Tensions and the impact of the restructuring makes this a big results call. The ceo joins us this hour. The performance of its stateside business will be watched as if he does numbers hit we will be joined by the ceo for the details. Welcome to bloomberg daybreak europe. Lets get to the numbers on the bloomberg. The red headline is the group is cutting its profit forecast and considering selling units. That is something we will look at later. To 1. 2 billion euros but it is cutting its studyingrecast and offers to sell some businesses, cutting the profit outlook for the fiscal year. Germanys slowdown pushing thyssenkrupp into a crisis. The units with no clear future cant keep burning money. It is studying options to sell businesses including elevators. We will speak to the thyssenkrupp shortly after 6 30 u. K. Time. Manus lets talk about a little bit of the drug manufacturing side on mark. Weve got the Second Quarter adjusted eps, so this is what weve got for you. Euros, a comfortable beat on the care unit sales, 1. 7 billion on the material side of the business. 580 9 million, a little lighter than the estimate we had come through on merck. It is much broader a company than pharma. Confirming their outlook for the rest of this year so that is one thing coming through in terms of guidance we had. Red headline coming through from siemens. We will talk to the merck cfo later in programming at 7 30 a. M. Buy are in the business to vascular for 1. 1 billion, a Robotics Firm with 1. 1 billion deal they are in the market to do. 4. 28ice of the offer at last7 above corindus closing price. Tracy alloway said there is a new opening time for the s p 500. It has gone 5 15 in dubai, the new time. How is it looking . Nejra futures are looking positive and that seems to be fueled by the pboc fixing on the yuan putting positivity. On the front foot but the bond market is telling an interesting story, the 33 yield on a 2. 26 handle. 10year down and basis point. Or theyying we could are ready to think about negative yields reaching the u. S. It would mean an easing cycle by butfed and perhaps more qe, joining the chorus of those calling for lower yields and a possibility of negative yields in the u. S. Jpmorgan has already done that. Manus the quicksand of negative yield. Lets talk about the single biggest story we were poised at 5 15 when i walked in here in dubai. The moment when the fixing was stronger than anticipated. It is beyond seven for the First Time Since 2008 but the message from the pboc, if there was any doubt in your mind, they want you to breathe easy. They are seeking to stabilize the market. Four are they . This is a different message from the pboc. By the choosing stability over volatility . Do they want to stop the risk of capital flight . That is anyones guess. Will market intervention, the central banker of oil come in and do something more aggressive in terms of cutting production . The aussie dollar is there. There is a shocker for you. Aussie dollar is bid on the back of the yuan. Have a look at nikole. Nickel. There were rumors that indonesia would stop the exports of nickel ore. You have to have a smelter in indonesia to export. That is the new regulation. No change at the moment. Nejra joining us for the hour is the multiasset portfolio manager, great to have you with us. Facinged about jpmorgan a quick stamp quicksand scenario and pimco ready to think about negative yields. Do you want to join the bond bulls or do you look for returns elsewhere . I think you look at the bond market. On a midto longterm investment, there are plenty of to invest butces i have been wrong over the past six months. 30 year negative, behold german bond market is negative. U. S. Treasuries could go down from here but in the longterm, governments and policymakers will want to drive some growth in the marketplace. Manus and that reach for yield as we get older is going to push us in a load of different directions. What do you make of the yuan fixing this morning . They want us to rest easy, a slightly stronger fixing, but are you convinced . Chinese is clear the want us to believe they can control the currency so it is odd the u. S. Are calling the chinese currency manipulators. But is exactly what you do they do have the ability to fix that pick. The market wants a strong u. S. Dollar and if you are pegging your currency to the u. S. Dollar, you are getting less competitive with the asian complex. They are becoming less competitive just like the u. S. Is complaining about being less competitive with china, the chinese are becoming less competitive with their competitors. If you look at that, the yuan has been strong. Manus lets see where volatility in the currency takes us. Investmentat newton im is with us for the rest of the hour. Juliette saly broadens your horizons from singapore. Juliette it really is about the stronger than expected fix from the pboc. Analysts seeing this as calling ingmarket, calm markets. We had a good trade data lifting sentiment. Exports at 3. 3 in july and imports slowing better than expected, the csi 300 up after the lunch break. Good and looking japanese stocks higher for the first time in five sessions. The yen, fairly steady after the yuan move, 106. 2. Australian and indian stocks also looking good and a lot of money going into chipmakers. At some of the other currency moves because the yuan fix has flowed through into the region but we are also awaiting the bank of philippines rate decision. Had Second Quarter gdp coming in weaker than expected. You could see a move more than the quarter rate cut they are expecting. The peso is up. 1 . The korean won getting a lift our japan eased the export ban on korea and of a won moving higher against the dollar. Inis having its best gain three weeks and the aussie dollar recovering from the 10 year low we saw yesterday, up. 2 against the dollar. A lot of moves in fx and equities on the back of the yuan fix. Manus we will be watching that like hawks over the next few weeks to make sure the stability holds or not. Thanks for the roundup. Lets talk about a deck of, Second Quarter remaining on track to deliver targeted incremental savings of over 70 Million Euros in 2019. Revenue came in at 5. 