merkel and francois hollande to attempt to break the deadlock of financial aid to greece. but the plans are a little in doubt according to direct ties. their latest plans failed to impress creditors. the u.k. chancellor will use his annual speech to the city of london to lay out the spending framework. they will set new rules that will require a budget surplus

when the economy is expanding. let's talk about what is happening in greece. the prime minister alexis tsipras is due to go head-to-head a little later on today. but the talks could be torn off course after yesterday's budget productions -- budget projections where the bit off target. we have less than three weeks to go before the bailout expires. hans nichols, our international correspondent is covering the story. is this going to take place and what are they going to talk about? hans: what the french always said was that there would only be a meeting if there was real progress. angela merkel said she would expect to have the meeting on wednesday and now we had a little bit of doubt. if there is progress to be made, it will have to happen at the political level. this document that greece sent to its creditors yesterday was rejected in part because it would -- in part because it

backtracked from agreements that alexis tsipras had already made. it also, in addition made new demands. in addition to the back walking, they want access to 10.9 billion euros in the european financial stability. and, they want to make it a little bit easier for greek banks to buy greek government deck -- government debt. they want in addition, new money from the european stability metric. this all adds up because they need the money. they will of the ecb a lot of money down the line, that is july and august. this month, they have those payments to the imf. later on today, we will have a sense of how much more they need to expand. we have been trying to talk to a lot of members of parliament in merkel's party to get a sense if

there is an appetite for an additional greece bailout because that is essentially what they are asking for from athens. here is what we have heard one important key merkel ally. he said: in some ways, we have heard remarkably consistent lines out of berlin. that is that it is up to greece. we have a very clear and now it is up to greece. guy: thank you very much, hans nichols. a little later on, we will talk to michael fuchs. michael fuchs is a key ally and he will be joining us a little bit later. he is usually fairly clear with his views on where greece should be going. let's find out from another man who probably has some clear views on where greece should be going.

tim will also be here in a moment with the stories making headlines on our website. where should greece be going? roger: we should be going out of the euro. -- greece should be going out of the euro. i think we have reached the point where that is in the interest of greece and all the other eurozone countries. it can't go on much longer like this. we have seen with extended and extended an extended. i think really what is at stake here is the future of the whole european economy. greece, in my view, should never have been in the euro in the first place. it was forced upon. frankly i think it is only a matter of time before greece leaves. guy: unlike other balance of payments crises usually you are

in a situation where you have full employment. this is not the situation with greece. the problem is, you need a devaluation to help the economy but you also need structural reforms and you wonder how those two would go hand-in-hand. roger: you do need structural reforms, that is absolutely right. you can weigh they want. but this is an economy where output has declined by 25%. it really is catastrophic. it is on the scale to what happened to germany and the united states in the 1930's. there has been no experience like it in the post world -- in the postwar. -- the postwar period of undeveloped economies. you cannot cure a problem fundamentally about lack of demand by imposing structural reform. in many cases, it will make the demand situation worse. guy: do structural reform is the

economy is moving again? roger: i think there is a lot in that. with greece being greece they done the right thing for economically, they are out of the euro, and they now say we can go back to where we were before and they backslide on reforms, government spending zooms ahead. that what i think be disastrous. guy: our main story on the website this morning. the housing story in london, i think is fascinating. we also have this erdogan story which i think is great. mr. putin disappeared for a while and now we seem to have the same thing with the turkish prime minister. tim: it is a modern-day where's waldo. the man was on the airwaves 6-7 days every week and now they had the election and he has

disappeared. guy: do we know where he is? tim: he is at his mansion, which is big. guy: maybe got lost. tim: 1100 rooms, couldn't find the exit, maybe? guy: london housing prices were expected to bounce after the camera elections. it hasn't -- after the david cameron elections. it hasn't happened. tim: everyone thought that we would see some kind of tax on housing if labour won. every said that when cameron won, we would see a big boom. it hasn't happened. the may data shows that the number of transactions is down. guy: what do you make of the housing market? should there be able? -- should

there be a boom? everything got pretty much locked down as we headed towards the election. roger: in my experience and looking for a house there was actually very little stock around. sellers thought this is a very strange market so they withdrew. a lot of buyers withdrew as well rotted and put it on hold. elections made things clear in both things come back. guy: there was one house that was on the market for x and it is now x + 3. tim: the election was apparently worth 3 million quit to someone -- 3 million quid to someone.

