Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240714

Nejra welcome to daybreak europe everyone. Investors trying to assess risk in the u. S. The s p 500 falling for a third day. We could see another day of declines, even if futures are indicating down 0. 1 . We hold on to a 169 handled today. The dollar steady, heading for a weekly gain. The new Zealand Dollar is a standout in terms of the downside because of some Consumer Confidence data. We are also seeing weakness in asian equities. Riskoff continues into the asian session. Oil heading for a weekly loss after we got that update from saudi aramco on bringing output back. President trump has used a closeddoor meeting with u. S. Diplomats to disparage a whistleblower complaint. The president said the whistleblower had no direct knowledge and was, quote, almost a spy. The complaint alleges the white house attempted to lock down records and could offer a roadmap for the impeachment probe. House Speaker Nancy Pelosi raised the specter of a white house coverup. Lets get more details from annmarie hordern. Great to have you with us. What did you learn . The first thing to do is to go through this complaint from the whistleblower. The first thing is that it alleges that a number of white house officials were aware about this phone call between President Trump and his ukrainian counterpart. The second thing, they tried to lock it down. I want to bring out one part of the complaint, what the whistleblower said. This set of actions underscored to me that white house officials understood the gravity of what had transpired on the call. It really kind of sets the roadmap of who the white house to the House Intelligence Committee needs to speak to and what exactly they need to be thinking into. Its a roadmap of who was involved and what information is being looked at for. Nejra what does it mean for the impeachment inquiry . Where do we go . Unclear. Is very is, hear fromg the whistleblower himself. The white house the House Intelligence Committee chairman was saying he was contacted by lawyers within the next week we could see the whistleblower actually testify. The New York Times has said this that worked inr the white house. The other people to watch out for potentially would be rudy giuliani, President Trumps personal lawyer, and william barr, the attorney general. They were also mentioned in that phone call we saw that memo from between President Trump in the ukrainian leader. Nejra thank you so much for that update. Now joining us for the hour, we have jeremy. Welcome to the show. In terms of the implications for the dollar, what is your first take . Dollar strength simply because of the risk and it is a safe haven . Expect thed normally dollar to do relatively well when you have a dollar a risk scenario. The question is it is a relatively unusual situation. From an investor standpoint, there will be reticence to plot back toward that safety of the dollar purely because that is the source of the risk, the emanation of the problem. It may be a case you see something, but frankly that is where there may be a flowthrough coming by the swiss , not necessarily automatically assuming the u. S. Dollar will do well. Ebbing said that, there are other overarching issues which continue to come out of this whole process, which is going to keep it under pressure as well. The implications this might have for President Trumps approach to the trade war. He could go hard on china or he could pull back. Do you sit on either side of that fence . I think that is a very interesting point. Often when he is a tight spot, he tends to come back harder in the opposite direction. Deflecting attention, look elsewhere. You could make the case he could push back against china harder to try to deflect attention. The political realities are going to become more real as we move forward. We are moving towards october and that is just a year away from the president ial election. That sort of political timescale, if we are assuming he will be able to withstand this process because of the illogic alleys of the senate, i think he will be looking toward some type of resolution, not dialing up trade rhetoric through the next few months. Nejra in terms of the election process, if we question what this might mean for democrats versus republicans if this drama rumbles on, or dollar investors pricing that in as well . Arista focus more on economic fundamentals . Are getting close to one year ahead now. That will start to as people start to preposition very aggressively for the trade strategy for 2020 as we move into the later stages of q4 and people are repricing outlooks for next year, that will start to become a more relevant issue. When you factor in that nascent Political Risk, particularly in relation to the way the cycle is translating in relation to the political cycle, that actually favors a weaker dollar environment. Nejra in terms of Political Risk more generally, what is more at fault for the dollar . What is happening in the u. S. , or Political Risk elsewhere . That is one of the sort of issues which does tend to oscillate and drive valuation levels. Had episodes we where Political Risk elsewhere being very real and relevant, europe is an obvious case in point. U. S. Move into 2020, the will becomes more relevant and more dynamic in terms of dollar performance. Nejra we will talk more about that in a moment. Lets get the bloomberg first word news in hong kong. More on impeachment. President trump has lashed out at the whistleblower, whose complaint is fueling the impeachment probe. He made the comments in a closeddoor meeting, but bloomberg has obtained video. Pres. Trump i want to know, who is the person who gave the whistleblower the information . That is close to us by. You know what we used to do with spies . We used to handle them very differently. Nancy pelosi accuses the administration of a coverup. The whistleblower is a cao officer cia officer. Thatu is losing faith Prime Minister Boris Johnson can deliver a deal by october 31. U. K. Watchdog says drug suppliers are ready for a no deal brexit. Than they are lower were before the original deadline. Inrie lam is taking place the entire unrest. The government looking to reduce tension ahead of the 70 that a bursary of the peoples republic. This weekend will see more demonstrations. Police have granted an application for a rally on saturday. Organizers of a march on sunday say they will go ahead without approval. France has released a 2020 budget set to deliver a series of tax cuts. This is in an effort by president macron to a pres appease the yellow vest protesters. The lowest income tax rate would be cut by three points to 11 . That will mean slower progress on cutting the budget deficit. Dropping itsis dress code for foreign women as it attempts to boost tourism. Trying to diversify the economy away from fossil fuels. Foreign women will not have to cloak that hasg been mandatory for decades. It is optional. Cleared inng to be the online visa application. Women see it as a mark of the culture. Some decide not to wear that. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you so much. Says the central bank is looking at altering its strategy for achieving price stability. We will bring you details. When youre traveling to work, tune into Bloomberg Radio on your mobile device or dab Digital Radio in the london area. Nejra nejra this is bloomberg daybreak europe. s get a check on the markets in asia. Not to the happy such a happy friday for investors. On track for their worst weekly loss since august. Trading stocks in japan , dividends weighing quite heavily. Also the kospi, we had that forecast from micron weighing on the likes of samsung. In hong kong, stocks ending the week lower by about a third of 1 . A little bit of uptick in chinas market today. The offshore yuan has been pretty calm. Includingd ftse not china bonds in the new index, but we also have Chinese Markets closed next week. Lets have a look at the overall state of chinas economy. More data released showing further downside coming through. We can seem inflation for august was down by 0. 8 , but industrial profits down by 2 on the year. That was after a gain in july. Bloomberg economic saying this points to further deterioration in the chinese economy and the need for more targeted stimulus. This comes ahead of the golden week holiday where markets will be closed all of next week in china. Thank you so much. A 21 billiondollar wealth manager has Just Announced a venture to expand outside the u. S. The new venture will be headed in zurich. He spoke about trends in investing when it comes to private equity. She spoke to bloombergs dani burger. It add to the general theme of uncertainty. People are asking, is it brexit, corbyn, brexit and corbin . We have seen a number of clients choose to leave the u. K. For various european destinations. It is important member that from ournvestment standpoint, clients will be globally diversified across the regions. Seizing opportunities across the world. Certainly another trend within Family Offices is private equity. As this trend grows, do you think it is looking are these markets nearing a top . It is topical. You would be tempted to say that as the private equity market has risen 7. 5 times since the turnofthecentury. There are trillions of dollars invested in private equity. Dry powder. That being said, we think there are a lot of opportunities and coinvestments and valuations. The average is 11. 15 that is being paid below the 2007 highs. Where are the opportunities . We divide investments into three categories, especially when it comes to this stage in the market. We look at active managers who concentrate their portfolio. Taking the professionalism inhouse and using their expertise. The bucket we used to access directcurrent investments would be the coinvestments alongside some of our limited partnership investments, using the scale to pass on access and costsaving to our clients. The final where i would say is the most risky at the moment is standalone direct deals. That is an area we are being quite selective on. Impact investing is another thing you have been focused on. Where do you see the path of flow . It is a hot topic for sure. The impact offering is core to what we do. Billion dedicated to impact strategy. See impact up until now has been a separate category to traditional investing. Weour investment decisions, have been weaving impact considerations into all decisions we make. That is the future. I think it is going to be interesting to see what happens in the next downturn. When theember in 2008 financial crisis hit, often the asact themes were seen discretionary by the large Asset Managers and banks. That will change this time. It is going to be extremely hard to convince the credits on berg thunberg generation it should not be a core part of any portfolio. Where to put cash right now for really any investor is a difficult question. What do you say to clients going through that struggle . It is a difficult situation. Given the negative yield , the u. S. T in europe has been an obvious place in which to allocate capital. Our capital55 of currently to the u. S. , not having been allocated there has been tarnished over the past few years. There are also cash alternatives, including invoice that many yields plus of our clients have access to. I should not forget to say the opportunity cost of upholding gold has gone away for many clients moving into gold. That was robert weeber. Now lets get the Bloomberg Business flash. Wework is cutting costs as it refocuses on core business. Executiveschief private jet being sold as the company had to postpone its ipo over concerns over valuation. Wework is also selling three side businesses. A job cut could measure in the thousands. Slumping, the latest of Tech Startups to slump. The companys chief executive remains upbeat about the future. People either see it or they dont. Theres believers and nonbelievers. The people that have believed and invest for every round for eight years now have been very happy. We are going to continue to find Capital Partners to invest in us. Is set tosuisse decide on the fate of a surveillance probe. Former Wealth Management had was followed. The findings will come next week. That is your bloomberg is flash. Flash. Mberg business approachder the new being looked into by the fed, the central bank would commit to making up for deviations from the inflation target. Clear it up says these strategies lead to better average performance of the economy in many macroeconomic models. Weighing in on the feds latest course of action, howard marks told bloomberg rate