Dozens of roles in its Global Fixed Income division. Matt good morning. What incredible moves in the market yesterday. It was not about equities, it was the climb in yields that took traders breath away. We see the 10 year yield, 10 basis point move from 146 to 156. Nejra that was the biggest jump since january. Any paradigm shift and markets, or to do with positioning. Matt we could have seen people , yieldsd of themselves fell quickly and fast. Stocks took a hit in august. What happened overnight in asia, stocks gained yesterday in the u. S. That carried through to asia, and you still have s p futures positive. People taking and putting risk back on the table means they can sell the yen and as a result get 107 japanese yen for your dollar. Nejra with u. S. Equities back above the average, that was notable. The gains yesterday means in a week we have regained the losses we saw in august. U. S. Debt, the best month since 2008 and august. We saw yields move higher. And 30 yeartwo, 10, climb ever so slightly. It was a global move in bond markets. The 30 year bond yield went positive. General risk on rally that seemed yesterday to be driven by data globally, but on optimism on the trade talks. A list to emerging markets. The move in fx not so big today. Citigroup saying it is time to cut bearish fx trades in em. Today, we are asking, how high can yields go before hurting stocks . Join the debate, reach out to the mliv team on your bloomberg. Matt ray dalio, billionaire of them Worlds LargestHedge Fund Says there is a 25 chance of a u. S. Recession this year and next. He added, when the downturn comes, Central Banks will not have the power to reverse it. He spoke on the David Rubenstein show on bloomberg. In 2007, it was easy to calculate debts that would come do. And thatcome due, there was not an adequate amount of funding. Those debt prices are something we were positioned well for. Those go through calculations, it is not the same. The amount of maturing debt and that problem does not look the same. It looks like a gradual squeeze having to do with a lot of debt of a certain type. With that also pension liabilities and health care particularly, as that produces a greater squeeze. We have large deficit. We havent of promises our large, but they will come at us at a more gradual pace. That will produce a squeeze. When you do not have Monetary Policy being able to be effective, what kind of Monetary Policy we will have, we will have more than likely a lot of debt monetization. Nejra that was ray dalio, founder of bridgewater associates. Joining us for the hour is peter schaffrik, global macro strategist analyst, rbc europe. Great to have you on the show. Lets start with a move in bond yields. Paradigm shift or a result of positioning . At this stage it is a combination of a number of things. Positioning is one of them. Investors in the u k and abroad, pretty much everyone was of the opinion the fed, and soom the on. Everyone was in the same kind of trade. That we that surprised get a counter move. I think it happened yesterday is positive news, we had hong kong, the china talks, hawkish comments from ecb speakers. Together,hings came good data out of the u. S. I would not say it is a paradigm shift just yet. Is it thatmportant the u. S. Data continues to be strong . A lot of times good news is really bad news for markets considering the fed has to act on it or not. In the u. S. By and large has been relatively decent, and we have been stressing this for a while. The story in the u. S. Is similar to what is abroad, with less amplification. Anything that has to do with manufacturing and trade is much more important in asia than the u. S. The flip side is the rest is relatively strong, and we think we will see that in todays data too. Nejra if you do not want to take the other side of the trade being long bonds, some investors worrying about a bubble are cutting duration and buying bearish options, going up in credit quality. Would you employ any of the strategies now if you are worried . Peter i think we have to betweentiate clearly the strategic positioning and a tactical positioning. Going into data and the ecb, we will talk about the ecb later, i would probably reduce bond bullish positions. That is what we have been saying for the last couple of days. Strategically, when you look at what has been driving it, other going away . Not entirely. Will there be a big fiscal spend . Probably not. Will the Central Banks remain on the front foot . Presumably. These argue for a relatively positive bond environment. Strategically, the story has not changed. Matt one thing that looks like it has changed, the citigroup index, i have a chart of it here. If we can come to it, you will data meetse expectations, you have green spikes, a small first one here. This is not what you get one spike up and then it goes negative. When we get into a positive trend, it holds for a while and it moves markets. Has the data gotten good enough or the expectations low enough that we will see an uptick . Peter i certainly recognize what you are saying, and the expectations have been downgraded significantly. I see that in the data i am looking at, and hear it from the people i speak to. People have turned their opinions relatively bearish as far as the economy. Is, where is positioning, and how is it reacting . Typically what you see in these relationships, in the early phase we have a strong market reaction, but later on it gets muted. Nejra despite how negative the bond