Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240714

Nejra welcome. Its risk on in the markets this morning. A delay from a tariff increase on chinese imports. A question over whether its a reach out of goodwill. You are seeing the impact across markets. The msci asianpacific index. You want strength. Yuan strength. Dollaryen on the front foot. The yen hitting a sixweek low. Yesterday closed above 3000 for the first time in six weeks. We saw the nasdaq push higher in the dow move higher for six days in a row. The nasdaq getting a lift from those tech stocks rising to its highest level since july. U. S. Futures point to further gains in the u. S. Session today. Oil on the front foot, tearing the losses we saw yesterday. We saw a drop of 3 on the supposition that President Trump might ease sanctions on iran. We are bouncing back with trade headlines today. Manus is not on the show today. He can talk more about oil because hes bringing live coverage from the opec plus meeting that is scheduled to pick up shortly. Great to see you. Manus very good debut. The bloomberg scoop that came through yesterday really move the markets. You have the potential tariff relief coming from the chinese and trump. On the opposite side, the potential for a dislocation i have not thought about. The potential for sanctions relief with iran would mean 7000 barrels of oil. You will not get that in one mammoth amount of oil oil coming back into the market. It will be a slowmoving taker. What we have to discern is a couple different things. There is not just a shift in terror of discussions between the usa and china. Theres a shift interests with an additional political nuance, the extreme hock. Bolton off of the agenda. What is it driving trumps thinking as he goes into the latter part of the year . The press scrum are here. If they move, i will move with them. We are languishing around 60. Iranian supply could knock is down to 50. What i want to draw your attention to is this. We have a new leader of the pack of central banking and oil. Plus camp,n the opec very simple. He made it clear. It is not the goal of the j mmc to make new proposals. I get the sense they really want to study this one out. Novak greeted everybody across last night. There was ballet, there was russian singing, that was a great festival. Mr. Novak was keen to ingratiate himself to his hosts. The prince was there. This man has a knockout range of watches. That is what we are looking at right here in abu dhabi. Good morning. Nejra michael anchor in abu dhabi, cannot see wait to see the rest of the coverage today. Thank you for joining us. Lets talk trade. The latest headlines on the tariffs, giving oil a lift in todays session. China considering allowing companies to resume purchases of u. S. Agricultural products in a show of goodwill ahead of upcoming trade talks. President trump announced a delay in next are tariffs by two weeks. A 5 hike was due to be added on the first of october. It will not take effect on october 15. Until october 15. Jeff weiner spoke exclusively to bloomberg. When you make the decision to operate in china, its important that you are prepared to comply with the law in china. Whether thats new regulation, additional friction. Things beyond the regulatory purview, Competitive Landscape is incredibly intense. E continue to see that operating there is very different than in the united states. Thats part of our commitment to being in business in china. Nejra joining us now is the Global Market strategist at jpmorgan. Great to have you with us. We see signs of goodwill on both sides. Is this something you would want to jump on in terms of turning more risk positive . We have been here before. We see positive signs and then escalation again. Its a step in the right direction. Markets have taken it well. Im slightly more cautious about stepping into this. This is the ad and flow of negotiations we have seen for some time. It will be hard to find common ground. Im reserved. Nejra when you speak to investors and to advise them on how to invest around the trade war, what are you telling them right now . You have to very binary outcomes. We have seen from markets over the past few days, the way in which sentiment can shift quickly. When you are faced with such different outcomes as the trade issues, its about not trying to make a row it calls on one side of the heroic calls on one side or the other. Nejra if you take at the take a look at the bull bear spread, investors have turned positive on that for the first time in six weeks. Does this make you more cautious about joining the rally in the u. S. . The s p 500 closing above 3000 for the first time in six weeks. You have to question whether now is the right time to be adding aggressively to allocations. If we do see more incrementally good news on the trade side, this rotation could continue for some time. Out of the winners of this year, the momentum stocks, the minimum volatility stocks, im more into value. Nejra you think what we have seen could continue . The news we have had overnight supports that. I would be reluctant to read too much into the latest news. Has trackedrotation what has happened inasury yields as well. Curve steepening and a backup and 10 year yields. We continued to back up a little bit on the general risk on. I know that jpmorgan recently revised down their 10 year treasury yield. Is that something you would want to hold right now . Do you think we could see a little bit more move to the upside for yields . There are lots of different views at jpmorgan. From my perspective, the weight of demand we have seen in fixed income markets is here to say. Stay. Yields, you would see significant demand stepping back and at those levels. Nejra you would be advising to buy in treasury. Theres a significant place for treasuries and portfolios today. They are still offering that diversification and protection for investors. If we see further escalation in trade or a simple weakening of the macro data, there is merit for treasuries and portfolios. Nejra would that be on the longer and duration or more cash . The longer end. If you are looking for treasuries to be offering real diversification, you want to be taking on an element in the situation. Nejra whats interesting in terms of treasury, the comments we have from President Trump yesterday saying that the fed should be taking rates below zero. You do wonder how much President Trump does use the rhetoric around the fed to fuel the next steps in the trade war with china. Is this something that you can see happening at all, at any time in the next two years . Rates in the u. S. Going down to zero or below . If you look at the administrations agenda, they focused on three areas. They want a strong stock market, a strong economy, and to be strong on china. The fed is really the valve for them to try to put on of those