Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240713

Uncertainty on the phase one trade deal, and concern over escalating violence in hong kong dull markets. Conservative election candidates support the Prime Ministers brexit plan. The first headtohead latest debate takes place later tonight. Welcome to bloomberg daybreak . Rope 100 protesters surrounded by police in hong kong. We have learned the schools will be open wednesday after carrie lam says she wanted a peaceful to to the University End the university standoff. Seng isingly, the hang in the green. Other markets like japan declining. A number of reasons being put forward to that. Chinese funds be stepping into support that market. Rba minutes were taken quite devilishly by the markets, spurring rate cut bets. We did see dollar weakness after the meeting between President Trump and jay powell. U. S. Equities is what we saw. Still question the direction and possibility of a phase i deal. It slips another basis point. Crude on the back foot with concerns around rising stockpiles. Getting back to that meeting, donald trump and jay powell have held their second facetoface encounter this year after months of criticism from the president. Powell was invited to the white house to discuss what trump labeled a range of issues from Interest Rates are low inflation and Dollar Strength, and a statement said powell did not expect expectations expect to stress it will depend on incoming information that bears on the outlook for the economy. Interest rates have been discussed in the meeting and trump tweeted they had a very good and cordial meeting. Hours ago, they followed up saying he protested that aside rate is set too high relative to the rights of other competitor countries. This is not a view shared by Eric Rosengren who dissented against the rate cuts. He said he is concerned the central bank has been unnecessarily accommodating. We are pretty close to our inflation target. Pces are a little bit off of where we would like it to be. We want it to be at 2 . The Unemployment Rate is still quite low. It is really quite low. Gdp is growing roughly at what we would expect, which is around potential. In terms of economic data, the outcome has been quite good. Said the powell economy is in a good place would you agree with that characterization . The composition has been different than we expected. Beexpected experts to stronger. We did not expect consumption to be quite so strong. The imposition of the tariffs for the global slowdown resulted in both exports and investment being weaker than we would have forecast. Consumption picked up and has been quite strong and we expect it to continue. Would you have expected it that way without the feds rate cuts . We would have been softer in some areas. Investment looks like it is picking up. One of the challenges i think is thinking about what the side effects are of very low Interest Rates. There are two side effects that i am continuing to worry about. One is how much room we had if we get an actual slowdown as opposed to a concern about slowdown. In that case, we do not have that much room before shortterm Interest Rates would hit zero. The second concern is the stock market has been doing quite well. Other Financial Markets in some areas have been quite appealing. It is the state of the cycle you want to have a little more push to Financial Markets. I would argue i am not so certain that is necessary. You about the first. You are saying the fed is almost out of ammunition. I am saying we do not have much room as we had before. Prior to the last three ezines, the fed funds rate was up pretty close to what we would expect to be as neutral. We were at 2. 4 . Since then, we reduced the federal funds rate by 75 basis point. Given the level we were at, that was a substantial amount of easing. Monetary policy and fiscal policy are accommodative right now, so i am not so sure we need quite so much accommodation at this time. I am worried we need less room than we otherwise would have we were to have a big negative shock and it is not just missed your end of the markets where the long end of the market. It is fluctuating between 1. 5 and 2 , a lot lower than what we were experiencing prior to the last recession, which means even quantitative easing will have some limited effect given that that could quite easily get down to zero more quickly than we are expecting. I think we will need fiscal policy at that stage. Very low Interest Rate environment. Fiscal policy becomes much more important tool. And then the talk i just gave, it highlighted this is a time where we should be thinking about buffers, including buffers for capital ratios for banks and in general, fiscal policy. A little bit more of a buffer in state and local government, enough buffer that they can weather the storm and hopefully not have to cut back if we were to have a recession. Take a look at what is happening in washington these days, theres no guarantee of any fiscal policy. What would happen then . A longer recession than we would prefer. Nejra that was Eric Rosengren speaking with mike mckee. We will get back to that conversation in a moment. Breaking news crossing the bloomberg. It is launching a Share Buyback program of up to 400 million swiss francs. That is the redhead mind to draw your attention to. Coming in at 422 billion swiss francs for julius baer. Lets get to our guest who joins us for the hour. Stephen, great to see you. Lets start the conversation with a meeting between President Trump and jay powell. The dollar weekend when investors talked about negative Interest Rates and dollar policy. How vulnerable is the dollar to more potential pressure from the president on jay powell in an Election Year . That will be an inhibiting factor for Dollar Strength. For this weird environment with the u. S. Dollar right now, global fundamentals are not great, and i get that it is now becoming the consensus that things should bottom out in the first half of 2020 and gradually recover, but what we have seen over the last few weeks is that the dollar can perform well as a safe haven at least against many currencies including most of the em space, but it can also perform well when the parts of the u. S. Yield curve were we teeping and ratesre resteepening and rates were going up. From the mindset of global investors, there is not a lot of attractive Investment Options out there that offer a