We are live on the ground. Good morning, welcome to bloomberg daybreak europe. Just after six 00 a. M. In london. Lets go to hong kong and get the latest on the protests. Stephen engle is standing by on the ground. Great to have you with us. The debate on the bill has been delayed, give us an update. Stephen good to see you. The debate and the dialogue on the bill in the building behind me it has been postponed until down a littles more. Some of the protesters with masks and goggles and paraphernalia rallied yesterday, and were repelled by the police force, including teargas and rubber bullets and pepper spray. Some of them came here this morning, they congregated around us and were waiting to see if the Legislative Council would have the reading of the controversial bill. It turns out they have decided not to meet today or tomorrow, they saw that as a moral victory. They have not gone home. They have retreated out of the main street here, and we have one protester wanting to jump into the camera. What did she say . Stop shooting hong kong students. That is what happened. There is a lot of anger on the streets by young people. They felt the force used by Hong Kong Police was inappropriate. There were 72 injuries, 50 men and 22 females that went to the hospital with various injuries. Some i saw on the Television Last night with wounds to their eyes with the rubber bullets hitting. It is a tense calm now. Read the bill today, but that does not quiet down the unrest. Ais was another placard protester gave me earlier this morning. It ishong kong basically a rallying cry, lets go. Figuratively, lets go. The sentiment is there. Sentimentolutely, still there. Looking very different to this time yesterday. Our chief Asian CorrespondentStephen Engle thank you so much. President trump said the tariff deadline is in his head. Futures on a back foot. We are seeing risk off on assets today. U. S. Inflation yesterday coming in soft. Cuts byate cut, two yearend. We are down a basis point today. The 10 year yield down a basis point, and the curve steepening on 2. 10. You are seeing risk off sentiment with the yen bid against the dollar. Jobs data is a separate story, underperforming in the g10. Crude, wti dropping 4 after we bounce back today. Markets in asia, Juliette Saly has more. Fromst got an update Stephen Engle, it is clear what is going on with the hang seng. What is driving risk off elsewhere . Juliette i guess comments from donald trump, no clear deadlines in talks with china other than in his head has given move into safe haven assets. You have bonds and the yen tracking higher. Kong, butgain in hong worth noting what is happening. The hong kong dollar has been on the front foot as well. Chinas market flat, australia flat as well. Fall below 1 eld for the first time as unemployment remained at high. 2 . At 5. 2 stocks in detail, the developers, property developers, the sector you are seeing in hong kong amidst this concern over the extradition bill. We are also watching a lot the gaming stocks in shanghai. This center ambition we are hearing breakthrough is giving a lift to companies. Plantntroversial adani has been given the greenlight to build in queensland, australia. It was a major factor of the australian election. Juliette saly in singapore, thank you so much. Inflation trailed forecasts in may, reinforcing the case for the fed to cuts rates. Trader paul jones expects a rate cap, adding you should go long on stocks and short on gold. We are getting to have a rate cut. There is rate cut 101. At least initially, long fixed income, probably short the dollar, long gold. That is what you do into the first rate cut. All those trades are processed. How much further will they go . I think they will go a long way. You think in 2019 we might see 50 to 75 basis points cap . Depends on thet tariffs, how far we go with them. Short. E cycle is cut we never really got the rates that we have gotten historically to end an economic cycle, they were cut short. Because of the tariffs. We really have to see the impact they will have, and if this next round of tariffs gets implemented, it would be a huge deal. If they get implemented, certainly it is possible that. Ould tip us into recession we have never seen anything like this in 75 years. We have not seen tariffs since 192930. There is no playbook. Nejra u. S. Commerce secretary wilbur ross says the december increase was at best amateur. At best premature. Most economists have been wrong, particularly with the Federal Reserve, staff economists have been wrong. They have been believers in the idea that unemployment goes down, inherently inflation will become a problem. They have been wrong in that thesis. To more that has led aggressive Interest Rates than the facts warranted. Nejra joining us now is marija veitmane, senior multiasset strategist, state street bank trust, our guest host for the morning. Lets talk about the Market Pricing around the fed. We have two cuts priced in for yearend, july is fully priced. What will it take for the fed not to cut in july at this point . Is an interesting question. Historical evidence is quite clear, once market prices are cut as strong as we have now, it has almost never happened. , we should get all the information next week at the next fed meeting. They have two choices, they either work the market back, or it is likely they will cut rates. It has almost never happened that Market Pricing is so strong. A disappointing market. Nejra the question becomes, will a cut be soon . Will a mini cutting cycle be forceful enough to preserve the soft landing scenario that u. S. Equities are pricing in . Marija if you purely look at the fundamentals in the u. S. Economy, it