cuts are not needed. Stimulative action should be taken by the fed when the grow ands failing to produce jobs. That should be the formula. Right now it is growing and making jobs. It is producing deficits and lowering rates the right thing to do when we are in record territory for economic expansion . I dont think so. The Canadian Imperial Bank of commercejeremy stetch is still with us. We are likely to see one more rate cut before the end of the year, but we are not expecting the trend to amplify through the course of 2020. We are still expecting a moderation in terms of the macro cycle. A legacy of that physical easement. Expecting the fed to go gung ho here in terms of additional stimulus. Is because of the strength of the u. S. Economy . The dot might diverge. Jeremy i do not think it is purely looking at the dots. The majority of the Federal Reserve are not necessarily on board with the easing somewhat advise. Certainly that the president would like. He would prefer. It is more a function of whether the economy needs it. Whether we actually are going to see material inflation. In a sense, we have all been operating in the world over the course of our decade or two we have been following inflation targeting systems. We are starting to question that methodology. That is an interesting byproduct of this particular crisis. Overall, we dont see the need or the benefit in terms of slashing rates more aggressively. If you look at what clear da is is saying clari saying, that is dovish. It is. If you take it to the nth degree and saying the fed are changing their mantra to say we can focus more on the symmetrical data of the inflation target, not an absolute level or a threshold we want to move toward, that does suggest the fed are going to be paired to allow inflation for a projected period. The labor market is remarkably tight. Cautious into be terms of how that is going to play out. We have been trying to ascertain how the relationship has changed. In a sense, the Central Banks have to be mindful of over stoking the boiler in terms of the rate cut story. Dollarwhy do you see the showing weakness after 2019 if you do think the fed is going to fall after december . It is an interesting point. We are starting to get into that more significant dynamic from the political cycle in the u. S. The twin deficit issues are still real and live concerns for investors. The fiscal deficit is continuing. The faster growth trajectory would have made up the impact of the production and revenues from the tax cuts. Has proved to be misplaced. We have the deficits. It may well be the case investors are starting to question whether the potential are available yield pickups is sufficient for some of those risks. Nejra if the dollar weakens, what currencies are favored . Jeremy if the dollar weakens we are going to see a scenario where currency numbers will get better. Even in the context of the euro, the risks, there are some question marks whether it is a good decision looking into euro positions next year. Stays withmy stetch us. And Andrew Wilson ahead of the goebel fixed income joins me from 7 00 a. M. London time. 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. President trump lashed out at a whistleblower whose complaint is fueling the congressional impeachment probe. It made the comments at a closeddoor meeting. Bloomberg obtained the video. I want to know the person who gave the whistleblower the information. We used to handle spies a little differently. Nancy pelosi accuses the administration of a coverup. The New York Times is reporting that whistleblower is a cia officer assigned to the white house. Carrie lam is taking blame for the unrest rocking the city. That is as the government is looking to reduce tensions ahead of the peoples were public 70th anniversary. Police have granted an application for a rally on saturday. Organizers of a march on sunday say they will go ahead without police approval. A series ofeleased tax cuts in an effort by president macron to appease the yellow vest protesters. The lowest income tax rate will be cut by three points to 11 . Saudi arabia is dropping its strict dress code for foreign women in an attempt to boost tourism as it tries to diversify the economy. Foreign women will not have to where the mandatory cloak that has been required for decades. It is optional. In the going to be clear online applications. Some women would like to experience it. Some will decide not to. Global news, 24 hours a day on air and tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. Nejra lets check on the markets around the world. Off with you. Indian stocks slumping slightly after gaining for the week. Why are we ending on the back foot . Well, you have seen stimulus from the finance minister. Some drops have been seeing over the last few days, yesterday session ended on a good note. Futures and options on a positive note. We are still looking at levels between 11500 and 11,600. Session, notodays contributing a whole lot. That is positive trade. Two stocks, one being nestle, that is something you need to keep an eye on. The other one is yes bank. That stock gradually decreasing holdings. Stock is under pressure in the last five sessions. Stocks elsewhere under pressure, particularly japan. There are a lot of technical aspects to this. Maybe some window dressing going on. Japan really under pressure today. We still see the nikkei down more than 1 . South korea also under pressure today. Allgmm equities screen, those asian markets in decline. When it comes to foreign exchange, its not hitting the top words for gmm. Consumer confidence disappointing. The aussie dollar to the upside, up by 0. 