guy: welcome to "on the move." 8:30 7:30 in london and in berlin. i'm guy johnson, alongside matt miller. germany's bayer has planted the seed for a monsanto takeover, offering $62 billion in cash. what would it take for shareholders to get behind this deal? presidents talk about the chances for a rate rise. to speakait for yellen

on friday, this after being burnt before by the fed chair. one-month ago until the brexit referendum. david cameron and george osborne say britain will be plunged into a crisis of its own making. morning, stories this though. definitely, this bayer deal. shareholders over the last few days have been selling the stock. they are not convinced this is the way to go. is bayer doing anything to alleviate that concern this morning? matt: well, they will be holding a press conference -- or at least a conference call. and look, it is going to be a very difficult purchase to make. we have had so much scrutiny from regulators on deals in recent weeks. inre was a cfo deal chemicals that was scrapped of the weekend. so, that is one difficulty. the other difficulty is that

germans are not used to takeovers of this size. $62 billion will be the biggest purchase ever by a german company, in corporate history. so, it is a lot to swallow, especially considering this is the first price offer. i had thought initially, maybe some burials would come in here. but the only other bidders possible could be basf, another german company that does not typically do this kind of thing. i was speaking with our editor here in bloomberg berlin about this. we will hopefully speak with him lateron the air. but it is a difficult deal for german shareholders to swallow. 18.38%. stock is down it will be interesting to see how the stock opens this morning. funnily enough, the german market is opening a little higher this morning. let's see how bayer and basf

opens. 2%.dax is up by this morning, matt, it looks like it will be a flat one. matt: let's take a look at what happened. flat in asia. if you look at the broader index. but if you look at the individual pieces, you can see losses in japan. the nikkei was down. the concern in japan is of course, the strength of the yen. it is trading right now at109.76. we had that above 110 last night, as i was watching this. this comes as the trade of the surplus swells. we had imports actually falling 23% and exports down 10%. that was basically inline with what we were looking for. you can see weakness in the bloomberg dollar index right

now, down .2%. asnt crude came down 48.16, iranians continue to put out as much oil as they can. they are not ready for an output freeze. let's get to the bloomberg first world worlds. reporter: bayer has tabled a bid to purchase monsanto for $62 billion. the german company offered $122 cash bid.with an all the proposed acquisition would be the biggest deal by a german company. later this morning, we will be speaking with bayer's chairman, at 11:07 u.k. time. exports fell for the seventh consecutive month in april as the yen strengthens. this underscores the mounting abe's efforts to

revive economic growth. oversee shipments provide 10.8% in april, were 79.9% drop estimated. -- worse than the 9.9% drop estimated. screen, which reveals why the angry birds were so angry. the"angry birds" movie took top spot from "captain america: civil war." jobsame maker recently cut because of waning interest. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg at top . matt? matt: thanks very much for that. the u.s. economy should be solid

enough to merit an interest rate increase this year and the fed will not caved to political pressure to refrain from tightening during a presidential election year. so says san francisco fed president john williams. the mall, the boston fed president, who is a voting member this year, says he is getting ready to back tighter monetary policy as well. janet yellen will be speaking later this week. guy, and been very interesting listening to all of these fed speakers. guy: it has, but you know what, the market has been burned this way before. we have seen this set up before. you get along with the dollar and then yellen comes in. let's talk to the strategist at ubfs wealth management. why do i want to stay invested when the fed may or may not pull the trigger on the rate hike? we have seen this movie before. >> there are those that believe

you can only stay invested if the fed remains dovish. staying at home forever is not the default option. so, those actually believe a bit more in fundamentals. no data is getting better. really, the output gap is tightening. thethe fed wants to tighten domestic conditions. the country is growing. why should we be worried about that? sorry, you think jim is a live meeting. we are seeing a 28% chance, as far as the futures market is concerned. we have heard from so many fed speakers lately that june is a possibility. rosengren is saying later this year. is it too soon? >> central bankers should never

precommitment, quoting the ecb. that means every meeting should be a live meeting, whether you believe it or not. fed was a bit uncomfortable of the market completely dismissing the prospect. we are still looking at the second half of the year for any moves. guy: i am sitting there and listening for these guys, but i am waiting for yellen. because as i have said before, the set up for this is something we have been through before. janet yellen has come in and poured cold water over this before. the have got to be in the back of trader's minds. >> i think the markets in general are accustomed to the central bank introducing this kind of volatility. they are not sure who to focus on. i cannot recall any instances, apart from the one with the bob, where you get the chief of the central bank being o utvoted. that would probably do more harm

