Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

Protesters in hong kong and beijing promises retaliation if it becomes law. Alibaba set to raise 11 billion in a second listing next week. It marks hong kongs biggest share sale since 2010. Coming from behind, Jeremy Corbyn holds his own against Boris Johnson in the first tv debate in the u. K. Election, a snap poll puts the leaders at almost even on the night. Good morning. Matt good morning. We are getting headlines that hsbc is going to replace its head of Investment Banking, so those of you working at the Investment Bank at hsbc, at least according to the financial times, looks set to get a new boss. The head will move to a nonexecutive role according to the f role ft and he will get a replacement. We will bring you the developments on this story as the new head of Investment Banking those into the Hong Kong Shanghai banking corporation. Less than half an hour from the european open and lets look quickly at what is going on in terms of the risk picture this morning, the treasury yield right now, down. Need as investors feel the to buy bonds, and as a result, maybe it is a reverse of that. This is a result of the risk off feeling and that is reflected in futures. Look at futures across europe. Much inown not as london as we are in frankfurt or paris, but you see sachs futures down. 3 dax futures down aroundse futures down 1 . Ftse futures, in the red. What do you see on the gmm . The some risk aversion in european futures and u. S. Futures. We see some of that in the Asian Session, hong kong down. 6 . Many of these markets already open showing weakness coming through. It seems the more we link the violence on the street with the trade deal between the u. S. And china, the more complicated things become. To be something making the markets nervous right now. We see u. S. Equity markets flat in yesterdays session, the nasdaq touched an alltime high. Talking about technology and the way that emerges. Diverges. Australian markets dropped off the gmm because it is closed. Quite substantial losses focused around west bank and allegations of financial wrongdoing. We will be looking at that story for any future read across. Lets get to the markets live conversation with mark cudmore, managing editor in singapore joining us now for some insight on what is going on in the Asian Session into europe. It seems increasingly complex to get through a phase one trade deal if we are going to see the chinese and the americans linking in some way, or the chinese response suggests it will be difficult to get the deal if we are linking the hong kong violence to trade. Give us your thoughts on how that plays out. Well, obviously the developments out of the u. S. Senate yesterday linking that passing the bill on the protests in hong kong and saying they will review hong kong status every year is a clear negative and the reaction from china shows it is not taken lightly and might derail trade negotiations. There is a notable negative overnight. What is most interesting is how minimal the pullback has been. If you consider we are at record highs in u. S. Stocks and amazing levels across equity markets, there has only been a tiny retracement. Overall, it is impressive how well the assets are trading in the face of a very markedly negative moment, so this reinforces the conclusion that we are probably not going to get the major risk off event until u. S. China trade talks collapse completely. I think people know the situational ebb and flow. They know there will be pullbacks, but it is not until the moment talks have broken down, we are not signing a deal, and more tariffs going to place. That could happen at any moment, but until that moment, i dont know if we get a severe risk off move. Matt why is that . Are investors buying insurance him . A treasury yields, we dont see a strong ending gold strong and and goal isnt very high. How are markets prepare them for the possibility of failure here . I dont know that they really are preparing for the idea of a possibility. Thats why i buy into the idea that if we get a complete collapse in talks, it will be a severely risk negative event. I dont think they have bought the insurance. What they have learned is the situation does ebb and flow overtime and there might be a delay before a deal, but generally there is a belief both sides september are determined to reach a deal or at least prolong negotiations enough that we dont see a further escalation. Neither side wants an escalation right now, so there might be no role progress, but as long as it doesnt get worse, that is enough for markets and that is why people are not buying insurance. They are not preparing for that collapse. Anna our colleague Mark Cranfield writes europe, it is chinaurn to deal with the u. S. Angst. Breaking news in the aviation sector. I got headlines coming through on emirates and an order being placed. Jets, and lowering and subsequently, a lowering of the 777x from the existing 150. They are shifting expectations but in terms of the 787, they an intent toy had order 40 and now it is only 30. It seems whether the 787 or the 777x, you are looking at a lower order. We will talk about going later on today. Let me ask about what is going on politically in the u. K. Weve had a number of tv debates last night and Jeremy Corbyn seemed to do well enough to at least spook the pound for a short period. Us about thet tell reaction function in the pound as we head toward december 12 . Mark it seems the interpretation of who won the debate was very dependent on which side you were going into the debate. It