guy: welcome two on the move. it is 7:30 in london. welcome to the new week. where counting you down to the european open. i'm guy johnson alongside hans nichols did this is what we are watching. a brave new world. saudi arabia is set to unveil a fresh vision of the future. is it the end of the oil era? is the auto industry ready? ask in a fewto minutes time.

policy politeness. draghi holds the door open for yellen. will she stepped through? through?he stepped we've got the fed on wednesday. .his is a bloomberg report the boj on more japanese equities than the world's biggest asset managers. we asked what is left on the shopping list? good morning hans. we have a big week it comes to the central bank story. politics fascinating and germany. , obamathese leaders corralling everybody in the same room. what are they going to be talking about? hans: they're going to be talking about the middle east, syria. more the industry side of things, the economic side of things, they are talking past voters. it is remarkable to me when obama and merkel, they are talking free trade and yet very

few german politicians are willing to publicly say this is going to get done. everybody is playing defense on trade ahead of these waning hours of the obama presidency. that is the challenge moving forward. guy: it is going to be interesting to see what the subject at dinner is going to be. we have the list of who is going to be having dinner. a particular ceo from volkswagen. hans: the volkswagen store and what germany does in terms of writing the entire industry, this is no longer a german story. we saw it in all of the auto stocks last week. a remarkable story. renault -- what is happening more broadly in the industry as it changes gear, maybe from the diesel engine and

petrol engine to the electric engine. hans let me run you through what we anticipate for the european open. big week, slow start. let me show you, a fairly flat story or european equities. this is the wti story. the european markets are expected to open fairly flat. story.t is an oil take a look at desk take a look at what is happening with brent. still below 45. we got dollar yen showing a stronger yen down near the 111 range. euro-dollar down near 1.12. let's get to bloomberg's first word news with david ingles. david: the bank of japan has become a top 10 shareholder and about 90% of the nikkei 225

companies. -- in about 90% of the nikkei 225 companies. largestk is the world's wealth manager. -- undermining efforts to improve corporate governance. -- the government should do more for the countries is that ms. -- the country's stagnant a comedy -- economy. the administration needs to accelerate reforms to raise japan's growth rate. this is a bank is scheduled to make a policy announcement. president obama's prediction that it may take as long as a decade for the u.s. to agree to ifrade deal with the u.k.

britain votes to leave the eu is realistic. so says eric nielsen. reasonableat seems a if not optimistic estimate when you recall that it took seven years for the u.s. to get it just for the eu to get a trade deal with canada." global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stores on the bloomberg at top . hans. hans: almost eight decades after the first commercial quantities of oil were found in saudi arabia, officials are said to unveil a vision for the post-carbon era. they seek to overhaul the economy and boost not oil income. the imf is reporting that economic expansion in the middle east is set to slow significantly over the next five years. alaa shahine is standing by us and by. what is the significance of the

deputy crown princes vision. alaa: this is the biggest shakeup since it was founded. it involves several pillars spirit we expect details today. some of the key components welcome include a plan for the future of aramco. they will seek to change from an oil and gas company into an energy industrial conglomerate. it will be another plan for the creation of the biggest sovereign wealth fund and the world which will increase its investments abroad -- in the world which will increase its investments abroad. plans for increasing not only for $100the plan calls billion of additional revenue by 2020 through initiatives, restructuring subsidies and a program that he said will be

similar to the green card initiative in the u.s. this basically shows saudi leadership have come to the realization that continuing the revenue,pending, using is unsustainable. actions speak louder than words spirit we have heard all of this before. why is this time different? alaa: you are right. we see oil account for more than 70% of revenue. what could be different now is this 30-year-old conference is saying -- 30-year-old deputy crown prince is saying we should push forward. on most detailed plan yet diversification since they started talking about it. he will still face obstacles because changing over hauling

the economy is very difficult. we have more examples of failure than that of success. he could face resistance from circles stunned by his rapid rise to power. hans: a lot of resistance. alaa shahine, thank you very much. let's welcome dan morris. good morning to you. getting tectonic shifts right in the land shape -- landscape is difficult. we need to make sure we are on the right side of the trade. they believe the era of oil is coming to an end to should we pay attention -- to an end? should we pay attention?

