Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240714

In the media are trying to build up because they would love to see a recession. We are very far from a recession. Asus italian bonds rally the Prime Minister resigns, blaming matteo salvini. Boris johnson will talk brexit with Angela Merkel. We speak to the German Economy minister. So what is the big market event . It is the 30 year bond auction. 30 years the duration. Already trading at negative. What will the appetite be for 30 year paper . 2015, there was a buyers strike. That could be the risk. The reason i focus on the difference, last week with there was talk of fiscal stimulus. That backed up longer dated yields in the United States. It was the tail that whacked the dog. The german bond market move the u. S. Treasury market. We have had near record low rates of oversubscription in july. The past three options, feeling, feeling. We will bring you the data. Have a look at wti. What is the big driver of Market Sentiment donald trump talking about tax cuts, talking about tax cuts, not delivering tax cuts. Mind, the equity market manages to get itself payroll tax cut, Capital Gains tax reduction, jp morgan saying you are going to see a pivot back before the end of the month. It may just be your coming to a squeeze in the market. We have a lot to cover from the bond market to double talk of recession. We could talk ourselves into a negative spending pullback. For a while, the world has been waiting for resolution. U. S. President donald trump says he is not ready to make a deal with china. Beijing wants one. Something could happen soon. As Global Growth concerns rise, barclays is forecasting three further rate cuts by the fed by the end of 2019. This comes as the San Francisco fed president does not expect a recession in america anytime soon. Points tohe data continued economic expansion. Trump echoed the comments. The word recession is inappropriate. It is just a word certain people in the media are trying to build up. We are very far from a recession. If the fed would do its job, i think we would have a tremendous spurt of both. Spurt of growth. Manus the president rebuffing the use of the word recession. Trying to recalibrate the mindset. We have gone into frenzy mode over recession. Worried is the desk in the United States . We are not super worried. The fact is if you look at data in the u. S. , it has been relatively strong. It is very light cycle. This is the longest cycle in history. This rise in protectionism i would say we need to be worrying about 20 20, but not 2019. You say the risk is the fed could be behind the curve and the markets desk you speak to, they want aggressive action. The risk is of course this week that jay powell does not deliver on the narrative that the markets want. The markets want 50 to 75 basis points. Barclays note this morning talking about another three. Is that the biggest risk . A powell failure to match expectations . I think it is a very big risk. It has been the story all year. The fed has been beside the market. Whether or not the market makes a lot of sense to have 75 basis points a rate cuts priced in given the current economy is neither here nor there. It is going to be a difficult balancing act for powell to meet the market expectations. Thats going to be a big risk this week. One of the things that came through clearly from blackrock and a number of others is the ability of rate cuts to do something substantial. But pimco flagged the possibility of rhetoric changing fiscal stimulus. Lets take a listen. There is a lot of corporate debt outstanding. It does make sense if investors are going to credit markets, but you want to be selective and defensive right now. The Global Economy is slowing. Monetary policy has limits. We are likely not going to pivot soon enough. The reality is risks have increased a lot. Credit investors need to be or defensive and selective. Defensive and selective. Manus trump painting we might do payroll tax, Capital Gains tax the narrative seems to be from the fiscal front in the United States in america. Is that the new momentum . I think the u. S. Has been using fiscal policy aggressively for quite some time now. It surprises me we are even talking about it, given the u. S. Has the largest structural budget deficit since the 1960s. What we really need to see his fiscal policy in europe. We are starting to see hints of that. We are not quite there. Why do you think goodness knows why anybody knows what goes on in the minds of anybody. Why do you think trump is leaning into taxi echo into tax . You would say that is not the solution. To sustain the economy . Listen, i think the key point is the u. S. Is in a situation where it does not have a lot of fiscal room. It has monetary room. Europe is in a situation where it has a lot of fiscal room. Im not saying payroll tax cut would not be helpful. The problem is in the u. S. , you have a large budget deficit. There is only so much room on the fiscal side. The point trump is talking about shows you the administration is getting worried about a recession in president ial election year. Thes i was looking at dollar. Is away, asking me to drive the bus. One second. Rolling the dice. There she goes. Dollar. About the look. I asked this question of my guest yesterday. The value of the dollar. If we take the three pillars of this trump administration, it is strength of the dollar, it is, inadequacy ofhe the Federal Reserve to act, and china. To what extent does this dollar need to reflect that . Does it sustain at a higher level because of trade angst and real yields . Reality is the environment for the dollar has been very positive the last couple