Decision to move the Central Bank Governor. It could undermine the regulators independence. Diluting the case for cuts. Asian stocks and u. S. Futures fly. Morgan stanley cuts its Global Equities allocation to the lowest in five years on concerns about elevated valuations and profit headwinds. New democracy problems. Greeces centerright party leader takes over as Prime Minister abe and am quite election victory, but will his as Prime Minister after his election victory. I have a strong mandate to deliver on my agenda. Which is an agenda to grow the economy, to create more jobs, but also to make sure that people feel safe again. Manus a warm welcome to bloomberg daybreak europe. Deutsche bank is the most read it has all changed. Read headlines coming through. There is an news ceo. Withp is named as ceo immediate effect. He was brought in to take over from the previous dealmaker. He is the new ceo, effective september 1, part of the longterm Succession Planning. What else can until you . It is a longterm Succession Plan by the board. Bernard will retire from the executive board. He has been with the company 21 years. All change them a strategic election within the banking industry. With. S what we lead they have unveiled a radical overhaul that will see the lender exit its equities business. Cut the work force. The ceo will take over a restructuring charge of 7. 4 billion euros for 2022 to pay for the enormous shakeup. Ines steel to guy johnson frankfurt and began by outlining where he sees growth coming from now. Obviously, we are in german bank with german roots but with a global network. We are aligned with the strength of the German Economy, which are really trade and investment. Dna ofgoing back to the the company, which is Corporate Banking, so in creating the is this division of a corporate think, that is really a sign of to emphasis in our plans invest in that franchise which is core to this organization. Guy so the drivers are . Realignment . The you will stay here are drivers. This is what Deutsche Bank is now. James it will be the greatest growth driver in a franchise as we see it gone forward, especially in todays Interest Rate environment. That may change in the future, but for now, we see great Growth Opportunities that have existed for several years and we have not been able to participate as much as we should have applied have. We see growth we should have or could have. We see growth in the Consumer Banking franchise as well as for italy and spain. Asset management has recovered after a difficult year in 2018 and is on a growth trajectory. We see underlying growth in our franchises. We are making the decision to step back from elements of our Global Markets franchise. In particular, trading. That is a significant step in reorganizing the bank. Now is guying us johnson, who conducted that interview. Good to see you this morning. The question is, the fifth attempt at turning the anchor around, is it going to work this time . Guy that is the big question everyone is trying to figure out. It is a more radical overhaul than we have seen previously. This was the bank that brought trust back in 1999. Ever since then, it has been effectively on a downhill trajectory. They have been trying to figure out how to make the franchise work. It has been a real struggle. This is probably the most we have seen. Ul they are very tight when it comes to riskweighted assets. Above their minimum they are required by regulators. He talks about the fact that they have a significant cushion. It is probably a little bit tighter than he makes it out to be. Nevertheless, we shall see which way the economy goes as to whether or not this is all going to work. Nejra great to see you. Deutsche bank retrenching at a time where the German Economy does not look so good. Is this going to be a problem . Guy it could be an issue. They are becoming more german and less global. Which, you of only have to look at the economic it coming out of germany at the moment. It does not look good. I talked to james about this. He put a more sanguine been on this. Spin on this. We were 40 bits last week, a reflection of things been quite difficult. They will lie on german industrials rely on german industrials. Germany caught between the united dates and china, states and china, it is interesting for Deutsche Bank to be retrenching back to its home market. Capital raising, if we look at the cost of this, it is half the market cap at the moment. Is that perhaps not the Silver Lining but thus far, they have not had to raise capital in this particular restructuring . Manus we will see, manus. This is probably the biggest question that is open at the moment as to whether or not deutsche is going to have to raise money. Over the last 10 years, i think they have raised 30 billion. The market cap currently is 14 billion. That tells you everything you need to know. We were talking earlier on about the tier one. If that comes down, they will have to come back and look to raise money from the market. If there is an issue with the German Economy and the numbers that are plugged into the current economic model do not stop back, maybe they will have to raise money. At the moment, they are saying they do not want this to happen. In have taken a tidy beating and seen investors have already taken a tidy beating. This is probably the biggest question that is open at the moment. What is going to happen with the plan . Will they need to raise money . Nejra our thanks to guy johnson in front for it. We will catch up with you again. They do so much. Stay tuned for plenty more from that interview at 6 30 a. M. , est. On friday was the blowout jobs number that dominated. Still seeing pricing for a rate cut in july and john. We saw the 10 year yield jump eight basis points. The 10 year yield still about 2 , down to the bank basis points two basis points. Futures pointing to another lower open as we head to that monday open. Of course, Morgan Stanley turning bearish on global stocks. Au have more detail in just second. We did see a weekly gain despite the decline. 112. 