Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240714

Manus a warm welcome to daybreak europe live from dubai and london. The question is who will plug the gap of the saudi aramco outage . A couple oft million back online in the next couple of days. Come is the extra going to from and how quickly will it hit the market . Nejra from the saudi reserves . Will the spr be enough . We dont have an update. The key question is still out there. Looking ahead to the fed, how might it take this . How will it fit into the Risk Management . Manus markets looking for another 50 basis points. Spike risk of an oil going to counteract the strengths of the consumer . E a quick sweep to the through the market. Have brent over two days what you are seeing this morning is more relevant, the drop of a 1 . The market is hoping the special reserves will be released. And the Oil Producers will come together online and plug the gap. Of is concerned. The policies the aussies are keeping the dream alive. The rba keeping the door open to lower rates. In termsbout shortage of property spiking on the prices. Hedge funds have boosted their position to net short. The 10 yearon yield. Jp morgan saying the september massacre is nearly done. On the risk premium in the u. S. Treasury but the moment is but the move is not sustainable. Nejra you saw the breakevens rise. But the risk off tone yesterday was somewhat contained. Outperformingcks to the outside. Consumer stocks underperforming. Futures flat. On the s p 500, for jp morgan, not at 62. Reshold is cable extending losses as well. Boris johnson, no joint news conference. A challenge ing the Supreme Court. Podium. Nd i an empty saudi aramco is not optimistic about a rapid recovery. The state Energy Supplier faces weeks or months before the majority of the output is restored at the Worlds Largest processing plant. Saudi arabia says an initial investigation shows weapon used weapons used in the attack are iranian. Let us get to yousef gamal eldin. The of the mood in riyadh. i cannot under describe the absolute shock and sheer be wildermuth here in the saudi Public Discourse about how and entity was able to hit the heart and soul of the saudi energy industry. The conversations i have been having so far point to the importance of a clear response from the kingdom. There is domestic pressure. The narrative largely is supporting a clear response and clear limitation, a drawing of lines when it comes to any iranian interference in the country. There is also a global question mark about saudi arabias regional role as a political heavyweight in the middle east. Overnight, the ministry of foreign awares Foreign Affairs giving us a prelude saying that they will take all measures to ensure safety and security. Theirre confirming ability to defend their land. They plan to bring in u. N. Investigators to help verify what actually happened. Nejra great to have you with us. The majority of the output will be offline for weeks or months. Quickly offline, how can Spare Capacity realistically be tapped . Yousef clean Energy Aspects saying the outcome has been quite far worse than initially anticipated. Not aslity is that it is easy as flipping a switch. In terms of the situation in saudi arabia, even if they were to tap the excess supply capacity, that would still need to be routed into the existing damaged infrastructure. It might take longer than anticipated. In some of the other countries as well, in the wider opec plus group, some of the infrastructure may have been offline or a while and some revisions would have to be made. The right crude great coils and the right processing facility. That would be quite an undertaking by any stretch of the imagination. Manus thank you to yousef gamal eldin. Is lucianoost jannelli. Atd of Investment Strategy the abu dhabi commercial bank. Straight to the point, this is one of those defining moments in the oil market where we see the coalition the most. The outages. We have a graphic in terms of capacity. How worried are you about plugging the 5. 7 Million Barrels of oil outage from saudi arabia . Luciano the opec plus is Something Like 11 million. Canreserves of the saudis cover approximately one month. And there is the Strategic Reserves from the u. S. But it will be tough. The key concern now is that there will be no escalation in the region. That there are not going to be further conflicts putting potential eight more strain or more of supply disruptions and creating a scenario of additional supply disruption over the next months to come. That is really the key. I hear people talking about the oil price now going to 70 or 80. But i honestly knows that would say that the Global Economy can still digest something between 75 and 80. The real issue now, the real uncertainty is how much time will it take the saudis to bring the supply again there but then will there be other supply disruptions . That is what we have to be concerned about. We have to watch carefully what President Trump is going to do and what the regional actors are going to do to try to deescalate and prevent this conflict from escalating. Nejra great to have you with us. That is an interesting point. The lack of any sort of escalation to this point might risk further escalation down the line. Take a look at this curve in terms of what we have seen regarding the moves over the last 24 hours or so. The you expect the curve to continue in this direction given what you just said . Thatno i do think can go up prices further. Ofid not say that the lack escalation means we have risk