years. You have a Better Business cycle in the u. S. , better yields. That is getting clear in recent months. Dollar we should recognize is sitting at the highest level in real effective terms in history. It is expensive. It is a problem. It is going to start showing up much more in earnings. Something has to give. I want to finish up with one other thought. I find this interesting. Implied volatility looks too low and risk asset levels look too high. Going back to this narrative, do i buy volatility . Which one . Which risk assets looks too rich for you . Buying volatility, yes. Which one, i would argue probably Foreign Exchange volatility in part because of all this currency war discussion that is increasing. Why . The global Business Cycle is very weak, which is typically an environment of higher volatility. In terms of risk assets, listen. There is a lot of candidates. I would say the s p probably looks the most extreme to me given all the risks we have around the earnings picture, the strength of the dollar, and the outlook for the u. S. Economy heading into next year. By 10 . Ould be correct what does it take to correct . Seen a near 25 correction at the end of last year. We saw 10 just a few weeks ago. What do you need to have a 10 correction . A continuation of what has been going on recently. Andfed behind the curve escalation of trade tensions and weakness in the u. S. Economy. Had a crystal ball, i would say we could deliver. Stay with me. Have a crystal ball, by the way. Lets get your first word news. Thanks. Regulators have rolled out changes to the rules and limits banks must follow. Wall street lenders have been pushing for the better part of a decade. It is hardly being change needed to spark a revival. Eu on Boris Johnsons attempt to renegotiate brexit. A backstop in ireland is a vital part of the agreement. With just two months until britain crashes out of the block, the sides are deadlocked. The u. K. May delay naming the next bank of england governor until after brexit. The chancellor may also postpone the budget until 2020. If the government is forced into a general election next month. Mark carney stepped down at the end of january. He twice extended his tenure to provide continuity during the split from the eu. China has detained an employee of the u. K. Consulate during his trip to the mainland according to his girlfriend who says he has been missing since august 8. Police in hong kong have launched a missing person investigation and are keeping contact with chinese authorities. President trump is canceling his meeting with denmarks leader because she does not want to talk about selling greenland. He tweeted copenhagen saved a lot of effort by being so direct. Trump described it as a large real estate deal. Denmarks Prime Minister has ruled out the sale saying she hopes he is not serious. Global news, 24 hours a day on air and tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus coming up, italys Prime Minister quits after launching a scathing attack on matteo salvini, good but could he return . This is bloomberg. Manus it is a Beautiful Day in the city of london. That is a shot from our london hq. Selling pressure is back as Boris Johnson puts forth his new ideas for a backstop. We will dig into that later. Juliette saly standing by in singapore with the latest on the markets. A mix in asia. The Msci Asia Pacific index down by 0. 3 . Low volume. Japanese stocks halting three days of gains. President trump indicating he once again said hes not ready to make a deal with china. Hong kong stocks recovering. A lot of buyers in the pharmaceutical space. New zealand the laggard today. People coming through as they warned about the impact of the china trade war on demand from china. Koreas market is flat. We have seen some money going into the korean won. A big focused on south korean exports, sometimes seen as a bellwether as to how we arguing trade in the Global Environment in terms of the south korea 20 day trade data. Another disappointing picture. In the first 20 days, with saw exports down more than 13 . Shipments to china were down about 30 . All of this is setting south korea up for a ninth straight month of declines when it comes to exports. That is going to show disappointing moves when it comes to the overall trade balance with south korea. Of 13 in that first 20 days. Interestingly, thailand came through with export data today. That was a bit of a surprise. It rose 4. 3 year on year in the month of july. Much aversive expectations. Manus thank you very much. Headlines, the latest in hong kong. Probing facebooks cryptocurrency project according to a document seen by bloomberg. The antitrust probe is looking at concerns the Payment System could shut out rivals unfairly. Facebook and the European Commission declined to comment. Sachs is conducting preparatory work for saudi aramcos ipo according to financial times. It says the work is ahead of pitching progress in order to have even work for free on specific projects. A breakdown in communication. What areview of review of boeing 737 max 8 is expected to site. Highlights the need for improvement. That is your Bloomberg Business flash. Thank you very much. As italysnte quit Prime Minister. He blamed matteo salvini, accusing him of irresponsible rebellion. Crisis willnt compromise the work of this government. Conte announcing his resignation. The fivestar movement and the democratic parties are holding talks over a possible coalition. James mccormick is my guest host. As you look at the potential political, somewhat say chaos in italy, do you think we are going to elections or do you think we will get a deal between fivestar and democrats . Our base