is quite strong. It is ok, slowing down, the 10 year business cycle. Definitely pricing for the cuts. It is taking into consideration potential for the trade war. We have Little Information on what is going on in Donald Trumps head. It is hard to anticipate. If you look at fundamentals, one cut, insurance cut is enough. Nejra will that be enough to keep stocks at this level or drive them higher . You do you might argue not even need one cut. We do not know. , not having a deal is exceptionally hard. War, if youa trade avoid a trade war, you do not need any cap. The probability of each is equal. It is exceptionally hard. Is nice for wilbur ross to say in hindsight it was a mistake. S,thout a trade war or tariff probably not. P early the economy is not in terrible shape. A slowdown, but not recessionary. Six to nine months ago we were talking about rate hikes. We need to get back to levels we need to be there. The economy has not collapsed. It is the trade war that is making us concerned. Nejra if we do not look back the way wilbur ross is, if we look forward like paul jones, says the first rate cut, 101 trade, long stocks, long gold, short the dollar. Marija we have been constructive on stocks for a while. Gapbig point is the huge between the economies which is somewhat constructive and robust, and we have negative recessionary expectations. Income . Hat about fixed would you be attracted to any part of the Treasury Curve . Marija given the flatness of , it is very flat, taking duration risk, we are not well compensated for that. That is what investors are struggling with. The curve is flat, you have an enormous amount of low yield, they have to take more risk. It has pushed out the risk spectrum. Manusnejra marija veitmane, ser multiasset strategist, state street bank trust stays with us. Lets get first word news from debra mao in hong kong. Debra President Trump has up his criticism of germany, and Angela Merkels support for that het trump worried could shift troops away from the nato ally over the lack of defense spending. Hong kong lawmakers have ncrapped debate o extradition bills. Filing classes yesterday, the question turns to what happens next and if this will become a prolonged test. Hong kong is not a safe place to keep assets now. If you are a u. S. Or British Investment banker, you have to stayly no rationale in hong kong. You moved to singapore or move your assets out of hong kong. What you will see, the reason you are seeing at spike is there is a massive liquidity shortage in hong kong. Japanese shinzo abe has to avoid conflict at all costs. He pledged to do his most. It is the first by a sitting ,remier in the 40 year history it comes as the u. S. Shows little signs of reducing sanctions. Senator Bernie Sanders has lashed out at jamie dimon after he criticized socialism. The jp morgan executive says statecontrolled Companies Lead to deterioration and would be a huge mistake for the u. S. The president ial hopeful hit back and said he did not hear any dimon criticizing socialism, that federal government bailed out wall street. Global news, 24 hours a day on air and at tictoc on twitter, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Debra mao in hong kong, thank you. The deadline, President Trump asked when china will return to talks. A fed cut. Hear more from Thomas Jordan today. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. A logistic Real Estate Developer has pulled its hong kong ipo. 1. 2 4 seeking to raise billion in this hong kong ipo, and that shareholders including Goldman Sachs calling for terms on the deal. This is what we are learning earlier. This month with selling 560 million shares. We are hearing the price range would have represented a market cap as much a 6 billion, but be pulled. Looking to lets check in on markets, a risk off day. Asiapacific index, energy, tech stocks are leading. Weakness in s p 500 could continue today. Futures on a back foot. Laryen changes in pricing, we have two rate cuts price in by year end. Year yield dropped below 1. 90. 4 de steady after dropping yesterday. Here is debra mao in hong kong. Debra philip greens empire has avoided collapse. The approval cleared the way for dozens of store closures and rent that at 200 sites across the u. K. And ireland. The owner of top shop and Dorothy Perkins says it was approved by creditors. Netflix is stepping up efforts to turn its streaming form into a multimedia empire. Is unveiling new video games. Stranger things 3 the game will come out the same day the third season debuts. Characterssing the to outside studios. Launcheds lanced three satellites. The falcon nine rocket and satellites were deployed successfully. They willans say provide 250,000 images to monitor the environment. That is your Bloomberg Business flash. Nejra debra mao in hong kong, thank you. Lets turn back to trade, President Trump says no deadline for a deal with china other than the one in his head. Trump is confident a deal will happen. Today, we are asking on mliv, our markets rising in a u. S. China trade deal in 2019 . You can join the debate, reach out to us and the mliv team on your bloomberg. Marija veitmane, senior multiasset strategist, state street bank trust is still with us. We have loads of things in our head that we should not share. A deadline on tariffs is one that should be verbalized. Lets talk about equity markets pricing in for a u. S. China trade deal in 2019. Marija it is a great way to ask this question. A review is that trading was not priced in. It has not been priced in in the First Quarter of the year. , we think it was based on q4 and the market was readjusting. If you look at global stocks, you probably can argue it could be