9 billion euros, they are the worlds biggest recruiter and have been targeting highgrowth Margin Expansion and a shift to profitable new markets but an economic slowdown in germany and france has threatened the strategy. Europe accounts 54 of overall sales. Unfavorable market conditions, weak Business Sentiment in the region has weighed on peers, including ronstadt. Lets get health check on the economy of europe and beyond. The ceo joins us to discuss the numbers from zurich. Always great to have you with us. Recession meet her for europe and the risk in the Global Expansion at the moment. Good morning, and like you were mentioning, we have delivered strong execution of our strategy reflected in all figures in the Second Quarter. Another structural margin improvement, this is the Fourth Quarter of margin improvement. Coming to your question regarding how economies are hasloping, you see europe slightly decelerated. It was in the Second Quarter at 5 . We see lower growth in most of the markets except algeria iberia but in the Second Quarter the deceleration in europe is there. America,ook at north still good. Activities were increased 9 and especiallyd growth withpan or northern japan 12 trading data adjusted. This is the overall picture. We fill continued weakness in the automotive sectors and manufacturing, especially in many european economies. Nejra great to speak with you this morning. One of the questions we ask as we see the downturn in Global Manufacturing is how much this is feeding through the services. What impact are you seeing on hiring in the Services Sector that can give you a sense of the outlook for that sector for the rest of the year . Alain what we seeing regarding the deceleration, it is not really linked to the services. It is linked to all services, especially in the manufacturing and automotive. Outside these two sectors, either the deceleration is very limited or there is no deceleration. It is focused on automotive and manufacturing. Up yourlain, i opened report and im scouring it quickly. Im looking at Gross Margins year on year. Temporary is less, perm is less, others have gone to zero. Where are you feeling the most aggressive margin compression . Explain these numbers to me. Alain i read the report a different way because it is the Fourth Quarter in a row that we are able to increase our growth the increasing growth margin is based on two strategies we are driving. Pricinge are working on and extracting the right value from the contract with customers and we have been successful. In this quarter, we have 40 basis point margin increase. This is regarding the pricing and again, the mix is about developing approaching new services with highvalue. Remember last year, we announced the acquisition of General Assembly in the u. S. , which is a up scaling andn rescaling and that activity is in high demand and that kind of activity is high value for us. Thats how we are pushing this gross margin positive Development Order after quarter. Quarter after quarter. Nejra you also talked about the fact that north america was still a fairly good market. I wonder what your outlook is for the rest of the year, particularly with the expectation of an increasing trend tensions trade tensions between the u. S. And china. Alain this is clear that overall in the world and especially in europe and in the u. S. , you have uncertainty and with this uncertainty you have volatility. Regarding the u. S. At this stage, we dont see any negative impact of the trade war. I would say on the contrary, when you look at hall permanent recruitment activities, we are quarter in the second havet means the Companies Still trust in the future and are continuing to hire and , rather than to work with temporary staff, they are going more and more for permanent recruitment. With the limited visibility we dont seee market, we any kind of disruption going forward. We spoke on the ninth of august last year and he said to me in the u. K. , they are backfiring. 18 months back hiring. They start hiring and that is what we see in our figures. Here we are a year on, hard brexit risk is rising. What can you tell me in the u. K. As angst is growing . Alain it is clear there is a high level of uncertainty in the u. K. , that we still need clarity and we dont have clarity. After this kind of rebound we have seen, especially in permanent recruitment, because the Companies Start at some point a higher again, we see everyone has frozen additional recruitment. It is reflected in the figures in the temporary staffing but also in the permanent recruitment. People are now expecting clarity. Nejra thank you for joining us from zurich. Alain dehaze, ceo of adecco group. Lets get a first word news with roulers. D pakistan downgraded diplomatic relations with india. Islamabad said it will take the matter to the United Nations and the army will remain vigilant. Indias Foreign Ministry didnt respond for comment. Time may be up for italys populist coalition. The deputy premier is hinting he could pull the plug if partners dont yield to demands. His call for tax cuts and investments is a dip hot investments. Rome could face early elections. Hasnt endorsed an expansion of background checks in the wake of two fatal shootings in the weekend. There is no political appetite to renew a ban on military style is all right. Political leaders in ohio and texas say new gun laws must be considered following the mass shootings. Global news 24 hours a day, onair 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. Coming up, slashing its profit forecast after seeing its market cap cut in half during the past 12 months. The crisis facing the industrial giant deepens. It could even lose its place in the mighty dax. Not a bad time to speak exclusively to the ceo. That is next. This is bloomberg. Manus this is bloomberg daybreak europe. Nejra lets get a check on the markets. Sother fixing on the yuan you see some strength. Csi 300 strongly bid and the aussie bouncing back after hitting a 10 year low yesterday on rate cuts following the decision from the rbnz. Manus we will talk more about oil later