dan: for the rest of the world, it is not necessarily, we know that we are in an error where $100 oil is not going to the future. it is seeing the ripples across the middle eastthey believe thes coming to an of them starting to realize applications for them, where is the developer will come to that realization. guy: when look at the impact on if that succeed, that is going to be one element to this story. you look at tesla, all of these kind of industries and how the destruction is starting to manifest itself. it is pretty clear andy serkis you this happening. dan: what are going to be the sources of energy? what is the change in the cost of energy? a lot of these initiatives were at $40, it isn going to be much more

challenging. the alternative is not as expensive. they are going to have to be redirected. guy: you get it right. the impact of that is going to be absolutely seismic. if tesla can figure out how you can take off grid with their body -- with their battery technology, you start to have a big impact. it could be anything and you start to really have to change your investment season. dan: how much of our economy is dependent on oil? still, it is a huge part of any developed market economy. in terms of emerging markets, where are they going to get their own -- now that they cannot rely on high-cost commodity exports to china.

korea.ot just north it is very significant. guy: we're going to be keeping you for a little bit longer. dan morris from b.n.p. paribas is going to stay with us. hans: up next, we will speak to how the company's relationship with mitsubishi has been affected. stay with on the move. ♪

guy: welcome back -- frans: welcome back to on the move. let's get to bloomberg business flash. here's david ingles. david: thanks hans. let's get started with yahoo!. if theyd of this week are going through to the next stage. that is according to people familiar with the matter. yeley advises has spent a week narrowing down the field of initial off -- a field of 10 -- offers ranging from $4 billion to $8 billion. winner is on a thought to be at least a month away. sony shares have plummeted after announcing it will delay the release of its annual forecast. the company says the mention of its -- due to the recent earthquake in japan may have "an

adverse impact." it will release the forecast in may instead. , while sharesors have dropped again after losing more than 40% last week over its fuel efficiency scandal, the -- that is according to people familiar with the matter. the company said we need more time to measure the effects and find competitions and other talks related to the -- that is your bloomberg business flash. hans. hans: thank you david. we going to stay with the auto story. we are going to head out to tom beijinge. he is live in . what do you have for us? tom: thank you. getting straight to my next guest, carlos ghosn. thank you for joining us.

let me start by asking, the nissan cedar which is been at the show today. how much are you relying on the government keeping that --? carlos: the market has been doing very well. everybody was predicting it would slow down. the forecast of 5% increase on the market share. so far we have seen a 9% increase. in a certain way, the cut on the taxes on small cars helped this market go up. the market is very healthy. it is very welcome. renault came up a little bit below what the market is doing in china. why is that? are -- shopping -- stopping some of the lines that are not profitable.

where contemplating on our efforts on other lines. you can expect a much stronger offer coming from the renault. tom: i'm going to ask you about the topic that is overshadowing a lot of the conversation here at the show, the emissions scandal. on the back of vw, you have a partnership with mitsubishi. they're providing you with minivans. what is the future of that partnership? >> mitsubishi is a partner and competitor. i think we are going to be waiting for the final announcement they are going to be making and the announcement made by the japanese government. there is a reshaping taking place, before making any statement or decision. you can understand at this point, where things are going on inside mitsubishi and the japanese government, it would not be make -- it would not be fair for me to make any announcement. tom: the industry as a whole has been affected.

carlos: i think we are mixing different kind of problems putting them all in the same bag . i think it is important that the public understands we have problems of different nature. obviously there are problems around the trust when carmakers are behaving in the way to deceive in a certain way, you know, customers -- this is one category. the other category is the performance of the technology that we are putting on the market. i don't think we can mix everything and put it all in the same bag. the only way is to be extremely transparent. we have to be much more transparent. at the same time asking the regulator to be more clear on what is expected. tom: you're confident that the test that are being done conformed to -- that are being done conformed?

carlos: when you come to a arelation, we can say we conforming to the regulations. technology,fic specifically diesel technology, there are the real driving emissions where the performance of carmakers are way above the level that is defined. -- this isre they where there is a misunderstanding. the best solution is to say to the regulator what you expect in these driving emissions. -- driving emissions? in real driving emissions which is fine because at least now the rules are clear. tom: you expect greater regulatory oversight? carlos: without any doubt. there is a public interrogation

what does this all mean. the function of this interrogation -- a lot of inquiries from the media. it is important that trust is being established by defining the level which is ok. the function of this is up to us to roll the technology -- tom: let's talk about electric vehicles. china are in negligible. are you expecting -- is there going to be any upgrades given what tesla is rolling out? carlos: what is selling today in low-pricedery diesels. it means we need to continue to tv, the kind of high spec increasing the range and lowering the costs. this market did not take off yet

in china but i believe it will. you have the second part of the market which is starting today which is the low spec tv. we are going to compete on both. we have the product on the high spec tv. at the same time we need to bring a product into the low spec, low spread tv. [indiscernible] tom: we have seen a lot of focus on what is happening in the local brands. in terms of where we go from here, the amount of money that is going to be spent reconfiguring the production lines, the manufacturing, the r&d. how much is that going to cost? how much of this is a transmission away from the traditional vehicle engines? how much of this is a revolution? carlos: it is a normal revolution.