below where yields are. Clients, manyto committed money to emerging markets. Some were on the margin generally. People were persuaded where Global Growth was slow. Not many people were convinced by emerging markets. Fed pricing, the u. S. Economy is not flying high, but it is solid. Definitely the market is expecting a sharp disruption in trade. Sides, if he gets the mexican deal, nejra you think risk is skewed to the upside. We do get an upside scenario. Where do you think that cash will be employed most aggressively . Marija we have been fans of the u. S. Market for a long time, i believe that is the market with the highest earnings essential, highest growth outlook. I am sure we will talk about it, but Growth Stocks is the centerpiece of our investment process. The u. S. Offers the best opportunity for growth. Nejra you do not think they have growth versus value . Marija absolutely not. Nejra lets talk about em. With the recent portfolio changes, corporate performance, i have a short showing it normalized. Corporate performance has collapsed in developing nations. Does this solidify your review of closing that overweight in the em . This positionse begrudgingly. We think the trade war is not priced in. Anybody who has economic treading sense thinks tariffs are terrible. Economicverall perspective, not a great thing. Think it is mutually beneficial to get a trade deal. Having observed exit negotiations for three years, a mutual deal is hard to make. Dealnk we will get a trade sooner or later, probably more later than sooner. Emerging markets should do well. Positions are quite low, so it should work. The trade war is keeping headlines, it is hard for emerging markets. Underweight. Al not we are waiting to go back. Nejra you also like european exporters. Why . Surely they are at risk. Has been oure least preferred market and still is. We are worried about european banks, and it is the largest part of the index. If you have to buy something in europe, by something that makes money outside europe is better than buying something that depends on making money in europe. Nejra marija veitmane, senior multiasset strategist, state street bank trust stays with us for the hour. Up next nejra this is bloomberg daybreak europe. I am nejra cehic in london. Here in london is annmarie hordern. I will make you sound like a broken record. You have been talking about banks for days. They are taking center stage heading for a correction. What is weighing on the sector . Good morning. Nifty percent down, and down 8 . Downgrades on some of the private banks. All of that is weighing in. If some but he was in those weaker banks, they would be worried. I would not want to be in his shoes. That is the one big problem. The nifty bank, third number on your screen is down 0. 8 . Something tells me you may have to tell us about that tomorrow. Ofare seeing a second day declines for global stocks, what is weighing on sentiment . Things weighing on sentiment, the trade tension and donald trump reiterating he will potentially raise tariffs on china. We have data out of the u. S. Playing into the hands of those who are gunning for change in u. S. Monetary policy. The fed is criticized to reconsider what they did in december. Equities are down across the screen. Hong kong down 1 . The kospi down 0. 5 . Foreign money moving into safe havens like the japanese yen and the u. S. Treasuries. Commodities, brent crude slipped below 60. In the past hour it went up higher still hovering around 60 per barrel. That is a key threshold for brent crude. Amid tensions and protests in hong kong, a surging hong kong dollar. This is a shortterm volatility, and you can see the surge amidst tensions in the city. On top of that we have the highest since 2008 during the financial crisis, within hong kong we have seen that spike volatility as well as the rate for it. Nejra the demand for cash alive and well. Thank you so much. Lets get first word news with debra mao in hong kong. Debra hong kong lawmakers have scrapped the bid on extradition legislature for a second day. Between remain high police and protesters after violent clashes yesterday. The question now turns to what happens next, and if this will be a prolonged protest. Hong kong is not a safe place to put assets now. U. K. You are a u. S. Are investment bank, you have no rationale to stay in hong kong. You moved to singapore or move your assets out of hong kong. What you will see, the reason you are seeing a spike, there is a massive liquidity shortage in hong kong now. Japanese Prime Minister shinzo abe has urged iran to avoid conflict at all costs. He pledged to do his most to ease tensions. It is the first time a sitting premier in the 40 year history, it comes as the u. S. Shows little signs of reducing sanctions. Senator Bernie Sanders has lashed out at jamie dimon after he criticized socialism. The jp morgan executive said state control of Companies Leads to deterioration and would be a mistake for the u. S. The president ial hopeful hit back saying he did not hear jamie dimon criticized socialism when the government bailed out wall street. Canadian satellites will take daily scans of the country. The falcon nine rocket took off from a military base in california, and the satellites were deployed successfully an hour later. The Canadian Space agency will provide 250,000 images a year to monitor the environment and assist emergency teams dealing with natural disasters. Global news, 24 hours a day on air and at tictoc on twitter, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Debra mao in hong kong. President trump is considering using u. S. Sanctions to stop construction of the north stream pipeline between russia and