anna: brexit talks begins. david davis and michelle barney a meet to talk off the negotiations. the eu starts discussion with more leverage as there is confusion about what the u.k. wants. matt: a developing story in london. hit a group of muslim worshipers in northwest london, one is dead. police are treating it as a potential terror attack. anna: macron's majority. while the french president is that to secure the biggest parliamentary majority in 15 years, voter turnout was the lowest ever for a french legislative election. show.e paris air

analysts expect fewer plane orders for boeing and airbus after the industry gets hit by low fuel prices and weak fares. we will take a look at the health of the industry and bring you live comments from the event. ♪ anna: a very good morning, welcome to "bloomberg daybreak: europe," our flagship morning show from london. plenty to talk about. stocks in asia going higher, keeping an eye on what has been called a u.k. terrorist attack in london, another key test for the may government. agenda, theeconomic eurozone seems to be impressing even those with leveraged money to spend. , this ispositioning

leverage money going long on the euro for the first time in three years. taking a long time to believe in the eurozone recovery story, and the euro surges back around 1.12 today, not making great moves, but the storied performer among major markets. matt: you can almost barely make blip at the end of the chart. another trend that was visible overnight was the chinese gain in equity. if you take a look on hong kong or the mainland, you see big gains for equities in the risk radar. i will show you the hang seng and the csi 300, goes a gainers overnight. it's also interesting to look at the currency trade, the jgb, the jp why, sorry -- it is weakening

again into this morning's trade. take a look at the pound, as we get started on the brexit negotiations. you get the feeling they are ignoring you. a few problems with the technology -- gains across the asian equities session this morning. let's get the first word news with juliette saly. juliette: thank you. u.k. prime minister theresa may has said police are treating a van crash outside a north london mosque as a potential terrorist attack. one person is dead and eight are injured after a van hit pedestrians. the driver has been arrested and taken to hospital. no other suspects at the scene were identified or reported to police. the counterterrorism command is leading the investigation. portugal has declared three days ing after a thunderstorm

killed more than 60 people. at least 30 died in their vehicles, with more bodies found near the side of the road, and others. more than 800 firefighters were working to contain the blaze that you rocked it saturday -- which erupted saturday. bridget is to observe a minute of silence as a mark of respect for all those who have been affected by the grenfell tower disaster. meanwhile, theresa may has said the response was not good enough, which comes as public criticism of her has mounted and police raise the probable death toll to at least 58. the u.k. government has announced it has canceled the queen's speech to give lawmakers more time to deal with exit legislation. the leader of the commons said the next parliamentary session, due to start wednesday, was being doubled in length to two years. the announcement comes as talks

between the divorce finally get underway today. in france, there was no public celebration from president emmanuel macron's government last night, as his party claimed an historic majority in the legislature. according to early results, they are on track to win 350 seeds in the 577 strong seat national assembly, the biggest majority in 15 years. but turnout of 44% was the lowest ever for a french legislative election. the u.s. navy has identified the seven sailors who died when they collided with a container ship on saturday. the seven crew members had been unaccounted for. divers recovered the bodies after the severely damaged fitzgerald returned to a navy base in yokosuka, japan. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries.

you can find more stories on the bloomberg at top . it's late trade here on monday in asia, and we have seen a solid start to the equity week. nikkei is up .5% in late trade. very strong movement on the hang seng and csi 300,. by around 1% as we await the possible inclusion of chinese shares into the global indices. they have been rejected three consecutive times. australia's market up by .3%. let's have a look at the stocks in focus. we have seen some weakness coming through in australian supermarkets, led by woolworths, as people start to question the strength of traditional brick-and-mortar retailers. foxconn looking very good in and investors are expecting aggressive announcements from the company.