of more escalation in the future. I just meant to say that the risk of further escalation is what im really concerned about. I am not so much i mean, i am sure that the output can be restored under normal conditions. Month or could take a two. I dont think that is really the issue. I think the issue is, will it stop there . On that does not depend only what is going on in the region. There are bigger issues there of course. What will be the appetite on the side of the u. S. To further escalate . Trump we have seen donald stepped from further escalation before. Word no further word on iranian fault. Have a look at this. It will take a much bigger spike a the oil price to invoke recession if we go by historical standards. You almost need to see oil rising to 80 before it provokes a recession risk. Are we still, and i say this very much tongue in cheek, are we in the safe zones from a recession . Concerns in terms of further escalation i do think it cant be contained. I do think there will be deescalation. I dont think this is an issue for the economy. Going to 80 will not put the u. S. In a recession. That is what matters. I think we can manage this. Nejra we appreciate your clarification. What i meant to say was the lack of retaliation right now from the u. S. Is what you said and that could risk further escalation and supply disruption in the future. Great insights. Luciano jannelli will stay with us. Moving on to our special covering climate now coverage, bill gates has invested millions in tackling Climate Change but now his major strategy is trying to prevent that. Hitants to help those hardest by Climate Change to adapt to it. Bill gates we will not have a year where the world is cooler than it is today. The average temperature will go up a lot. In the next 50 years, it will not go down. Now, deciding how much it goes two will it know what i degrees or three degrees or four degrees, that is in our hands. If we ignore the problem, you will aim at Something Like a four degrees scenario. Fires, daysorest that humans cannot go outside if you live near the equator that is a pretty extreme case. Seriously people are going to take it and what types of innovations will come along will determine where in that 24 degree range we are by the end of the century. I certainly hope we do not run the experiment of being higher than two degrees but it will take a lot of commitment and a bit of luck on the innovative breakthroughs to be able to get there. There are a number of different ways to fight Climate Change. Renewable energy is clearly one of them. Do you think governments should subsidize Renewable Energy . Wind ands the cost of solar has come down dramatically. Some of that subsidization has driven the volume. Now, they are not going to come down much more. Be tax benefits there should shifted into things that are more limiting like energy storage, offshore wind which still has a huge premium price a lot of places where we need the market to get going. The progress in solar and wind is helpful but the sunshine does not shine 24 hours a day. If you are far away from the equator in the winter, you cannot get as much. Is just for the electricity piece. 25 of emission. We need a lot of efforts. That subsidization, that accelerated rollout is one of the few advances we have. 10 of allthan Energy Generation because the Global Economy has a lot of Energy Generation. But it is one of the good things that has been developed. That was the worlds second richest man, bill gates speaking to bloomberg at the bill and Melinda Gates headquarters in seattle. Great to get his insights. First word news is to be had. Annabelle manuals has that from hong kong. The supremehe u k, court will start hearing a debate about Boris Johnsons decision to suspend parliament. The proceeding is scheduled to run until thursday but the court may not rule until next week. The polls this week for the second election of the year. That netanyahuin will retain power. The final result may only come after prolonged horsetrading. These are Uncertain Times for israels longtime leader. Worx softbank is the companys biggest investor and has been pushing for postponement. 47 billion. The company may go public at about 50 billion or even less. Won a bidding war for seinfeld picker it has gained rights to all of the episodes of the classic sitcom. Nots of the agreement were disclosed. Sony has a deal with disneys hulu. Global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Thank you so much. Coming up, President Trump says the u. S. And japan have reached initial trade an agreement clearing the way for white house to talk china. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. Manus im manus cranny in dubai. Let us get your asia market check with Juliette Saly in singapore. Aresian stocks as a whole lower for a second day in a row. Have a look at the gains though in japan. Energy stocks catching a bid on huge slack we saw in spike we saw in energy prices. Macau stanley downplaying casinos. Ongoing concerns in the city. Chinas market being hit are the fact that we have more week data on home prices. We also had a weaker than from the pboc today in terms of the yuan reference. That is weighing on the aussie dollar. Pointingal bank today to potential future using ahead. Have a look at the impact of the overall trade war particularly here on the singapore economy. We saw doubledigit losses in terms of electronics exports reflected by this blue line here for the eighth month out of nine in a row. Singapore exports as a whole fall for