consolidatingis because of the amount of investment in order to be of to absorb all of this investment without absorbing your p&l. i think this is going to continue to consolidate. the big players will have much more easiness interfacing these --straints and regulations and still be competitive. i think everything we are seeing is pushing for more consolidation in the industry. tom: in terms of and for that is a crucial part of it. when you have come position with carmakers, which countries are going to be best positioned to implement the infrastructure needed for electric vehicle rollout? carlos: china is one of them. in europe, some companies are doing a great job.

i think part of the net estates also, but more based on local initiative at the level -- then at the federal level. federal level is very positive with zero emission. it is going to be a long process but frankly there is no way out of electric cars. it is going to be necessary if you want to meet -- [indiscernible] [inaudible] car.e have you ever been approached by apple or any of the tech giants? carlos: i am not going to speculate to tell you all of the folks that are taking place behind the scenes. tom: thank you very much.

guy, i will hand it back to you. guy: tom mackenzie, great interview. thank you very much indeed. he is assuming apple is working on a car. say --rl's going had to with carlos goes and had to say about that. let's go to caroline hyde. caroline: keep an eye on phillips because it could fall. earnings beat analyst expectations, this is the stock price over the course of 12 months. we are focusing on the news out today that they could push forward with an initial share sales. whether or not they sell the assets to a buyer, they could be looking at a night you -- looking at an ipo. at the same time, the share prices, we could see a sale of its unit. phillips earnings did seem to beat -- some earnings analyst

saying maybe it was a little bit lackluster. maybe ca shares give way about 1% -- maybe see the shares give way about 1%. novartis is looking to sell its stake in roche. that is what is being reported at the moment. this is novartis and the white. white.he it has been another 4 -- another performer. novartis could gain. the chairman is looking. novartis to a not just to neutral. -- to neutral. look at zodiac as well. ?emember that news people questioning the news. hans: futures --

pointing negative last night, the market opened that is coming up next. ♪

guy: good morning. welcome. you are watching "on the move." we are moments away from the start of the morning trading. and hans nichols has your morning brief. tos: saudi arabia is set reveal a fresh vision of the future. and draghi holds the door for yellen, but will she step through? with the bank of japan on thursday. bloomberg confirms the boj now owns more japanese equities that the world's biggest asset managers. we ask, what is left on its shopping list?

it looks like the fair market value of cac is down. the dax looks up. maybe that tells you a different story in terms of the auto sector. let's check in with caroline hyde. caroline: a very good morning to you and it will take you straight to the wei function on bloomberg. you can see in asia, it was a down day. there is much speculation about what the bank of japan will be later in the week once that news comes on thursday. little bit of caution going into that. the ftse 100 is opening flat at the moment. we are in the green tentatively on the euro stoxx. as we start to rev up, it will be caution ahead of the united states and japanese central banks. commodities.n australia and new zealand have been closed today, but overall it does seem to be a negative picture. the cac 40 is up by .2%.

let's have a look at what is going on on the imap. the stoxx 600 is flat at the moment. as we dig in to the individual seetors, though we can consumer staples are on the high side. financials are one of the performers, interestingly. on the downside, oil is trading lower and materials are off 5.1%. that is the imap function digging into the industry groups. we're still slightly lower than beware on the open. we are up by .1%. that is the function that shows you the overall brent contract on the bloomberg. we can see oil dip lower because of concerns once again about saudi arabia pumping a little bit more and iran. one million barrels were added since the end of sanctions. how much higher can they go?

the japanese yen is strengthening, as is the british pound. we are seeing the likes of phillips on the move. phillips up by 3.5%. many are feeling that the earnings number is not living up to expectations. by .5% and edf is down by 4.9%. hans: japan is increasingly working for a shareholder unlike any other. that is the nation's central-bank. the etf purchases have made it a top 10 shareholder and about 90% of the nikkei 224. komura has more. what does this mean for investors? reporter: the information is

public. we had two big into many different sources, but it is out there for people. many had to dig into different sources, but it is out there for people. this week, we expect the bank of japan to double the etf they buy. +++ don't really think about is, what really happens when it happens.