than good. all of the fed speakers know that behind the scenes. but they are telling you, this data is looking better. to us and are going to be on hold forever. with the stronger dollar are tied with the g-10. they will be much more worried about the destabilizing fashion. we have to look at the trade with china. guy: this is getting to some pretty interesting levels. >> it is. it looks like it is going to stay there. if you look at commodity markets overnight, they are taking quite a battling right now. guy: they are done massively right now. >> everything is pointing to a softness in growth and demand. you have to look at the situation there and say, if you believe what people are saying in the front page article, they are serious about re-cutting capacity. rates are already quite low and they don't want to cut them too much further. no more run offs, of course.

they know the path is clear right now. will other asian currencies follow? that is something we have to pay attention to as well. geoffrey is going to stay with us. next, we turn our attention to japan. exports drop for the seventh month and a low. we check in with the world's's third-largest economy, next. ♪

matt: we have some breaking headlines from the bayer conference call. $122 peroffering 152 bal share. the ceo says he expects a positive response from monsanto, as far as this offer is concerned. of course, it is an unsolicited bid. and typically, the first thing you get is a negative response. bayer will have to come back theoretically, and offer a higher price. however, this ceo expects a positive response and expects everything on santa brings to the table. you wonder if that is a shout out to monsanto's management. of course, when the company gets purchased, the management fights against it because they don't want to lose their jobs. in any case, you can see the shareholders' response to

bayer's bid. the speculation has been there over the last month, it has gone down 18.4%. now, let's get to the bloomberg business flash. reporter: well, matt, ryanair has forecasted that earnings growth will slow this year even as profits jumped. the largest discount carrier in europe expects earnings to rise 13% this year after a 43% surge in the 12 months through march. airlines have cut ticket prices tice customers. but profit after tax in 2016, euros.to 1.2 billion axa has is that it will stop investing in tobacco and will divest 1.8 billion euros of assets in the industry.

bondobacco industry holdings are valued at 1.6 billion euros. said, smoking axa causes the biggest threat to public health in the world today. $11.3 billion jet order from viet jet. planes wasr 100 announced in the presence of barack obama, who is currently visiting the southeast asian country. back to you. 's exports fell for a seventh consecutive month in april is the yen strengthened. the underscores the mounting challenges that prime minister abe is facing to revive economic growth. dropis worse the me 9.9% that have been estimated by economists. imports as well, fell 23%, leaving a trade surplus of $7.5

billion. forecast thats earnings growth will slow this year, even as profit jumped. we will continue to talk about that and the airline sector as a whole, the first, i want to go back to jeffrey yu. we jump back a second and talk to you about japan. the imports i think, that number was sort of massaged bite oil prices. -- by oil prices. but what do you think about that drop? this gives japanese finance impotence to, really intervene when the u.s. does not want them to. j did nothing, they were making a big bet on u.s. growth. secondly, you mentioned export growth, or the lack of. that tells the what you need to

know about external demand. japan has always had an excess savings problem. this is a lot different from one import contraction is far worse the next for contraction. the cousin cannot recycle that. -- because you cannot recycle it. guy: japan is a huge exporter at the moment. you look at the shape of the curve, it is japan. what happens next? give me a sense of the policy in country and how that will impact ex country. geoffrey: if you look at some of development over the past year, fdi has picked up significantly. i think if corporate are not willing to invest their cash on shore, which is to be the case, i think that fdi will still flow. you will get higher returns that way. as far as the treasury market is concerned, it is not just japan

right now. matt: i love -- there is a story on bloomberg. you can see the most read stories on the bloomberg. up there is a story of goldman sachs managing a couple of corporate debt offerings that have negative yields. international traders still investing in this because they use cross currency basis swaps to in the end, get a 78 base points return. are you hearing a lot about the cross currency basis swa ps? >> this is known in the markets. you can even see this on the wealth management side, to be honest. thiss long as we have negative rate environment and

central banks are pushing it, especially in europe, they will look at these things and say, are these the distortions being brought through to the market? is a steady there stream of funding and people say, why not? guy: why are we talking about this intervention now at y9? >> the gap right now versus the corporate's benchmark, that is one gap. for japan, it is not about level. it is about pace. now, as long -- guy: so, kuroda is going to sit back and wait for yellen to do his harvard? >> well, yes, but what happens if yellen does not do his hard work? guy: minutes away now from the

market open. it looks like it will be a fairly flat story. bayerl be th -- will be the big stop to watch. what are the implications on the back of this deal? is good move all of the markets. the $62 billion bid for monsanto, that story is next. ♪

guy: welcome back.

