Pace in over 20 years. Industrial output and retail sales fall short. Jay powells happy place. He says Monetary Policy is where it should be as he sees monetary growth continuing. I think Monetary Policy is in a good place. If developments emerge that cause a material reassessment of the outlook, then we will act appropriately. Anna less than half an hour to go until the start of the equity trading day in europe, this is what the futures look like right now. They look weaker across the equity markets. And for the u. S. Equity markets, we have the ftse 100, the cac also weaker. Expectations for a weaker start being paired back a little bit by some reassurance from the german data. Lets not overdo that because the global story around growth is not a positive one. Lets have a look at u. S. Futures. They also have been pointing to the downside. Lets see if they still do. They do, but not by an enormous amount. German data offering reassurance, but the state of the German Economy is still weak. Add to that the weakness we have seen elsewhere. Week data out of china. We can see some of that in the Asian Session coming through on the gmm. Asian equity markets firmly in the red. We have Chinese Markets reacting to a sort of trilogy of week data points, whether it was investment at the slowest pace since 1998, factory output and retail sales looking week. It was not just china, the japanese story also week. Australian jobs data coming through weal. Reacting domestically into the chinese data. The Hong Kong Market down by 1 . The talk in hong kong is of the possibility of a curfew over the weekend, which would be another step in the direction of ratcheting up of the pressure on that hong kong protest situation. Lets get to the markets now. Our Bloomberg Markets strategist joins us from singapore. We are also joined by our economy reporter from frankfurt. Lets talk to you first. What drove the growth that allowed germany to avoid a recession . Lets start with the brighter spot. Likeght, it looks consumption growth in the German Economy. It has come as a surprise, but the overall picture has not quite changed despite the positive news this morning. The government advice has downgraded the forecast for this expansion next year and given how export reliant the German Economy has come any further tensions in the u. S. China trade could do away with what little growth we are seeing at the moment. Anna the domestic growth has short up the economy a little bit from the global tensions that you mentioned. Let me ask you about what this means for fiscal policy and the ecb. We have heard from the ecb and Christine Lagarde quite keen for some european economies to do more fiscaling. Yuko that has been the ecbs hope. They kept up the call for fiscal policy to step up. Today iscoming out likely going to see more dragging from german politicians. The german finance minister, his assessment has been that the German Economy is stable. This mornings data is likely to be further indication of that for the present. It is likely that while they will keep on doing what they can , it is not likely that we will surprised expansion in german fiscal policy. Anna thank you very much. Lets get to the asian growth story. Mark, lets come to you. I know you have been asking about what kind of impact the hong kong tensions are going to have. That remains epic story for you. Lets deal with the weakness in the data. It is not just china, it is japan, australia. Are we starting to ask questions about whether we are really seeing a bottoming out in the manufacturing cycle, for example . , it is kind of a long bottom here. There is no gray signed it is making a major turnaround. Possibly, we are closer to the end of it than the beginning, but it is may be stabilizing at a very low level. The indication from the china data in particular is that there is some growth in china, but it is relatively soft. They certainly do need to have some help, probably from an official level. There is already talk that there would be more reserve ratio cuts this week. That would be more targeted lending as well. Maybe moving toward more Beneficial Interest rate cuts. Certainly not very encouraging signs. There was also talk that china is beginning to realize that is also goingar to be a 5 area rather than a 6 area which they have managed to achieve this year. Certainly, everything is pointing toward even a slightly weaker period of growth in the year ahead, not going into recession or anything like that, but just pretty soft growth compared to what they have been used to for many years in china. Can what kind of response we expect from the pboc . You mentioned maybe the possibility of some kind of cheaper money Interest Rate cuts , but at the same time inflation is being pushed considerably higher by domestic food prices. Even the factory gates prices show a weaker picture. Indeed. They have this rather unusual situation in china. Pork, which isto a major part of the chinese diet. Because of the cutting of pigs, pork prices have gone through the roof. ,s you say at the same time they have been in contraction. You hear mostly from china is they are beginning to look through the cpi part as though it is something relatively temporary. At some stage, that will start to come through. Related toot more the slowdown. Do with the tariffs situation in the United States. They have been very targeted and start withres to small companies. They have three or four different levers. For now, they have not done an official Interest Rate cut. They seem to be holding that back, but it is getting closer and closer