guy: i wonder how the psychology works we were trying to sell a house that they. tim: when i was looking at the story, the word greed kept coming to mind. when else can you call it? guy: the london housing market, in some ways, has become an will become a long-term problem for britain. london is a global center and houses here are the reserve currency in some ways. if you want to park money london is a great place to do it. roger: let's draw a distinction between top end central london and the rest. that could continue to go bonkers because we have yet to see a major influx of chinese multimillionaires, billionaires which will be coming here in the

next 10, 20, 30 years. we need a lot more supply and there is some coming on board but we need to build and renovate an awful lot of housing. but secondly, before we all panic about this, lesser number that we are in an arrow right now of next 20 interest rates. -- an era of next to zero interest rates. guy: do we need to tax that upper end? some without that some would argue that we don't get full value from the capital coming in. roger: i think there is a reasonable case for a different scheme possibly for higher taxes but it wasn't the mansion tax.

it really was a disaster. interestingly, i think there is a case also for taxing and the london homes -- taxing empty london homes. you go around the central burros in large quantities of these properties are empty. it changes the quality of the place and makes it difficult for people to live in central london. guy: let's bring you up to speed with some of the market action we are watching. we are seeing some of the biggest daily gain again this morning. this is of the back of comments from the governor of the bank of japan. he is talking about the effective rate of the yen really not getting any cheaper from here and as a result of which, we have seen the dollar selling off pretty aggressively.

our interbank rates were down 1% -one .5%. when we come back, we'll be talking about greece. ♪

guy: initially shanghai shares drop. they have bounced back. greece's latest plans failed to convince creditors. the british chancellor george osborne will announce a budget surplus when times are good. good morning. welcome. we are here in london.

it is 7:00 london time. let's talk about the news we have been focusing on. chinese stocks are bouncing back now. this is a global benchmark followed by a lot of money. shanghai has had a bit of a rally area initially it got lower. we are into positive territory despite the decision. you can see the rally. our twitter question of the day is fairly straight or it. it has been quite a rally. is it worth chasing? they have a few doubts.

should you have a few doubts as well? let's talk about some other markets. story is fairly benign. the s&p 500 doing well overnight. the big market news has been in the foreign exchange markets. let me show you dollar yen. this has been the biggest move. few have seen quite a bit of vets put in the market -- quite a bit of bets put into the market. i want to show you what is

happening with the aussie dollar. the governor talked about further rate cuts. it didn't have much of an effect, did it? they have been popping higher. i suppose that his hand in hand with what we are seeing with china. prime minister tsipras expected to go head-to-head with his counterpart. there is a meeting in brussels. we are not sure when that will happen. angela merkel and francois hollande trying to break through , trying to find a deal that will finance greece going forward. only three weeks to go before

the current bailout expires. hans nichols is in berlin. our ecb correspondent in frankfurt. let's start with you. what can we expect from this meeting? it's actually going to take lace. -- take place. >> what we heard is that you only have a meeting if there is something to discuss. mrs. merkel has in a little clear there is going to be a meeting. the great position has actually retreated -- the greek position has actually retreated from what they thought they would agree to on the june 3 meeting. take a look at the new demands they are asking for.

they want to get another 10.9 billion. then they want to make it easier to refinance themselves for the great banks to buy. then they want an additional pot of cash from this european stability mechanism. we have new demands from greece no real movement in terms of heading to creditors directions in terms of where they are going to be with the primary budget surplus. here is the latest in germany. merkel's party was increasingly divided. here is a key quote to give you a flavor of the tone. that is we want greece to stay in the euro but whether it is achievable depends entirely on greece. conditions have to be met. one thing to look at is what is the number for the primary legit surplus?

