Another round. After aosedived tweeting spree. We spoke with mike pompeo. Reciprocity, core concepts. When that happens, asia will thrive. A specialposes dividend after secondquarter results. Hear from the ceo after the open. A majority of just one. Boris johnsons lead in the commons cut to a thin margin. Strategy for brexit under threat . We are less than half an hour from the european open. I have a chart of german bunds going back to the 80s. 48 basis points in concerns about the escalation in the trade war. We have some big superlatives in terms of equity futures. I saw futures down the most they have been sentenced 2009. Since 2009. Ftse futures, down a little more than 1 . What you see. We see pain for risk assets. Tape in thethe session is one of pain. You can see that written here. Equities selling off. Commodities, mostly weaker. That, moneywith going into sovereign bonds. That is very much the dominant story we are getting. That seems to be the story. Oil and gold, a slightly different dynamic. Maybe they are ready to settle down. Oil dropping like a stone. Biggest inrop, the four years. Gold surging. Today, stabilization and gold and will. Thoseing in some of riskaverse moves. Ready to move on or stabilize. Oil and gold. Other assets still in the eye of president storm from donald trump. His plan to put tariffs on goods. Lets break this down from a market perspective. Running us now from singapore. Into bondout a move markets. You have been looking at the bond markets. Do you think this latest round, this pledge to impose tariffs could be something of a deal for the bond market . Breaker for the bond market . More like something that is really going to help the bond market. It seems like there has been a shift to since yesterday. We were talking about the fed i got that wrong, the fed cut Interest Rates. Flirt the purposes was to spur inflation. Today, that seems like ancient history. Oil prices is going to keep inflation in check. Treasury breakeven rates. Tumbling like crazy. To bets fordding the Federal Reserve to cut Interest Rates again. Of the year,ing people talked about finishing 2019 with yields in the 3 area. Now it is looking like 2 or less. If they wanted to spur inflation, they could have asked for the president s help. That should do the trick. As far as the pboc, the chinese side, what is the outlook . Chinese bonds are suffering rate cut envy. Banks cuttingy rates or talking about it. From the fed to the ecb to japan. Australia and new zealand. I could think of a couple more. Signaling any are unidentified official who signaled rates are going to be on hold read the pboc would not all of the bed. Maybe if your economy is growing at 6. 2 , you dont feel like there is a big need to cut Interest Rates. China bonds up about 2 this year. The bottom ranking among the biggest in the markets. There is probably not going to be any sort of rate cut so it looks like they will be the laggard among the markets this year. Theur colleague writing pboc is not intimidated. Talking about what has been the tradethe fed, tensions, lets not lose sight of the data calendar. What can we expect from todays figure . Bloomberg has a fancy function that allows you to track how markets respond to certain events. It is ecm i. The s p 500 has risen after the five employment reports. Employment has been pretty good in the u. S. After each has risen of the past five reports. Five in a row is pretty good. Six. Today will be ecm i is one of hillarys favorite functions. Give us your take. Lets go to the first word news. We go to debra mao in hong kong. Prime minister has seen his parliamentary majority cut to one. That is after losing an election in wales. The tory mp4 the area was recalled after a conviction for faking expenses claims. Japan has removed south korea from a list of trusted export destinations. Fromemoval of south korea the socalled white list will take place august 28th. Soul says the move is reckless. L says the move is reckless. Saudi arabia will allow women to travel abroad without a male guardian. That camerestriction under heavy criticism. A blockade of venezuela. That is what President Trump is considering as he races pressure on nicolas maduro. The white house has thrown support by juan guaido. He is recognized by 50 nations at the rightful leader of the south american country. President trump signed an executive order that appears to authorize the second round of sanctions against moscow. That is in retaliation for the nerve attack. Global news, 24 hours a day, powered by more than 2700 journalists and analysts. This is bloomberg. Thank you very much. Debra mao in hong kong. The u. S. Secretary of state hits practices and china. We will bring you that conversation next. We will be bringing you the latest from the mike pompeo interview. Asspoke out in traded just bloomberg President Trump was hitting the markets. Welcome back to bloomberg markets. We are minutes away from what looks to be a very negative session in the cash trade. Ftse futures down. Seeniggest drop we have since 2009. Dax futures down 1. 