good risk a return on a risk adjusted basis. The dollar can gain in a number of different Global Economic environments. I would say the worst possible scenario for the u. S. Dollar in 2020, this is not a base case, but i would not rule it out. It would be the u. S. Tends to underperform the rest of the Global Economy. We are starting to see sentiment or expectations build about that paradigm or narrative coming into play in the first half but we have got a really long way to go to see if it actually plays out i think. What if we have a situation in 2020 where the trade negotiations are getting a little bit better and the fed is on pause . Does that mean we are going to see still Dollar Strength . Perhaps you see it curve steepening but led by the long end of the curve. What is the dynamic for the dollar in that scenario . It could appreciate if the dollar is getting a rate advantage. As long as the United States appears to be avoiding recession, which currently, it is, i know the odds have increased for the u. S. Recession in the last two months or so. Can still gain from having a rate advantage. What i would caution against is that theres a lot of hype at the moment around this phase about whether or not china the u. S. And china are going to get a phase one deal signed. Optically, it might be pretty good for trump and president xi if they can get phase one and move on to phase two and phase three. In terms of the impact on growth in the u. S. , i dont think phase one matters that much. I really think this is a question of, you know, what the u. S. Growth potential is, what fiscal policy is going to do in 2020, is trump going to announce options on fiscal policy unilaterally and try to get congress to approve them . If congress does not approve them, he will have another thing to take into the Election Campaign. A lot of it will depend on what happens to fiscal policy in the u. S. Next year and the rest of the world and what happens in november 2020 in that key u. S. Election. If phase one is not necessarily enough, does that mean you think we could still get fed rate cuts in 2020 even if phase one is signed . Fed rate cuts are possible but the rest of the World Economy will have to deteriorate as well. Of course, you cannot rule out a situation where the u. S. Has some type of idiosyncratic slowdown, and it is the worlds leading, as it were, leading underperform her. You could have a situation like that. Relatively low risk scenario. If the fed were to cut again, it would the because of more signs of deceleration in growth at the global level. Nejra nejra briefly, what i am trying to get out of all this, does the dollar still hold up . It becomes a safe haven again. We are looking at Dollar Strength in any scenario for 2020. The Dollar Strength paradigm or narrative is going to be hard to break. We are going to need concrete evidence that the u. S. Is slipping definitely into recession or you are going to need concrete evidence that the rest of the Global Economy is really rebounding at a pretty rapid clip. Nejra Stephen Gallo stays with us for the hour. Lets get the first word news with selina wang in beijing. Hello. Selina the public hearings of the impeachment inquiry starts again today. The Committee Plans to here from eight witnesses this week. The house is looking into whether the president lied to robert mueller. This comes as President Trump says he is strongly considering testifying in the investigation. Is reversingates its stance that Israels West Bank settlements are illegal. The move is a policy shift for the u. S. It could give a boost to Benjamin Netanyahu but it is likely a further setback to the Palestinian Peace process. Bolivias ousted president has weighed in on why on who is the countrys rightful leader. He says the interim president lacks legitimacy. He says the senator is the legal head of state, adding the Current Administration has no constitutional right to rule. He says he has not had contact with them. Not have any channel. As far as i know, the only communication is between that took part in the coup. They have contact in order to set some rules, probably. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra selina wang in beijing, thank you. Coming up, caught between a rock and a hard place, u. K. Business leaders are not impressed by pictures from either of the Party Candidates. We will discuss that, next. This is bloomberg. Nejra this is bloomberg. Ybreak europe i am nejra cehic in london. The violence continues in hong kong. A university siege is raising fears of a crackdown on scores of protesters remain. 100 people are still there after 600 protesters escaped or were evacuated overnight. Chief executive carrie lam called for a peaceful resolution from both sides. Areie if the protesters coming out in a peaceful manner, in other words, they stop violence, they give up their weapons, they take the advice of the policeman, then there is no situation that that sort of violence will happen. Nejra joining me now from hong kong is bloombergs east asia government reporter. Great to have you. We have learned that schools are going to reopen on wednesday. Is this a sign that the standoff may be coming to an end . It is a sign that the government feels they have the broader situation under control. The signs from the campus that is being fortified and surrounded for the past couple of days protesters are dwindling. Theres reports that theres only about 50 left, down from several hundred before. I think it is a sign that the government seems to think they have things under control at the moment. Just remind us because obviously, this has been going on for five months now, where last week, there was quite a strong turning point for hong kong. What are the demands the protesters still have . Yes, may have been saying they have five demands for the past several months now, and they feel the government has only met one of them, which is withdrawing this extradition bill that kicked off the whole mess back in june, but the government has said there is no more political concession coming from them. The protesters still want an independent inquiry into the whole unrest, and they also want genuine, universal suffrage. In there things beijing local government will find it very hard to please them on. At the moment, it does not look like there is any end to the broader battle between the protesters and the government here in hong kong. Nejra in the meantime, we had commentary from the u. S. Pompeo saying the u. S. Is gravely concerned about the rising violence. Mitch mcconnell urging President Donald Trump to speak out on behalf of the demonstrators as well. Ian marlowe in hong kong, thank you so much. Lets check in on the markets in asia. Juliette saly in singapore has more for us. Good to see you. Headlinech action on a level, but the hang seng is in the green. Absolutely. Still seeing resilience coming through in hong kongs equity market, rising quite sharply. I will get to some of the theories why in a moment but you can see it is up by 1. 