what impact does this have on individual companies, that is what we looked at. 90% of the nikkei 225 count them as a top shareholder. the boj is a top-five shareholder and owns the present of the company. it is a $30 billion company. they have a lot of money. as far as your question, what it means for investors, it is a big boost to share prices. so good side, what does this do to corporate governance? as you know, index etf's are cheap instruments. they don't have the resources to go in and analyzed how well the company is being managed. with the boj buying, gives more power to etf. the question is, prime minister abe wants corporate efficiency to be a big thing in japan, but essentially the bank of japan continues to buy. it detracts from the. -- from that. hans: we are looking at what we have received on the negative interest rates and quantitive easing. how much for guidance are they giving? how long are they going to play the etf? reporter: the quota has been asked many times. he said it is too early to talk about an exit. he avoids that question because

he knows as soon as he says something, the market will sell off. dents. have prece in the u.s. and hong kong, the government but large stakes, but over time they have gotten rid of them. it has never been on this scale or impacted as many companies. it is the first time in history that we have had something like this. i guess we will see what the exit looks like when it becomes time to do that. hans: hopefully, we can come back to you at that point. thank you for your time. i want to bring you breaking news. there was a big gathering. president barack obama is there with angela merkel. barack obama is urging the audience to buy american. i don't think that will go over well with the crowd there. but he is doing his ambassador duties for ford, general motors, and chrysler all in one swing. guy: a couple of salesman up

there. hans, i think we're going to keep an eye on this one. it will be interesting to you what goes down. these countries are definitely in competition regarding the industrial output. i just want to get your thoughts on the boj. it is now this massive owner of japanese etf. does that tell me that i want to be running away from as best as i can? because that will not end well. >> certainly longer-term it is not the kind of environment you want to see. not within a fixed income market. it distorts prices, which is probably not good over the longer run. over the short term, what is important, even with all of the purchases and japan, we have underperforming yen. we need to focus on the yen in the short-term.

and less on what the bank of japan is doing in terms of their purchases. i agree though, longer-term it is not a positive signal. you are creating more distortion and that will cause problems. daniel, walk me through when we look through some of the valuations. they are trading at what 16 times the future value? we have a global average closer to 18 or 19. even with the boj weighing in, they can't seem to get those averages up. >> if you look at valuations for the japanese equity market, on a relative basis, they do look good compared to european markets. so, on the relative basis you would say, you would want to buy japan, but you want to think about where the earnings growth will come from. and we are more skeptical there. we don't see the potential earnings growth in japan. at this point, it is not as much for the valuation.

what we really need to see is a change in the way companies are operated and focused on profitability and increasing margins. see at point, you would lot of long-term interest in japan, but we don't seem to be there yet. guy: we are looking at the work function on the bloomberg terminal, which is nicely named. we have a fed meeting this week on wednesday. this is an interesting chart here. this comes back to the fx story, and you mentioned that. this is the trade weighted euro appear and then the trade weighted odollar. draghi is on hold for a while. he is not going to be doing much. maybe then we will have another rethink. he just opened the door to janet yellen. she can now be more aggressive. she does not have to worry about the dollar spiking as much as a result of what draghi has done. >> it will be a factor she takes

into account. if there is a risk underpriced in the market right now, it is that the fed does like more than people expect. futures are pricing in something that is very dovish for the rest of the year. at this point, it will be a "wait and see." economically, the growth figures seem ok, not terrible, but not great. so, i think it is a factor telling her, we can probably wait a bit and see how the payroll numbers and the witch growth numbers work out before we decide, is it really necessary for another 25 basis point hike. guy: stay with us. up next, it is the most dangerous bond market in history. investors take bigger risks than ever before. we look at the half percentage point move that could wipe out more than $1.5 trillion. that story, next. ♪

hans: good morning. this is "on the move." it is time for your chart of the hour. let's get straight to nestljra. nejra: this is a chart of the bond market and how investors are taking a bigger risk than ever before. of $7.8 that yields trillion of government bonds have been driven below zero. that compares to about $3

