Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20170914

Euro to much better levels. I do not think they will do anything for the time being. A very warm welcome to bloomberg daybreak europe. In flagship show, from here the city of london, i am anna edwards. And imf miller in berlin. A lot to Pay Attention to throughout the day, especially when we look at currency moves. Anna i will talk about the dollar in a moment. The big story around aramco, will it be in new york, along with riyadh . I should point out, the saudis say aramco remains on track. That big story throughout our programming. Risk on has been the story at the beginning of this week. To what extent has that unwound the dollar last week . Making something of a comeback. The u. S. Dollar Bloomberg Index shows at the bottom of the screen. Risk assetsrally in at the beginning of this week, now pausing in asia. Chinese data, all three measures coming in below estimates. All cooling, versus the last months set of data. So much to learn, whether that is the bank of england rate decision, u. S. Cpi. Will that be the measure we really watch in december around the fed . If so, how do you add the Hurricane Impact . All of that will be crucial. What is what else is happening in markets . Matt the currency moves for me are most interesting. We see the Dollar Strength again. Even though you see dollar weakness, strength against the pound, 132. 02. Futures show a risk off day. Take a look at the cable. You take a look at the eurodollar, you see 118. 77. European currencies are down against the dollar, it even as the greenback loses ground against wider tradeweighted ask it of currencies it is up against. It will be interested to see what we have in the trade. That will give us direction. Noting at futures, we do have any future in the equity indexes. Anna taking a positive for key data in the banking decisions. Or taking timeg to digest the latest update in geopolitical tension. Here is Juliette Saly. Juliette north korea has made an explicit threat to use a Nuclear Weapon on japan. The staterun news agency quoted officials saying, the main island of japans maralago beuld archipelago should sent into the sea. Donald trump has blocked an investor from buying lattice semiconductor. This is the fourth time in a quarter century an american president has ordered it be stopped because of a National Security risk. The Trump Administration has maintained the u. S. tough stance against chinese takeovers of american businesses, even as they seek help from china over the north korean crisis. Russias efforts to influence u. S. Voters through social media is a redhot focus of Robert Muellers investigation into the 2016 election and possible links to donald trump. According to one u. S. Official, zeroing in on is how russia spreads taken damaging information through social media. It is taking additional evidence from facebook and twitter about what happened on their neighbor network. Saudi arabia has a contingency plan of a possible delay. According to people familiar with the matter, while the avernment is still aiming for saudiaramco ipo in the second half of next year, the timetable is looking increasingly tight. The country may not make an announcement until late last month, when they hold an Investment Conference in riyadh. Of chinas economic expansion unexpectedly cooled further last month after a lackluster july. Factory output, retail sales, and Asset Investment all slowed. Industrial output rose. Retail sales expanded to 7 10 of 1 . That is ahead of the communist Party Congress meeting. Baer says helius sees asia generating a significant portion of the banks business in coming years. The comments came in an exclusive interview with bloomberg. We can safely assume asia will become 1 3 of our basic of our business in five years. North asia, there is upset potential. We look at markets in philippines, emerging asia, thailand, indonesia, a lot of upside. Juliette global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. You can find more stories on bloomberg. Did put theata brakes on the asian equity rally today. We have the nikkei down to tenths of 1 . A lot of selling in hong kong. A lot of carmakers have been rallying so far, coming under profit taking. Largecap stocks under pressure. The asx 200 in late trade down 2 10 of 1 . We saw a surprise uptick in jobs in the australian economy in august. Still focusing on apple suppliers. Cpk falling on concern that the late of the the iphone could hurt its sales. It is a touch screen maker. Samsung hoping to support the kospi as a partners with wechat. That will come before the iphone x. Toshiba signed a memorandum of understanding with the bain capital. They are struggling to sell their check business. This chart pulls this into perspective. The yellow line it shows assets which came under pressure. They fell by the slowest pace since 1999. Retail sales coming under pressure as well, 10. 1 for the month of august. A lot of economies would love to have doubledigit growth. We are expecting stability ahead of the Party Congress in october. Anna thank you very much. The bank of englands act battling with the familiar tradeoff. The u. K. s inflation rate is nearing a fiveyear high last month. Wage growth remains a stubbornly low. Toy say they thought reassure the European Union britain will not use brexit to undercut regulations. At a speech in london, he said there are different concerns legitimate concerns about the oversight and supervision of Financial Markets in the u. K. Joining me to discuss, chief Investment Officer at cairo investment. Which of the lets talk about the bank of england in a moment. TalkingPhilip Hammond about not undercutting europe and also talking about how he wants a status go transition period for the u. K. When it leaves the e. U. This is setting us up for big speeches and interventions by the u. K. Prime minister. At the end of the day, when you look at the negotiation now, it is a difficult situation for the u. K. You negotiating with a Strong Partner on the other side. Strong, they have