germany. Quote, we are protecting germany from russia, and russians is getting billions in money from germany. Annmarie, great to see you again. Marie he is sitting alongside the polish president , which is a transitory country. On, one isare going bipartisan support. You have a republican and democratic senator it drafting this bill or sanctions. It will have a domino effect for anyone working on this project which should be done by the end of the year but will be delayed. Critics say this is not the u. S. Want to get into the market, russia is so europe is so heavily reliant on russia, a third of the gas comes from russia to europe. This is the u. S. Wanting their own lonng play. Realistically, could europe import more from the u. S. . Is that what President Trump wants . Annmarie it is a stretch. They would have to have to freeze it and put it in tanks, while it is easier to go through the pipelines from russia through europe. No transitory fees crossing europe. It would be more expensive, more lng is likely to go to latin america or china. This could be why u. S. Wants to put more pressure on. Nejra thank you so much. The nextn europe, battle between italy and the eu starts today at the meeting in luxembourg. The budget defiance is not on the agenda but is likely to be discussed by finance ministers. This comes as the European Commissioners look to discipline and rein in debt. Maria tadeo, great to have you with us. Seatnni chia takes the hot today. He does, it is a tough sell. His credibility has taken a hit. He is not able to rein in the buys they will be a will to bring down the deficit and debt, but he has to make a case for the italian economy. Says thegovernment economy will gain ground by the end of the year and tax revenue will increase. The reality is that the market does not by this. The european the market does not buy this. The debt pile is 133 of gdp will go down, if anything, increase. Of minibotsncept issuing paper that rattles investors. Are these concerned overblown are these concerns overblown . Maria this is controversial and a hypothetical, it is a motion the Italian Parliament is looking at. It does not mean it will happen. In principle, the Italian Government could issue shortterm paper to pay the government. Whether or notat there is a plan to take italy out of the euro. The italian treasury says there is no plans, there is not much use for this. The stark warning came from mario draghi that ultimately this is a binary choice. Money that is clearly illegal cannot have a separate currency. If you look at the debt, you already have a big debt. Verywas Mario Draghis stark warning. Nejra thank you maria tadeo from luxembourg. Marija veitmane, senior multiasset strategist, state street bank trust is still with us and following markets. In italy, if you look at btps, they have been rallying, you have seen yields despite the prospect of renewed tension with the eu. What is your take on why the market is reacting like this . Hard in ourere hit portfolios. We reason for buying btps, are still long. Closeea is we are already to 11 trillion debt with negative yields. The talk of depression was a couple years ago, and they are going back to it. It is difficult for fixed income investors to find yield anywhere. Thinklculation is, do we italy is a backstop. Have we proved the point of no return . Yet. Udgment, not there is a backstop, there are yields. It is risky, but to earn some returns, you have to take risks. Nejra they took advantage of the low yields yesterday. Times theved four number of orders. The hunt for yield is alive and well. Staying below 400 basis points and where it is now, does that not make it more difficult for the European Commission to put pressure on italy . Marija absolutely, absolutely. They are taking advantage a little bit, what can you do . [laughter] elsewhere in europe, we are talking about that you like export, and that is because you have concerns around the domestic economy in the eurozone. Talk a little about that. Doesnt matter where the exporters are exporting to . Would you like European Companies exported to china with the trade concerns . Marija it is interesting to look at the reports recently. They said they have the highest sales and growth in china. It is interesting. You are right, it is company specific. Luxury goods seem to be finding its market in europe and china. Income andibution of overall trade is slowing. , that is axury goods little on the discussion on growth. If you want growth, you have to pay for it. There are a few sectors in europe that look attractive, not much, but still attractive. Nejra i know you like i. T. In the u. S. Watch, i understand you like growth and value, but if you look at the chart, you said it is outperforming for 12 years. Would you haveel High Conviction on growth versus value . Marija growth versus value, i love this chart. Years, Interest Rates have gone down, yield curve got flatter. Growth stocks, you are , another strong factor is lack of overall Earnings Growth. It is a lower growth rate and lower Interest Rates for a long time. They have been outperforming for a long time, but you get what you pay for. There is a stock generating earnings. The market demands premiums. Unless Interest Rates are going sharply higher. Nejra marija veitmane, senior multiasset strategist, state street bank trust stays with us. Here is what you should be watching today. At 8 30 we get a Rate Decision from the Swiss National bank. We will have an interview with Thomas Jordan later today. At 1 00 p. M. Where do you get the results of the first conservative party ballot of mps , candidates will be eliminated. Hope francis meets with oil executives, the vatican