30. Unchanged at manus we will get to that in just a second. There is a credibility gap, a. Hasm the firing of the Central Bank Governor of turkey and the market has taken a swipe at the lira, giving up nearly 3 on the open. It is not exactly that. It is a rereading. Real rates in turkey, over 8 . What does that do in terms of the great kerry trade . Has that been thwarted . Lets talk about the Morgan Stanley note. Have a look at this. This is global stock markets. We added a trillion dollars since the start of the year. Starttrillion since the of the year. Morgan stanley has gone underweight and turned bearish. Fiveowest allocation in years. Check out the oil market as well as this. Nymex crude flatlining. Hedge funds are growing more pessimistic, raising short bets on crude to the highest since midjanuary of this year, so some good calls from big market players. If on man has the markets wrap from the hong kong studio. Yvonne good to see you here. You mentioned about the heady feeling we are seeing across markets. We are seeing that in asia. We are seeing this beyond the u. S. Jobs report hanger we have been seeing here and perhaps something more localized. Tensionssimmering between japan and south korea and that is weighing on the kospi. We are down 1. 8 . We have liquidity issues in hong kong and Mainland China ahead of the big ipo is coming up here. That will come online in a couple weeks. The hang seng and the csi 300 seeing some heavy selling here today. We are talking about not just the liras move but asian fx selling off against the dollar. You see sovereign bond yields as we zoom out picking up and seeing a slight melt up when it comes to yields across the board as well. To look at the movers were watching as well. We mentioned about the south korea and japan trade tensions. The chip sector certainly is in focus. Samsung getting hit. The headaches from the tips industry, still reeling from the trade tensions between the u. S. And china. They are saying that theres concerns over the Financial Reporting here. The stock falling 7 in hong kong here today. An assembler of circuit boards. Interesting move we are seeing. Atord drop of close to 90 one point. The chairwoman, we are learning, has been detained by police in china. We are seeing other Chinese Companies with its key amount of risks we have been talking about for some time now. In hong kong. Man stocks in asia lowered this morning. We have been following their u. S. Counterparts, which retreated. 224,000 inimbed june, taking pressure off the feds Interest Rates this month. President trump ended the weekend adding pressure on the central bank to lower rates. Trump or reporters that if the fed me what it was doing, it would cut know what it was doing, it would cut rates. Joining us, nick. Still in play in the market. Does the report on friday actually perhaps allow the fed to cut in july . But then think about pausing afterwards . Nick that is a possibility for the fed. I think it would be a mistake. I am more on trumps side. I think if they cut 25 basis points, the market will be a little bit disappointed. You had a truce. Inflation coming in very low. The thing that worries us most is the strength of the u. S. Dollar. It is hard to see you are talking about german data earlier. It is hard to see the world relating without the weaker reflating de without the weaker dollar. Rally we have seen and risk markets has been purely predicated on central bank easing. Any signs that they were kind of allgoing to have a cycle caused pain in markets. Manus you mentioned the dollar. The dollar has one great big bear called donald trump. What i find more interesting is we are talking much more about the dollar and the strength therein. If you think they are on a cutting path and that still remains, what does that do to your dollar call . Will it roller . All over . Will it roll over . Nick i would not say it is toast. Know, when you look at Interest Rates, the fed have more cut than the ecb. That has been the call in the last couple of months because the fed has more room. There is the potential for the u. S. Dollar to weaken versus others. I think that have been part of the reason why risk assets are rallying. But if there is any kind of sign that there is looking to cut because of this report or because of the china truth, i think the dollar will kind of rally quite rapidly, and i think that will be problematic for risk assets. Nejra you are short the dollar. If it did rally quite dramatically, maybe that might cause you to rethink some things in the portfolio. What are you rethinking, if anything, on rates at the moment, given the outlook for the fed . Has been aates trade great one because of the central bank pressure. There was perhaps some financial positions that were loose. Credit spreads were very tight. They responded to lower inflation and everyone is trying to out dove each other at the moment, so the rally in duration has been great. What makes me nervous is it has been purely on Central Banks, this rally. Just i dont think it is enough to shift the thinking. Policymakers were talking about whether they would be more willing to wait until september. If there is any sign that Central Banks are perhaps wanting to take it easy now that credit spreads are ok, i think some of this rally could unwind. Ask him about duration positions off and get that a lot more close to neutral in the u. S. And europe as long. The rally has been exceptional, and making things are in a trade. And i think, things are in the trade. It would have been a very painful trade and it makes sense here. Manus thank you very much. Stay with us. Nick wall make has much more to get to the Annabelle Droulers. Get more. Annabelle droulers. Annabelle Deutsche Bank announced a sweeping plan. It will see the biggest bank radically shrink and reshape its operations. Equitynned exit from an its equity sales business. It will cut 18,000 jobs. The restructuring will cost nearly 17. 5 billion euros through 2022. It will be the greatest growth to in the franchise as we see it Going Forward. Interest rates change but for now, we see great Growth Opportunities that have existed for several years and we have perhaps not been able to participate as much as we should have or could have. We see growth in the private bank. The new democracy leader in said to take over as Prime Minister after yesterdays election handed him a mandate to tok all the chronic lows tackle the chronic woes. I have a strong mandate to deliver on my agenda, which is an agenda to grow the economy, to create more jobs, but also to make sure the greek people feel safe again. Sewing 737 max boeing 737 max lost its first customer. An entirelyate airbus fleet. A setback for borrowing. It is under pressure to prove the max is safe again after twoing deadly crashes deadly crashes kill people. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra. Nejra Annabelle Droulers in hong kong, thank you so much. Turkey stuns again. The rally in the lira comes to a halt as the president remains a Central Bank Governor weeks before policy decision. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. Manus i am manus cranny dubai. Lets give you a quick snapshot of how your markets are moving. The msci asian index just trending a little bit lower. Some of it data from china is looking softer. Morgan stanley going under on global stocks. The lira getting battered as the Central Bank Governor was dispensed with. What does that mean for rate cuts . Dollar korean won is a little bit on the move. A threeweekp into low. Trade tensions rising. Japan and korea. There was a survey in japan about pushing a little bit of pushback against korean exports into japan. Nejra. The indian rupee slapping a 10 day winning streak so we are seeing a little bit of weakness and in u. S. Futures as well. Stocks dropped on friday following the jobs report is not cute offers we are seeing here in falling from record highs in u. S. Stocks, too. The 10 year yield jumped 10 basis points on friday. The twoyear yield coming down, hitting a 1. 87 handled on friday. Manus. Manus thank you. Lets talk about the curveball that was thrown at the turkish market. President erdogan backed the. Entral Bank Governor the move comes weeks before a policy decision on july 25. He reportedly told lawmakers to get behind the governments economic policies, including his conviction call that higher rates cause inflation. Nick wall is still with us. Seeing an Immediate Reaction in the currency and a number of different houses said mostkind of move is disconcerting for turkish asset. What is the message you take away from the dislodging of one Central Bank Governors Bank Governor because he was not on message with the president . It is hard to argue against the view that the institutional credibility of the central bank is shot to pieces. Apparently, in turkish, the new Central Bank Governors name translates to malleable. That is probably exactly what he will be. It was clear he was not going to cut rates as much as president wanted. The central bank is fully in his control. You can understand the currency weakness this morning. Weakness, ifrrency it continues and if we see any sort of free fall from here, doesnt that actually ironically make it harder for the Central Bank Cut rates on july 25 . Nick i think we are beyond that. I think we will cut rates regardless. Erdogan isesident fully committed that lower rates will end up with lower inflation. I find it very difficult the them not cutting rates now. Difficult to see them not cutting rates now. Manus i want to get your perspective from the fixed income side of things. I look at the emergingmarket bond yields, local debt yields on hitting the lowest in a living euros. In the broader em context, the fed was our saving grace, isnt it . Those that rally in young debt does that rally in the end that pause post the jobs data . Nick it would be a buying opportunity. The fed, even if they have the lead to a that will stronger dollar quickly back onto the table. So i think the market has been looking for any kind of real yield story, anywhere where there is a nice narrative behind it. I think that will change. That is perhaps one reason why they have not done more this morning because the real yields are still there. People short this stuff especially when you have the better markets nejra i wonder whether and when the lira becomes a buying opportunity because of those real rates you pointed to. Nick wall staying with us. Coming up, a banking bombshell. Deutsche bank unveils a radical overhaul that with the most a 2. 8 billion euros in quarter loss and cut 18,000 jobs. More from our interview with the cfo, next. This is bloomberg. Wanna take your xfi to the next level . Now you can with xfi advantage. Giving you enhanced performance and protection. When devices are connected to your homes wifi, theyre protected. Helping keep outsiders from getting inside. And if someone tries, well let you know. So you can stream, surf and game all you want, with confidence you can get coverage where you need it most. Thats xfi advantage. Make your xfi even better. Upgrade today. Call, click or visit a store. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. Manus i am manus cranny in dubai. Readche bank is the most story on a terminal. They are unveiled a radical overhaul that will see the vendor exit its equities business. 2. 8 billion euros secondquarter loss. They cut the workforce by a fifth. The ceo will shop a dividend this year and next. A restructuring charge of 7. 4 billion euros through 2020. Guycfo spoke to bloombergs johnson in frankfurt and began by outlining when he sees growth coming from now. Bees corporate inking will the greatest growth driver in the franchise Going Forward especially in todays Interest Rate environment. Now, we see great Growth Opportunities that have existed now for several years and we have has not been able to participate as much as we should have or could have. We see growth of course in private banks. Fishermen, you know, Consumer Banking franchise we have as well as italy and spain. That management has recovered after a difficult year in 2018 and is back on a growth trajectory so we see underlying growth in our franchises. We are taking the decision to retrench and step back, in particularly client,i am a german the question i might ask is are you still going to be able to certify names . That is part of the core question. Many of our clients, and a significant portion of the revenues earned or international revenues. 30 revenues are trying to outside of germany. 40 of german organizations, as mes have activities out of germany. They expect us to be able to service their needs. The needs maybe cash management, risk management, at at, and those fx, and those are areas we excel. Retrenchmentsthe in equity affect that . Concerns wef the have had about retrenching away from equity cells in trading is the franchise impact and the potential it will have knock on impact in our other businesses. Making the decision have made, and we had to grasp that will need to manage through that. We are retaining a targeted Capital Markets franchise as well as research in limited distribution to continue to serve our clients needs around equity finance it. The sales and trading decision has been a difficult one for us. Of course, recognizing as you say that there are likely to be some knock on franchise implications of that decision. Manus do you think you will lose clients as a result . James as we looked at the , frankly, we will keep a fair number of our clients we think and continue to be able to serve their needs. We will of course reduce our client franchise as we attempt to focus on those core clients where we devote our resources. But the impact of you like that clients who are uniquely served by us is surprisingly small. Guy you are going to be operating with a smaller cushion when it comes to capital. Art regulators comfortable with that . You said they are for now, but it is a slim margin. I would not call it flame. Even at 12. 