market has gotten on growth and inflation, equities have not had a bad time. August was painful, but yesterday above the 50 day average and retraced the losses from a painful month in august. Youhat a bullish signal for in the short term for the s p 500 . Peter if you allow me to take a step back, i get these questions a lot, the way i look at this, the equity market has earnings expectations and what you discount those earnings with. What we currently had was fears that the earnings would come down, but no real tangible evidence. On the other side, the expectations of the central bank to react forcefully. That stabilized the equity market. If we came to the point were you cannot lower the discount factor or put rates further down, but on the flipside the economy is collapsing, that is very bearish for the equity market. The Interest Rates will probably stay low even if we back up a bit, because the economy is doing well so the expectations are. It seems difficult to become too bearish. It is quite plausible we continue to trade up for a while. Matt thank you very much, we will get more from you. We want to talk about what is going on with Central Banks, especially the ecb and the fed. We will cover everything from brexit you need to know about. I want to bring you breaking lines on Robert Mcgaughey born in 1924 has died. , president ears old until 2017. Over zimbabwe. We will bring you details from this story. Lets get the first word news from hong kong. Britains main opposition parties are drying up plans for a general election on october 29. Is in talks with the Scottish National party to outmaneuver Prime MinisterBoris Johnson over brexit. They worry he wants to crash the u. K. Out of the union without a deal. Trade policy uncertainty is holding back local economic n on thend may weigh o economy in 2020. Hard numbers on the argument u. S. Central bank has made four months. It says the trade tensions led to a decline of 0. 8 of global gdp in the First Six Months of this year. Oil is heading for its biggest weekly gain since july as the american crude stockpiles shrink. They slid by 4. 8 Million Barrels , more than double the level expected. Oil has been a volatile since the trade war accelerated. Is barrelingian toward north carolina, where it may make landfall. It is brushing the coast of the states. Forecasted six inches to 12 inches of rain, and storm surges of seven feet. It has killed 30 in the bahamas. Global news, 24 hours a day on air and at tictoc on twitter, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you so much. Coming up, we have interviews throughout the day. Who better to brighten the day than Francine Lacqua. Francine ciao. It is gloomy here. We are here to do business. We have the Prime Minister of italy to figure out the coalition, and we will speak to the former Vice President of the European Central bank who will give us an idea of what he innks mario draghi can do preparation of Christine Lagarde taking over the reins. Official former ecb and mr. Doom and gloom to figure out what happens with recession. We will have a busy day here. Francine lacqua on the banks of the gloomy and businesslike lake. I am sure she will not visit torge clooney but be talking World Leaders and bankers. When we come back, more with peter schaffrik, and more interviews you do not want to miss. We will also update you on the death of Robert Mugabe. This is bloomberg. Matt good morning, this is bloomberg daybreak europe. I am matt miller in berlin. Nejra i am nejra cehic. Juliette saly has more with the risk on rally. The bond selloff continuing into asia. Look at the australian 10 year yield, above 1 to the first time in a month. Risk on in equities. Asian stocks having their best week since june, and the shanghai continuing to rise. A lot of chinese indices are looking good. Hong kong looking good after a volatile week. Despite the fact we have had Warning Signals in terms of hong kong. Fitch downgrading hong kong for the First Time Since 1995. Chart in termshe of concerns in hong kong, not only the downgrade but earlier today citi cutting its forecasts. They downgraded the retailer. This coming after we heard from the finance minister in hong kong saying it is likely the city will enter a technical recession in the third quarter. Fitch downgrading hong kong for the First Time Since 1995, due to the protests. Much toank you very juliette saly. Lets get the Bloomberg Business flash. Deutsche bank is cutting dozens of salespeople in his Global Fixed Income unit. The business was spared from the first round of reductions two months ago. They are trimming roles and investmentgrade debt. Softbank and its affiliates owned 29 of wework. Not beenle stake has disclosed publicly, and it comes as wework has a valuation well below its last round of private funding. Stores every day in china to stay ahead of growing competition. The Company Posted its fastest in threeles growth years. It sees china as its biggest opportunity, saying no limit to expansion on the mainland. Is a huge platform, and rest of my for the lifetime in china, it is that big of an opportunity. That is your Bloomberg Business flash. Equities in thel u. S. Service sector, trade optimism has not hurt and appears to ease between the u. S. And china. Trade uncertainty is the biggest drag on Global Economic growth. Tot that is according research from the federal reserve, it says the rise in trade conflicts in the first half of 2018 accounts for a decline in global gdp of about the