8 . In china his comments add to the pressure from President Trump in beijing by announcing new tariffs. We spoke to the secretary of state. Decades, china has taken advantage of trade. The time for that to stop is now. President trump has said we are going to fix this. To fix this requires determination. That is what you sow this morning. The president determined to achieve this outcome. The chinese agree to it at one point. And then walked away. Huawei athile way the of it . This is the central premise about how trade will be conducted around the world. Is it ok for a nation once developing to continue to take advantages when they are no longer in that status. Tariffs rmas enormous tariffs. Barriers in Companies Investing in china. All we have asked for, it is really simple. It is the golden rule. Do onto others. Fairness, evenness, reciprocity. Happens, asia will thrive, Southeast Asia will thrive. The u. S. System will thrive. It cannot be the case and nation uses protectionism to protect its own goods and uses predatory tactics to deny other economies the chance to grow. We are seeing pmis easing. Countries revising downward growth projections. Yes, the u. S. Is in a good position. Sayingh President Trump he will tax the hell out of china, there are negative implications. Ofnegative implications decades of bad behavior on the part of china. For every business in this room. Chinese companies, especially through the committee on Foreign Investments in the u. S. , of what you play a huge role, and you look at the bloomberg data, it suggests there are 170 three Chinese Companies worth about 750 billion effectively listed in the u. S. Just Chinese Companies in the u. S. Could you be sending a negative message to these companies who are interested in putting money in your country . We welcome capital that comes to america. Every day, all day. What we want to make sure is the basis on which it flows to the u. S. We want to make sure American Capital that wants to come to. His region can do so that is a lobar, simple standards. Sending is we are come to america, participate. Do so through transparency. Dont create champions with political objectives. Make them economic objectives. Many Chinese Companies will come and compete and be successful and we welcome that. Timely conversation between Haslinda Amin and mike pompeo. The business flash here is debra mao. Lowerast Business Investment returns hit the property business. Operating profits now 5 . 5 . Ell citigroup making cuts twoway workforce. The company has dismissed dozens of employees this week. That includes derivatives traders. They are joining banks eliminating hundreds of jobs. The u. S. Federal trade commission looking into facebook acquisitions as part of a broader antitrust probe. They are looking whether they bought upstarts. This is part of the escalating scrutiny of tech giants. Boeing is redesigning the Flight Control system of the grounded 737 max. The plane maker aiming to present the software by september. The Flight Control system will read inputs and outputs from both of the jets computers. That is your Bloomberg Business flash thank you very much. Debra mao. Minutes away from the open. Taking a look at stocks to watch including per really. Pirelli. The tire maker has cut forecasts. This is bloomberg. Welcome back. The european open. Last trading day looks as if it could be a drama filled one. We are joined by Annmarie Hordern and. Dani burger focused on lets go to you, rbs. A special dividend, 12 pence. Challenges ahead for rbs and they highlighted some of that. Aboutre talking profitability targets. Looking forward to the interview with the rbs cfo. What can you tell us about tire maker . One it is not so good looking at the results. Irelli cut p results for the second time this year. The trump tweets in tariffs probably did the rest of that. Automakers and auto suppliers this morning in frankfurt, declining to3 . It is going to be ugly. Lets come to you, iag. Aviation business downplaying the effects brexit is having on the company so far. Brexitof the big issues, being one of them. The fair war going on. Iag not suffering as much as some others. Shares, higher by 2 . Finedcing they have been by a data breach. Thank you for joining us. You can get the latest stories. We also had results out from the biggest european insurer. Beating the street estimate. We were looking for 2. 9 9 billion. It left its outlook unchanged. , it earnedteresting more than half in the first half. He said we could see a correction and equities in the second half. Visibility is not great. They want to stay cautious. Keep an eye on that. Numbers broadly in line. Just like other french banks, strengthening their capital buffers. We are going to be focused on the very big picture around trade tensions. Look out for movement, anything sensitive to trade tensions could be on the move. Future suggest we will be considerably weaker, particularly over in france. Looking pretty weak and is still down by 2 . Iron ore is one of those down 3. 