once you get the numbers you can figure out how to get there. it is going to be difficult to make rye grass. >> plus, merkel is having problems with her party. how big a gap is there between the press and syriza? -- between tsipras & reza? >> we will have to see what effect it is going to have. at this point, the impact is at its greatest. yesterday we had a series of lawmakers asking for prime minister tsipras to deliver. he said the greek parliament would vote. they would reinstate collective bargaining. he was asking to increase the

minimum wage. then we had them reminding it is down to political responsibility when it comes to parliament. we have to keep in mind it is a party like no others. sometimes the leader acts more like a manager trying to keep his shareholders happy, and that's difficult. >> particularly where big decisions have to be made. paul, let's turn to you. the greeks desperately need more

financing. one thing they like to see is the ecb buying more of their debt and they can ship that around the system. we have got this meeting later. we have a call on the emergency liquidity program. any movement on that at this point? >> the position remains as uncomfortable as ever. they said they have this balancing act they have to achieve every week. what he is talking about is they are concerned about the health of the greek central bank to hand out emergency liquidity but you have to weigh the risk of dipping the higher financial system into chaos. it is a difficult one for the ecb. it will probably grant whatever emergency liquidity is needed. it probably won't tighten the screws.

>> thanks for the update. giving us all the angles on this story. let's get a bit of analysis. also joining us is the director of research. good morning. we seem to be in a position where the tone of the conversation is hardening. the creditors are not convinced and not convinced by the way the proposals are coming out of greece and what is in the proposals coming out of greece. >> the greeks keep rehashing old stuff and increasing demands. >> negotiating that. >> so far i think they are the worst enemies to themselves. they negotiate through the media. one of the few allies left.

all in all across the board it's not great. they are going to push it to the brink. most likely tsipras will get a deal ahead of the meeting scheduled for the 18th of june. >> have they got any friends left? >> friends are difficult especially when you ask for new money. when you look across the board the preferences have not changed . greece needs to stay in the eurozone. it can be solved in paris and elsewhere. the government is not only difficult to manage, but also

technically as well as her are lots of issues. we will get there. the big question is whether tsipras can sell the deal to his own party. the decision he has to make is whether to take this to parliament or not. if he takes it to parliament it will get past. but at the end he may not have a fundamental majority. >> you can understand the frustration of the creditors in this negotiation. when they are trying to sell this to their own people, is there anything that recommends this deal? we are going to give these guys more money. there is no guarantee we are going to get it back. >> i cannot see what would recommend it other than the principle of keeping greece in the euro. you what to continue to uphold that sensible. it is time to relinquish it. it is no good for greece.

we are talking about a financial problem. how greece gets finance. it is running a reasonable position on its budget. it has a huge debt level. it is all about high finance. that is important, but it's not the only problem greece has. it's not even the most important problem greece has. the most important is economic. you have an economy that has lost a quarter of its output. there is no sign of any upward momentum. if this was a normal country we wouldn't be sitting here worried about financing. we would be sitting here saying how on earth can we get this economy growing. >> we will carry on the conversation in just a moment. i want to get you some headlights flashing across the terminal.

effectively talks have made no progress to end the impact. they disagree on targets, and this may be the primary surplus on some of the measures that need to be taken. we will come back to you with more details in a few moments time. we also need to talk about fee five. -- about fifa. we will have more on that story.

>> it is 7:16. let me tell you about the stories you need to know about this morning.

they have regained traction. they are now in positive territory. a decision may come at any time. the great prime minister alexis tsipras scheduled to meet with angela merkel and francois hollande a little bit later in brussels. the idea is to break the deadlock over financial aid. greece's latest plan has failed to convince creditors. and the bbc has reported they are planning a presidential election that will take place in zurich. there will be a news conference we think around 10:00. let's get back to the greece story. the intelligence director is with us.

we were kicking the surround at the break. how does tsipras handled the story domestically? i am hearing talk of a referendum maybe on the package put forward or fresh elections. does he have to go to the people if he is going to push anything through? >> it depends what he gets from the creditors. he talks about new cuts to pensions. if he is able to bring these goods back home, he has a chance to sell it to the party and get it approved in parliament without losing his parliamentary majority. what's he gets the deal, tsipras will have to decide whether to take it to parliament. it will most likely be approved. the question is whether he will have a majority or not.

that will depend on the content of the deal. what is difficult to sell his anything about pension cuts. guy: this guy is massively popular in greece. he is fighting for the great people. if you were a greek voter, would you get along with anything he says? >> i would have left long ago. we are in a fascinating position. on both sides the politics are extremely low. if the creditors give enough to make the position comfortable, they create uncomfortable position for themselves domestically. i am aware that within germany you had the rise of the euro movement in the last few years. earlier there was no skepticism whatsoever. merkel could do whatever she wants. she hasn't got a free hand anymore.