battling climate change. And a production update. Meet insters luxembourg. We will be live at the meeting all day. This is bloomberg. Nejra this is bloomberg daybreak europe, in london. Cehic the worlds lowest Interest Rate could go lower. Depreciates with global reading turning dovish, could the key rate be further below zero . Here with the market view is dani burger. Back. What a day to be we have this Rate Decision, and economists do not expect a change in rates today, but there is the potential given the appreciation of the frank for there to be devastation generally. If you look at what the frank has just done, we see it hit a two year high versus the euro. Thats what you hear the snb president say it looks highly valued. Even though the overnight volatility rate, which i havent blue, is at its average, it suggests traders see a muted reaction today. When we turn to the bond market, there is a lot that could concern snb stock. Here is the german and swiss tenures. Narrowest since 2015. What was happening in 2015, the sharp drop in the spread is when we first get the snb announcing 75 basis point rate. We have this negative rate already. Cuts are further if needed. We are seeing traders price in further cuts to the worlds lowest rate. Nejra how vulnerable could the swiss franc be . Dani burger has told us all about it. Coming up, we speak to Thomas Jordan, president of the Swiss National bank, and get his take after the Rate Decision. You do not want to miss that conversation at 10 00 a. M. Here is debra mao from hong kong. Debra electric vehicle sales are plummeting and the stock price greater in, but the founder and chief executive does not see what the fuss is about. In three 70 value months, and investors need to understand developing new vehicles costs money, and the company will be profitable within a few years. A you cannot ask fiveyearold toddler to make money, it is difficult. If you look at tesla, it has been established for 16 years. We have only been established for four years. We do not need a decade to make it. Netflix is stepping up efforts to turn its streaming platform into a multimedia platform. It is unveiling video games based on it shows. The game things 3 is coming out when the show debuts. It is licensing the characters to outside studios. That is your Bloomberg Business flash. And hong kong,o thank you so much. Boris johnson formally launches his campaign yesterday. 10 candidates are battling it out to succeed theresa may. Here is what to look out for between now and late july when you cable get a new primus. Today we will get the first results of the first ballot. Anybody with fewer than 16 votes will be eliminated. On june 18, the results of a second ballot. Any candidate that gets 32 votes are fewer will be gone. Wednesday, june 19, a third islot where the fewest votes unlimited. That will continue until only candidates remain. Then they will Campaign Across the country. Conservative Party Members will vote, and on the week of july 22, a new leader will be selected. The new leader will form a government perhaps within hours of the contest ending. Marija veitmane, senior multiasset strategist, state street bank trust is still with us. How would you trade the pound in the runup to this . We short sterling. Of idea is for our measure media sentiment, it got negative recently. Suspect it has a lot to do with the results of the european election. Rhetoric, no deal rhetoric heavily hardened, and what we are seeing from every candidate, we have to leave, deal or no deal. The sentiment of a no deal increased somewhat. On the back of it, Economic Data started to disappoint. If you look at the economic surprises out of the u. K. , they have fallen. Some deceleration there. Media sentiment is negative. If we think about investor positioning, people are not shorting sterling. There are some positions that could get involved, so that is were we come from and what are thinking. What it means for equities, interestingly nejra i would imagine you would long the ftse 100. Marija absolutely. If you short sterling nejra that sounds straightforward. Do you have protection positions. How much convictions do have behind the trade you outlined . I think the number of factors against sterling is quite compelling. A lack of negative positioning and weak Economic Data. That puts us squarely into the short sterling camp. Nejra and that is because you like the dollar on the other side. Do you have a similar position in sterling versus the euro . Marija those are our longerterm positive positions. For the dollar, we are thinking it is safe for currencies. That is a longerterm trade. With the fed cuts, the u. S. Economy is the strongest, you have this yield rhenium. Even medium to longer term, the dollar should be supported. Nejra somehow we managed to get that to the fed. Marija veitmane, senior multiasset strategist, state street bank trust, really great to have you with us. Will continue the conversation with us on radio. Lawmakers in hong kong scrap debate on extradition. Stephen engle is on the ground. What is ahead . Stephen this was the epicenter of the protest yesterday. It is a tense calm now. Many protesters retreated. Some came back and debated whether they would continue the fight, especially if the Legislative Council was going to convene and debate this extradition bill, which is the heart of the protest. The Legislative Council decided not to convene today. It will likely not being tomorrow. A bit of a moral victory for protesters who will continue to put up a fight behind the scenes. The big dilemma for the pro supporters, how do you most forward when so many people are against it . There are placards including this