3 . Come out that could weigh on the mining stocks. , weprices and gold prices may remain risk off across these assets. This is bloomberg. Good morning, everybody. Lets take a look at how markets are positioned. Through the asian session. A pretty negative, risk off into the european session. Selling coming through on these asian markets. President trump alerting everyone he is going to put further tariffs on china. Iron ore retreating with that. Weaker in the asian session. Down by more than 3 . That could weigh on the mining stocks. Falls by the bounce we see in oil prices today. The does not make up for the losses yesterday. That was directly as a result of what we saw from President Trump and the tariffs. S p futures remain a little but underwater. We will watch what is developing stateside through the early part of the european trading day. For the moment, european futures do look markedly negative. Futures aree, those kind of off their lows. They had been predicting a slightly more negative open just half an hour ago. Lets see what materializes. It is a day when we are not seeing a great deal of volatility in european currencies. That makes a change. At the start of the week, we started talking about the pound a lot. The bloomberg dollar index, pretty flat. We are risk off today. We are seeing money going into the yen. In terms of currencies that influence the european trading days, we dont have a great deal of currency movement. We do have a very negative start to the european session. The Deutsche Mark is down by just over 2 . The cac is down by 2. 3 . We do have a very negative start to the trading day. 1. 4 lower for the ftse 100. 1. 6 lower, euro stocks as a whole. This is to do with the ongoing trade tension between President Trump and china. Further tariffs are expected to exports,d on chinese imports into the european United States. What kind of tariffs will we see President Trump impose on europe . One will that be part of the congress when will that be part of the conversation . Lets have a look at a sector perspective. That does not seem to be much point because everything seems to be read. A small area of green. One area of green in industrials, which is quite impressive. Consumer discretionary, energy, materials, basic resources, information systems, bright areas of red. Financials, bright ed. A little sliver of grain. Essentially, red across the board. Not a day where the sector story really matters all that much, as we are seeing quite indiscriminate selling. Im sure some of the sectors that are very affected by trade tensions will be seeing the biggest losses, but broadly speaking, we are just weaker. Matt we are seeing indiscriminate selling. We have 523 stocks down. Only 22 are gaining. You do see some very big numbers. Lets quickly get through the gainers. They are not many of them and you will see some very defensive stocks. You will see utilities not doing poorly. For the most part, other than things that you need or are addicted to, you are going to see selling. Moya Hennessy Louis vuitton down 25 . A big drop for the french luxury goods owner. We see asml down. Down 2. 33 . Ale Credit Agricole falling 4. 5 after secondquarter results. Taking a look down the line here. Allianz is down 2 . We just spoke to the cfo. They left their forecast unchanged because they are unsure about the second half. You see the Oil Producers all down. Bp,le, royal dutch shell, as well as the miners. Even anheuserbusch is falling today. There is an argument that you need beer to survive and yet it is being sold off this morning. I guess it is a little too early for that. [laughter] lets talk about fixed income markets. We are moving out of equities. We are seeing another leg up in fixed income. Another leg down in yields. 124 is where we are trading. We dropped below the 1. 85 level on the u. S. 10year. A little bit of a leg down on the 10 year yield. That is part of the story. Im also looking at the way we started trading this morning from a sector perspective, which i think is pretty interesting. We are down 1. 8 on the stoxx 600, but there are no sectors in positive territory. Some of those a little bit more resilient. Usual slightly more resilient component to the more resilient side of things. Essentially, were selling everything. About one tell you stock in particular that is of interest and that is rbs. We had an announcement earlier on around their profitability. And a rich a hedge has been speaking. The statecontrolled bank warned of tough times ahead. It is really a function of the transaction. I knew i would spend a lot of time talking today. There is a bit of pressure on income. Because of the whole uncertainty in the rate curve kind of moving down. And then there is also and that really actually is the driver of the 12 . Drop grown our lending. We have taken 173 million out. On the lending, margins are under pressure. That is where the pressure feels unlikely in the short come. You mentioned the market curve in terms of expected yields, the bank of england has a noeen modeling for brexit scenario. The most important thing we can do is say we have the right liquidity. We have a really strong Balance Sheet. It is the strongest in Balance Sheet in terms of history. That site is important and it is ready. The other thing we need to do to make sure we are administratively ready, we are doing all the payments now and then we want to make sure we are engaging with our customers. What they need to be thinking about. In an environment of a no deal brexit, you