trillion yielding above 2%. investors are continuing to purchase bonds even when they pay next to nothing. concernsuggest deep over the state of the global economy. that gloom combined with the aggressive stimulus measures from the bank of japan and the european central bank have pushed average yields in the bank of america, broad market index to a record low 1.29% earlier this month. some are saying that investors are setting themselves up for damaging losses because if average yields rising little bit from the rock-bottom levels, we could see some significant losses. a half percentage point increase would result in $1.6 trillion in the global bond market. that is according to data compiled by the bank of america. the big question is, are investors actually underestimating the power of inflation? and underestimating the fed's

tightening this year? there are many different views on this. bill gross says of course, that a tiny move in the japanese government bonds could wipe out an entire year's income. and you can remember his comment about german tenur year bonds a month ago. and then some other investors see it differently. they expect yields of ultra long bonds to keep declining. this will keep the fed from raising rates. we have seen investors move further and further out along the curve, looking for those returns. 2money managers are pouring money into debt. the 100 year bond issued by ireland, that yielded 2.35%. that was similar to the yield on ten year german bonds offered as recently as 2011. guy: let's carry on the

conversation. dan morrison from bnp is to let us. shunted to then back en dd of the curve. as nejra says, the risks that are being built up here, you have to be worried. if you get just a tick higher, people will have substantial losses here. dan: absolutely. i think it is more likely that ts atcb will do more attemp quantitative easing that will keep yields low. without question, over sometime friend this is going to be a big risk. and it will be a big problem, but not one necessarily that you will see in the short-term. guy: this is a massive market. dan: if it was anything like normal, yes, it would be a dramatically significant move and result in a decline of prices, if you have inflation at a 2% mark in the u.s.

numbers, very big however it is conceptual. in terms of what we are paying for bonds these days, it is not so much with the fundamental value should be. it is what you are willing to pay. that is the value of it. the central banks are willing to pay quite a bit, so it is ok for you to purchase. hans: on that point, when we talk about japan and europe, where do you see u.s. debt going? you see pushing through that 2%? right now it is right around 1.8%. what is your call there? dan: it will depend on what the ecb and boj do. if you look at treasury yields in march, when there was that they decline, which people mostly interpreted as a flight to safety o or a risk off move, it was really just a reaction to the ecb.

we have to look at what did the ecb and boj do? if you're in europe and looking at the alternatives, now the u.s. treasury looks very attractive, even at 1.7%. it is those balance of forces that are going to play out. traditionally, you are gue for higher yields in the u.s. guy: the market seems asymmetrical the moment. it seems to be all on one sid.e fed willboj, and continue to carry on with what they are doing. i am looking at the other side of the distribution story. is there danger to the inflation that starts to move higher? is there a danger that the european economy looks better than draghi would have us believe? you start to put these into this narrow and you start to think, what if actually the story is

not as bad? >> we are not necessarily advising -- it is a big opportunity. in terms of these very extreme scenarios people play, no. that said, when you do have the changes in sentiment, because the market is so dominated by the central banks, you have outside reactions and prices. a, there is non-negligible risk at this point, but it will not be from 1.7% to 4%. but it could be from 1.7% to 1.8%. guy: how do you build that into the portfolio? our case is central banks will continue to do what they are doing. how do i mitigate that risk, though, that actually, maybe the economy starts to look at little bit better? maybe the u.s. starts putting a decent numbers.

maybe the numbers out of the european economy are better. what do i do on the other side of that trait. -- of that trade. dan: we agree with that view. we think the outlook with europe and the u.s. is not that bad. it is not that great, but it is not terrible. we don't see the risk of a big increase in stress because of risk aversion or a slowdown in the economy. a is one area where people they need to be looking fo. alternatives is emerging-market equities. guy: as you said, it is all the distribution of risk. thank you for spending so much time with us. daniel morrison, from bnp. up next, the latest fuel data.

regulators need to be clearer about what they expect from automakers. more on this story, next. ♪

>> the market was doing really well in 2016 because everybody was predicting a slowdown. so far, we have seen in an percent decrease. so, in a certain way the cu ton t on the taxes of small cars helped this market go up. awaytlet's

from beijing. thanks for joining us. we just heard president barack obama talk about "buy america." always seem to read about in germany is the scandal with volkswagen. how far do you expect this issue two missed us the siz arouno metastasize into the entire sector? >> how far can a spread? on friday, the german transport 630,000y, we heard additional cars needed to be recalled in germany. one thing we need to highlight here is it was not an illegal defeat. we ended up pushing the boundaries when it comes to regulation.