5 and for the mix wes makes we will will be orienting towards, we will be highly capitalized. That was the Deutsche Bank cfo with guy johnson in frankfurt. Our guest this morning is nick wall. When you take the scale of the restructuring that is going deutsche, i want you to translate that into the bond market for us this morning. The context of flow, also have on liquidity, if at all, in your opinion. Guess the bond market is partly responsible for some of the pressure we are seeing in european banks. Everyone knows deutsche has its own issues, its own problems, european banks share prices have not exactly been all guns blazing recently either. It puts the ecb in a bit of a catch 22 situation here. It needs to support the bond market and the general economy and it has done that by cutting rates and by potentially but this puts qe pressure on the front end of the curve and it affects banks profitability. While the bond space of banks may well be ok because they are well capitalized and everyone is desperate for a bit of yield in europe at the moment, it keeps pressure on the equity prices. Discuss butmore to for now, lets get the bloomberg first word news with Annabelle Droulers in hong kong. Annabelle thanks. Edging higher as european powers urge iran to embrace enrichment levels but they stopped short of threatening sanctions. Iran said it is open to talks with europe to solve it the nuclear deal salvage the nuclear deal. French finance minister Bruno Le Maire has called for compromise on the next managing director of the imf. E. U. Governments are reportedly considering mark carney for the role. Picked tolagarde was be the next president of the ecb. She has a lot of experience at the highest level. She has been a great general director for the imf. I am deeply convinced that she will be a good president for the ecb. Soccer teamhe u. S. Won the womens world cup. It is a backtoback triumph for team usa and a record fourth title. The team will fly back for its parade in new york city on wednesday. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus. Thank you very much. Annabelle droulers in hong kong. The new Democracy Party leader in greece will take over as Prime Minister today. That is after a landslide election victory, handing the former banker the mandate to tackle chronic woes after a decadelong plus financial crisis. Maria joins us from athens. Good to see you this morning. The victory. What does it mean for greece in reality for policy . What is the Biggest Issue that he will have to talk tackle . Maria creeks are waking up to this stunning political uturn are waking up to this stunning political uturn. This is what the Athens Newspapers are reading today. It does not get more mainstream or establishment. This is a banker who belongs to a wellknown political dynasty. He is probusiness. He really ought to grow the economy aggressively and things will move very quickly for him. He will be swan in today. His government will be announced by the end of the day. They want to legislate from day one, but the big issue is always the fiscal targets. He wants to cut taxes, but to do that, he needs his. It is a question whether he will get that. Good to see you. Investor expectations have been pretty high going into the elections. Stock market is one of the bestperforming. The 10 year yield hitting a record low. Will he be able to meet those expectations now . Been a lot of this has priced in. We have seen the yield compression. A lot of that also had to do with the European Central bank which really soared this year. It is a big question. The plans are very ambitious. He says he wants to grow the economy 4 and go back to brussels and renegotiate with creditors. Priority. S number one that is what he said to me what i spoke to him in athens. Lets take a look. With our european creditors. We made our plan very clear. No real surprises involved. We want to drive a real reform agenda for the country. , very bold,tious and very, very detailed. Was been speaking to us yesterday and in athens. The point here is he wants looser fiscal targets. He wants to renegotiate that surplus greece needs to meet to cut taxes. He seems to think that is the key to kickstart growth in this country, but again, it will depend on two things, whether he is able to perform reforms and good faith in the european commission. Nejra thank you so much, maria joining us from athens with the latest on the election. Nick wall is still us on the london set. Talking about yield compression, you have seen that. Going into the election, you were one of the investors that went long greece. Do you still want to hold that position now that we have had this result . Nick yes. Theres going to be some skepticism around for that he will be committed to that fiscal heance and how aggressive will push tax cuts with European Partners. He promised on the flipside to increase the pace of asset sales and undergo structural reforms. Some of the European Partners were worried they were not being implemented. Perhaps they might allow him to cut rates and not be too worried, but the fiscal balance is important to us. One of the main reasons why we got involved in greek debt was this huge cash balance they built up. Now, the average maturity of thek debt is way into future because a lot of the loans have been turned out so they negated that role of risk by having huge cash balances. There was any sign they would be rapidly depleted, then perhaps greek investors would get a bit more nervous. It is a lovely line in the bloomberg story today. If you are willing to hold junk related and ililliquid debt japanese investors. Illiquid debt. So the flow of money in this negative yielding world environment, where does that reach for you . Are you still a believer in compression . How do you play that . Virtually all of the german curve is underwater bar the 30 year. Nick it is what you argue against it at the moment because, like you said, most of the board curve bund were is nd curve is in exit territory. In the future