three pieces of the puzzle into play. Of the pressure coming from the administration, the fed is watching the macro data and are seeing reasons to take it slightly more cautious. I think passive rates are lower. As to whether we get towards zero, we would need a significant deterioration from current levels to get there. Nejra do these latest signs of goodwill change anything beyond the september meeting for the fed . The 25 basis point rate cut in september is pretty much expected by markets. Does this put a question mark over that . I wouldnt read into it too much at this stage. Weve seen these negotiations can turn very quickly. The fed has told us throughout this year that they want to be extremely data dependent and that they will be treading very carefully around any meeting. For me, the september cuts certainly look very likely at this stage. Potentially one more between now and the end of the year with a second possible if we see the macro deteriorate more quickly than i would expect. Nejra what would a fed disappointing the markets look like to you . You would see a backup in treasury yields. You would see a broad disappointment from risk assets. One of the biggest supports of both the equity market and credit markets this year has been that pivot from Central Banks to a more dovish stance. It would probably be taken as not particularly good news for risk assets. Nejra our guest stays with us. Lots more to discuss. Lets get the bloomberg first word news. Annabelle u. K. Government paper is warning about sweeping chaos from a no deal brexit. Theres the possibility of public disorder. Ministers were forced to release the internal document called operation Yellow Hammer to comply with the deadline set by parliament. They passed a law intended to prevent pregnant us to Boris Johnson forcing through a no deal brexit. He says hes ready to do it anyway. Sayces in the white house john bolton left after arguments with President Trump over easing sanctions on iran. Mold atold the president meeting. Bolton argued forcefully against it. The u. S. Government is promising to increase oversight of the ecigarette industry. President trump says vaping has become an Urgent Public Health concern. U. S. Health secretary says 5 million kids have vaped this year. That the jump from 3. 6 million in 2018. State and federal investigators are racing to identify a mysterious lung disease that has been linked to the use of ecigarettes. That are an oilman turned corporate radar begins has died at the end of age of 91. He became a billionaire Energy Investor in vocal supporter for wind and natural gas power. He had suffered several strokes and a bad fall three years ago. Achieved fame for takeover bids in the 1970s and 80s. He earned much of his wealth betting on oil and gas. Global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra mario draghi faces one of the most contentious policy meetings of his presidency. Hes preparing to ramp up monetary stimulus again despite skepticism from some of the euro areas biggest economies. A rate cut looks all certain. Some policymakers warn they see no need to resume qb. Maria tadeo is in frankfurt for us. Great to see you. Take us through what consensus expects and what disappointment for mario draghi would look like. Thats right. Thats a big concern. How dovish can mario draghi be today . Can he really deliver on the expectation . Theres a huge hype tilt into this meeting. This is the first time the governing Council Meets since july. They made it clear they would take action to prop up inflation and the european economy. Look at the price action. Cut, perhapsrate another record low of 50 basis points. Would sayovish calls this would be 60 basis points. The big debate has to do with qb. Whether or not mario draghi will be able to trigger a new round of bond purchases in the market. Look at the internal debate within the governing council. That is still very heated. We dont know whether the at announcement gets me today. Investor expectations are all over the place. Many tell you we are looking at a modest qe two. Others tell you we could come up with a big surprise, anything between 4050,000,000,000 euros. If he doesnt hit that mark, you could see that disappointment in the market today. Nejra consensus looking for 30 billion. A guest later sees 70 billion of qe. Think you for joining us. Great to see you. Coming up, a stimulus showdown. Expect drama. Dont miss our coverage. When you are traveling to work, tune into Bloomberg Radio in the london area. This is bloomberg. Nejra this is bloomberg daybreak europe. Lets get the Bloomberg Business flash. The worlds biggest brewer is revising plans for an ipo of its asia business. After they scrapped their hong kong listing, its now aiming for an ipo by the end of september. The revised application excludes its australian operations. Hong Kong Stock Exchange shares have fallen sharply after its unsolicited bid for its counterpart in london. Ofs offering the equivalent 36. 6 billion for the london Stock Exchange. The ft reports they are set to reject the bed amid doubts of Political Risk and deal structure. Oracle says the ceo was taking a leave of absence from of related reasons. Willounder and coceo assume his responsibilities. The company didnt give more details or say how long the absence would be. Oracle shares fell in afterhours trading as adjusted firstquarter revenue missed the lowest estimate. More than has raised 20 billion for its largest Real Estate Fund ever. The final close on Blackstone Real Estate partners dwarfed the 15. 8 billion raised in 2015. Are putting much more money into the property project to protect against inflation and diversify their holdings. Thats your Bloomberg Business flash. Nejra thank you so much. Ecb officials are expected to cut Interest Rates when they meet today. Expect drama at mario draghs penultimate meeting as president. He will likely go bake and a final stimulus push. There have been protests from among his ranks. Andcials including germany a dutchman are among those who expressed skepticism. They say would be disproportionate to economic conditions. Former ecb Vice President told bloomberg tv that investors might have outside expectations for action. Jpmorgan Asset Management is still with us. Where you sit relative to consensus . What the ecb told us in july is that its all about the calibration of different measures for this meeting. They are trying to get the best bang for their buck, effectively. They know they dont have unlimited room to maneuver. Its all about trying to convince the market that they are taking action while keeping powder dry if the outlook does deteriorate. A rate cut is likely. A 10 basis point cut would be more likely than 20 basis points. On the kiwi side, i think we will see the start of a new stimulus package there as well. Nejra you expect 10 basis