one, which means add oil, lets rally, lets go. And stop shooting hong kong students, that is a frank statement. There is a lot of debate. The use of force yesterday was excessive. We will delve into all these issues when i do a full report from Central Hong Kong on the state of the protest on the extradition bill. I am Stephen Engle, this is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Nejra good morning from Bloomberg European headquarters in the city of london. This is bloomberg daybreak, and here are the top stories. President trump points to his head when asked when china will return to talks, the fed points to a rate cut. Rom Thomas Jordan. The u. S. President says hes considering sanctions to stop nordstream 2. Were live from the european meeting where the top story could be matteo salvini. And lawmakers scrap debate on the hong kong extradition bill for the second straight day. Were live on the ground. Good morning, just after 7 00 a. M. In london and cpi crossing the bloomberg now. We look at cpi month on month for germany, bang in line, month on month and year on year, in expectations, inflation out of germany. A look at equity markets ahead of the open, which is just under one hour away. Before those, let me bring you more breaking news here. A port official says an oil tanker is on fire in the gulf of coming through the bloomberg right now. Checking on the oil price, not necessarily drawing any connections, but we see a spike in brent. Yesterday we saw plunging numbers on u. S. Inventory data. The spike we see in brent, trading over 60 a barrel. Lets get to the futures market. U. S. Futures pointing lower. We saw some weakness in the session yesterday. In europe, yesterday we saw weakness, down. 3 on the stoxx 600 after three days of gains. We could see another day in the red. Ftse, dax, cac futures all in the red, may be concerns about trade giving the ambiguity of President Trumps comments, or may at this point the market has priced and what they expect from the fed. With the soft u. S. Inflation, we have seen pricing for a july cut increase, and two cuts priced in by the end of the year. Anotherear moves lower basis point. We see steepening. The reflection in futures, bund yields edging higher. Bond sales in europe and the u. S. Yesterday. Juliette saly has more for us. Juliette were focusing on hong kong, lower around 0. 7 , continuing declines from yesterday as we still see uncertainty over the hong kong extradition bill that sparked those protests. The shanghai market looks ok, fluctuating and trying to get into positive territory. Pretty flat at the moment. Australia has closed flat but holding onto nearly 12year highs. Indias market showing a little weakness. Money going into the japanese yen today. Still concern over the u. S. China trade relationship, weighing the nikkei weaker 0. 5 . We have watched interbank lending rates soar. The one month rising the most since 20080. The hong kong dollar is a little weaker against the greenback but has been Holding Onto Gains we have seen the last few sessions. The biggest three havent a rally we have seen since november. Aussie,g on the unemployment remaining at 5. 2 today, and economists expected it could drop to 5. 1 . You also sell yields lower, on australias three year note below 1 for the first time ever. Nejra more breaking news. Tesco, firstquarter like for 0. 4 ,. K. Sales rising missing the estimate of 0. 8 . Firstquarter like for like u. K. Sales missing estimates, but tesco saying it had a strong start to the year, firstquarter like for like sales overall up 0. 2 . Soft,k. Sales coming in firstquarter like for like sales, and a u. K. Growth slowdown was expected by somes analysts. Thats tesco. More breaking news, i believe were looking for breaking news from morrisons, so going through the lines. Morrisons and amazon are expanding a pact on Online Grocery home delivery. Thats an interesting line you might want to watch, some of the online retailers at the moment when the European Equity market gets going in just under one hour. Back to the fed. A closely watched measure of u. S. Inflation trailing forecasts in may, reinforcing the case to cut rates. The core price index rose 2 . One billionaire macro jones said billionaire investor said he expects a rate cut, speaking to vonnie quinn in new york. Tocks artut 101, long s t least initially, long fixed income, short the dollar, long gold. Thats what you do in the first rate cut. All those trades are already in process. The question is how much further they will go . I think they will all keep going. So you think in 2019 we might 45 75 basis points of cuts . Well, so much of it depends on the tariffs, how for we go with tariffs. Remember, this rate cycle was cut short. We never really got the rates weve gotten to historically to end an economic cycle. They were cut short, because of the tariffs. So we have to see the impact, and if the next round of tariffs is implemented, that is a huge deal. Id say if we go to 500 billion implemented, certainly its possible that could tip us int recession. Weve never seen anything like this in 75 years, right . We havent seen tariffs since 1923. There is no playbook for this. Nejra meanwhile u. S. Commerce secretary wilbur ross siaid the december increase has been at best premature. Where most economists have been wrong, particularly where the Federal Reserve staff theymists have been wrong, have been believers in the idea that as unemployment goes down, inherently inflation will become a problem. Been simplyavbee wrong in that thesis, and i do benk thats led the fed to more aggressive in Interest Rates than the fact really warranted. Nejra joining us now from yu. Va, darryl