but saudi arabia wont tolerate a continued decline in prices. Gain. Tures managing a we closed above the 100 Day Moving Average and a record low set in the 30 year paper yesterday as there was a fast and furious reach for yield. We will talk about pimcos call for negative rates may be in the u. S. The top story is dollaryuan, yuan strengthening after a fix strongerthanexpected. The pbocs reference rate is than sevend weaker for the First Time Since 2008. Atstarted with paul flood newton. When we look at the volatility in the yuan, do you think the market will take another punch at it . If they really wanted to send a strong resetting, we would have seen a subset the number on the fixing today. Paul i think thats right. Back at thek trade negotiations, you are halfway through the trade tweetedion and trump some fairly negative commentary on the chinese not coming to the table and china says we have bullets in our gun too. Of re was some type this is much more tactical around trade negotiations but also the fact we are looking at a strong currency in the global context while they are pegging against the u. S. Dollar, the currencyseen a strong over the past six months, making china less competitive with those around them. Nejra Global Markets arent tenterhooks as we watch the refixing. How much lower could we go on the yuan from here . You probably stay through seven until we start to see better economic data. The chinese are trying to pressure the u. S. The chinese are trying to delay until postelection because that puts them in a better situation perhaps to get a better trade deal with a different administration. The one thing i heard ubs say yesterday when he joined our program was dont panic. Look for big carry trades in emerging markets. Tie those thoughts together for me. A, if we dont panic, where do you hold your nerve and the you step into these stocks on a drawdown . Paul weve been thinking much longer term and being strategic because you cant wake up every morning and turn your portfolio over depending what is happening on tweets or some shortterm move. We are trying to find structural growth areas. Example of that. We are moving away from the Combustion Engine and that will increase the demand for nickel. If you want to increase the supply of nickel in the market, there is a shortage in the longterm of highgrade nickel and you have to have a higher price to support that and make sure miners come to the table and expand the supply of nickel. Nejra youve got the long nickel call for a specific reason but in terms of other metals, what is your take given how close they are to the chinese economy . Paul the chinese are moving away from on infrastructure spend to one that is more directed toward the consumer. Like thearticularly whole commodities space but nickel is one of those areas we think there is good reason to be positive. Nejra paul flood from Newton Investment stays with us. Coming up, we will speak to the adidas ceo as the sports giant has seen a 50 jump this year and releases secondquarter earnings shortly. Dont miss that interview after 7 30 london time. Manus i suppose it depends. Soont be interviewing him, we will talk about elevators. I cant wait to find out what thyssenkrupps elevator business is worth. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Manus bloomberg daybreak europe. Im manus cranny in dubai. Nejra im nejra cehic in london. Great have you with us. The r. B. I. Delivered the unconventional unexpected 35 basis point rate cut. It has been the reaction in markets since the decision . The moves in yields were interesting. They backed up after a bit. Andj good morning to you 35 basis points may be giving participants more than anticipated and a normal reaction might have been a cool is positionedrket for dovish commentary and the was two points, 50 basis points would have an leading participants to believe the next cut wont be 25 but lower. Two, they mentioned they recalibrated their approach going ahead. Maybe the market is making too much of that but it seems to be the case and even today, the 10year is at 6. 37 higher than yesterday. Manus thank you very much. Good day to you. China set the fixing at a stronger level. Has it soothes the market . There is a bit of retouch on the s p 500. Annmarie in asia, we are seeing equities moved to the upside, in the green after the stronger fixing of the yuan. Out of china. The csi 300 up more than 1 as well as the south korea kospi outperforming as tensions ease. Between south korea and japan. We are seeing a rally across. Currencies from malaysia to south africa. Sovereign bonds, we are seeing them rally, some with real yields continuing to lower and it has been a brutal 48 hours for the likes of iron ore and oil. Iron ore is above 90 a ton. Below 58 aat 3 , barrel but given the week it is had, we are seeing a bid. I want to focus on that this morning because there seems to be some phone calls about opec plus and its members. And bloomberg scoop overnight saying according to saudi officials, the saudis will not tolerate the price slump we have seen. Brent has been trading sub 60 a barrel and on a weekly basis, having its worst drop this week since december. Talking about the fact the saudis will consider all options on the table to stem the route. One option to me would be to cut deeper and before 2020 comes around. She can imagine these guys on the phone together, she imagines the conversation is quite ferocious. Thank you both so much. Lets get to some breaking news from adidas, confirming their fullyear 2019 and secondquarter growth margin 53. 5 , the estimate was 52. 9 . Secondquarter operating profit comes in a little light. 643 Million Euros. Secondquarter revenue comes in a little soft, 5. 5 one billion euros, the estimate for 5. 50 4 billion. It sees fullyear sales up. Look for the u. S. Performance following caution from peers like under armour. Also the outlook for margins, we have given you that number so that is something that will be addressed in the interview and any commentary on the effect of u. S. China trade tensions. We will hear about that when we speak to the adidas ceo after 7 30. Youve got more breaking news. Manus a little bit on the reinsurance sector, hanover re. Business,on the pnc that is their profit metric. It softened a little. They still see the fullyear net income of 1. 