have big exposure. If the lows start to sour, how could that impact the capital side and the potential capital return to shareholders . We obviously all do the stress tests. Point thatto the there was something very dramatic, impairments take a little bit of time to come through. Things moving along. ,aking sure we are lending making sure we are not doing anything foolish, and we are really working with our customers to understand what difficulties they are facing. Matt up next, we are going to bring you some of the stocks on the move and there are a lot of including ams. The chipmaker slumping after the u. S. Announces another round of tariffs on china. This is bloomberg. Anna welcome back to the european open. 10 minutes into your trading day. A day after the trump tweet storm around trade, imposing further tariffs on imports into the United States from china, and this is having a negative impact on the European Equity space. The cac is down by 2. 1 . The dax is down by 2 and change. Industrials, chemicals, autos responding, technology responding to trade tensions. I was looking at what is driving the paris market lower. It is not just the sectors i mentioned, but it is also the Banking Sector. Credit agricole lower. Lower,ury space is also investors fearful of what damage this is going to do to the Chinese Consumer, the Chinese Consumer that does not just consumed luxury goods at home, but also globally. Hordernt to annmarie who has your movers. Annmarie same thing in the movers. We are seeing a lot of moves based on these tariff tweets from president donald trump. I want to start with technology. The biggest mover is ams, down more than 13 . Lvmh down about 3 . And of course, these tariffs will hit consumers directly. Technology products, Consumer Products. Iphones, bags, etc. That is why we could be seeing this selloff. To the upside is iag up more than 3. 5 . As the rest of european airlines, are dealing with this price war, iag is soaring above that. They were depended tom longhaul dependent on longhaul flights to lift this quarter and they beat the street. Matt thanks. It look at some of your big movers. Lets talk about trade now. Donald trump says he will be imposing a 10 tariff on a further 300 billion worth of chinese imports, escalating the trade war with china. The new import taxes will come into effect on september 1. He said they could go well beyond 25 . On aariffs will be imposed long list of goods expected to include smartphones, laptops, and childrens clothing. This will come on top of the 25 250already in place on billion in chinese goods. Ahead of u. S. Jobs data, we speak with the senior shesset strategist thinks the consumer is holding up the economy in the face of a manufacturing slowdown, but could we see the consumer falter under the weight of a further 10 increase in prices on these goods . We would be concerned about the consumer and this is because globally there has been this dichotomy between consumer driven data and data coming from the manufacturing sector, which globally is showing signs of a contraction. Primarily tariffs are on Consumer Products as well as autos, which directly hit u. S. The potential has to inflict significant damage on the u. S. Economy. While the chinese currency can appreciate against the dollar, because of the narrow trading, it cannot be enough depreciation to upset the impact of these tariffs. Even if it were just to be kept at 10 . If you escalated further, it becomes even more damaging, even more concerning, from our point of view. Anna . Good morning to you let me ask you about market complacency or lack of. I got this chart by one of my colleagues. A basket of trade sensitive data. About the trade war monitor, all kinds of indicators he throws in, and he suggests markets are still complacent. Were toket, if it factor in the full extent of trade tensions, things would look a lot weaker. What do you make of that conversation around market complacency . Supriya absolutely. If i think about gauges, i would think of volatility. Clearly, the vix has been at a very low level. That changed overnight. In our own portfolios, we have been taking advantage of low volatility, which we thought was too low given the balance of factors, to put protection into our portfolios, as well as position for upside where we saw it. That is one gauge that is indicated markets have been relatively complacent. Also, if you look at all the gains on equity markets have been driven by pe expansion, that has meant that it is factoring significant either improvement in growth or liquidity boom, essentially. That suggests complacency to me also. Matt by the way, i want to quickly break in because we are getting more news from south korea right now. The country says it will remove japan from its white list as well. Earlier, japan removed south korea from privileged status in terms of its exports and south korea struck back initially with president moon speaking at a cabinet meeting, saying he thought it was unfair, and that he wont let japan take advantage of south korea again and that they would fight back. Now, it looks like they are with pretty much the same move. It is a titfortat trade war between south korea and japan