Enough support to finally get a deal over the line . A warm welcome to daybreak europe, and of course, it is not just 1 billion, it is 7. 5 billion worth of tariffs, your cheese, wine, aircraft, all more expensive. Lets have a look at the markets. The ftse is a personification of global slowdown and brexit risk, a toxic cocktail that has taken stocks with the biggest oneday drop since january 2016. I take you back to june 24. We dropped by 9 , and on brexit morning, we finished at 8 . That gives you a sense of just how big a move it was in the ftse. Do you want to buy . We have a number of people who have done the analysis. We will have that for you shortly. The s p 500, the first backtoback losses of more than 1 , recovery in the futures, but the first backtoback losses of more than 1 in 2019. 10year low in manufacturing. The fed are worrying. Debtegative yielding drops, and i will show you this chart later on. What does it do for gold . If there is a rate cut, what does that do to the market . We talk about that. A shakedown in the asian markets, the s p 500 really rattling the markets. We have the private payroll numbers, a day after manufacturing data was the lowest, so a fairly toxic cocktail. There are concerns this could be spreading, and therein is the point, the trade war drags on, and there are fears the fed will cut rates this month. We are seeing signs of the economy slowing somewhat, and we want to get Monetary Policy positioned to keep the economy growing at the same pace. We arewell, today, asking the question how far will the u. S. Go . You can join the debate. You can reach out to the team and myself. We are all there, and joining me now is maria, a senior asset strategist at state street. Maria, you know what shocks me more . We are shocked, shocked, that manufacturing has died in the United States, joining china and the eu. Are you shocked . Maria why are we shocked . Why are we surprised . We have had the trade war with us for a number of years. We see slowdown everywhere. Probably something to be expected. I agree with you. Manus with that in mind then, the question is this, my thought was there is a 75 probability in october. T october was near not supposed to be life. October was not supposed to be live. Are we getting ahead of ourselves . Data, the evolution of the trade war, the evolution of the escalation between the countries us, marija with veitmane with state street. You do not want to be away from your bloomberg screen. Radio, the chicago fed president , charlie evans, the central banking series in madrid. Do not miss the conversation, 7 30 a. M. I want to give get get you up to speed with your first word news. Here is a reporter from beijing. Reporter thanks, manus. Someh, one, and shes just of the products facing tariffs. It will come into force on scotch, wine, and shes just some of the tariffs just some of the products facing tariffs that will go into force on october 18. President trump is heading out again at House Intelligence Committee chairman adam schiff. He is seizing on revelations that schiff met with the whistleblower as part of the inquiry. Thep says this negates complaint. He is alleging the california democrat helped write to the initial complaint but did not provide any evidence. Helped write the initial complaint but do not provide any evidence. President trump he should resign in disgrace, and he should be charged with treason because he is making up the words of the president of the United States, not just the words but the meaning. Reporter in hong kong, unrest continues, and they are urging curfews. A protester was shot tuesday in some of the worst violence since protests began. Lawmakers are calling for a ban on Wearing Masks at public gatherings. Mope protests are planned over the weekend. The indonesian president is promising to have sweeping changes, a move that would deliver on some major items. O widodo also said they are not aligning with either the u. S. Or china in the trade war. indonesiaidodo wants to not have the trade war negatively impact our country. We have good relationships with the u. S. And china, and the most important thing is that our National Interest comes first. Reporter global news 24 hours a day, on air and tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. This is bloomberg. Manus thank you very much. Ja,guess this morning is mari a senior asset manager at state street. We are trying to put together the napoli of risk the panop oly of risk. How far will the u. S. Yield curve steepen . Anhave seen quite acceleration, two basis points to 12 basis points, and if you want to be long, as we go into 20 20, if there is a recession, this would be the best as we if there is a recession, this would be the best. How are you looking at the difference . Which plays better in your mind . A i actually have to say, we are quite a lot more optimistic than our colleague. Makeld probably try to some more positive by buys. I would probably look to buy them as we look at some sort of stabilization. I think in the mediumterm, it is important to realize that our central case is we are slowing, but we are not collapsing. We are not going into recession. What market indicators are suggesting, the market is really priced for quite a negative outcome. We are seeing sentiment being very depressed. We are seeing business sentiment, consumer sentiment, Investor Sentiment very depressed, going back to the 2008 levels. We see things being close to alltime highs, but i think a lot of venues are surprise. The market is already positioned defensively, and we will get some stabilization in economic data, and there is some kind of worry, a few green shoots, china slightly better, instead of bottoming out a little bit, a lot of support coming, but i would say we are going to slow down this recession, and it is a bit more optimistic than current market prices. Also, i would be on the opposite side of the trade you suggested, so i would start looking at buying stock. Manus ok, and i should be very, very clear. Citi did not say that was their base case. They said if we go into