1 billion. The company is well positioned to deliver fullyear net income from about 1. 1 billion. Has beend quarter fairly benign for natural disasters. Upsthalf net income, 6 19 year on year and the growth premiums come in at 5. 3 2 billion and the market had penciled in 5. 3 billion. Lets talk about 30 your paper in the United States of america. Approached a record low in yesterdays session before giving a little back in gains. This as Global Concerns intensified. Pimco warned the u. S. Treasury yields may eventually go to negative, adding to a pool of debt that surpassed 15 trillion. What would it take for negative yields in the u. S. . Probably not around the corner, but what it would take is a serious downturn in the economy, a recession in which the fed will take rates all the way down to zero. We will restart qe and at that stage, we may see negative yields in the u. S. As we are seeing them in many other parts of the world. Meanwhile, the chicago fed president says the risk of economic headwinds since last weeks rate cut could bring more easing by the fed. Paul flood from Newton Investment management is with us. How strong is the poll for you to u. S. Treasuries in a multiasset portfolio . Paul if you want any duration in the fund, the u. S. Is the area give got the ability for the central bank to cut Interest Rates. It is the highest yield in developed markets yield curve youve got. If you want duration in the portfolio, that is where you look for it. Trade tensions are at the forefront, the longer that more likelye corporates are less willing to invest. That could push it into a selfinflicted recession in the United States and that would be the situation you find yourself in with pimcos call on rates coming back to the rest of the developed market areas. Manus that reflects to what Larry Summers has been saying. If you play with fire, i. E. In these trade wars, you might not get burnt the first time but the second. This is about the undoing of the great anticipated 25 basis points from the fed and the market on monday, the Goldman Sachs stress tracker undoing a vast amount of benevolence from the feds cut. Pressure does this tightening of financial conditions make the probability of a more aggressive move in september by the fed . It will certainly be something they will be watching among other and that the fed has got a mandate for inflation and employment. Strong,ployment remains the lowest we have had in i dont know how many decades, Wage Inflation 3. 9 in the United States so you are getting strong Wage Inflation across the u. S. Economy. If the consumer is doing well, that should be good for the u. S. Economy. Clearly, the fed has not got this mandate to make the u. S. Competitive against china but that is something the administration wants. If those trade tensions resulting a weaker economy it is something the fed will be looking at. Certainly financial conditions becoming tighter. It depends on whether you think the fed is going to be looking more at the economy or more trying to ease financial conditions and Capital Markets. My feeling is we need to move toward supporting the real economy and stop worrying about Capital Market gyrations. Fact thatpite the maybe the fed should not be cycle,ng on a deteething a lot of people have been coming on the show in saying that. You have to take a longerterm view so how high a probability do you put on the prospect of the fed taking rates to zero and are starting qb . Qe . Paul that depends on if you think you are getting a trade deal in the shortterm and i think the chinese are trying to delay until the next election. I thought we would have had a trade deal already, which is why we had a negative you in the bond market. That hasnt played out. It looks like as we get closer to the election next year, all the u. S. Had the Strong Economy and chinese had the weak economy, which is why trump was playing hardball. As we moved to march of next year, the chinese might be able to delay this, be willing to accept a slightly weaker economy in the short term because they are longerterm thinkers than that. That would go against the u. S. Position of trying to strike a hard to deal and it may be in a weaker position with the u. S. Election coming up that the Trump Administration wants something done. You want to done six months before the election so it boosts the economy and is more supportive of the republican party. It is all down to politics in the end and the cash in our pocket. Paul flood at Newton Investment stays with us. Battlesp, thyssenkrupp headwinds and says it will press ahead with plans to lift its elevator unit. It makes up 17 of revenue last year. We speak to Guido Kerkhoff about the strategy. This is bloomberg. Manus this is matt . This is bloomberg daybreak europe. Nejra thyssenkrupp has slashed its profit outlook and is weighing offers to sell its businesses. Economics amid an slowdown in germany which has added to concerns for the conglomerate. Market cap was cut in half in 12 months and there is possibility the group could lose its place in the dax. Thyssenkrupp says it will move ahead to plans to lift its elevator unit. They made up 17 of profit last year. Guido kerkhoff is with us. Lets address the lifting of the elevator business first. Could you get a sense of the timing on that . On track with our preparation for the ipo of elevator and this could happen within fy 2019. Butre on track to do that we have clearly received a lot of interest from external parties for our elevator currentlywhich we are evaluating and taking a look into whether there are alternative options. Manus good morning. You are looking at serious alternatives. What would your preference be and what have valuation are you applying . Lots of numbers being bandied about, 15 billion being one of them. Guido you see a lot of numbers and people have to see what alternatives might be. It is too early to say. Up thyssenkrupp value and its shareholders. There might be alternatives