and perhaps we will see china go for the big rate cut which people have been waiting for. Around the hong kong protest story, how much will protest style hurt . On asian stocks or hong kong stocks and if a discount should be applied . Mark indeed. Probably this queue is slightly toward people isolating hong kong as being a bit of a special case. When you have some of the headline things, rumors today headline, butle people see this more about being a local issue. This is really since the middle of the year. This week is beginning to pick up again. We are beginning to see hong kong trade at a discount and especially those stocks which are in most of their income from hong kong specifically. Tourism is down dreadfully. Things are really pretty bleak. Seele are mostly willing to something that does not affect the whole region. Of course it sends a shudder across the whole region, but mostly it is a question of hong kong underperforming the rest of the whole world. Anna thanks very much, mark. Mark cranfield with the latest on the hong kong story and the we did a picture out of asia. If you want to get in on the debate and ask answer the question of the day, reach out to us. Use the function in your bloomberg. Up next, a close shave. Germany narrowly avoids a recession by surprise growth in the Third Quarter. We also have the numbers out from merck, the drugmaker and the business goes beyond life sciences. We will speak to the cfo of the german mark. Mark. Anna welcome back to the european open. 17 minutes or so to go until the start of equity trading. Futures points downward. Germany not in recession, it turns out. Asia weighing down the markets. Lets get a first word news update. Germany has dodged a technical recession. Europes biggest economy reported growth in the Third Quarter. Analysts have expected a contraction. Trade tensions, weaker Global Demand in the key car making sector. Announce as to curbing of chaos. All schools will be suspended until sunday. The Financial Hub has been suspended when a protester was shot. Boris johnson is back in Election Campaign mode after a difficult visit to floodhit areas in Northern England where his response was criticized by local residents. The u. K. Prime minister said getting brexit done would trigger a wave of investment. Jeremy corbyn pledged he would not allow a referendum on Scottish Independence in a first term of his government. Bloombergs latest five paul average put johnson some 11 points ahead of labour with the antibrexit liberal democrats in 16 . The first day of public hearings in the formal impeachment inquiry into President Trump heard from the acting ambassador to ukraine and a Senior State Department official. Both said they thought Rudy Giulianis efforts in ukraine were intended to dig up dirt for political ends. The u. S. President says he plans to make public his summary of an april phone call with the ukrainian president. Trump has said the call was perfect and he denies any wrongdoing. Is chairman Jerome Powell pushing back at President Trumps calls for lower interest that does not fit the u. S. Economy at the moment. He did not signal he is ready to act if the outlook for growth falters. His commitments largely echos message last month when he noted continuing threats to the economy. Global news 24 hours per day on air and on twitter, powered by more than 2700 journalists and analysts. This is bloomberg. Anna thanks very much. , the german version, is rating its fullyear forecast. The rating guidance to do with factoring in the numbers. Lets speak to the sea feet cfo. Very good to speak with you this morning. Can i ask about the performance of the lifesciences business described by some of my colleagues at very strong. It is now the three of your biggest divisions. Having ever thinking of it separately . Marcus good morning. The life science business is doing very well at the moment. Spinning off that business is not on our minds. Anna are you satisfied your three divisions are the right size . Health care, life science, Performance Materials as equals, youve talked about. Are they the right size . Marcus we do not have a fixed portfolio ratio. That is a percentage number in mind. However portfolio should look like. What we believe is that the current three pillars structure is the right one with what we want to go into the future. Breakwe now take an m a and focus on the successful integration and delivery of the synergies. After that period of about two years, we would then be open again to look for further strategically relevant and financially attractive, Day Opportunities to develop our opportunities to develop our group portfolios. Anna the multiple sclerosis drug that you offer, we have seen sales falling. Is there a bottom to the sales declined that you have in mind . When and at what level do you expect sales to stabilize, if that will happen . Marcus the bottom is zero. No, just kidding. The decline will continue. That is something that we have already told the markets. Older, off patent product. It is a very attractive safety profile, so we believe that the decline will be moderate and under control. However, we expect to see over the next couple years it continuation between 10 and 15 eventually. That is our current estimate for the future. Have, in this year now, got ms approval now for another drug that we have launched in 70 countries, in europe and also in the United States. In the Third Quarter for the first time in years, the neurology and immunology franchise is growing again. That means sales are in out overcompensating are now overcompensating and