thession, in 2020, that is type of trade they would want to do. But you say it stocks are not expensive, valuation multiples in line with historical averages, so are you a buyer on the dip then with the glass halffull . Think i should be. If you simply look at the multiple, i prefer tiple, that p mul looks like we are around historical averages, but when there is lower inflation, stocks change. That has not happened the last few years. We are going into a trade war as affectson, and that some future earnings potential of the stock market. The discount,15 , but we think the market is of an effect 15 of the trade war. Should there be some resolution or some kind of calm down of this of calming down, and we are still far away from that, that discount can potentially come back. That is kind of the degree of the potential upside that we are seeing. As we discussed, it positive news,positive some resolution of trade wars, trade wars, so close to alltime highs, we see earnings are still there. They have not yet collapsed. Of a slowt seen kind recession coming in. We are seeing a little bit of slowdown, but yes, i think there are opportunities in the stock market. Manus it is interesting. I did a panel yesterday with a host of ceos in abu dhabi, and i asked, are you worried about a capital war or a trade war, and first of all, they tried to contain my enthusiasm of a capital war, and it is not an enthusiasm, but they were using words like, manus, this could be catastrophic. , lets get capitalitis call it that, that could be traumatic. Ija absolutely, it seems like a catastrophe. Calmer minds prevail, with the trade war in a kind of capital account, that would be that would be catastrophic. Maybe just acknowledging how catastrophic it is could potentially stop it, if people realize it is to no ones benefit. I think we are beginning to move away from this very early trade war, saying trade wars can be won, and we see both sides suffering with the trade war, and the capital war would be even worse. A couple of examples we have seen so far, how damaging trade wars can be, and it could potentially stop further escalation. Manus yes, and the other number thrown around yesterday was cost 1500,ill versus the tax break, which is 1300, and we are now in a negative net because of the trade wars. Veitmane from state street. Coming up on the show, 28 days ago and co. , Boris Johnsons new brexit faces parliament, and the eu says there is still a lot of work to do on the irish backstop. More brexit. Coming up, we will speak to the vice chairman of goldman sachs, and you can see that interview at 1 30 london time. This is bloomberg. Cant you see your business being disrupted . 6 17 int is just london. This is daybreak europe, and i am manus cranny in dubai. Global growth concerns spilling over for a third day for asian stocks, the nikkei 225 down close to 2 , also lows of the session here, but that yen strength certainly playing an issue, and the hang seng doing better, but we had that nasty, nasty retail for the month of august, contracting for a seventh straight month for retail sales as the protests go on, and jakarta is better. There was the interview with the odo saying joko wid reforms is what he wants, and after a selloff when it comes to japanese bonds, we are seeing a top four yields and following the global bond rally once again. Yields andr following the global bond rally once again. This chart says it all. It was bad, record slump, falling 23 percent. The government said they would be in permitting possibly more stimulus measures if needed, but you have got jewelry sales fallen off the cliff, and now there are some growing calls of adding curfews as well to try to control the unrest in the city, so potentially, this could get worse, and more pain ahead. Manus . Outs or we could send rishaad to help out the retail sales. Luxurylooking good in there in hong kong. Lets get your business flash. Selina wang is standing by. Selina thank you, manus. Tesla has failed to live up to , and shareshype sink as they fell short of the chief executives much hyped 100,000 metric, and they say tesla is relying too much on cheaper models to grow. And yesterday, the u. S. Auto sales were as bad as it were the day before, ford sales just over 5 , coming in better than estimates, and Fiat Chrysler and general motors, gm had a Strong Quarter while fiat sales were basically flat, and that is your Bloomberg Business flash. Manus . Manus selina wang in beijing. The british Prime Minister is optimistic that he has got enough support from hardline euro skeptics to finally get a deal over the line. Speaking at the conservative party conference, the Prime Minister outline plans that would see Northern Ireland staying in the Single Market for goods and a customs union. Johnson we will under no circumstances have checks at or near the border in Northern Ireland. We will respect the Peace Process and the good friday process ofnd by a renewable democratic consent by the executive and the assembly of Northern Ireland, we will go further and protect the existing regulatory arrangements for farmers and businesses on both sides of the border. Atus a significant shift conference yesterday from Boris Johnson. Over in brussels, the eu welcomed some of the concessions that the u. K. Propose, but it is clear, the plan is far from acceptable in other areas. There is be frank, lots of work that still needs to be done to reach and to fulfill the backstop, no border, the Northern Ireland economy, and protecting the Single Market that we are protecting the consumer, the citizens, and the businesses inside the Single Market of the member states. Manus our reporter is in brussels for us. Good to see you this morning. Boris johnson has his plan, and does it get us closer to a deal . It is a regional border, is my reading, into the irish sea . Reporter that is right. He accepts that is going to happen. Politically, what he is trying to do here is say i was able to downscale, and i did what theresa may was not able to do, which is why my deal should go through. When you look at the