2 in late trade. We have seen weakness coming through in japanese and korean stocks. Australian stocks did quite well. We have seen weakness coming through in the aussie after the rba minutes came through. Essentially very dovish. It does not look like the central bank is willing to wait and see how much of an impact the recent rate cut can have. They may move the trigger yet again in november. Lets have a look at some of these theories as to why hong kongs market is showing such resilience. One of the theories, according to mliv bloggers is because we are seeing earningspershare outshine those of asian peers, thanks to some strong overseas revenue. Even though we know hong kong has been entering into this technical recession, the pmis have not been good. There are signs that the bottoming out a starting to happen for hong kongs equity market. Even though it is at its widest level against the Msci Asia Pacific index since 2016, perhaps there will be a bottom according to analysts. Inra Juliette Saly singapore, thank you. The u. K. s Election Campaign is heating up the Party Leaders are failing to impress Business Executives top between Boris Johnsons brexit and Jeremy Corbyns nationalization plan. Lets hear what the candidates had to say. The advantages of voting conservative in this election is that we can and will get it done and get it done in a matter of weeks. We have a deal ready to go. Just add hot water, stir in pots. It is there. But we are offering this country is to negotiate a trade deal with the European Union, which gives the credible leave option. Liberal democrats are absolutely going to try to stop brexit and use our greater strength. We are being very ambitious in this election to bring much more reason to british politics. Majority,et a working we can get Parliament Working for you and then we can unleash the potential of the whole country. Properly functioning Public Sector that provides a health care, social care, and education that is so essential to all of our lives. Thats the areas we will be campaigning strongly on. Business,not in that somebody who is unfit to do that job as Jeremy Corbyn or Boris Johnson. Still Stephen Gallo is with us. We really got a sense that for british business, it was a dilemma. For fx markets, it is like the upside for sterling is a comfortable tory majority. But what are the Downside Risks . Right, if on december 12, we come back and it is a Hung Parliament in the sense that neither of the two largest parties are able to cobble together a majority, so that would mean obviously the conservatives really know what will govern with them, so they do not get enough seats, and at the same time, it looks very, very difficult for the labour party to cobble together a workable, coherent majority with the other parties in the lower house in the commons. The s p, the lib dems, the greens. And so on. We are in dangerous territory for sterling. I think some investors would say that means brexit is going to get delayed indefinitely and it probably would. Therefore, i think you sell the rally. You faded. Sterling goes down. We will probably have new elections by the spring in that case. That is the nightmare scenario for sterling. Nejra if we talk about the upside and we get the comparable tory majority and it looks like borst johnsons deal is going to get through, where does it get capped . 133, one 34. Eurosterling looks like it is already there. I do not really think there is much more downside left in eurosterling. Maybe one big figure or so because eurodollar will rally a little bit with cable because of the uncertainty factor being reduced. But again, once we once the u. K. Legally departs the block, then we are in an even more difficult set of negotiations. It will come down to one key issue. How much trade does the u. K. Want to do with the European Union in return for the rules that brussels will demand the u. K. Follows . Will those rules basically undo the outcome of brexit in the very first instance . That is the predicament they are both going to be in. Nejra there could potentially be another cliff edge of a different kind coming. What does sterling two through 2020 on the assumption that we get the brexit deal through and then we start negotiating the trade . Does it drift . Stephen i think so. A lot depends on what the u. S. Dollar does right now based on what the markets are telling us, what the fx markets are telling a spare probably. The dollar itself continues to tread water but remains reasonably resilient. We will probably see something 128 in cable once the initial euphoria dies out and people realize by june or july, there has to be some type of a decision on the transition already. This whole issue with the u. K. Not nominating a u. K. E. U. Commissioner has not caused things to get off to a good start, so borst johnsons relationship with ursula von der leyen is not going to get out to a good start, i dont think. Negotiations looked like they will be tough. Everything i can see from the european picture, it suggests to me that there are a lot of you know, with merkel weakening, there are potential political power grabs that are going to be going on, so that is chaotic. But brussels itself to me is firm and its position. It does not want countries to leave the e. U. Because that weakens its position. Nejra Stephen Gallo stays with us. We bring you our exclusive conversation with the president of emirates airlines, tim clark. We speak with the International Air transport Association Director general and ceo. That is next. The today, we speak to managing director of the International Monetary fund. Do not miss that exclusive interview at 9 30 a. M. London time. When you are traveling to work, to mentor Bloomberg Radio two and Bloomberg Radio. This is bloomberg. This is