that could be evaluated but it is too early to say what is on the table. When the time is due, we will assess what is best for us and our shareholders. Nejra are all these moves you going toounced today be enough to turn the company around . Guido i clearly think so. If you look behind the current figures, you see Strong Developments. Although the overall numbers are distorted by the weak Automotive Industry and the problems in steel, you see in elevator we improved margin and one quarter. We are clearly looking ahead that we can to fill our guidance for the full year and weve seen a turnaround in the margin. Overall, our capital goods businesses have increased cash flow by more than 500 million compared to the previous year. Andargely lost from steel canauto sector, but we clearly see our changes in strategy are working through and in cashirst results flow. Manus always trying to get a sense of the speed. Talk to me about the momentum of the slowdown and where is that mostually demonstrated, in which geography . Guido if you take a look into our numbers and see significantly, it is europe and european steel, with high iron ore prices. The business is most significantly hitting. On the auto sector, you see weaker demand, especially in china. Youve seen some slowdown already in the u. S. And europe is down, as well. Are just a factor in europe but you see it from competitors around the world hit by the higher iron ore and weaker demand, which to some degree is not a natural situation. Nejra what is clear in the release today is what you are selling, what you are getting rid of in this turnaround but in terms of what will be left, talk us through what you are going to have to work with in terms of improving the bottom line. Guido as we have said when we announced in may our strategy, we have a flexible portfolio approach and what we could we not onlyy is want majority positions, especially in the components industrial sector, but weve seen stronger interest than we expected and meaningful discussions have started. We can see this move was right and leading us in the right direction. What we have said on top of that is in the materials sector, weve had strong positions in steel europe and material services, but we are evaluating consolidation options there if they are around and wherever we have stated in our communicated strategy that we are open to partnerships, weve received more interest than we expected. Manus im curious, where have most of those interests come from, geographically . Guido from different geographies, but what surprised me most was more than we expected, strategic interest from Strategic Partners for developing the business is further. Nejra have you had any response from shareholders to this latest announcement yet . We will see where the share price opens but im interested to see what you have heard from shareholders, but also the Supervisory Board. Guido we can clearly see that all the strategic changes we have made over the last year the split of the company financially not being viable, we always had unanimous support of the Supervisory Board in that direction. It is not an easy situation for thyssenkrupp, as we are somewhat financially constrained. Therefore, we had to react and weve always had Financial Support for what we do. Manus briefly, Larry Summers says the u. S. Recession risk is much higher than it needs to be and is much higher than it was two months ago. Youve been through a number of cycles. Are you seeing the hallmarks of Recession Risk in the United States market . We have just seen there was a Strong Development of the u. S. Market everywhere. Elevators, which is our strongest business in the u. S. , which seems to be a noncyclical business so stable developing and based on a good market position. The rest remains to be seen. Currently, we dont see any outlook of a recession in the u. S. Thes thank you very much, ceo with short, fast, and sharp responses. Guido kerkhoff, we wish you the best. Annabelle droulers is with the team in hong kong with your business flash. Annabelle hedge funds are now the most bearish since 2016. They are intensifying bets against the market unlimited long positions to a shrinking group of companies. The ratio of hedge funds long to sank to its lowest level in three years according to morgan stanley. Ryanair pilots in the u. K. Have voted to strike in a pay dispute as the chief executive struggles to keep a lid on wage claims after agreeing to the introduction of unions. Pilots that belong to the labor group will walk up for todays august 22 following three days of action in september. How the, thats billionaire feels saying Jeffrey Epstein swindle him out of vast amounts of money. It pales in comparison to the unthinkable allegations epstein now faces. He is in jail in manhattan having pled not guilty to sex trafficking charges. His lawyers have yet to comment on the allegations. That is your Bloomberg Business flash. Manus thank you very much. That is the roundup. To the oil markets, we had a bloomberg scoop. Weve seen a rebound in the market from the lowest level since january after we reported saudi arabia is considering all options to stop the decline. The Worlds Largest exporter contracted other producers contacted other producers to suggest options to stem a route driven by worsening u. S. China trade. The ceo ofexclusive, the worlds biggest independent oil trader told me crude markets are focused on the trade war. It shouldnt discount the tensions in the middle east. Weve had a number of incidents recently and we know a huge amount of lng comes through the strait of hormuz. A huge amount of oil comes through the strait of hormuz. Slightly protected by being outside the gulf itself, opportunitys that to build it into more of a hub than it is today, but are we under pricing it . Probably yes. The market seems to be putting its weight behind economic slowdown and trade wars, and slightly underpricing the risk that supply could be interrupted. Paul flood is from a Newton Investment management and is still with us. If i look back to 2008 and 2009, from 141 to 40, opec and opec plus must be nervous. The pressure is