many partners in europe. It is difficult from the u. K. s point of view. There is an incentive to try to gain business out of this transition. All of these are probably well known and the lack of clarity around the u. K. And brexit is very well known. Clearly matt theyre going to florence, the cradle of the italian renaissance to make her speech about close relationships. Is that a message that will go down well in italy . Is a strong u. K. Partner for all of the european countries. There is a willingness to try to work on this. At the same time, it is difficult. It is a sort of divorce and it is difficult to get a divorce to work in a nice way. Matt there is a bill to settle. Anna how much is the market paying attention to this stuff . Both sides will be far apart before the deadline. Do you put it off to the side when you are investing . Did you hear the question . Sorry about that. How much does the market care about this . Get no real will news before the deadline of march 2019 . Michele yes, i think the market is already pricing in one of the worst case scenarios. It is not going very well. There is a lot of room for improvement. It will be important for the equity market. The sentiment is extremely negative. I have not met anyone positive on the outcome. That tells me probably people are positioned the wrong way. Sterling has behaved better over the past few months. There is a lot of real interest in the u. K. , a lot of sovereign wealth funds. A lot of investment in companies. Extremewe are now at an pendulum, swinging to the other side. Matt i wonder anna i wonder about the hedge funds in new york. Some of this is around bank of england, isnt it . Changing, shifting expectations. Uss chart g btv 583 shows the cpi numbers in blue. They have popped up as high as 5 . And the way the bank of england in white has ignored all that. We have a history of looking through inflation. Does the bank of england continue to do so this time . Michele i think so, because they have very little option. The economy will be weaker in ledgedture and they acknow that in their last speech. They will have to accept the rates are lower than they would want. But it is necessary and already priced in. Matt thank you, chief Investment Officer at kairos. He stays with us on the program. We will bring you breaking news on the bank bank of england policy decision. Coming up, Asset Investment in china rises at its slowest pace since 1999. We bring you the numbers from the worlds secondlargest economy. This is bloomberg. Matt welcome back to bloomberg daybreak europe. It is 6 15 in the morning in it is 6 15 in the morning in london. In singapore, 1 16 in the afternoon. You can see the weather gathered over the skyscrapers. Get out to Juliette Saly for your Bloomberg Business flash. Juliette storms led by hurricanes harvey and irma will probably wipe out thirdquarter profit and their ability to make their target. Get out to Juliette Saly for your Bloomberg Business flash. Juliette the Worlds Largest rer had given guidance with profits of 2 billion euros. The storms in north america add to challenges. They are seeking to counter years of fallen profit as the company was pressured by low Interest Rates in competition. Apple is playing the role of kingmaker in the contentious battle for toshibas memory chip business. The iphone maker is in talks to have 3 billion in capital for bain capital. It may exceed apples largest deal ever. The 3 billion acquisition of bates electronics. Charged with conspiracy and fraud over the suspected role in manipulating the price of precious metals. He is the second person publicly charged in a u. S. Investigation into the fixing of gold, steel, platinum and palladium prices. Alibabas cofounder has said the chinese Online Retail giant plans to push heavily into southeast asia. They spoke exclusively to bloomberg. We want to be able to serve 2 billion consumers over the next 20 years. We should be going outside of access to these consumers. With a mobile wallet and ecommerce, is the best way for us to grow that internationally. Juliette catch more of our unprecedented and exclusive access to the Alibaba Group, including interviews with founder jack ma. Special halfhour program, alibaba the global disruptor. 8 00 p. M. In berlin. Anna lets talk about china. The pace of chinas economic expansion unexpectedly cold further after a lackluster july. The worlds secondlargest economy saw investment and retail sales slow in august. Lets get Details Behind the numbers with malcolm scott, who joined us. Good morning to you. Run us through these numbers. Moves across the board that saw weaker than estimates and weaker than last time. We saw week july numbers, we thought it was a one off. But there was more weakness in august. 10. 1 retail sales rising in august from a year earlier. And six to Asset Investment at the slowest pace since 1999. It came in at 7. 8 as the cumulative number for the first eight months of the year. What does this batch of data mean for the policy outlook . Malcolm in some ways, china is growing in the right direction. Many of areas in industrial output, those responding the fastest, are the areas the government wants to slow. The oldest smokestack industries, overcapacity Industries Like coal, cement, steel. There were efforts to root out the overcapacity. That is helping to reflate the economy. That reflation is helping Indebted Companies pay back loans. There is a Silver Lining to this. Consumption remains strong. Investment, because we had a fairly robust external environment, the government is able to dial back its own investment plan. The policy outlook looks fairly similar in the second half. While this is slowing, it is not a worrying slowdown yet. The growth is tied to 6. 5 or better. That is in the bag, given the strong first half. Anna what is outlook . Given we have big political gathering taking place in china. Malcolm it looks like we are slowing. We had two months of the second half, under what economists had expected. Economists had been calling for a slowdown for quite a while. The housing cycle is looking long in the tooth. Numbers a suggested is really turning. Not falling off the cliff, but turning. That should be a slower second half and betterthanexpected firsthalf. No crisis. The economy was running at 6. 