Most since 2008 after accusations of fraud. Matt good friday morning. A historic week in markets. One in which bank of america says we have seen traders rage for safe havens like we have never seen before. Part of the reason why we have seen yields plummet to alltime lows. Nejra what a week it has been. Whipsaw in yesterdays session. We are stabilizing a little bit. Haveabove 1. 5 but we dropped more than 20 basis points on the 10 year yield this week. The curve in birding for the First Time Since 2007. We are above zero now. Close toar yield stays 2 . In terms of other safe havens, that is part of what banc of america was planning to as well. Matt talking about the rush to the yen, rush to gold. The 10 year yield and 30 year yield. We do see the yen strengthening up a little bit against the dollar today. Off. Coming but still relatively close to the record high. A bit of awe see risk on read across futures. Amidst this local bond rally, japans benchmark yield has fallen further below the central targeted range. Comments from the bank of japans Deputy Governor this month that they may widen the targeted yield may suggest that they are willing to accept a lower targeted deal. Reach for hisbal safety comes as markets await a response from china on the ongoing trade back and forth. Beijing calling looming u. S. Tariffs a violation of the accord reached a between President Donald Trump and president xi. Speaking ahead of a rally, President Trump says he has a call scheduled with the chinese president very soon. Policy ofbank concern, another quarterpoint reduction has been priced in. Bullardolicymaker james says there is no need to rush into an emergency rate cuts. Joining us now is Michael Metcalfe. From state street bank. What a start with the plunge we have seen in yields first. How quickly could we get to 1 or below . Michael we have had a very big move this week and i think it is fair to say that the bond market is pricing in the worse Case Scenario for trade. Certainly Global Growth and especially u. S. Growth. Quited say it is difficult to see the current returns in bonds continuing at the present rate. Matt you dont think that we go back and retest the lows that we have seen, the 1. 3 on the 10 year . Say right now,d the current economic environment would not so with that. I think that is particularly true in the united states. We have had bad news about the Growth Outlook outside the u. S. And especially this week, for instance but certainly in the u. S. , the current economic fundamentals do not support that. Nejra how concerned are you on the inversion . We are no longer in verdict for now. Historically, the concern comes when you see a quick resteepening after an inversion . Step in soon enough and aggressively enough . I worry that the narrative around the curve is becoming potentially a little selffulfilling. Hasnow how good the curve been. It has been a better forecaster of a recession than any economists. I wish i had that forecasting record. But the challenge here is there is so Much Negative yielding debt in the world, you have to wonder if this time the economic signal from the curve will be as good as before. There is a risk that there was a nice in fact, there was a nice story on bloomberg yesterday. It is spiking up because of the curve in itself. I think there is a worry that we are getting this selffulfilling narrative. It is all part of a negative narrative. Michael, question is, what do you expect from the fed . We had great retail data in from the u. S. Yesterday but concerning manufacturing data. With ae fed come through 25 basis point cut that has fully been priced in or a 50 basis point cut that some have been asking for . Michael the one thing i have fairly confident about is the fed at this point. Because the market is fully priced at 25, i expect that is what they will deliver unless there is an effort to change expectations. September is a test of what howell has said powell has said. A cautionary midcycle ease. Row,u go to meetings in a that is beginning to look like a cycle. And it is also testing the balance between the international and domestic news. The domestic news on the consumer and inflations ride has been robust. Manufacturing has been a bit weaker. That in the u. S. , it is stronger than it has been before the the International Environment has deteriorated further. If they do deliver on expectations in september, it shows you how much weight they are putting on the International Environment. Nejra is this a bit of a false alarm the fed will act . I would the one thing be fairly confident to say is that the strongest signal we have got, the biggest warning sign we have gotten is the bond market itself. That is why i think there is a danger that some of this become slightly selffulfilling. And it is a little bit of a shortterm market panic. Nejra even in the 30 year yield . Michael yes, because you have negative yield so far at the curve, it it is impacting longduration all the way to the curve in the u. S. As well. Matt Michael Metcalfe is our guest cohorts cohost. Let us get the bloomberg first word news. The question is, is the special relationship in danger . The u. S. Said it is gravely disappointed with the u. K. After a gibraltar report allow the release of an iranian tanker. The u. S. Has threatened against anyone that does business with the ship. Washington says the decision could put the u. K. At risk. Tensions in hong kong have an unexpected new participants. The socalled french spiderman. It featured juxtaposed flags of hong kong and china in a symbolic