point. Will that be accompanied with an announcement . I think thats more questionable. What you might see from mr. Draghi is a commitment to bring in tearing in the future and a confirmation that its ready if needed. The comments weve had from some of the more hawkish members of the governing council, i dont think the ecb will be in a position to date to go all out across all of those different measures. Nejra how is the rates market going to take that, the fact that its not accompanying the rate cut . The rate market can take this quite well. Before,hi has shown hes really so skilled in the way he communicates to the market around these policy changes. I think a strong commitment would be enough for the market to see yields move lower. Nejra you would expect that on bund yields and peripheral yields . Theres room for both to move lower, yes. Nejra what are you expecting in terms of Forward Guidance . They have told us that rates will be on hold or below current levels until the first half of 2020. You could see that pushed out to the end of 2020. The being said, if there ecb are focused on maximizing the impact today, shift towards a more state dependent type of Forward Guidance, a commitment to keep rates low or even on the kiwi side until inflation starts to move more sustainably towards the ecb target, would be a more impactful way of communicating that to the market. Nejra you have written some of your research with the announcement of qe, they need to tie that to Forward Guidance as well. Had he would expect the language on that front to be articulated today . That would really be the best case from a market perspective. I dont think we would see something as strong as that. Take for example a commitment to buy a smaller amount of Government Bonds and Corporate Bonds but to do that over a much longer time. Tying that Forward Guidance on qe to a return to better levels of inflation. That would be an interesting thing for the ecb to consider. It would remove some of the challenges that they are facing around simply running out of bonds to buy by being able to commit to a lower level of monthly purchases. Really what the ecb have done is already collapsed borrowing costs across governments and corporates. If they were simply to convince the market that they are looking to anchor borrowing costs around current levels, i think they then turnover the question to government and corporates to really start spending rather than saving. It be effective in terms of spurring lending to the real economy . It helps to an extent. A growth from perspective, the ecbs backing is a good thing for the market to know. That being said, Monetary Policy can only do so much of the work in the scenario. Saying seen mr. Draghi regularly that fiscal policy needs to play more of a role. As we roll further into this story, a greater coordination between monetary and fiscal policy will be necessary. Nejra that has been called for for over a decade now. In terms of your expectation for qb, 10 bases more likely than 20, but no announcement of tearing today. What is that going to do to Market Expectations of the reversal rate . The reason the ecb are focused on tearing is to try to push down the markets perception of where the reversal rate lies. Really, if the market can see that commitment or if the ecb does go further and bring in tearing, its about lowering the Market Perception of how low rates can go. Nejra how would you be investing around fixed income in europe at the moment . Popular trade has been to buy Corporate Bonds in anticipation of what the ecb will do. Has that trade run its course . We have typically seen ecb meetings in a by the room, sell the back scenario. Markets rally much more ahead of canteting and sometimes digest the news. Theres the potential for not big moves today. Mr. Draghi has to come to the market with something very powerful to drive spreads much lower. Nejra how far away are we from the lows than in Government Bond yields . Past fewk over the years, we have constantly felt the fixed income market has been expensive. I certainly have. Yet, yields have continued to push lower. With this weight of institutional demand for fixed income assets, particularly from price insensitive buyers such as Pension Funds or insurance companies, they are willing to step in even at current levels. I think we could certainly see yields plus push significantly lower from here. Nejra great to have you on the show this morning. Meet inp, the opec plus a debbie. Deeper production cuts are expected to be off of the agenda. Ministers are growing worried about demand. We are on the ground for the latest. 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. Nejra this is bloomberg daybreak europe. Has beenonsensus trade knocked back over the past as cenal banks around the globe refrain from sounding dovish. The ecb is expected to cut rates further below zero today. The rise of doubters have caused markets to rethink the extreme easing. Here with more is dani burger. Good to have you with us. Isthe crowd of doubters sizable enough to chip away at the likelihood of a large stimulus package today. Policy makers half of the euro area economy have expressed some form of opposition. You can see it in the dark pink here. One sign, france. The bank of france governor signaled that a cut and guidance might just be enough. Really, the opposition is not just europe. The vision of an ecb cut followed by a halfpoint cut from the fed next week is starting to look dicey. Policymakers in sweden, canada, australia have all balked away from adding more stimulus. A bid toave also taken can talk. Government yields have picked up from multiyear lows. This could just be the beginning of a sweeping recalculation. There is still plenty of almost for those invested in large easing messieurs. Measures. More than 80 of the commonest predict that the ecb will we start bond purchases. We have a corner of the market that is most sensitive to immediate action. It still sees looser policy. This is really setting us up for it a showdown at this ecb decision. Nejra thank you so much. The ecb, the groundswell of skepticism over the path of policy threatens to cripple some of 2019s hottest rates. Yields have rebounded. Bond proxies have been punished. Value stocks are staging a turnaround. Were asking the question on and live, how long will that outperformance last . Join the debate. Joining us now is Portfolio Manager for Global Equity at you investment management. Lets address are mliv question. Some say that trade can run longer. Value stocks outperforming. Would you agree . That is probably true on the basis of positioning in the market. Fundamentals are harder to predict. One would have to start seeing some form of economic rebound in order to justify that. Certainly a lot of the more longterm trends we have seen have been coming much more in