3 in the first half. 6. 5 , that should fairly well gel with what policymakers are wanting. We should not see a reactive policy change, just a slight moderation in the growth. Scottthank you, malcolm joining us. Michele gesualdi is still with us from kairos. Is this your take away . Michele absolutely. We have to distinguish between structural change in the chinese economy where they are rebalancing. That is a good development. The second aspect, there is data that is correcting. But it is temporary. What we hear from our contacts in china, things are going very well. There is a sense things have turned for the better. The big question we have to look at is the political events. Emerges as a great leader, we may have an incentive to try to revamp the economy further. That is the only risk that is out there. The reality is that they were probably try to focus on growth. The project is clearly the biggest in this sense. The Chinese Markets have tried to price a scenario. Sense thatking is a things are going well in china and other markets, in resources, the commodities complex in general. And in australia see will we continue to metals, oil, gains in gains in the underlying commodities china needs if you expect this kind of growth . Michele we think so. The biggest anomaly is Industrial Metals. Based they have had a supply deficiency for a while. This is certainly going to be the first place we see things improving. We have started to see it in august and september, very strong for some commodities and stocks. The mental be strong. Even Energy Markets will rebound because of this. Demand side of most commodities is trying to stay very strong. The supply has been capped in all of these commodities. Markets are starting to realize this. Matt i have a great chart i have just taken from bloomberg subscribers can access it. We see Industrial Metals in white and wti crude in blue. They track each other quite well since 2012, only diverting last year. Industrial metals has continued to gain since the low in 2015. Crude has not kept pace. Do you expect crude to make up that pace . Do expect crude prices to rise . Michele we do. We think there are a lot of misconceptions about what is happening in the energy space and oil market in particular. If you look at anyone really working on the data, they are optimistic about this prospects. At least in the shortterm. If youk at2020,. Look at 2020, it could go down a lot. There is a big imbalance. Probably people are focused too much on the shale side of things. If you look at the actual data, it is as low as it has been in 60 years. Anna in the china conversation, we have seen a recent pace, quickening in the appreciation of the chinese currency. Some have pointed to changes the pboc has made around reserve requirements. Saying some point to that and say the pboc wants to weaken the currency. His point is that maybe the pboc believes the capital flight risk have diminished and they are realtor live thing the currency as it was before. What is the politics behind this . Michele they have been good at managing the currency throughout this period. They have sold it and appreciated the currency. They are incentivizing Asset Managers to put the resources there. They have been good at driving the demand side of the currency. If you look at the renminbi, it has appreciated. Now we can stabilize. If you look at the dynamics, 700 billion is a trade surplus, very strong. For the last three years, corporate have not been hedging, because there was no incentive to do so. Anna thank you for your thoughts on china, michele gesualdi, ceo at Kairos Investment Management. We hear from the julius baer ceo. We get his views on the swiss franc and this is bloomberg. Good morning and welcome back to daybreak europe. It is 2 30 in the afternoon in tokyo. Looking at a picture of the beautiful palace. 7 30 in the morning here in berlin. 6 30 over with guy johnson in the markets. Guy you and i will work our way through that open. We are expecting to see a little bit of positivity creeping in. The fair value being predicted by bloomberg is for a fairly flat open. You can see this on your wei screen. Yesterday, european had a reasonably good bid. You can see those stocks up 3 10 of 1 . Overnight, the japanese nikkei stronger. The aussie dollar is well bid, as is the kiwi dollar overnight. Here is where things get interesting. If you were short the dollar, you would be squeezed yesterday. The same in the treasury story, as well. That is interesting considering what we are about to show you. Skew, thee one year risk reversal, on the calls and puts. For the first time in many, many years, we have this trading above into the positive line. One year outcome of the market is saying it expects the euro to be higher. That does not tried with the music. Just on the edge to swing in favor of the dollar. Story, buty early may be swinging in favor of that. That is quite interesting. This is a dollarrelated story, oil is taking over, maybe from the Industrial Metals. You see a rally in Industrial Metals, and oil may be closing that gap and playing catchup. Anna, back to you. Anna lets talk about the u. S. President trump is working to woo the democrats saying, he wants the tax code to benefit the middle class, not the wealthy. A contradicts fellow republicans who want to spread the benefits of tax reduction more broadly, and may complicate the path forward on tax legislation. Michele gesualdi from Kairos Investment Management still with us in london. There was the debt debate in the u. S. A now we have a story around how donald trump is trying to woo the democrats with the tax code. Deal on the dreamers and trying to fix that situation with the democrats, all over dinner, apparently. Is this the start of Something Big and significant in term of the white houses ability to deliver . Or is it just a distraction . To achieve something there has been disappointment in the u. S. When we talked to people in new york and boston about the ability of the administration to do something. Look at staffing, they have not filled a lot of the positions. There is a sense the administration has to deliver and do something by the end of the year. Everyone is focused on taxes, but there are other things that are important. Matt what else are you focused on besides taxes . What else do you think they have a chance of getting accomplished . One of the things most important for the equity market and all markets is the appointment of the new fed chair. Clearly, if they try to deal with the democrats a bit more, they might actually achieve something and maybe confirm yellen, which is what seems to be the most common assumption. Anna we will get the cpi data from the u. S. Later, and the fed decision in december very close. This is chart g btv 2037. This is investors betting it will not hit that price target. We are hearing comments from fed notcials about markets going along with their Inflation Expectations. What do you make of the inflation data and how key it was . Bloomberg intelligence said we have to strip out the hurricane effects to get to the underlying inflation picture. That will be incredibly difficult at a tough point in the fed hike cycle. Michele it is a very tough topic. We are seeing people do not believe in the Central Banks in general, not just the fed, achieving their inflation target. The discussion seems to be Central Banks should not focus on the inflation target. They should not religiously try to achieve that inflation target when they make policy decisions. The past few weeks we have seen that mention that inflation a should not be as important in policymaking decisions. Canada hashe bank of not mentioned inflation last week when they hiked their Interest Rates. They took out the phrase on inflation. Is a consensus among central bankers that maybe inflation should not be the driver of policymaking. Anna speaking of central banking, matt . Matt the boe is not the only game in town. The swiss Natural National rate is expected to hold rates steady when they well hold the meeting at 9 30 in switzerland. Slideelieve the francs is not enough to make it change their tone. From julius baer spoke exclusively to bloomberg about the currencies fall. Currencys fall. Boris it has been overvalued for quite a while. Real world it is all about the economic relationship between the eurozone and the swiss franc. We have had a bit of a rally of the euro in the last few months, too much great, better levels. I do not think they will do anything for the time being. Matt michele gesualdi, chief Investment Officer at Kairos Investment Management happens to be with us this morning. You have a close relationship with boris of julius there. They have the lions share of your business. I guess i cannot ask you if you are agree or disagree. The do you think of movement we have seen in the swiss so far this year . Michele obviously i agree. General, it was strong across the board. It makes even more sense for the euro to be strong. Thati think is relevant is if you see a risk off correction, one of the best currencies in that scenario can be the swiss franc. The swiss franc and the yen will drive the rally if there is a moment in markets between now and the end of the year. Brings banks will be less relevant. It is more about flows and positioning. When you get to extremes in terms of positioning your subject to reversals. Anna the strength of geopolitical concerns has not done more for the swiss franc. It is not counted the runup in the euro, which i found interesting. I read comments about todays meeting at the snb, saying it could be the most important interesting snb meeting for a while. They have to say something, dont they . Michele they probably will. It is a little like bank of england. There is a lot of talk about things. They will not actually do anything, that is my guess. , chiefichele gesualdi Investment Officer at Kairos Investment Management will stick around with us. If youre traveling to work you can tune in to Bloomberg Radio, where the Central Banks conversation continues. They will be joined by michele napolitano. You can get bloomberg with the bloomberg plus at. Ou can also type in radio alibaba rivalry is heating up with the u. S. Company hiring hundreds of staff in china as it tries to regain market shares in the World Largest Online Shopping arena. Our correspondent Stephen Engle spoke exclusively to alibabas vice chairman and founder joe tsai. He started by asking how open the chinese ecommerce is to american competitors. I know the people have talked about china being somewhat of a closed market from an internet link to view. Point of view. But in ecommerce, china has been open to foreign competition. Inn we entered the market consumer ecommerce, ebay had 90 market share. We were fighting from the little guides position. Amazon came into the market early and made an acquisition. They were able to freely compete. In the case of alibaba, we are fighting against all sorts of competition, domestic and foreign, from day one. It was a very open, competitive environment. We also did not charge commissions. It speaks to the longterm focus of our thinking process. It started 2003. For five years, we did not generate a single cent of revenue because we were looking at growing the market and the buyers and sellers in a twosided marketplace. Free is not a viable model, ebay said. But they had to do the same thing. Free is not a viable model, but patience is. Lets talk about the United States. How will you crack that market . I know you were in detroit recently. You have a global network, 300 initial veterans. Vendors. What will be the secret to taking on amazon in its own market . In the u. S. We are differentiated from amazon in that we are reaching out to the entrepreneurs, merchants, brands, american companies, and educating them as to what it is like to sell in china and how big opportunity is