2 . There is some trade optimism. Bonds continues to be japan. Heavy foreign selling. A lot of that might be technical. We have to take some of that with a grain of salt. I also want to talk about whats going on in the euro. I tracked the eurodollar one month implied volatility and just recently, this option has started to capture both the ecb meeting and brexit. You would think traders would be really concerned. Above that yellow line means traders are hedging. They think volatility is going to be higher than it currently is. Yellow thinks they mean volatility is going to be subdued from here on out. Traders still below that yellow line thinking that volatility to come is not going to be as high. Perhaps its just because if you bet against titan volatility, it has not work that well against tightened volatility, it has not work that well. Nejra the eu sees little chance for a brexit deal in october. It thinks that u. K. Has failed to present any serious proposal. Boris johnsons rhetoric is damaging to the negotiation. On the continent, the ecb stimulus continues to split opinions. Not, quote, were such a big package. There is still room for further rate cuts if needed. Jeremy stretch is still with us. He is head of fx strategy there. If you take a look at the chart, the euro is set to test multiyear lows. It does look to be the path of least resistance. I think we are getting toward the 2017 levels. The question is, is it a case of extending negativity into next year . Despite comments from philip lane, im not convinced we are going to see significant and aggressive monetary easing. Despite the fact we have openended qe, it is not quite as aggressive as some might have feared. We are also getting closer to the debate on fiscal expanse of europe becoming a more realistic scenario. The efficacy of the black zero policy has really ruled german Macro Economic policy for the last decade. I think that underlines the fact that the monetary mix is starting to get nearer to change. Thats going to be quite important for the euro zone trajectory in the euro trajectory as we move into 2020. Nejra are euro traders already pricing that in . Jeremy we are starting to see more debate. We are still away from actually getting to the conclusion. We can see tax cuts have been proposed in microns budget as well. Germany is the architect of the driving force of europe. We are still away from seeing the physicality of some degree of physical easing. Markets will start to preempt that an price that in as we consider the outlook for 2020. Nejra that does mean significant upside. Think the policy takes away the hawkish dissent and actually be could see a much more dovish ecb . Or do you think even if that happens it does not push the euro lower . It is interesting, as we see one of the hawks leaving, it is another german member who has speedily in the context of the broader perspective. She was not only hawk. Central bank owners from france and the netherlands governors from france and the netherlands, but of course, we should not lose that of the fact we are in the fact we are in a transitional phase anyway. We are seeing the transition from mr. Draghi to Christine Lagarde. There is an important dynamic change which is going to occur here. Because of the fact Christine Lagarde is not an economist in the way most Central Banks are normally, normal governors are, its going to be interesting to see whether there is going to be a greater reliance on the chief economist. We need to focus more on philip lane. Andas talking about cuts places like switzerland. There is still some debate whether we could use that as the template. I am not sure necessarily additional monetary stimulus is going to drive the euro economy forward. Euro volatility seems to be suppressed even with risk. Is that because all the volatility is just going to play out in sterling or eurosterling . Function of the fact the market has downplayed, in reality, most people are thinking that looks less likely to be the outcome now. It seems increasingly probable despite with the Prime Minister may say that there is an extension that takes us to that one month volatility period. Thank you so much for joining us on the show this morning. Saudi arabia, will allow tourists easy access, exempting them from the dress code that has long been a hallmark of the society. The chair of the Study Committee for tourism told bloomberg how the country will change. To become one of the top five destinations locally. Jobs, the bring contribution to jobs in saudi today to 10 , the Global Outlook by 2030. Lets talk about investment opportunities. In saudinvestors arabia, the government is inviting them. What kind of opportunities will they be a label will they be able to put stake in . We are targeting the tourist economy of saudi arabia. Have to deliver and achieve 2030,0 million visits by we assessed the gap in the 215hts and we have a gap of million seats. It comes to airports, we need to exceed our capacity by about 30 . Airports. He main this is a massive opportunity for construction companies, engineering companies, many, many investors. Hotels, lifestyle, malls, so on and so forth. 500,000 in 2030. 250 plane to be delivered by the government. The 250,000 keys will come from the private sector. We encourage the private sector and the investors to explore the massive amount of opportunity as a result of opening tourism to the world. If i am a female visitor into saudi arabia, what should i expect in terms of how i should behave, how i should dress . When we go to any country, we respect the culture of those countries. Nonsaudi women live in this country for many many years, they live normal in this country. Abbaye is optional. The is going to be clear in visa application. 28 for 49rom countries. Canrest of countries, they you will see the dress code. Some nonsaudi women would like to experience it. They see it as part of the culture. Some will decide not to. That was the chairman of the Saudi Commission for tourism and national heritage. Coming up, gaining momentum after hedge funds were hammered by the stockmarket reversal. Their favorite strategy is showing signs of life again. That is next. When youre traveling to work, tune into blue bird radio Bloomberg Radio. Nejra this is bloomberg daybreak europe. Funds dropped 5 in the first two beaks of september. The sudden reversal has quietly ended with more is bloombergs dani burger. What have you found . Hedge funds love momentum. You can see how much that heard them over this month. I have the returns of the big guys we have heard of. People familiar telling bloomberg, a big loss here. Due to the fall in momentum. There is reason for hedge funds to have reprieved. It looks like momentum have cap has come back. This is the global momentum factor. It is the top performer, up 1. 