case is we are going to get a centerleft coalition. We think snap elections, the risk around that is now much managed. We are probably looking at much diminished. We are looking at next year for elections. Of positioning, the risk is salvini came to power, there would be fiscal indiscipline. The fivestar and the democrats, does that reassure you . I dont think so. Longterm we have to recognize italy has clear fiscal issues. The european economy is weak. The ratings in italy on btps is one notch above junk. You are always going to have that problem. Looks like werisk have dodged that. Manus lets get to our reporter in rome. Gerald. R Senior Editor good to see you this morning. We have just been talking about this. Some might say it is an unholy alliance. How would you describe it . Im not sure i would call it unholy, but there have been archenemies for some time. One of the most successful policy platforms for fivestar the previous administration, the democrats. It is a strange prospect, the idea these groups could come together. We have seen stranger things. The government between fivestar and the league was even more unlikely. Anything is possible. Manus thats what i love about politics. Of power and whiff all across the world, they get a little bit desperate. Tell me what happens next. Run me through the choreography and how markets have got to judge what happens. Today we start the consultations between the president and all the interested political parties. We will begin with the smaller parties first. The real action in terms of the heavy hitters is likely to take place tomorrow. Away from the president ial palace today in rome, there will be a meeting of the Democratic Party. An internal meeting in which we expect them to decide what their line is going to be toward fivestar. We are hearing fivestar is more eager. That meeting could be crucial. Manus thank you so much for coming in early, keeping us real on the politics in italy. Back to my guest in london. Position,f your btp obviously, yesterday we saw a nice reprieve on the btp trade back to 2019 lows. Thatpread is back below 250 basis points level. Is there a further compression in the spread . You did warn we are one notch above junk on this paper. How best to play it . The spread makes a lot of sense for a number of reasons. It is still pretty high. Political a period of quiet combined with an ecb thats going to restart qe, you can be looking at spreads back 175, maybe even 150 if things go particularly well. The other side, the german bund yield, if we are beginning to think about fiscal policy in germany, that could start to push up the yield as well. Spread trade makes the most sense in this environment. Manus we have this 30 year paper. Yada yada. This is on 30 year Government Bond paper. It is quite important. What is the risk of a buyers strike after 2015 . Is it different this time . Would you buy this paper . Is there a risk of a buyers strike . I think the way you need to look at the curve at the moment is that we are kind of in the middle of a transition. The First Response to weakness in europe is going to be monetary policy. Our view all along is that would flatten the curves substantially. We have seen that. Start transitioning into a discussion around fiscal policy, you need to get out of the bond curve. Ve. Bund cur stay with me. More work to do. Coming up, Boris Johnson heads to germany to meet with Angela Merkel. Will has planed to renegotiate brexit get a better response than it did in brussels . We discussed that coming up. 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. Manus here is a live shot of sydney. The aussie dollar is stronger this morning. , it was asie rises bit of a strike in some paper that was brought to the market. This could be a bit of a precursor to what is going to happen in germany. People are now talking about aussie yields getting back above 1 . Thats on the mliv blog up there. Have a look. If you are desperate for yields the turnaround, i am. Lets get to annabelle in hong kong, she has got your first word news. Fulda full. 2. 0 is looking more like a tweak them an overhaul. They have ruled out limits that banks must follow. Wall street lenders have been pushing for some of the updates for a decade but they are hardly the changes needed to spark a revival of trading discs. The u. S. Economy does not appear to be headed towards a recession according to San Francisco fed president. To continued expansion. She wrote it looks towards continued expansion. She downplayed white house fears of a recession. Proof the word is inappropriate. It is a word that certain people in the media are trying to build up because they would love to see a recession. We are very far from a recession. In fact, if the fed would do its job, we would have tremendous growth. In china has detained an employee of the u. K. Consulate in hong kong during his trip to the amendment. That is according to his girlfriend. Hong kong police said have launched a missing person investigation and are keeping close contact with chinese authorities. President trump is canceling his meeting with denmarks leader because she does not want to talk about selling greenland. He tweeted that copenhagen saved a lot of effort by being so direct. Trump described it as a large real estate deal. The Prime Minister has rolled out the sale, saying she hopes he is not serious. 