building on the downside for crude. What does that mean for you . What are the ramifications of that commodity move . Paul that is certainly one of the things we have been concerned about as we move toward a world which is the nizing. Eisen decarbo before, wentioned need to spend 50 trillion building out Renewable Energy carbonizecture, to de the worlds power generation. That to me is the longer structural story to be aware of. Drivenll term gyrations i by trade concerns and the middle east, the price on the shortterm basis but whatever the saudis look to limit, that is a loss of revenue because volume is going out and that can be taken in the market. Everyone is worried about stranded assets. If youve got one, you are more likely to want to get out of the ground as quickly as possible. Youve seen argentina trying to mimic the u. S. Shell revolution. There are opportunities around the world for the lack of supply to be taken up by other participants. Nejra are we underestimating the risk of an Oil Price Shock to the upside . It is tough to talk about that when brent is in a bear market but it is something some in the market are considering. Paul people are bearish on oil in the moment and i wouldnt be surprised to see hedge funds short the commodity. There is a risk that if something happens, it can quickly rebound. Opec are very aggressive on volume cuts. That would underpin the oil price but i dont see it as a situation like we saw previously. That is one of the reasons the u. S. Treasury is where it is. Weve got that deflationary impetus coming from energy prices. That is great for the consumer, consumer in the u. S. Still looks fairly well positioned. As long as we get a trade deal in the next three to six months or at least a move toward that, that will take some of the risk that the Market Participants have priced into the market today. Nejra as long as we get a trade deal. That is a big if, isnt it . Paul it is a huge economy. Nejra paul flood from Newton Investment. Confirms its outlook for the full year after marginally missing the street on the top and bottom line. How is the u. S. Consumer holding up . The ceo talks secondquarter results at 7 30 u. K. Time. Manus that will be a fascinating want to watch. The charts are there that you and i use, tv. Good morning. Im nejra cehic. Cranny liveanus from dubai. These are todays top stories. Shortterm fix. The one climbs as the chinese set a strongly than expected level, soothing nerves. Asian stocks take higher. U. S. And european equities set for a positive open. Causing a storm . The u. S. 30year flirts with alltime lows. Pimco says yields could go negative. Charlie evans says headwinds is near more easing. Saudi scoop. Oil bounces from a sevenmonth low as the king calls producers to discuss a response to the slide in prices. And results. Adidas confirms its outlook for the full year after marginally missing its streak the street on the top and the bottom line. The ceo joins bloomberg this hour. To list its elevator unit thysseelevator unit at nkrupp. Nejra welcome to daybreak europe. We are looking more positive for risk assets after we got the strongerthanexpected listing for the yuan. Futures very much on a positive footing for europe. Ftse 100 futures up 0. 9 . Cac alsoap futures higher futures also higher. Also seeing u. S. Futures positive after we closed flat yesterday. After we have seen this plunge in bond yields, what starts to look attractive is the s p 500 dividend yield versus the 10year because that has gone positive for the First Time Since the aftermath of the trump election. What big moves in bond markets we saw yesterday. Manus yes, huge moves. It was the 30your paper that made a near record low, but it was the ugly 10year option. Itco, making the point that is no longer absurd to think that we could go to negative yields. You would need to see a major fed easing cycle. And that remains a possibility rather than a probability. Pimco says negative yields is something we could begin to think about if there is a Recession Risk last year. Well above the prevailing market to draw in the bid. Are we hitting failure, illness, or a slightly limp moment . Nejra, get your Running Shoes on tell me what your the levels are in adidas. Nejra manus, you know me. I dont run except if im late for the bus or the train. The secondquarter operating profit misses. Perhaps that is what the market will focus on, but we are seeing a drop. Some news from aviva, as well. Manus they are confirming they will review their asian business. The net number, 1. 1 2 billion. This is the big piece. Aviva to look at the option for the business. That is all part of trying to extract value. We spent a little bit of time yesterday. He talked about investing in businesses. The financial position remains strong. Capital surplus of 11. 8 billion. 2. 3 billion in cash. Maintaining a healthy cash surplus is important to reduce debt levels and safety navigate the uncertain market conditions. Aviva is ready and resilient. Ready and resilient. The yuan, we have been watching the fix all week. We have an indication from the pboc of a little bit of a reprieve in the u. S. China trade escalation. We have a stronger than expected fix coming through, but it was weaker weakest since 2008, moving past 7, despite all the volatility we have seen. We have started to see a little bit more stability coming through in the one after the fix and now it is stronger by 0. 