bloomberg daybreak, europe. I am nejra cehic. M or if is still interested in the dreamliner and a decision on an order could be months away. Speaking exclusively to yousef gamal eldin, tim clark said the aircraft Industry Needs to improve the quality of planes it delivers. It would be helpful if we knew when it would be delivered to us. The is when and if we take a seven and it is important that going gets the aircraft out of the door. Qualityhe high level of control and standard we expect of them. We have to wait and see. Hopefully, we will know that in a few months. I am not altogether sure. How big an order would that be in terms of the number of planes . Tim we are working on it. Ok. The other thing to take into consideration and when we spoke last time you made it clear that you were not seeing any green suits in the industry ahead. Now, a few months on, how has the picture possibly shifted . Sure it shifted. We did enter a turbulent stage. If you look at the Airline Failures and the last two years, since the last airshow, there have been 15 of them and some of them have been quite large. Industry enters a phase of itsolidation and we knew would be on the periphery and that is what happened. The industry is now going through a consolidation phase. The Global Economy has not helped, of course but where do i see us Going Forward in the next couple of years . I think 2020 will be tough. A lot going on. There may be a resolution of the chineseu. S. Tariff issues and hopefully the trade war will then dissipate, finally. That will help the economy get going. Everyone is affected by this but principally the europeans. In 2021, i think we will start consolidation in the industry as far as airlines are concerned. More efficient. Efficientem and more use of their inventory. Im quite optimistic in 2021 and 2022. Clark that was tim speaking exclusively to bloombergs yousef gamal eldin. Airbus has secured deals valued at 30 billion on the second day of the airshow. Les arepany sa. Till being thwarted and boeing is being sued by shareholders who have accused the missing of warnings. Matt miller, great to see you. Matt i am here with alexandre. E juniac from the iaea you were talking about going so why dont we start there. We have discussed this on many occasions and i did not expect to be talking to you still about this at the end of 2019. When will that plane be back in the sky . Alexandre it is a good question. Orhave seen now from july june a postponement about of almost a month by a month. We would see something in january but the real answer is we dont know. The point on which we have to Pay Attention is for the regulators to be aligned to in their schedule and in the conditions they will impose on the return to service. Otherwise, the process will be broken and segmented. We have built our Safety Record which is exceptional on the reciprocity in this process. Were talking about broken and fragmentation, when we first spoke about this, and it seems like years ago now coming you were saying that the regulators globally were not aligned. You wanted to see a more regulation. Fort and alexandre it has not improved. We are still hoping they will give an answer to boeing and the airline. It will not be strictly aligned as it should have been. What was before has been broken. Matt do you expect it to be fixed . Our Global Regulators going to get back on the same page . Global regulators going to get back on the same page . Alexandre i do not think so. Matt your conference is called the winds of change. What are the problems you think need to be fixed . Alexandre we have to explain to everyone that this industry is doing everything it can and has been for 10 years, to reduce its carbon footprints. E are designated hadeas we have for 10 years. N intense program beenirst years that have 20,009 the in commitment we made was to reduce the footprint by passenger. We are at about 2. 3 . In 2020, we are committed to having a Carbon Neutral growth. Above theignificantly expectations of everyone. Growth, we 5 or 6 ,ill have Carbon Neutral growth which is the most important commitment, we will have reduced our carbon emission by about 2. 4 . The unitedught nations report said there were 900 Million Metric Tons of carbon emitted and that it will triple. Alexandre it will triple if we have done nothing. When we implement our program, it will be divided in two. It is super ambitious target that we have put on our shoulders. We are serious in this industry. When we make a commitment, we stick to it. Help supporting Sustainable Aviation fuels. That will be contributing to 18 of that carbon reduction. You mentioned flight shaming and not everyone can but inn fiber domestic cases, it seems to have taken hold. Do you notice any change in peoples habits . Alexandre not yet and even in sweden in which we follow closely the market, we have seen growth in demand but at the same this at the same time as shaming has increased, we are seeing a slowdown in the swedish gdp growth which is also a negative impact. It is difficult to identify reason will which come the slowdown in the fly demand. We probably have something but it is not easy to detect at this stage. , we have to share with everyone that it is not a shame to fly. It is a shame to him that carbon. The enemy is carbon. We will do everything to fly without co2 emissions. That is what we have committed to do. Matt you are focused on that. Reduction, we have seen a real difficulty for cargo ments i am assuming mainly due to the u. S. China trade war. How do you see that playing out . I you optimistic that a phase one deal will turn that negative trend around . Alexandre it started last november. November, 2018 and month after month we have seen a decline of 4. 5 . Throughout 2019 we expect a decline by 4. 5 of cargo. Andomes from the trade wars the protectionist measures popping up everywhere. It also comes from the slowdown in gdp growth we have seen in many parts of the world. It comes from geopolitical concern uncertainty. There is instability in the golf, you have there is instability in the gulf, and you have brexit. All of these factors contribute. O the reduction in the freight significant. 4. 