six months. But they were better than expected. A. 9 drop year on year and that was the best or the slowest i guess pace in terms of a drop we have seen since february when we saw exports rise. What was interesting was that out of the 10 markets that singapore exports to, there was demand coming through from china, the only market where they saw demand increased. Exports to china rising 38 for the month of august. The impact of the fall on electronics still weighing on the overall singapore economy. Juliette saly in singapore, thank you so much. President trump says the u. S. And japan has reached an initial trade accord to be finalized in the coming weeks. He also told congress the government will be entering and an executive agreement with tokyo on trade. He made no comment on the threatened duties on the cars. With us is luciano jannelli, head of Investment Strategy at a bood up a commercial bank. More importantly, we are hearing we are to have working level talks between the u. S. And china tomorrow. Waiting for the facetoface meeting. Are you getting a sense of a in thelation or a pause trade war which gives you more hope for risk assets and perhaps even Global Growth . Luciano absolutely. A couple of weeks ago i was here in the studio. There was a war hanging over the Global Economy. Really had a sense that he is trying to do you escalate trying to deescalate. If you look at all of the prior u. S. President ial elections, the direction of unemployment is so important. If unemployment decreases and even if it is at low levels, that is a problem. For President Trump, unemployment can almost only increase. I mean, it is at such a low level that it cannot decrease. What matters is the direction of unemployment and why should he take this risk . A recession is selffulfilling tariffsnext round of was going to hit consumers. A recession can be a selffulfilling prophecy. Even if the consumer is resilient, wages are much higher than they were or they have grown significantly, let me put it that way compared to the other manufacturing cycle downturns we had three years ago and six years ago, even if the situation is good, he can provoke a recession by continuing to beat the drum on trade tension. I think he is backing away from that. We have had 24 minutes together. You have a deescalation in the middle east. Donald trump is dialing back a little bit. Let us talk about the Global Economic system surprises from citibank. A record straight of losses. Black friday, last friday we turned to the black on this number. The 24 minute deescalation talk that you have just given to me, could we be looking at loading up on more risk assets if we are at the bottom of the geopolitical pull . That is the sense that we could be at the bottom because the u. S. Typically leads the cycle. U. S. The same chart the economic surprises have been on the upside. Consumer credit is going up. Expectations on Consumer Confidence are going up. There is some sense of turning around. You can see it. You can see how the Australian Dollar picked up in the last three weeks compared to how gold came. The treasury yields. Look, we have had this manufacturing cycle downturns, this is the third one through the Global Economic recession and they did not lead to a recession. We have had manufacturing recessions not leading to aggregate global recessions. There are signs we are again in the same situation. I mentioned a couple of weeks ago that to me what the concern was this will he insist on the trade front . There is a risk. Manus time is against us. We have more time. Fear ye not. We have another block together. Luciano jannelli will stay with us. Want to dig into that. Coming up, we have apple going up against the European Unions most powerful antitrust chief and the worlds in the worlds biggest tax case. We are live in luxembourg. For all of your data, stories, and market info, this is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. Manus i am manus cranny in dubai. Let us check in on the markets from around the world. Crude prices are the number one subject globally. India is a big importer. Take it away on market impact. This what have we got . Good morning. Across the markets we are seeing another day of risk off. Crude prices spiking adding geopolitical tension heightening for investors to digest what happened in saudi arabia. Onare waiting for clarity how long it will be until we get production back. We have a fed decision tomorrow. Normally, we would be dominated by fed coverage. Gmm,an see a cross on my hong kong is down. The asiapacific is down more than 0. 5 . Dollar. Er u. S. Australia topping at the top of the gmm taking a second day down. The reserve bank of australia saying they are prepared to take a rate cut if needed. 10 years rising. The yield down from six to five basis points respectively. It is all about crude again today. Wti hitting a positive down more than 1 . This comes after yesterdays extraordinary day for the oil market with recordbreaking moves. I am trying to tie in what we are seeing with the oil markets and the fed. You have to think this will stay this way. What did the high prices mean for inflation . Tick higher. Of a this has to bode well for thursday when we have a 10year tip sale as well. Nejra on the global markets, we go back to Divina Keller to take a look at the indian markets. A second day of declines. Does this still had to do with the oil markets or something or Something Else . The oil picture is playing its part in todays session. Down 0. 