with over 200 million middleclass consumers. And also, almost half a billion users using the alibaba platform to buy things day in and day out. We want to enable companies, both big brands and small entrepreneurs. Big Companies Like procter gamble, apple, nike, they are all doing business on a platform. But if you want to sell apples from Washington State or cherries from michigan, farmers can also have access to the platform to sell to chinese consumers. Have you met any push back in the United States because of the rhetoric coming from the white house and the antitrade sentiment that might be there now . Is a more challenging today than it was a year ago . There is a little bit of antitrade sentiment, but it is understandable, when you see a fairly large trade deficit. At it, it does not affect us, because the trade flow that we are talking about is selling American Products and to china. Into china. We are focused on that strategy. In the other direction, i think some of the retailers, traditional and online in the United States, will suffer first, if there is a trade war based on trade tariffs. Of ourou can catch more unprecedented and exclusive access to the Alibaba Group, including with jack ma. Our halfhour program, alibaba the global disruptor, 7 00 london time. You can watch the show using them tv function. You get the regular tv stream but also the charts and functions we are using during the program. You can influence the conversation by clicking on the ask as a guest question on the screen. Matt coming up, change of plans. Saudi arabia said to prepare for delay of the aramco ipo, pushing the share sale into 2019. We tell you what this means. This is bloomberg. Good morning. It is almost 8 00 7 47 in berlin this morning. In new york city it is a 1 47 in the morning. Very foggy there. You should be thing to the left the empire state building. You cannot make it out because of the cloud of fog. Lets get the singapore for the business flash. Storms led by Hurricane Harvey and armagh will probably wipe out thirdquarter profits and threaten the companys ability to meet its earnings target. The largest reinsurer has previously had profits. The storms add to challenges. There have been years of fallen profit. Apple is playing the role of kingmaker in the contentiouss memory chip business. If the agreement is completed, it may exceed apples largest deal ever, the 3 billion acquisition of beit electronics. A former trader at ubd charged with fraud in manipulating the price of precious metals. He is the second person publicly investigation. S. Into the fixing of gold, silver, platinum and palladium prices. His attorneys say they will fight this case. That is your Bloomberg Business flash. Saudi arabia is said to be preparing contingency plans for a possible delay to the initial Public Offering of its stateowned oil company by a few months into 2019. While the partial sale of saudiaramco is scheduled for 2019, the timeline is looking increasingly tight. Lets get more on this massive, gigantic, unbelievably large ipo with yousef in to buy. What do we know . Saudi aramco is not just a major story for global investors, it is also a story about credibility of the saudi reform program. The new saudi arabia trying to open up to capital. According to sources, theyre looking at contingency plans for a possible delay and a push into 2019. We do know we are speaking to the new york stock exchange. They have a cascade of regulatory and preparatory work that cannot happen until that actually takes place. That is what is Holding Things up a little bit. There in mind, advisers of the ipo have been choice and chosen. Advisedently, they are by michael klein. That delay raises the execution risk a little when it comes to the ambitious saudi reforms. Anna raises interesting political questions around the listing rules in the united kingdom. Talked about achieving a 2 trillion valuation. A lot of it must hinge on where the offering goes. Yousef the saudi aramco story is an important part. It is massively important to what saudi arabia wants to project. It does not give them that much flexibility. You hit the nail on the head. Valuation would be tied to the vast amount of oil reserves they own, the 2 trillion valuation. Some see that is too much. Math, looking at a decent amount in terms of that ipo. Looking at 100 billion. The record was raised by the Alibaba Group and 2014, just to give you a sense of the scale of this ipo. Also, lower oil prices. If you look at the function on the bloomberg, something above 50 a barrel does not help a higher valuation of saudi aramco. There is little room for the authorities to move. They have promised to deliver and investors will be looking forward to seeing how they will execute on them. Anna thank you, yousef gamal eldin joining us from dubai. As theyared to invest look for critical supplies of cobalt and lithium used in car batteries. We are taking a special look this week into the electric future. We are analyzing the risk factors that can delay or derail the adoption of chargeable cars. We have michele gesualdi, cio of Kairos Investment Management. Cl we also have another guest. Is everything we are talking about along the adoption, is there an inevitability to it or not . We are getting closer, but it is not inevitable yet. There are number of factors that could derail or dramatically slow down this growth and momentum. One is just policy support. They are still dependent on policy. If you took one or two away, that would dramatically slowed in the market. The other is battery cost of declines. They are down over 20 70 since 2010. They still are not price competitive with combustible vehicles. Anna should this be a collapse scenario . Colin i do think there are some of these factors. Some things announced in the last week could push it up further, faster. I do think some of these are worth looking at. If you look at what bmw announced, they want to make sure they have a secure supply chain. That is another risk. There is a possibility of real price fights that go into batteries that