favor of growth stocks. Given the fact the market is short, we may see this for a few more weeks. After that, it will have to be more justified by fundamentals. Nejra have you made any changes to the portfolio . Are you thinking about it, based over the moves we have seen tied to the expectations around Central Banks . Its always tough to sift these things out. To some extent, that is what we have done. These areas are representative. Over the next few weeks, we will start scaling this position down. In order to get better prices for some of the arm those value related stocks. You have talked about selling strength rather than buying. We see the s p 500 close above 3000 for the first time in six weeks. Do you have even more conviction . I know you dont trade. I think thats right. Certainly, i think the portfolio which has much more defensive characteristic cash flow generation, lack of excessive economic cyclicality will be the place to be as we come into the end of the year. Nejra lets talk about the ecb as well. Expectations about what we might hear from mario draghi today . Consensus says 10 basis point rate cut. I think its hard to imagine that it will be anything two different from that. The ecb will do what they can. There is that much drive to the left in order to stimulate markets any further. A piece ofhing on string and knowledge he is important. We party seen these kind of packages in the past. They havent been outrageously success as far successful. From that point of view, the markets will be keen to see what happens. How long the impacts last may not be that long. Nejra impact on Bank Profitability is something we need to discuss. Take a look at the chart. What you are seeing is financial stocks near a record low. The broad index in europe is near an alltime high. Is this cap going to close it all with financial stocks moving higher based on a stimulus package from the ecb . Two things have always been hard to reconcile. If you will cut Interest Rates, its not good for european banks. They are so Balance Sheet dominated. They do not facilitate that. Debt. At lower Interest Rates, that can be really difficult in terms of profitability. From that point of view, you may see that the higher cyclicality of those kind of businesses will be seen by the market as a reason to purchase them. The impact on the profitability can be quite negative. As we have seen, the ecb has been keen to discourage banks from holding a deposit by themselves. Its a way of forcing them to lend. However, that hasnt always been a successful strategy either. Weve seen banks rallying in the past couple days. Theres no doubt the valuations do have their attractions, dividend yield in particular can be attractive. I think the chance of seeing them come back to trading will be a big ask. Nejra how much difference with tearing make . Would that mitigate the negative rates rather than compensating for them . It would be a source of delta. A real change for the operating environment for the banks. They would probably react positively to that. Tos not as penal for them hold deposit that the ecb. It is still a really tough environment for both the loan creation side and the profitability side. After an initial reaction to that, id suspect the impact is going to be fairly minimal. Nejra it doesnt sound like you are to positive on banks in europe. What sectors are you liking at the moment . We have tended to be focused on Excellent Companies that europe has. There are certain sectors which reached pretty good. Health care is one of them. Theyve tended to be in areas where the European Product Development has been strong, brand image has been strong. Dedication on the educational side to trading the right kind of people for the healthcare sector has been much higher than it has been for other parts of the world. Been a legacy benefit of the european educational system. That is something we keep a positive view of. Domestically, its harder to get exposure to winners. We dont have a big tech sector in europe either. We would tend to be focused on more global companies. Domestics have not featured largely. Nejra our guest stays with us. Coming up, a stimulus showdown. Expect drama. Do not miss our coverage. Follow that at 1 30 p. M. London time. Tliv blog as a always. Lets get the bloomberg first word news now. Bloomberg understands that china may resume u. S. Farm imports as a show of goodwill ahead of the upcoming trade talks. This comes as President Trump said he would postpone the imposition of a 5 tariff hike by two weeks. Tariffs onauses u. S. Imports at 25 until october 15. The u. K. Government paper is warning of sweeping chaos from a no deal brexit with disruption to trade and Financial Services. And the possibility of public disorder. Ministers were forced to release the internal document called operation Yellow Hammer to comply with the deadline set by parliament. Mps have passed a law intended to prevent Prime Minister Boris Johnson forcing through a no deal brexit. He says hes ready to do it anyway. Sources in the white house say National Security advisor john bolton left after arguments with President Trump over easing sanctions on iran. The president mold a meeting with iranian leaders later this month. Bolton argued forcefully against such a meeting. U. S. Government is promising to increase oversight of the ecigarette industry. President trump says vaping has become an Urgent Public Health concern. U. S. Health secretary has 5 million kids have a this year. Million jump from 3. 6 in 2018. State and federal investigators are racing to identify a mysterious lung disease that has been linked to the use of ecigarettes. T Boone Pickens has died at the age of 91. He became a billionaire in Energy Investment and supporter for wind and natural gas power. He suffered several strokes and a bad fall three years ago. He achieved fame for takeover bids in the 70s and 80s. He earned much of his wealth betting on oil and gas. Global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra thank you so much. Lets get a check in on the markets around the world now. Are. Us great to see you. Indian stocks are tracking most asian peers. Its a double winning of when he of good news and winning. Thingsher of these having more wait for the market today . Good day. As a matter of fact, a lot of these factors are playing out as far as sentiment is concerned in indian markets. That is why we are seeing in advance in the benchmark indices for the sixth straight day. Gains of nearly 1 10. The sentiment has improved. The big aspect is the improvement of banks. The banking index specifically is up as much as 1 . Thats largely on account of some of the private sector banks that were very volatile in the last couple weeks. Looking at a recovery on the back of the many factors you spoke about. We will keep an eye on that. The other positive