e is one of the best performers, one of the hong kong property developers. we had data showing home prices rose in fewer cities in the month of may, 56 of 70 tracks by the government. at this chinaook property story in more detail. there is concern that there could be a property bubble, because you are seeing residential price growth shrinking. saw in may prices of existing homes in beijing all in my almost 1%, the third decline since february of 2015. anna: juliette, thank you very much. juliette saly in hong kong. almost a year after britain voted to leave the european union, brexit talks will begin in brussels at 11:00 a.m. david davis describes the negotiations as the most complicated of all time. matt: prime minister theresa

may's election disaster has put her own position in doubt, fueling a new battle within her conservative party over the kind of brexit the u.k. should seek. anna: joining us from brussels is john's hayden. whether you thinking each -- what are you thinking each side is hoping to get out of today's talks? it is the first day of very many. >> that's right. i think both sides are pretty happy that the talks are actually going to be starting today. just that is a bit of an accomplishment, given all that has been going on, especially over in london recently. i think they just want to put a good face on it. they want to have a positive start to these talks. you are going to see a lot of smiles, handshakes, goodwill on both sides as they go into these highly anticipated is very important to talk in brussels. matt: what exactly is on the agenda for today's meeting? mostly thet's

initial contact, if you well. itseu has made sure that main objectives are there. you are going to see what they call the separation issues, the divorce bill, financial settlement, and includes the citizens' rights of eu people living in the u.k., and u.k. people living in the rest of the eu. we are not going to see any decisions or agreement today, but the eu wants to make sure that those things are the first things on the agenda when the talks get underway. anna: nd in addition -- and in addition to the election debacle, theresa may faces other domestic problems. what does that mean for how the brexit talks will start? >> well, the main thing it means is a bit of confusion. theon't know the eu side,

eu side doesn't know where the u.k. position is, and it depends on how things shake out and come together back in london. even though we are starting the talks here, we really don't know exactly what the u.k. position is going to be. it is probably best that they start with these separation issues and tried to get those out-of-the-way, then set up the sequence of how the talks are going to go forward. then they can get down to the substance. matt: thanks very much. jones hayden, from brussels. we are joined by nicholas garside, cio for international fixed income. good monday morning. let me first ask about the possibility of a softer brexit here. how much more likely is that and how does that change the way we are investing? >> on the face of it, it looks pretty unlikely. theresa may seems pretty clear that the u.k. will leave the

union, leave the single market, so they haven't confirmed that in interviews, and the pound is also not telling you that. it's stuck just under 1.28. if there was a possibility of a significantly softer brexit, you would expect much stronger sterling, which we are not seeing. anna: last week, there was a theresa mayne, talking about the 1922 sound as, and it does if philip hammond is sticking to those policies, although he did say no deal would be a bad option. do you sense -- we hear from a theof investors saying, indecision over the u.k. general election means a softer brexit. you don't seem to believe that. there's a i think triumph of hope over reality. there might be some wiggle room

with this idea of a transitional arrangement. you could have a lot of transitional arrangement from the current to future. maybe that is what people mean by a soft brexit. part of then't disastrous failure of the conservatives in the last election? the people of the u.k. saying, we don't like theresa may's hard brexit stance? was it her hand softened by the fact that she failed so spectacularly? . the interesting thing about the election is that both parties had the same major commitments for brexit. the labour party manifesto was also did take the u.k. out of the single market. matt: not as explicit. >> not as explicit, but on the face of it, both accepting the referendum result. the election was more about austerity. and when you look forward, austerity was yesterday's policy. anna: talking about austerity,

or maybe not austerity, just struggling to make ends meet, showing gdpthis, growth coming off recent highs. england, cpi rate going higher. this might be too early to talk about stagflation, but how bad do things get to you on the u.k. economy? >> this chart screams of stagflation, let's say that. as you look at it, that increase in inflation acts as a tax on consumers. unless we see at lot in the way of wage inflation, looks pretty unlikely. anna: yet three members of the mpc voted for a rate hike. we know why, because cpi is on the rise. >> well, if you go back to it, that's the bank of england's objective, to control inflation.

inflation is too high. matt: what's the best way, then, to get us out of stagflation? i know central banks have been fighting with this for decades, but is it fiscal policy that needs to change? >> it is. we said earlier that austerity is dead, and it is. they need to turn the tax on. -- taps on. we should expect that not just from the u.k., lots of governments around the world. anna: philip hammond said yesterday we are not deaf, in response to pressure about austerity. thank you. nick stays with us. let's have a quick look at what lies ahead. the paris air show gets underway today. the u.k. parliament is said to thursday, i and on european union leaders start a summit where they will discuss the relocation. matt: coming up, rex tillerson

tries to resolve the crisis in the gulf, entering its third week. we will bring you the latest on that. this is bloomberg. ♪