first half of 2019. The ceo of starbucks, kevin johnson, told bloomberg it is committed to expanding in china and downplayed the impact of the trade war. Impact fromot seen the situation, but we are not immune. We have navigated it quite well. Matt peter schaffrik, global macro strategist analyst, rbc europe is still with us. Thisve been chatting about inhouse. It was just tweeted that yesterdays exuberance is repeated over eagerness for whoseve policy outcomes trade case is low. Do you think that is the case . First of all, on the market side, i can see that argument clearly. On the broader issue, it is difficult from the outside to see what is really going on. You are seeing stories about meeting, then nothing comes out. Now we have a story that this time will be different. It is different for the market to get a good read on that. You also have these volatile movements around any news that suggests something is happening. Seemedthe equity market to see it as good news. Payrolls today, it might be skewed by employment, but if we get a strong payroll reading, is the equity market going to read , and the bondews market continue to selloff . Peter i think currently it is likely skewed by positioning. It is a cheeky excuse, but currently you see the reaction will likely be in that direction. If we have good news, and we think it will be better than the consensus, going back to the chart matt showing it is likely bond yields will be negative and the market will be negatively impacted. Looksthe u. S. Economy fairly ok. 25 chance of recession, but the european economy continues to look weak. Dont you expect something . What do you expect from the ecb . Had court ecb members saying they do not think qe is right right now. Peter the european economy is weakish, but more of the same picture with everything related to the export economy to trade and manufacturing. The rest is decent. We are seeing less exposed in germany, doing reasonably well. It is not all gray. As far as the ecb is concerned, qe is not necessarily a done deal. We do not forecast it to come out of next week. We reckon the emphasis will be much more on Interest Rates, and secondly on the Forward Guidance and issue of symmetry that value has raised. There is reason why we do not forecast qe. Nejra qe not a done deal is something we will pick up on. Peter schaffrik stays with us. Coming up, Boris Johnson tells reporters he would rather be dead in a ditch than ask brussels for an extension. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. I want everybody to know there are no situations i would ask brussels to delay. We must come together to stop no deal. This week could be our last chance. I do not want elections, you do not want elections. 328301. Not a good start, boris. Brussels october 17 to talk this out and take this country forward . In ordere bill through to take no deal off the table. This is the first in the democratic history of our country to refuse the invitation to an election. The offer today is like the offer of an apple from the wicked witch to the snow white. It has not obtained the majority required. Can you make a promise to the British Public that you will not go back to brussels and ask for another delay . Yes, i can. I would rather be dead in a ditch. Matt those were some of the highlights and lowlight in brexit this week. This is bloomberg daybreak europe. I am matt miller in berlin. Nejra i am nejra cehic in london. The british Prime Minister declined to say whether he would resign if an extension had to happen. Johnson says he will try to trigger an election with the vote on monday. Party and the scottish are discussing a possible election two days before a brexit deadline. Peter schaffrik is still with us. We saw the tenured gilt yield hit a low this week. Negative yields in the u. K. , and we could get negative yields on a hard brexit. If you look at the market, are you making a decision on brexit outcomes . Are interwoven. On one hand, the gilt market is part of the global theme we discussed earlier. Part of that is brexit. Off the nocitly take deal by october 31, certainly one of the elements driving yields up. It is difficult to disentangle the two. Think abouto you the currency fluctuations we have seen . Everyone was bidding up the pound. , or isat make sense there a risk going into the end of october . Peter the risks have clearly reduced, and you see that in the currency. Me, the shortterm movement makes perfect sense. You can closely track probabilities of no deal with shortterm currency movements were short sterling movements. Youa to go back to gilts, think they should underperform cross market, and if you look at the curve, it should underperform. Talk to me more about the brexit scenarios that would lead to that. Peter one of the things that clearly happened is in the runup to the selloff on the global rally, the gilt market has been doing well against europe initially. The frontend is doing relatively well because the expectation was a no deal goes up. Back, it isracing probably a little of the reverse. As we continue to trace and it is a relatively straightforward thing. The question is, how long is this global bond market selloff going to last . Equilibrium . Some it is difficult to get your finger on it. Matt how much pressure was a no deal brexit putting on European Assets . We saw the euro fall. For u. K. Isk is lifted assets, shouldnt European Assets fare a little better . Peter they should, you nailed it. When you look at the