e, politiciansid acted little bit hypocritical here in my view. they set the standards and the regulations. and now they complain about how they are fueled. in general, i expect the demand will increase in the regulatory costs will go up even further than we have seen. hans: who is the best protected? is anybody immune? of the avoided many ouch negative press, so far. >> based on the report, it would be bmw. because all cars that have been tested from them didn't raise any questions. they passed. from that perspective, at the moment it is bmw. we will see more details on what has been tested. ongoing testing is still a m

atter. cars.end to sell larger you can put much more exhaust re, muchtments in the more content in terms of aftertreatment systems in there. with smaller cars, it is more difficult. guy: we have just been hearing from carols. he was talking about the move to ev sparking consolidation. do you think the emissions scandal will have the same affect? >> is very well could, but at the moment when we make our analysis, it is very difficult to see with a lot of people switching to electric mobility. we don't have enough infrastructure available or enough cars available. also, the schedule just went far worse when we look at the oil

price. so, economically speaking, it does not make sense at the moment. on top of that, we don't have a very attractive offering globally. i think it will take years and years to come -- to really push electric mobility forward. guy: you think that the issions scandal will cause consolidation? if you look at some of the balance sheets for these companies, does it have an effect? >> absolutely. forlatory costs will go up the smaller players. they are pushing for a merger with other players. the pressure is increasing.

guy: thank you very much indeed. we will take a break. markets are trading low this morning. ♪

guy: welcome back. you are watching "on the move." let's see how things are shaping up. we are done by .5%. london is underperforming in the energy sector is one of the main reasons behind that. the dax is underperforming at .8%. are down. and energy ha let's look into the details as to what of those markets are on the move with caroline hyde. caroline: i can starting on an optimistic note this monday because i am starting with your best performer. anglo american and merrill lynch says it is time to buy.

if you want to be able to get them, you go to ashtead. the analysts seemed to be saying, it is time to start buying up these stocks. on the downside, phillips is down by 4%. why? 14%.n see sales rising by uisse is a little bit worried about that number. and the revenue numbers have come in line. this company is really trying to reorganize itself. it would seem that rather than sale the business as a whole, selling shares could be the way to go. the market looking little bit better and equity market sentiment has been improving compared to the first couple of months in the year. so maybe, they will see phillips proceed with a share sale. down 6%.we have edf

that is no surprise when on friday it was announced they were looking to sell up to 4 billion euros in more shares. more shares were added to the market. a cost-cutting aera. they could be selling off 10 billion euros worth of assets. this is by 2020. the french government says, we will purchase most of those new shares sell. nevertheless, more supply means, down go the shares. hans: as we have been talking about all morning, u.s. president barack obama has praised angela merkel's open door stance on refugees. this could be his last visit to germany as president. he said the chancellor's position showed courage. president obama: what is happening as to her position on

refugees here. in europe, she is on the right side of history in this. and for her to take on some very togh politics, in order express not just a humanitarian concern, but also a practical concern that in this globalized world, it is very difficult for us to simply build walls. she is giving voice, i think, to the kinds of principles that bring people together, rather than divide them. hans: the leaders also talked trade and policy on syria. today they will meet with the leaders of italy, france, and the u.k. we will stay here in berlin. we are joined now for a conversation. thank you for joining us on bloomberg television. you were also on the economic board.

we spent a lot of time talking about refugees. we spend a lot of time talking about the potential political impact. what is the potential economic impact. >> the economic impact is still pretty unclear. that depends largely on the way in which we can integrate the refugees. this must be the key for all political and economic thinking. how can we achieve integration? how can we bring those who come here as soon as possible into the labor market? this is what we should concentrate on. hans: the other big conversation here was obviously, the auto sector. last week, headlines were dominated by volkswagen. there seems to be an implicit understanding that it can get very bad for volkswagen. an implicit backing of volkswagen by the german states? >> at this point, i am more convinced that volkswagen will be able to sell the problem by itself. there might be a settlement in

the united states. there might be others coming up, but at the same time, it shows confidence. this gives me more confidence at this point in time. hans: and you are not worried that it could be spreading across the entire sector? or is that in a weird way, good for volkswagen? because everyone else who does it, their transgressions don't seem as severe. >> certainly, the report that came out last friday of last week gave us indications that there might be more coming up. it is supported for us to distinguish between those things that were wrong doing and others that were a very lenient way of doing things. -- butneed here is more what we need here is more cooperation. guy: do we need the german government to spend more money?