would slow down the battery cost decline and delay this point of equivalents on an upfront cost basis. Ebs ise of my favorite made by bmw. The i8 has a great triple gasoline engine. They call it a range extender. It also helps boost power. My concern is, if i am driving somewhere and need to charge up, around europe, there are not a lot of supercharger stations. Even if i did stop at one, it would take a half hour or 45 minutes to get back on the road again. Is that infrastructure going to change, or will he rely on continuing to have a gasoline range extenders in these electric vehicles . Colin the infrastructure is changing. You mentioned the supercharger network. Europeans the cited to band together and build a network with a high charging rate. That will keep improving. Were looking at factors that could derail this. We still do not know how the middle market will behave. There is good indication once these things are cheaper but those things you mention, having to stop and refuel, those are untested. The degree to which they want to fully change their behavior to go electric. Consumers on the final group to decide whether this will take off. Middle market, consumers might have questions. How about the Investment Community . Are you buying into the electric dream . Michele we are not. Real is a sense this is and there is a lot of hype, probably too much hype. At the same time, it is important for resources. It is very concentrated. The ownership of resources you need to produce the battery is very concentrated to four or five players. A good angle, which is quite important. The third aspect, it has longterm implications for geopolitics and the equilibrium. 2025, youk at 2022, get collapsing demand for oil. That will affected geopolitics in a big way. Matt thank you so much for joining us, michele gesualdi, chief Investment Officer at Kairos Investment Management. From Bloomberg Energy finance. Matt saudis plan b. The kingdom is said to repair for a delay over aramcos ipo biggestsh may be the chair sale of all time year later. China cools. Economic growth shows more slide sign of slowing and retail sales took lower. Nuclear threat area north korea threatens to sink japan, further cranking up tensions in the region. In decision day. We get policy announcements from the boe, snb, and turkey, ther [inaudible] we have had a bit of a riling of the euro a rally of the euro to much better levels. Matt good morning and welcome europe,berg daybreak in our flagship morning show on the continent and on the island of great britain. I am matt miller in berlin. Anna i am anna edwards in london. We are getting breaking news on the car sector, i will give you a moment to open up the stores history. You have some of the numbers. Rise, 9000 3000 vehicles and change. Was carmakers like to show fiat and alfa romeo who are selling smaller suvs that helped to boost the numbers. A gain of 5. 5 for european car sales. Very good news for an industry that right now needs the question is, are they slowing down . Anna some of the second line news items here, registrations improving. Something we talked about, the strength of the european economy. They seem to have done well. We are getting some breaking a. M. Here. 7 00 lets get to the closing retailer, having us firsthalf pretax numbers. And a revenue figure of 1. 8 9 billion pounds. Looking to see if they have anything to say about the impact of a slower consumer environment, the headwind for well. K. Consumer documented in terms of increases in inflation. To what extent are customers stepping up to keep dying . That was one of the numbers that went higher in them most recent inflation figures. How resilient is the Business Model in general, one of the cus numbers. There was morrison is talking about the debt profile, they are giving us profit numbers that to be broadly in line. First half adjusted pretax profit 177 Million Pounds and the estimate was for 177 Million Pounds in the first half. They are giving us numbers around sales, Second Quarter comparable sales up 2. 6 . A shade higher than the estimated 2 . And net debt less than one billion pounds for the rest of 201727 2018. According to analysts, margins in focus as well. Lets look for some of the details. Lets get to the futures and talk about where we expect to open across the European Equity market. Investors pausing in the asian session. Putting the latest geopolitical rhetoric to one side. We see the euro stoxx 50 is. 3 cted to be down by. 2 or at the start of the trading day. Matt lets take a look at the assets. One of them is bucking the trend, the euro showing some weakness against the dollar. The dollar falling against a basket of currencies. The euro down against the dollar. Not a big move but interesting to note. We often see the euro and the pound determining the direction of their respective equity indexes. 1. 187rodollar at 118 5. One of the things aramco could be waiting for is for the price to rebound. The global edge mark trading at 55 even for a barrel. Look at the asian trade to see how their equities fared, poo rly, the nikkei and hang seng down. Mainland chinese indexes were down as well on the weaker economic anna. We do have asian stocks leading us to a weaker open this morning in europe and the european futures are lower. Anna definitely worth a mention, the chinese data. All of it below estimates and all of it you low last month. The conclusion we got from a colleague in hong kong is it is cooling. Lets get a bloomberg first word news update. Haidi north korea has made an explicit threat to use a Nuclear Weapon on japan. The Statement News agency quoted an efficient an official being the country should sunken into the cp or co the threat was an abominable propagation, an official said. Donald trump has blocked a chinese backed investor from buying lattice semiconductor. The Trump Administration has maintained the u. S. s stands over chinese takeovers even if it takes chinas help to resort resolve the nuclear crisis. Saudi arabia is preparing contingency plans for a possible delay to the initial Public Offering of its stateowned oil company by a few months into 2019. According to people familiar while the government is aiming thea saudi aramco ipo in second half of next year the timetable is looking increasingly tight. The country may not make an announcement until late next month when it is holding an Investment Conference in riyadh. The pace of chinas economic lacklusterfter a july. Factory output retail sales and asset invest meant slowed. Industrial output rose 6 from a year earlier while retail sales expanded 10 . Everts to rein in credit expansion ahead of the coming as Party Congress appear to be working. The u. K. s prom prime speech inas a florence next week. Her announcement came as chancellor Philip Hammond said he understood fears about the position of Financial Markets and would try to allay them. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top go. At top. On thearkets stalled back of the china data. You have the yen strength weighing into the nikkei, the nikkei closing down by one third of 1 . Australias market losing by. 1 of 1 . And up limit remained steady at 5. 6 for august. Carmakers have been rallying quite strongly. The kospi looking good up 131 . A lot of the apple suppliers in focus, one falling the most in three months. It is on concerns that the delay of the iphone x will hurt its sales. Samsung partnering with wechat and releasing a phone ahead of the iphone x. Toshiba shares coming under pressure. It signed a memorandum of understanding but there is concern it is struggling to sell the chip unit. Into a the china data picture we can see. Pacerose by the slowest since 1999. We saw ipn retail sales at their slowest pace of growth so far this year. A shock to markets but what we are expecting to see instability from these countries and doubledigit growth in terms of retail sales, something other countries can only dream of. Anna Juliette Saly joining us with the latest on the chinese data. Mark carney is grappling with a familiar tradeoff as he prepares a policy announcement do today. The u. K. s inflation rate is nearing a fiveyear high last month that 2. 9 . Wage growth remains low. We have the policy announcement at the day u. K. Time. Joining us is been ritchie, head a historyeem to have looking at spikes and inflation. Do you expect the central bank, the bank of england continues to look through the spike and say it is temporary and to do with the pound. Guest the simple answer is yes. The boe have been cautious, they see this as inflation and keen to stress it is likely to be temporary and against that backdrop they have been quite dovish over the last of to 18 months and i see no reason for that to change. Matt if i look at the notes we were exchanging yesterday, i see so many negatives for the u. K. , a drop in real wages, High Consumer indebtedness and a low savings rate area that could go either way. Limited. T finances are there is so much uncertainty for Corporate Investment in the u. K. Is there anything bullish, is , votingything positive well for the u. K. Economy between 9 now and march of 2019 . Then there is an awful lot of uncertainty and policy options are limited is well alongside that. The piece that concerns me most which does not seem to be priced into markets is political risk. The risk of collapse in the conservative coalition, perhaps another election. That does not seem to be priced in many u. K. Assets. It does not seem to be priced into u. K. Government bonds and domestic u. K. Equities either. I find it hard to look for the positive within the u. K. Economy. Anna if youre working in other currencies, the weakness of the. Ou pound is adding the government wants a states quote transition, something that many businesses, not all but many have been pushing for. Big speechhas this to make in florence on september 22, delivering a message of friendship to the eu but two weeks later she goes to the conservative Party Conference and the language or the town at those events have been typically been right of the tory party. Then it will be a difficult balance to get right and to deliver the economic message. Anna we did see the market move last year at the conference she talked about citizens of nowhere and those very memorable lines. Weakness maymays be her strength. The conservative majority is so narrow. A cooperativee is administration. They may be able to make a lot of noise but the path that she sets out is likely to be the path that will end up in the path because there is not an alternative and i doubt there is a coalition that can be formed around to the right of theresa may either. Matt if i look at just valuations, we are looking at the ftse here trading pretty low pretty high for 25 times earnings. At least forward earnings. What do you think about british stocks and their price . Ben there is a tremendous bifurcation in the market. Domestic facing equities have had a tougher time over the last few months and we have seen a slew of negative outcomes, people like next or things like greene king. We have seen companies that are with broadcing international exposure. They continue to be rated highly so the Market Dynamics are bifurcated in that regard. You can make an argument that some valuation attractiveness is merging in some of those domestic plays but there is a lot of uncertainty. A momentuick word on in history, 10 years ago but a ade has been past passed. What happened since in the u. K. Banking sector is phenomenal and the economy has not entirely recovered. Chart shows the shrinking the british this is banks of more than 10 . They are facing up against these challenges despite asset sales. The capitallook at ratios the institutions had going back to 2007 they are 20 of where they are today. In order to deliver a return above the cost of capital against that headwind has been challenging and you can see that in those numbers. Ben richie is staying with us. Under an hour to go until the european open. Heres what were watching. Because of jose and thirdquarter profit will be wiped out, they cannot say how much the storms will cost and they are us we are keeping an eye on morrison. You saw the u. K. Supermarket, with sales that were in line with expectations but a gain and 2. 