5 . Matt we can be optimistic that will be taken care of this year. It looks like there is a possibility that brexit will have some resolution and a phase one trade deal seems to be in the cards. Thank you for joining us. Thank you for coming to the studio in berlin. Theandre de juniac from iata. Get the bloomberg first word news with selena wong in beijing. Hello. Protesting about u. S. Interest rates. That is what President Trump did when he met with fed chair jerome powell. He said they are too high compared to other developed nations. It was the second facetoface this year. In hong kong, police and protesters continue to clash around the university campus. City later carrie lam is calling for an end a peaceful end to the siege. 100 demonstrators remain inside. Six protesters escaped or were evacuated last night. The public hearings of the impeachment inquiry start again today. The house intelligence Committee Plans to hear from eight witnesses this week. The house is looking into whether the president lied to robert mueller. This comes as President Trump says he is strongly considering testifying in the investigation. There may be an end in sight to the political deadlock in spain. Isalan Separatists Party looking into putting pedro back in power. He is preparing his supporters for the possibility and in return, they want direct talks over the future of catalonia. The u. S. Is reversing it stands that Israels West Bank settlements are illegal. This is a big policy shift for the u. S. And is the latest political offering to israel trump. Esident it could give a boost to Prime Minister Benjamin Netanyahu but would be a further setback to the Palestinian Peace process. Bolivias ousted president has weighed in on the rightful leader. He says the Nations Interim president lacks legitimacy. The senator elected by the the legal head of state adding the Current Administration has no constitutional right to rule. He says he is not had contact with them. I dont have any channel. As far as i know, any communication is between led largest legislators. Selena global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra selena wong in beijing. Coming up on the show come easyjet reports earnings and we will speak to the ceo of easyjet. We speak also to the managing director of the International Monetary fund. Do not miss that interview at 9 30 a. M. London time. When you are traveling to work, hop on to Bloomberg Radio. This is bloomberg. Nejra this is bloomberg daybreak europe, i am nejra cehic in london. Here is selena wong in beijing. 3000 jobs could be cut across europe. The latest move to the regions industry. Two thirds of the reductions would be office staff. It did not give a detailed breakdown of where the cuts would be made. U. S. President ial hopeful Elizabeth Warren is calling out blackstone for its real estate practices at accusing the company of shamelessly profiting from the 2008 housing crisis. This comes as she releases her housing plan including strengthening tenants rights. Wework will begin cutting jobs in the u. S. We of jobs may go, around 2000 positions. More news could come on friday when the companys chairman is expected to release a fiveyear plan for the company. Juul fora is suing marketing its ecigarettes to teenagers this as deaths and illnesses grow across the u. S. The state alleges that the company failed to post required warnings. Juul says its target Customer Base is adult smokers are not underage users. That is your Bloomberg Business flash. Nejra selena long in beijing, thank you. Treasuries and u. S. Futures steady. Record for the s p 500. Goldman says the trade wars drag on the Global Economy could be coming to an end. The impact on u. S. And china could aid in 2020. Moodys says the trade troubles will weigh on korea next year. This is the book this as the u. S. Extends huawei waivers. Stephen is still with us. Let us go back to basics. What are risk assets pricing in right now in terms of u. S. China trade . A conclusion of phase one by the end of the year. Pointsaining sticking being resolved in the discussions. And probably a partial rollback inthe tariffs imposed september. 15 or so tariffs. Nejra and a delay to the december tariffs as well. There may be room for a relief rally in risk assets if that happens. There is a lot of room for disappointment. Nejra in india, what could we see . May be back to 710. But youets may take a will have bond yields go lower which will be supportive for global risk assets. Nothat scenario, the fed cutting in december could exacerbate the move lower in risk assets. That ifd see headlines phase one does not get done by the end of the year coming you could see headlines early in 2020 that suggest talks continue at a constructive pace. A lot is driven by the poker game between the white house and negotiators and president and the president of china and his negotiators. Nejra we have not been able to go back above 2 . Yesterday i was speaking that bm had spoken to the correlation and we need to see the onshore yuan strengthened to 693 for the 10 year yield to go above 2 . Thehat make sense but again signals you are getting from chinese policymakers is that there are deeper Financial Leverage growth concerns within the chinese economy that are happening independent of the u. S. China trade war. Course, we got to a situation where the entire trade situation would be resolved overnight, this would be a huge windfall for Global Emerging Markets and risk assets but i am not banking on that at the moment. You are in a situation where the rmb does not look like it is in store for significant appreciation. Regulators dont want that. 195he u. S. 10 year yield is to 225, that is a buying opportunity. We have talked about this earlier in the show. The dollar tends to benefit in bull scenarios. Nejra you have a great hes out that talks about the fact that thenariff issue is deeper as you call it, ro ro. Risk on, risk off. What this has done is open up a new paradigm for the Global Economy where the u. S. Is not just a place where countries can dump their extra demand. I. E. Their exports. They cannot rely on the u. S. And other net exporting countries as a source of demand anymore. This could be further exacerbated in 2020 if donald trump wins again the white house. Toald trumps strategy is turn things more inwards. Make more stuff in the u. S. Whether it be by robots are humans. That would mean lower u. S. Trade deficits would which would be bad for net exporters. The issue of dollar shortages which we saw crop up this year, in my opinion, unless we get a significant acceleration of growth in 2020, i dont think the dollar