6 , a value which is cheaper stocks, everyone said this was going to be its time to shine, its not doing as well basically that. A lot of people have owed this to the rally in bonds, back and forth, dragging value with. I want to bring up an interesting argument by barclays which says it is all about taxes. There is a form of tax efficient settling that you have to sell the losers. Do tax on momentum to efficient investing. Here in late august, we hear trump says he is thinking of cutting the Capital Gains tax. He can do it without congress. Thats where you see momentum drop off. When the thought is donald trump rules out cutting the Capital Gains tax. Is perhapsay here this was not some big reversal, just a temporary blip driven by technical factors. Now lets get the Bloomberg Business flash. Wework is cutting costs to refocus on its core business. It is selling the former chief executives private jet after the company had to postpone its ipo amid concerns over valuation. Wework is also selling three side businesses and we are being told it may turn to job cuts. Peloton slumping on its debut, the latest in Tech Startups to slump on third day trading. The Fitness Company raised 1. 1 billion in its ipo and the chief executive remains up the about the future. People either see it or they dont. There is believers and nonbelievers. The people that have believed, for every one of the rounds for eight years now, have been very happy. Withe going to continue Capital Partners who invest in us. Credit suisse is set to decide on the fate of top executives implicated in a surveillance probe. It is looking to find out who is responsible for having him followed. The board will meet to review the findings. That is your Bloomberg Business flash. Lets focus on green investing. How can investors align their portfolios with the u. N. Sustainable Development Goals . Next guest hides up e esg management. Tell us about that. Connotative quantitative aspect is in an interesting place. Into therner insights sustainability orientation of a company. Able tore investors isolate specific factors in esg . Specific parts of companies or companies they want in their portfolio . It is a variety of different things. We have clients working on the divestment approach, including Certain Companies based on the activities they are participating in. We are seeing an increasing demand utilizing techniques to identify the companies that are being esg sustainability leaders. More of that positive integration approach is certainly what we are seeing demand for. The best in class approach where you dont decide not to buy Tobacco Companies or oil companies, but you look or every sector for the best performing on esg metrics . That is what it is. Even within different sectors, we looked at different aspects. Aspects we are looking for for Energy Companies and utilities was really the most impactful material things from an esg perspective for them are quite different for Consumer Services companies. We have been able to take a nuanced approach to identify the issues that matter. Nejra what questions do you get from investors . All sorts of things. Do you see it as a risk control standpoint . , with sustainable Development Goals, what is the best way to adopt principles into the investment portfolio . Nejra and the answer is . I have been taking an approach to identify the companies that are really positively contributing to the sustainable goals and also identifying the companies that are negatively contributing. Reallocating capital away from the worst actors to the better performing ones. Nejra do you get a sense from investors they really want esg to be in the dna of their olio now . Definitely. Across the board, predominantly we have significant u. S. Investors, significant european investors that really want to see this elevated to the objective function. It used to be a conversation of, can i add alpha and do esg . Nowadays, esg is almost being elevated comparable to alpha. Nejra talk to me about the alpha. Is there significant generation, or is it more nuanced . It is more nuanced. We certainly have always had governance related and management quality factors in our models since the firms inception. We see over time those companies that are well governed outperform. When you look at esg broadly, you have to get more granular to extract this important information. For example, we certainly see that esg controversy can really drive returns in the short term and have a company is managing its human capital, natural resources, really does promote longterm growth over the long run. Lets say an esg portfolio performs in lines with another. Are investors happy with that or do they want the alpha . Outofcourt finding has been you certainly can deliver Strong Financial returns on notably improving the esg and sustainability profile of a portfolio. Investors are starting to grasp that. That is a great starting point. There does seem to be this ongoing question of, is alpha they are . Alpha there . We have a multifactor approach to really isolate what is esg compared to what is good earnings, good management, well governed companies, lower stock price volatility, you know. Take a multifactor approach to isolate the core version of esg. What distinctions do you see between investors from different types of organizations or geographically . Is there a distinction . There definitely is. That is why we place a third of our assets in europe. I have had the opportunity to go to some of the scandinavian countries the other day. Mentality is much stronger on the impact side, wanting not only to utilize esg as a lens through which to make a better investment decision, but really to drive impact and drive change with capital. In the u. S. , you do see that. There are certain states where you see that more predominantly than others. Then it really gets into investors pacific release in values. We want to take more of a defenseman approach divestment approach. Nejra great to have you on the show. Laina draeger. Coming up in the next hour, Andrew Wilson and cohead of Global Fixed Income joins me on the show. A quick mention of a special a quick mention of a special program coming up. We go inside the protests in hong kong. We talked to key players unearthing the cause of the unrest and looking at possible solutions to a crisis reddening the future of the city threatening the future of the city. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Good morning from a bloombergs European Headquarters in london. This is Bloomberg Markets european open. This is bloomberg daybreak europe. President trump lashes out as a sistleblower complaint testimony inflation overhaul. Richard clara suggests the central bank is seriously considering a shift in its approach to inflation. Ipo slump. Peloton becomes the latest major debut to fall on his face. Hours later, endeavor pulls its offering. Welcome to daybreak europe. We definitely saw some risk off yesterday with investors trying to come to grips with the implications. Futures turning positive in the u. S. But also in europe. Yesterday, we saw some positives in european equities anyway. Taking a look at the bond markets, we saw treasury yields tumble along with u. S. Equities yesterday. The 10 year treasury yield steadying up a bit and we push up slightly above 170 today. Not a lot of action in btp and bonds and the futures at the moment. For now, lets check in on the markets in asia. Juliette saly in singapore has more. Good to see you. Looks like the weakness still continuing in asia despite the tick up we have seen elsewhere. Juliette when we spoke about an hour ago, the nikkei was off by more than 1 . Worth noting that a lot of the weakness in japanese stocks were due to the fact that a number of stocks have been trading without rights to their dividend. Looks like asian stocks will round out the week with their worst loss since early august. Hit by microns forecast. China seeing a little bit of buying, perhaps not that surprising because remember, china will be closed on next week for the golden week holiday. Kongsave a look at hong economy, because we flagged yesterday that it was likely we were going to see some more downbeat data in terms of trade and thats exactly what we saw. We saw exports down in august, falling 1. 6 from a year earlier. This drop in exports is the 10th monthly decline in a row for hong kong. The government has warned that exports could actually worsen or remain week and worsen in the near term. Are impacted not only by what you have seen with the u. S. China trade dispute globally but hong kong has its own issues. We are now only one quarter away from a technical recession in hong kong. President trump has used a closeddoor meeting with u. S. Diplomats to disparage a whistleblower complaint over his controversial phone call with ukraines president. The u. S. Leader says the whistleblower had no direct knowledge and was almost a spy. The complaint alleges that the white house attempted to lock down records of the ukraine call and could offer a roadmap for the impeachment call. Nancy pelosi quickly raised the specter of a white house cover. Tell us what we have learned. The drama continues in d. C. This could be going on for weeks, if not months. Yesterday, we got the revealed complaint from the whistleblower and two really important things. Number is alleged that a of government officials were surprised and quite shocked about this phone call between President Trump and his ukrainian counterpart on july 25. That resulted in them wanting to lock down this call. This is now possibly going to be a roadmap for what the House Intelligence Committee needs to investigate and who they need to investigate. A number of people were mentioned as well in this complaint, including the attorney general and rudy giuliani. Nejra what are people in d. C. Saying about this . Its not just d. C. Trump had a closeddoor meeting with u. S. Diplomats in new york. He equated the whistleblower to a spy. I want to know, who is the person that came to whistleblowe . Who is the person that gave the whistleblower that information . That is close to eight spy a spy. In the olden days, we use to handle it a little bit differently. Republicans and democrats will be split on this. A lot of democrats will tell you it was a whistleblower. This is first, second, or third time hearing this over. The democrats saying this is a turning point. Nancy pelosi even raising the specter of this being a white house cover. Nejra where does this go from here in terms of the roadmap to impeachment . The key is that the house intelligence chairman was in contact with the whistleblowers lawyers. We can hear from the whistleblower as early as possibly next weekend i think that will be crucial. Nejra thank you so much for that update. The fed is considering altering its strategy for achieving price stability, including according to the vice chairman. The central bank would commit to making up for past deviations from its 2 inflation target instead of treating misses of the goal as bygones, as it does now. Says clarida says howard marks told bloomberg rate cuts are not needed. Stimulate of action should be taken, in my opinion, by the fed when the economy is failing to grow and thus produce jobs. I think that should be the formula. Right now, it is growing and producing jobs. Is this the time to run a deficit . Is producing deficits and lowering rates the right thing to do when we are in record territory for an economic expansion . I dont think so. Nejra joining us now is Andrew Wilson, Goldman Sachs Asset Management. Great to have you with us this morning. Do you agree with howard marks . I think it is interesting because we saw last week that the fed is divided. If you focus on just the consumer, it is doing very well and the labor market is very tight. We have good wage gains. If you just look at the consumer in the u. S. , you will say, the economy is doing really well. If you look at the trade situation, investment, the picture looks much different. Our own view is that the economy is doing reasonably well. It is growing around trend and to some extent, the fed is being isrced into some of th easing. Nejra does the fed need to try and steepen the yield curve . Its not so much about the yield curve but we need to look at the differential between japanese rates and u. S. Rates. They are attracting a flow of capital, which means the dollar appreciates. It is sort of a balancing act that the fed is trying to walk here as they see capital coming into the u. S. Nejra so the fed is reluctant to ease, in your view. Do you think that it will have to capitulate to the markets may be in 2020, if not as much in 2019 . It is going to come down to the trade situation. The global economy, certainly the u. S. Economy is that at an Inflection Point. Do we stabilize and pick up again or continue to deteriorate . You have to look at what is happening in the external markets, Manufacturing Sector is weak, European Growth continues to disappoint, japan is soft, china falling a lot. All of those things. 