we expect this to continue into the future. Anna let me ask you about another drug. It did deliver better than estimated sales this time around, but has not had a great year. What expectations should investors have around this product . Marcus we are still in front of having a couple important readouts. So, we have guided for this year we have renewed our guidance slightly to increase the roughly expected sales of about 100 million. We are looking forward to the next data readout of these bigger indications in 2020 and then lets see where we stand. Briefly, the German Economy dodging a recession. I know it is the Global Business you run there. Does it feel like an economy running at a very weak level . Marcus at a moment, we actually dont. Many of the markets are in good shape. Health care is pretty independent from Global Economic developments, the life science markets are still in very good shape. We do not expect this to change in the near future. In thesome weaknesses outer market. Where the Surface Solutions business is affected somewhat. That 2020not believe will be a heavy recession year. Anna thank you very much for your time. Marcus kuhnert, the cfo of merck. We will get your stocks to watch coming up next. Reports of a bid over in the u. S. This is bloomberg. Anna welcome back to the European Market open. Six minutes to go until the start of equity trading. Lets look at the stocks we are watching. Nokia and ericsson. Burberry. Dani burger is focused in on thomas, lets go to the Telecom Equipment makers. Cisco posted weaker than expected earnings. This is something to look at for nokia and ericsson. They are different companies, but close enough to look at. Nokias terrible mark three weeks ago, this suggests there may be broader challenges. Anna interesting stuff. Burberry. The headline is out the headlines out of this particular luxury goods company. There are some encouraging signs. Held up well in the first half. In spite of the hong kong protests. The collections are finally in the stores. The message remains cautious for the Third Quarter always because of hong kong and the protests. Anna absolutely. Absolutely. That is something we focus on daily. Ini already trading up 11 trading. Thermo fisher sciences is considering a bid according to people familiar. Other bidders could emerge. These will not necessarily lead to a purchase of the Molecular Testing company, but their american deposits rallied 10 , so look for something similar. Anna you can find all the stocks our team is covering in your bloomberg. , they are daimler talking about cutting personnel. Seeking more than one billion euros in personnel savings at mercedes by the end of 2022. European equity markets set to open weaker this morning. This is bloomberg. 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S p 500 futures to be a little bit weaker at the start of the u. S. Trading day. Interesting to see the eurodollar jumping a little bit. Something worth bearing in mind. German datahat coming in better than anticipated. The markets have been expecting we would see a drop for the gdp number. 0. 1 in then of German Economy. Dodging the recession. Lets look at the markets. Undeniably, the growth story out of germany still looks weak regardless of the line side of the line it came out. Good news that we did not see the German Economy going into a technical recession. The ftse 100 down. Euro stocks fairly flat. We have a lot of markets to open up and we dont see many of them open at this point. The chinese data, there were three data points that really disappointed. After that, the australian jobs data, gdp numbers out of japan also looking week. The dutch market opens and it is a weaker picture, down by 0. 2 . We will get gdp numbers out of the netherlands later today. That is the picture for the European Equity markets. The french market, a little bit more resilient. Lets break things down from a sector perspective. We have a number of areas and green. Financials have divided themselves. We have some financials up and down. , a mixeddiscretionary picture. Things looking pretty mixed in this European Equity session. Fairly flat. The stoxx 600, entirely flat. 257, 254, that is the number of stocks going up versus down, so we are not really very convinced. Individual corporate reporting is not moving these numbers around. To the upside. Numbers better than expected out of veltis altisse. Altice. A decent performance coming through from henkel. Lets move to the downside. Or faller. Ll sainsbury also falling. Ses, we talked about the news earlier this week. Some of the Retail Stocks in the u. K. Performing not that well. Marks spencer is down. Shell is a little bit weaker. Quite a bit of a pointsbased move. European equity markets opening almost entirely flat. Narrowly avoided its first recession in six years. Weak data out of china and japan. Joining us now is the ceo of hermes fund managers. Lets ask about the global fund stocks. Then we will home in on some of these individual places. The Global Growth story was that we were in a manufacturing recession and we were looking for signs we were finding a bottom. Do you see any of those positive signs . I think things have not yet changed. I think we are in a manufacturing recession. The difference is that the consumer has been carrying the day. Or aonger methodology stronger quantum than the consumer in germany. In germany, the story is that they have avoided a technical recession. The worry is that the consumer side of the equation starts to weaken. Asia is a longterm story about china trying to slow down its growth. Track for were on consumer led growth. Therefore stronger in north america than in europe. Matt this raises questions anna this raises questions as to the extent that would be possible. The worry is because this is the beginning of some cracks in the labor market, that could spin over into the German Economy. That is what we looked at in terms of the gdp numbers. If you look at japan, the pmi index. In both cases, manufacturing might spill over to the consumer. Remaining incredibly weak. North american growth. China, who knows what the real numbers are. That 4. 