reaction chain, the pound will be hit the first, and the euro will be second. In safe haven bit assets, and the dollar is treated as such. The reversal will probably lift the euro and we see that in the currency market as well. If you extend to other Asset Classes, European Equity market doing well, european bond market doing not so well. Under a lot ofe pressure yesterday. Matt peter, you will stick with us, peter schaffrik, global macro strategist analyst, rbc europe. We will get the first word news. Hong kongs Credit Rating has been cut by fitch to aa. After months of persistent protests and violence continue. The ratings agencies sees continued economic and political integration with the mainland. Says there ray dalio is a 25 chance of u. S. Recession this year and next. The founder of the Worlds LargestHedge Fund Sees banks having limited influence to address it. He noted the fed is cutting rates. Cutting slowly, in other words 25 basis points not as fast as is discounted in the curve. Hurricane dorian is barreling toward north carolina. It is brushing the coast of the states. Coastal areas are forecasted to get six inches to 12 inches of rain and seven feet storm surge. Charleston harbor is seeing 92 mile per hour winds. Zimbabwes expresident Robert Mugabe has died at age 95. Was a controversial figure especially in his latest years. He has been accused of human rights abuses and economic mismanagement. Global news, 24 hours a day on air and at tictoc on twitter, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. You. thank lets get a check on the markets. Indian equities set for a week of game after slumps to start the week. How sustainable is this turnaround in sentiment . A lot of skeptics will be happy and relieved this has happened. And in theeekly green. Bounce going looks good for the time being. The finance minister is going to announce incentives for the economy, and that might open the markets meaningfully. Markets will probably not buckle down under pressure, and some reaction to be seen on monday. Matt dani, you are looking at the bond markets bond rout we saw yesterday fueled by u. S. Service data that beat estimates. Dani we also saw supply Investment Grade coming into the markets to help lift yields. What is happening in asia is tracking what is happening in u. S. Bonds. Australia above 1 for the first time in a month. Japan, also higher. Carrying financials is this rally. , a big trade surplus came in the data. Things like aluminum, copper, growth sensitive commodities. I want to get to this chart, part of the reason we have seen because the, economic surprise index listed by city is in positive territory since february. This risk on rally as Economic Data in the u. S. Looks better. The pmi trend is still lower, so that does not necessarily mean this is what is happening, but with bond markets the trend is lower and yields are not a oneway bet. Nejra is it really good news or low expectations . Dani burger, powering through there and titus. Coming up, we are in italy with a lineup of newsmakers. We will be speaking with former ecb Vice President vitor constancio. Matt in the next hour, Jp Morgan InternationalJacob Frankel will sit down with Francine Lacqua. Later on, we will speak with fabrizio pagani. Christopher pissarides. Himself, nouriel roubini. This is bloomberg. Matt welcome back. This is bloomberg daybreak europe. I am matt miller in berlin. Nejra i am nejra cehic. Stoking fears of a recession and concern the Central Banks will not have firepower to tackle the downturn. These will be topics at the top of the agenda and something our next guest is acquainted with. Francine lacqua is on the banks of lake como. Francine great to see you. With us is vitor constancio, former Vice President , European Central bank. As always, thank you for getting us a little of your time. So much has happened to the euro zone economy. Thing you be the would tell Christine Lagarde to do . When she went to parliament recently because it is the appropriate thing to do, the present slowdown and the situation deteriorates further, in particular coming from the with thef europe worldwide downturn, then europe and the euro area cannot fully face this without fiscal policy. Francine who should deliver that policy . Vitor it should be at the european level. Well why at the center is necessary, not just to shock, but the duration of the World Economy aggregates the situation in europe that is dependent on exports. Francine do you see germany spending . Think they may do it in the end. It is surprising they are not preparing to do it in view of the fact they have negative ares to borrow, and there Good Investments that are needed as in any other country. They should have done it already to preempt the situation, which slowdowny is showing a which is already visible. Francine if we have lower is this a cause for concern . Happens innything that aspect of negative rates, create be by itself not such a situation. Negative rates should not be overused, and the rule there to tweak and go down is small in my view. There are limits if one thinks , whichhe impact on banks is working well with negative rates. Negative, and more banks have to reflect that on deposits, and that would create a backlash. I do not expect the instrument will be used until such a possibility can emerge. Francine do you have an actual figure . Vitor i do not have a figure, but i think my personal view is we are already close. Some tweaking. Francine is there something Central