that is escalating next to the chinau. S. Trade war. Let me get back to our guest. Do you think we should see trades in place for a worsening Global Economy . Is this going to go downhill from here . Supriya yes, and the interesting thing is that come of this year, if you look at equity versus bond markets, they have not affected pricing and different views of growth. It could be argued that the improvement in financial conditions driven by fallen bond yields have propped up equity markets. But there is a limit to how much lower bond yields can stimulate the equity markets if you see a deterioration in growth, and that is what is honorable here. Yes, if you do see tariffs going through, if you do see a ramping up of trade tensions, you would be negative on risk assets. We have be cautious in our own portfolios. I would argue that that is the correct stance. , it is just basically itde the Global Economy, also leads to the compression , so there is an argument for being cautious. Anna more coming through from china this morning saying it does not want a trade war, will never step back on important issues, tariffs are not in the interest of the world. This is the ministry of Foreign Affairs speaking in china. The markets trying to come to terms with the latest on these tariffs and what implications this has for the fed. Some suggesting that President Trump is very aware of this might do to the fed and Market Expectations of fed rate cuts when he put these tariffs on china. I pulled up the work function on the bloomberg. Yesterday, i showed this. There was a 17 chance 70 chance of another rate cut and now it goes up to 90 . Supriya remember that chairman powell specifically alluded to the global trade and Global Demand as being one of the main drivers of their decision to cut rates. This amplifies that concern around the impact of global domestic economy in the u. S. And on domestic inflation. There certainly is a higher argument for rate cuts. If you wanted to be cynical, this is a negotiating tactic from the president , not just in china, but also with respect to the fed. He wants to box the fed into a corner as well to some extent, you could argue that. I think Market Expectations are justified. Matt we are going to keep you with us. We have a lot to talk about on this incredibly busy and very negative friday, at least in terms of equity prices. Senior multiasset strategist, she is going to stick with us. We are getting some headlines through from china, from the ministry of Foreign Affairs, saying china does not want a trade war and that chinas position on trade talks remains consistent, answering back president Donald Trumps threat to increase tariffs again in september. Is the worst over for Bank Earnings . This quarter was not quite as bad as expected for europes lenders. Are they out of the woods . We will talk about that next. This is bloomberg. Matt welcome back to the european open. We are 22 minutes into the trading day and looking at pretty much everything down. This is a sector picture of the stoxx 600, the broader european index. Only real estate is gaining right now. Utilities, health care, food and beverage are on the top half of most of these losers. Dont the bottom, basic resources and auto parts really taking the hardest hit, as well as banks. It is interesting if i change from one day to a year to date picture, you can see that banks are one of the year to date, everything is doing well, with the exception of banks. Banks are now down 3. 5 year to date. Very important to look at that, especially in light of what we have seen from earnings season. It was expected to be incredibly graham for the banks grim for the banks this earnings season. You have negative struggling economies, but now that most lenders have reported numbers and the have not been all that bad. Here is dani burger with the details. Dani you only need to look at those numbers, those returns, to see what a tough quarter it was for european banks, but trading was one of the bright spots. This surprised a lot of analysts , especially when we look at their u. S. Peers. Fell as muchrading as 14 . The bar was set very low for european lenders can they beat it. They felt very close to the range that the their u. S. Peers did. This excludes Deutsche Bank. Trading revenue and equities fell more than 30 a large part because they are exiting the business. This didnt come debt trading looked even better for europe fixed income debt trading looked even better for europe. We saw bnp and Credit Suisse handily beating it. Suisse saying clients saw a great pick up in activity. Have european banks turned the corner . With trading perhaps, but the ecb still looms large in the picture, so the worst may not be over. We are hearing banking ceos get more vocal about this. Ing, around their earnings, the ceo said a decrease of rates into further negative territory is hurting Consumer Confidence in the future, so this certainly continuing to weigh on banks. Anna thanks very much. Bloombergs dani burger with the latest on the Banking Sector. Lets get back to our top story around global trade tensions between the u. S. And china, specifically. We are now hearing more from china. Of thent through some comments coming from the ministry of Foreign Affairs. Now we get this red headline across the bloomberg. China to take countermeasures if the u. S. Insists on new tariffs. President trump said he will put these tariffs in place on september 1. The suggestion by the chinese that they will take some action. I was looking to see what kind of impact that is having on the markets. 