that becomes perhaps more problematic. If there was, you know, if the fed are successful, they come back into the market. A lot of these yield trades at fairly tight levels already could unwind and you can see some more messiness in bond markets in the future, but right now, with Inflation Expectations as low as they are, with Central Banks being as aggressive as they are, i am not too worried yet. I think most people would look at that as a buying opportunity. Nejra in the portfolio, what are you doing now in the periphery versus bunds . Our we cut back some of italian exposure. That is just more of a valuations thing rather than necessarily that. We had the rally on the back of the ebt. That is a procedure they did not implement and it does not look like they will see that. We still like greek bonds. But kind of continuing to play the high beat part of the curve. Manus thank you very much. Nick wall, Portfolio Manager for fixed income. The income in European Central the incoming European Central bank chief, christine lagarde, should shift policy to make a comply with the mandate. This according to the ruling christian democratic party. We have also got the thoughts of on the guardseo appointment. Christine lagardes appointment. She had leadership during the financial crisis. And the imfs capability to move forward and to transform a very large organization. I do not think she is political. With their colleagues e towards, i am sure she can take the Monetary Policy of the eurozone to the next level. Package, great leaders are joining the group. He will be presenting the union abroad. Mr. Michel can build compromise and i think he will be a fantastic replacement for mr. Task. The new leader tusk. The new leader has skills to face great challenges. Toare extremely enthusiastic work with those guys. The new finance ministers may replacehis monday to the imf director. Circulating as mark carney, currently at the bank of england. Is he european enough given he holds british and irish passports . I do not want to comment on things that have not happened yet and things that are not really related to this. Of i do hope that he sort initial deals, which is that the world bank is led by somebody from the u. S. And the imf is led by somebody from europe, is going to continue. Because the worlds a world with different values, and European Values are specific and must be expressed and heard in the global framework, and i hope carrying these European Values will run the imf. Nejra that was the euronext ceo speaking to caroline could know caroline in southern france. Finance ministers gather in brussels today for the euro group meeting. Christine lagarde ecb nomination is expected to be ratified today. On wednesday, we get fomc minutes from the feds june meeting. Jerome powell will be delivering his Monetary Policy report to a house panel, taking on greater importance after that jobs number. Manus. Manus absolutely. Get ecodata. Inflation manufacturing from the European Countries on wednesday and thursday. It includes the u. K. , france, germany, switzerland, denmark, and norway. Account ofes as an their june meeting on thursday. Friday, we get the inflation data for june out of the u. S. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. Cranny inm manus dubai. Lets turn our attention to bond etfs. 2019, global assets up 1 trillion after coming onto the market 17 years ago. The next five years, blackrock expects pace of adoption to accelerate and global bond etf assets doubled to 2 trillion. A big call for a big business. Ishares at blackrock joins us. It is like a bullet train, isnt it . 17 years to one trillion, but we will rocket to 2 trillion in five years. What will trigger the next acceleration . A more efficient product in terms of costs . What is a driver . There are four main drivers for fixed income etfs. One is the change in the Way Investors are constructing portfolios. The increased adoption from Institution Investors as more investors understand etf and more investors are using them in different ways in portfolio, finding utility for their outcomes. I would point out we see most of the use of etf by active managers. Product innovation will drive some of the growth, to be sure. Continued think the regulatory support that we see through transparency in markets, the continued transparent around these, understanding around fees nejra i was wondering how you see the pace of adoption differing in different regions of the globe, naspers is asia u. S. Versus asia . Etfs were first launched in the u. S. And most widely understood in the u. S. We in europe are catching up. We are starting to go through milestones for european etf that we perhaps saw in u. S. Markets in 2014 and 2015, so last week, or the week before last, when we saw the dovish turn by the ecb, with some volumes spike. The European Investment grade etf we saw traded more than one billion dollars in one day so that was a big milestone. We are starting to see more transparency and liquidity in european etfs. Now that all of the otc prince are being prints are being reported, these are steps forward in terms of the ecosystem which are helping to advance europe. To be sure, the u. S. Is the bigger part of the market to the. Today. Manus can we get deeper into liquidities . A number of great points about the rush in. It is great to rush in. That is marvelous. , the liquidity consequence of being so crowded in the products, is there any risk associated with that . How do you manage that risk . Brett etf have been tested etfs have been tested in a number of risk scenarios, germany by market related events or specific asset class events. Yield related examples which is an area people look to when they have these concerns. A key thing to understand is the way assets or money gets in and out of etf. One of the advantages is it can deliver out securities in kind or bring securities into the portfolio in kind. Ist this means as a manager you have the ability to keep a portfolio in mind with its benchmark. You are not selling them all liquid assets or the asset that are you here to find a bid for at that point in time. The other thing that is important to understand is the etf manager or the index manager were generally is not trying to buy and sell every summer bond in a given benchmark so it is not a case of trying to indiscriminately by bonds when you have inflows or indiscriminately sell bonds when you have outflows. You have a lot of flexibility in which ones you can use, which creates managed risks and reduces transaction