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. Manus thank you very much. Lets check in on the rest of the markets from around the world. Mumbai,tanding by in and in london, dani burger has the latest. , what doain benchmark you think is holding the traders back . What is the deliberation . Manus, good morning. Maybe a bit of both. One point you made out, waiting for communications, the Indian Central Bank has minutes coming out today and that might have a bearing on whether the central bank is dovish. , theresult of which penultimate day of the weekly option expiry, the markets have started off on a sedate footing. Will see if there is traderelated uptick, but her terms of news flow, not much is driving the market. Maybe tomorrow there can be a bit more volatility. For now, it is very quiet. Back to you. Manus thank you. Lets get the rest of the markets. Dani burger is standing by in london. Nejra niraj said, we are seeing volumes off as much as 30 . That means there is more chance for volatility, so still some excitement in the markets. We are seeing australian stocks leading the declines. We saw indonesia and japan down as well. The south korean won is rising. We are also seeing the haven trade take a breather. The yen declining. 2 . The bloomberg dollar index gaining. It has been trading around highs for the year. Treasury volumes have been off as much as 50 . Again, wait and see mode commodities. I also want to touch on what hong kong markets are doing. This is a crucial time for the hong kong protests. This is the date of chinas anniversary. Here, we are looking at risk reversals. Both are suggesting volatility to come that is the highest since 2016. Traders here are taking out some hedges, concern about what is to come for the hong kong dollar. Manus thank you very much. Great roundup, guys. Blog,iv question on the you can join us if you wanted. What would benefit the most from chinas stimulus . You can join that debate on the mliv team anytime throughout the morning. Shifting gears, the eu has rebuffed Boris Johnsons attempts to renegotiate the brexit deal which would involve scrapping the irish backstop. Tweeted treated that it is a vital part of the agreement. Johnson will try his luck again, this time on a visit to berlin. Where the threat of a no deal of brexit with a threat of a no deal brexit to convince Angela Merkel and Emmanuel Macron to change the deal. James mccormick is still with us. Seed to see you heard you. , in terms of the risk in the u. K. At the moment, boris is going to meet the other leaders. He wants to renegotiate the backstop. There are a number of thesis is out there. One is that we are getting ready for a general election, would you concur . What are the market ramifications . I think almost any brexit outcome leads you to the path of a general election probably sometime later this year or potentially next year. Given of the polling and uncertainty, i dont think the market is going to like the runup to an election. We may have an outcome that changes the picture completely. But between now and the general election uncertainty, pound weakness, it looks like the story. Story there is a lovely this morning. Bluebay has exited their big three your position. This has been one of the most successful trades from mark gowdy. He says it is time to end the three your bets. They see an extension to the deadline and a fresh election is the most likely outcome is it too soon to exit short the pound . James i do think it is a little bit early. As i said, until we get to a general election and see the add thati would also the big change this year is that alongside the political uncertainty, we have a lot of economic uncertainty. Maybe we are 80 there in terms of the pound move, but it does feel a little bit early to us. Manus i pop this into the gd library, well done to our queen of charts. This is one year versus threemonth risk. If you wanted to have a risk and octoberween now , this implies a no deal brexit is already priced in. Would you be prepared to spend a little bit of option money to have that optionality . Listen, i think the biggest view for us heading into the autumn is that sterling volatility is just too low. Uncertaintyuch coming, so much uncertainty around the bank of england, so buying volatility in sterling fx is very compelling. I want to get your view on this. He said we expect unemployment to rise. Sir, that inou, the case of hard brexit on october 31, could you envision a rerun of the lehman ask lehmanesque time where the impact of brexit would not be felt until eight or 12 months out. James we should use the referendum as a model. Most assume the economy fall off a cliff after the results and the truth is it took some time. We are seeing the economy on years of brexit uncertainty, so yes, maybe the impacts would not be felt until later. But from our point of view, it would be a negative impact. Manus ok. Where does that take me . I get the sense that mark carney is not an advocate of negative rates. I look at what hildebrand a blackrock has been saying recently, which is saying more qe. What would be the immediate reaction, more qe . And would that be the right trade for them . James it would be instantly more qe and rate cuts. It would be fairly aggressive. We do expect this new government to ease fiscal policy in the coming months. But i agree with you, the impact of further monetary easing, whether or not it helps, is questionable. But im certain the bank of england will be easing instantly if we do have a hard brexit. Manus stay with me, weve got more work to do. James mccormick. Money into assets guaranteed to return face value seems counterproductive. But there are ways that it can be traded for a profit . Profit. Annmarie hordern has been digging the government looking east for a convoluted hedged trade. Good morning. Annmarie we have 17 trillion of negative yielding debt. The question is how you make money from it. The first one i want to talk about is fx hedging. Rising demand means those with funds can generate positive returns in europe and japan. Is an annualrs yield of 2. 