>> do you buy the argument we are seeing a division? we are gaining traction a little bit now. >> i think they have different views. i think the dynamic helps to manage the party, especially concerning greece. i don't see a divide between the two. there is still lots of technical details to sort out. we have achieved progress there. i do not see a division between the two. guy: if you are david cameron, how would you be viewing this? >> it's quite clear the british government is actually worried

about all this quite keen to keep greece in the euro. i guess they are worried about overall financial stability. i thought all along if greece were to leave the euro the danger is financial security. i think that is obtainable. the hope is this shows the way to other countries. the main interest ought to be in ensuring the eurozone is prosperous and successful. i think people have different views on how to get that. the only way to get decent growth in europe is to end this ridiculous currency experiment or to modify it. some members of the eurozone

need to be out in their own interest. if i was david cameron, that is how i would see it. >> how do you feel? >> i think it is more and more about controlling his own country. i agree with the issue of greece leaving being beneficial to the eurozone. if greece leaves it will go up very quickly. if italy goes then it is the end of the day for everybody. it's not a question of numbers. it is the political presence you will create if you let greece go , especially because it the end of the day the blame game goes

both sides. the idea of a grexit at this point despite the existing difficulties. they will kick the can down the road as they have in doing. we will try to look for a long-term solution for greece. italy is pretty divided. >> that is why i am in favor of greece leaving. the euro was a disaster for the european economy. lots of people have conceded that.

guy: you talked about italy. you talked about concerns. this is music to his years isn't it? >> yes. >> they were too extreme. >> putin launched a fairly charming offensive over the last couple days. basically reiterating how important the trade is between the countries. it is an important issue.

italy exports to russia. the other way around italy will probably lead. italy will agree to that as well. he will try to score some points during the visit. >> roger is this the right way to treat people. >> i don't think sanctions have had that damaging an effect on russia economically. in some ways it has rebounded against our best interest because it has made putin less popular. russia performed a, which is what you would expect.

it's an economy that was resource dependent. that disguised the underlying weakness. as soon as you got this commodity prices falling substantially, what is laid bare is how badly run the russian economy is. guy: we seem to spend a lot of time talking about greece. you look at russia. it's a a deal for economies such as germany. >> nobody wants to put in ukraine. the only option is to try to contain russia, to put pressure on putin is sanctions. >> thank you. lovely to see you. thanks to roger, who is here for the last hour.

you can tweet about all the stories we are talking about. you can follow me on twitter. after the break we are going to be talking about the erlang conference in miami. we will see you in a moment. -- airline conference in miami. ♪

guy: we have got 30 minutes to go until the european equity markets open. let me get to speed with all the things we need to know about. we are watching the situation in china. they have opted to work with the security regulator to try to overcome obstacles. chinese shares dropped on the news but are now starting to gain. the greek friend -- greek prime minister alexis tsipras is scheduled to meet angela merkel and francois hollande.

the plant talks on the sideline are in doubt. the u.k. chancellor will use his annual speech to the city of london who set out a fiscal framework. finance rules will require a budget surplus. let me take you through what is happening on the foreign exchange market. this is dollar yen. why is dollar yen doing this? the governor of japan has been saying the imbalances have been corrected. he is talking about the effective rate of the yen are unlikely to get any cheaper.

a lot of people have a position on anticipation we would see more from the boj. that is why policy markets have reacted. this is the expected open. these are the main markets you want to focus on. the ftse, the cac, and the dax they are all lower this morning. we have got the ftse 100 down. a slightly softer open anticipated for european markets this morning. we will get to the open in around 20 minutes time.