anna: welcome back. it's 1:18 in the afternoon in hong kong, 6:18 in london. let's get the bloomberg business flash with juliette saly. juliette: anna, thank you. u.k. preminger theresa may has said police are treating a van crash outside in north london mosque as a potential terrorist attack. one person died at the scene and eight were injured after a van hit pedestrians earlier this morning. the 48-year-old driver has been arrested and taken to hospital. no other suspects at the scene were identified or reported to police. the counterterrorism command is now leading the investigation. china's home prices have increased in fewer cities last month, according to --

rose and 56 of 70 cities, compared with 58 in april. prices fell in nine cities and were unchanged in five. boeing has signaled its intent to build a new jet with the launch of its new workhorse set to get the go-ahead at the paris air show. says it isane maker confident the plane can compete with airbus's biggest narrowbody model. we will be speaking to the ceo at the paris air show at 7:38 a.m. u.k. time. that's your bloomberg business flash. matt: juliette, thanks. juliette hon saly. canceled aon trip to mexico as he tries to resolve the guitar crisis. he had expected to go to cancun today. tillerson will instead continue

his efforts to deescalate tensions in the middle east with phone conversations. anna: joining us from dubai, bloombergs middle east and african editor. good to see you. is there a bit of momentum behind the effort to resolve this issue? we have seen various diplomatic efforts from kuwait and elsewhere. where is the momentum coming from now? >> i think it's the tillerson aspects that seems to get going right now. a tript that he canceled to mexico seems like there are serious talks underway, and there seems to be less evidence of that just a week ago, where the american position was less clear. the u.s.me time, , seeminglys to qatar

supporting the qatari position. with tillerson in action and the uae minister saying they need that western support, it looks like something is going on with serious talks on the way. matt: how does this position the u.s.? from the middle eastern point of view, what is the u.s. position on this crisis, as we are simultaneously criticizing what's going on and selling them attack weapons? >> look, you are right. it is hard to tell exactly where the u.s. stands on this. tillerson has been from the beginning calling for moderation, for talks to get this resolved. he has excellent contacts from his time at exxon mobil and he is clearly using them to try and resolve this. president trump's position was also clear, but that seems to be

significantly different from what tillerson has been saying, which is that he supports with the saudis and uae are doing, and gives them credit for it. now with the activity, the action seems to be going the tillerson way, to try and get people talking, to find a resolution. anna: thank you very much. bloomberg's middle eastern and african editor, in dubai. let's go to the u.s. economy. last week, the fed raise rates for the second time this year. the central bank also unveiled plans to start slowly shrinking the balance sheet, and updated forecasts are suggesting there is a third hike penciled in for 2017. matt: later today, we will hear from the chicago fed president charles evans. nicholas gartside is still with us. what do you expect from fed policy going forward? we were looking for a dovish hike, in then we got a pretty hawkish one in the end.

do they stay on task? >> oh, very much so. this year we will get at least one other hike. we get them starting that reduction of the balance sheet. then when that is in play, what we will see in 2018 is rate hikes all the way until we get to a neutral real fed funds rate. if you are thinking inflation is 2%, that is what the fed gets to. anna: so we have to do this one more time. and what does that do to various assets? chart, a is a counterintuitive rate hike reaction. the fed hiking at the same time, the s&p goes higher, the bloomberg dollar spot index comes down. not what you would expect. >> no, it is what you would expect. let's think about the 10 year yield. as the fed starts to lift rates, as you approach that final fed funds rate, the yield curve is typically very flat.

that is on its way to inverting. if you assume that the terminal fed funds rate in and around 2%, that is where your 10 year yield gets too. now, andn where we are that's also when environment if you are thinking of the u.s. dollar to push it weaker. sub 1.20.r matt: we did see core pce coming in very soft. we saw growth in the u.s. come very soft. is that just, you think, transitory? a soft first-quarter? do we start to see real growth and inflation throughout -- >> oh, definitely. always a terrible first-quarter in the u.s.. it's higher than it was in the first quarter, but remember, the fed always has that get out of jail card, the dual mandate. the other part of the mandate is full employment. anna: you see these fed hikes