would be, the rupee has strengthened against the dollar. That continues to be another factor which is playing out. Nejra thanks so much. Annemarie, the easing of u. S. China trade tensions seems to be playing out well against across other markets. Absolutely. Risk on this thursday morning. We are seeing a thawing of rhetoric between beijing and washington, giving a boost to the markets. We have President Trump postponing this imposition of 5 extra tariffs by two weeks. Side, china in a goodwill gesture may allow for the repurchasing of u. S. Farm goods. It is risk on. Msci asiapacific up more than 5 . Topping the list is japans negate. Nikkei. We are seeing a lot of risk on in the Foreign Exchange markets. These em currencies are getting a bit of a boost. The kiwi also higher. , the new zealand fiveyear in new zealand 10 year coming down. And commodities, its really risk on this morning. Soybean up nearly 6 10 of 1 . Iron ore up more than 1 this morning. Wti and brent are higher. And iron ore, china is the number one destination. Digging into whats going on in the agricultural front with these headlines out of china, i want to look at soybeans. We saw soybeans and corn cake higher in chicago. You can see how dire the trade war has been to u. S. Exports of soybeans. Thats in the white. It has fallen off a cliff. China has had to look elsewhere. Brazil has been a big benefit of the trade war. China is looking to argentina for the silly meal itself. Soybeans and corn are the kinds of Agricultural Products to watch day. This news will not just be welcomed by these chinese buyers but also in the american heartland. Nejra thank you so much. Our guest is still with us. I know you are not one to jump on every risk on rally that we see. Are you tempted to make any changes at all to the portfolio now that we seem to be reaching some sort of detente . Its tempting. I think the kind of problem that we may see is that there will be a waxing and waning of the situation. Battles within wars. From that perspective, the u. S. Election will be really important. The demonstration will be keen to make sure positives are more positive farmers are more positive. That drives the decisionmaking. The fact that traditionally having a strong stock market into an election time is a positive. It has a more instant wealth effect in the u. S. Than a dozen other parts of the world. You may well see Going Forward that certain aggressive behavior may be driven more by a recently strong stock market. We should be wary of that. If one is fleet footed and has stocks which one believes can react very positively but are liquid enough to take profits rapidly, that could be a strategy. It is not something we have done that frequently. Nejra good point. Looking globally, are there regions you might look to add to . Perhaps china . We have seen a number of steps for it to prop up its own economy in the past few days. The rrr cut being one of them. Some of the changes around the tariffs as well for china in terms of exemptions. Perhaps even india. Both are working in different ways. I would suspect and suggest that we have seen some may be move towards a resolution with some of the unrest we have seen together with a more favorable outlook for the trade war. That could be very positive as well. One would imagine that brazil would be a strong market. I think overall, stocks are close to the geographical region. China, Southeast Asia should do better in that scenario. Most markets around the world get some kind of tilman from this. The question is, how does it last . Nejra in that scenario, how does japan fit into your strategy . Japan has been an area we been very interested in for a long time. Valuations come back to levels that are now a discount for the world indices. Quiet seeing if a very continuation which we see as very positive. They are put off by the lack of physical progress for inflation. The view is that japan will find it difficult to store up inflation at all. Domestic stocks have not done as well. The yen is such an important barometer for export related stocks. That has been more strong in recent times. View, it point of sometimes dances to its own tune. If you look at the geographical proximity of those markets that are favorable for japanese goods and services, it can be an area that participates as well. Nejra our guest stays with us. Coming up, codename Yellow Hammer. The details of the worstcase no deal brexit scenario that the u. K. Government tried to keep secret. Thats next. Tune in to Bloomberg Radio, live on your mobile device. This is bloomberg. Nejra this is bloomberg daybreak europe. Lets get the Bloomberg Business flash. The worlds biggest brewer is reviving plans for an ipo of its asia business. Two months after a be index scratch the hong kong listing, it is now aiming for an ipo by the end of september. The revised application excludes its australian operation which is being sold. Kong Stock Exchange shares have fallen sharply after an unsolicited bid for its counterpart in london. Ofis offering the equivalent 36 point 6 billion for the london Stock Exchange. Bft reports it is set to reject the bed amid doubts about Political Risk and deal structure. Says it ceo is taking a leave of absence for healthrelated reasons. Willounder and coceo assume his response abilities. The company didnt give more details or say how long the absence of b. Oracle shares fell in afterhours trading as adjusted firstquarter revenue missed the lowest estimate. Blackstone has raised more than 20 million for its largest Real Estate Fund ever. The final close on the Blackstone Real Estate partners worked the 15. 8 billion raised in 2015. Institutions are putting more money into the Property Market to protect against inflation and diversify their holdings. Electric car sales fell in china in august for a second straight month. In the latest sign that one of the most durable dealers is crumbling. Deliveries of new Energy Vehicles declined 16 from a year earlier to 85,000 units. This comes as the government scales back subsidies. Thats your Bloomberg Business flash. Nejra thank you. The full scale of damaging no deal brexit could cause the u. K. Has been revealed. Boris johnsons government published worstcase scenario last night, a document codenamed operation Yellow Hammer. The paper warned of food and fuel shortages, disruption to the supply chain, and intense pressure to return to the negotiating table. Undermines Boris Johnsons assertion that the u. K. Can cope with a no deal brexit. Mps have passed a law intended to prevent him forcing through a no deal brexit. He says hes ready to do it anyway. Paul martin is still with us. Re iscenario outlined the troubling. Is a no deal brexit something you are bracing for . It has been a really difficult decision to make. Wasously, the market expecting a remain outcome in june, 2016. Those