everybody is calling for it. there is very strong resistance in berlin, particularly from wolfgang schaeuble. will that be the thing that saves europe? because a look at sweden right now, an economy that is booming with 4% gdp growth. part of that is what is happening with the government. part of that is the migration story. and they wonder or not whether that should be the model. >> right. germany needs more investment. that is clear. the only question is, how will it be financed? what has happened in the recent years, it shows be have more and more concentrated on the equilibrium of the balanced budget. but at the same time, far less attention has been spent on the question, whether it should be investment that should be cut? it looks like that it has not been cut at the same extent as investment. therefore, we need more

investment, but it should be possible to maintain a balanced budget. guy: i agree with all of that, but i am wondering. you can tie the two things together. for instance, with the volkswagen story. why don't they scrap a load of cars. germany can borrow a pretty much 0%. i expect the ep economics to build a new road or bridge. i expect that to work with those kinds of numbers. >> that is absolutely right. at the same time, i am rather concerned about the greatness with which further social promises are given. we saw the election in 2013. areexample, the pensions now granted at the age of 63 if you have worked for 45 years.

mothers are given extra pension benefits. there is no discussion about getting more for the pension. we know that much of this is coming out of the fiscal budget. we have to be very careful on this side. while at the same time, thinking how to increase investments. hans: you just laid out big political roadblocks for angela merkel. we had a vote in austria. it was a ceremonial position, but nevertheless, it looks like the far right party will be in control. is this unique to austria? artist germany need to start worrying? > -- or does germany need to start worrying? >> germany has seen a small move in this direction. is gaining some traction. but it is more important to stick to the cause and explain to the electorate what actually is in it and also to avoid getting to the far right wing movement that actually doesn't have anyone. argument schaeuble

is that 50% of it can be explained by the low interest rate environment. is this a plausible argument? >> i would not think that the low interest rate environment is really the key contributor to the rise of the so-called alternative for germany. we have questions regarding the refugee crisis. the refugee crisis just needs to be dealt with unanimously with strong efforts to actually avoid further risings on both sides. markel's position is to stay secure on both sides until the election. >> i would think so because there is no real opposition to her overall stance in terms of the refugee crisis. at the same time, important that the concerns out there are taken seriously. and at the same time, not to follow simple stick moves on the other side. quick final

one on the auto sector. all of the german companies have in making the transition to e-mobility. at what point do they get serious about subsidizing this technology? a it is actually quite -- very complicated situation. on the one hand, we see a record profit for many of the car manufacturers. it is difficult for them to explain to their own employees that change is on the way. real changes needed for example, to think about e-mobility, but also to battle those other competitors like google that have entered the market. hans: i don't think i will be traveling in a google car anytime soon, but we will see. i think president barack obama wants us to buy american. talking we will be

about the new reality for the auto industry suppliers. that is coming up next. ♪

guy: welcome back. i'm guy johnson in london. let's get your bloomberg business flash. david: thank, guy. phillips is becoming more likely. first-quarter profit rose more than estimated.

adjusted earnings rose to 374 million euros. analysts had predicted three-on-two 62 million euros. -- 362 million euros. >> we are in the careful process of looking at a final bid and the ipo. we have not taken a final decision. equity markets are improving. so, an ipo is the more likely scenario, but the decision still means to be made. we expect that will happen in the second quarter. s will u.k. retailer bhp file for the administration. retail acquisitions will raise 160 million pounds. they opened its first store almost nine decades ago.

and over to japan, mitsubishi motors' shares dropped again after losing more than 40% last week over the fuel efficiency scandal. earnings reports were due out wednesday. the company said they need more time to measure the effects and extent related to the falsified data. that is your bloomberg business flash. back to you, hans. tro arehares in covesr trading lower this morning. this is a supplier to the automotive industry. with goolet's get over to the c, patrick t homas. when you look at the overall trends in the auto market, are we through the worst of it, or is there more of a downturn,

especially with the german manufacturer? >> i think the story on automotive is really a positive story of the asian pacific and north america, where we have seen a lot of strength. flight change in the china mix has seen less luxury vehicles and a lot more small vehicles being produced. and for our business, we see some of the export high-end vehicles suffering a little bit in the marketplace, particularly in china. but overall, we have experienced very strong volume growth, 8.5% globally with 15.5% in china. that is driven partly by the construction industry, which had a very mild winter, but also by the electronic industry, where new products and the wearable technology and virtual reality technology are beginning to kick up. overall, pretty strong growth for us. the sales line is down primarily because prices came down as raw materials dropped, but that is