75 . Index the housing is also down. Banks have been looking week. Weak. Loansw, we are seeing unwinding. Informationtechnology and pharma are most likely to benefit from the tailwinds. Manus thank you so much. Our partner in mumbai. Is likely toeserve cut Interest Rates for the todaysime this year at fmoc meeting. This comes as policy makers try to get ahead of Economic Risks emanating from the global slowdown. The Central Banks leadership has come under increased pressure from the president who is denouncing its reluctance to slash rates more aggressively. Question isl live unt the feds bl rate cut . Tv is your destination. It is a bit like driving the bus with gears. That is your destination for what ive just referred to. Luciano jannelli is the head of Investment Strategy for the abu dhabi commercial bank. The dollar squeeze we have in terms of the overnight repo rate. It came back to around 2. 5 . Is there a dollar shortage . Is this an anomaly . And what impact will this have for the fed . This disconcerting at any level for you . Think it is either a technical error. That over thes longer term, in the years to calm, we have in the years to come, we have the weaponization of the dollar. Dollar shortage over the long term is an issue. Something we really need to monitor. Have manyan implications. I dont think we have time to talk about that. But right now, i dont see it as a big risk. Anything could have happened in the repo market. What has happened here in the Arabian Peninsula is not indifferent. Implications the is that the fmoc may need to er again. I o wo looking at the dollar, i know you see the dollar as peaking. Does that have to do with your stlook of the fed easing cycle . The ecb certainly has more room to cut. Luciano it does have more room to cuts. Central banks are having increasingly less room to cut. This central bank which has more the federalis reserve. If you look in europe, there is byig impact of more easing mr. Draghi and also some other political sectors within europe. Tightening within the eurozone. That is very important for the European Union. And it is as important as a weaker currency. It is important for italy, greece, spain, and portugal. Mainly italy and greece. That does have an impact on the European Union and with that reachedmr. Draghi has his goal. I dont think he is under any dissolution. Why du see the dollar peaking thats why do you see why do youking see the dollar peaking . Luciano the fed has more room to cut. And then regarding the Global Manufacturing picking up again. Dollar is the most countercyclical currency. When the Global Manufacturing cycle except, the u. S. Dollar typically weakens and then i put that together with the Monetary Policy that i just discussed. Seee are the reasons why i the dollar peaking. The dollar has strengthened significantly in the last two years. Why i seet sense is it peaking. It has strengthened in the last two years in line with the manufacturing recession we have had in the last year and a half, almost two years. Manus can i ask how you see risk assets . Hasaught up with a man that 106 billion in various forms of investment. Take a listen. Gates we are not in some defensive posture where we are mostly in cash or anything like that. The strategy that has been used on the investments is to be over 60 in equities. Manus he is not defensive. He is not in cash. He is 60 equities. Would you agree with him in terms of proclivity to risk to the upside . Luciano equity markets desk the only one that has gone up consistently is the u. S. Market. Manus i should clarify the risk reward luciano . We have valuations that are between 15 and 16. By any stretch of the imagination, that is not expensive. The issue is that if you look at longterm cyclically adjusted evaluations, in particular the that is about 30. It is huge. The longterm earnings yield is 4 . T over the last 10 years, at some point in time we will enter into returnsof lower equity high cyclical earnings. That is also in line with the fact that we have very low yields globally. Negative Interest Rates globally. It is not something we should be concerned about as something that will hit us in the short term. Over a longterm, that is a reason for concern. Nejra luciano jannelli, head of Investment Strategy at avenue david commercial Bank Abu Dhabi commercial bank stays with us. A trillion dollars with a tax bill of 14 billion. Both sides will make their case in luxembourg. Maria, good to see you. What can we expect from todays hearings . Maria good morning. A big legal showdown. An army of lawyers has worked on the case pitting the European Commission against the Irish Government and apple. This goes back to a decision in 2016 in which the Commission Said apple had given or was given special tax treatment by it Irish Government allowing to pay an artificially low tax and in return, it was asked to pay back 13 billion euros to the Irish Government. The core of the attention is that the Irish Government did not want to take this money. They appealed the decision and argued that the investigation by the European Commission was decided to take this to court. When it comes to apple, they came out strongly against the decision. They said a lot of it was moderated by politics and they insisted that they never asked for special tax treatment. When we speak to the experts, they predict a long legal battle that will go all the way to the European Court of justice. What are the broader ramifications . Do we need to ask from the european side about operations there . Korea that is the maria that is the