handshake. , theusiness in question hong kong skyscraper. Congresswomen. Theident trump added that two hate to israel hate israel. Fired twoa unidentified projectiles into the waters off it east coast according to south koreas defense ministry. This comes a day after liberation day, a holiday marked. P by both koreas south koreas military says it is monitoring for further possible launches. Global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Nejra thank you. U. S. Yield curve in version have we learned and a lesson when this happened in the past . We will discuss that next. Later, we bring you an exclusive interview with brian moynihan, the ceo of bank of america. You will not want to miss that interview at 3 00 p. M. This is bloomberg. Matt this is bloomberg daybreak europe. I am matt miller in berlin. Nejra and i am narrative edge in london. Markets moves in bond today as well. Equities looking at a decent day. We are on track for a fourth straight week of declines for asian stocks. In taipei, still up more than 1 . Csi 300 up 1 before the lunch break. The hang seng doing much better even the turbulent week we have seen in hong kong. The government announcing fiscal measures. Dealing with bad numbers on trade exports. A doubledigit drop once again. Singapore is down about 0. 7 . Bond markets are steady here today after we did see the u. S. 10 year yield above 1. 5 level here after pretty strong retail sales out of the u. S. Also, we briefly touched below 1 . The boj did step in to try to halt the plunge in yields cutting their purchases on the short end. Are stillear yields the safest place to be, north of 3 . Matt yvonne man, thank you from hong kong. Let us get a Bloomberg Business flash. We go to beijing. General electric plunged of the most in 11 years after a prominent financial examiner accused the company of accounting fraud. Harry, famous for raising concerns about party made ask is working by shortsellers he did not identify. Claiming market manipulation pure and simple. Shares amid the route. A new owner for the brooklyn nets. We have learned alibabas executive vice chairman is billion for 3. 5 the Basketball Team and the other arena. He previously purchased a 49 stake and had until 2021 to exercise his options to take control of the club. Basf of its construction chemical unit is running out of steam. Several are considering walking away. The auction is becoming increasingly focused on corporate highers. It is exhibiting reluctance. Deutsche bank has hit a record low again. Just two months after rebounding on optimism. Shares fell to a new low. Stock is trading around 94 down from its 2017 numbers underscoring the impact in the reversal of its rates. That is your Bloomberg Business flash. Nejra thank you so much. The most widely watched part of the Treasury Department yield curve is being watched this week. What have we learned from the past. Annemarie is here. Why should we be concerned about the greece deepening greece resteepening. Take a look at asset prices. Gold the was trading fairly well to the upside. Steepen up the curve for good. June 6, 2007. This is the resteepening. Dropped, bond prices dropped. If you are an investor in this kind of environment, it is not the inversion you should be worried about but instead the resteepening. Forparibas posed many, it was this event, this june 6, 2007 event that brought the crisis. This was more than a year before lehman collapsed. Howard k you, emery annmarie hordern. Michael, what is your take on how this portends doom . Certainly in the postwar environment, the curve has been a good signal. Point,marie horderns the markets are priced for a repeat of the financial crisis. It shows how negative the outlook has become. About theuld make curve in version is that if you look at the interwar period, you will note that the u. S. Curve was a poor signal of recession including for the Great Recession itself. The reason we discount that is firstly because it was a long time ago but also because there was not an economic signal there. The only thing i would say right now is because we have had quantitative easing and negative yields around the globe, i think it is fair to say you have a policy distortion of the curve right now so perhaps he economic signal is not as strong as it has been in the past. Nejra in the point you bring up about negative yields is an important one. We are in a different paradigm. What has become interesting is japan is starting to look like a highyield option. This starts to look attractive when you talk about currency hedging. How would you be advising investors to navigate what is happening with curves amid a negative yield environment . As you rightly say, it is not just japanese investors. It is also the case for u. S. Investors coming into europe. Explains why negative yields are not quite as bad as a look at first glance. Thinking fundamentally about buying a bond with a negative yield is it does change your investment mindset somewhat. It is pretty unlikely that you will hold the security to maturity. You will guarantee yourself a loss. Fixed income has to become more tactical and shortterm. Matt what do you think about the idea that these rallies will keep going . Outou think it has tapped in terms of negative debt rallies . Now,el i think right coming up to yes, another one of these trade deadlines, i think you can understand why markets are skittish. A high degree of uncertainty. We are waiting on a phone call. That into youror investment process without being a bit more defensive . That is what we are seeing this week. We have