seems conservative members thought Boris Johnson did well, labor supporters thought Jeremy Corbyn did well. It is notable the pound did we aken and it we seems sterling one and to the weaker. Wanted to go. It seems we have priced optimistically and i suspect by how it is trading that we will see sterling trade lower to the election. People arent really sure what is the positive outcome that will grab the currency higher . It sounds good if the conservatives get a clean majority and not the political uncertainty, but that clear majority means a harder brexit than many want. That means many people are looking at the election and saying there is nothing particularly good for the pound and we have priced all this optimism. Slowly andy weakens surely into the election. To go andgoing interview the Vice President of the ecb later today because of the Financial Stability review. I wonder what you would ask him. You were so helpful yesterday giving me a question, and she was concerned about the debt issue, not only in latin america, but also in africa and argentina was keeping her up at night. What would you ask as far as negative rates and Financial Stability being the focus today . Youve got to stop putting me on the spot like this, but i guess my question would be can yields get back above negative next year and will the path of european rates affect a discussion around fiscal policy . I think there is growing momentum we want more fiscal policy, everyone agrees apart from those in charge of turning on the fiscal taps, but if we start seeing higher yields, that normalization signal, will that remove the pressure for fiscal policy in europe. Anna getting insight into matts Interview Research process here. Mark cranfield, mliv. When will the u. S. Curve flattening hit stocks . Reach out to us and they want to live team the market live team. Lets get a first word news update in london. Have left atn iran least 106 people dead according to amnesty international. Thousands took to the street increased gasies prices by as much as 300 . Security low forces launched a crackdown that saw thousands arrested and the internet closed across much of the country. The u. S. Is investigating if sanctionsreached against russia. The allegations refer to the s transactions after the u. S. Imposed sanctions following russians annexation of crimea. Swedbank says it hasnt found any signs it breached sanctions. Coachappointment to head at tottenham hotspur. The endract runs until of the 20222023 season. He oversaw a disappointing spell as the manager of another team after previously coaching chelsea, madrid, and milan. Global news 24 hours a day, onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anne with the first word news. Bloomberg is cohosting the Economy Forum in beijing and have a great guest coming up for you through programming. Solomon, ceo and chairman of Goldman Sachs will be joining us for an exclusive interview. You can see that at half past 6 00 tomorrow morning london time. Forward too look coming from the forum in china. Next, alibaba set to raise 11 billion in its hong kong listing. We are live in the city next with an update on the pricing and remember, Bloomberg Radio is available on your mobile device or dab Digital Radio in the london area. This is bloomberg. Matt welcome back to Bloomberg Markets the european open. We are currently 15 minutes out from the start of cash trading across europe and in the u. K. China has threatened to retaliate if a u. S. Bill supporting protesters in hong kong becomes law. Passedate unanimously the legislation and warned against the violent suppression of demonstrators. Move marks a challenge to beijing as the worlds two largest economies work to close a preliminary agreement, a phase one agreement and their trade war. For more, Jodi Schneider joins us from hong kong. What would this legislation do what do we have to see for it to become law, first . We still have a few hurdles before it becomes law, even though the house and senate have unanimously passed the legislation. The legislation in each chamber is somewhat different and they have to pass the same bill for it to go to the president s desk. They have to reconcile the bills and it goes to the president who has not said whether or not he will sign it, the comments from Vice President pence have seemed to indicate that is happening. They required the u. S. State department to certify annually that hong kong remains officially on thomas to justify autonomous to justify the special trade relationship with hong kong, which is a different relationship it has with other areas of china. Is interesting, and threatens to complicate the broader u. S. China trade talks. How does this play into what the market is fixated upon right now, and that is getting to a phase one trade agreement or even getting a date for a phase one trading agreement . Jodi it certainly seems to complicate it. At least it complicates it from a visual standpoint, and optic standpoint because now you have the u. S. Or the u. S. Congress basically giving a signal to beijing that they are very concerned about hong kong, a signal that beijing views has the u. S. As the u. S. Trampling in their own affairs, places they dont belong and those commons were made today by chinese officials saying this was meddling in chinese affairs. They also threatened retaliation if this bill is passed, unspecified retaliation, but it seems it would complicate the talks, which are now focused on things like tariffs and tariff relief for china, which is something china is demanding before a signing agreement. This