costs in the portfolio for the investors. To deliver better performance ultimately versus trying to simply lift or sell risk indiscriminately into markets. Nejra tell us a little bit more how as an institutional investor, you would integrate a bond etf into your strategy. Brett there are a number of these cases. Tactical asset allocation. An investment person does not necessarily want to go through the ins and outs of specific names but they know they want to take a view on u. S. Highyield dollaraughter emerging that. One of the big drivers we see for the acceleration of the use of fixed income etf is the way portfolios are instructed. Managers are looking to become more efficient and focus on areas where they actually add value. Building blocks in the shape of etfs are really useful in that context. Here ise final point the etf becomes more embedded in the ecosystem, one of the other things i mentioned, the inkind and delivery or receipt of securities, that is useful for the ecosystem so that helps provide a buffer during periods of liquidity. One of the applications we hear commonly is investors will trade the etf because they know where it is pricing. Transparency it provides even for Institutional Investors who have the most transparent the in the bond market rise a lot of utility. , productett pybus strategy at blackrock. Coming up, thinking bond shall banking bombshell. 2. 8 billion euros secondquarter loss and cut 18,000 jobs. More from our interview with the cfo, next. This is bloomberg. Nejra good morning from bloombergs European Headquarters in the city of london. I am nejra cehic. Manus and i am manus cranny, live from dubai. This is bloomberg daybreak europe. These are todays top stories. Deutsche bank unveils a radical overhaul that will see it exit equities. It will cut 18,000 jobs. The lender will shift its attention to a new corporate division. Corporate banking will be the greatest growth driver in the franchise as we see it Going Forward. Lira plungesrkish as president erdogans decision to remove the Central Bank Governor. The move could undermine the regulators independence weeks before it decides on policy. They did in the case for cuts. Futuresocks and u. S. Slide after fridays a strong u. S. Jobs report. Morgan stanley cuts its Global Equities allocation to the lowest in five years as concerns about elevated valuations and profit headwinds. New democracy problems. Greeces centerright party leader takes over as Prime Minister after a landslide election victory. Will his mandate be enough to tackle the nations on a close chronic woes . I feel like i have a strong mandate to deliver on my agenda. Which is an agenda to grow the economy, to create more jobs, but also to make sure that people feel safe again. Nejra good morning, everyone. Welcome to bloomberg daybreak europe. We have data breaking on the bloomberg from germany. Industrial production coming in 0. 3 as a gain for may, slightly worse than the survey of 0. 4 and year on year, a drop of 3. 7 . Analysts were expecting was a drop of 3. 2 , so coming in worse than expected on german Industrial Production from a after we got the disappointing factory orders data last week as well. Not looking too good in terms of german data. We also heard from julius this morning. He is departing later in the summer. You will get phillip rickenbacker taking over. It is a revolving chair. Lots of stories about him taking business away from julius baer. He will step down. He studied the ship, many would say. Steadied thed ship. There was speculation that he would sit in. E left Credit Suisse another might be made the ceo. Lots and lots of speculation coming through. The Deutsche Bank changing situation. There is more breaking news coming through, this time on the airlines side. Ico isiag is saying the proposing a 183. 4 Million Pounds penalty related to data theft. So that is the red headline crossing the bloomberg. It will be making representations to icos, to take all appropriate steps to defend the airlines position. Iag saying it is surprised and disappointed in this initial finding. So that is what we are getting so far, but basically the red is sayings the iag the ico is proposing this penalty of 183. 4 Million Pounds related to data sets. Now to our top corporate story, Deutsche Bank unveiled a radical overhaul that will see the business,t its equity post a secondquarter loss, and cut workforce to reverse a slide in profitability. The ceo will take restructuring charges of 7. 4 billion euros through 2022 to pay for the enormous shakeup. Johnson in to guy frankfurt and began by outlining where he sees growth now. James we are real renting reorienting the company. We have a global network. We are aligned with the strength of the global economy, trade and investment. We are going to the dna of a company, which is Corporate Banking. Creating the fourth Business Division over corporate bank, that is a sign of the emphasis in our plans to invest in that franchise which is core to this organization. Guy so the drivers are . James the drivers of our realignment . Guy the growth. When you have gone through this, you will look back in a few years time, and you will say here are the drivers. James Corporate Banking be the greatest growth driver in a franchise as we see it gone forward, especially in todays Interest Rate environment. That may change in the future, as Interest Rates change but for , now, we see great Growth Opportunities that have existed now for several years and we have perhaps not been able to participate as much as we should or could have. We see growth in the private bank. The german Consumer Banking franchise that we have as well as for italy and spain. Asset management has recovered after a difficult year in 2018 and is back on a growth trajectory. We see underlying growth in our franchises. Obviously, we are taking the decision to retrench and step back from elements of our Global Markets franchise. In particular, equity sales and trading. That is a significant step in reorienting the bank. Manus that is the cfo of Deutsche Bank speaking to die. Guy. We will get to that shortly. Buybacks, it is a hallmark. Imperial brand is delivering 200 billion pounds worth of a buy back 200 Million Pounds worth of a buyback. They have revised the dividend policy. It will be progressive. They are revising their capital allocation. Heart of theto the equity market story globally, which is that buybacks in the United States are hitting records. Highest levels the 1970s. Have a look at this twitter