question. Court finds the arguments forwarded by the European Commission valid, it will embolden the commission to take tougher actions and the will be emboldened to continue her investigation. It will also put American Companies under more pressure to pay more taxes. In europe, this is something we hear time and time again. And the irish corporate is not a this secret that this is a country that has become debt dependent on the u. S. They will say they are not a tax comes underat intense pressure from the European Commission as well as the french government. It will tell you at this point that the irish needs the Irish Government needs to start taxing more money. And the commissioner is there for another five years. Maria tadeo will be covering a lot of tax crimes in the coming years. Bill gates know something about antitrust investigations. He spoke with bloombergs Erik Schatzker in seattle. Bill gates i dont know the last time a company was broken it has been quite a long time ago. And you have to really think is that the best thing . Is there if there is a way that a company is behaving that you want to get rid of, you should say it is a banned behavior. Narrow set of things that i think breakup is the right answer to. Big, companies are very very important companies. The fact that governments are thinking about these things is not a surprise. I was naive about this but that was a long time ago and i did not realize that we would come under scrutiny as microsoft. 1990shink back in the that has made us more thoughtful about this type of activity. You share the governments concerns that anyone of these companies or all of them are abusing their power and influence in such a way that it undermines either the political system or perhaps the consumer economy . Bill gates i think these companies are behaving totally legally, they are doing a lot of innovative things. The fact that the tax rules in you to act at certain way and you can minimize your taxes people could want to change things going forward. No one has a crystal ball. Social media what exactly the solution to that should be to i do think government really needs to talk about what those role should be. Rules should be. You could say i am biased but i see these as wellmeaning, highly innovative companies. It is up to society to make sure innovation does not have negative side effects. That was the worlds second richest man, bill gates speaking to bloomberg in seattle. Heres a look at what you shall be watching today. Israel goes back to the polls for a second time this year. The longestserving Prime Minister, netanyahu, will be hoping to form a coalition government. A tax showdown between apple and the eu judges in luxembourg will start weighing whether the regulators were right to levy a tax bill. U. K. Supreme court will hear a challenge to Boris Johnsons suspension of parliament. A hard time in luxembourg. Manus a bellwether for the Global Economy. Fedex reports its quarterly earnings. The french finance minister speaks at the London School of economics. I wonder what he has to say about the qe. Israeli voters are heading to the polls for the second time this year. You can follow the story. On our bloomberg on your bloomberg terminal. This is bloomberg. Manus it is bloomberg daybreak europe. I am manus cranny in dubai. Nejra i am nejra cehic in london. Signaling a delay for its much awaited listing. Asiang us now is our technology reporter. What does this mean for softbank . If you have been following the news this week, it has been a roller coaster. The latest is that they will not list. We will see how strong their commitment is. The latest valuation figures are i grabbing. Eye grabbing. Softbanks last round of investment valued the company at 47 billion. Softbank stands to book a loss. This is only the beginning. The shares have been trading 25 over the price. One reason why softbank might want to delay the inevitable is because they are raising money for vision fun too. Two. Sion fund [indiscernible] a bit of bad news that came out today was that saudi arabia pis might be in for a lot lower state. So far, the news is not that great for softbank. You very much. Our Asian Technology reporter in tokyo. Plan willsons brexit be tested in court today. Most seniors judges will rule on his suspension of parliament. The heart of the debate is whether suspending parliament is a matter for the judiciary. Nejra a decision against the Prime Minister could throw britain deeper into a constitutional crisis. Talks yesterday suggest that the two sides are no closer to an agreement. Still with us is luciano jannelli. Basicallyt for you is a bottoming in the Global Manufacturing cycle, a weaker dollar, good for cyclicals, good for value, good for europe and emergingmarket equities how does brexit fit into that strategy or is it a completely isolated risk for you . Is an issue. It the u. K. Is the least manufacturing country and all of european countries. The u. K. Is the least manufacturing european country. There is a risk for the Global Economy and for your. But it is not a significant as the global trade war or not as significant as what is going on currently here in the region. Iranthe tensions between and saudi arabia. Manus if the current Prime Minister, Boris Johnson, says he will pull out without a deal on october 31. Worstcase scenario. , howwe talk about shocks or where would that reverberate . How would it manifest itself . Sterling first of all. Luciano i am not a institutional expert but if he would not ask for extension, then probably