really puts President Trump in a difficult position. This legislation may pass come to his desk as he is trying to negotiate the final details of the phase one agreement with china. Much, jodis very schneider, bloomberg Senior International editor in hong kong. Alibaba is set to raise 11 billion u. S. Dollars in its Mega Hong Kong listing as the Company Tells investors it will probably price shares around 176 hong kong dollars, representing a discount of almost 30 3 from last close in new york. Joining us now, bloomberg reporter in hong kong. Why is alibaba doing this now . Weknew they were listing, knew a little more about the price. Thanks, yes. It is an interesting time to be doing the listing in hong kong and alibaba doesnt need to cash, but they never really abandoned their ambition of listing closer to home, even after going to new york because of the issue with the dual class shares. After hong kong changed listing rules last year, it gave alibaba a chance to list close to home and chinese investors to hold one of chinas tech darlings. Such a wellknown name, such a wellliked company that it probably is one of the few companies that can get away with doing a listing at this time in hong kong when there were protests in the city and markets were quite volatile. What does it mean for hong kong for the city, especially at this time . Win for hongeat kong and for the city has a listing venue. Hong kong over the summer had been lagging behind other andanges, notably new york there were a couple of hypo high profile flops of ipos that had to be shelved so that a company can do such a Successful Listing in hong kong shows the exchange is still in business and despite the u. S. China trade war and the protests, one can still do a really large listing here and successfully price with investor interest. It is likely to push hong kong to the top in the rankings of. Xchanges for ipo that will be a large success for the exchange. It was number one last year and towill certainly be angling be number one this year, so that will put it closer. There is obviously quite a bit of time left, though and new york is not that far from behind. ,att Julia Fioretti bloombergs reporter in hong kong, talking to us about the alibaba ipo. Bloomberg is also cohosting the new Economy Forum in beijing. We got some great guests lined up. Credential ceo mike wells will be joining us for an exclusive interview. You can see that at 9 00 tomorrow morning london time, 10 00 on the continent. We are minutes from the open. Next, a look at stocks to watch including swedbank after a swedish public broadcaster reported it is being investigated by the u. S. Authorities. This is bloomberg. Anna welcome back. Six minutes until the start of the trading day. Lets get socks to watch. We are covering wirecard, and swedbank. Lets come to you first. Annmarie beaver tree called u. K. Retail space is weighing on sales. Theyre holding that growth for. Ext year, the retail space we have seen consumers moving online and on top of that, brexit has been a key geopolitical concern holding back retail. Wirecard,story at another one that could move lower. Yeah, it is going lower by 10 in the premarket so far this morning. There is a newspaper report saying the auditor was unable to form a final audit on the singapore account, unable to determine the completeness and accuracy of the Financial Statement of wirecard in singapore. Responded they follow procedures and the auditor couldnt access documents due to the Ongoing Investigation down there. Anna thanks very much. What about swedbank, the troubles of that business . Have authorities investigating whether swedbank breached u. S. Sanctions against russia. Swedbank itself says it is not aware of sanctions violations. If we look at the stock, this is a tough one because there has been a lot of negativity priced in. Down 1 to 4 . Anna thank you. Thank you for the stocks to watch. Retail,er in the u. K. , first go is the function. The market open is next. Anna a minute to go until the start of cash trading. This is the European Market open as we build our way toward the market open, lets look at what asia has delivered. With asession from asia lot to do with the politics in the u. S. , legislation passed in the senate, still a ways to go before it comes law, but seemed to back the protesters in hong kong, angering the chinese and looks to influence the could narrative. We see asiapacific stocks down. 5 the session. We will focus on the lack of progress on the phase one trade deal. No date for a phase one trade deal and the pound under pressure. To do corbyn seemed better than anticipated in yesterdays debate and as a result, some weakness in the pound. A two weekce, near low, fell more than 3 in the session yesterday around u. S. Inventory. Futures suggest we are weaker at the start of the day, focusing on the trade tensions and a relapse of progress. Ands open markets in europe chiefly get a move to the downside as a lack of progress in trade, no data in the diary for phase one could deal being signed. Questioned of if we can do that or get other phases of a trade deal with more tension morphing into a geopolitical crisis really between the chinese and the u. S. Over hong kong. The french market, down. 5 and the ftse 100 down. 4 and the euro down. 4 . We had weakness in the pound. The dollar, broadly stronger today and the euro retreats. 