european response, they had been waiting for weeks for these proposals to be put on the table. We heard from jeanclaude , ander and Michel Barnier this is something that they still need to work on. It is not good enough, and it is not going to come in just yet, what we are actually expected to have more negotiations this week, and this is key, because at this point, manus, the European Union does not want to be seen as being unwilling to engage with the united kingdom. They want to be seen as looking at this hard and trying to get this deal done. It is also interesting that Boris Johnson spoke to Angela Merkel yesterday. The germans have always been more willing to listen, and, of course, Angela Merkel has always said she would like to have a deal for everyone and that everyone should work to get a deal done. Maria, thank you very much. Our brussels reporter following the brexits story. Is still with us. It was nine days of negotiating and no deal at all, and getting europeans at the table, which is i am prepared to shift the backstop. How do you interpret the nuances of the past 24 hours . Yes, i think that is right. It is the first kind of realistic proposal in a long time, and europeans will look at this, and i think it is quite important for europe. It needs to be legally binding and operable. I think the proposal, as it stands right now, it probably , and there are a few things that need to be kind of discussed and negotiated and see europe get more comfortable with it, how legally binding this proposal is. I think my reading so far is it is not, but probably that is a basis for negotiations. This is probably as encouraging as we could have hoped for. A proposal coming from britain as a basis for negotiations. I will probably leave it at that. Manus i quite like the use of language, about downscaling the backstop, but i want to show you upscaling. To me, there was something very interesting about the volume and the ftse yesterday, and i think it is global and brexit. Look at this. This is the volume, records, the second highest volume we have ever seen. Now, what i want to do is i really want to test your resolve. Three and a quarter percent yesterday, the biggest drop since june 2016. I take you back to that morning. Live, down 9 . What happened yesterday . Why were we doing this so veer lately yesterday in the u. K. Lently in the u. K. . World was onhole sale, selling off, and the u. K. Probably more, but the whole world was on sale. Itondly, i would have to say is very difficult to find a longterm investor right now who wants to take a position in u. K. Stocks either way. Very, very concerned about uncertainty, about politics. Binary,ee it is quite so it is less about u. K. Fundamentals and more about will there be a deal, will there not be a deal, so longterm investors are shying away from the market, so we think they are probably holding i holding a benchmark position for staying away from the market. To maybettributable like shortterm traders and speculators and kind of kneejerk reactions. I would not worry too much about longterm investors about the u. K. I think that is probably overstating it. And you can tell the contrarians have arrived. I am about to change some money into sterling. Street. From state coming up, all that is good in life comes with a price. Tariffs slapped on cheese and olives. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Bloomberg is daybreak europe, and i am manus cranny. Lets check the markets around the world. We have a reporter in dubai and one in london. Stocks gaining for three straight weeks. The momentum is there. How do you reckon that streak is going to go . They have turned. What turned sentiment . Reporter well, manus, good morning to you, as well. I reckon the same problems plaguing everybody, the Global Markets pulling back, and i think the last three days, we have had that plus the combination of banks, and this chart would show you how india after aneasures announcement, and then there was an uptick in the nifty, and then the last sessions, the shadow ,anking companies in india todays session down about half of 1 following the losses overnight, following losses yesterday, so we had a very good run the last three days, not particularly great for the indian markets. Back to you, manus. Manus all right, thank you very much. All in the party. Dani, lets bring it to you. Guest host said, the whole world was for sale yesterday, and my exuberance for the u. K. , and the eu, the discontent dani yes, and this is another day that we are seeing this, manus, like yesterday, when we had disappointing manufacturing data from the u. S. , today it being other data. This one beacon of hope, the u. S. Being steady, it looks like there is some weakness spilling across the different sectors, so asia really catching that cold. Essentially the entire equity index column is in the red, being led downwards by australia, declining more than 2 , as well as japan, the yen also affecting that, a oneweek high, and we are seeing bonds pick up again. Save havens, the interesting one being japanese 10year yields, which previously shot up, but now, declining as Global Growth worries come back in. I want to concentrate on what u. S. Options are looking like, because it will give us a good idea if u. S. Markets are, indeed, what is leading in this scenario, what is to come, and i am looking at the skew index, for extreme swings. At first glance, it looks very odd, selloff, another day of declines, but the skew is not there. People are not taking out insurance, expecting large rates of change, and other writs, betting on gamma, it actually makes sense in other words, betting on gamma, it actually makes sense to make another trade. That is why we do not see much reaction on the skew index, because, perhaps, things are going to look up, if anything else. Manus dani, thank you very much, and naraj shah in india. Lets get your first word news with selina wang in beijing. Thank you, manus. President trump is heading out again at intelligence chair adam schiff, not at the whistleblower at the heart of the