1. 07ryen, a drop before and it continues to beat. Gold, the slightest perception of an uptick. Lets get back to our guest on this subject. We are seeing markets, investors taking another pause for thought and perhaps increasingly moving into these risk off positions. Where do you hide . Supriya yes, we have been concerned that bonds are likely to provide less diversification given the significant move down in yields. We mentioned volatility earlier. We have used volatility to manage risk quite actively. We have also been on gold. We have been long gold as a commodity, as well as gold miners. Especially given the situation where real yields are quite low, as well as geopolitical tensions will likely remain quite elevated, we have seen that is being quite a good diversifier. Matt all right, we really appreciate your time this morning. You are going to stick with us. As the trade war has escalated. China strikes back. Matt 30 minutes into the trading day, lets get your top headlines. Cks nosedive mr. President after President Trump announces more tariffs. Beijing vows to strike back. We talked exclusively with mike pompeo, the secretary of state. , evenness,fairness these are core concepts. When that happens, asia will thrive. Matt tough times ahead. Rbs awards a special dividend but warns it is unlikely to meet profitability goals. Because of the whole uncertainty in the rate curve. That is the driver of the 12 . Of one. Us, a majority leads Boris Johnsons is cut to a thin margin. Is his Brexit Strategy under threat . Good morning, and welcome to bloomberg markets. This is the european open. I am at miller in berlin alongside anna edwards in london. Normally, we check the individual movers, but we have put up the map of european equities as a whole. It seems the individual stock story is being overwritten by the broad tensions around trade. U. S. Saying they will put further tariffs on and the chinese are saying they will retaliate. The destruction that is having on the european equities space. Interestingly, it is not the periphery that falls furthest at this time. The ibex and the portuguese market, all of these down by more than 1 , but not as much as we see in london. The cacund falling by 4. 2 . It is not just the hike in and the auto stocks you would expect to see weakened by trade tensions. Within the luxury goods sector selling off in france and the Banking Sector looking weaker. So it is fairly indiscriminate. We see some retreat into real estate and utilities and stocks that perform like bonds. Generally speaking, we are weaker across the European Equity picture. Lets get a first word update. Citigroup has begun to make cuts to its workforce as they work to call 400 people cull 400 people. That includes cash equities and equity derivative traders. They are joining banks including Deutsche Bank and socgen in eliminating hundreds of jobs. Drive as theys left earnings for the second quarter. Pimco attracted 23 billion euros of new money but lower investment returns hit the property and casualty business. Fell 5 from ats year earlier, missing estimates. Rbs plans to award a special dividend for the second time this year. It will pay shareholders a one off 12 pence award as the lender warns of more challenging times ahead. Are unlikely to meet targets amidst political and economic uncertainty. We are very sensitive to rate cuts. We have got some detailed disclosures that have a big impact. By first year was impacted 144 million and it grows by the time you get to 30 year. As you can see, our structural hedge rolls over, so it is definitely impactful. Saudi arabia will allow women to travel abroad without the permission of a male guardian according to local media reports. It ends the restriction that came under heavy criticism and led some women to flee the country. It is part of saudi arabias modernization which has seen the government of alexa gender segregation and lift a ban on women driving. President trump signed an executive order yesterday that appears to authorize a second round of sanctions on moscow. That is as punishment for the 2018 nerve agent attack. It permits a bank loans as subject to sanctions for using chemical or nuclear weapons. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna and matt . Anna thanks so much. Boris johnsons first test at the ballot box has ended in defeat. His conservative party lost a special election and wales, reducing the majority to just one seat. That leaves very little room to maneuver as johnson seeks to live to deliver brexit. Member, that agreement that majority is only due to an agreement with the dup. Your thoughts on u. K. Assets . We have been very caught up in the conversation around the bank of england and what they could do to mitigate the effects. Mark is keen to point out that there are limits to what the bank can do. , we dont see much from the pound here. We dont take a clear view on the pound, but we are quite positive on externally facing which areu. K. Stocks out of favor and have high dividend yields close to 5 . Valuations are quite favorable. Thats where is our position in terms of u. K. Assets. We think there are more upsides given the fact you have seen a depreciation in the pound. Matt how do you see the pound acting here . Are we looking at a situation where it heads down and maybe bounces back after another extension . What is your outlook . The move down has very much to do with the increased probability of both a no deal brexit but also a general election. And a diminishing probability of a more orderly brexit that the bank of england seems to have as the base case scenario. But by any sentiment, it is oversold. , this signals will not provide enough information in a situation where you have a lot a lot ofe political uncertainty. We would rather manage risk around it than position either way. Anna so in extension, the pound we have dealt with, the ftse 100. Gilt markets are clearly caught up on a number of different crosswinds. There is the general downward drift in yields we are seeing. The bank of england is a little different. Was a note yesterday saying that gilt yields could easily go to zero and saying that Recession Risk is underpriced at the short end. What do you make of fixed income in the u. K. Context . Spookedts start to get by physical promises, other moves can be foreseen. Right now, yields have taken their cue from the forces weighing on the u. K. Economy. We are in an investment slump. Weakening Global Growth does not help. And you have the prospects of the consumer buckling under because of gloomy outlooks essentially. That is what it is reflecting. However, i do think there is room to act fundamentally more constrained because they have to take into account the pound has slotted and the tight labor market. So i think things are slightly. Ifferent so we might get a rate cut or two, but i think it is constrained. The greater room for maneuvers come from the fiscal side. Of course, that calls for higher gilt yields. I think the economy will be the major factor here. Matt i want to give a quick update on the safe haven assets we are seeing gaining. The yen has a 1. 06 handle. Bund yields are further negative, 49 basis points to months of a record low points, so a record low. Why isnt gold bid here . Asset as we haven see trade wars not only with seeau. S. Escalated, but we equities absolutely tanking. Why isnt gold bid . Reasons one of the might have do with technical or positioning factors. We have seen flows into a variety of gold etfs as well as other gauges. We have seen investors increase the positioning in this particular safe haven. But if we look at positioning versus for five years earlier, it is not nearly as high. We certainly think the fundamental driver for gold to sign are there and i would have expected it to be stronger, especially as i said it has moved down. And you have significant uncertainty and trade tensions dont forget retaliatory easing of bank policy. We are a little bit higher than we were in the middle of the session, which is interesting. Even though we have unwound some of the gains. Thank you for joining us. Senior multiasset strategist at picte assetic management. Up next, we will talk about stock movers. Also see the mining stocks under pressure because of weaker Commodity Prices overnight. We talk about the impact of trade tensions next. This is bloomberg. Matt welcome back to bloomberg markets. We are 45 minutes into the session and looking at big losses across equity indexes. The ftse is down, the dax is down. 2. 3 . Cac off as donald trump prepares to put new tariffs on chinese good, china is saying they will retaliate goods, china is saying they will retaliate. It is a very red a day in equity indexes. Stocks absolutely tanking on a trade tensions. Today, autos are the secondbiggest drag, eclipsed only by miners. Part of that is because of the cost in electric and autonomous vehicles. Of course, trade is what is hitting the carmakers today. It is alsot states down to weakening sales around the world. The authors say the prospect for recovery is dim. Joining us from frankfurt is one of the leader writers of the report. I first have to ask you about the trade concerns. Expect the u. S. To come out against europe with more tariffs on autos today. They are going to make a statement glut likely about beef statement, likely about beef. What sort of dampers is this putting around the world . It is clearly negative news. And part of our revision of ands forecasts coming down at least another percent next year was driven by escalating trade tensions. The major revision was on china, where we have cut forecasts from 2 to around 6. 