coming, despite the fact that the data is getting softer. we have hard data disappointing, surveys souring. saying the surprise is in the surveys, wait for the hard data to catch up. if you strip out the survey data, you are also seeing a deterioration. >> the reality is, though, that the u.s. is growing at a rate above trend. about 1.5% to 1.75%. clearly they are aiming for north of 2%, so you still have accommodative monetary policy, and the fed have made it clear -- we need an interest rate so we can cut it when we need to. anna: is that a good reason? >> oh, absolutely, absolutely. look in europe, where you have negative interest rates, and it's a nightmare to get out of that. matt: are we counting on the

trump policies to actually come through? are you counting on tax reform, on deregulation? are you counting on spending on infrastructure? these things -- do they have to happen for stronger growth in the u.s.? >> not now, no. in our view,o, -- it will add maybe 0.1%, lady with a little deregulation. but even without that, the u.s. economy is reasonably healthy. nicholas gartside is going to stick with us. we are going to be speaking with secretary wilbur ross, by the way, at 1:30 p.m. u.k. time. you don't something want to miss. anna: 6:26 in london.

next, boeing is set to offer its first new jet in almost four years. will it be able to steal market share from rival airbus? we are live at the paris air show. this is bloomberg. ♪ . .

. .

anna: welcome back to bloomberg daybreak europe. near 11.r-yen is matt: of the weather is nicer in tokyo than hong kong. it is afternoon there. tokyo andng kong and there is always a gray smog over hong kong. anna: a new version of the app is available on the mobile. the cover story is the van that

inlided with pedestrians london, killing one and injuring eight. was aiver of the van 48-year-old man and the police are treating the attack as a potential terror attack. theresa may had an emergency response meeting and the a rmedormed -- unconfi reports suggest that those may have been leaving a mosque. for the prime minister has 10 days to save her position under the threat of a rival leadership bid. are demanding a no-confidence vote. britain will be leaving the single market, but is aiming for a gentle departure. d, soft --matic, har

all options for brexit. parliamentary elections. his republic on the move in thet is on track national assembly. it would be the biggest majority in at least 15 years. the turnout was a record low. is set to commit to its first new jet in almost four years and it will carry almost as many 200 30 passengers and save on fuel. will it do the trick against their rival? we will speak to the ceo this morning. 7.ll us about this 73 any legroom? guy: i would not expect a lot.

ans is a competitor for airplane that is selling strongly and a lot of carers want that aircraft. in some ways, has been quite slow in playing catch-up. they are unveiling some ring say is better in some would say is worse, but is designed to compete against the latest airbus. they have already got a max 9 here. the question is if this will cannibalize some of the orders coming. we will see. we will speak with the ceo later about that. mid-market unveil a aircraft, a kind of 767 replacement? .t could be a 797

there may be too aircraft we are talking about from boeing. o aircraft we're talking about from boeing. pressure with trump? uy: there is the question about defense spending and a lot of people are talking about that. as you said, there is pressure that the president has placed on nato partners to spend a little more. will that affect the defense side of things? financial analysts like the defense sector, at the moment. i will be speaking to someone from ge later on. civil sideg from the to the defense side to try to take advantage.

matt: what do you expect from macron today? guy: there does not seem to be celebration, but he is keen to get the french economy moving and he has talked about startups. the french president always comes on day one. nevertheless, people expect an extra kicker on this. there is the victor he just won and everybody is just so positive about him in france, at the moment. it is an incredible journey watching him walk around and seeing the response he gets. he will be here. anna: it thank you for that update. we will be speaking to the ceo time.ing at 7:30, u.k. the italian minister says that

they are easing programming and heading towards the conclusion. he said that there is -- we are joined by peter, the head of market strategies at j.p. morgan asset management. he is still here with us on set. good morning to you. we started out this program talking about the euro positioning. matt pointed out that it is incredibly hard to see, but this is a small green line here. chute.is a green leverage funds are impressed. el recovery,unlev but people do not give it as much credit as it is due. ecb has to provide a backstop for very peripheral

countries. there is no way they will ever as a currenthese strategy for monetary policy, but our view is that the timing is right and the unemployment story, from a headlines standpoint, looks excellent and we will see this removing some of the emergency measures. to --a and the fed has the ecb will be doing something similar in september and i think that is a stronger europe. matt: are you concerned about the inflation? we were talking about the inflation in the united states not meeting the fed's target, and the inflation is not going to hit that target.