inquiry. Trump says this invalidates ukraine, saying the california democrat helped write the original complaint but did not provide any evidence. President trump he should resign from office in disgrace, and, frankly, they should look at him for treason, because he is making up the words of the president of the United States, not only words but the meaning, and it is a disgrace. It should not be allowed to happen. Kong, unrestng continues, some urging for a curfew. This comes after a protester was shot on tuesday and some of the worst violence since protests began. Some lawmakers are calling on a ban on Wearing Masks at public gatherings. More protests are planned over the weekend. The u. S. Economy is strong, according to a fed president , the policymaker asked what keeps them up at night, and his answer weaker volatility what keeps him up at night, and his answer weaker volatility. Was veryass response effective. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. This is bloomberg. Manus . A, thank you. Selina wang in beijing. New tariffs on whiskey, french wine, and cheese, among other goods. As much as 7. 5 billion dollars of exports from the eu, and the 15yearlong battle over illegal aid to airbus. To retaliateected against the tariffs when the wto rules on the subsidies to boeing, but the european trade commissioner said the mutual countermeasures would only inflict damages on both sides of the atlantic. Our guest joins us. Who is going to be hit the hardest by the sanctions . I think those that will be hit hardest our consumers, not at the bottom of the consumption table but sort of middle and upper income consumers. That is because a lot of the stuff getting tariffs is stuff that is a little bit of a luxury consumption. Those are certainly the ones in the headlines. You are talking single malt scotch, french wine, french cheeses, things of that nature, the sort of stuff that if the trade war is driving you to drink, that is going to get a little more expensive, that sort of stuff, and the other thing is, frankly, because this is coming off of airbus, a levy on largescale planes from europe, which is pretty much airbus, so those are kind of the two real headlinegrabbing ones. A lot of the other stuff that might be, you know, down lower, you can think of kind of domestic cheaper things you can get from the u. S. , but it is hard to get single malt scotch from arizona or Something Like that. That pretty much comes from one place. Manus you are not wrong there. In terms of u. S. Competitors, who stands to benefit . Think it is i interesting here, because there are a couple of places i would go with this. One is that it is sort of a sector switch. If you are a fan of single malt scotch, you can kind of go into your bourbons, which is real american stuff, and so that is a switch. On the wine side, french wine, there is actually away the Trump Organization itself can benefit here. Now, that is not the genesis of this, but i do think it is interesting. Trump winery is a real place you can drive. If you get in your car from washington, d. C. , and drive two hours south to charlottesville, there is a nice plot of land they have a winery on, the Trump Organization, they make wine on, and i think there is a real buttery chardonnay you can get instead of the french one. I am sure people would recoil that you could do virginia wine instead of something out of bordeaux or burgundy, but it is an option. I think you will see some form of a sector switch though if these sort of things come up, and if the price is actually fully forwarded on to the consumer, it only makes sense to switch out one wine for the other, doesnt it . Manus it absolutely does. Derek, thank you very much. Cheese, things not going to be the same again, especially as it gets more expensive. Marija is from state street. A question. I dont know. Were you shocked by the 7. 5 billion, yes or no, and did you prepare at all the portfolio in any way in preparedness for the next tariff shoe to drop . Of all, to your first question, no, we were not shocked. Finding of subsidies did we adjust our portfolio . Probably not. We have been underweight for quite a while. Europe is probably going to suffer, so we were kind of there already. And in europe, very much and economic slowdown and stagnation, with potential support coming from the ecb, very little they can do at this stage, some fiscal stimulus. I would probably venture that they may be coming sooner rather and if we are seeing anything out of europe, europe is a weaker region. It is hard to see how we get out of there. , europe is very heavy on banks, so that is where we are concerned. Manus my pet hate. An interesting point of view, from a trading point of view, probably not the most lovable sector, but if we go back to what derek was talking about, the consumer, whether it is the highend consumer one, we are getting punched by hong kong, 26 , retail sales down by 26 . Luxury, are you disincentivize on luxury are you disincentivized on luxury . Marija the consumer is at the center of angst. The consumer has been kind of the rock that kept us away from drifting into recession, a slowdown, and that has been the strongest part of the economic landscape, so, yes, should we see some kind of weakness there, it would be very, very significant. I would probably be slightly more sanguine on consumers so far. What the newhas york fed president said, that the underlying economy is strong, but we have a lot of uncertainty, and uncertainty is coming from the trade war, from the Manufacturing Sector, from china, but the underlying consumer is strong, and i am sure you have a lot of commentators on the show talking about the share of consumers and Service Sectors in the u. S. , dominant, expanding, the u. S. Economy is very domestic, and this part of the economy is quite strong. We see record low unemployment. We see wages growing. This is still there. The question, would we have a spillover effect . So far, we see little, but seeing it continue, the more we see trade escalation, that is kind of the chink in the armor, so that is