>> giants gathered for the annual meeting. the aviation's reporter has the latest. what are the big things? we have seen a lot of things happen. a big fight between the airlines out of the emirates etc., u.s. carriers, and that crash we saw in the alps. what is the big focus? >> they wrapped up yesterday in miami. it was a three-day extravaganza. you have everybody gathered. the big themes were the outlook for the industry as a whole, the director was giving an upbeat

forecast, saying this year we will have a profit of almost 30 billion for the industry up 80%. the outlook is very positive mainly driven by north america. the other elephant in the room was the subsidies spat playing out between the u.s. carriers and the gulf carriers. there was no real resolution at the event. it was an interesting meeting between the different factions. he shot back and said, this is all made up. the health of the u.s. carriers points to them being supported by the governor in the past. there is nothing to fight about here. the president of the emirates had a press conference yesterday where he said the company could double its size going forward.

he had his first public appearance after the germanwings crash. it was interesting to hear him navigating through the crisis mode while keeping the company hole, running a business. -- company whole, running a business. that was the analysis he provided. >> let me take you back to the emirates. there was a piece talking about the fact that tim clark is looking to coordinate some issues with easyjet. what do you make of this? how does it work for emirates?

how does it work for easyjet if these two were to get together? >> they are looking to penetrate the market more. they are restricted in some ways. in berlin they only have four landing permits. cooperating more closely with the likes of easyjet would give them greater access into secondary airports. it would support that notion. they have started working with the french railway. combining those modes of transport, helping people get on to trains. really, it's a way to get even deeper in the european markets. we probably will see more of that. in some ways the business models are not that different. they are basically about

disruption. they are about mass transportation. you would inc. easyjet, ryanair and emirates are two different beats. >> the paris air show is underway. we will have plenty of coverage coming from that. some great coverage coming out of bloomberg news. i want to draw your attention to what we got. diabetes care, we are talking about testing. a kit that everybody who has diabetes needs to use on a regular basis. the monetary systems being

offloaded. the price tag just over one billion euros. 1.0 2 billion. what else are we watching? the market chief joins us now. michael, european equities look like they are going to open a touch softer. i think we are looking for a direction. >> i think we have a direction and i think it is being driven by yields. you can probably state the turnaround in the dax to the bond market. i think they have correlated very well. the euro is not particularly great for german exporters. china is slowing down.

we are still up a considerable amount yet we are significantly off the highs. that suggests we could see a larger correction going forward. >> down 10%. he was expecting another 10% as well. >> when you consider where we were 20 years ago, it's definitely achievable. if you tie it to a firmer euro if that's not going to push the dollar up, what will? >> a rate hike, maybe. >> that's not going to happen. the jobs numbers were very good

yet payrolls are still very weak. we have record openings. payrolls are trending at the low 200,000. what does that tell you? skills gap. >> let's talk more about the markets. what is the story inside the market looking at the moment? where du hideout? >> this may seem strange, but people are hiding out in the euro. they probably think it's going to get kicked down the road. we have heard some narratives that we could get another extension. i think that does limit the downside opportunity. i saw a breaking -- an interesting breakdown in europe. we could see some further upside.

>> we are here. >> we are here now. it would seem to suggest potentially we have got at least another four or five big tickets on the upside. >> what does that mean? if you are watching the strength of the euro coming through, how much of a drop-down do we see? how big of an impact is that going to have on profitability? >> it's manageable. we hear a lot about the impact of exchange rates. they posted really good numbers. i think a large part is due to the fact we have seen the euro come down. that had a massive effect on profitability. >> they got a lot out of turkey.

the currency has come down significantly. that is a lot shorter. >> they rotate the stock a lot quicker than a company like marks and spencer's. i think it is still a work in progress. sometimes my eyes will glaze over. have you ever heard of options or hedging? for me it's not that big of an issue. i think they should basically take an average and hedge accordingly. it is a little bit of a false premise. >> thank you very much. we are going to take a break. all eyes will be on george osborne at the speech. what does it mean for the banks? stay tuned. we are back in a couple minutes. ♪\

>> 7:45 in london. 8:45 in brussels. stocks to the benchmark. the regulators overcome obstacles to inclusion. chinese shares have gained as the rally continues. this is a big deal. this is one of the biggest stock market rallies in history being supported or not supported. the greek prime minister tipper's is scheduled to meet angela merkel and president francois hollande a little bit later in a deadlock over financial aid to greece. talks are taking place on the

sideline. greece's latest financial plan is not exactly convincing creditors at this stage. they u.k. chancellor will use his speech to reform the framework. the idea is to guard against future financial crises. let's talk a little bit more about that story. what are we going to get out of the speech? what will the governor of the bank of england say? let's start off with the chancellor, who has got the issue of making sure the budget is in a good state and the economy is doing well. which is going to take priority? >> i think banker bashing he is going to say is a thing of the past.