shortage issue will go away. Effectively a limited supply of dollars globally. Availability for funding. That is an issue worth watching. Nejra in terms of watching whether we can get sustained strength in the yuan against the dollar but also the euro against the dollar, you think a phase one deal will not be enough for that. Is there fiscal stimulus or the prospect of it . The eurozone has a lot of organic, internal conflicts ancial, fiscal, political that it really has to solve. In the last 20 years of his life, all the eurozone has demonstrated is that it is an illconceived Currency Union in a stage of terminal decay. They need nominal gdp growth than they need it fast. Are your hopes not able to be up for any kind of euro strength . Out would not rule additional fiscal stimulus from germany or in the eurozone as a whole, but especially in the context of banking. I dont inc. Eurocrats realize that in order to get banking done, you need a dramatic reduction in sovereign risk. And in order to get that, you need growth. How do you get growth when you are operating in a system of fixed Exchange Rates . Need fiscal policy. The fiscal policy story and the Banking Union story are all interrelated. You cannot have one in total without the other working to help its. They need growth. They need growth and they need it fast. Nejra in the meantime come if we look at the u. S. Because of the fiscal discussion there as well, what will be the more important driver from here the school or the potential for negative rates . Is a big canates of worms and i dont have a lot of time to speak about it. Nejra 20 seconds. The debate about it will put a lid on the dollar while it yes,ns but fiscal policy, i think you will see more movement from the white house between now and the election to get additional fiscal policy done whether it is a payroll tax cut or something along those lines. Try to get it through congress. A lot will be based on what happens in the 2020 elections. , thank you. En coming up, easyjet reports earnings. We will speak to the ceo, johann monger and. Lundgren. Johan this is bloomberg. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. You can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. All with millions of secure wifi hotspots and the best lte everywhere else. Its a different kind of wireless network, designed to save you money. Switch and save up to 400 a year. And now get 250 off google pixel 4 during Xfinity Mobile beyond black friday. Thats simple. Easy. Awesome. Click, call or visit a store today. Nejra good morning from bloombergs European Headquarters in the city of london, i am nejra cehic. Faced to face, the u. S. President and the fed chair host a cordial meeting but donald trump again rails against rates being too high. We are in a good place. The composition has been a little different than we expected. We expected exports to be stronger. We did not expect consumption to be so strong. With the imposition of the tariffs and the global slowdown, business fixed investment was weaker. Up andngs have picked been quite strong and we expect it to continue. Ra the trade war dragged uncertainty over the phase one trade deal and the escalating violence in hong kong way down the markets. And of for debate, the pound holds a sixmonth high after a conservative election candidate supports the Prime Ministers brexit plan. A headtohead debate takes place tonight. Nejra welcome to daybreak europe. Let us get to the numbers from easyjet working on the bloomberg right now. What we are hearing is that fullyear revenue comes in at explain for 3 billion pounds. Stronger than expectations. Estimateine pretax was 426. 7 million. A little better than expected. The Dividend Per Share is 43. 9. Easyjet forward bookings for the first half of 2020 Financial Year are reassuring. That is the commentary coming through. They are slightly ahead of last year. These are the numbers we are getting. In terms of Capacity Growth, easyjet still sees Capacity Growth for the year at the lower of the expected number. The fullyear adjusted basic eps at 88 pence for now. Joining us now is the ceo of easyjet, johan lundgren. Thank you for joining us. I have run through some of the numbers. I understand you also have some announcements to make. Johan yes, the we made to announcements this morning and one is that from today, we are offsetting all of the Carbon Emissions from our flights. We are doing it from today across all of the network. Together with the other activities we have been doing to reduce Carbon Emissions per passenger per kilometer, we believe we do more than any other airline. It is tough to say this is a perfect solution. It is an interim step before new technologies but we do believe it is in line with what customers Want Companies to do. Nejra the announcement there on offsetting Carbon Emissions. The other thing investors are looking to is your new holiday business plan. Is that up and running now . How hopeful are you about it in terms of growth . Johan we launched this well in time for the peak booking. Eriod this will combine the flexibility of the network. Thany to more destinations any other airline. We do more weekend flying. To thesetiple traffic destinations. And together with some of the best hotels in europe and best in technology, this is best for our customers so were really excited about that. How much are you expecting to be able to take in terms of market share with these package holiday deals . Johan we launched in the u k market but we can see that we can roll this out also to a number of other core markets. December 2020 will be our first significant season. We are looking for this to continue to grow and we think this will have a meaningful contribution to the overall profits of the company. It is a great proposition. I dont think anyone else can match the flexibility with the value together with the strength , we feel this is something very exciting. Nejra where else are you looking for growth . In what is a Competitive Industry and one in which you might see consumers turned away from shorthaul flights in favor of taking trains . Seen thereave not has been a Significant Impact on the shorter flights that we do. Mind you also that even if the flight in some cases are about an hour long, in order to get to those places, it could take a train three or four hours sometimes. It is not actually the flight distance that determines