2 may be a slowing global economy. To maybeu. S. Point a slowing global economy. Nejra do you see this spilling over into services in the u. S. And affecting the labor market . I think it is unlikely. What is unusual about this cycle , well, what is most unusual is the fact that the fed has been very preemptive in cutting interest rates, providing that stimulus. We saw the Housing Market in the u. S. Start to pick up a little bit, not surprising given that Mortgage Rates have start to come down. The consumer is in good enough shape that the growth carries on. Nejra how should one invest in treasuries, given everything you said . We look at it more as a relative value trade at the moment. That spread that you pick up is generous enough to mean that u. S. Yields are likely to outperform. I said the funk that the fed was a reluctant easer. Investorsa lot of agree with what you are saying and looking at that rate differential, does that continue to put downward pressure on u. S. Yields, even if the differential holds up . Correct. There is still a very good pickup there. I think you see that capital flow into the u. S. The spread compresses, which is why i think the yield curve as a measure is not as precise as it has been in the past. The u. S. Market is a highyield er now. I would not focus as much on the slope of the yield curve. Nejra how much are you taking into account the drama we have seen in the repo market and thinking that might distort some of the things we have talked about . It certainly makes the transition mechanism quite difficult. Last week was quite a surprise in terms of the volatility. For the fed, it was a bit of a signal that hold on, we need to inject more liquidity. We have seen them react quite significantly in the last several days. We have those bubbles coming back down to sort of more normal levels. We know there is some pressures there. Yearend, very significant pressures. Are we going to have the mechanisms in place to ensure that we dont get really tight markets at the end of the year . It is certainly inducing volatility and creates an certainty. For investors that are uncertainty. For investors that are heavily leveraged, it makes a real impact. Nejra in terms of the mechanisms that need to be put in place that you referred to, do you anticipate the fed, we have been told, dont call it qe whatever you do. Do you expect organic Balance Sheet growth from the fed . You have to differentiate qe policy designed to generate growth versus ensuring that the money markets operate effectively, the repo markets are there, and the transition of fed policy is effective. I think some Balance Sheet expansion, as we have seen in the past few days, is inevitable in terms of ensuring enough liquidity. We have seen both overnight operations and shortterm operations. I think that is what we will be looking for for yearend, is there sufficient liquidity to prevent these kinds of spikes . Nejra will that Balance Sheet action impact your expectations for treasury yield at all . No. This is a very technical operation. I think in the short term, these kind of things dont really drive longerterm drudgery yields treasury yields. It is really more a technical policy. Nejra Andrew Wilson from Goldman Sachs Asset Management stays with us. Lets get the bloomberg first word news with Annabelle Droulers and hong kong in hong kong. The eu is losing faith that Prime Minister Boris Johnson can deliver a deal by the october 31 deadline. We have learned they have all but given up on a breakthrough in the next five weeks. Meanwhile, the uks spending watchdog says drug supplies are not ready for a no deal brexit. Stockpiles are at a lower level now than they were before the original deadline. Carrie lam is taking blame for the entire and rest rocking the city unrest rocking the city as the government looks to reduce tensions. Police have granted an application for a rally on saturday, but organizers who march on sunday say they will go ahead without police approval. France has released a 2020 budget, and will deliver a series of tax cuts. According to the spending plan, the lowest income tax rate will be cut by three points to 11 . That means a slower progress in cutting the nations budget deficit. Saudi arabia is dropping its strict dress code for foreign women as it attempts to boost tourism as it tries to diversify the economy away from fossil fuels. Foreign women will not have to wear the clothes that have been mandatory for decades. It is optional. This is going to be clear in the online visa applications. Men, you know, i know saudi would like to experience it and they see it as a mark of the culture. Some or not to wear it and this is their life. Global news 24 hours a day, onair and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra Annabelle Droulers in hong kong, thank you so much. Commerzbank downgrades its revenue outlook as the Bank Confirms a strategy rebound that has underwhelmed investors. We speak to the cfo, stephan engels. Dont miss that interview at 8 00 a. M. London time. When youre going to work, tune into Bloomberg Radio. This is bloomberg. 7 18 a. M. In london, 41 minutes away from the start of cash equity trading in europe. Lets get the Bloomberg Business flash. Heres Annabelle Droulers in hong kong. Is cutting costs as it refocuses on its core business. It is selling the former chief executives private chess. The company has postponed its ipo amid concerns over its evaluation. They are also selling three side businesses. It may also turn to job cuts that could number in the thousands. Peloton is slumping on its debut yesterday. It is the latest in a long line of text based startups to flop on its first day of trading. While the Fitness Company raised over 1. 1 billion in its ipo in the companys chief executive semains positive about peloton future. People either see it or they dont. The are believers and nonbelievers. People that have invested in all the rounds for eight years now have been very happy. We will continue to delight the Capital Partners who invest in us. Credit suisse is set to decide on the fate of top executives implicated in a surveillance probe. It is looking to find out who was responsible for having the eadmer World Management h the board will review meet to review the findings. Delta airlines is dramatically expanding its south american footprint. It is agreeing to eight 2. 