6 . Investors can plug that money into something safe, like the japanese 10 year, which would make 75 basis points above that. Then if you want to do the same with euros you can earn about 4 more. Thing we are going to talk about is the steeper yield curve. This means you can borrow in the shortterm and invest in longer maturity. , the price at which the bar from each other is minus five basis points. Whereas the ¥20 rate is positive 11, a pickup of 60 basis points. Where in the u. S. , the similar scenario would be 40 basis points your lower. Its all about the slope of that yield, manus. Very well put. James mccormick is my guest this morning. James, do you want to do a trade in the jgb based on that proposition . Do think that what annemarie has just outlined is a point we are missing in terms of how to profit from some of these dislocations . Listen, and there are always ways of finding potentially profitable trades. But when the riskfree rate, and it is called that for a reason, is negative, all of these apply some risk. Implies some risk. So lowvolume trades with volatility affects, it is essentially profitable but is risky. Moving out the curve means you are taking duration risks. There are things the do and things we look at, but they are not risk free. It makes it much harder for investors. Manus can i ask you about liquidity . Jpmorgan put out a note saying market liquidity is below the average, reading lots of various pieces around that aired are you concerned that these bond markets, and we could turn, we could get a trade deal, we could get a shift in the United States of america. I know those are perhaps longer possibilities, but if that comes, are you confident that the liquidity is there to unpick some of these traits . Trades . For some timefelt that the next big crisis would be a crisis of liquidity. Balance sheets have been fixed, banks are less risky , but at the expense of less liquidity in the market. Comesn the big selloff about liquidity will be one of the big drivers. We have seen elements and anecdotes of that throughout the last year and a half. Manus james, thank you very much global head of strategy at natwest. Coming up a little bit later, we speak to the German Economy minister. We will get his take on the slowing economy, the risk of recession, and the response mechanisms. Dont miss that interview. This is bloomberg. Manus this is bloomberg daybreak europe. Lets get you set up for the trading day. 9 a. M. London time, the Worlds Largest Sovereign Wealth Fund releases secondquarter reports on its holdings. Holds on average 1. 4 of global stocks. Will this morning, germany alter 2 billion euros of 30 year bonds, a good gauge of the appetite for long data as yields continue to hold near record lows. I love with the mliv blog is saying, it could be a damaging movement or just a buyer strike. 5 00 a. M. , Boris Johnson meets Angela Merkel and the visit will set the tone for the welcome he might receive. And this evening, we get minutes from the Federal Reserve. Some say these are absolute and theyve cut hold cut rates. Of get your business flash headlines. Lets get your business flash headlines. The eu is already probing facebook to lira project f project onira concerns it could unfairly shut out rivals. They declined to comment on the investigation. Goldman sachs is conducting preparatory work for saudi aramcos blockbuster ipo. It says the work is ahead of any formal pitching progress to secure a role in the offering. Have charged lower fees or even worked for free on specific projects. Spidermans place in the marvel universe looks to be facing a bigger threat than thanos. We learned a dispute is threatening to end production of the superheroes films. Website, disney wants a 50 share profits going forward. Disney gets 5 of box office revenue. That is your Bloomberg Business flash, manus. Manus thank you very much. Are the banks worstperforming stock sector and the stoxx 600 so far. Negative rates underpin a lot of the pain they have suffered. Banks are now being forced to pit it from a dependable income from lending to more volatile sources like commissions. Worse, some say, they are compensating for the lost revenue by increasing volumes of low yielding loans. This is what eats into shareholder returns. Who better to make sense of it all then our opinion columnist who covers finance, jonathan working for bloomberg intelligence. How much room do it european banks have to maneuver . I take you to the pc wrote on the back of ubs is most recent most recent move. I think this is the point. If you look at the profitability ,evels across european banks looking at profitability that does not sustain the business models. If you take a study the ecb put out a few days ago, looking at profitability in 2018 measured by return on equity, that has delivered about 4. 