1 . We see a weak start to the european trading day as our colleague on the mliv blog was saying earlier, it is our turn in europe to deal with the uncertainty around global trade and what does that do to the sector picture . Nothing positive if you are long these markets. Weve got financials looking really weak, energy looking weak on both fronts because if you are concerned about u. S. Inventory and global trade, that perhaps weighs heavily on the Energy Sector and weve had a drop of 3 in energy price oil price specifically yesterday. The market, still dealing with that, as well. What do you see in individual movers . Some breaking news. Matt yeah, lets look at some breaking news first off on siemens. It looks like the ceo has decided to shed 75 of the energy unit. Definitely a stock you want to watch this morning. Keep your eye on what is going on with siemens shares, as the pany peels off almost all lets just say the lion share of the energy unit. That will raise cash and help it focus on the core business. Ive been covering siemens for 20 years now. I started out this business covering siemens in this office 20 years ago and the ebb and to movingdiversifying back to its core business is just amazing to watch. It is like a living, breathing organism. Movers, of individual on your side youll have a big screen to focus on. Do you seef breadth and who do you see winning and losing this morning . Anna a lot of breadth to the downside,488 to the 188 to the upside. A lot of negativity around trade influencing global stocks the last 24 hours. Looking at the upside, i dont see any of the stocks we have been covering. Up 3. 5 and mitchells and butler is up 1. 6 . On the downside, that is where a lot of the action is today and we see wirecard down by just shy of 6 . We heard from our colleague, jp was telling us the authorities of singapore could not conclude their audit. Some files were unavailable and as a result, wirecard is down. It is a volatile stock since the report around them. Also, there has been news around another business. Aviva down, some news from them. Swedbank, also weaker this morning down by 2 . That one, just opening. Im still looking for opening prices on kingfisher. We will look for those when they start. Trading. European markets, opening lower after the Senate Passed a bill that would potentially complicate trade talks. Nnning us, the cio of Investment Partners. Great to speak with you. Marketopean equity opening with no positive territory sectors this morning. Given the tension now over hong kong, is there certainty of trade deal . Lets look at it from the perspective, we hit new alltime highs in many of these markets. We have been talking about trade wars and negotiations between the u. S. And china for many months and we are going up and down all the time and yes, it is right. We are at high levels and clearly the news isnt positive this morning. It is a factor that will weigh and reduces the possibility of a phase one deal getting done. Markets are right to be concerned, but it is too early to conclude the return for coming months. Matt the fall from this level would be much harder, right . What kind of protection would upsput on, because we say and downs, but there are really not that many ups. It seems we get positive news and negative news. It is not that we ever get a lot of steps forward in these trading or she nations. Trade negotiations. I agree with trade negotiations themselves, but since the summer, the overall tone has at least moderated a bit, and i think it is now up and down rather than just down. On the other hand, there is also other factors at play. You can see in the weaker sectors today they are often related to the sectors that brought the weaker numbers into the latest earnings season. Overall, growth seems to be bottoming out, earnings surprise broadly on the upside in the u. S. And europe so there are other factors at play that have supported markets and are not necessarily going away, but the trade factor is more negative. Anna interesting to see europe reacting as negatively as asia, underlining the global interconnectedness of trade. To your point around the sectors , the sector breakdown of the stoxx 600 today. None of these sectors are in positive territory. In utilities, health care, resilientand fairly sectors. How does that time into the trade around the various sectors . If you see today financials and energy weaker again and in europe, relatively weak numbers but overall, the numbers were better than expected. Seeingink you are weakness related to the trade talks but also weakness in areas where earnings numbers have been a bit weaker. That is also probably playing through a little today and to your first point, i think it is absolutely correct. Europe is still relatively weak in its growth and very dependent on external demands, and the trade talks are critical there. Europe doesnt have a lot of internal dynamics supporting growth so once we see these sentiments deteriorating, europe gets it. Matt are there any sectors that have been unfairly punished due to the trade war, and are there any that you think are really thatevergreen sectors arent going to be affected no matter what happens . End, it isin the hard to say the more domestic oriented sectors are less exposed to the trade war but in the end, if it escalates from start toevels, a will become a real risk factor for global recession and we will see sectors what i do think is if you combine what has happened over the last couple of months in terms of trade and sector dynamics with the latest Earnings Results and for example, industrials might be a sector that is interesting. It is home herbal to trade talks but could produce good numbers in the earnings season and if the pmis later this week show further bottoming and this doesnt escalate, that