3 billion deal with another airline, giving it a 20 stake in latin americas largest carrier. Work for as legal similar plan. Nejra thank you so much. Lets get back to Andrew Wilson from Goldman Sachs Asset Management. We heard from the ecb chief economist yesterday, saying that there is room for further rate cuts if needed. What the ecb announced, not such a big stimulus package. Do you see rates going much more negative in europe . No. They have obviously cut rates. What was interesting around that announcement was frankly the openended quantitative easing announcement. I think we are getting towards the end of the ability for the ecb to cut interest rates. Internally, we have a lot of discussions around the reversal rate. At what point do negative rates become harmful . I think we are getting towards the end of it. They have to leave the door open and there is certainly scope to cut more. There is an interesting pivot towards pushing governments to know more fiscal to do more fiscal. Incentiveprovides an for governments to do norma do more. Mario draghi was surprisingly correct around the need for fiscal policy to take some of the load here. It cannot be just on interest rates. Nejra how close are we to that Inflection Point where negative rates are more harmful than doing good . Are we there yet . I dont know if we are there yet but we are sort of close. It is hard to know. It is going to be a gradual thing. Asdepends on the economies well and to the extent that cash is used more or less. We think somewhere in that to 1 in the case of europe. It is difficult to define. Do you want to be pushing the limits of that . We think there may be some negative consequences. That is why this sort of emphasis is going on fiscal policy, because the ecb board is aware that they are getting close. To this kind of level. We dont know. This is New Territory after all. Nejra is the fiscal policy in any way priced into the bond markets right now or is it something investors are waiting and hoping for . I do not think it is priced in. What scope is there to do that fiscal policy and to what extent for some of the core countries, particularly germany and france . I think at the moment, european investors are little bit that they will follow through with significant fiscal policy. At this stage, people are not looking for it. I think it would be greeted positively because of the chance to get out of this lowinflation world we are stuck in in europe. Nejra what do you do as an investor . I think there is a bit of a misnomer of negative rates getting negative returns. Managerss, that is not what we do. There is the opportunity for negative yields to become more negative. I think importantly, the slope of the yield curve, you can roll down a curve and still generate returns even though it is negative. There are ways to generate returns. We focus more on the relative value opportunities. I was talking earlier about those opportunities, europe versus the u. S. It is certainly not a buy and hold type market but there are still ways to generate returns in european bonds. Investor,an active goldman is bringing its american etf battle plan to europe. It is multi factor. Correct. Yesterday was a very exciting day for us. We launched our first etf, u. S. Largecap. It is off of the back of our business in the u. S. We are not new to this business. We have raised 13 billion. We are bringing that expertise and experience to europe. This sort of multi factor approach, so smart investing made simple, is really a strap line here. The idea is that you can focused and have aactors lower volatility portfolio. You would still expect to at least match and maybe even outperform. An index nejra is there a difference between what european investors are expecting from the investorsat american are expecting . No. The u. S. Market has done very well and we expect that to continue. That is first. There is a range of etfs behind that catering to some of the demands we see in europe. We will be launching several more of these etfs. We are making a significant investment in terms of providing answers and options for european investors. Nejra whats interesting just a generally with etfs is the fact that with bonds, it is a little bit more behind than what we are seeing in equities. Are you getting more demand from investors for bond etfs and what are you hearing from them . Yes, clearly it started in the bond markets. I think there will be increasing demand for bond etfs. Using our smart meter approach, where are there opportunities to generate returns . Where are there solutions that we can provide to investors on a our etf cost basis via platforms . European investors are hungry for yields. There is the expectation that european yields will be low or negative for a prolonged time. We are seeing increasing demand for any products that can generate positive returns. As a bond investor, looking at the negative yields on sort of core europe, the opportunity to generate positive returns is actually pretty interesting. Nejra great to have you with us. Andrew wilson, thank you so much for joining us today. Coming up, commerzbank downgrades its revenue outlook as it confirms a strategy revamp that has underwhelmed investors. We speak to the cfo, stephan engels. Do not miss that interview at 8 00 a. M. London time. That is it for bloomberg daybreak europe. We are in positive territory on equity futures. uro stoxx 50 futures up 0. 3 after we saw quite a risk obsession in the u. S. Yesterday with investors grappling with the implications of the Political Risk over there. Tune into Bloomberg Radio live on your mobile device and dab digital in the london area. This is bloomberg. Anna good morning and welcome to Bloomberg Markets european open. We are live from our European Headquarters in london. I am anna edwards alongside matt miller in frankfurt. Got a new toppe dog . France is set to outpace germany in growth after its 2020 budget. It european futures higher. The open is less than 30 minutes away. Anna almost a