peoples willingness to go by train. Increasinglyhis is on peoples minds. We do know people are more considering different means of transportation. They are also considering the different airlines. When it comes to the footprint on the environment that these companies have. With this mornings announcement, we believe we do more than any other airline to reduce our footprint on the environment. In terms of the routes, we fly routes and we launched an additional 100 flights 100 routes in the last year. We believe there are many opportunities for us to continue to grow in the europe network. We are the second Largest Network in europe. There is plenty for us to grow within all of europe. Nejra you have taken may write to my next question. I have to admit i have a bit of a personal agenda. I was born in sarajevo and you do not yet fly there. When will you . Johan we are always looking for input from our customers and im happy to go back to the office and look at that. We do fly to more destinations than any other airline out there. We hold more slots in the world than any other airline in europe. We serve well but there are other routes. Nejra thank you. An operating environment are you in right now . Johan the year just ending has been challenging for the whole of the industry. Affect alson that in the growth across the industry. We are growing at the lower end of the rate. Grow justr we will above 1. 7 and for the whole year it will be around 3 . But we have grown a lot in the last two years, about 20 . We have taken some very strategic positions. The number one and number two positions at primary airports. It is a reflection of a period of growth and now that the demand has been more challenged when you look at the deal and environment, most airlines are looking to mature their growth and continue to focus on delivering and optimizing their results and that is what we are doing as well. Some you did benefit from issues with your rivals in terms of strikes. How much in your numbers was due to that benefit . That might fade away as it were. Johan we recognize the benefit of about 10 million. Not a significant improvement. The significant improvement we was really selfhelp initiatives. We reduced the cost significantly by reducing the number of cancellations we have. We also reduced a lot of the 24 er delays that we had, of three hour or longer delays. Of 37rove down the cost million for the whole of the company. Alsos fantastic because it clearly improved the customer experience. We also did a lot of work on our ng the selfhelp initiatives have really work and given us a strong finish for the year. Nejra johan lundgren, ceo of easyjet. Great to catch up with you this morning. Let us look ahead to how the European Equity markets might open. We are about 50 minutes away from the open of cash equity trading. We closed flat yesterday. This after the s p 500 did make a reluctant record in yesterdays session. Higher andly ended u. S. Futures also pointing higher. Investors continue to assess the prospects of a phase one deal. The bond market the 10 year yield continued to slide in todays session. Not reflective in the treasuries futures. We got to 180. Not getting a huge amount of indication from the european futures there that in terms of fx, the focus was on some weakness in the dollar yesterday after the meeting between donald trump and jay powell. Let us talk about that because they have held their second facetoface encounter this year. After months of criticism from the president , powell was invited to the white house for a series of discussions. A statement from the central bank said jay powell did not discuss expectations for Monetary Policy expected stress that its path will depend entirely on the incoming information from the economy. The dollar dropped to a session outonce the news came that from the meeting. Rosenberg dissented against all of this years rate cuts. He is concerned that the central bank is unnecessarily accommodative. I am not sure we needed so much accommodation at this point. I am worried that we have less room than we otherwise would have ended is not just the short end of the market. The long end of the market has been fluctuating between 1. 5 percent and 2 , lower than what we were experiencing prior to the last recession. Quantitative easing will also have a limited affect. 20 us now is seema shah, chief strategist. Let us kick off with a conversation that President Trump did have with jay powell and the fact that the dollar took a hit perhaps a run concern they were talking about a weaker dollar and negative rates. Are these legitimate concerns for dollar investors come the dollar policy from the white house but also the prospect of negative rates in the u. S. . Seema we are very skeptical about the idea of negative rates in the u. S. And even in europe and japan. They have hardly been a Success Story over here. We have heard repeatedly from the u. S. That this is not appropriate for the u. S. Although President Trump may have mentioned it, i suspect jay powell pushed it back. Nejra we have even heard from jim bullard, one of the biggest doves suggesting a high bar for future rate cuts. Is the bar really high for a few for further rate cuts . Seema we expected to stabilize soon. The trade deal, the partial deal , we see it going ahead. A positive. Equity markets are at record highs and unemployment is low. In this atmosphere, rates will be on hold. Continueds a weakness, there could be further rate cuts but the maximum we could expect would be two cuts next year. Nejra i was speaking to Stephen Gallo last hour and he said what is priced into risk assets right now is a phase one deal going euro, a positive on the december tariffs but also a rollback of the september terrorists. I said tariffs. I said that is a lot of room for disappointment. Seema there is a lot of room for disappointment. This is all pricing and entire trade deal which we have seen has failed. What we are expecting is that the december 15 tariffs are the most important. We are dubious there will be pushed back on the technology transfer. Im hoping the markets are not resting on those expectations. If we dontnot see that rollback, then i think the market is in for a real disappointment. At this stage, the comments coming out from both sides seem that both sides are very eager for a deal. They could be rocky. May itsix months ago, in looked like we were close to something but we all know what happened since then. Get pushed into 2020 and we dont get phase one or a pause on the december tariffs, what happens to the u. S. Economy then . Seema if the december tariffs go ahead, this year all that is standing between the u. S. And a recession has been a resilient consumer. If the consumer weekends, we expect the markets to reprice a recession. We are confident there will be a partial deal which will help the risk assets. Nejra seema shah from principal Global Investments will stay with us. That is go to selena wong in beijing or the bloomberg first word news. Kong, police and protesters continue to clash around the university campus. Carrie lam is calling for a peaceful and to the siege. 