5 sneeze percent growth, but it is much less. Anna it is very difficult to understand the data coming out of china, which is what Jerome Powell said. Im sure a lot of people feel that way. For a lot of time, the Investment Strategy had to buy into the growing middle class rather than the exports, which could be threatened by trade tensions. Is that something that is still a sustainable strategy . For the time being, yes. It is going to take a very long time for the chinese economy to shift to being a consumerlet economy. Trade ton why the exporters has taken a slight tick up is that the trade tiff with the United States, hopefully that gets resolved at some point despite the strong words from President Trump yesterday. About theve a chart u. S. Recession tracker. It tracks where the recession expectations live. We have had this looking better, probabilities higher. E are not there right now what do you look for for signs of recession . Are we not there right now in this particular tracker . Next year or later in the year . In the u. S. , it is the consumer. It has been weak in this last quarter, better, but still weak. There is a discrepancy between the very Strong Performance by the s p and the performance by the secondary markets, the smaller cap markets. If it continues the way it is and if the fed continues to ease, that will recover. Anna a lot depends on the trade story. A lot depends on the trade story. Anna we talked about whether there could be some kind of trump put here. If he continues with this trade strategy for china, but he would only continue up until the point when the u. S. Economy would really weaken is that the strategy . Sense, i think it makes from his point of view. He needs the economy to be strong, not least because that is what he continues to be the most important part. He has a bipartisan support for his strategy with china. Anna thank you very much. Up next, we will bring you some of the stocks in the move. Most since 2002. The stock up 15 . This is bloomberg. Anna a pretty flat picture for European Equity markets overall. There are some interesting stock movers to focus in. Dani there certainly are. Qiagen, the biggest mover on the stoxx 600, jumping as much as 15 at one point, its biggest gain since 2002. Thermo fisher is considering a bid for the Molecular Testing company according to people familiar, though those deliberations will not necessarily lead to a bid and other bidders could emerge. Dime will following more than er falling ordaiml than 3 . Really demonstrating some of the headwinds they face. Gaining someice 3 . That thisalysts say supports the share price actually doubling. We are certainly not seeing that today, but certainly some solid gains. Nna thanks very much burberry shares jumping as much as 9 after the First Half Results and the announcement of a reliance a lot an alliance with tencent. The comparable Sales Numbers look to be impressive, holding up in spite of the hong kong protests. Can get on that luxury goods company. Today marks equal pay day. 14 is the day of the year where the gender pay gap means that women effectively stop earning in comparison to men in the u. K. We spoke with the principal at ask whether it is the responsibility of shareholders to hold company to account over equal pay. I think it is the responsibility of individual firms, supervisors, shareholders, everybody involved in the ecosystem to progress in issue. We are starting to see some shareholders put more pressure on investment firms to put more pressure involving gender disparities. It is starting to trickle down. I think the combination of the individual firms policymaking pressures, that is the only way we are going to push to the next wave of change. In an economic downturn, the most Vulnerable People in society will be affected the most. Im thinking about the importance of socioeconomic diversity and ethnic diversity. Where the companies that you spoke to focused on that . Absolutely. Now more than ever, the importance of recognizing that gender is one aspect of diversity is becoming increasingly prominent. Often, we talk about gender because it represents 50 of the population. Inre is such a disparity population representation, but that applies to many aspects of diversity. Gender is a starting point. When we talk about gender initiatives, it can be used and should be used as a way of broadening out into those broader topics. If you are launching a gender initiative, thinking through, how will this impact women of color . Women from the Lgbt Community . Women from different socioeconomic backgrounds . Using that to continue the dialogue and starting to understand the differences at those intersections of different aspects of diversity. Cla that was jessica empner from oliver wyman. I want to broaden the conversation. The questions of engagement versus divestment. This comes to whether you are trying to shape a board policy in gender pay or influence environmental record. Where do we stand on engagement versus divestment . I think there