seen this play already this year. In may andinvitation in the end, they delayed and moved on until the next deadline. We make at the same thing again. Some say it has already been pushed back to december. I think you want to be guided by what the fed is saying and what the data is saying. The data this week outside of the u. S. Has been weak while in the u. S. It has been robust. We are not too concerned about global recession just yet because the u. S. Is doing fine but honestly, it is a slowing growth environment. Nejra investors are getting more defensive. And bond traders may be getting more tactical. We have already seen a spike in volatility. Recommending investors brace for more volatility . Michael look at longterm jgb returns. Close to zero. Where bondsisodes do very well in the risk off environment. You can understand right now because equity markets have been skittish about trade war, wide money is being rushed into the market. Suppose the phone call goes well . And the trade war is postponed again . In the u. S. Continues robust . Matt how much of this is supported by Central Bank Buying . I can answer that question in the u. S. Quite easily, it is not supported at all. An interesting question on the stick to yield curve control and yields remain under pressure and continue down i wonder if we get to a point where the boj will need to start selling jgb. Right now you worried about the impact of what is happening in yields on the Banking Sector are and how that will feed through to the real economy . Michael very much so. A deep concern in europe right now because we are now gearing up to what we expect to be a substantial easing from the ecb. The interesting question on that is what will the knockoff knock on effect on the banks be . Yields are already negative. What will the signaling mechanism be . What will the impact be . Michael metcalfe of state street will stay with us. We have a lot more to talk about with him. Nejra coming up, General Electric tumbling the most since 2008 on accusations of fraud which it labeled meritless. We will discuss that next and discuss which hedgehog hedge investor has come to the rescue. Closed in positive territory after wild swings. Taking a look at asian equities. Nothing too aggressive in terms of in terms of buying. We are back above. The 10 year yield at 2 . We dipped below it this week for the first time ever. Matt take a look at the yen now losing streak losing strength. Gaining futures euro stoxx 50 futures gaining. S p futures opening in just about an hour. When you are traveling to work, tune into Bloomberg Radio. In the london area. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. Matt i am matt miller in berlin. Shares of General Electric tumble the most since 2008 after a prominent financial examiner working with a short seller has accused the company of fraud. Raised concerns over bernie madoff. Ge is increasing reserves and immediately saying the company is hiding a loss of more then 9 billion on its hughes asn bakers well. Nejra the claims have been called market manipulation plain and simple. He added that he wrote a paper but never talked to Company Officials goes to show that he is not interested in accurate financial analysis. Stanley said he purchased ge shares on thursday. The idea that they are engaging in a intentional fraud is ridiculous. This is one of the most read stories on the bloomberg and it is interesting particularly given ges history and the challenges up until now the company has been facing. Matt the history of ge is murky. Notable murky financials. Taking part in bringing out bernie made off. But so many big names are purchasing shares here are not just dropped in miller drew cadruckenmiller. Let us check in on the markets from around the world. We are joined by our reporter in mumbai and in london by annmarie hordern. Back arounds 11,000. Is there more room to run . We missed out on trade yesterday. This is more of a coverup. Is trading inn the green. We have not been able to mirror that. Back to these levels. Manage to hold the theachieved on friday markets are still looking we. Ak. A shallow market. It will be interesting to see what happens at the end of the trading session. Nejra thank you so much. Youre looking for further reaction in asia. Picture having a mixed in asia struggling for direction either way after a tumultuous week in the market. Some investors this morning are likely saying tgif. Struggling for direction. But u. S. Futures and europe futures are pointing to hire starts. Foreignexchange the swiss franc is a little higher. A risk on. Commodities, brent, crude brent crude and wti crude both higher today. Donald trump pushing back some ariffs until december. Spread, thejapanese singapore, and the australian. They are closing in on 0 as Global Growth and outlook have occurred there. It is not just the u. S. And the u. K. Where we have an inversion on the benchmark yield curve. We could see it across other countries as well. Matt thank you so much. Thank you for the roundup. Today, we are asking the question on the you can join the debate. Let us get the bloomberg first word news. President trump says he has a phone call with the chinese president very soon. But chinese Officials Say they are off track regarding the dispute. Beijing has vowed to retaliate. Investors are still confident that Jerome Powell will cut Interest Rates next month despite strong u. S. Data supporting the Central Banks forecast. Markets may get a hint when howell speaks at the retreat in jackson hole, wyoming. The special relationship in