Mattarella this afternoon, the president. He says elections are the way out of the current impasse. I wonder whether the president is entirely convinced. Vonnie you were alluding to it there, something happened the last few minutes, and it could have been a combination of things because we had a few negative catalysts, including theirtocks are up against 50 day moving average, and that may have triggered some selling. 210 turningthe negative, still negative at this point. That triggered a selloff. The s p is now down six tense of 1 . Nordstrom did beat, and is looking maybe even more attractive as a target. More attractive, as is target. It is up 15 . Some dismal data out of europe earlier on. Germany making the headlines when it comes to the pmi, manufacturing and Services Pmis dropping at the fastest rate in six years. It is a strong signal that europes biggest economy could be heading towards a recession. Negative. Ady had one at the same time, the german bund is bank the German Bundesbank saying it does not see the need for stimulus right now. Do you agree with the bundesbank . Against the backdrop of negative prints in terms of secondquarter gdp growth rate and more generally weaker global growth, there is an increasing focus on the german fiscal stimulus. But we get an impression that the sense of urgency at the government is less than what we see in the market. In fact, germany is the country where we see a lot of room for fiscal stimulus. Even if germany complies with black zeroes of the constitutional debt rule, we still think the fiscal space could be over 1 of gdp, so quite substantial. At the same time, if we look at the measures that are currently being discussed, specifically Climate Change spending and cuts in income taxes through the abolishing of solidarity surcharges, all of these measures are accounting for about 1. 5 , but these are over a number of years, so we wouldnt expect this to have a quick macro impact. Guy you just gave me an economists answer to a question. On one hand come on the other hand. So does german on one hand, on the other hand. So does germany need fiscal stimulus . Anna on balance, there is a need for fiscal stimulus. Theres an emphasis for increasing importance of fiscal stimulus in the euro zone, so yes, there is a need for it to come through. Vonnie anna, why would the central bank way in on this central bank weigh in on this . Clearly, sources tell bloomberg there are deliberations ongoing, and theres no need for fiscal stimulus. But why . It cant hurt, right . Unless banks anticipate that inflation would go wild, why throw cold water on fiscal stimulus when Central Banks all over the world are desperate for their governments to enact fiscal stimulus . Ita i think in that sense, is a good example to look at the last time when germany did a big fiscal package, which was during the financial crisis in 2008 and 2009. At that time, it took the government quite some time to get around to the idea of the need for fiscal stimulus, but once they realized that the slowing much faster , they endnticipated limited a package. It is looking like perhaps the central bank and the government currently dont anticipate an economy to slow down very quickly, and are still of the ainion that it could be midcycle slowdown, which wouldnt require fiscal stimulus. If we do see the economy performing worse than they expect, i think we could see fiscal stimulus plans being pushed poor being pushed forward. Vonnie is the bond is bank is the bond is bank is the esbank as political as others . Anna german banks are generally independent. Guy germany probably sticks to it more than most. Nevertheless, you have to ask this question. Bundesbankuldve the prefer negative rates, or fiscal stimulus . That is a tough question to answer, isnt it . Anna i think from a central banker perspective, hes rather facing a choice of more negative rates or more qe purchases. Fiscal policy is left to the government. Before, theentioned central bank independence, this is outside of his mandate. Guy he also used to be a chief policy advisor to angela merkel, but now head of the bundesbank. They probably talk to each other. If the ecb is likely to deliver fiscal stimulus in december, today probably augments that idea. My question is, is it going to work . Is more Monetary Policy, is more qe, more negative rates actually going to do anything for the euro zone . Guest i think this is a question they are asking themselves as well. We do expect them to deliver easing. There was a clear message out of the meeting on july 25 saying that the current inflation we do expect them to deliver more easing at the september meeting. The big question is in what shape and form it is going to come. At this point, we expect them to with the Interest Rate cuts and introduction of deposit tiering. The qe discussion is a bit more the fallout of the december meeting, what could be the potential response if we see some Downside Risks such as brexit materializing in october. We think that this whole discussion is going to