thank you so much for joining this morning. Do you expect the fed to start a minieasing . . Cycle in julydarryl good question. Theyu look at the market, have priced in some cuts already. I think everything will depend on the data that comes out in the next month or so. In all the data weve seen recent weeks suggests the u. S. Economy is slowing, in line with the global economy. Nonfarm payrolls were pretty disappointing last friday, so a july moves chances are deftly are other, but there things that have to fall in line first before the fed will probably pull the trigger. Nejra so there need to be some variables. But are you preparing the portfolio for the fed rate cuts to come, daryl . We heard from paul tudor jones, talking about his fed rate cut 101, long rates, long stocks, long gold, short dollar. How are you preparing the portfolio for fed rate cuts . Daryl right now we are not positioning. If you look at the marketplace today, were positioned relatively defensively, so not aggressively long equities at this point in time. Were underweight equities, because we still see a number of risks. Trade tensions the number one concern right now. It obviously depends on what happens in the g20, this month. A pickupwe need to see in global Economic Data. Global pmis have gone below the 50 level, a bit of a concern for us. The slowness has been disappointing. So our readings suggest a more defensive position, which is why we are underweight equities and Holding Quite a bit of cash at this time, so waiting. Nejra so underweight equities and holding cash. You say you are defensive. Does that mean at the moment you are preferring cash over duration . Daryl thats right. Because when we look at the cas 2 eposit rates recently, and 2. 1 . S. Dollar from the treasury. To riskreward doesnt seem merit holding longterm u. S. Treasuries at this point in time, so i guess everything depends on what is the overall outlook with regard to rates. The market may have gotten it wrong, in terms of pricing in a recession. Thats what the bond markets expect, a recession this year. Scenario at this point in time. Could be the next year, or the year after, but u. S. Economic numbers are still pretty robust. We dont see a recession in the nearterm at this point. Gold daryl, is buying part of your defensive stance . Daryl yes. We have about 3 to 5 allocation in gold. Gold is tricky, because it actually hasnt done very well the last several years. It has picked up in recent weeks beenonths, and that has part of the portfolio just to provide some diversification. Because when you construct a portfolio, one of the big problems this day and age is actually trying to find diversified assets. The way the world is, when something happens in one part of the world. We havent seen the usual correlation between volumes and equities, which is one reason weve maintained a certain allocation in gold. Liew stays with us. We have more to discuss. Check on the oil price, because a uae port official says that an oil tanker is on fire in the gulf of oman. Brent crude up 1. 25 . Wti lagging a bit, but still higher after plunging yesterday after the u. S. Stockpile data. Lets get first word news with debra mao, in hong kong. Debra President Trump has upped his criticism of germany, threatening sanctions over chancellor Angela Merkels continuing support of nordstream 2. He has previously warned the project would leave berlin captive to mask out moscow, and warned he could shift troops away from berlin. Japanese Prime Minister shinzo abe has urged iran to avoid conflict at all cost. Hes a rare friend of both washington and tehran. The visit comes as the u. S. Shows little signs of reducing sanctions. Senator Bernie Sanders has lashed out at jamie dimon, after he criticized socialism. The jp morgan executive says state control of Companies Leads to deterioration and would be a huge mistake for the u. S. The president ial hopeful hit back, and said he didnt hear jamie dimon criticizing socialism when the federal government bailed out wall street. Global news 20 were hours a day, on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra . Nejra thank you so much. Staying with hong kong, the Legislative Council has canceled debate on the controversial extradition bill the second straight day, amid threats of more mass protests. Our chief north asia correspondent Stephen Engle is in Central Hong Kong. Good to see you again. Give us the latest. Stephen we probably shouldnt say canceled, because that has more of a definite ring to it. Its more likely postponed. Weve heard from the chief executive here, carrie lam, saying she will continue to push with this highly controversial extradition bill, in the Legislative Council, the building behind me that needs another 66 hours of public debate before it can be put to vote. Turned rally that violent late yesterday here in hong kong was right here, in fact, the epicenter. It was really focused on getting the legislators to rethink this bill, and perhaps even withdraw it. So far, no indications from the Hong Kong Government they will withdraw it, but at least everybody is talking about it today here in hong kong, and especially after the use of force by the Hong Kong Police yesterday that left 72 people injured and in the hospitals, 50 withnd 22 women left injuries. Right now it is a tense calm. Some protesters showed up this morning with their masks and goggles. Early this morning, it was left strewn everywhere around the Central Business district of hong kong, the helmets and masks and goggles and the like, because of the rubber bullets, the teargas, the pepper spray, the projectile beanbags, a number of different weapons used on protesters yesterday, which left a lot of protesters quite mad. Some of them did show up here this morning, but when they learned the Legislative Council decided to shelve the reading, the debate today at least, they kind of withdrew. Not necessarily going home, but pulling back from the cauldron, if you will, and waiting to see if indeed the Legislative Council will do an aboutface or whether indeed its been tabled. Nejra stephen in hong kong for us. Thank you so much. Breaking news on alibaba. Its said to have filed for a hong kong stock listing. Well keep an eye on that for you. Lots more to discuss coming up, talking trade war, the risks of it mounting or not. We see a little risk off across markets today. 