8:52 inlondon and berlin. i want you to pay attention to what is happening with commodities right now. they have been crunched i asia overnight. nyou could see a read across stocks. iron ore you are continuing to see this money moving out of the markets. it is now having an impact on the real economy as well. matt, the other started we are really focused on this morning. bayer making, as one analyst put it, a once-in-a-lifetime opportunity. matt: that iron ore chart for today, that looks like the chart from the bayer chart over the last month. bayer is offering to purchase monsanto for $62 billion, possibly grading the world -- possibly creating the world's's

biggest supplier of genetically modified seeds. the bloomberg managing editor for global's nest joins me now on set. -- global business joins me now on set. we are hearing from the ceo that he expected positive response from monsanto. typically, these deals get bigger after the first sell, though right? >> exactly. later today, they put up the sales. the price we have now is unlikely to remain. it will probably have to go higher, and they probably have to go higher. guy: i am going to jump in. think there is a problem with your mic and we can quite hear you. the fx implication of a massive transaction like this, while it absolutely depends on how it is funded and how the euro market

will take notice. they might have the multicurrency and credit facility. that is the norm. a lot of this will depend on shareholders and the geographical distribution of the company has well. but the net number might be a lot lower than the headlines will suggest. immediately, you will see pricing in. if that is going to start to pick up, that could affect the fx market as well. deutsche, vanguard, those of the major shareholders we are seeing in bayer. we will see how this one works out. i have not got the monsanto number, that we will get that for you later. it looked like the market will open flat in europe. the biggest story in t equity

marketh is, what will happen with bayer today? we will bring you that market open momentarily. ♪

guy: good morning. you're watching "on the move." i'm alongside matt miller in berlin. we are moments away from the start of european trading. matt has your morning brief. matt: on this gorgeous morning in germany, bayer plans to cede for a monsanto takeover, offering $62 million in cash. and, hiking a hike. fed president john williams and eric rosengren out of boston talk up the chances of a rate rise, but traders will wait for yellen to speak on friday after being burnt before. one month ago until the brexit

referendum, david cameron and george osborne say britain will be plunged into crisis if the country votes to leave the eu. if the ask roger bootle country is headed for a recession. let's get to the market open. guy: looks like we have a fairly flat open. let's get the numbers up. the picture at the moment looks like a fairly flat picture. london opening flat, paris unchanged. waiting for the dax to open, looking for a bayer number. we are getting details out of france. the pmi numbers are just beginning to hit the tape. rising to 51.8. the french manufacturing pmi rising to 48.3. the services number looks solid.

the manufacturing number looks like. that number a little bit light. a number of things moving the euro around. the details of this market open. nejra cehic has that. nejra: time digging into the industry groups on the stoxx 600 on the bloomberg. it is very much a next picture. are seeing a lower oil price today. health care looks to be leading the gains, up 0.4%. is some of this down to this bayer deal? let's look at the top stocks we are looking at. bayer right at the top. if this goes ahead, biggest deal globally this year. also would be the biggest takeover ever by a german company. bayer offering $122 a share. this was someone at the lower end of what analysts were

expecting. still talking a $62 billion deal. shares were called slightly lower by some analysts at the open. we are talking about a 20% premium to monsanto's last close in the u.s. last week, shareholders in bayer punished the stock when we first heard they made an offer from on center. we will keep an eye on that. we are also keeping an i on ryanair. it forecast that earnings growth is going to slow this year after a spate of terror attacks and lower fuel prices have prompted airlines to cut ticket prices. slowing profit growth is what they forecast. i wanted to look at tobacco companies. we did get news from france's biggest insurer, saying it will stop investing in tobacco. that is what we're watching today.

matt? matt: absolutely, waiting for bayer to open here. could take a little while for traders to get that stock open. bayer has offered to buy monsanto for $62 billion. that deal would be the largest in german corporate history. the world'sate biggest supplier of farm chemicals and genetically modified seeds. benedict is back with us. we had some microphone problems. i apologize. tell us about the difficulty that you foresee here. regulators have been blocking deals left and right across industries over the last couple months. german shareholders have been really worried, have been selling off the shares, in anticipation of this offer. >> there are huge complexities. you mentioned the regulatory side of things.