is a split still in the investment community. There are those who clearly believe you should divest to fei company is not doing what you want. We disagree. The objective is to change peoples attitudes so they increase the longterm of the company. Why do we want gender diversity . The population is 50 50, therefore it is financially stupid to cut your supply line by 50 . This is a financial question. Kicking the company out of your holding is not a problem. Them that in the long term it is important to be prepared. Clearly, if there is a company that is flagrant, you clearly dont want to own it. But in a free market, you can buy in large convince them to create sustainably over the longterm. That is a generality. Anna excellent. We will pick up for only esg seen and talk a little bit about Climate Change in our next conversation. Fundeo of Hermes Management stays with us. The u. K. Election campaign took a dramatic turn, when nigel faraj said he would not contest other seats. Swenson said the move clarified the choice for voters. Lets talk about the latest polling with a former labour mp and a candidate for the liberal democrats in the north of london. Every good to speak to you today. Pollingou boost your position . Im talking for the party as a whole, not in your constituency, but the polls dont look great. Where the remainers go . Flowsoften see ebbs and in polling over the course of any election. There are many events over the course of the coming month. Im looking forward to the leaders debates we will be having one people will be able to clearly see the stark choice offered at this election. Party the only u. K. Wide that is putting forth clearly and election position to stop brexit. It is very clear that many people want in the country. Anna how many seats do you think the liberal democrats can realistically win . You want to do better than the andt or 12 you got in 2015 2017. Do you have your heart set on 62 or a different kind of number . We are contesting this election for the prime minister. We are putting forth an alternative in this election. Im sure you will have programs. The moment between Boris Johnson and Jeremy Corbyn is no choice at all. I am very delighted we have adjacents and our leader or party that want to stop brexit. This is the only part of the election intending to do so. Anna there has been some controversy about where you stand in canterbury. The broader picture for the International Audience is are there places where the liberal democrats would stand down in the face of a strong remain Labour Party Candidate or is that absolutely not what you plan to do . The liberal democrats are part of the unite to remain initiative. The liberal democrats and the green party. The labour party refuses to take part. A alliance certainly does not include the labour party. Anna looking at your contest in north london, do you think your campaign can turn 6. 6 in 2017 into victory . Absolutely. We know from our experience on the doorstep that people want alternatives. Strongly remain constituency, almost 70 wanted to stay. Current estimates put it higher than that. Im the only candidate in this election that would advocate on behalf to remain in the european union. Anna are you disappointed at the number of women who decided to standdown this time around . Im not surprised. We have had a very toxic year in our politics. Is tough to be a part of when you are seeing such high levels of abuse. Make a contribution, i will. Anna thanks very much, thanks for your time. The liberal democrat candidate in north london. Jay powells happy place. The fed chair says Monetary Policy is where it should be as he growth continuing. We will talk about the fed coming up. This is bloomberg. Our economy is in a strong position. We have inflation a bit below target, but very low and even negative rates that we see around the world would not be appropriate for our economy. Speakingome powell about the u. S. Economy. Fundeo of Hermes Management is still with us. A good place is what we seem to hear a lot from the fed. Does that describe the u. S. . It does. Theyve got to a stage where we have seen strong consumer growth in the economy, and little bit of dipped down in manufacturing, but the United States economy is in a very strong place. There is no inflation. They are in a happy place. What he has also said is if they do see that business is down, they are ready to act, but they are not in the dire place of europe where you have to go to further easing. They are not in the uncertain place where japan and particularly china seems to be. Anna you mentioned inflation. You said there is not an inflation problem, but ive got the u. S. Breakeven rates on the rise. A little bitgest more expectation around inflation in the u. S. , but Inflation Expectations have been so low for so long where are we in the inflation story . It must come back a little bit. Particularly, in this state, it is muted because energy is a big part of that and the energy price is not going anywhere. Although there is increasing job growth, there isnt indications overgrowth in wage growth in the United States. I think it still remains reasonable at this stage in the United States. Anna lets ask where they rub up against the breadandbutter of Monetary Policy. The fed said Climate Change is not something they deal with specifically. They do with Monetary Policy. Other Central Banks joined the dots it live but more explicitly, talking about of Climate Change affects prices, productivity, output, so then it effects Monetary Policy. What are your thoughts on how these interplay . I