he has said he is talking about preventing future financial crisis to a room full of some of the people. think it's an opportunity to set up focus for the financial sector. we have a budget in july. that's going to be when the financial policy is going to cut out. this time he can start spending out what he expects. there is some talk of a tax review. that is a sweetener for the financial industry. we had a lot of banks. maybe this is a chance to give a little bit of a sweetener. >> when we talk about the

budget how much do we actually need to take seriously this idea we have to run a budget surplus during economic expansion? this sounds like an awful lot of politics to me. >> it's pure politics. it is putting the ambition into some sort of legal framework. how enforceable it will be is a different question. osborne is on the ticket of economic responsibility. >> last year the governor of the bank of england caused a little splash. is he going to do the same thing this year? >> my guess would be not. last your he made comments and

then backtracked afterwards. i think this time around the focus is going to be on the financial industry. we had the markets review. it was set out new rules to stamp out misconduct. i feel the focus of the evening is going to be on that. >> the chancellor wants to come through and say we are going to end the fiscal relationship. we are going to put ourselves in a more even keel. then the governor is going to get up and say we need more regulation etc. >> he is a well-known diplomat. i think you have to make a distinction. i think this is a difference in emphasis. they are both really good.

>> joining us from bloomberg news. we have got nine minutes to go until the equity markets open in europe. the big move has come through in dollar yen. kuroda makes his comments, and that was the effect. the dollar yen dropping. the yen having a big update. i am not sure that is what kuroda desired. i am going to show you the next chart as well. it's going to give you an applied open. this is the expected drop we are going to be seeing. the ftse down by half of 1% as well. a continuation of the equity

market negative story we are going to be seeing. a little bit of a dip. that is the story jon ferro is going to be taking up in six minutes time. on the move is coming up shortly. >> looking forward to it. the comments are fascinated. a couple minutes ago president obama said he didn't like the dollar strength. then he denied it. what i think is interesting is watch what he does and not what he says. what he does potentially a lot of people are talking about more stimulus. >> everything i have heard is the expectation the japanese are going to do more stimulus. >> i say watch what he does and

not what he says. we have come a long way. a big move. if he is going to do more, what can you do about the currency? greece is interesting. 12 months ago governor carney. >> he is not going to do that again. >> it was a big shot. he was very dovish. he showed up, and get ready for a hike. >> the bank of england had the market all over the place. do you think we are in a situation where we actually have some clarity? my sense is rate hikes are being pushed out more at the moment,

and you wonder whether you are going to get to the point where the government says, come yourself down. we are going to hike rates. >> we're looking at the june meeting. i think tonight is set to be the osborne speech in a good way. >> we will see. it is interesting we are going to keep a fairly progressive levy. if you were hsbc, and what we want to see is a lower levy. he has two raises money somewhere. >> how he navigates that remains to be seen.

>> yields keep getting higher. it is quite a turnaround. that is driving everything. >> he can correlate quite carefully. george osborne is next. he will be taking it off where we left off. we have seen a big move in dollar yen. it is going to be interesting how that turns out. plenty more coverage coming up. coming up on the polls with francine lacqua. do we have a division? he will talk about that. plenty more coverage coming up on bloomberg tv. ♪

>> let's get straight to your morning brief. and adding china's mainland stock to the benchmark exit to overcome remaining obstacles. the bank of japan governor says it is hard to see the japanese currency we can -- weaken much mor greases lateste. basel fails to convince that prime minister tsipras is scheduled to meet merkel and how long -- hollande later today.

tonight, george osborne and the other mark carney. those of you who remember the speech last year, get ready for a rate hike that never came. more news tonight. futures lower. dax futures up 16 points. the stoxx 600 on a six-day losing streak. come over to the touch screen and i will give you an idea of what is driving trading. it's not in the equity market area it's right here in the bond market. yields on german bonds keep going higher after the worst week for the german market since 1998. yields are three basis points higher.