bayer is pretty positive. we've got the banks to do the financing. we feel confident about this. we have a good credit rating level to support this deal. they feel safe on the financing side of things, but we should remember this is the opening shot. it will go higher. the offer was made more than 10 days ago, so a lot will depend react, soreholders the financing is one side. then the political angle. monsanto is seen as a difficult company to advertise in europe. a lot of people have negative views. jin negative -- modifiedetically seeds, i feel like someone will throw me out just for saying it. gmthey pulled out of research in germany a couple years ago because they felt the

framework just wasn't as it should be. guy: the stock is opening down, pretty much in line with where we thought. as matt says, it has already been crushed. how are the bankers advising the defense team at monsanto going to be pitching this one? are they going to say, go on the attack? how is this going to play out? >> that is the big question we're all waiting for. we haven't heard anything from monsanto. we received this offer and we are reviewing it now. we don't know whether they like it or dislike it. they've gone from the hunter to the hunted. they went after syngenta last year. syngenta now is in the arms of cam china. a lot of movement there. itself, will be asking do we have a choice or are we weakened because of our foray to

my syngenta? we have to give a hard look at this number that bayer is putting on the table. or maybe there is somebody else waiting in the wings who might put forth another bid. guy: i don't think we're done with this one. thank you very much indeed. stocks now down 3.5% in germany. let's talk about another corporate, ryanair forecasting earnings growth slowing this year. riseexpect earnings to after a 43% surge in the 12 months through march as the airline cut prices to entice customers. let's get to our aerospace reporter, men cats. -- ben katz. what is the business model looking like? >> they are really uniquely positioned in that their cost

levels are the lowest. is that allows them flexibility when it comes to filling the planes at lower prices. while you have other competitors like euro wings that deutsche lufthansa is trying to get off the ground, they don't have the same flexibility that ryanair has. they are best prepared for these low fares. will ryanair have a problem if the price of oil continues to rise? we are back up 80% and the 12-year low in january. >> what they very fortunately have is a fuel hedging strategy. what they have is 95% hedged in the 60's range. next year, they are 45% hedged in the 50's. the most important thing with fuel is that they can predict the cost. guy: you talk to the guys over

there and they like the idea that fuel prices because low prices are keeping some weaker competitors in the market. either.ys can't hedge it kind of is a double whammy for them. >> there's this competition that hasn't really been sustained previously. what ryanair and the entire european airline industry is battling with is the fact that everybody wants to add capacity. it is the cheapest that it has been for a long time. what that allows is this massive competition, this massive growth in capacity. that is where we see the fares being pressured downwards. that pushes down ryanair's growth. guy: thanks. jeff, would you hedge at this level if you were thinking about oil prices? do you think the downside risk

is bigger than the upside risk? geoffrey: we do have the supply and demand issue, but then you've got opec production issues as well. not taking too strong review right now. then perhaps going back to dm, iron ore and things like that, maybe slightly more downside. guy: ok. matt: by the way, even though oil has come back a lot, we were still under $50 for both brent and wti. did we ever get a benefit as far as growth is concerned from lower oil prices? did you ever see that really come through? geoffrey: if you look at the u.s., the savings rate has gone up. the excess income from lower gas prices, that has been saved.

airline industry, it is quite symptomatic of what is going on globally. there's so much competition. companies don't want to raise prices. margins don't expand and you don't need to pay your employees as wage growth is weak. they need to start paying their employees of it more to jumpstart the cycle, to get them to use the savings. i think the results right now are mixed. said, i need to pay my staff a little more so they can afford the cars i make. stay with us. geoffrey yu sticking around for us. up next, greeks pass a new set of reforms in the hopes of securing more funds from the eurozone. we're going to athens next. ♪

welcome back. let's take a look at the numbers around europe. dax now down 0.8%. bayer, we will get the number in a moment. the cac is down 0.9% as well. matt? matt: take a look at bayer shares right now, just getting down about 3% on the back of that monsanto bid. the biggest bid ever by a german company.