6 . That is well below the costs of equity. And significantly below both the u. S. And the nordic peers. So this is the starting point. And then you have got a couple factors that are making that even tougher. On the other hand, you have impairment, which is unlikely to get much lower. On the other hand, on the costcutting front, yes, banks are doing more to cut those expenses. But they also have to invest. This environment with an explosion of fin tech, alternative payment services, all of which is forcing banks to put up more money. So the cost cutting is not as effective as it might have been. Jonathan, let me take it to you. Who is under the most pressure . Those who lend to you and i in the european continental area or is it the more Investment Bank oriented divisions . Where is the negative pressure coming the most . It is actually pretty even. If you look at next year revenue expectations, you got to sort in 8 . The italians and spanish are down five or 7 . Those are cuts to your revenue source, that is a huge problem. In terms of how we are thinking clearly, one factor is to lend more at lower margins. We have got price wars going on in france. This is not going away. , in we are looking for is september, the ecb has to do something. When we talk about negative rates, it is the fact that 7 billion euros of revenue is lost because you have got access liquidity sitting at the ecb. We have got tltro three coming up. Across the board, it is not just fees and commissions. Look at italy. But fees and italy are falling five or 10 quarter on quarter. Can i take it back to you . Jonathan touched on the policy response we expect to see. What there is this debate about tearing tiering in terms of rates. What is the responsible reaction . You have got to assume there will be some sort of kerry. It is not clear how much of that banks will be forced to pass on and their wealthiest customers. More broadly, looking particularly at europe, there is overcapacity in the industry. That needs to be taken out. One way would be through consolidation, including crossborder consolidation. Without a deepening of the Banking Union that we have, it is very difficult for that dealmaking to take place. Banks cannot move around funds freely. From a policy standpoint, that needs to be addressed, as well as tackling those pockets of the industry that distort competition. For example, the lenders we have in germany. Tackling those pockets of business would help. Manus i suppose it just depends on crossborder mergers. They he very much for joining. Elisa, an opinion writer. Producing research hard and heavy, Senior Analyst for bloomberg intelligence. , recession and rate cuts, could we see either in the future . We discuss. Manus good morning from bloombergs middle east headquarters in dubai. This is bloomberg daybreak europe. Axing times donald trump says he is not ready to make a trade deal with china, but on the domestic front , thinking of possible tax cuts quote all the time. And thinking of cuts, barclays sees three more fed cuts this year. Meanwhile, mary daly does not see a recession at all. Donald trump does not even want. O use the word it is a word that is inappropriate does it is a word are tryingn people to build up. Manus italian bonds around the as the Prime Minister resigns, blaming salvi for the governments fall. In berlin is Boris Johnson, here to talk brexit with angela market. Merkel. We speak to the german finance minister later executive. Later this afternoon. Manus a warm welcome to bloomberg daybreak europe. Have pickedseem to up, is us on the back of Donald Trumps speculating . There is a huge distance between the rhetoric of tax cuts and the delivery of tax cuts. , itever way you look at it is the second time in 24 hours he has said that. Maybe the markets are buoying themselves up for a robust delivery at jackson hope. Way, you got jpmorgan saying we are getting back to because we have such a dislocation in the equity markets this is where it really begins to be come an interesting day. I love that the mliv blog has said. Bones are a key focus. The bond markets are a little bit lower. It could be a 30 year bond auction today. 0 coupon. How much demand will there be . Will the bond market have a damaging moment . Could you have a buyer strike like you had 2015 . The treasury markets are also lower and yields rising. But get to Juliette Saly in singapore with the rest of the markets. It is a pretty negative session here, a little bit mixed. Very low volumes here in asia. Were seeing the nikkei down. 3 . The yen is also tracking weaker today. Hong kong has been fluctuating, little flat at the moment. We have Seen Movement going into pharmaceutical stocks. South koreas market is up, as is the one won. We saw exports down more than 13 and quite a bit of weakness in the australian market, down by around 1 . Part of that reason is what you are seeing in iron or. Ore. We have seen it fall more than sincee biggest fall march. It comes after last month. Now we do have quite a bit of concerns coming through. Sending the price close towards 80 miles a ton. The other thing traders are focused on is whether there will be any announcement that weve had the republic of china on the onh anniversary on october 1 whether there could be stricter environmental curves. Certainly a big plunge coming through in futures today. Manus thank you very much. Lets talk trade. The world is waiting for a little bit of resolution. The president of the united that beijingdd wants one is something could happen very soon. Nothing three further rate cuts by the fed at the end of this year. President as the fed said she does not expect a recession and america anytime soon. In fact, she says the data points to continued economic expansion and trump echo the comments echoed the comments. Recession is inappropriate because it is a word that certain people in the media are trying to build up because they would love to see a recession. We are very far from a recession. In fact, if the fed would do its job, we would have a to mend us a tremendous burst of growth. Anus joining us is our guest his behavior is always exemplary. , is it inappropriate to think of a recession . What do you reckon . I would say it would be foolish to admit that the risks of recession in the u. S. Are zero. The risk is clearly not zero. It is lower than in other parts of the Global Economy, but this is a trade war. There