10year treasury yields moving lower, equities in the red in asia, and european futures on the backside as well. This is bloomberg. 7 20 a. M. In london, 39 minutes from the cash equity open. Nejra brent crude spiking after an incident in the sea of oman, where an oil tanker sent a distress signal to the united arab emirates. Henry horton, what can you tell us . Annmarie the u. K. Annmarie hordern, what can you tell us . Annmarie the u. K. Maritime agency is looking into this. After this signal we have seen 1. 7 , after it dropped below 60 a barrel yesterday, starting off the day below that. We see it spiking now. In the terminal, i want to show you what is going on in the gulf of oman. You can see this vessel and track it on your terminal. Ais kind of tanker has capacity for 750,000 barrels of oil. We are not sure how much is on the tanker, but we know where it started, where it was headed, to taiwan. We will track the story, but for now we know there was a distress signal sent from the tanker. Gulfany destruction in the of oman, near the strait of hormuz, that can send shockwaves through the market. Nejra thank you very much. President trump said there was no deadline for the deal with china, other than the one in his head, and restated his threat to impose tariffs on over 300 billion of chinese goods and less beijing reverses course. Is confident a deal will happen. Today we are asking on mliv, what odds are markets pricing in for a u. S. China trade deal in 2019. Daryl liew is still with us. Lets use that as a starting point. What odds are Market Pricing in for a trade deal in 2019 . Daryl if you look at the equity markets performance, see the u. S. Market still extremely strong, the asian market rather strong as well, it suggests the market thinks a deal will get done. What form that will be and whether it will be relatively in, although i believe President Trump and president xi will meet at the g20 and something will get done the next couple of months, i dont think that means all the problems go away. The issues between the u. S. And china are far wider. You look at the huawei s ituation, it epitomizes the problem. This is more of a containment strategy to curtail chinas ri se. Nejra with that in mind, what does it mean for relative performance of equity markets from here . In your midyear review, you pointed out that asian and u. S. Markets are starting to diverge again, and emerging markets. Close . Expect the gap to if so, do asian markets move higher, or u. S. Markets move down . Daryl in the nearterm, my position is u. S. Markets will move down. There is a bit of complacency with regard to the u. S. Market. No doubt, growth is still positive in the u. S. , unlike in asia. Looking at the trend of eps expectations, we started the year with markets expecting an almost 10 Earnings Growth for asian companies, but today we see a contraction of 2 , a sharp 12 swing. Thats primarily driven by the trade tensions and uncertainties relating to moving forward. So if we get some form of trade deal, hopefully that will kickstart more certainty in the marketplace, and we could see improvement in terms of asian equities. Over the middle term to longterm, we could see asian markets bounce again. Nejra daryl, what would be your preferred asian market in that scenario, and why . Daryl i think if you look at the yeartodate performance for a number of markets, the heavy in northiven markets asia have been hit. Laggard ine biggest this regard, with the Global Supply chains. The difference between the china market and the hshare market, the hshares have been pretty resilient. I think thats primarily because of msci inclusion and passive flows. Fromurther hit taken demonstrations in hong kong, that could be wanting to look out for, looking for rebounds from Companies Like tencent, listed in hongkong. They could get a boost if we get some form of trade deal, moving forward. Nejra the dollar continues rolling over, that could also feed into that. Thank you, daryl liew. Ts it for today great daybreak europe. A quick look at brent, continuing to slide on the Oil Tanker Fire report. About 61. Right now, stay for our interview with Thomas Jordan. Bloomberg markets surveillance is next. A bit of riskoff, along with u. S. Futures moving lower. When you are traveling to work, tune into Bloomberg Radio live on your mobile device and on dba dab digital live in the london area. This is bloomberg. The latest innovation from xfinity isnt just a store. Its a save more with a new kind of Wireless Network store. Its a look what your wifi can do now store. A get your questions answered by awesome experts store. Its a now theres one store that connects your life like never before store. The xfinity store is here. And its simple, easy, awesome. Good morning. Im anna edwards alongside matt miller in berlin. Matt the markets say, are you ready for a cut . Legendary trader paul tutor joan expects easing from the fed. Europe points lower as tonomists expect the snb offer lower guidance