think the fed is the only one that has a very clear mandate given that gives them two things, theyve got to look for Economic Growth, and theyve got to make sure they look at inflation. Within that, they can argue that until we see any threat of Global Warming in growth, there is not anything for us to do. And we leave that to the regulator or the government or the free markets economy to do something about that. Other Central Banks have a wider mandate to some degree. It does not mean that they are unaware of the problem, it just means it does not fall within their mandate. The americans tend to work with a more defined mandate. Anna where do your investments take you in terms of these greener scenes at the moment . Investing in companies with a green track record. What is the story at the moment . The story is two parts. There is a shift that wants to go to more green types of consumers. Cars, electric cars, less meat, you can play that and make a lot of money from that scene. The second part is that there is a risk associated with the adverse effect of Global Warming. For example, flooding. We all know about flooding risks. Therefore, you have to mitigate against that and you have to put that is part of your story. It is a bit of an upside story if you know what to do it, but there is risk. Anna it is the disclosure of the Climate Change risks by corporates. What about investing in the fiscal green deal . Is that something you see happening in europe . I think europe is much more advanced and has taken a much more ecological stance than the United States. I think it makes sense. Look, the weather is changing. It is going to create risk for us. Unless we start putting money into alternative technologies, we are going to be in trouble further down the line, so it does make sense. Anna thank you so much for your time. Saker will be continuing his conversation at bloomberg, he will be joining me on Bloomberg Radio at 9 00 u. K. Time in around half an hour. Up next, a close shave. Germany narrowly avoids a recession with surprise growth in the Third Quarter, but the picture is still weak. We will talk about europes biggest economy. We will ask whether structural changes are needed in the German Economy. This is bloomberg. Anna 30 minutes into the trading day, here are your headlines. Germany dodges a recession after surprise growth in the Third Quarter but weakness is persistent. China letters. Sputters. Industrial output and retail sales for short of its quotations. Powells happy place. The chairman says Monetary Policy is where it should be as he sees growth continuing. We do think Monetary Policy is in a good place, but we will be watching carefully. If developments emerge that cause reassessment, we will act appropriately. Anna good morning, welcome to Bloomberg Markets. I am anna edwards at bloombergs european headquarters. 30 minutes into the trading day, this is the picture. 376 stocks go down. 211 to the upside. The momentum is highlighted by a move lower on the stoxx 600. On the top side, this dutch business is up by 12. 5 after talk of m a potential. That stock has gone higher in todays session. Eight Percentage Points higher for this luxury clothing retailer doing a deal with tencent. Ofalso have numbers out bouygues. We should mention exdividends at sainsbury and martin spencers. That is having quite a downward impact. Disappointed, this stock is down by 6. 5 . , downe numbers out of rwe in response that. It looked like a decent story with the potential for upside. Earlieril psy selloff this week saw a selloff earlier this week. Daimler is having a Capital Markets date taking place and costcutting is a theme coming through. Lets get a first word news update. Boris johnson is back in Campaign Mode after a difficult visit to floodhit areas of Northern England where his response was criticized by locals. Speech, the u. K. Crepitus are said getting brexit done would trigger a wave of investment investment. Jeremy corbyn, meanwhile, said he would not allow a referendum on Scottish Independence in his first term. The latest poll puts johnsons conservatives 11 points ahead with the antibrexit liberal democrats at 60 . At powell is pushing back President Trumps call for lower Interest Rates, saying it does not suit the u. S. Economy. He told lawmakers rates are on hold after three straight reductions, but did not signal they are ready to act as the outlook for growth falters. His comments largely echoed the message last month when he noted continuing threats the economy. He is in a strong position. We have strong growth, inflation a bit below targets. Even a negative rates we see around the world would not be appropriate for our economy. Hong kong has suspended all schools until sunday amidst a fourth straight day of chaos. The Financial Hub has been paralyzed since monday morning when a protester was shot. Hong kongs subway operator has partially suspended services and few people remain in critical condition. Chinas economy slowed further in october. Factory output, retail sales, and fixed Asset Investment all missed estimates. Investment grew at its slowest pace since 1998 with private Companies Pulling back. Meanwhile, japan has reported an unexpected the week Third Quarter. Work growth in the worlds atrdlargest economy came at 0. 2 percent, sharply missing estimates. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna thanks very much. Germany posted surprise growth in the Third Quarter, but weakness is expected to persist by many. Joining us from frankfurt is the associate managing director at moodys goochland deutschland. Let me ask you for your response to the data we got this morning. ,etter than had been expected avoiding a recession, but still an economy in low gear. How would you respond . The plus. 1 we saw in the Second Quarter is precisely in line with our expectations in the Third Quarter. Ourt is in line with expectations of a deceleration of growth, 2. 6 for the full year. Are significant headwinds building up for the european economy, particularly the German Economy. Theres anything you heard today have any bearing on a Credit Rating . Double, first of all , germanys rating is probably one of the more resilient bombs so we are not particularly bothered. The medium to longterm perspectives that we are concerned on, theres a situation where the german Economic Growth model is more challenge than it has been. Challenged than it has been. We see increasing trade tensions and that bodes ill for the economy. Capital machinery, and that regard, we are seeing headwinds but it is also a structural issue that could lead to a gradual weakening overtime of germanys economic strength. That is something we are very much looking at. More action see being taken from politicians . Germany itself, we are not seeing that much in terms of structural reforms, to be fair. The changes we have seen with moving to aensions less favorable position from a credit perspective. There is not a lot going on in terms of improving affect stability the flexibility. Germany starts from a strong position in that regard. But in terms of the structural change, it is relatively slow. Is movinge seeing from a multilateral approach towards bilateral is fragmentation bilateralism or fragmentation. That is an environment that is not supportive for germanys economic prospects. Anna if the government decided it wanted to borrow more, and i know that is not simple, but if it decided to borrow more, how much borrowing would the bond bund markets tolerate . In that regard, there is quite a bit of fiscal space if you look at debt to gdp numbers. There are only three countries in the euro area with lower debt to gdp and one of them is germany. 55 ratio trending towards that mark. There is fiscal space and the quality of the spending that set. Deadset. Germany has turned towards spansion fiscal policy expansionist fiscal policy. Anna where should spending focus . We are rating agency, prohibited from giving policy advice. Terms,general infrastructure investment. Anything that would support the supply side of the economy and could enhance trend growth going forward. That is one option. Another option is obviously to increase the tax burden on the German Economy tech burden on the German Economy. Forecast, our baseline is actually at a slight acceleration of Economic Growth going into 2020 where we have a forecast of 1 . In terms ofk andrse scenarios, germany the whole european economy would go into negative territory. There would be significant fiscal space on germanys side to counter that. Quite similar in terms of automatic stabilizers and additional measures of it we saw at the time of the Global Financial crisis. Quite effective at mitigating the impact on german activity. Anna just briefly, we talk a lot about negative Interest Rates in europe. They have been criticized by bankers in the last couple of weeks. What is your assessment of how effective negative Interest Rates have been . Mean, germany is clearly benefiting from the lower Interest Rate environment. A key indicator is Interest Payment to revenue. You clearly see significant tailwind in terms of the fiscal balance. Concern, ifbigger we talk about capacity, on the monetary and fiscal sides, you could argue that both on the Monetary Policy side with record low Interest Rates and on the fiscal side as well with higher levels, the to gdp economic environment is still kind of benign. So what if a shock would hit . What is left in terms of really doing something. There, i guess the assessment is in terms of Monetary Policy, we are running in diminishing returns. Monetary policy is less effective than it was a couple of years ago. , beyond, itl side is much more difficult. Anna to diminishing returns of negative rates. Dietmar, associate managing director at moodys germany. This group is trading higher on news of a deal with chinese internet giant tencent. This is bloomberg. Anna welcome back to the European Market open. 44 minutes into the trading day, this is the picture for european equities. Part of that is a concern around Global Growth and chinas economy slowed further. Factory output, retail sales, and fixed Asset Investment all missed estimates. Investment grew at the slowest pace since 1998 with private Companies Back pulling back. The weakness across the economy suggests that chinas efforts to arrest the slowdown are falling behind the curve. Lets speak to the manager of the Jp Morgan Asian Investment trust. Good to speak to you. Lets start with the chinese growth story. The latest information we have about the numbers weaker than expected, does this fit your base case . Yeah, it does. A few things are leading to the slowdown. One is the definite determination by the government to rein in credit growth. The trade war whatever, the slowdown wouldve happened anyway. It would have been engineered by the central government. They want the slowdown to happen. Anna you see any trade affect in this data . The second aspect is the trade affect for sure. That is slowing down the economy. Whether the numbers are here or there, who knows. But the slowdown was expected. Anna what do you expect the pboc to do in response . My colleagues