4 offshore over the last three sessions. Beverly played into equity markets. Lets have a look at the reprieve we saw. Across theeen right screen when you have a look at the world map function. The csi 300 up in late trade. Rising. Japan also giving a little bit of a reprieve to south korea in terms of that export bag, easing that. The cosby up. Australian market also recovering. The aussie dollar also rebounded from the 10year low we saw yesterday. Decisions, rate awaiting the bsp later today. It is expected the Philippines Central Bank will fall follow along the dovish tilt. Manus thank you very much. Great roundup in our singapore studio. Lets get back to the top story of the day. The yuan strengthened. A strongerthanexpected fix. The pboc reference rate was peggy that weaker than 7 for the First Time Since 2008. What does it all mean . Lets get to zurich. He joins the cio nejra and myself this morning. This is what some would say a message to try to stabilize the market after the shock they sent to america at the start of the week. Do you buy that theory . Say would not necessarily it is a message to stabilize the market. I think the message was sent a few days ago when they moved it through 7. We are still well short of where the yuan should stabilize they want to fully offset the 10 tariffs on the 300 billion. Nejra norman, are you keeping positive bias on chinese equities with this backdrop . We are actually quite cautious on chinese equities and we do think the growth story has been improving, but the valuation story is actually quite challenging. With this new move and with the trade side of the picture, we think better valuations are being awaited for investors to come in. Manus can i ask you where the rest of asia sits in that complexion for you. If you are looking for better value . Lets deal with that side of the world first of all. I think the weakening yuan picture is going to put pressure on asian currencies. We think it is a place for more caution than proactive interest. We certainly saw some shock and all when it came to awe when it came to Asian Central banks. We have yet more decisions to come. Do you think that those moves in the aipac region smack more of desperation than being able to work if the trade war worsens . Certainly that would be the tail wagging the dog. I think what they are really the chineseis that provide more domestic stimulus to shore up their economy and the u. S. If both of those things happen and the trade war moves to the the asian i think economy can breathe a sigh of relief. Trying to avoid the mistakes of the ecb and the fed and the markets reacted very violently when they did not ease enough. Manus and some would say i think it was the rba governor yesterday, really did question the fx channel. If we are in a race to the bottom by Central Banks, does that send an even more desperate warning flag about the health of the Global Economy . Norman we clearly are in a slowing environment for the Global Economy. We have been of the view that what you really need to see is much more fiscal activity in the Major Economies in the world. The chinese have been doing that in their economy. We think it falls to the europeans with the new leadership coming in in september october to pick up the mantle. Historically, that has been a challenge for europe to do in any meaningful way. Manus in order to find nejra in order to find safety in a portfolio, would you be looking to gold or the safety of u. S. Treasuries, which we will discuss more in a moment . Norman we think both have played an Important Role over the last week or so and we have seen treasury yields fall very sharply. Those trades, we would be a little bit cautious. We think there is a little bit more upside. There are scenarios where you see a 1 type of level on treasury. Another areas investors should look at is the currency area. We think japanese yen could come through 100 against the dollar from here. Swiss franc strength going into 2020. Nejra norman stays with us. Lots more to discuss. We will come back with your thoughts on the fed and treasuries. You mentioned the yield falling and the 30youre not far off the record low. Lets get the bloomberg first word news. Annabelle thanks. Pakistan suspended trade with india and downgraded diplomatic relations. Seven decades of autonomy were revoked. Take the said it will matter to the United Nations and the army will remain vigilant. Indias Foreign Ministry did not respond to a comment. Time it may be up for italys coalition. The deputy secretary said he could pull the plug if partners do not yield to his demands. Its call for deep tax cuts and investments. A decision is not reached, run could face early elections. President trump has endorsed an expansion of background checks in the wake of two fatal shootings that the weekend. But he says there is no political appetite to renew a ban on military style assault rifles. Political leaders in ohio and texas have said new gun safety laws must be considered following the mass shootings. And that could help ease rejected a china has demand that could help ease tensions in hong kong. A proestablishment lawmakers position asijings there is no room for any compromise. Global news on air and on twitter, powered by more than 2700 journalists and analysts. This is bloomberg. Manus . Manus thank you very much. Aheadhat has your agenda for the day . 9 00 a. M. , the Philippines Central Bank. They are going to make their rate cut decision. Consensus is for 25 basis points up. A shocker from the kiwis yesterday. Jobless claims from the u. S. At 1 30. Bloombergs estimates are a rise of 5000 from the previous seven days. Nejra after u. S. Markets close today, uber will release results for the first half. Finally, keep an eye on a shareholder vote at anadarko today. This is bloomberg. Manus 7 16 in the city of london. Just under 43 minutes away from the start of your cash trading. Daybreak europe. Im manus cranny in dubai. Nejra im nejra cehic in london. Lets get a check on the markets. We still have not crossed back. We are seeing a little bit of a stability and responding markets. European futures up more than 1 . Still, the 10year yield is down the 30year yield got within a whisker of a record low. Up withes, we caught the ceo a little bit later. The market is more balanced than other regions. Focusing on more affordable segments of the market. Up all of the ceos comments. Gold is again above. This is cash gold. Cash gold about 1500. If everything was so peaceful in the world, maybe it should drop a little more egregiously. One markets that is whipping around is pushing higher this session. I spoke to the ceo after the group struck a deal. Listen. We are a little bit concerned about growth. The numbers are not as concerned as they work. Sub 60 and come off that is baking in a little bit of the problem we have with growth. Hardy. That