if it was carried through, the biggest deal ever by a german company. guy: ok. another small technical problem seems to be plaguing us. something about german microphones. let's get the bloomberg first word news. here is haslinda amin. fellnda: japan's exports for a seventh consecutive month in april as the yen strengthened. it underscores the challenges to prime minister shinzo abe's efforts for growth. overseas shipments declined in april, worse than the 9.9% drop estimated by economists. imports fell 23%, leaving a surplus of $7.5 million. britain will be plunged into recession if the country votes for brexit, that according to david cameron and george osborne, who have written a

joint article for "the daily telegraph." analysis to be published today says gdp and house prices would slide in a while inflation would jump. the eu referendum is set to take place exactly one month from today. the big screen adaptation of the angry birds games which reveals why the birds are so angry topped the north american box office. in $39birds" raked million. it is a shot in the arm for the game maker which recently cut jobs due to waning interest in the franchise. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg and top . guy: why they are so angry, we finally find out. greek lawmakers approved austerity measures today to

unlock emergency funds from the euro area. they include increases in sales tax rates and a cut in social benefits. because chris alaris joins us now. getting thise through and he seems to have the backing of the other parties. is this going to convince everybody that we just start releasing funds? >> it should. it was a substantial package of fiscal measures. pension cutsop of and income tax hikes equal to 2% of greek gdp earlier this month. it is no wonder we heard so many officials praising the government's commitment to the bailout program. the disbursement of the next bailout funds is only a matter of time. maybe even tomorrow, euro area finance ministers will make a

decision to release more aid funds for greece. mark's a big question here, what will be the impact of additional austerity on greece's economy? for the moment, it seems that greece will get the next loans and be able to meet its debt repayments this summer so we won't see the drama we saw last year. guy: ok. i'm slightly disappointed but that is because i like greek food. let's talk about what could upset things. the debt issue is the trickiest issue in the discussions and this stage. withmf is at loggerheads greek european creditors about the credibility of greece's program. the fund is saying the assumptions are too optimistic. the expectation that greece will maintain a stellar fiscal

performance for decades to come is basically a far-fetched fantasy. the imf is asking for some substantial debt relief measures for greece, asking that greece doesn't make any payments on its bailout loans until 2040 and that the maturity of these loans be extended until 2080. governments including germany are not willing to offer that much to greece. it will slow down any meaningful impact on the greek program. the worst-case scenario would be the imf walking from the program , citing the lack of credibility of the program. that would be the clear option. war with someo to of its biggest shareholders? we don't know yet. we will see in the next few weeks. guy: looks like it is going to be not as interesting, but still

an interesting summer. very youthful looking. thank you very much indeed. let's get back to geoffrey yu. greece, does it sound like it is done to you? geoffrey: close. i don't think the markets have ever treated this as an issue is and all the other issues around europe. they don't need a financial crisis on top of the migrant crisis. if you look at how euro-swiss has done, eurozone-specific issues is probably the only aspect which can get people to bid on swiss franc versus euro again. matt: i am back, guys. can you hear me? guy: you found your voice. my master plan to silence matt miller has failed. matt: since i've been over here about a week, i've heard a lot of complaints from german

citizens, even as their growth is the best it has been in at least two years. 0.7% in the last quarter. most germans seem very displeased with angela merkel's handling of the migrant situation and the situation in greece. it seems that and a time when the economy is doing so well, it is not helping her out. do you find that interesting as well? geoffrey: it depends whether the economy -- we look at the numbers -- if that is trickling down. how are they feeling it? one thing we've always said about german households is their lack of consumption. you hear about both sides of the german political sphere complaining about negative rates and the perception of that eating into underlying income. that could channel into displeasure. we are seeing this globally

right now. judging by what is happening in austria, all of our clients are asking us about politics and populism in europe, the u.s., and everywhere, is that going to derail the recovery? policy something that need to deal with. guy: this morning, deutsche bank has fairly aggressive cut its year-end target for the stoxx 600. is this because u.s. investors aren't going to be involved, or is it because european companies can't generate any top line? geoffrey: slightly more to the latter. we removed our overweight euro on equities so we are flat on both accounts. it is more on the earnings side. we are relatively optimistic. that hasn't delivered on the top line side. now with the euro trading where it is, you don't get too much of an fx it either.