that were positioned aggressively for that were punished by the market. It shows you that taking a strong fiscal stance isnt necessarily the sensible thing to do. Its hard to ignore as a driver from equity markets globally, including within europe and the u. K. We have not taken much either way. We are of the view that sterling k during thebe wea twists and turns of been a good negotiation. None of us expected it to be going on as long or noisily as it has. One takes mostd, traditional metrics on the currency markets and equity markets, the u. K. Does look cheap. One could be rewarded for being exposed to it. That outcome is going to be very large in any decision that one makes in that regard. Nejra what is your view on u. K. Banks . In the context of the ecb, we are talking about the fact that you are not positive on european banks. Are you more positive on u. K. Banks . It doesnt suffer from the same malaise as the eurozone banks do. Some of them do overlap. There are structural issues which are pricing power, thin tech, a lack of inflation compared to the past. The u. K. Doesnt suffer from that is badly as the eurozone. They dont have specific stock related issues. We have very different business structures among the big players in that market. Clearly, there are questions around the u. K. Economy which would be difficult with a harder brexit outcome. It would be harder for those banks to be driving their revenues effectively. The valuations look attractive. Certainly some of the cash returns from those areas can be pretty good. Times theing at. 3 value. That is something which we couldnt preclude happening to the u. K. Banks as well. Nejra great to have you with us this morning. Up, making concessions. The china and u. S. Offer gestures of goodwill. Could we be closer to a trade resolution . Bloomberg users can interact with all the charts shown using to tv. Browse recent charts and catch up on key analysis. Save charts for future reference as well. This is bloomberg. Nejra good morning from bloombergs european headquarters. This is bloomberg daybreak europe. These are todays top stories. President trump delays a tariff increase for china as beijing considers resuming stateside farm imports. Treasury yields and stocks push higher. Mario draghi heads into a tense ecb meeting with a rate cut looking a certainty. The main question, how much stimulus is enough . No deal scenario. Horace johnson government publishes its worst case brexit outcomes, Yellow Hammer wrote warns of fuel and food shortages. Nejra good morning. Welcome to daybreak europe. Rman data hitting the tape in up bang ini, coming line with estimates for cpi. 0. 2 month on month. 1. 4 year on year. Thats the data weve got. Dominating the markets this morning is signs of a little bit of data in trade tensions between the usa and china, a delay of tariffs by President Trump and a bit of leeway on the Farm Products from the u. S. From china. We see a lift in asian equities. Futures pointing higher in europe. The s p 500 had a fairly strong rally yesterday. The dow gained for six days in a row. We saw a bump in the nasdaq. The s p 500 closing above 3000 for the first time in six weeks. Take a look to the bond market. You are seeing the risk on sentiment reflected there as well. In terms of the 10 year treasury yield, that did move higher earlier. We are steady now. 175 handle. Remember where we were last friday. We have moved significantly since there. In terms of the futures in the u. S. , you see the reflection there. That is reflected in the cash yield. Balloonsof elsewhere, will be very much in focus along with btps in terms of what we hear from mario draghi in the ecb today. Consensus looking for the resumption of qe. Attend basis point rate cut. What will we hear and what kind of reaction could we see . Lets check in on the markets in asia. Juliette saly in singapore with more on the Market Reaction to that slight cooling for now. What you seeing . A little bit of olive branch is coming from either side. Giving a lift to sentiment in asia. You cane nejra nejra see chinas market in late trade up by 6 10 of 1 . The nikkei closing higher for an eighth session in a row. That is the longest winning streak we have seen since december. Overboard signals flashing on the border topics. Australia finished higher by 2 10 of 1 . We are seeing weakness coming through in indian markets. Sentiment has been pretty high. Its that typical thing of the yen. And onshore you want having the biggest johnson about a month. Lets take a look at some of the hong kong assets we are focusing in on. After the bell yesterday came what some are calling an audacious bid from Hong Kong Exchange for the lse. You have seen Hong Kong Exchange down by about three. 25 . ,ity downgrading the stock saying the price is too high and there are so many regulatory hurdles. Wh group is looking good in hong kong. Up almost 3 when we heard the news that china may allow companies to resume purchases of u. S. Agricultural products. Cathay pacific under pressure. Im watching the hong kong dollar which has risen to a fiveweek high against the u. S. Dollar. This is due to the ap in bev ipo we heard could be back on. Traders speculating that a yard sale sell could lock up funds and tighten liquidity. Upside moved to the hong kong dollar. Thank you so much. Nejra we are awaiting the start of the joint Ministerial Monitoring Committee and abu dhabi. In terms of what we have been reporting, not expecting any commitment to greater output cuts from opec plus. You can see the gathering there. Mica linger is not on the show today because hes getting ready for the scrum, getting ready to break news for us. We are keeping and i on those pictures to see when that gets underway. Theres a link to be made to this. But well price in the trade story i talked about. We saw oil trade weaker yesterday on perhaps speculation that President Trump might look at easing iran sanctions but oil getting lifted a with those signs of an easing in trade tensions. Speaking of that, china is considering allowing companies to resume purchases of u. S. Agricultural products in a show of goodwill ahead of upcoming trade talks. This comes after President Trump announced a delay in extra tariffs on chinese goods by two weeks. A 5 hike was due to be addedo be goods to goods on the first of october. It will take effect on october 15. Joining us now is senior fx and precious metal strategist. Great to have you with us. The last time we spoke, you downgraded your expectations around Global Growth linked to the trade war. Does the news weve heard this week change your view would all . At all . The news so far has been more positive. More often int the trade tensions between the u. S. And china. You have waves like this. At some point in time, it looks like they are coming more together. At the same time, in a few weeks or