get quite tricky. Germany can, if borrow negative yields, why the attachment to a balanced budget . Anna there are a few fiscal rules that germany is following. One is the constitutional debt break rules, mentioned specifically in the constitution. Then there is also the socalled black zero rule. Vonnie we get that, but why the attachment . Cant they break some of these rules . Anna i think if the economy gets much worse than they expect , if we see a few quarters of negative growth, then there is call for them to break the rules, yes. Guy i think they can break the rules if there is an emergency. The definition of that emergency is, we will wait and see. But if they do break the rules, it will be easier to find what the narrative is and how it all works. Staying with is us, ubs european economist. Vonnie lets take the temperature of the markets now. In germany where are down half of 1 , but germany is not the worst performer in europe. In the United States, we have a sharp decline. It is now repairing somewhat. Of 1 , then 1 3 nasdaq down 7 10 of 1 . The 210 spread is now positive, but just barely. This is bloomberg. Vonnie live from new york, im vonnie quinn. Guy from london, im guy johnson. This is the european close on bloomberg markets. Lets get a first word news update with courtney donohoe. Courtney french president Emmanuel Macron gave Boris Johnson little hope hes willing to come from eyes on brexit. He told him that any changes to compromise on brexit. He told him that any changes to the deal wouldnt be sick. Deal johnson the wouldnt be significant. The Trump Administration is getting closer to unveiling its plan for the future of mortgage giants freddie mac and fannie mae. Bloomberg has learned top officials at the white house and federal agencies are reviewing the proposal that would free them from government control, where theyve been since the financial crisis. The field of democratic president ial candidates just got a bit smaller. Washington governor jay inslee has dropped out. He told msnbc hes determined he couldnt win the nomination. He ran as moderate, far behind in polling and fundraising. The amazon rain forest in brazil is burning at a record rate. There was an 84 increase in fires there between 2018 and 2019. Brazils president bolsonaro says nongovernmental organizations could be setting fires to discredit him, but he has offered no evidence. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im courtney donohoe. This is bloomberg. Vonnie thank you. Lets check Global Markets now. Heres abigail doolittle. Abigail theres a bit of a risk off tone at this point. U. S. Markets started higher. Were looking at a slightly risk off tone in the u. S. The s p 500 down 3 10 of 1 . At the lows, that was down 7 10 of 1 come about the highs of , sobut at the highs, up 1 a lot of volatility. Emerging markets also doing poorly, down 7 10 of 1 . Lets take a look at an intraday chart of the s p 500 futures to see what is happening. Overnight, they were basically flat, and then heres that. 5 gain and a pretty steep drop off. This has to do probably with the feds Patrick Harker saying hes on hold for another rate cut, and that seems to be something investors dont like, hoping theres going to be a more accommodative policy coming out. It will be interesting to see what fed chair jay powells has tomorrow. As for one area of particular weakness on the nasdaq in particular, take a look at china related stocks. This may have to do with the fact that alibaba has sidelined its listing in hong kong due to political uncertainty. These are the biggest drags on the nasdaq 100. The risk off tone we are now seeing is getting to the Third Quarter. Lets see a great chart that weve been looking at. This is the Third Quarter. In purple, the s p 500 futures. In white, treasuries. The yellow, the yen. Into the fed meeting on july 31, all had been higher. After that, stocks goes down, gold higher. The s p 500 still down 1. 8 , so right now the Third Quarter is tracking risk off. It seems a lot to do with the fed, so it will be very interesting to see what fed chair jay powell says tomorrow at jackson hole. Guy absolutely. All eyes on jackson hole. You were mentioning the harker comments as well. Very similar to what Esther George has been saying. She has been saying the economy doesnt need lower Interest Rates. She was talking to bloombergs mike mckee, giving her sense of what happens next. Mike mckee at the annual economics symposium in jackson hole, wyoming. Esther as i look at where the economy is, it is not yet time. Im not ready to begin to provide more accommodation to the economy without seeing an outlook that was a just the economy is getting weaker. Michael hiring has slowed. Our companies struggling to find workers, or are they cutting back or limiting hiring because of uncertainty about where the economy is going . Esther the reports are that businesses are still having a hard time finding people. They are still wrestling with wages and thinking about how to compensate a workforce that they need