danger . Is gravelyys it disappointed with the u. K. After a Gibraltar Court allowed the release of an iranian tanker after with after it was detained under the suspicion that it was hauling oil to syria. The tensions in hong kong have an unexpected new participants. The french spiderman scaled a skive a skyscraper to unfurled a banner calling for peace. The building in question is the nerve center of a billionaires Business Empire of a billionaires Business Empire. Ofael barred the admittance two congresswomen. Israel says the pair will not be allowed in because of their support for a boycott of the country. Twoh korea fired unidentified projectiles into waters off its east coast of according to the south Korean Defense industry. Afterve cons a day independence day. South koreas military says it is monitoring for further possible launches. Global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. They are calling for ecb to come up with an impactful stimulus package. H central banker spoke out. Ecb policymakers are scheduled to meet. From statecalfe street is still with us. What would be an impactful package of stimulus measures . Michael this is the challenge for the ecb. Most people expect a 10 basis cut in rates. But then what do they do in terms of quantitative easing . Had the market is already for that the market is all ready for that. Matt what else could they buy . Could they funnel money directly into household accounts . Helicopter money . , you have good questions this morning. Way down the road in terms of policy options the ecb could consider. Most people consider the bank of japan the playbook for which steps you go down in terms of alternative routes. More corporateng. Onds or equities that is an example of what the bank of japan has done. Mliv questionur of the day is so relevant. I think the reason for the failure of the control in japan is that everyone will look to japan to see what everyone else will do next. I think the ecb is in a difficult situation to beat expectations. It is interesting that you are saying that everyone is looking to japan. Some former central bankers of blackrock. In terms of looking to take a is thatpan overdone . Michael i think some of the comparisons, certainly the economic and demographic comparison to japan, you cannot overplay the comparison. Where it is very relevant is what the central bank can do and what the possibilities are. We are still only at the beginning of alternative Monetary Policy. Will come up with Something Else entirely. In europe at least, we are not quite there yet. Mmt, ihen you bring up think about the dangers of mess allocating capital. Miss allocating capital. See various bubbles or allegations of Zombie Companies being supported by this alternative central bank policy. Does that come back to bite us . Michael i think it is definitely a concern but if you are concerned about bubbles specifically, look at sovereign fixed income markets. Risk. K there is a and that is even before you get to the credit allocation point. That is the challenge for the ecb now. They want to build significant stimulus. That is the right thing to do but given alternative Monetary Policy is all about signaling and forward guidance. When yields are already negative, how does that signal . Yields are already negative. That is a real challenge for the ecb. He is saying they want to overshoot expectations and right now, it might be very difficult to do that if they are only buying bonds. Marketis the bond telling us we should be worried about deflationary pressures globally . I think the bond market is telling us there will be a global recession and that part of that will drag inflation down. And in places like europe where the starting point for inflation is already low. Riskswould be deflation in that environment. There is a question as to whether that is where the trade war will go. What it is a risk the market is counting. Michael metcalfe, thank you for joining us from state street. Protests in hong kong against the controversial extradition are enteringng their third month. Let us look at the economic in act economic impact. Terri announcing a stimulus package saying the economy will struggle to grow at all this year. This week, the administration to its 2019 gdp forecast 2. 3 . A drastic cut. Nejra the benchmark hang seng timesis trading at 1. 1 book value. It seems the situation is not scaring purchasers on the mainland. They have had the longest run of inflows since 2018. Matt is europes powerhouse powering down . Is recession coming . Attake a deep dive look europes biggest economy, the engine for growth, next. Nejra when you are traveling to work, tune in to Bloomberg Radio in the london area. This is bloomberg. A hall of shame we dont have much in negative yields but you can make it work and even over a year ago, we had short euro debt. People want certainty of income. Think it is something we can call financial repression. It forces you further down the credit spectrum and that is a desired function of current ecb policy. A little bit of protection against credit spreads. Any negativeotten yielding fiscal bonds. In the mediumterm, i think it suggests you do have to pay for it. I think it will be here for quite some time and we have to get used to it. Matt those were some of the assts this week commenting the negative yielding debt topped a record. This is bloomberg, i am matt miller in berlin. Nejra let us get a Bloomberg Business flash. OfGeneral Electric plunged the most in 11 years after a prominent financial examiner accused of the company of accounting broad. Harry, famous for raising concerns about arnie made off, is working with a short seller he did not identify. Ge calls thee accusation of market manipulation incredible. A new owner for the brooklyn nets. Alibabas vicechairman is paying about 3. 