where our concern is. So far, we are probably steady, but, yes, risk is there, definitely. Manus it is interesting. We had a guest on yesterday who said europe was at a 16month hi, there is a disconnect with at aurope europe was 16month high, there is a disconnect with europe and others. My guest, marija veitmane. And opening up the country to foreign investment, next. This is bloomberg. Manus manus this is bloomberg daybreak europe. I am manus cranny in dubai. The International Monetary fund. Unpopular reforms. A finance minister said the nation is not committed to its own reform agenda with or without the imf is committed to its own reform agenda with or without the imf. Future, still under consideration. We have not reached a conclusion with the imf. And i would say that our relationship was about continuing now and continuing in the future. However, i know that sometimes for our investors, to give them some sort of comfort that it is one way or another for future which gives a reflection about the egypt are happy toh we give comfort to our investors, but what i would say is we are determined to continue seeing Egypt Economy moving in the best or with Monetary Policy other items in the business , and over the last three years, we have made a very successful economic reform program. Reporter just to be clear, you do not see a need for a formal program, that your government can do it on its own . The insurance of assuring that our economy will be moving in the best way. It is in the best interests of egypt, you gypsy people, and even our investors. As i said, ensuring that to the investors it is the best it is in the best interests of egypt, the egyptian people, and even our investors, and as i said, ensuring that to the investors, economy and growth is moving in the right direction, which would be good news for all so whether doing it with the imf or doing it anyway, it would be a good use for all of us. Egyptianat is the finance ministers speaking to bloomberg. Says henesian president will use his second term to introduce a wide range of reforms, including changes to labor laws for indonesia to attract Foreign Investors. He spoke exclusively to our editor and chief. Competet widodo we against other countries in attracting investment to create jobs. Complaint from investors on labor law complaints from investors on labor law are always expressed to me. They also expressed a need to simplify licensing. We will work on these as soon as possible. I will talk with labor unions without causing loss. This is for new workers, so industries can expand, Foreign Investors can invest, and help create jobs, so indonesian children can work in available sectors. John is that your priority . Will you introduce that lobby for the end of this year . Yes. Dent widodo priority is labor law, but i have to talk to labor laws labor unions. Also, licensing can be simplified. Negative investment lists will be reviewed to provide jobs and attract investment. John you have the negative investment list, which you said you would fully open up to 25 sectors you would fully open up 25 sectors, such as telecom. That has not happened yet. Do you have a timetable, opening up those sectors where you can clearly by sectors in indonesia . President wid president widod o we will set up universities and special economic zones, foreign hospitals with the latest technology also allowed, but in special economic zones. Also, in the technology sector, we will provide room. Yearend many the sectors removed from the negative investment list to create more jobs. John the Global Economy, what hurts the world is the u. S. China dispute, and i suppose that is a dispute where people in South East Asia have to decide whose side they are on. Whose side do you feel that you are on . Odo indonesia is in the middle. We want opportunities because the trade war is not good for all countries, but indonesia wants to not have the trade war negatively impact our country. We have good relationships with the u. S. And china. The most important thing is that our National Interests come first. Our indonesian president speaking with our editor and chief. My guest is from state street, where she has got a lot of risk ismanage, so, marija, there a plateau. Fed, china, trade wars trade wars. When you look at emerging markets, where do you want to have and continue to have your exposure . we desperately want to buy emerging markets. In general, they are big fans of growth. Definitelyrkets offer a lot of Growth Opportunities in emerging markets. Emerging markets are also quite cheap, which is unusual to find cheap growth. Unfortunately, there are a lot of risks, and there is a political situation, and unfortunately, the trade war is scaring investors from going there, worsening sentiment, so we are looking to go in there. I would have to say, i have been trying very, very hard to persuade clients. I think people are genuinely waiting to see some realization. Is not goingonomy to collapse or go into recession, and emerging markets offer you a lot of opportunity. Manus if i was sitting in front of you, i would be convinced on the merit. I tell you why. Because you showed me a chart. It is based on fact. You say, yes, youre dying to buy them. Talk me through the valuations the chart ,e. M. Relative in the chart, e. M. Relative to other markets. It is quite a differential. Got oneline, you have thing, and then you have got the msci for e. M. The yellow line at the bottom, which is my differential, which is narrowing a little bit, but if we look at the gap, there is still that overarching thing. Absolutely, absolutely. Emerging markets are not expensive, but there is a reason, and the reason is the trade war and the potential effects of a slowdown, so we do need to get through the negative sentiment. I suspect there is a bit too much discount there. That probably can come out, but we do need to see some stabilization in that kind of economic backdrop. Once that is done and behind us, we will probably see some very, very strong appreciation. Ratherd be coming sooner than later, so we are very