said they face a strange situation where inflation is on the rise because of specific factors. Pdi shows a deflation story. Deflation sotry, so far, it has been very targeted. They have been very targeted in which areas they look at in terms of policy responses. Thatll be the same case for the pboc. Looking at the numbers and adjusting here or there. We may see fiscal responses as well. I would like to say that, despite the slowdown, if we look at it from an investment standpoint, corporate earnings and china are generally very healthy. This year, we are still looking at corporate Earnings Growth at 15 . The latest numbers are surprising on the upside. With all this negativity over chinese growth, the stock markets are still up 10 . Anna i was reading a peace by piece my colleagues by one of my colleagues talking about the retail environment, saying there is a recipe for a price war damaging to some of the corporate you mentioned. It is retail still a big thing to invest around . It is. You will get winners and losers, and frankly, it is our job to pick the. But it is a growing country, whether it is at six or 4 . The base case for next year is just below six. The gdp numbers there are huge. Even if you are growing at 3 , 5 , it is creating a lot of wealth. That retail increase is going to continue. Areas such as insurance, specifically, health care, where it is still underpenetrated. Anna we look daily, it seems come at pictures of hong kong and violence and destruction. Seems to be becoming more ever present. It is not just weekends, but filtering into the weekday. Are we talking about a permanent discount being attached to Hong Konglisted companies . How do you deal with that . There has deftly been an effect on tourist arrivals. Retail, food and beverage, to a certain extent. These areas may still get impacted for a while. Looking at the longterm quality of these companies, there will be winners and losers. I will give you an example. In all of this the supermarket and frozen food sales have gone up because people are eating more at home. So there are opportunities within. Looking beyond, it is a high quality company. We will look beyond this and look at the earnings potential. Anna we will continue this conversation on radio shortly. Tune in for more of his thoughts. Lets get to stop movers this morning. Stop movers this morning. Gain burberry continues to , the secondbiggest gainer on the stoxx 600. The Earnings Holding up well, despite the unrest in hong kong. Analysts there show the rollout of its new desire was untracked. Also, a new partnership with tencent, which i should say also had earnings that missed expectations. Welle rweut as earnings out as well. According to rbc, the Renewables Outlook is maybe too optimistic for this corner. Quarter. It was surprisingly weak. , this is their biggest twoday decline on record. Had toay, they said they reevaluate the commercial viability of its discoveries in south america. Today, jeffries is out with a cut to the shares saying they missed their key it objectives. Anna dani burger with removers. Coming up, is germany through the worst . We look at what markets are pricing in. This is bloomberg. Companies are coming to my office. Ceo of these Companies Say to me that paris is very attractive. Of course,kers, quality in our work, and quality of life. And more business friendly. Anna that was the mayor of paris telling bloomberg about the appeal of her city to businesses. Recessions dodged a with surprise growth at 0. 1 . Business sentiment appears to have stabilized and investment is improving, but far from an all clear. Jones, us now, richard our mliv strategist. Im interested in the lack of reaction we have seen here. Do you see anything discernible . Hard good morning. The good news is that germany did avoid technical recession but the Bigger Picture is that the German Economy has largely been flatlining. Nowhere near where anybody wants it to be. An economy that has suffered the most from global trade tensions. As a result, the ongoing tensions we have seen, in addition to weaker data out of , isn, china, and australia giving warning signs going forward. Were not out of the woods in the Global Economy and that playing out today. Bund yields are lower, even with the beat in gdp data. Anna i talked about this with moodys earlier on, whether structural changes are needed. Even if we do see a turnaround in trade tensions, that could lead to some sort of cyclical boost. , isat the same time exposure to the auto sector and weakness still a factor . Richard that is undeniable, anna. When you look at the domestic German Economy, there is need for infrastructure investment. There is talk of fiscal stimulus here in berlin starting to get a little bit of traction. But it is nowhere near getting the full by required. That means it will still be challenging even if trade tensions abate. Anna richard, thanks so much. Member, you can enjoy the debate and get involved in our question of the day. We have been asking about hong kong whether the turmoil will impact asian or hong kong stocks. Reach out to us on your bloomberg. Germany avoids recession but theres still a week story weak story. Is next. Ance biggest europes economy dodges recession after surprise growth in the Third Quarter. Roads are blocked in schools are shut as protests paralyze hong kong. And jay powell says Monetary Policy is where it should be as he sees u. S. Growth continuing. Francine welcome to bloomberg surveillance. Good morning and good afternoon, this is bloomberg surveillance. The stoxx europe 600 pretty much unchanged