are costs to all sides in any type of a war. The point is that, at the end, the victor will be the side that incurs fewer costs and damages. So it is a long, hard slog ahead into the 2020 general election, i think. Manus it certainly will be a slog. You make this point that, in a war of salvos, who wins is who has got the most ammunition. You would say pboc over the fed. This is about who has the most ability to push back. Is that a fair summation of your base case . Stephen i think the pboc has plenty of levers. Leversors have plenty of to manage domestic policy risks. That does not mean that they want lose control. As always a chance they can lose control. There is always a chance they can lose control, but they have much more control today. The main issue we are not talking about is the main issue of a potential shortage of dollars. This is because the forces that were in play in lead up to the financial crisis were largely negative. And in the aftermath, when the fed was pumping money into the system, those forces were dollar negative because of trade and various other factors. Those forces are now going into reverse. Although there is not evidence of an acute shortage, there is a risk over the coming 12 months of one materializing. The trade work that exporters based in the peoples republic of china, chineseowned exporters, they will ultimately take in fewer dollars as a result of exports and u. S. Tariffs. Of course, you have hkma selling dollars to defendant dollar hong kong from going above the top end. And then you have got the demand for dollars because many emerging markets have loads of dollar denominated debt. So it is a global problem, a global problem. We need to keep that on the radar screen. Manus how will that potentially manifest itself. That lack of liquidity, where is that squeeze going to be manifest . Through the fx channel or presumably the race channel . Stephen it will probably be more of a funding issue. Its could beg of dollar strength, simply just at a fear of investors not wanting to load anything but dollar cash or money in gold or eight dollardominated bank account, or even a Swiss Bank Account but they have to pay to do that. We are not there yet and the fed has levers and rhetoric if can use to prevent an acute situation from happening. But we are closer to that situation today then i think we than ien in the cycle think we have been in this cycle. Manus we have more to cover from italy to the german bund. Stephen stays with me. Lets get your first word news. Thanks, manus. 2. 0 is here, looking more like a tweak. Regulators have rolled out the limits banks must follow. Wall street lenders have been pushing for some updates for the better part of a decade. But they are hardly the transmission changes needed to spark a revival. The eu has poured cold water on Boris Johnsons attempt to renegotiate the brexit deal. It says the socalled backstop to prevent a hard border is a vital part of the agreement. With just over two months until britain crashes out come the two sides are out,etely deadlocked the two sides are completely deadlocked. The bank of england may delay naming the next governor until postbrexit if the government is forced into a general election. Governor mark carney stepped down at the end of january. She has twice extended his tenure to provide continuity during the split from the eu. China has obtained an employee of the u. K. Consulate during his trip to the amendment. That is according to his girlfriend, who says he has been missing since august 8. Hong kong police say they have missed an investigation and are keeping close contact with authorities. 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. Manus . Manus thanks for the roundup. Donald trump has canceled a meeting with denmarks Prime Minister because she does not want to talk about the possibility of the United States buying the island of greenland. Annmarie hordern is with us with the details. Why does he wants to buy greenland . Annmarie location, location, location, two reasons. One is a strategic location on the map. Of course, greenland has been indexes of tension with denmark, norway, russia, the United States, and canada. It also gives them control of this northern sea route that they do not want russia and china to snap. The second reason it is important is because we know the arctic is melting and we give the u. S. , or anyone, vast access to these very critical minerals. I am talking iron ore, diamonds, gold, and even oil. This actually has been done before, we see this in the 1800s buying the louisiana from france or alaska from russia. But they have done this in the past. Manus that is a fantastic wrap up of the story. Annmarie hordern, thank you. Ever. Work, as our resident reported in london. ,rrivederci content conte the Prime Minister quits after launching a scathing attack on his opponent. But he could soon return as the head of a new collision. We give you the details. This is bloomberg. Manus daybreak europe, 10 16 in dubai, 7 16 in london. But check in on the markets. Abu dhabi and dubai are up and running. We had a big report on chemicals being overpriced. Abu dhabi is off by. 4 . Dubai is little changed. The dollaryen on the move. It has been stuck in a range ahead of jackson hole. If you want to buy a conflict interest rate, thats the question for yourself. Tenure yields backing up as their stalks of tax cuts. Is as low as 50 of the average. We . S, where are see how politics play out. The lowest since 2016. And near awn by 5 fivemonth low. Eating,isruptions are and in china, demand is slowing. Anabel will take you to the business flash from hong kong. Thanks, manus. The eu is already