careful on that front. That is something on our watchlist. We are watching. But we do need to see some stabilization in world sentiment. Talk about thewe conversations you have with the customers, do you get a sense there is a lot of cash sitting on the sideline, waiting for resolution, whether it is geopolitical, trade, whatever other, brexit . Lets call it that, trade, politics, and brexit. Is that Holding Money back, and do you see more people in cash, like the report from ups World Management . Absolutely, people putting money in cash, gold, even treasuries benefiting, safe havens. , trying couple of weeks to persuade them to put some money into equity and s p calls, because they cost next to nothing, and then there is the potential for upside if we get some resolution, so, yes, lots of cash on the sideline. I would strongly advocate putting them into calls. Good luckl, marija, with the calls. Nobody wants to be left on the sidelines and unexposed, a good story. Marija, well done. Joining us the past hour, from state street. One panel and one destination. The lady of boyle herself is moderating. She has got the the lady of oil herself is moderating. She has got more. Manus good morning. From bloomberg headquarters in dubai, i am manus cranny. Little stocks slide after more disappointing u. S. Data. Could a third rate cut from the fed be in the cards . We will hear from the chicago fed president , charles evans. And some european exports americans will pay more for, new tariffs on a wto ruling. Johnson passed his new brexit plan in parliament. Does the Prime Minister have enough support to finally get a deal over the line . Manus welcome to daybreak europe. Ledking news, the lady who the scene for quite a considerable period of time, Allison Cooper to step down as the ceo of imperial brands, as this is a tough industry at the moment, going through a huge number of changes. Cooper will step down. Brandsee what imperial says. During her tenure, they reshaped the business, more than 10 billion in dividends delivered to shareholders, and she delivered a sharp focus. The search for the successor of to drive theues performance of the business, and they expect to realize proceeds of a Development Program of 2 , so as weunds by 2020 wait to see where that search will take imperial brands, if you go to your bloomberg terminal, she was in the seat plus years. Alison delivered return on equity in terms of her peers, i can tell you she delivered 4. 92 , and then there was a return of 14. 77 . The outgoing ceo. I do not get to go there very often anymore, Third Quarter argins, the margins are just little bit higher than the market had expected, but when it ,omes to pretax profit, 5. 01 so that is nicely what the 8 ,ket had anticipated at 4. And ups pointed out the gross margin should benefit from a with the price cuts theyve been implementing. They have been implementing those price cuts, and that has helped the margins, so protect 50. 8 ,ax, the margin is and therein lies the point, two breaking stories that will drive, presumably, the markets later. Salething was for yesterday, everything, according to state street, second highest volume ever on the ftse 100. We are down again. Manufacturing under pressure. Again, more rhetoric from the president in terms of inciting treason for some people in the United States of america. I read one line talking about it is still, and ahead of the u. S. Jobs data. They say signs of the economy are slowing, and that puts the fed in play, and therein lies the key point. Is the fed in play . A cut . Thes go over and look at bond market, because there is a big move. If you have a recession next year, those risks are rising in 2020, you want to be long steepers, the curve could go up from the 12 we are seeing right now, rather than shorting stocks, so that has been the case for citigroup. Steepeners. N or those are the bond markets. Lets go to a broader context. The volumes are lighter, but the sentiment in asia is taking a bit of a pitch. Yvonne . Yes, you mentioned everything is on sale, or at least it seems that way. We are doing with some thin volumes, but the nikkei 225 taking the most hit, down 2 here in tokyo, the yen playing into a factor here at oneweek highs, and the hang seng as well. We are down, doing a little bit better, but those abysmal retail numbers for the month of august, contracting for a seventh straight month as the protests go on, and we had a guest this morning saying, look, if youre thinking about buying on these dips, now might not be the time. Stocks are still overvalued. Exclusive interview with the indonesian president , saying the priority now is reform, labor reform, to help spur more investment in the country, which they largely missed out on benefiting with this u. S. Trade war, and following treasuries lower, it seems like the selloff has halted here with treasuries now taking charge. 19 basis points for the 10year jgbs. And it will be interesting to see what they say about hong kong, because this is a chart you have to look at, a 23 decline when it comes to retail sales. The country says they are looking at more measures when it comes to stimulus if needed, but we saw mainland tourists down, jewelry sales down, as well, and now calls for, perhaps, curfews in the city as they try to control the unrest. Manus yvonne, thank you very much. Great round up, great context, in hong kong, as she said. The call will be interesting. Thanks in hong kong. To the broader stock story, the ftse drop yesterday and has continued to backslide this morning after the private estimatesell short of after a manufacturing slump, the lowest in a decade. There are concerns the slowdown may be spreading to the consumer as he trade war drives on. Those fears have increased thats the fed will cut rates this month. That the fed will cut rates this month. We are seeing signs of the economy slowing somewhat, and we want to keep the economy growing at a sustainable pace. Manus so todays question is how far will it steepen . Said, with a, as i propensity of 180 from citi. I will come back to that in