Banks can do . Vitor no, there is nothing else. Tweak the Interest Rates, certainly it is not difficult to organize that. For the european economy, what do you worry about . Trade war, noina question. It is the thing that has been inating the present slowdown a significant way worldwide. Everyone is very nervous about what can happen. Hampered they outlook for investment everywhere. That isthe main thing behind the present condition. Francine if we were to have a deal that the u. S. And china held, does that change the outlook for the fed and centralbank . Vitor i think so. If there is a deal, there will be a burst of optimism. Withhole mood will change the reflection in the financial markets. The situation would change a lot. Important, thinking about the possibility of recession coming is what will happen in that aspect. One can speculate that mr. Trump in view of the electoral possibilities will organize some deal and in it as a big and spin it as a victory. Aroundn change the mood the world because that is what is disturbing the situation everywhere. Haveine the banks do not the tools for the next downturn. That is not for me a question of real concern. Central banks are still independent, and the people in charge still uphold that independence. My concern is that the Central Banks have already done a lot, so the additional tools that they have are limited. We have to recognize Monetary Policy is limited. Historically and in theory one knows for Central Banks it is easier to counter inflation than push up the economy, and Monetary Policy has limits. Letaps the situation before people in the Central Banks to believe they can do everything. That was never true historically , and that is the situation we are in because Central Banks have done a lot and still have an accommodative policy which is helping already. If something more comes, fiscal policy has to step up. Francine as investors looking for yields . Vitor that may happen also. I am not sure that Central Banks will have to do whatever markets think they have to do. Some action by Central Banks is already priced in and can lead to disappointments. The Central Banks have to consider that situation is not here, we are not in a recession, and they do not need a big package right now. Take some insurance with measures, but no more. Markets are pricing in much more already. What worries me about the Central Bank Position right now. Francine thank you so much. Vitor constancio, former Vice President , European Central bank. Back to you in berlin. Matt thank you very much Francine Lacqua in italy. Always great to hear from vitor constancio. Especially now as we go into a big week for the ecb. The question for investors is what form will the ecb take . The backdrop on the potency of Monetary Policy and whether it is time for fiscal policy to drive growth. Does anybody think Monetary Policy will solve our problems . Peter i do not think so. I totally subscribe to what we hear from many people, there is a limit to what Central Banks can do. In europe with the ecb in particular, they are probably closer to the limit than others. That does not mean they cannot do anything next week, but if you take a long stance and a potential downturn down the road, yes, the tools are limited. Nejra earlier you were saying qe is not a done deal, and if curve,k at the german yesterday it was reflecting that. Does that mean you want to jump on board with a steepening curve like this . Peter i want to make that distinction there is a strong difference between tactical moves and strategic moves. We stay with the strategic mediumterm view. We also heard one of the key underpinnings why we are in the Current Situation is the trade war, and the fallout thereof. If that changes and there is a deal, then the strategic situation is clearly different. Case,g as that is not the the trend toward lower yields remains, tactically i think there is more steepening coming. If there is a disappointment, the reaction in the market will be higher yields and steeper curves. Nejra peter schaffrik, global macro strategist analyst, rbc europe joining us as our guest host. Bloomberg users can interact with the charts featured on bloomberg tv to catch up on key and analysis. When you are traveling to work, tune in to Bloomberg Radio live or on your mobile device or dab digital in the london area. I will be there from 8 00 a. M. The will stay to talk about market reaction, and what it means. Going on in markets, and a question whether that was a bond bubble bursting or a new paradigm. We will continue to ask. This is bloomberg. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Good. Good morning. These are todays top stories. Data propels treasury yields higher. Can the u. S. Jobs report and a speech from Jerome Powell maintain momentum . The britain Opposition Party borist to outmaneuver johnson. The Prime Minister saying he does not want a brexit delay. I would rather be dead in a ditch. I think it is totally pointless. No longer spared. Cut dozens ofwill roles and its global division. Its global division. Welcome to daybreak europe. I am wondering whether it is a paradigm shift or a result of positioning. Amazing to wake up to yield so much higher. What do you see in the futures . Equity market, big moves. We sought a rally in europe. It looked like it could stall any europe, list futures pretty much flat. Europe, and the red. In the red. Perhaps yesterday, markets looking at good news. Perhaps not so much in equities. Lets look