to be productive. I think that still is one of their largest concerns, keeping the workforce they have and figuring out how to compensate them in a way that will keep them. Guy my next question is where is that wage pressure we should be seeing that youve been looking for . Anna i think we are seeing higher wages. Its true that for a number of years, even as the Unemployment Rate came down, we were not seeing a pickup in wages. Over the last couple of years, you have seen that pickup. As productivity has gotten stronger, the recent releases around that suggest that inflation is not going to pop up in a way that will undermine the workers ability to realize some gains around that wage growth. Michael you were an advocate of raising rates to get ahead of inflation. If you are not ready to cut rates, are you happy with where rates are given that inflation is lower than anticipated . Would you be happy to leave them at this level for quite some time . Toher i think that is going be a process of judging how the economy unfolds. Relative to the unemployment and inflation rate, we are at a sort of equilibrium right now. I would be happy to leave rates here, absent seeing some weakness or some strengthening, some kind of upside risk, that would cause me to think rates should be somewhere else. Vonnie Kansas City Fed president Esther George there, speaking with bloombergs Michael Mckee. For more on what we can expect from the jackson hole symposium and the fed in general, with us still is anna titareva, ubs european economist. I know you are more focused on europe, but some of your analysis has to relate to what the fed will do. Given that this is clearly an insurance cut on the part of the fed, there is a very definite president s of hawks definite presence of hawks on the fed, do you think the fed to lower rates again this year . How many times . For that, i would have to refer to our u. S. Economics economists, and they expect the fed to deliver more hikes this foryear, and minutes from yesty that at the last meeting, there were only a few people calling for a 50 basis point cut. They think that the latest data we have seen is actually going powell in favor of showing some weakness in the economy coming through. But the jackson hole conference is going to be very important, and obviously all eyes on that. Guy you probably mean cuts. Hikes would certainly get the market on edge. Bund yields are moving the treasury markets. German policy is certainly having an effect on Global Markets. If the ecb throws the kitchen sink at the euro zone economy, does the fed have to respond . Trump is going to be on powells back asking for that. If the ecb goes even deeper than the most dovish pricing in the market suggests, how much pressure is there going to be on the fed . How symmetrical are they . Anna i think the Central Banks are interlinked come about largely also because of the growth with u. S. And china trade escalation. Our economists in the u. S. Expect negatives in term of growth, which would trigger reaction from the fed perspective. Europe is not a bystander in this conflict, and given its trade exposure, it would also suffer in terms of growth, which would lead to some reaction from the ecb. In terms of policy response, inh banks seem to be precautionary mode, trying to happening,ething big unlike the bank of englund. England. Guy how much is down to fear around brexit . I understand a lot of it is down to trade and what is happening between china and the United States, and all the other factors as well, but we are getting awful close to a hard brexit, and you kind of wonder whether or not some of this data is down to the fact no one knows whats going to happen here. Anna i think if we look at the survey indicators, we definitely see some fear factor, but it is quite tricky in terms of distinguishing what is driven by the global trade worries or what is driven by brexit, but what we actually have seen in terms of hard data is in the First Quarter of this year, euro zone and germany specifically have benefited from stronger demand from the u. K. , where we saw a strong inventory buildup ahead of the initial expected brexit at the end of march. The second quarter, we saw somewhat weaker trade data in germany, and again, this could partially be driven by weaker demand from the u. K. , so in terms of survey indicators, i would say it is hard to distinguish between the two drivers, but hard data is showing some impact. Guy thanks for coming to cs. To see us. Anna titareva, ubs european economist. This is bloomberg. Guy from london, im guy johnson. Vonnie from new york, im vonnie quinn. This is the european close on bloomberg markets. We had a big turnaround in the last halfhour. We are off our lows. Nevertheless, the nasdaq is still down 6 10 of 1 , the s p down one quarter of 1 , and the dow jones down 10 points right now. Most of the stocks in the dow went negative, in fact, right around the 210 spread turned negative. We are seeing some of those eke out gains. Verizon, nike, and the best