manufacturing side, a lot to be desired. consumption side looks better. that should drive growth. it is just not happening at the pace we would want to see. guy: we never get enough time with you. geoffrey yu, thank you very much indeed. up next, hedge funds are piling into the same stocks. we're going to chart those momentum bets next. ♪

matt: welcome back to "on the move." i'm matt miller in berlin. bayer shares are down in german trading after offering up $62 billion to buy out monsanto. if you look at the shares over the last year, they have come down hard since talk of a bayer bid for monsanto started. they are down now 25% year-to-date. hedge funds are piling into the ed yourocks that zapp returns at the start of the year. let's get to the chart of the hour with nejra cehic. nejra: investors doing well in 2015, but that broke down at the start of this year. what this chart shows is that investors stuck with this momentum trade over the value

trade. this is even though it posted some of their worst losses in seven years at the start of 2016. of 4.5% in thern first four months of 2016. the biggest loss since 2009. hedge funds have taken a bearish view. a move from values momentum that this chart is showing. much indeed.u very nejra cehic with the chart of the hour. bayer is definitely on the move this morning. , if you ares looking at your screens and scratching your head and wondering why italy is down, just take a look and you will see big dividend payouts. we are going to talk about what is happening with brexit after the break. david cameron and george osborne

worn that leaving the eu will spark a recession. our next guest is an economist. i'm pretty sure he's going to disagree with that. roger bootle, next. ♪ okay, ready?

whoa! [ explosion ] nothing should get in the way of the things you love.

♪ get america's fastest internet. only from xfinity. guy: welcome back. we are 30 minutes into the trading day. there's a couple big corporate stories. bayer is one of them. the dax down by 0.7%. if you are wondering why the italian market is down as hard as it is, a lot of big financials have gone ex dividend today. matt miller, over to you. matt: we are seeing the purchasing managers index come out. rises to 55.2.i that is more than the forecast

54.6. german pmi of 55.2 and the manufacturing pmi rose to 52.4. that was more than the survey of 52 even. pmiices and manufacturing coming out ahead of the forecast. here you see a euro-dollar trade. euro gaining some strength. german pmi coming up and sort of balancing a long a level here. i've got a chart of pmi over the last two years. we've been hanging around this 55 level. let's get to our top stock stories with nejra cehic. nejra: bayer first and foremost, we saw this stock drop on thursday after bayer confirmed it had made an offer for monsanto. we got the financial details today. 37% premium to monsanto's

closing price on may 9. we are talking about a $62 billion deal, the biggest ever takeover by a german company and it has pushed bayer shares to the lowest in more than 2.5 years today. it is down 3% at the moment. covestro.ooking at still has a stake in this plastics business. is it going to sell that? sell toe could bayer finance this all-cash offer for monsanto? finally, i'm looking at ryanair. company forecast that earnings growth will slow this year as terror attacks and lower fuel prices have been prompting airlines to cut ticket prices. ryanair expects net profit to rise in the year through march.

we are seeing the stock rise. guy: thank you very much indeed. ryanair trading a little higher. michael o'leary getting a nice benefit on the pr front from taking sides on the brexit story. plunging into recession according to george osborne. exactly one month before the eu referendum, a controversial treasury analysis says thousands would lose their jobs. gdp want plunge by up to 6% over a period of time. our next guest is going to disagree with this. roger bootle joins us from capital economics. he is also the author of a book which i think has been updated. are we heading for a recession if we leave the eu? roger: i am going to disagree

with this analysis. guy: i'm shocked. roger: it is a very difficult thing to forecast the future. all economists should know that. we have to be pretty modest. in would be funny if it were not so important, this issue. really, we don't know. there's an enormous range and a positive range. my own guess is that after we left the eu, there would be a period during which not much would happen. continue.fe would then we go into a strange phase where we don't know what is going to turn out, then there will be some effects. but we don't know what those effects will be. guy: this is where it is interesting to listen to people about how we tease out what is happening now and whether or not the talk of a brexit is having an impact on economic activity.

let's assume there is some effect and you extrapolate forward. you could say there will be some negative read across into the economy. people just don't know. when people don't know, they tend not to make big decisions. they won't know the details. roger: i think that is fair. there are some people i think who are putting off decisions already. there are other reasons why there might be weakness in the u.k. economy. you shouldn't put on it on brexit. the u.s. economy was week in the first quarter. i think people could wait and see, and therefore there could be a little bit of saltiness. to put a precise number on that, i really think it is asking a lot. pound, whats to the we don't know is how the bank of england would react. i haven't read this treasury document yet but it would be

interesting to see what they say would be the response of the bank of england to the onset of weakness. are they assuming the bank would put up rates? the bank would have the option of cutting interest rates. matt: would you be concerned, roger, about dates going up to trade, essentially the eu should make it easier for england to trade with the continent, and if they were out, that would be a problem. roger: it depends on what the nature of the arrangement is. it is unlikely anything is going to happen soon. under article 50, there's a period of two years where we talk and try to sort things out. if we don't get some train deal, u.k. exporters would have to pay the eu common external tariff, which on manufactured goods averages about 4%. this is not a game changer.