at the bond futures. German and italian futures rising. We could see those yields come back down. Futures tenyear bond sold off as the yield arises. They have been buoyed. Services sector, a positive jobs report. Tensions appear to ease between the u. S. And china. We are asking the question of the day, how high can yields go before hurting stocks . You can reach out to us. Now, a global economist. Let me get your take on what we saw yesterday. Nejra has been asking whether it is a paradigm shift worry balancing of overextended positions . I dont to get is a paradigm shift. It is because market positions tooe been to bearish bearish in bonds. Mostate expectation is the pessimistic since the financial crisis. Treasury is the most crowded for the second month. Positioning is extreme. We have seen positive data out of the u. S. Markets have been worried about the contraction. Got ays later, we strongerthanexpected services data. It is encouraging for markets. Domestic economy is relatively unaffected. That is good news. The extremee of positioning. When we have spoken before, you said you are not wanting to hold duration. We did see a backup. Bundat the bond yield yield. To these shifted the dial . Dial . These shift the we would have to see a more significant backup to change our views. Veryink bonds are expensive in relation to equities. There is still a risk the global lessmy is doing last bad than markets are pricing and at the moment. There could be upside for trade. China, they are announcing stimulus. That could change the mood of the market. We are not interested in the moment. We see ishares, the etf plunging. The 2016since president ial election. One day moves. Do you short this . Rt bonds that you think are too expensive . We dont do shorting of bonds. The answer is no. I think bonds are expensive. Especially given the extreme positioning of the market. Pessimisticthe most since the financial crisis. Financial markets warned that . Do they really justify that . You could also ask the question does the optimism in theequity markets reflect markets . Some saying, that is a technical indication we are in a bullish trend. How are you positioning . Are you full on buying equities . The answer is no. Equities, frankly rna more positive scenario than bonds. Is slightlyelease concerning to us. Months, Earnings Growth could slow because of the signal. It bears a good relationship. See there is a risk copper earnings are going to slow going forward. The levels of valuations are quite high. We are not particularly keen on that. Favorable toward u. S. Equities. Ofthere is a piece out kind laming economists for not pricing in the risks to the economy so far. That is why we see the surprise index beating expectations. The expectations have been lowered so far. What do you think of the surprise index turning positive . Do you think economists have underestimated the problems, the headwinds . Thinkask i dont economists are underestimating the problem. When i see the research, they concerned about the Global Economy. Revising down growth forecasts. Updating their scenarios. Sense people are getting more cautious. We only have the data. The most important economy to track, whether the Global Economy is going into recession. I dont think you can say economists are too pessimistic. We do have Downside Risk scenarios. When we talk about the city economic surprise index, we point out it is beating lowered expectations. There are only two ways to look at these things . Looking ahead to payroll, there are questions that will be skewed by the census of 2020. Robert kaplan made a good point when he said if we wait for the u. S. Consumer to turn, it is too late. Could you share that view . U. S. Consumer,e if it turns, you mean the market reaction. Definitely. We think the Monetary Policy works for at least one year. When you start to see consumer that proceeds a recession. It will be too late. In july. Had cut they will cut in september as well. Monetary policy works with a lag. They want to be ahead. Athink they will projected dovish tone. To act before the worst case scenario. Basis point cuts for the economy driven by consumers . Arent rates low enough already . Isnt the fed just reacting to markets . Think it wouldi not be very positive for the overall economy. I think it is a signal they dont need to worry about Interest Rates going up. Quite a if they project a the next 12s over months or so, that is quite helpful. Borrowing costs, financial conditions. I think that would be helpful to consumer, business sentiment. It could be helpful. Im not saying it will be like a game changer. She is staying with us. No resolution. H what are businesses doing to mitigate their bottom line . Lacqua is there. We are joined by the chief aboutive, we talked sustainability and finances. For joining us. There is excitement. Not linked to Financial Performance but sustainability. How is that working . Bondshange how we issue and sustainability . This is the first in the world. It is out today. 1. 5 billion. The u. S. Bond. We are going to replicate that in europe, too. It is linked to us. Percentage of 55 or more capacity and renewables. 