is a sector that could have upside. Anna thank you. The cio of nn Investment Partners stays with us. Cohosting the new Economy Forum in beijing and weve got some great guests lined up. Among them, former white house economic adviser gary cohn. You can see that interview at half past 9 00 tomorrow morning london time. Plenty coming your way the next 48 hours from that conference in china. Next come the stocks on the move this morning, including wirecard. Shares of the german finance fintech business, falling this morning following a news report over a delay to a nod it an audit in singapore. This is bloomberg. Anna welcome back to the european open. 12 minutes into the crater day, weaker for european equities. Down. 7 on the stoxx 600. Lets get your stock movers. Annmarie hordern is standing by. Annmarie there are a lot of individual corporate stories this morning moving individual names. Wirecard, down nearly 7 this morning, one of the biggest declines on the stoxx 600. It says it file the filled , andeporting obligations rejects a report that says wirecard could not approve the of theal statement subsidiary in singapore. Swedbank to the downside, more than 3 after a swedish public broadcaster said the u. S. Authorities are investigating whether the baltic unit allowed transactions that breached sanctions against russia. Swedbank says they are not aware of any violations. One of the biggest gainers, up 3 . Local press reporting nex their considering a share deal. Matt annmarie hordern, looking at some of your big movers. The latest fed minutes tonight are expected to show a reinforcement of the view rates will stay on hold in the u. S. Jerome powell and colleagues have been chatty since last months cut. Valentijn van nieuwenhuijzen, cio at nn Investment Partners is still with us. What are you getting from the chatter . It looks like they are happy with the three and then. Youve got some doves and hocks coming out, but how long will they be on hold . Valentijn in that sense, this is one of the more boring moments of fed watching. It seems to me they are for now on hold. They are data dependent, but clearly they need a sizable move in the data before they contemplate something different. Dont expect a lot of new insights from the minutes. Maybe a little of an assessment of detergents between members that i dont expect too much there. Things can change. I do get a sense there is a higher hurdle to contemplate into next years hiking rates than to easing rates further. There is still a bit of an easing bias if these trade tensions reescalate again. Weve seen that before. There seems to be an interaction between the two and it seems to create a bit of an issue by which the u. S. Or donald trump can increase these tensions around trade and the fed will step in. Anna will the easing bias be perhaps required . If we see any worsening in the u. S. Consumer, focusing on the consumer in relation to new home sales and what that does to consumer spending, weve got the new Homes Construction or new home sales and home depot shares on this chart. That was a story, the weakness in the outlook for home depot. How vulnerable is the u. S. Consumer . Valentijn lets not forget, there are vulnerabilities but at the core, this is one of the areas of strength in the u. S. Economy and we have seen how the labor market is developing. Also, this is an area where the policy of the fed has had impacts this year. Stillg rates in the u. S. Has an impact and influence to stimulate the economy through the housing markets, murray have seen other sentiment indicators are proving improving. Im not concerned on the outlook given the rate cuts by the fed and we are in lower Interest Rate territory. That is something to be relatively comfortable out. The key risk factor is contagion of the trade and Industrial Production type of sectors into the domestic oriented sectors. We are not seeing that yet. Matt where do you see rates headed . We see 1. 75 today. It doesnt look like investors are well, investors seem sanguine about the trade war. Do we hover about this level until a phase one deal is meant . Valentijn met . Valentijn in the shortterm, it is pretty neutral in the rate outlook. Weve seen quite a bit of Rate Movement in the u. S. And european rates in the past few months. Levels could well persist into next year, but like with many variables, yes, the trade talks are crucial factors. With respect to the bond markets, i think there is another swing factor related to fiscal policy and the extent to which that will be used as an alternative to Monetary Policy to really support growth into next year anna is that something that sense rates higher in the u. S. . A concern about the fiscal spending commitment . Weve seen a lot of fiscal stimulus from the u. S. And fiscal debate elsewhere. What could europeans do . Do you expect more from the u. S. . Valentijn it is a fair point. In terms of where the change could be, it is much more in the european sphere. For now, the u. S. Is sort of the. I cannot done. I cannot exclude another round but dont see it has the base case for next year. The story is more european, but it would also have an impact on global rates markets. The effect will be bigger in europe and the u. S. Markets. Anna valentijn van nieuwenhuijzen, the cio of nn Investment Partners stays with us. Shed 75 ofing to its energy unit. Joining us, bloombergs Senior Business editor. In terms of the market reaction, we are seeing a little downside, but in line with the markets. What was the big takeaway from this news floated a . Flow today . Most expected siemens to hold