account. Julius baer, cars bank, imperial brand, all at the open. Nejra a huge amount of corporate news, manus. Lets get to the futures. Front, we funds, are focused on the funds. In fiveto the lowest years, and it downgraded Global Equities to underweight. Drop on. S. Equities friday post that jobs data and futures lower in the u. S. And a drop in the european equities and futures look to be pointing to a lower open in europe today as well. Manus. Manus there is no doubt about it. Did we go lower in terms of yield . We are seeing a covering. Ask yourself, post jobs, you are seeing a rise in prices and a movement in the yields. Italy ramping higher. U. S. Treasury higher. The ecb needs to act to support the euro area. Also some lines coming through from a number of people. Bruno le maire talking about fiscal stimulus. Lets see how all of the data plays into the markets. Yvonne man has been standing by. Yvonne you mentioned it is a heavy selling day. We are seeing red on the function on your bloomberg today. You mentioned about the jobs report number out of the u. S. With theix it in geopolitical tensions between japan and south korea, which seems to be getting worse. We are hearing lines from moon jaein saying there is some political purpose here on my japan put the export curbs on chip materials, which is weighing on samsung and sk hynix on the coffee. Ending the day down more than 2 in seoul. The tokyo stocks down on the nikkei 225. 800 ng down more than 500 points. Than onex down more point 5 . If we continue to see the clients of this magnitude, it seems like we are on course for one of the worst days for asian talks in months. We have the g20 euphoria, well past it now, and we are dealing with what is ahead for jay powell when he makes the testimony later on this week. Samsung, sk hynix, down close to 2 . A Sports Company getting a short from muddy waters number talking about concerns over Financial Reporting. Another company plummeting 80 . The chairwoman detained by chinese police. Manus. Manus yvonne man in hong kong. Just getting an indication on how Deutsche Bank might open in the opening sweeps. 4. 9 on trade date versus the veteran dax closed. Covering we have been is the size and scale of the gutting of the equities side of that bank. It will cost over eight alien dollars to revamp the bank 50 of the 8 billion to rebound the bank 50 . To the u. S. , the payrolls numbers. For june. Was despite the strong data, the president of the United States added pressured to the central bank. Joining us now is esther, the effects strategist fx strategist at commerce bank. One suggested there would be a cut. It would be folly for the fed not to carry through with that and deliver on that. If that is the base case, what comes next for the rest of the year . Think the payroll numbers will determine the timing of the rate cut, might put it further down into the future, but i do not think that it will avoid a rate cut because there are several other reasons why the opt for a rateto cut. In particular, the german numbers. It is more the Global Growth concerns that bring the fed on the brink of a rate cut. Nejra good to speak to you this morning. What does that mean for the dollar . Does it mean the dollar strengthened because of global concern . Or it weaken because of the cycle . Isher cutting cycle negative for the dollar. What matters for the dollar will be whether we will indeed your rate cutting cycle or whether the u. S. Economy will hold up so good that the market only or two really some one cautious rate cuts while all the other Central Banks globally might be forced to ease their Monetary Policy much further, for example, because the in europe oritions far worse than the United States. It depends on whether the the u. S. Can the couple from the recession concerns or not. Manus how want to get your opinion on the note released by pimco. Overly paraphrased it earlier saying independence is toast. He said the heyday of Central Bank Independence is over the constant frontal attack on chair powell and his colleagues and repeated calls for cuts and qe by the president and other members of the administration, does it leave the fed in a nowin situation . To what extent if at all do you agree with him . We cede globally, but of course, the biggest concern is for the fed. The market is very confident that the fed will do the right thing, but yes, the fed might feel pressured to cut Interest Rates due to the global environment. This might be interpreted as a step two, you know, like to give in to political pressure, which could in the long run be disastrous for the u. S. Dollar. Im in, there is still a lot of confidence in the fed, so we are not there yet, but it is a development we have seen globally. We have seen this disastrous step for the turkish lira from the turkish president. We also have comments from some german political leaders saying the ecb should be less expansionary. Globally, politicians try to have a strong jerk impact stronger impact on the bank. Tora you have taken a fight the lira. We are seeing a drop on this concerns around Central Bank Independence, with the Central Bank Governor gone over the weekend. Weakness now, but what is your call on the lira from here . Would you be tempted to buy the dips at any point . Esther no, i would not, to be honest. I was surprised the lira held up quite well when the market opened this morning. I would have expected the dollar the euro to trade beyond the six level because the danger is that it might trigger or it is highly likely to trigger a further downward spiral. You cannot expect the central bank to step in with emergency rate hikes any longer after the governor is gone. And you know, this drop in the lira will increase inflation at locations. If the central bank does not set in, this will in turn increase depreciation expectations, and i just do not see what the central bank or the governor could do to convince the market that they thestill focusing on stability of the lira. In my opinion, there is only one way to go for the lira. Us. A esther will stay with coming up, back to political normality, greeces centerright wins the election by a landslide. We are in athens. This is bloomberg. Manus that was just some of the leaders and chief executives we spoke to at the aixenprovence summit with Christine Lagardes nomination to lead the ecb. It is bloomberg daybreak europe. I am manus cranny in dubai. Nejra i am nejra cehic in london. Lets go to bloomberg first word news with Annabelle Droulers in hong kong. Annabelle. Annabelle thanks. Deutsche bank has announced a sweeping turnaround plan. It will see the biggest bank radically shrink and reshape its global operations. Among the most dramatic of the changes is the land exit. The plan will see it cut 18,000 jobs. The restructuring is set to cost 7. 