performer, boeing. The twostens spread has turned positive once again. Guy it is a thursday in august, with powell speaking tomorrow. Volume is really, really like. Stoxx 600 down by about half of 1 . The british pound trading your session highs. More positive sentiment, apparently the doors not completely be enclosed in Boris Johnsons face as he tours europe. Italian bonds bouncing around today. Not much movement. Deadline ofecting a the extension they are expecting an extension of the deadline for talks for a coalition. This is bloomberg. Guy 30 seconds until the end of regular trade in europe this thursday afternoon. Volume is very light. A long weekend coming up in the u. K. A lot of people probably already off in anticipation. Markets are lower. The ftse 100 is down more than most. The reason for that, i will show you in just a second. It is the pound. The ftse 100 down 1. 2 . Dax down not as much as most in the cap 40 down 1 . 40 down 1 . Ac very light volumes throughout the day and getting lighter throughout the week. In terms of pound movement, it is a decent bounce for the pound. We are seeing sterling higher today. You can see the move up in the morning or the afternoon in the United States. Doors not completely closed in Boris Johnsons face. Emmanuel macron described the meeting with Boris Johnson as constructive, which given the expectation going into that meeting sounds remarkably positive. The market responding quite well. There is also talk of finding an intelligent way around the Northern Irish situation at the heart border and preserving the good friday agreement. All of that leading to the british pound rising 1 . Positioning is also a factor. Let me show you a few around europe in terms of individual names. This is also an interesting story. Vonnie cost cutting means not only is it performing better but it better looking target for another company. Sales has turned negative along with the broader market. Guy five stars just updating reporters down in rome. If we get any headlines, we will bring it forward. Lets talk about what is happening in the finn textbased, the payment space in particular. A 40 rise in firsthalf net. Evenue joining us from amsterdam is the companys ceo. Thank you for joining us. Analystsany, the way in the market look at your company right now is it is all about topline. Topline Growth Continues to be blistering. The number of payments you are processing is rising very rapidly. Expectations are high. Is there anything you can see that is going to slow that number down, that its going to cause you concern on the topline . Can you keep up the pace of acceleration. If you look at how the first half of the year went, you can see we are growing everywhere. Pillars which the are large corporate, unified commerce which is merged into physical storage, you see Everything Grows so we are confident about this growth and continued trajectory forward. Guy youre becoming the Payments Company for paypal. How is it going . I have misread. Youre replacing paypal for ebay. Sorry. How is that going . The integration process is moving along. We have a very good relationship. The speed of execution is off on their end, but the project is running well. Vonnie how did you manage to replace paypal. Given you have done it for ebay, is there any limit to the amount of business and customers you can take on . Youre already the payment processor for cooper, for er, spotify,or ub how are you grabbing this market . There is always the question of how far you can go. We look at it differently because we are in more and more markets. We are moving in different indices industries because we can do not only online but also the instore. In retail things are changing the way consumers are shopping but the services they expect. Merchants are responding to that and we can help them take the hurtles out of that. It is convenient for consumers to buy and return instore. Market is reprising increasing through all sorts of tailwinds. The shift from cash to cards. The shift to international. We do not feel it is a finite customer base. It seems unlimited. There are nonie barriers to entry, so unless you squeeze your own margins, you are not doing anything different unless you have some secret sauce you want to tell us about. If that is the situation, how do you protect your account from other companies entering the space . Are quite open about our secret sauce. Our secret sauce is we build everything ourselves on a single platform that we control very well. We have more than 40 engineers and they are all working at making it better for our customers. We have more functionality and a system that works better. If you look at the industry, there is a lot of consolidation and many different platforms. While there are problems with each platform, we are spending the time to help. We do not believe in those mergers. That is if you believe it is a commodity. Onfeel building it yourself a single platform is the way to position yourself. Guy how do you see the Competitive Landscape . I was reading a report this