was russell it is growth. He went on to discuss the geopolitical risks. He said are we under pricing i said, are we underpricing risks . He said, yes. We are still trading sub 60 even the we are seeing a bit higher on the oil prices today. The market has been obsessed with the demand side. It is a frenzy on the demand side. Brent has the worst week since december 2018. You have to imagine if you are sitting on top of the oil ministry of the kingdom, it says they need about 80 a barrel. Sub 60 is probably getting them a bit nervous. The saudis are discussing options on how to stem this downfall. One option that is obvious to me and many in the market is that they need to cut deeper into before 2020. Will to get the remainder of producers on board . We are waiting to see what kind of options they are talking about. They said they had a brutal week. You can imagine that the conversations have been quite ferocious. Nejra lets get the Bloomberg Business flash. Annabelle thanks. Hedge funds have turned the most bearish since 2016. They are intensifying against the markets and limiting long positions to a shrinking group of companies. They sent to their lowest level in 3. 5 years according to morgan stanley. Tish airways has picked fixed a computer glitch. Technical difficulties hit the travel plans of about 20,000 people. It mainly affected journeys across the europe and the u. K. Flights are returning to normal, but there will still be some knock on delays. Deceived that is a billionaire Leslie Webster feels, saying Jeffrey Epstein swindled her out of lots of money. She said it is a tremendous shock, but that it in comparison to the allegations he now faces. He is currently in jail in manhattan, having pled not guilty to sex trafficking charges. His lawyers have yet to comment on the allegations. That is your Bloomberg Business flash. Manus thank you very much. 30year treasurys in the United States approached a record low in yesterdays session before giving a little bit back, some of the gains. Yields are worried to potentially go negative. It is probably not around the corner, but what it would take ina downturn in the economy which the fed will take the rate all the way down to zero, restart qe. At that stage, we may will see negative yield in the u. S. As we are seeing and many other parts of the world. Charles evans says the risk of economic headwinds could bring more easing by the fed. Norman, as we see yields march lower across the curve, what we noticed yesterday was the s p 500 dividend yield looking favorable compared to the 10year yield since the trump election aftermath. Do you favor equities right now in the u. S. . Norman we are in equities versus bonds, but we are in protected equities because we do feel there is a lot of volatility as we move into the fall. In terms of the exposure to the u. S. , Larry Summers said the correlation of the dividend recession, risk of where do you want to be position . Are you prepared to buy bonds . Slashed. Jor major pimco is talking about negative. We do think there was a risk of a one handle on the u. S. Treasury 10year going forward. We are going into an election year, republicans and democrats seem very eager to bring fiscal to the table, so it is not only going to be a repeat of europe where there is only Monetary Policy at the table. We think if the economy continues to slow, it would not surprise me to see fiscal policy back on the table. That should be on the longer end of the crew. Nejra what does that mean for your fixed income strategy . Whether you prefer duration . And what do you prefer regionally . Norman on the credit side, we do like credit still, even though you are getting a safe haven bid. The reason is the pickup. Returnhink the risk tradeoff continues to look good. We think on the duration side that there are scenarios where yields continue to fall from here, but risk reward is extremely getting skewed against investors, so we are not taking a lot of Interest Rate risk in our portfolio right now. Manus to what extent when you look at japan and you see a warning on profits, you see this sometimes aggressive move in yen as a haven and you see a sales task risk coming in as well, how much exposure do you want to see given the strength of the end . Norman we are underweight japan, but we do quite like the yen, we think it is a good safe haven. Yes, they are going to come in with the higher tax in september. We do expect them to offset that a bit with some fiscal stimulus going forward. The keygoing to be message for investors. We are focusing on Central Banks , but as we move into the fall and 2020, i think the story of fiscal stimulus is going to come onto peoples radar increasingly. Nejra what does this all mean for corporate . Are you worried about and earnings recession . Norman i think the earnings recession is largely here. We have seen some disappointment at the back end of the order. Wewe move into the fall, still think earnings expectations are too high and they will come down again and that will be another headwind for markets in the fall. Manus ok, one quick last one from me. Lets get a little bit about south america. What about brazil . Norman we are quite impressed with some of the political reform taking place in brazil. If we can get away from the chinese slowdown and the trade war and look at some of the domestic factors, we think it is increasingly impressive for investors in the emerging markets face right now. Manus norman, thank you so much. Im looking down at what kit juckes has sent out. The sky has not fallen in. Do you trust the stronger than from the expected pboc . Nejra always so great with the context. That is what we are going to be watching on the European Market open. This is it for daybreak europe. Futures strongly higher. This is bloomberg. Morning. D welcome to Bloomberg Markets european open. Im anna edwards alongside matt miller in berlin. Matt no yield is too low as money continues to pour into the bond market. 30 year treasury yields hit a record low. Can color imagine a world where they go negative. European equities looked to build on the bounce. The cash trade is less than 30 minutes away. Anna