5 billion for the Basketball Team and its arena. He previously purchased a 49 take and had until 2021 to exercise his option to take control of the club. The announcement may be made today. Fn sale of its chemical several buying firms have been frustrated with the reluctance by the company to receive records. Deutsche bank hits another record low. Stock is now trading around 94 , down from its 2007 peak. The lost decade for european banks. That is your Bloomberg Business flash. Matt thank you very much. Is germany the sick man of a europe with a gdp contraction and a slew of warnings . Is it being pushed into recession . That therkel hinted government may consider fiscal stimulus but will the famously austere country want to loosen the Purse Strings and how much worse could the corporate picture get . Joined by our government reporter and senior editor. Let us start with the story you wrote. Angela merkel is loath to increase spending. Are there cracks in the exterior showing . See thenk you can cracks almost everywhere. Angela merkel was much more cautious after the summer break. She is aware where the economy is going. For the first time she said there will not be a stimulus. We know the government is much more careful. And the german finance minister 20not as committed anymore which is what Wolfgang Schaeuble put forward. Great to have you with us. If we do get a recession in germany, how much more pressure will that put on the government . Will they be prompted to act more quickly . People have pointed out that traditionally, germany does not react unless they are in a fullblown crisis. There is an issue that the german constitution has put very launching bigon stimulus. You do have to have the parliament declare a fundamental crisis. And this is the constitutional and legal situation and then we have a political situation. Have agreedthe spd to keep a balanced budget. And the cdu, almost the last landmark what this government is standing for and they are unlikely to give this up easily. Matt although when youre getting paid to borrow, you may want to think about changing those laws. What has been the corporate fallout to all of this . Good has not been a quarter for a lot of companies. Across the board, we have seen it at companies that are bellwethers. Across the board. Though there are some pockets that are particularly pronounced like automotive. Consumer spending has been hard hit. Look at hownt will Consumer Behavior is shaping up into the next quarter. And it is not looking great at the moment. Germany is historically fairly tightfisted but we have seen it ripple through the industries especially automotive, travel. Matt when i go out and talk to volkswagen ore at , ibers Bank Commerzbank ask them if the government should be spending more money and they say they are fine with it. And i have not seen the german infrastructure in such bad shape in the last 20 years. You are right. Roads are in disrepair. If you go down the autobahn, you will spend more time in a traffic jam. Is something a lot of companies are waiting for us so we are in a bit of a holding pattern. Nejra if the trade war gets day by day we are watching the headlines and that is one of the reasons german corporates are suffering, will they be able to turn things around or is it a downward trend from here in terms of profits . I think it is more of the letter of what you just latter of what you just said. Hitch with the trade war not showing any signs of abating, that is a bad bit of news. Is depending on being able to move its cars without barriers. Brexit. Have there are a number of things heading into the second part of the year that companies are quite apprehensive about. Ton of money has a anyway, a surplus but the borrowing is also so cheap. Way and theone government is looking at this. Budgetstting up special outside the existing budget. , infrastructure including the train structure or climate. Green is something we are talking about. Spd do wantnd the to make this a particular a political issue. Especially because the greens are on the rise. They want to show that they can do what the public wants them to do. Nejra thank you to our berlin team. Taking us through the corporate story. Coming up on bloomberg later today, we bring you an exclusive interview with brian moynihan. Dont to miss that at 3 00 p. M. London time. And bloomberg users can interact with all of the charts at we show. Gt go. Pe this is bloomberg. 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. Good morning. I am matt miller. President trump he will hold a verywith president xi soon. Fully priced in. Investors bank in another court or point reduction. Quarter point reduction. Anre is no need for emergency rate cut. And shares in General Electric fall for the most since 2008 after an allegation of fraud. The industrial giant stabilized in afterhours trade. Welcome to daybreak europe. What a week it has been. A big historic week in terms of the yield curve. Wild swings in equities. It has been a fantastic time for me to spend the week with you in daybreak. Moves and markets have in some cases been unprecedented. Less than 2 is pretty amazing. We are looking at a risk in look at lets take a the bond futures and see if it is playing out there as well. Yield had fallen each day in the past trading sessions to an