they will have to do a languishing and stagnation type of environment and we are not ghteningabout a ti policy, but in removal of the extreme measures. the light steps you take forward while praying to the phillips' god's, looking for ways to inflation. does this put the ecb off? >> well, it shouldn't. economy at the eurozone and it is on fire on the gross side, outperforming the united states for the second year running. is the rate suitable for the environment? no, clearly not. the negative interest rate has a negative effect.

that you are so bad have to have negative interest rates, it reinforces the downside risk in people's mind. they need to get the interest rates to zero. the negative interest rates do not encourage them to lend more money. they cut back. if we see a normalization of the policy and we get the economic boost from more lending by banks and more bank profitability -- >> people will have a confidence boost. market,say to the "things are better.": i believe that there will be a tightening recovery that will coincide with this. euro and the the

ecb exiting policy, but they will not want to see the shock, will they? have a current account surplus versus the u.s. deficit and, when you look at it, it is it isthe ecb and realistic that the euro-dollar is 1.20. >> 1.20? >> yeah! the surprises that they change the reaction function a little it and that is a light boost. anna: is that enough to worry the ecb? >> i didn't hear anything that nicholas was saying in the green room, but i think that they made a lot of money betting against the fed and they are overpositioned in this current

situation. ecbstart seeing mthe moving very aggressively and does the 1.20 euros scare mario draghi? absolutely. tohas done a lot of work improve from a trade standpoint. will he have to live with this? it is coming to that place where he has to feel comfortable. ds?t: where do we see bon we are at 0.728. that seems rather low for the normalizing ecb. >> they could have the handle and there is no question on that. that reflects the reality of the economic environment. gils?

>> it is a tricky one. it is difficult to see the bank of england moving rates. we have the reality of the trajectory of growth being down. you think of uncertainty and it is probably building and not declining. in the eurozone, the uncertainty is declining and that gives a little more wiggle room. >> thank you very much. head of -- he will also stay with us. egypt has been struggling with inflation since lifting the currency controls. the finance minister spoke exclusively to bloomberg and south korea and said that the consumer prices remain his number one challenge. sickr first priority is a

week to bring down the inflation to the teens. we have headlines at 30%. that means that the inflation is everything. the most important factor or challenge we are placing is inflation, something we need to pin down quickly. >> what impact would inflation have on your budget deficit and growth? >> it should not be at a high level for a long time. we see the inflation level coming down to an ordinary level and, for any investor, growth, everyonewho are -- should know that this is not something you will have to worry about for long. when it comes to investment, it

is a short-term effect. investment should not worry about it and should worry about the high inflation level. this could scare the markets and that is a further challenge. >> what could stand in the way of the inflation target? >> prices are at a manageable level for us now and there is fear of external shocks, like oil prices, for us. we need to move on bringing down the inflation. and we areed in that under control, we will the and a position to deal with external shocks. this is more risky for us. >> there is concerns about inflation and will that impact the growth target. >> we have seen the growth rates

come out yesterday and they are at 4.3%. 4.6% isar, fou 4.6% is manageable for us. withll also have an issue the currency and the tax regime and i 2015 and 2016 suppose that will slow down a great deal with the economy coming back at a local level. sinces been very strong october 2015 and we are seeing different sectors operating at a better level. inflation has been a factor, but we are seeing better momentum.

is resulting in more economic activities in a stronger way. the egyptian finance minister spoke exclusively with us in south korea. anna: up next, the french party is and macron's on track to a majority, but turnout is at a record low. peopleago, a van hit leaving a mosque and killed one. we will bring you an update, including that the police are treating this as a potential terror attack.

anna: welcome back. this is bloomberg daybreak europe. here are some images of the north london area where, our ago, a person drove a van into a crowd of people and injured eight and killed one. anddriver has been arrested no other suspects were identified or reported to the police. counterterrorism command is leading the investigation and we will bring you updates. matt: let's go to the bloomberg business flash. we go to julia. julia: increase in the wake of measures imposed by authorities. cities compared to 58 with your. prices fell in nine cities and were unchanged in five.