100 demonstrators remain inside. Evacuatedd or were overnight. The United States is reversing its stance that Israels West Bank settlements are illegal. This is a big policy shift and the latest political offering to israel. They could give a boost to Prime Minister Benjamin Netanyahu but it is likely a further setback to the Palestinian Peace process. Axing jobs across europe the latest blow to the regions industry. Two thirds of the reduction would be Office Space Office space. It did not give a detailed breakdown of where the cuts would be made. Global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra . Nejra selena wong in beijing. U. K. Business leaders are not impressed by pitches of either of the main Party Candidates in the upcoming elections. We will discuss that next. This is bloomberg. And we will speak to the director of the Internet International managing fund. This is bloomberg. Nejra 7 20 a. M. In london. 37 minutes away from cash equity trading. I am nejra cehic in london. Let us look at what you should be watching out for. Eu Affairs Minister will kick off a council. And wall street will get retailersrom big u. S. Including home depot. Another big week for the public impeachment hearings into President Trump kicks off later today. Eightchiff has scheduled more witnesses to appear in the next few days. Will30 p. M. U. K. Time, we get u. S. Building permit data and later today, the first debate for the u. K. Elections. Jeremy corbyn will go headtohead with his opponent. Business executives are caught between Boris Johnson and Jeremy Corbyn. Here is what the candidates had to say before tonights televised debate. One of the advantages of voting conservative in this election is that we can and will get it done and get it done in a matter of weeks. We have a deal ready to go. Just add hot water and stir in hot. It is there. What we are offering this country is to negotiate a trade deal with the European Union. Liberal democrats are absolutely going to try to stop brexit and to use our strengths. We are being very ambitious in give moreion to reason to british politics. We can get Parliament Working for you and then we can unleash the potential of the country. If properly functioning theic sector which provides services so essential to all of our lives, these are areas we will be campaigning strongly on. We are not in the business of putting into number 10 someone so obviously unfit to do the job. Nejra seema shah is still with us. Update and he said when it comes to the pound, nothing is priced in. It could soar or crash. It could hit 145, that is sterling on a deal. 110 with the no deal. A conservative victory and brexit going through. The 130 level is telling you that the market believes they are getting some uncertainty regarding brexit. I would say that if there is a no deal brexit, if that were to come back on the table, we would be looking at 110 or below. If brexit is completely taken off the table. Then you would hit that but we cant see that. Nejra your base case is a conservative my geordie conservative majority. Doris johnson and the negotiations. What happens to the pound then . Really key for investors to take into account. Assuming brexit goes ahead, investors believe this is bringing certainty to the u. K. And it does to some extent. But then real negotiations have to start. Considering how tough the last few years have been, to have only 11 months to go through this, we think the process of a no deal brexit comes back on the table. Then sterling will weaken as will overall u. K. Assets. Nejra what do you want to hear from Boris Johnson and Jeremy Corbyn . Seema from Boris Johnson, reassurance. Where thosenow fiscal stimulus plans are coming through. They also want to see a focus on nhs. People wantcorbyn, to know that he still wants to be supportive of those in the business environment. Overall, i think people want clarity. Later, wea half years want to know what the election will produce and what will happen with brexit. That is what investors want to hear we want to know the route going ahead. Nejra some investors are bracing for more spending regardless of the election outcome. Something you would be bracing for as well . How would that impact your view on gilts . Have a fiscal we spending plan coming in, either conservative or labor. Success would be likely. Gilt would be selling off sharply. When we think about what the bank of england is likely to do as well, we think it will stay in a hold. Nejra what are your expectations around brexit in the u. K. Economy and what does that mean for your euro call at the moment . Seema we have a lot more positivity around europe. The uncertainty is being taken out of the market. Tend to be underwhelmed by europe. As long as the economy stabilizes and the ecb will not hike rates in the future, with valuations where they are, things are becoming more attractive. And we have begun to advise reallocating towards europe in the last few weeks. Nejra seema shah, great to have you with us. Coming up, we speak to the director of the International Monetary fund. Dont miss that interview at 9 30 a. M. London time. The european open is up next. The s p 500 limp to a reluctant record yesterday. U. S. Futures flat and s p futures turning positive in europe. This is bloomberg. Good morning. Welcome to Bloomberg Markets european open. We are live or from our European Headquarters in london. I am anna edwards alongside matt miller in berlin. Matt today, the markets say sit on your hands. Asian stocks traded mixed as investors weigh signs of trade progress. European equity futures point to a positive open. The cash trade in less than 30 minutes time. Anna siege