a minute. Jim, fromuest, northern trust. Jim, a bit of a shakedown. Having state street saying everything was for sale yesterday, you look at this Global Manufacturing story, you this. The question is we had some policy responses. Take a look. Policy responses, rate cuts, talk a fiscal stimulus. Is this the bottom of a cycle or the beginning of a new leg lower . Jim i think what we are seeing is a global slowdown led by manufacturing, we do not think it is going to push the Global Economy into recession. As we look at the yield curve, we expect to see modest steepness over the next 12 months. If the fed continues cutting rates, that will provide a bit of steepness to the curve. If the fed is insufficient in their cuts, that would actually put the economy at risk and be more of a flat in her. If we were to see a material wdown, we would not expect that would actually put the economy at risk and be more of a flattener. They would rather that you have it steeper, with a propensity of 180 basis points from 12, and we have gone from two to 12 in a couple of days. Jim yes, i would take the other side of that. I do not think you would see that level of steepness at all if we went into a recession. I think there be more Downside Risk in equities if that were the case, so i do not see a case where you would have a significant steepener. The u. S. Has been a safe haven and will prove to be a safe haven. Manus is the dollar a haven for you . Everybody says if there is an impeachment, and i use the word if, if there is an impeachment, a recession, a lot ofifs, is the dollar one the better performing havens in your mind . Jim you mentioned impeachment. The odds of that occurring in the United States are low. That is because of the number of republicans that would have to switch sides. The market is not terribly worried about that or about munications that come out on a frequent basis about trade issues or political issues in the United States the market is not terribly worried about that or about communications that come out on a frequent basis. When we look at what is going on in the credit markets, the credit markets are the legendary canary in the coal mine. Spreads2016, high yield got 8. 5 percent. Today, they are at 4 . And we have had similar Good Behavior across the european yield markets to where we are not yet seeing that level of concern spreading into the credit markets. That is an area we are paying a lot of attention to. Breakevens for you. Goes live in october, does that put a floor in the whatflation story, but does that do . Someit should provide floor under breakeven expectations. The concern is is the fed going to provide the right policy to continue to promote growth. You have heard president williams talking about the importance of that, so that would provide some floor underneath it. We only expect a modest uptick in inflation over the next five years. The Secular Forces from technology bringing new capacity into numerous industries, whether transportation or lodging or the labor markets or online retail, all of those have been very persistent in holding inflationary trends down, and that is a critical support to the markets over the next five years, because low Interest Rates have underpinned higher than normal valuations. We think it is justified, but if we do get a switch in that, that would be a negative in the outlook for risktaking. Us ok, stop flay should stockflation, my guest host from london hq. Radio andair and on tv. And the chicago fed president and the central banking series in madrid. Do not miss it. It is at 7 30, so about 18 minutes. Where will they send me . Up next, more to go. Boris johnsons new brexit faces the mp litmus test in parliament. There is more work to do. And you have got it, the irish backstop. We are live in brussels. This is bloomberg. Just7 16 in london, 10 16 dubai. Moments away from the european trading day. This is daybreak europe. I am manus cranny dubai. More from london. Wine, cheese, just some of the exports facing tariffs, on the 7. 5 billion of tariffs coming into force in october. Washington got the goahead in the wto do to a two airbus, the largest award in wto history. The eu will retaliate when the wto rules on its complaint over subsidies. President trump is hitting out again at House Intelligence Committee chairman adam schiff, seizing on the fact that he met with the whistleblower on behalf of the inquiry. Trump argues this invalidates issues pertaining to his behavior in regards to ukraine and said the democrats help to write the original complaint but did not provide any evidence. President trump he should resign from office in disgrace, and frankly, they should look at him for treason, because he is making up the words of the president of the United States, not only the words about the meaning, and it is a disgrace. It should not be allowed to happen. Reporter tesla has failed to live up to elon musks hype, 90,000 cars in the quarter, falling short of the chief executives muchhyped 100 and warning the revenue muchhyped 100,000 units, and warning revenue may slide. Day, onews, 24 hours a air and tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. This is bloomberg. Manus great to have you on the show, from london. Faces parliament, the british Prime Minister optimistic he has enough support from hardline euros caps euro skeptics to finally get a deal. Minister outline plans that would see Northern Ireland stay in the Single Market for good and leave the customs union. We willnister johnson under no circumstances have checks at or near the border in Northern Ireland. We will respect the Peace Process and the good friday ofeement and by a process renewable democratic consent by the executive and the assembly of Northern Ireland, we will go further and protect the existing regulatory arrangements for farmers and businesses on both sides of the border. Manus but over in brussels, the eu welcomed some of the concessions in the u. K. Proposal, but it is clear that the proposal is very far from acceptable in other areas. Progress, but to be frank, a lot of work