5 . Rket was looking for doing a little bit better than what had an anticipated. This is bloomberg. Matt good morning from berlin. It is about a quarter past 8, 8 19 a. M. And 17 seconds. You are looking at a shot of the Brandenburg Gate in berlin. On markets have been trading bunds for 20 minutes and investors are selling them pushing the yield that. Maybe it will be more of a risk on day but we see futures for the most part across europe in the red right now. With the exception of the ftse. Lets get to the Bloomberg Business flash with roseland chin. Russel irma will probably without thirdquarter profits. The Worlds Largest reinsurer profit ofguidance for 2 billion euros to 2. 4 billion euros. The storms in north america at to challenges. The company was pressured by low Interest Rates and competition. Playing the role of kingmaker in the contentious battle for toshibas memory chip is this. According to people familiar, the iphone maker is in talks to provide 3 billion in capital for the bid for the unit. It may exceed apples largest deal ever, the 3 billion acquisition of [inaudible] person chargedond in the fixing of gold, silver, platinum, and palladium prices. His attorney promised, we are going to fight this case. Ordered Martin Shkreli to be jailed immediately. He offered a bounty in a Facebook Post for a strand of former secretary of state Hillary Clintons here. He was stonefaced as the judge handed down the decision and he was led away into a Prisoner Holding cell adjacent to the courtroom. Alibabas cofounder has set the chinese ontime Online Retail giant plans to push more heavily into southeast asia. You want to be able to serve 2 billion consumers over the we should be, so going outside of china to have access to have touches with these consumers and with a mobile wallet and ecommerce is the best way for us to grow that internationally. We have an interview with alibaba founder jack ma and this program at 7 00 p. M. In london. That is your Bloomberg Business flash. Anna we have u. S. Cpi for august and unless the economy shows evidence of significant deterioration the inflation data will be a key determinant of whether the fed hikes again before the yearend. Lets speak to been ben r itchie. Will this be the key to whether the fed hikes or is there something a little more structural going on, more predetermined by the fed . They want to get the rates of the ground a little bit further. Ben i think they do. We will see when they have to make that decision and they will be looking at a range of factors, there is a desire to raise the fundamental level of Interest Rates and that may out see. Outweighed what we matt one of the most read stories in the bloomberg is one in which fed officials admitting that inflation is softer maybe hardening up as quickly as they it would. Are we going to start to see Central Banks around the world, i do not want to stay abandoned, but let loose from their 2 inflation targets . Ben we are starting to see a discussion of structural elements, why inflation is at the levels it is at. The discussions have picked up in recent months because the Employment Data is heading in a different direction to the wage and inflation data. We would expect to see through traditional models and there is questioning as to why that well might be the case. Central by banks may be revising the thoughts about what the accessible level of inflations against what might be an excess pool level for the cost of money. There are implications that low and from the price of money. Investors sacking Inflation Expectations and if we are going to be hung up on the inflation data which we have established maybe we should not be between now and december, the hurricane and trying to strip that out. Economists were talking about how it would be difficult to get to a clean inflation number for the u. S. Over the next few months. Ben it is not unusual to see these kind of events, there are adjustments that could be made to him anticipate what the impact might be. Matt i wonder what you think about u. K. Stocks may be cheap, u. S. Stocks if we look at this chart from the bloomberg, we can line as the s p 500 priceearnings ratio climbing above that of the msci world xus. The spread from the bottom part getting biggers and u. S. Docs are getting expensive. Do they have room to run . Cautiousave been quite on u. S. Equity valuations for some time but that is not a new thing. We have been quite optimistic about valuations in emerging markets which we continue to see as reasonably attractive on a relative basis and also in europe, in the market i spend most of my time looking at, relative valuations compared to the u. S. Remain attractive, especially for domestic facing businesses. Anna what are your expectations some expect in the last year, trump seems to be doing a few deals deals across the aisle. Ben that is more optimistic about what could be achieved at the end of last year and America Needs Corporate Tax reform to be competitive against the rest of the world. As other countries become bigger and more influential in the Global Economy they cannot get away with having a tax system that does not make sense so they do need to make those changes. Anna good to see you today. That is it for daybreak europe. Bloomberg markets the european open is next. It can tune into Bloomberg Radio live on your mobile device and on dav digital radio. Tune into that. Bloomberg television continuing the conversations and the u. K. Consumer fairly upbeat. This is bloomberg. Guy good morning and welcome. You are watching bloomberg markets. European cash equity about to start in under 30 minutes time. I am guy johnson in london. Matt miller is in berlin. What are we watching this thursday morning . Pride and prejudice. Traders have been buying the pound for five days, we are talking about eurosterling. Will the bank of england rethink the trade at nantes today . What is priced in . Saudis pl