the pound has fallen by more than that this year. i don't think it is a huge problem. matt: what about this grand experiment? the whole reason for trying to unite europe is the fact that these countries have fallen into great wars over the last century. are you concerned that if the u.k. leaves, it gives the wrong picture as far as piece is concerned? roger: i think this is a very important issue. if i believed leaving the eu could precipitate world war iii as some people are suggesting, i might reconsider my stance. if i believed the eu was responsible for keeping the peace, i might reconsider. but i don't believe that. those people who think this is an important issue. i just think their judgment is all right. the eu doesn't make a

significant security contribution. the individual members armed forces are typically very weak. what has kept the peace is nato. guy: let's get back to the economics. is it ok for carney to intervene in this debate? roger: i think he's on a difficult weekend. i thought when he was questioned by the treasury committee of the house of commons, he was reasonably fair. that is what the bank of england thinks, he probably got to say it. appearing on the andrew mars show, i'm not sure that was necessary. i would say he stepped just the wrong side of being cautious and actually has to be extremely careful about what he says from now on. guy: he hasn't got much longer. i think he speaks tomorrow. it will be interesting to get what he has to say then.

there's been a lot of emotion in this debate and a lot, some would say, of fear. not a lot of economics to my mind this far. maybe today we change that. from the brexit side, it is easy to make the case that there hasn't been enough solid economics. is that because it is so hard to model what the picture would look like? is that the achilles heel of all this from your point of view? to a group ofg economists which has come out with a model-based forecast which produces a gain some years into the future. he believes in the adoption of unilateral free trade. what we do when we come out of the eu is drop those tariffs imposed by the eu. that triggers a price drop. people all able to buy goods more cheaply. it also triggers a competitive

game. eu exporters now have to compete eu exporters. we've done this. we've argued the case. i think the overall problem is that the world is very uncertain. oecd, have the imf, the all flattering you, i think people are in danger of being up the of being taken garden path. they think there are all these authoritative people saying the loss is going to be x%. frankly, this is all speculation. bookies are pretty firm that the eu is going to stay in. what do you think the economic story is going to look like if we remain in? give me a sense what you think the economy is going to do. , they arethe bookies

very bad forecasters of political results. they are not so good at football either. sincet would look like, i we probably are in a bit of a slowdown at the moment. some of that may be brexit-related. there's a chance of recovery if we vote to stay in. i think there are other factors making for slowdown that will kick in order. we are entering a period of fiscal consolidation. this is the other side of mr. osborne. in the second job, he's aiming toward reducing the deficit that is going to tighten fiscal policy. bet is not going to comfortable. we have those encouraging figures from germany. i think it will be a little bit of softness in the next year or so, but then later on, i'm relatively optimistic that it

can recover. guy: roger bootle, thank you very much indeed. roger bootle joining us from cap i know economics -- from capital economics. matt, we need to talk about cars. matt: we do. fiat shares are falling in italy. germany's authority has found that fiat chrysler used illegal software to manipulate emissions of its vehicles. that is according to a newspaper here in germany. shares in fiat chrysler getting crushed. they are down on your screen 4.7%. we're going to talk about whether or not this company can come back from this, even though it is only alleged. next, merkel on a mission. the german chancellor makes another trip to turkey as she strives to rescue the fragile refugee deal. ♪

guy: let's get your bloomberg business flash. here is haslinda amin. haslinda: ryanair has forecast earnings growth will slow this year is in as profit jumped. the discount carrier expects earnings to rise this year after a 43% surge in the 12 months through march. airlines cut ticket prices to

entice customers wary of flying after recent terror attacks. ceo michael o'leary told bloomberg that egyptair crash will put further pressure on airlines. said it will stop investing in tobacco and will divest. france's largest insurer will sell stock in tobacco companies and run off its tobacco industry bond holdings valued at about 1.6 billion euros. said smoking poses the biggest threat to public health in the world today. boeing has won an $11.3 billion jet order from a vietnamese carrier. the deal was announced in the presence of barack obama, who is visiting the asian country. the u.k. financial services sector would suffer if the accordingaves the eu,