onto the business a little longer or more of this business. Typically with the have done in the past when they shed assets, and they done a lot of that, theyve sold health business, lighting business, but typically, theyve held a firm hand on these assets. The ceo is now signaling that over time, they would be willing to get rid of 25 plus percent, minority. Ing this shows he has been quite radical of his rebuild of the company. Abouti was talking early in the 20 years ive been watching this company, it is that itccordionlike in diversifies into conglomerate and then it sheds businesses and focuses on its core business. What is stage is siemens in right now . Well, as you say, it is an ever disappearing company. Ive watched the company for close to 20 years myself and it used to have everything from to bigphones to trains, medical scanners and the story of the last decade, and that has accelerated over the past several years, a quite radical slimming down. His view is we dont want to end up somewhere where ge ended up, a big conglomerate that was hounded by activist investors. We dont want to end up similar to another with activist investors. Of our to be the masters own destiny, that means scaling down and keeping a nimble operation and getting rid of the conglomerate weve known for the last decade. Matt i do remember how excited i was to get hold of this siemens mobile phone 20 years ago when the Telecom Operators had just ponied up 50 billion slow for disappointingly 3g technology. Its been a great couple of decades with you. Benedikt kammel, great. The leaders of the uks two Main Political Party take part in the first debate ahead of next months election and it was an interesting time. We will discuss. This is bloomberg. We have a deal that is oven ready. It is ready to go, and it has not just approved by members of the eu, but everyone andhe conservative cabinet includes everything we wanted from brexit. Agoe will in three months she ate a credible leave option with the eu and within six months, put that to a referendum for the british people to decide between that option of leaving, while protecting jobs and trade, and the good friday agreement with europe, for remaining as or remaining as members of the european union. That will be the choice put before the british people. I think it ive been very clear about the deal i have done. There it is. It is in black and white. You can read it. We dont know what mr. Corbyn is he wont come clean with the electorate about whether he would thank you, mr. Johnson. What i would probably leave under the tree for him is a Christmas Carol by charles dickens. He can then understand [laughter] a literary effort, a copy of my brilliant brexit deal. Anna some of the high and low lights from the debates. I was the first Election Debate ahead of the vote. Went headtohead on brexit and their spending plans. In what was it ended in effectively a tie. Jeremy corbyn defied negative , valentijn vans nieuwenhuijzen, cio of nn Investment Partners is still with us. Entrenched . Come un notes, you talk about all situations producing uncertainty. Valentijn i think that is the sad situation if you look at it. It is kind of hard to imagine an outcome whether it is a surprise win by corbyn or the brexit of johnson, we could end up with a Hung Parliament or kicking the can down the road, but all in all, in all situations, even if there was a solution for a referendum, we would still have the u. K. In thatg in the eu, situation, six months, 12 months later, some political scene in the u. K. To push for another brexit. To understand how to make their investment plans and how to build on the tenure horizon, it10 year is hard to become convinced this is the time to put their capital to work. Anna on Scottish Independence and brexit. Matt yeah, well those are some interesting questions. I think you will be grappling with them, i suspect, for a longer time than you imagine. Valentijn van nieuwenhuijzen, the cio of valentijn van nieuwenhuijzen. Thanks for joining us cio of nn Investment Partners. Is hosting the Economics Forum in beijing. This is bloomberg. Matt lets get your top headlines off the bloomberg terminal. Power to the people the u. S. Senate passes a bill supporting protesters in hong kong. Beijing threatens it retaliation if the bill becomes a law. Alibaba works its magic. The company is set to raise about 11 billion in a second listing next week in hong kong. It marks the citys biggest share sale since 2010. Amesa. P at siemens gome they aim to list about 75 of its struggling power and gas unit in a radical move. Good morning and welcome to Bloomberg Markets european open. I am matt miller here in frankfurt today for the Financial Stability review at the ecb. I will be peeling off a bit earlier and heading over there in a few minutes. Anna edwards alongside me as usual at bloombergs European Headquarters in london. Anna we will miss you when you do that but look forward to your coverage of that ecb report later on. 30 minutes into the trading day. Lets have a look at where we are. Th to the lot of bread downside. 450 stocks on the stoxx 600 go downward. Concerns around the global trade, concerns about the extent to which we are now optically linking the hong kong tensions to the u. S. China trade discussions. All of that adds up to lower expectations of what we can achieve on a trade deal. Lets look at where we are on movers. Vidual next is up 3. 4 . That stock is going higher on the expectation. That is one of the big standout gainers of the date. Plenty more to talk about. Kingfisher, u. K. Retailer of Home Improvement products essentially and also retail in france also. Sales numbers were disappointing on the stock is down by 6. 