alltime low. 10 year bond futures are rising again. See another record year and the german 10 year yield . Italian bond futures are falling. U. S. Tenyear bond futures falling. We do see the 10 year yield. You know what is really interesting with that in yield bund yield, there was a story that japan looks like a highyield. Put in currency hedging, it can look attractive, that s getting tothe bund a high. Two days of declines for european equities. Green for the s p 500. Wild swings in the session. Concerns about the trade rhetoric as well. We are looking like we are going to end the week in the green. The 210 is no longer inverted for now. Lets check in with the markets in asia. The yvonne man has more. How is looking . Big moves in bonds. Big moves in bonds. The asianudied session. A risk in equities. What we are seeing the most, gains in china as well as hong kong. Recovering here after what has been a turbulent week ,olitically with airports canceling remaining flights and ongoing protests. The government issuing some fiscal measures to try to boost ing itsnomy after slash forecast. Slashed its forecast for the asian tigers. At bonds. K we are watching more about the asian bonds, fixed income. I 10 year yield. We continue to see tremendous rallies. 23 minus basis points. We did see the boj step in to try and hold the plunge in yields. Yield, 3 at the moment. Bonds willgovernment give you the best returns amid this rally. Earnings very much front and center. Adding to the gains in hong kong. Profit jumping. Strong set of profits. Watching the chinese beer stocks. 10 . G earnings, up China Resources beer next in line, rallying. Cathay pacific as well, recovering from 10 year lows after protests in the airports. Cathays stop up 10 . Rally, the global bond falling below the targeted range. It is fueling speculation about when the Monetary Authority could step in. Theents are it may widen range. Yield fells the u. S. Below 1. 5 for the First Time Since 2016 in yesterday session. Yesterdays session. The markets await a response from china on the trade back and forth. Beijing called looming u. S. Tariffs of violation of the accords reached by President Trump and xi. This as china has lost its status as the top foreign creditor to japan. Of not a market rally but a political rally, President Trump said he has a call scheduled to the chinese president scheduled soon. Where centralbank policy is concerned, investors have priced in a quarterpoint reduction. A dovish policymaker from the st. Louis fed said although that is priced in, he need to rush no into rate cut. That is james powell. Joining us is a portfolio manager. What do you make of this when you put it together . Cutting 50the fed basis points or 25 . The idea of doing something that appears panic driven could be counterproductive. It is fortunate in the sense Central Banks have had dry powder to use. There is not much to cut out when it comes to Interest Rates. What is the level of yield we are seeing . That inversion . What does that mean for how you would look at u. S. Equities . The traditional reaction to for the Banking Sector to underperform. That is usually because the market persists with the belief that is no longer much the case. To some extent, as an indication of the economic outlook. One would probably want to be more defensively positioned in businesses with a more predictable cash flow stream. What is your view on how this trade war plays out . Trump is this going to slow down . Would you expect another outcome . Twostage process. There is an Election Year coming up. Thewould have to imagine u. S. Administration would want to make sure the stock market is not into bad shape for the Election Year. Is hard to coincide that with mood music, coming negatively from these chinese trade wars. The chinese may retreat economically and try to accelerate the domestics causation domestic movement in their economy. These are skirmishes or battles within a wider war. Trade balance perspective, they are likely to be won by the u. S. This mean for volatility . We could see more volatility. You can see in the chart how the outside moves have been as of late. In equities could yield for quite a while . Find in au often bearish environment, the updates can be more violent and more marked than the down days. The down days fuel painful, there is an opportunity to reduce exposure. That is probably the way i would do it. Results. Ve had may give you an opportunity to lighten up. Lets go to bloomberg first word news in beijing. The tensions in hong kong have been unexpected. Spidermaned french scaled a skyscraper to unfurl a banner calling for peace. Flags of hong kong and china with a handshake. Entry to two muslim members of the u. S. Congress. That is after President Trump said letting them and would be a sign of we asked. He added the two hate israel and all jewish people. Not be allowed in because of their support for a boycott of the country. End a 20has a plan to year standoff with its creditors. The countrys finance minister has flagged rate cuts and bond sales. The nation hopes to access the finance it needs to revive its economy. Global news, 24 hours a day, powered by more than 2700 journalists and analysts. This is bloomberg. Thank you selina wang in beijing thank you very much. U. S. Says it is disappointed with the u. K. After a Gibraltar Court allowed the release of a anchor suspected of hauling oil to iran. Disappointed in this decision the volcker court is saying. Moresay they have no grounds to legally hold the tanker. The u. S. Is threatening sanctions