2021. That, the bond is satisfied. If we dont, we pay a premium. We reach that percentage. The promise we are making to the market. Is this because people are more aware of sustainability . Or is it the story of the market . Looking for other Asset Classes . Sustainability linked to bonds is a needed tool. There is a lot of money that tries to find a sustainable flavor. Bond environment satisfies only partially. Is difficult to handle. It is a very exciting new tool investors have today if they want to put money at work. Have big investors saying there is a 25 chance of recession . The real worry i have is this lingering trade war discussion, threat. Down, what deep actually happened on the floor. It is not that much. Is damaging. Of it i think that would not go away. Because damaging consumers spend less . Chief executives spend less in investment . Dont deal with back and forth. For Many Companies that have that, if you have to put down your money, you see there is a trade war going on, what happens when i have to export from that country . When investors wait, the economy cannot go forward . How do you view europe . The italian political situation is more stable than it was two weeks ago. What do you worry about most . I think brexit is a complex thing for me to understand. Honestly, it is a bad idea. I think is very simple. Finallypean commission, it is taking shape and it is a good shape. It is going to be fantastic and going forward. Wellnk europe is going out into this new capital. I am encouraged by the european perspective as such. Not by the brexit outlook but i cannot really comment. It is incomprehensible. Flax it would not have a direct impact on your company. We are not in the u. K. Everything like that doesnt help the economy. We provide electricity, energy. The business does not really thrive. Are you expecting italian financials to be more stable . I expect ds. We have to do that typically. This government looks capable of handling that. It is in general are linked to bonds. It clearly helps. Thank you so much for joining us. We will have plenty more ahead all day. Two former Prime Ministers. With a possible recession call and the impact on the markets. This is bloomberg. Markets. This is bloomberg. This is bloomberg daybreak . Rope industry facing a number of issues including the trade war and fallout from the grounding of the 737 max 8 jet every lets get out to anna edwards who is at the World Aviation festival. To see you. I am at the aviation festival. The directory general and ceo. Good to speak to you. Lets talk about the demand story and how trade tensions are affecting the industry. Clear, theysment is are affecting the industry negatively. We have seen cargo demands dropping. It started at the end of last year. Month after month, we see demand declining. Which is an advanced signal of the impact of an economic slowdown, a downturn. Now, thely, we see growth in passenger revenues also slowing down. It isnot negative but reducing. What is your assessment you graph of a of where we see weakness. Some are saying may be the european economies are struggling a little. Moreas the u. S. Looks robust. Our assessment is the following. Ok. Pe is the u. S. Is slightly better. The region where the demand is the weakest. In asia, the demand is pretty slow. But you have to correct that with domestic figures in asia. Is pretty strong. Double digit demand in china for domestic. Also, in india. Are we set to a tough and for the year . Causing in hong kong disruption . We disclosed our figures in june, we have reduced our forecast compared to the forecast last december. I will not tell you with the figures will be. Concerns about the aviation element. Let me ask you about another element, the green agenda. Flight shaming has been something getting a lot of headlines. Fightinge industry back . A commitment to reduce our carbon footprint. Betweenreduce it 20102010 and 2020. Byhave reduced the omission 2 instead of 1. 5. Have carbonwill neutral growth which is very ambitious. This program will be implemented in 2020. It is a program adopted under the umbrella of the International Civil aviation organization. We convinced states to follow ourregulate us, compensate carbon emissions. 2015, we have we have reduced our co2 emissions by half. It is incredibly ambitious. The taxation has to play a role. It would incentivize the industry to buy more efficient aircraft. You, we have no need for a taxation. Fuel represents 35 of our cost. Efficientor having aircraft has been there for ages. There is a reason why we are using new aircraft that are 1520 more efficient than the previous generation. Lets talk about the 777 max. You said you were concerned about discord when it comes to the regulation. What did you mean . That has worked fantastically, we are transporting people safely over the planet, is based on a authority, mutual recognition, there is one followed by the other. We have seen differences and disagreements regarding this. We have urged regulators to get together, have a single certification process. Agenda, single condition. Patchwork of different systems. When you expect the aircraft to return. We understand the target is the end of the year. We would like that to be done. Thank you very much. Good to speak to you here. The director general and ceo. Great to have you with us. For daybreak europe. The european open is up next. You will be coanchoring that as we look ahead to equity markets stalling and europe. U. S. Futures higher. Willie 10 year treasury yield get above 160 . Tune intor to Bloomberg Radio. This is bloomberg. Rg radio. This is bloomberg. Good morning. This is the european open. I am matt miller in berlin. The markets say angst, germany. Industrial data disappoints. Look ahead to u. S. Jobs data. The cash trade in less than 30 minutes. Pushing higher