morning. Ainas pbmc today issuing three Year Development plan and it is making finn tech central. It has a three Year Development plan for the finn tech sector and it wants that sector out of china to become globally competitive. Presumably the Competitive Landscape is only going to become more and more difficult. Certain projects. I think everyone in this industry agrees payment is becoming more complex. You see Payment Methods out of. Hina being accepted worldwide there are new players. What is always the case is there are part of consumers that pay that way. T gets more complicated. I think it helps us. If you look at the market, who if you see to that, where we win our mergers from, incumbents and banks who have difficulty responding to the changing industry. Guy we will leave it there. Thanks for spending times. The ceo of ayden. Vonnie lets turn back to Monetary Policy and whether the question of the u. S. Economy needing lower Interest Rate still has room to run. Michael mckee put that question to the Kansas City Fed president Esther George at the annual Economic Policy symposium in jackson hole. Have a listen. As i look at where the economy is, it is not yet time, im not ready to begin to provide more accommodation to the economy without seeing in outlook that suggests the economy is getting weaker. Vonnie joining us is bloombergs Michael Mckee. Datae start with this new we have out from the Kansas City Fed . We just got it a few moments ago. It will obviously play into the collection of data that the fed considers. Michael it is interesting you mentioned that because Esther George was looking for some signs the economy is weakening. The Kansas City FedManufacturing Index just out shows it fell by the most in three years. New orders fell and also production lower. I asked Esther George during our interview about that and about ceos werehat what telling her in her district and heres what she had to say. Business leaders express a fair amount of uncertainty and concern about knowing where export markets are going and what their opportunities are going to be. On the whole, they continue to be optimistic about the outlook for the economy. Michael general outlook but some signs of deterioration. Esther george does not think we need more accommodation but she wants to see the data by the time we vote on september 19. Vonnie mentioned the data out of the Kansas City Fed. Can you give us specifics about what that is telling us . Michael it is telling us what we are seeing in many indicators around the country. The market ism number for the United States looked below 50 for the first time. We are seeing a contraction in manufacturing according to that measure. That seems to be buried in the Kansas City Fed numbers although some of the regional feds have not seen the same kind of slippage. If the Manufacturing Industry is back into a slump. That is the question the fed will have to wrestle with. Vonnie it is quite exciting to watch you because people will start to gather and the symposium goes through the weekend. It is a collection of academics, a fun gathering. What are the rumblings about what the main questions will be today, tomorrow, and it is saturday . The theme of the conference is challenges for Monetary Policy, which you can boil down to how you steer an economy into a slow down or a recession if Interest Rates are so low you cannot cut them . The United States could get 200 basis points of ease but in past recessions they have cut by 500 more. You look at the European Central bank and the bank of japan, they almost no room to cut at all. And forwardied qe guidance and will be discussing to those things work. Does communicating with the market send a message the markets will believe. Does buying securities help push down on Interest Rates and does that lead to further additional spending. One of the issues is we seem to be in a situation where demand and the cost of capital are not a problem. His Monetary Policy even the answer at all . Those of the kind of Big Questions they will be talking about. Vonnie looking forward to more from you later today. That is bloombergs Michael Mckee at the fed meeting in jackson hole, wyoming. Plenty of great interviews coming out over the next few days on bloomberg tv. Just some of the names for you right there. As we digest those, let us think about where we closed in europe. A dip towards the end of the session. The ftse 100 closing down over 1 . Probably the biggest factor was a sharp spike in the pound. The dacs down. 5 . The s p bouncing off of its moving average. All kinds of factors in the mix. That is where we find ourselves. Carry on the market coverage on bloombergall kinds of factors i. Radio. Jonathan farrow is a new york. I will join him in london for the cable show on dv Digital Radio and around the world on all of your bloomberg devices. This is bloomberg. Vonnie live from new york, i am vonnie quinn. Guy from london, im guy johnson. This is the european close on bloomberg markets. Lets get a bloomberg first were news update with