9 . Viacom down by 5 . It is a volatile stock. Entially, we have got this the auditors in singapore unable to conclude their audit. Aviva holding an update for investors and the stock down by 3. 4 . Swat bank down by 2. 9 edbank down by 2. 9 . Investigations are being held into wrongful behavior at the business in terms of breaking sanctions with russia. U. S. Authorities running these investigations. The bank denies this. Lets get an update on the bloomberg first word news. The u. S. Senate has unanimously passed a bill in support of hong kongs protesters. It is warning beijing against violently suppressing the unrest. The legislation would require annual reviews of the citys favorable trade status. China has threatened to retaliate if the bill becomes law. Westpac has been accused of breaching Money Laundering laws more than 23 million times. It is the biggest breach of the laws in australia history. It includes failing to detect payments that may have been used to facilitate child exploitation. The Commonwealth Bank of australias 53,000 infractions. Westpac says it recognizes the severity of this issue. Hsbc is replacing its Investment Banking chief, according to the times. L he will move into a nonexecutive role at the division in part of a series of management changes. Sbc is declined to comment a new head coach has been appointed for he most recently oversaw Manchester United after previously coaching chelsea, real madrid, and ac milan. Global news 24 hours a day, onair and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna, matt . Matt thanks very much. Leighann gerrans in london with your first word news. Emerging economies Central Banks from india to brazil still enjoy the firepower to shore up the Global Economy if they can. While policymakers at the fed and ecb are similarly set to keep Interest Rates on hold. Many of their developing nation counterparts have room to cut further. That should help support the World Economy amid its weakest expansion in a decade. Joining us now is marika fixed incomee Investment Specialist at j. P. Morgan asset management. Ng worlde developi Central Banks really that powerful to shoulder the entire Global Economy . Think thedont developing world Central Banks will necessarily be shouldering the Global Economy. Helps. At the margin it it is interesting, this divergence we are seeing where the developed market Central Banks are on pause mode with an easing bias. Emerging market Central Banks show they still have capacity to cut rates further. Thatxed income investors, looks attractive, particularly in the local rates space, where you can get relatively high real yields on a relative basis combined with this continued easing policy from the Central Banks. Anna good morning to you. I wonder what this does. If we do see emerging market Central Banks cutting Interest Rates, maybe that is positive for their domestic economy shoring up growth but it eats away at the yield differential if developed world Central Banks are not doing cutting and finding other ways to stimulate their economy. What does that do to the relative attractiveness of em debt . Marika we do still think it is attractive. If you look at the overall em local index at the broad complex level, real yields are less than 2 . That does not look outrightly attractive. There are individual countries where you can still get yields in excess of inflation of 3. 5 4 . You compare that to where we are in the developed market world with significantly negative real yields. That looks attractive to us still. Matt where are those yields going . Yields we think that over the longterm will continue to go lower. For more of a strategic perspective, we think it continues to be a very positive environment for fixed income broadly. So we have got an environment in which Central Banks definitely are not hiking anytime soon combined with the way of cash really propelling investors weights of cash really propelling investors. Anna the pile of em debt, matt was talking yesterday to the imfs new managing director and talking about the level of debt that we see in emerging markets at the moment. She acknowledged that she is worried about that accumulated debt. Suggested the low Interest Rate environment was encouraging more and more debt and perhaps those economies should not get used to it because financial conditions can tighten. Is that something that worries you may be in a longerterm perspective . Marika i think not necessarily in the near to medium term as these economies look to develop and make their way through that progress. They can take on further debt and there is a lot of scope for that still. Matt what about here in your . I am going to go here in europe . I am going to go to the ecb for the Financial Stability review. At ecbs to me, normally meetings they tell us they are happy with negative rates and the experiment has gone very well. Twice a year at the fsr they point out all the problems and headaches caused by negative rates. Those headwinds are getting bigger and bigger, are they not . Marika they are. I think one of the Big Questions for the ecb is, can they go into territory . Ative rate they have had a negative deposit rate for five years now so this is not a new phenomenon. Regarding the ecb, what we are really focused on, particularly this week, is president lagardes speech on friday. It will be her first major speech since assuming the role of ecb president. She might announce a review of the ecbs policy framework