5 . That was a reflection of weakening consumer and corporate sentiment. Takenher revision we have is in broad investment in europe are we have cut forecasts for almost all countries. What really sticking out was italy and spain but really sticking out was italy and spain. Anna i wonder how much visibility you have on the auto sector. How long you see these headwinds lasting. That drawn to a comment talked about the auto sector being weak 43four quarters for 34 quarters. What kind of visibility do you have . Everyone, including us was expecting a better second half for the year. Last months, it became clear this was going to happen which triggered downward revision. We still have a potentially hard brexit around october. There is a deadline of the 17th against europe. Clearly, Downside Risk from here with very low visibility. Matt how much of a problem was the wl tp, the new testing standards that put a bottleneck in german production. Have the german carmakers bounced back from that . We have worked through the new testing regime. But when this has funneled through, it was met with weaker consumer demand and continued pressure. So it is not really the major issue going forward. Indeed, we have expected a better second half the cousin we have worked through the issues. Matt but you have still got the other concerns. Fascinating report, thank you for your time. s Corporate Finance Group Managing director. Up next, stocks of nosedive after President Trump announces more chinese tariffs. They say they will fight back. We speak with someone from pantheon macroeconomics next. This is bloomberg. Anna welcome back to the european open. 51 minutes into the negative trading day for european equities. Theld trump has upped tariffs on an additional 300 billion of tariffs. Beijing has vowed to strike back. Now we see the impact of the news flow on the equity markets. 52 minutes in, this is the extent of the weakness. Just shy of 2 down. The auto sector is down under pressure. The basic resources sector is see theer pressure we dollaryen with a 1. 06 handle and yields continuing to drop. And u. S. Futures suggested there is more selling to come. Joining us to assess the impact on asian economies is the chief asia economist at pantheon. Great to have you with us. The chinese say they will retaliate. Retaliation would be most likely given what we know so far . Retaliation has been much more measured, it has not been like for like. That is partly because of the economic constraints facing the chinese side. There will be retaliation and a Natural Market based marketbased retaliation. Actually, this makes it less likely that the pboc will go ahead with a rate cut in the wake of the fed just because they wont want to exacerbate things. But they wont stand against the renminbi depreciation and it would be foolish to do so. And they to the market dont want to burn through their ethics results. So that is the main kind of retaliation they will come through. What do you make of the trump move coming in the day after the fed cut rates not as much as he would have hoped . Is this as much of a shot across the bow of the fed as it was beijing . Freya this is my main worry with regards to the u. S. Side. That mr. Trump actually cares more about extracting cuts from his own central bank then he does than he does about securing this trade deal. The constraints on the political side have to kick in on some point. What we learned from mexico and his uturn on those tariffs was that republicans in congress are mindful of the fact that there is an election next year. Any space firms had to absorb tariff hikes has already been eating into margins and there is not much space to absorb those hikes any further. That means there will be an Immediate Response if these tariffs are put in. When there are from the few examples of consumer goods that have experienced hikes already, that exacts an Immediate Response. Sheens at annualized rates of 18 when the tariffs were hiked washing machines at annualized rates of 18 when the tariffs were hiked. It is more about getting the cuts out of the fed. Anna and the electoral calendar as well. Let me ask you about what the chinese can do. You said the weakening of the currency can be on the cards now. Asking questions if there could be announcements over the weekend. Fiscal tools to boost confidence, do enough need that at this point . Freya the pboc governors in a bloomberg interview saying the fiscal stimulus is already tremendous. And that is true, its not necessarily the biggest in history if you take into account the Balance Sheet operations. But it is very large, probably three quarters the size of the 2016 stimulus. That stimulus about a big response in gdp growth in 2017. Already, fiscal stimulus is very much there. The problem they are facing is a funding gap and local governments. They are already pushing quite hard on the fiscal side, so im not sure they have much scope to expand. See some measures to boost confidence in the immediate future. ,att thanks for joining us chief asia economist at pantheon macroeconomics on the escalating trade war that has absolutely clobbered markets today. Stocks down 2 . This is bloomberg. Francine President Trump announces a new 10 tariff on 300 billion of chinese goods. Sink, asian and european stocks tumble. The next big thing to watch, the usa jobs report. And the prime ministers majority is cut to just one after the antibrexit liberal democrats win a by election. Welcome to bloomberg surveillance. Good morning if you are watch
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