days from now, you can have a bit more tension again. Im skeptical. You see that in the Market Reaction. In markets, we are very optimistic right now. After this, dollaryen should be much higher. The dollar should also be higher probably in this sense. The chinese wants to be lower. I should say that people are more cautious. We have seen this before. They are not getting overly optimistic. Dollaryen has been strengthening for four days now. We are on a 107 handle. Do we get to 108, 109 before we move back to 105 . If you stay in the current sentiment, probably we would get to 109. When you get a a bit of deterioration in sentiment, dollaryen is the want to go lower. I would not change forecast on the latest developments as of now. This is volatility that you have an markets. We are currently in a positive swing. Dollaryen could go to 109. That would be dovish. I expect the yen to strengthen again towards the end of the year. We expect trade tensions to come back. Nejra if you look at gold and expect the trade tensions to come back, is 1600 on the gold price in the short to mediumterm term still looking like a good target for you . We trade just below 1500 right now. Interestingly, gold not reacting at all compared to other assets today. Nejra thats thats true. There are fferent drivers going on. If it would only be reacting on trade tensions and in the same way dollaryen wouldve been, more trade tensions, gold would have been much lower. Thats not the case. That signals that the whole development is more complex than gold. Players areand, buying gold because of the uncertainty. If you have more trade uncertainty, there is physical demand out of china. On the other hand, you have investors buying gold at zero interest. Other assets are paying negative interest. If you have risk on and gold is doing relatively well, it is getting more of a fiscal play. The dynamics are very different there. A bit more complex than just risk on and risk off. Nejra what are the prospects for the yuan actually strengthening back through the seven level again at any point before the end of the year . I would not expect that. Also because we expect the trade tensions to come back as well. If they would have a deal in this deal would be remaining there, you have the possibility that dollaryen would go below seven. Thats not our base scenario. We expect trade tensions to flare up again. I do not expect the dollar yuan low seven. This is also signaling that we have waves of trade tensions again. We dont think were out of the woods yet. Our guest stays with us. On abu dhabi. We are not expecting for there to be any sort of agreement on deeper cuts. They look to be off the agenda in terms of our reporting. Opec plus ministers gathering and abu dhabi. Theres growing concern about the strength of demand with the Global Economy slowing. Ministers do see reason for concern about that slowing Global Economy. For now, whats likely to be off the table are those additional curbs, just delayed until they meet again in december. We are awaiting that to start. Thats what were looking at. The meeting room for the ministers of opec plus. Manus cranny is standing by, ready with a microphone and camera to run in and start grilling or ministers. This is bloomberg. Nejra we are looking at live pictures of the start of the joint Ministerial Monitoring Committee. The opec plus meeting beginning in utley. B. Manus cranny is standing by, ready to quiz the ministers. We understand the deeper out the curve of the agenda, even with the uphill battle facing the group. Venezuelas output slumping. Saudi arabia Cutting Three times deeper than initially planned but prices have been supported at 50 per barrel on brent. Those are the challenges, also concerns about slowing demand. Thats at the front of ministers mines. Deeper output curves are set to be off the agenda. Manus cranny will bring the details throughout our programming. Lets check in on the markets now. In the greek market, but elsewhere, what has been preoccupying market is this signs of detente between the u. S. And china. Perhaps a slight easing of trade tensions with a pushing back of tariffs by the u. S. To october 15. Dollaryen on the front foot. One away. The yuan strengthening. Oil getting a lift after quite a big drop yesterday. The 10 year bund yield will be in focus with the ecb meeting and Mario Draghis News Conference later. 56. We edge of a basis point there. That has to do with the broader risk on. We have seen the u. S. 10 year yield move higher. U. S. Futures on the front foot after the s p 500 closed above 3000 for the first time in six weeks yesterday. Lets get the bloomberg first word now news now. Annabelle u. K. Government paper is warning of sweeping chaos from a note of brexit. Disruption to trade and Financial Services and the possibility of public disorder. Ministers were forced to release the internal document called operation Yellow Hammer to comply with the deadline set by parliament. Law to prevend a Boris Johnson forcing through a noted brexit. He says hes ready to do it anyway. Sources in the white house a National Security advisor john bolton left after arguments with President Trump over easing sanctions on iran. He mulled a meeting with iranian leaders later this month. Bolton argued forcefully against such a step. Government is promising to increase oversight of the ecigarette industry. President trump says vaping has become an Urgent Public Health concern. U. S. Health secretary says 5 million kids have they this year, a jump from three point 6 million in 2018. State and federal investigators are racing to identify a mystery lung disease linked to the use of ecigarettes. Hong Kong Stock Exchange shares have fallen sharply after an unsolicited bid for its counterpart in london. Ofs offering the equivalent 36. 6 billion for the london Stock Exchange. That ellis he is set to reject the bid amid doubts that are political about Political Risk and deal structure. T Boone Pickens has died at the age of 91. He became a billionaire Energy Investor and vocal supporter for wind and natural gas power. He suffered several strokes and a bad fall three years ago. He earned much of his wealth correctly betting on oil and gas. Global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra thank you so much. Mario draghi faces one of the most contentious policy meetings of his ecb presidency today. Hes preparing to ramp up monetary stimulus despite skepticism from the euro area is biggest economies. A rate cut look somewhat certain. Some policymakers have warned they see no need to resume qe. Our reporter is in frankfurt for us. Great to see you again. A wide range of views out there. What is the consensus view in terms of a deposit rate cut and qe today . There is a lot of expectation going into this meeting. This is the first time the governing Council Meets since