we are ready have anyone conservative pms that have crossed the rubicon. He does not have a majority. I think he would have to face a motion of nonconfidence. As i mentioned, these 21 conservatives have already crossed the rubicon. There already is a majority that is asked for an extension. So i do not see how he can go against at the parliament. The parliament will be functioning in the last 10 days of october. And on the other side of the coin, the europeans have to say yes to an extension. Hold that. Luciano jannelli has been our guest host this this morning from the abu dhabi commercial bank. We are going to talk about saudi arabias Oil Production in the next 30 minutes. This is bloomberg. Nejra good morning from bloombergs European Headquarters in the city of london. I am manus cranny live from dubai. This is bloomberg daybreak europe. The system. Geopolitical tensions continue to weigh on Global Equity in the aftermath of the aramco attack. A rapid recovering of oil and production looks unlikely. Johnsons suspension of Parliament Comes under scrutiny from the Supreme Court. Biggestghts the worlds patent case. And a crashing valuation. Valuation will not end wework from ipo by the of the year, but how does softbank feel . Welcome to daybreak europe. We are in oil prices. Aramcohearing from saudi. As we look ahead to the fed, they look through inflation risks in Risk Management strategy. It solidifies the cut. Manus the breakevens moved higher, tips as well. Maybe a little bit richer for the investment. It is going to come down to who is going to lift the weight . Last week the debate was about compliance. This week is going to be about, what can the uae do . Better quantum of what size that gap is, we will be able to make better sense of it. In terms of how this translates to equity markets, we got risk off yesterday, but nothing dramatic. The s p 500 lower by 0. 3 . European equities declined as well. Most Industry Groups in the u. S. Oil and gas stocks, no surprise, outperforming. Ftse futures and dax futures, cac 40 futures absolutely flat. It is interesting youre seeing ftse futures underperformed given that we have seen some weakness in cable yesterday and today. We are still keeping an eye on brexit risk matters. For borisn luxembourg johnson. The bond moves were interesting. 50 basis points priced in between now and january. It really creates the same inflation pressure as before. Bond markets, a little bit of money going into u. S. Treasuries. If you look at the rate strategy calls, u. S. Strategists weigh the risk of higher yields. Jp morgan calls it a massacre, talking about 140 to 190. Is it a massacre . That is the question we ask. Deutsche bank says 185 by the end of the year from 215. In the second half of 2020, back to 155. Jp morgan says this months rout, the risk premium amount in u. S. Treasuries, they dont think it is sustainable. Lets get reverberations from this part of the world to the asian complex. Juliette saly standing by. Juliette the biggest reverberation in terms of what we saw in the oil attack earlier in the week is that japan has had to play catch up to that move. Energy stocks in japan coming back online after that Public Holiday yesterday and rising. The topics up. Elsewhere we are seeing asian stocks under pressure today. Hong kong off by 1. 5 . We have had trade derailment also, a downgrade on macau casinos. A lot of the ongoing protest implications starting to hit the market further. The csi 300 down 1. 7 . We are seeing the shanghai comp close to the level it but it seems to not be able to rebound from, off by 1. 5 in late trade. The aussie dollar under pressure. A weaker fix from the pboc and also the rba remaining dovish. The aussie dollar under pressure. Arent to show you what we expecting from hong kong. That is the jobless numbers for the month of august. In july we saw unemployment to cup for the first time in two years. That is of course a reflection of these ongoing protests and the impact they are having, particularly in the tourism and retail figures. We are expecting on appointment to remain at 2. 9 , but what would be interesting is whether or not we see any reflection on the people that have been put on unpaid leave. It will not be rough like that in the official data, but it is one to watch in terms of movement. We are hearing a lot of people in the likes of retail, bus drivers, et cetera being asked to not come to work, not get paid. It does not mean they are losing jobs. It is just a reflection of the ongoing protests and the impact they are having in the city. Manus thank you very much. Juliette saly lining up the markets. All eyes focused on how soon saudi arabia and production can be restored. Saudi aramco is optimistic about rapid recovery. The state Energy Supplier faces weeks or months before the majority of output is restored to the Worlds Largest processing plants. Meanwhile, as saudi arabia says an initial investigation shows weapon used were iranian. Give me a sense of the mood in riyadh. What is the likely response from the saudis today . There is an aura of trepidation over riyadh as the rest of the country the conversations i have had make it clear much of the public in is trying to raise awareness on that front. The setback on the attack largely means there is quite a bit more pressure on the saudi government to come out with a firm response. The first step toward that we got overnight was a statement from the foreign ministry. This may be more important than chasing the oil price down a rabbit hole. Take allom