waning interest hints that the slow down will continue, according to write to move, saying that the prices fell the biggest since 2010 and left them down from a year earlier. the national asking prices fell to the weakest. boeing signaled intent to offer the first new jet in almost four the upgrade to their workforce is going to get a go-ahead. ceoill speak to the boeing at the air show at 7:30, u.k. time. that is your bloomberg business flash. very much. you the republic on the move party is on track to get 350 seats in

the national assembly, according to the early results, meaning the biggest majority in almost 15 years off of the lowest turnout ever in a legislative election. -- wewhere standing by are standing by. >> good morning. the support of the macron party is -- good morning. this is a good majority. asis not as high or big expected. are you disappointed? >> not at all. you have to remember that, a year ago, we were a budding party doing our first rally with 1000 people. the turnout was not as they do as expected, but the results is

very good for us. at 56.6%,mentioned, record,est record -- on -- 56 point 6%, the lowest on record, is that bad thedemocracy -- 56.6%, lowest on record, is that bad for democracy? >> i don't think it is bad for democracy. they did not have time in the months to construct a real project and the electorate did not feel like turning out to vote for them because they did not know what they were voting for. >> the far right and the far are making their entries into the national assembly for the first time.

-- for the first time. are they going to be strong in representing the disenchanted voters? >> they are going to have a small representation in the parliament and, they will be --al, but they will be small and they will be vocal, but they will be small. their numbers have gone down and the french people have chosen against anger. people of both parties did not come and vote. they watched and they are trying to give the president a chance. >> everybody is expecting the business community here in france. do you expect big protests? >> personally, i don't think so. i think that what is going to

happen is that the french will and allown a chance him to push the reforms. it was clear he was going to do that. i would be surprised if there are strong protests. >> we will see if we are seeing protests in the streets. paris is amayor in strong supporter of the macron majority, who have 350 seats in the national assembly. much for thatery reaction to the french political story. it was very noisy in the background. matt: paris in the morning. .e are joined by nicholas anna has pulled up the old spread.

ou can axis this on your bloomberg. i am sure you have so many different ways to access this. we have seen this recovery here. >> it is a stunning achievement for macron. this was a party that did not exist a year ago. you look at that spread. thatnteresting question is high and he has to do a lot to implement reforms. that will be a challenge and a lot of those things are easier said than done. anna: there is a lot of expectation. thank you two for joining us. peter will stay with us. brexit bargaining

begins almost a year after the the-eu talks started. find out what both sides hope to achieve next. this is bloomberg.

matt: brexit talks begin. meeting in brussels today to , theoff the negotiations eu starts off with more leverage after the confusion over what the u.k. wants out of the divorce. developing about an attack on a group of worshipers leaving a mosque in london. it is being investigated as a potential terror attack. matt: the macron majority. voter turnout was the lowest ever for a french legislative election.

anna: analysts expect fewer plane orders. there taking a look at health of the airlines industry and bringing you the ceo interviews live from the event. matt: welcome to daybreak, the flagship morning show. i am matt miller, standing in for manus cranny. it is just after 7:00, 8:00 in paris or berlin. we are looking at the equity trading and we have the ftse 100 , which could go higher. it may be higher by half of a percent.

matt: let's take a look at what happened overnight in asia. it is interesting to look at the chinese trade on and off the gaining almost 1%. 0.7onshore percent is up percent. there are strong equity gains in asia and the currencies are important to look at, as well. you do see the dollar strength against the yen trading at 111.0 1. we have seen some gains in recent days. we have the pound to look at at the start of the brexit negotiations. rangehanging in the 127 -- 1.27 range. anna: it is a good time to talk about chinese assets on the risk radar, because we get that

decision about whether the chinese will be considered in the main indexes. and we havemovement talked about the french political situation in the last 24 hours with the strength of was able to achieve, even if the turnout was a little bit lackluster, shall we say? >> theresa may has says that the police are treating the crash as a potential terrorist attack. one person has died and eight were injured. the driver was arrested and taken to the hospital. no other suspects were identified or reported to the police. the counterterrorism command is now leading the investigation. portugal has to clade -- has declared three days of national

mourning. theeast 30 people died in vehicles. than 800 firefighters were working yesterday to contain the ed saturday andt spread amid 40 degrees celsius temperatures. moment of respect for all of those affected by the disaster. theresa may has says that the response was not good enough. this comes as public criticism of her has mounted and the police have raised the probable death toll to 58. lawmakers are looking for more time to deal with brexit legislation. is set to start on wednesday.