5 billion euros through 2022. Corporate banking will be the greatest growth driver as we see it Going Forward. Especially in todays Interest Rate environment. That may change in the future as Interest Rates change, but for see great Growth Opportunities that have existed for several years and we had perhaps not been able to participate. Annabelle Hong Kong Police arrested five people while dispersing the latest protests against the controversial extradition law. Police made repeated carrie lam suspended the bill last month the protesters want it withdrawn entirely. The u. S. Soccer team has won womens world cup, beating the netherlands 20 in the final. It is a back to back triumph for team usa in a record fourth title. The team will fly back to new york city on wednesday. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus. Manus thank you very much. Annabelle, i want to take our viewers attention quickly to the lira. You can see that oneday swap. The lira down 2. 66 percent. The dollar up by 2. 66 percent. You are seeing pressure come to bear on the lira. You are seeing a swift move. The turkish lira, one your. Urrency jump this after the Central Bank Governor was pushed aside and we await the next policy meeting later in the month. To greece, a shift to the centerright new Democracy Party leader. He will take over as Prime Minister today. That is after a landslide election victory handing the former banker a mandate to tackle the nations chronic woes following a decadelong financial crisis. Usia, thanks for joining this morning. A sweeping victory. He has a mandate. What is top of the agenda . Maria good morning, manus. Greek politics this morning going full circle. Voted out of office and a return to the establishment. It does not get more mainstream than him, someone who is probusiness, perl investment, belongs longs to a wellknown political dynasty here in athens a euro investment, belongs to wellknown political dynasty here in athens. He talks about 4 gdp annual someh, and he also wants fiscal leeway to be able to do this. I spoke to him yesterday night in athens, and he told me his number one priority will be to to go to brussels and make sure he can get some fiscal room to put in place the fiscal taxes and the cuts he wants to implement very much from the getgo. Lets take a look. Discussions with our european creditors will begin immediately, but we made our plan very clear. No real surprises involved. We want to drive a real reform agenda for the country. That is ambitious, very bold, and very, very detailed. Maria that was him speaking to us yesterday night after winning the election with a big majority. And here is the thing. Things are moving very quickly for him. He will be sworn in today at 1 00 p. M. The government will be announced by the end of the day and the market is buying this idea that he can somehow get some concessions from the European Union and that he can grow the economy aggressively. We have seen that reflected in that rally in greek stocks and that compression and bond yields. But this will depend on whether or not he is able to get that fiscal leeway from the european commission, from the creditors, and actually see growth revamp in the country. So much. Ank you maria joining us from athens. Esther is still with us in frankfurt. Taking a look at greeces 10 year yield, not much. We are seeing yields move lower in italy and also on the bunds. We have one yet more disappointing data out of germany. How much of a gravitational pull downward on the euro do we have from bund yields where they are and European Data . The fed potentially embarking on an easing cycle . Esther i think there is a potential affect, in particular report. E u. S. Market so this is back on what the ecb will do and there is concern in the market that the ecb might be forced to be much more expansionary. We already see that in the bund yields and an effect on the up. If they try to surprise on the is asionary side, there high likelihood the euro will be pushed further downward. Thing that struck me, and i was just ruminating when i looked at my bond board that i started this half hour with, ramping higher in price in bonds, ranting higher in bcps, i amtalian much more worried about Global Growth. So we are back to perhaps some of the best opportunities to pick up protection. If i look at dollaryen, swiss, what does the bond move this morning say to you about the protection prison i should be seeking an fx prism i should be seeking in fx . Demand forre is some safe havens, because of course, it is not only what the Central Banks will do. We also know the east is limited in how much more they can do. Aboutis this concern whether there will be a global recession. There is also some concern whether the trade conflict between the u. S. And china will like this for now. In fx, the currency havens like this was think and the japanese yen swiss franc and japanese yen will remain in demand for the remainder of the year. Nejra a quick question on sterling. Saying the pound could rally 10 . What is your latest you on sterling . View on sterling . Esther we would see a substantial rally if the u. K. Could avoid a nodeal brexit, but right now, it does not look like it. We are waiting for the result of the conservative leader election, and i think, for now, the science are really pointing towards a hard brexit, and therefore, right now, i do not see much upside for pound seeling as we simply do not how a no deal brexit can be avoided politically beyond the new leader, particularly if he is called Boris Johnson and he is not interested in avoiding a hard brexit. Manus we will dig deeper into that call. That is the fx strategist at commerce bank. Thanks for joining us this morning. That is it for bloomberg daybreak europe. Bloomberg markets european open is up next. There is no doubt about it. These one markets are beginning to shutter again, considering the real risk of a slowdown. Nejra that is it. Bloomberg markets european open will pick up on that, next. This is bloomberg. Anna welcome to bloomberg markets, the european open. Im anna edwards. Stocks and futures fall. Markets are pricing in two cuts this year. The cash trade is less than 30 minutes away. Anna Deutsche Banks equity exits. The german linda