is going to measures to ensure safety and is capable offirm defending its land and it is going to respond strongly to this aggression. The first part of that is going to be bringing in investigators to find out where those missiles come from. The iranians say all of this is not true. How have saudi assets fared in the last 24 hours . Do we still have the uncertainty in terms of how long it is going to take to restore the output . This has been interesting to watch. On the one hand, you have metrics that are quite important like the saudi rial forward. There is a great chart our climates can pull up, jumping by the highest in five years. Then you have a different tale ian told on the stoxx front, where we have seen a recovery despite these increased tensions. The petrochemicals or hardhit. A quick note on what is happening on the bond front, because the market has been to sanguine when it comes to pricing in geopolitical risks. We have been talking to Asset Management saying that is how that is going to be reflected. Nejra thank you so much for joining us. Now joining us is christel rendu atlint, head of fixed income nnion bunker prevail unio bancaire prive. The 10 year yield seeming to reflect global risk off. How much further does risk off trade have to run with the 10 year yield the echo it really depends on what will not happen with the Oil Production. Obviously all eyes are on saudi arabia on the rally will take to restore production. Right now i think most of the reaction for what we know is probably in the price. The market needs to price in one additional risk, one additional uncertainty. We are discovering oil fields be attacked. If we leave at that, i think we have right now this additional risk, but obviously, what could change the picture is, number one, if we hear that it will take a very long time to restore production or that further attacks are looming or worse happening. Good morning to you. We are trying to assess the momentum in the Oil Price Shock wave we have had. When or what quantum do you use to apply higher inflation feeding through as a result of this kind of Oil Price Shock . If we head toward 70, 80, where is the break point in regard to the breakevens . It is probably a question of in my view, where the Global Economy is is a position of relative weakness. We all remember the recession talks remain not far away. I think this is right. We are not just at the breaking point. The Global Economy is actually week. We have a Manufacturing Sector that is undoubtedly in recession. It is still being held by Services Sector pretty much across the world. Be more of a growth will have more of a growth impact than an inflationary impact. You can see it coming through over the coming months. If weis sustained and were to have a meaningful impact on this core inflation, the resulting effect is one where quite simultaneously we will see growth coming down further. That is down the line a weaker situation. Nejra you see the Oil Price Shock as a growth rather than inflation impact. If we translate to the fed, does that mean the fed sees what happened in the middle east this week as another one of the global risks that add to their Risk Management strategy and perhaps cements that 25 basis point cut . I would think so. Absolutely. It is just one additional uncertainty. We are thinking, will the oil price stay there . Will it go higher . Will it come lower . That is nothing else but uncertainty. 25 basis points was already pretty much from the fed. Really, the crux is how they deliver this message. How they qualify the risk. That is the key question right now. Can i get euro cents, jp sense, jp morgan, they called the recent move a massacre. Thats very strong language, i feel. Did it feel like a massacre for you . No, it did not feel like a massacre. You had a very large move in august to start with. Wasrprisingly maybe it august which is notoriously a liquid month, lets say. What we are seeing here is pretty much a reversal of that move. I think really it makes sense. This deflation risk, this recession risk, everything got priced in to bond markets a lot less in risky assets. We are held by the bond yields coming down. In terms of flow, we certainly have not seen dramatic flows. The question comes now. Two investors start worrying because they see their talk of return going down . I would not call that a massacre. Lets just see whether the bulls have run out of road for the moment. From ubp. Endu de lint stay with us. We have more to do. Bloomberg first word news. U. K. , the Supreme Court will start hearing the case against Prime Minister Boris Johnson. At the center of the debate is whether the decision is a matter for the courts. The court may not rule until next week. Hits the polls today for its second election of the year. There is no definitive sign if Benjamin Netanyahu will return to power or lose it. The election comes out an uncertain time for israels longtime leader. Netanyahu failed to form a coalition after aprils vote. Russia is offering to sell saudi arabia its Missile System to bolster the kingdoms defenses. Riyadh has been in talks with moscow for the deal, but going through with it risks u. S. Sanctions. Russias recent success in persuading turkey to buy the betweenrovoked risks the u. S. And its nato ally. President trump says he probably will not go to pyongyang, but adds he would be willing to visit the north korean capital in the future. This follows local media reporting the nations leader invited the president for talks. Trump says maybe chairman kim would