still needs to be done to reach and border,the backstop, no the economy, and protecting the Single Market, protecting the consumer, the citizens, and the businesses inside the Single Market of member states. Inus our reporter is brussels for us, maria. Good to see you this morning. Boris johnson, of course, he still needs to keep the europeans at the negotiating table. Do you think that he managed that balance . Maria well, there is a compromise, of sorts. You see Northern Irelands days Northern Irelands days, and he would like to be able to say he was able to do Northern Ireland stays, and he would like to be able to say he was able to do what theresa may was not able to do. Cautiously optimistic. We heard from Jeanclaude Juncker and Michel Barnier, both of whom said we are not there yet but that they want to continue talking, and politically, this is also key for the European Union, because they want to keep the u. K. At the table and do not want to be seen as not being willing to engage, and they want to continue to get a deal done. It is also key and interesting that Boris Johnson spoke separately to Angela Merkel. The germans have been willing to engage and have always said if there is a possibility to get a deal done, then everyone should work to get it through the finish line. Manus ultimately, it comes down to the irish response and leo leo varadkar. Thea when you look at reaction from dublin yesterday, it was much more cautious than brussels. They simply said it does not cut it and does not make the objectives of the act stop. Now, this is a very tricky situation for the irish, because they have always said they have needed a act stop, but they do not want to patrol the border they needed a backstop, but they do not want to patrol the border. Lets not forget that everyone ultimately also has a bigger incentive, and that is to protect the integrity of the Single Market, which the europeans still consider as the crown jewel here, and very quickly, i am hearing speculation that the europeans believe time is ticking. They would consider an extension nonetheless, even if Boris Johnson johnson does not ask for one. Manus well, lets see the responses and how they come through. Maria, thank you, from brussels. My guest host is jim. It is interesting, jim, to get your perspective. You have landed in london and have done your grand tour. Investable isow the u. K. For you as you look at the brexit story . Jim it is funny. U. K. Has the the fire highest return forecast of any of the developed equity regions. The challenge is over the next month, you do not know how this is going to progress. Eventuallyt there will be an agreement for the exit, but you are really not getting paid right now to take that risk, so we think you can take a little time to get into this position and that the u. K. Is attractively valued and should generate a better return than many of their competitors or peers. Manus just, jim, to keep our viewers updated, this is from the initial eu response. Ons is the brexit secretary, hugely listened to u. K. Station, and he said the initial eu response to the plan is constructive. Clearly, more work needs to be done to get brexit across the line. So the u. K. Market is, as you said, 7. 5 , a really good yield return, and how does your stack up for you, because if i look at the performance of europe, and i had this conversation with marija from state street, hsbc would say there is a discount between the equity performance and the fundamental ecoperformance. Do you agree that we have this divergence . Jim there is frequently a disconnect between what the markets are doing and the fund mental underpinnings. We are seeing some positive change at the margin from a political standpoint across europe, a little more commonality of leadership, and europe has been very exposed to the trade risk of the trade war that is underway. As we look at the next five years, we see the returns between europe and the u. S. As being relatively comparable, and we are in a relatively neutral position in our Asset Allocation model against europe, so the outlook for europe looks ok, but we think you want to be positioned for continued trade tensions, which leaves us to be underweight the u. S. And overweight emerging markets in our portfolios. Is that if reinforced even more if there is of cuts . Onal fed cycle lets say you have one in october and one in december. Does that reinforce your long u. S. , or would it shift your e. M. At all . Jim it would provide a little bit of a difference, but enough of that is priced into the market that what is really going to drive asset prices is what happens with the economy and with the trade war, so i would put Monetary Policy, at best, third on that list of what is really going to move the relative performance between the u. S. And e. M. Over the next year. The biggestcould be shock . Trade deal . Exogenous shock on the upside . Jim well, on the upside, that would be big. We had one but took it out because we do not think the probability is anywhere close to being high enough that there would be a significant deal between the u. S. And china. We actually have a theme called aaron second irreconcilable differences, for the next five years or longer. Our view is inflation risk and more trade tariff proliferation are the two biggest risks over the next 12 months that could up upend things. Manus jim, good to see you in london. Make sure you come back and see us on the next trip. We havent update. We have an update. Coming up, guy johnson has the conversation of the day with the fed president of chicago. Charles evans. The central banking series in madrid. Do not miss our conversation, and a little bit later on, bloomberg is on the road in moscow with the saudi energy minister. Good morning, we are live from European Headquarters in london. I am anna edwards alongside matt miller in berlin. They say mark watch the pmis. Analysts looking at another red, asmber, in the attention turns to the services data. Will it prop up the Manufacturing Sector . Cash trade less than 30 minutes away. Anna slowdown fea w