july. They made it clear they signaled very strongly that they would take action to prop up inflation and the european economy. Look at what has been priced into the market. Thats a rate cut that has seen the only debate is whether we go for 10 basis points or a cut that is more aggressive. You are looking at a deposit rate once again hitting a new record. The real debate has to do with qe two. Mario draghi can announced today the ecb is going back into the market to buy bonds but we know there is a very real debate within the governing council as veryether that kind of aggressive stimulus is warranted at this point. If you look at investor expectations, they are all over the place. Many tell you there will be small qe, 20 billion euros. The dovish calls tell you, 56 euros. Its very unclear. Those expectations show investors could be in for disappointment today. Nejra bloomberg has done the survey. The most economists are expecting around 30 billion euros a month in asset purchases for one year. There were wide ranges of views out there. The other focus is the impact on the banks in the reversal rate. Are we looking at an introduction of tearing today or just a signaling of it to come . Thats right. Thats the other big question. Mario draghi could change the Forward Guidance and signal the market that we are going to st very low for longer. You could also say, we are going to tear reserves for ban that should provide relief for european banks. We have heard from many ceos who will tell you, its difficult to make money. Profitability has an impact when you operate in such a low negative rate environment. We do get that. That will depend on the terms and conditions attached to it. You could see european ballot banks rally on the idea that they will finally get some kind of relief and exemptions when it comes to the very low rates we could be headed for. Nejra thank you so much for joining us. On the ground outside. Our guest is still with us. I was really struck by your outlook. You have quite a standout call in terms of the kiwi. Qe. A consensus is looking for 30 billion euros. You are looking at 70. Yes. Thats right. The thing is, we think that qe is necessary to bring inflation towards the target the ecb wants. A package without aggressive qe would not bring it there. One of the other questions is, what will the euro do . We think the euro will not weaken can that much even if our call in the kiwi is correct. On the qe is correct. Price the a complete first time coming you see a big Market Reaction. This time around, there has been a lot of speculation about the amount. Hugell, you wont see a selloff in the euro afterwards. Think that it will stay around the levels we see now, maybe towards 109. Not much lower than that. The only thing is if it doesnt if they dont deliver or if theres not much Euro Weakness . We dont expect much Euro Weakness. Its a well play against the u. S. Dollar. Next week, we have the fed coming up. We also expect rate cuts there as well. It depends on the risk environment you are in. It looks at the moment, eurodollar is not really prepared to move. Theres more potential for the euro to go down. Nejra ok. Makes sense. If you are expecting 7 billion 70 billion euros, if we get the 30 billion that consensus is expecting, you would see that as a disappointment. If we get what consensus expects, a 10 basis point deposit rate cut and 30 billion euros of qe over a year announced, do we see the euro strengthened significantly on that . Doesnt deliver on current Market Expectations, the euro has room to recover. I dont expect a huge rally. I think it could go back towards 111, for sure. Nejra what are you expecting in germs of a rate cut and tierin as well . On the rate cut, 10 basis points cut. 10 basis point in december. The market is a bit more aggressive than us. On eurodollar at the end of the year, we have 112. We are currently around 110. The biggest downside we have more in euro swiss which we expect will now be one away. The s p is next week the one to decide Monetary Policy. We expect a rate cut. Nejra on the 70 billion euros, i know im fixating on this. It is a standout call. T kind of compensation composition are you expecting around that qe announcement . Expect a bit more adjustment on the issuing limit. We also expect more regional. Will be veryails difficult to say right now. Overall, we expect quite an increase, as you have seen. Nejra yeah. Pushing on a string is the phrase i hear a lot with the ecb in terms of the limits of the effectiveness of its policy. Is the ecb going to be able to deliver on its inflation target . Do you expect the market to react in terms of fiveyear fiveyear swaps in any way to todays announcement . Comic what isent currently expected in the market, im not sure if theres a big reaction there. If they were to go for the 70 billion, theres quite a chance that you see that reaction in the bund and on inflation expectations. We think that is needed to bring inflation towards what the ecb is aiming for. Nejra great to have you with us. Thank you so much for joining today. Senior fx and Precious Metals strategist at abn amro. It will be interesting to see if that clays plays out. Consensus coalescing around 30 billion per month qe and a 10 basis point deposit rate cut. We watch that with bated breath. Coming up later, that stimulus showdown. Expect drama at draghis second to last meeting as ecb president. Catch the News Conference at 1 30 p. M. London time. Type life go on your bloomberg terminal. Tliv blog will be up and running as well. Another thing we are watching live is the joint Ministerial Monitoring Committee in abu dhabi. The opec plus gathering of ministers. You can see them all seated there. We are awaiting some lines out of that. We have already had some. Saying that opec plus actions continue to have lasting positive affect as saudis oil minister says opec plus must maintain a high degree of cohesion. The policy of assuring the market will remain unchanged and the opec plus goal is to reach a stable oil market. Every opec plus country should pull its weight. Thats what saudi is saying. Alexander novak saying that all ies areus countr determined to show full compliance. We werent expecting any deeper out the cuts to be on the agenda. Thats what we are hearing so far from that opec plus meeting. We will continue to monitor. Thats it for daybreak europe. The european open is up next. To do to Bloomberg Radio, live on your mobile device. This is bloomberg. Good morning. Welcome to Bloomberg Markets european open. We are live in london. I am anna edwards. Today the markets say, take it easy. It is riskon in equities after if austin the trade war and ahead. Of todays ecb meeting the cash trade is less than 30 minutes away. Anna easing expectations. Mario draghi. s pronouncement could be a dramatic one. Will he provide the stimulus the