the announcement comes as the talks between the british and the european union over the divorce finally get underway. a celebration from the macron government as his party claimed a historic victory in the legislature. the have 350 seats in 577-strong legislature. theu.s. navy has identified seven who died when there was a collision. the divers recovered the bodies after the damaged destroyer returned to a navy base in japan , aided by a tugboat. powered by is

journalists in 127 countries. you can find more on bloomberg. we are seeing the markets close andin asia, japan australia. we have a look at what is moving the markets and you are seeing chinese companies with the gains ahead of this. will the fourth time be lucky for china and the japanese exporters? have slumped after the amazon-whole foods deal. foxconn is up the most. we have seen chinese home prices ease and 56 out of the 70 cities. the other graph is property development, still one of the strongest in the region. we have a look at btb.

are we seeing signs of a property bubble question mark we have seen the home prices increase and the prices have lowered in the top tier cities, as reflected in this chart. the prices for existing homes in beijing fell 1%. that was the third decline. there is a little bit of a movement with the property curve. you very much for the latest there from hong kong. it is a most one year after voting to leave the european union. thed davis says that negotiations are the most complicated of all time. theresa may election disaster has put her position in doubt and there is a debate over u.k.ind of brexit the should see. what do you think each side

wants to get out of the talks? they are glad to be sitting around the table after almost a year since the referendum took place and they are going to try andput a positive outlook make it look like they're having a heartfelt negotiation. we will have michelle and david in the face-to-face and, afternoon, their teams will meet to discuss the agenda items for the talks. and will come back at 6:00 have a press conference to let us know how things went. anna: what is on the agenda for today's meeting question mark even -- meeting? even the conversations on where to start have been contentious. >> that is right.

does not know what the u.k. position is and they are going to talk about preliminary things and the structure of the talks. wants to start with the separation issues. that is a divorce bill and citizen's writes. these are main things that they want to have a preliminary discussion about and they hope to find out whether the u.k. if theresa may pulls things together after the election thing. matt: thank you very much. still with us is peter, the head of market strategy. what do you think of a possibility of a softer brexit. >> i wish manus was here -- brexit? >> i wish manus was here to

argue, but we see a softer >> it. t. a softer brexi we have those terrorist events this morning. they reaffirm the security coordination between europe and the u.k. there are connection points where this exists and it is hard for me to say that there will be a complete separation, even if they negotiations get contentious. there will be a point where they do this is this and that will slow down the extreme -- this business and that will slow down the extreme brexit. ofa: theresa may faced a lot concerns over her handling of the tower disaster. rometeromberg brexit ba

is a proprietary index that measures u.k. wealth, economic activity, the employment situation, uncertainty. it clearly shows a downward thatctory and we suggest the u.k. is in stagflation. the charts screen that. -- scream that. >> it is hard, when you see the u.k. economy with spending, consumer income, investment growth drying up. and you aret, softer and kinder, you see the drops and the handling of that and expectations of decline the growth scenario. in our view, that is the

scenario we are looking more to ofause of the spillover brexit. anna: you don't think you're reading of the softer brexit is wishful thinking? peter: people always tell me that my head is in the clouds and you look at the surplus in germany and we are not going to give that up. it is going to be difficult to negotiate that. start looking at the hard numbers, it is really difficult to do a hard brexit. matt: maybe the lack of the majority won by the conservatives was about people coming out and saying that they were not happy with theresa

may's hard brexit stance. if you believe in a softer or fake brexit -- we are moving to a fake brexit. matt: with this give you a position -- what this give you a position to buy into assets in a stronger economy? >> one of our stronger assets is sterling. thee is a disbelief of brexit story. there will be higher rates and the swiss have no intention to move anywhere. been inomics have preaching -- appreciating -- have been appreciating and we

think the sterling swiss looks good the next year. anna: thank you for that different view of the u.k. economy over the next hour or so. matt: you need both sides of the trade. on majoritye macr and the turnout trails. live we leave you with pictures of north london. hits ago, a van worshipers leaving a mosque. this is bloomberg.