courtney donohoe. Courtney the u. S. Labor market is still showing signs of strength, filing for unemployment benefit dropped to a four week low. Jobless claims decreased to 209,000, below all estimates. The number remains near historically low levels. Another signal that europes largest economy is slowing down german manufacturing shrank the eighth month in a row in august. Overall, there is a confidence decline and orders fell for the third time in four months. Job growth is still solid but factory employment fell at the fastest pace in seven years. In italy, the president is beginning highstakes talks to end the political crisis. He will meet with political leaders to try to create a viable governing coalition. He has the power to nominate a new leader and may give two parties, the democrats and fivestar, a few more days to enter into formal discussion. Global news 24 hours a day global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am courtney donohoe. This is bloomberg. Houre our stock of the highlights in the past week. And howe earnings much is the role retailers have been on since walmart has reported . Abigail doolittle will explain everything abigail says the stock has been will explain everything. we have had good retail earnings coming in. Yesterday getting a pop from target. We had nordstrom and Bjs Wholesale Club putting up good earnings giving the stock a left. Yesterday there was a big block trade happening. That tells you there was a high degree of conviction they will put up a good quarter. They need to do that because the expectations are not good. This goes back about two years and we are looking at cap samestore sales. In blue we see the banana republic. The namesake store in white. Old navy in green has been doing well. This quarter they are expected to do a negative comp. The traders buying the stock ahead of times, maybe a lobar quarter, they think they will be able to beat it. Guy traders have had a good week and positive on the retail sector. Our analysts convinced . Most neutral, but you have analysts saying the trending has not been going well. Gap it is unlikely the gap can get out out of the main way. Old navy the first negative. Hey put up does not looky good. It depends whether the traders stepping up the stocks are right or the analysts. We will know after the close. Vonnie looking forward to seeing those results. Abigail will take us through them on bloomberg tv. Coming up, it is our global battle of the charts. This is bloomberg. 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. Vonnie it is time for our global battle of the charts. You can see these charts on the bloomberg. Run your function gtv. Kicking things off today is alex deal. Alix steel. Alix the white line is the 210 curve. The blue line is the ratio between oil and gold. If it rises, it means oil is moving higher, if it falls it means oil is moving lower and gold higher. What i notice is when youve had the yield curve flatten or take a dip lower, crude mirrored that. In most cases crude underperform the flattening of the yield curve. That is not happening this time. You are seeing crude lower but not keeping pace with what we are seeing. My question is that a supply thing with oil or the underlying fundamentals of demand not as bad as the 210 spread on the surface might make you think . Vonnie that was one winning performance. Im not going to give away the result just yet. Guy, you do have a chart for us. Alix isope so because definitely going for the sympathy vote and i think it worked. Lets talk about what is happening with the pound. This is the decline of realized volatility. I have a number of pairs here. You have dollar yen, yellow is eurodollar. The cable rate is in blue. I bring this up because im reading more and more reports suggesting the market analysts believe a note yield brexit is already priced into the cable rate. We have seen a little bit of a spike table this afternoon which may reinforce that. Even the hint we get a deal done could suggest we see a significant upside on sterling, which would be a factor in this volatility. It is interesting we are seeing the next three months period of volatile for the cable rate. That is unsurprising given the politics. I am beginning to wonder whether that risk is symmetrical asymmetrical rather than symmetrical in the big risk is on the upside. People are saying maybe you go down to 110. That is not what the politics suggest. The markets are beginning to sniff around that idea. You can find this chart on your bloomberg. Vonnie guy, why such a good chart today . You know my sympathies were already one over before you begin to present so i hope that is consolation. I think that is a phenomenal chart. My decision today is that alix steel is the winner. Alix thank you. If i did not get it by the sympathy vote i did not know what was going to happen. Vonnie do not forget to join steel for commodities edge coming up in one hour. Right now, we have more coverage of jackson hole on balance of cos head ofim public policy. This is bloomberg