be willing to come to the u. S. Netflix has won a bidding war for seinfeld. The streaming platform is getting the rights to all 180 episodes of the classic that come starting from 2021. The classic sitcom coming from starting from 2001. We have learned it because the streaming service 130 million over six years. Reportingrk times is President Trumps tax returns are being subpoenaed by a manhattan prosecutor as the da examine touch money paid to stormy daniels. Formove widens the effort tax records trump has refused to disclose. Global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Coming up, President Trump says the u. S. And japan have released have reached an initial trade agreement, clearing the white house to focus on china. Is up and tliv running. We will be seeing action through the day. A live shot for you there as you can see, the israeli election is underway. , so letse this year see what the turnout numbers are like. Tliv function, monitor the election. 7 20 am in london. We are minutes away from the equity market open in europe. Lets take a quick check on brexit. To buy stocks up. Oil and gas stocks rallying. Workarket just trying to out one production will come back on board. Dollar, what is it supporting the dollar . Are we nearly at the top or where are we in the global cycle . That is the question we need to answer. We saw weakness in the u. S. And europe yesterday. Judging by the futures, but jp oil is where the s p 500 breaks. Cable extending its losses. Challenges for Boris Johnson in luxembourg, also facing the Supreme Court. Lets get the Bloomberg Business flash now. Wework expects to complete its initial Public Offering by the end of the year. Softbank is the companys biggest investor and has been pushing for postponement. The japanese giants last investment was at a valuation of 47 million. Make take the Company Public at 15 million or less. The worlds second richest man said he would not impose a wealth tax. Than 106, worth more billion, spoke to bloomberg. Doubt u. S. Will do a wealth tax, but i would not be against it. The closest thing we have to it is the estate tax, and i have been a huge proponent that that should go back to the level 55 that it was a few decades ago. That is your blue your Bloomberg Business flash. Manus thank you for the roundup. The fed is likely to cut Interest Rates for the second time this year at this weeks fomc meeting. The Central Banks leadership has come under pressure from President Trump, who announced his reluctance to slash rates more aggressively. The president also commented on the u. S. China trade deal saying the initial accord was reached and will be finalized in the coming weeks. Ourstel rendu de lint is rate specialist adjoining neera and myself this morning. The rba,e minutes from the aussieshe rba, and the kiwis lead the charge. They have left the door open to further easing. This is the language if not the action we can expect more of from global Central Banks. Is that how we look at the back quarter . I guess so, but it is not clear, i guess, the fed has been reluctant to open that door too much. At the same time, trying not to close it. Powell was really characterizing this rate cut as the midcycle adjustment. My view is that he will stick to this approach and we will stick to the usual mantra that the fed will be ready to act as appropriate, but i dont think he is ready to indicate too many further rate cuts. The dot plot chart is also unlikely to indicate that. It is really a question of alan active balance between what sort of moves have you been making in the portfolio . Risk management moves are but do sing exposure. Exposure. Ucing pricing over 100 basis points over one year from the fed. , yes, the thinking risk of recession has increased, but the recession is not just upon us. We started taking some profit on the rate. Similarly on the credit as well. The credit is where it is. Rates have come down so sharply. This is a question of squaring down the position in particular for these kinds of portfolio and assessing where this risk will end up in Central Bank Actions as well. I was obviously caught by your reference to the fully hedged fed. The language powell is using. What is a midcycle adjustment to you . The market is saying two more rate hikes between now and january of next year. Are be locked and loaded for the mediumterm . It is really anyones guess. That is the beauty of this. It is somewhere between three rate cuts, i guess maximum four rate cuts. Probably two to three in the feds language. They will not open to further rate cuts in the dot plot. The market has moved ahead of itself, which is normal. The market is just a probabilityweighted measure. Ae fed is just giving us chart. It does not mean there are no other scenarios. Nejra great to have you with us. Christel rendu de lint. There is a great piece on the bloomberg that will give us more fodder for discussion tomorrow talking about the fact the doves are on the mountaintop and the hawks are in the valley when it comes to the fed. A line from iran as well. From a leader, there will be no talks with the u. S. The Supreme Leader says they will not negotiate at any level. This is bloomberg. Anna anna good morning. Welcome to Bloomberg Markets the european open peer european open. Geopolitical tensions continue to weigh on Global Equities in the aftermath of the aramco attack. European futures point lower. Cash trade is less than 30 minutes away. No quick fix. Timeline for saudi aramco to reach full output again could be weeks or months away