probing facebooks lira project. The antitrust probe is looking at concerns the system could unfairly shut out rival. Facebook and the European Commission both declined to comment on the investigation. A breakdown in communication, that is what a review of boeings 737 certification is expected to cite, saying regulators did not understand key design elements. That have not find found signs that relations were not followed, but it highlights the need for improvement. Spidermans place in the marvel universe is facing a bigger threat than thin us thanos. According to the deadline website, disney wants a 50 share of profits going for the forward. Sony wants to keep the current arrangement. That is your Bloomberg Business flash, manus. Manus thank you. Seppeset a content gui conte quit as italys Prime Minister after blaming matteo salvini. Your president , dear colleagues, and the current the Current Crisis will hamper the government. Manus the interim president will today begin consultation with a hope of going forward. They are holding talks over a possible coalition. The alliance between the populists in italy, is it really over . It certainly seems that way after what weve heard. It doesnt look like there is a way back given the harsh terms conte used to describe his former deputy calling him out for bb for behaving in a way that is not appropriate. Wayt is difficult to see a to have reconciliation between the two of them. Manus to lay out the roadmap for today and in the coming days to get a reconciliation on this. What happens now is that the president of italy will conduct consultations with all of the players. Tradition, he will start with the smallest parties today. We wont see the helle hitters heavy hitters until tomorrow. But away from the president ial palace, there will be a meeting of the Democratic Party. We are watching that because we expect to have some indication. Whether they want to link up with the fivestar movement or not. Manus i think you chastise me a little bit, i called it a potentially unholy alliance. What is the possibility that they Work Together . They do have some common ground. The idea being floated is to have a somewhat limited program. Areas like ecology and civil rights, there is the possibility of common ground. There is an open question over whether we can bridge the many differences. Manus thank you so much, our Senior Editor from italy. Jerrold, thank you. Stephen is still with us. When you look at the market was ann yesterday, there heible sense of relief that have this demise of the oneyear coalition and the prospect of fivestar and democrats coming together. Does the political angst irked you in anyway when you look at the euro complex . Stephen we are at a risk of looking at things in the wrong manner. All, the mainstream view on italy is that this is normal for italian politics. You have all sorts of messy, we coalitions that break down and you have this successive line of new governments coming in. There is nothing typical about vinis rise to popularity in italy, nothing at all. He is very atypical, trumplike. This is a new phase for italy. And i do not think the real issue in italian politics is whether or not the Democratic Party can ally with the fivestar movement. Us re starting to get with already, it isis how much brussels can manipulate italy, how much they can to block salvini from getting the premiership of italy. That is the main battle. A battle between salvini and brussels. That is not going to go away. Is important that we recognize that brussels decisions are a lot more finely balanced than many people think. If they give ground to the nationalists, brussels loses if they dont give us any ground whatsoever, they will also lose. That will fire up the nationalists even more. You know we dont tend to promote things that way in the Mainstream Press etc. Manus can i ask you then can we got 2. 5 minutes left. Of them, weve got 2. 5 minutes left. Does this empower brussels to soothe the path in italy . Stephen possibly, it does. Germany isdicament in is that if germany wants to open the tax so aggressively, others will want to do the same thing. No matter whether they come from the right side of the spectrum with a left side, they will see that as a recipe for future eurozone instability. So it is the straitjacket of the euro sum that is the big problem. The euro zone is the closest thing we have two adult standards. That is a key reason we are in the situation. Also, you have the fact that only 20 years on it is becoming very clear that the longterm costs of membership are infamous andhe enormous enourmous painful. Manus beautifully put. Modernity and moments of crisis. Would you think that this is one of those key moments . 30 year paper, negative yield in the market. Do you think there is a risk that there is kickback and a buyer strike . Stephen not yes. Yet. There are two things that would cause investors to shun japanese paper. One is that they are more comfortable in global risk assets. The second reason is that german yields are too low because they have entered a fiscal union with the rest of the block, i. E. Eurobonds. Manus not there yet. I will leave you with that thought. Always great to see you. Gallo, our guest. Tune in. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its 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 preorder a new samsung note. Click, call or visit a store today. Looking to bloomberg markets. Open. S the european give the havens a break. Treasuries, gold, and the yen slide as President Trump says he is not ready to make a deal with china. European futures, though, point higher ahead of the cash trade, less than 30 minutes away. Matt