on the port, vessel. Basically, saying they want the ship to become a pariah. They are saying, you need to think about this and a broader context. Boris johnson is working on brexit. This is something the two may discuss at the g7. If you take a look at what is swan on, you can see grey gibraltar area. They want to get it out into international waters. For the u. K. , it is interesting. Detained, ship was that was a u. K. Flagged vessel. It still remained in irans corners. They are saying this is a decision for the u. K. It doesnt look like a tanker swap. But it is likely the u. K. Could get there vessel back. Shares in General Electric after the company was accused of fraud. Said they will need to increase insurance reserves. Company is hiding a loss of more than 9 billion. Ges chief executive officer called the claims market manipulation. He said the fact he wrote a 170 talked to but never Officials Says he is not interested in financial analysis. A hedgef miller fund manager said he purchased thursday. Ge climbed 3 in late trading after the company said he also purchased shares, 2 million in shares after the rally. A story worth reading. Well bring you an exclusive moynahan,with brian the bank of america ceo. This is bloomberg. Good morning. 19 past 8 00. 19 past 7 00 in london. I am matt miller. Lets get a sweep of the global markets. Ona, we have seen some green the screen. You can see that reflected in bond yields. Treasury yields dipping below 1. 5 . Dropped 20 basis points in the 10 year yield. Level. Ped below that there have been some historic moves. Aret does look like we getting more risk in signals. Euro stocks and futures are rising. Gains are substantial. The lasteen flips in couple of sessions. You see 0. 6 percent gain. It has been a wild week. The exchange is awaiting the act acquisition. Is according to people familiar with the matter. Joining us now is europeans Bloomberg Finance minister. How likely is this to actually happen given the reasons behind the move . Preliminary a stage. That is what they said. Investmentlking to banks. They are still looking at options. Are talking about markets in spain and austria. A lot will have to happen before something concrete goes along. They are being used as a political football. Completelyde the eu poses risks. The European Finance manager. Lets pick up on that and get your thoughts. See equities attractive in terms of defense, moreou would be getting defensive. It does not represent any particular economy. Ofrepresents a Cross Section global companies. Large financials. The swiss health care stocks, we have been positive in. Clearly, there have been some Strong Performance track records. It is a Market Global investors will want access to. It is something the europeans will have to think about. Clocks i want to ask you about the equity markets and what happens after an inversion in the yield curve. Themarie saying, beware steepening. When the steepening comes back on. What do you think about that . Lag until we see highs. Shouldnt investors stay and markets . In markets . Since the financial crisis, the bad news equals good news. Securityes have been a signal for equity markets to get more bullish. Bad could equal bad. We have had a long cycle and started to see some indicators become more mixed. Perhaps the earlier opportunity to sell might be more attractive. Resultsseen reasonable coming through. That is always going to happen. The mood music does seem to be changing. That was an interesting comment. Europeane looking at equities, we were having a conversation about the challenges facing german corporates. We have seen that contraction for the second quarter. How exposed are you to german equities . We have reduced our exposure to the german industrial sector. A socalled neutral stance. They have been struggling. Is a slightly indirect consequence of the trade war. That is why the bund has been driven down so low. Exposure economic are there Industry Groups you like, paul . You think about value plays . It has been a loser, but is there places where you see value and you want to buy it . Certainly what we saw a few weeks ago was an attempt at becoming a little more constructive. Brief flurry in some conductors. Back, it did look like a bit of a blip in a downward trend. An important aspect is the divide between growth and value has been exacerbated by the differences in credentials. Quite a few of the value sectors dont stack up that well. An importanting consideration. Something i would be watching. Inre will be opportunities some spaces and we will get situations where handset manufacturers will have good results. One may have to be quite fleet footed in regard to trading some of those areas. It has been a pleasure having you. For global manager equity. We want to show you some live chinese paramount tillary police have gathered. Is located next to military police have gathered. That is it for daybreak europe. European markets is next. Stay with us for that. This is bloomberg. From the 5am wakers, to the 6am sleepers. Everyone uses their phone differently and in different places. Thats why Xfinity Mobile created a Wireless Network that auto connects you to millions of secure wifi hot spots. And the best lte everywhere else. Xfinity mobile is a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Click, call or visit a store today. Good morning. This is the european open. Markets stay long and stable. Bond yields began to study. Futures point higher as asian equities grind out gains. The cash trade is less than 30 minutes away. Call incoming. President