anna: welcome back. this is bloomberg. it is 7:17 in london and you are looking at a live shot of london. drove into a van wen

crowd out in front of a mosque and killed one and injured eight. the driver has been arrested. no other suspects were identified or reported to the police. the counterterrorism command is leading the investigation and we will continue to bring you updates as we get them throughout the program. gainsthe euro is making as macron is making the biggest legislature in 15 years. the currency is back at highs not seen since before the u.s. election. anna: we are joined by david right now. let's talk a little bit about the eurozone. we started talking about where the euro goes from here. that mattnice chart has been laughing at me about

this morning. what are your expectations around the euro? set up the story. currency is deconstructed into the structural, the cyclical, and the political. was elected, people were optimistic about europe and the french election was "beware." that is flipped around now. surprisinge that is and you talk about the ecb possibly doing something. you can feel the turnaround for the cyclical and the political. the structural side, at the moment, nobody cares. they are burning the candle to have a little bit of illumination. the time whene everybody was dollar-bullish and cyclically-bullish. this is the view of europe and

not the united states. the target is 1.20. anna: this is the euro-positioning chart. there is a green bar you can see. matt: the trend is clear, right? >> we start talking about the taper tantrum and people talked about the federal reserve raising rates. 3.5 years time before the ecb does anything and the euro should be moving up. the dollar moved aggressively. remember the other day question mark nothing -- the other day? nothing. it is priced in. matt: if you want to pull up a chart, i have on the question. it seems to me that mario

draghi, his default is dovish. if you look at the inflation outlook, it is nowhere near the target and they keep lowering the forecast for inflation. i have trouble believing they will ever get there. arishness thatbe is coming. b that wants to do the tightening and i will do the tightening with the euro-dollar. it was going up a bit and we said, right, we will do the tightening for you and the dollar went rocketing up in 2014, just where you showed. why not now? the market has to start smelling the coffee, man. the currency market can do a lot, but you cannot just raise

my salary. are not voting for a rate hike. there is no wage inflation in the united states or australia. there is no wage inflation. is wagehink there inflation, go to your boss' fo don't get say, if i a wage rise, i am going. you are worried you will never get a wage rise again. people are being a little bit eurozone. the there is no wage inflation. phillipst about the curve. >> i have never felt -- curve? >> i have never felt the phillips curve. it looked outrageous, but the

year progresses and this is part of the deflationary world we are living and. there is a cyclical uptick in growth, but no inflation. anna: is the euro-dollar too strong for the ecb? 1.20.ere talking about 2 >> what are they going to do question mark come to my house? knock on my door? when theas not happy dollar kept going in 2014, but what can they do about it? this crashes the cyclical recovery, which i don't think it will. i think that europe is going upwards and onwards. matt: angela merkel said that ecb policy was like talking to a class of schoolchildren. what do you think about the bonds? do you think they will yield 0

.75%? >> we have to flip their. the yield will stay low. all those looking against the majors, a lot of them are buried in my backyard and looking for higher yields. i would not go against them. anna: yes. we have talked a little bit about the u.k. and put it into focus. gdp is lookingd sluggish. we talked about the possibility of stagflation. >> what are you all smoking? what are you talking about with stagflation? real incomes are getting squeezed. this is austere -- the sterling working. this is the most brilliant thing we have got.

if we were like greece, people goes up.d unemployment the sterling falls, in the u.k., the inflation rises, the real income gets squeezed and the consumption slows down and the account deficit gets better. this is a healing crisis. anna: you are seeing the inflation, but not the stagflation question mark >> the sterling is falling. you said the phillips curve and the alpha gap that has been squeezed in the central bank, but the currency has risen because of this current account deficit that we were going to get rid of somehow because of changing relationships with europe. this white line continue to come down or do you see it trending back up in the

event of this fake brexit? >> in my world of cyclical, ral, political, the politics is brexit, the structure is the current account deficit. politics brexit softening? nott is softening and it is softening. we heard that the problem was france and we are now hearing that it will hurt the europeans more than us. we have been wrong thrice. anna: thank you so much for joining us. david bloom, the global head of currency. matt: that is it, unfortunately, for daybreak. dennis at thewith paris air show at 7:30, u.k. time.

do not miss that. guy johnson is life in paris. this is bloomberg.

♪ >> welcome to bloomberg markets, the european open, we renewed the first trade every day. i am matt miller alongside guy johnson in paris today. brexit begins. david davis meet in brussels to kick off negotiations, but what does the u.k. want from the divorce? light from the paris air show, analysts expect fewer air shows after low fuel prices.