normal and was expected in our results. all of the analysts had that in their models and that is because the raw materials have dropped more than their prices. we still have prices up despite that. increase up to% just over half a billion for the first quarter. i think in terms of outlook and how we see things developing, it looks volatile. we have limited visibility, but we are able to suggest that in the quarter two we should see a level pretty close to the quarter two of last year that was pretty strong. guy: good morning. it is guy johnson out of london. can i talk a little bit more about those markets in more detail? we are talking about western europe being absolutely flat, or slightly up from flat. oem's seeing that

you are not think? how does it work? and what are you expecting in western europe? >> in western europe, we saw a growth rate, which was the lowest out of all of the regions in the world. it was down at 520%. automotive only makes up about 18% of our business. it is an important sector. we tend to deal with the tier two's in ther industry. oesome of deal with the the oem's. we tend to see the strongest growth in america and in asia. guy: you think the british leaders leaving the eu would be a pretty dumb idea. what kind of an impact do you think it would actually have? you probably have a pretty good the of both sides of this -- a

pretty good view of what sides of this story. what effect would this have on the european economy and more specifically, the british economy? >> the most important impact would be on the british economy. and in a world that is increasingly more connected, in a world where global business is the norm, i have strong concerns about british pulling out the drawbridges, or as i put it, burning the bridges. the effect of this will be unknown. we might not like all of the things that are going on with the european union, but that is true of everything in the world. the political argument, well those are likely not to change with or without the brexit. i see no significant change in the refugee situation or the terrorism situation. these are not solved by brexit or non brexit.

the manufacturing and financial services would be affected and i see a real risk with brexit there. hans: patrick, you are in a unique position. i want to ask you which team you support. but there probably is not time for that. walk us through how you see the polyurethane market. do you think we are to the worst of it, or do we have more headwinds ahead? >> depending on which part of the polyurethane business we so, it is pretty strong. that was particularly because of the mild wind turn. that business is being pushed quite strongly. of countries adopt stricter building codes -- as more countries adopt stricter building codes around the world,

polyurethanes also goes into the mattress market. almost everybody sleeps on a polyurethane market nowadays. in china, that business is growing, despite the weakness of the market. in the rest of the world, the trade is away from the metal spring market and towards polyurethane. in the auto motive sector, light weighting is key. and that is where polyurethane brings the biggest benefit, bringing a lightweight component. across many sectors, and polyurethane continues to grow. it is growing faster than the supply-side. i would expect to see you tighten over the next 18 months to two years in the market and pricing power to be returned. guy: patrick, great to see you. thank you for taking the time to talk with us. oil.xt,l life after

saudi arabia tells us how it plans to survive after eight an economy dependent on crude. ♪

guy: welcome back. is it the end of the oil era? saudi arabia officials are expected to unveil a vision today. we are joined now out of abba debbie. abby what can we expect from

this announcement? we have heard this before, but why is this time different? >> this time, they are announcing the entire package. they are expanding it officially. but we have had so far was released in interviews where the deputy crown prince was leading this effort. he explained some of the ideas behind what they call the saudi vision 2030. what we know is it is going to have four elements. the first is the national transportation program. which they are hoping to announce in more detail in a month from now. the second element will be the transformational saudi force from an oil company to an energy industrial conglomerate. this will create a public investment fund. the plan is to put the saudio ramco into this fund and create a giant, at least $2 trillion, fund. the fourth element is the

partnerships that they are planning to grow into companies to change things in saudi arabia. joined and are waiting for that announcement. we're going to get it very soon. so, it is a packed week. then, it is going to start getting busy. angela merkel has a meeting for the so-called g-5. that is happening later today. tomorrow we have the primaries in delaware and maryland. then, we get to the main meat of the week and it is the fed rate decision. how dovish ultimately, will yellen end up being? and then thursday, we have the decision out of the boj. great reporting from bloomberg. then, we get gdp data out of the u.s. later on as well.

all about, obviously plenty of coverage as we worked our way through the week. all of that will be covered and it will be a great week. hans nichols and myself will hand you over now to francine lacqua. ♪

francine: life after oil. saudi arabia outlines plans for crude oil. we are from the deputy crown prince earlier -- later. policymerkel for refugee . the president wraps his tour with a g5 meeting. car troubles. the emissions scandal hangs over the beijing auto show. urges clearer rules. ♪ francine: welcome to the pulse, live from bluebirds european