to britain's representative on the european commission. in a speech to be delivered today, he will say leaving the market could leave our financial services industry without a passport, without that crucial right to provide services anywhere in the eu from just one country. toyota is teaming up with the inventor of the segway to build wheelchairs. the deal helps introduce a new version of the wheelchair which sets of power wheels to walk up and down stairs and all those disabled people to stand face-to-face with others. that is your bloomberg business flash. hey, german chancellor angela merkel is in turkey on a mission to rescue the refugee deal she struck with turkish president erdogan. relations were increasingly turning sour. we are joined by bloomberg's

head of european coverage. this is anrd, interesting story. from needs something from anyone. to be seen good time giving something in return. how is she going to work this out? alan: it is a difficult time for merkel. this is her fifth visit to turkey in the past eight months, which is an indication how important this is to her. it is fundamental. the number of refugees coming to germany has peeled off since this. she is trying to encourage erdogan to hold to the agreement. limitbecause she wants to the number of refugees coming to this country. exactly, but she also convinced it is in his interest to alter this deal. for example, the eu is holding out 6 billion euros of funds

which is hasn't yet supplied. she believes it is in his interest to crack down on organized crime along the energy ean.-- the aeg guy: when you look at what is happening politically, looking at austria, looking at what is happening here, is that changing her thinking? alan: she's obviously acutely aware of these developments in austria. we know that she's frustrated at the fact that the reduction, the curtailing of any refugee influx increase in in any her poll ratings. that hasn't happened. yesterday, interview

saying that she was very irritated by the fact that some people actually seem to want this deal to fail, which doesn't make sense in her view. matt: coming from the u.s., i always think of, it is the economy, stupid. well,r economy is doing you should be doing will politically. at have german gdp growth the highest level in two years. it seems migrants are contributing to that growth. yet a number of voters are unhappy with her handling of the migrant issue. and of course she's got the greek problem as well. it doesn't seem to go away. can her success with the economy be toppled by the problems she's got socially? alan: it can be. theel is undisputedly leader in europe. with that responsibility comes

all of that criticism. time, it is part of a movement across europe that we are seeing, the support for established parties being eroded. coalition of grand the two main parties in germany, it would struggle to get over 50% at the moment if there were an election now. so yes, she is very concerned about these developments. whether the economy will carry her through, it will carry her some way, but society seems increasingly polarized. matt: thanks so much for joining us, alan crawford. up next, after those french and german pmi numbers, we have data from the euro area. we will look ahead to that data. ♪

guy: welcome back. let's check in on what the bayer stock is doing. we have seen some selling, a continuation of selling on the news surrounding monsanto. we are down 2.68%. we were down 3%, 3.5%. let's talk about the week ahead. it is a busy week that culminates with some interesting stuff.

we are going to hear from some fed presidents. tomorrow, bank of england governor mark carney faces mps for the last time before the eu referendum. clearly, friday is going to be quite important. we've got a thursday lead in to this g7. we've got the leader summit in japan, then friday is gdp data out of the united states. ,hen we get into janet yellen which pretty much everybody is waiting to see. the big story to my mind this morning is the data out of europe are coming through strong , really quite strong. >> pmi was quite encouraging today. the one thing that is probably not as converging, the manufacturing numbers in france. the composite numbers look ok. i think mr. draghi will look at

this, and given the fact that pmi's have a forward-looking bias, the eu economy is heading in the right direction. these numbers are encouraging. matt: was going to ask what you think draghi will make of this. the ecb i believe is going to put out new projections for growth. it looks like what he's done so far is working as he would hope, rich. >> i think we've got some traction. these numbers are probably a little too close to 50. the french numbers, the manufacturing numbers, are below 50. having said that, these are green shoots of encouragement. guy: we are building up to yellen on friday. what a week we have. richard jones joining us from bloomberg first word news. stay with bloomberg television. "the pulse" is next. jon ferro and i are going to be on the radio with rich jones.

we will kick around what we think this week is going to look like and what europe should make up the numbers we are seeing this morning. all that on bloomberg television and bloomberg radio. ♪

francine: japan exports fall in april as g-7 leaders disagree on currency wars. a german company offers a $62 billion all-cash deal for monsanto as shareholders worry about overpay. recession.dum on a david cameron a george osborne say britain will be plunged into a crisis of its own making if they vote for brexit. welcome to "the pulse," live from