given that they have not been meeting. L in their inflation target thus far if we were to see that announcement from her, we believe that the markets would probably interpret that gabashvili, given it devilishly dovishly. Anna what do you expect from the fiscal side of things in europe . More. Y is doing a bit is there an expectation that germany and some others in europe do more fiscally . Marika i think ultimately, fiscal expansion is needed to get the economy out of the slow growth environment. It is really kind of grappling between the capacity for governments to spend and the willingness to spend. On the latter, we are not necessarily seeing that willingness. We may see more fiscal spending at the margin. We think we will need to see further dear rick perry further deterioration in the economic backdrop. Germany just avoided a technical recession. They dont feel that level of urgency. Matt thanks so much for joining us. Marika dysenchuk there, fixed income Investment Specialist at j. P. Morgan asset management. We will bring you some of the stock movers this morning, including kingfisher. That is after a report of third sales softer than expected. This is bloomberg. Thirdquarter sales softer than expected. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 43 minutes into your trading day. Negative session of for here for European Equity markets. Real concern around global trade. Matt miller has ducked out of programming to continue our coverage around the risks to the european economy. We look forward to his report coming later. For the moment, lets get the stocks on the move. I am looking at a lot of butane companies. Kingfisher down. The ceo said the trading this thirdquarter was disappointing. Mitchells and butlers to the upside, up nearly 7 . Their operating profit for the year came in beating the highest expectations. The update should ease debt concerns. I am looking at the u. K. Lenders. I am looking at the u. K. Lenders. All are this morning down this morning. Better thanns anticipated performance may be starting to feel some concern that the margin of victory made with the tories is starting to narrow. This could potentially mean another Hung Parliament. More uncertainty. Anna lets focus in on a developing story in hong kong. Alibaba is set to raise about 11 billion in its Mega Hong Kong listing as a Company Tells investors it will probably price shares at around 176 hong kong dollars. The potential price represents a discount of almost 3 since the last in new york. Juliette saly joining us. The new information seems to be around the pricing. Remind us why they are listing at this time or listing more of themselves at this time. Alibaba never really gave up the dream of listing closer to home. It had to give up in 2014 and go to new york because of disagreements over its dual class shares and the fact that they were not allowed in hong kong. The Hong Kong Stock Exchange changed its listing rules last year, and that opened the door for Companies Like alibaba to come back and list close to home. This gives chinese investors a chance to hold one of the countrys tech darlings. In terms of why now, the company does not actually need the cash, but this obviously fulfills their longterm dream. It is such a wellknown name that now is almost in some terms as good a time as any, given the clout the Company Holds among investors. Anna what does this mean for hong kong . All of this coming at a time when we see a lot of tension, protest activity, and violence on the streets of hong kong. To see a listing under those conditions is quite surprising i suppose. It is surprising. In many ways, it speaks to the thet of alibaba and popularity it holds among investors, the fact that is able to carry out such a large listing at a volatile and delicate time in hong kong is testament to the companys standing and the fact that hong kong still remains a viable listing venue for companies. This will come as a huge success for hong kong. It is a huge boom for the exchange, which has been lagging through the summer behind other exchanges. This helps put it right back at the top, just ahead of the nasdaq. This could put it on course to reclaim its crown as the worlds top listing venue. It had that crown last year with a spate of multibilliondollar listings. The pace slowed down somewhat this year. This listing by alibaba puts hong kong squarely back in the wee and going to year end, will have to see if it manages to keep this up. A very good sign for hong kong. Anna julia, thank you. Bloombergs reporter in hong kong with the latest on the alibaba listing and we will be building up to the. Siemens is aiming for one of us to most radical shakeups. They want to shut about 75 of its struggling power and gas unit. Joining us now is benedikt kammel. Some new information this morning, the extent to which of their to rid exposure to this business, to this sector perhaps coming as a surprise to some people. You are right. We knew that they wanted to sort of listed this business, get rid of this business. We did not know to what extent they might actually separate. In the past, when they have a business is health unit, like the lighting unit, they usually kept a relatively big stake in those businesses. What were hearing now from joe kaiser in an exclusive interview with my colleagues in frankfurt last week is that he wants to make a more radical cut here. Withys we might end up just about 25 percent, maybe 25 plus 1 . A strong signal that this is a business that does not really fit into siemens anymore. They want to focus on sort of more nimble digital assets, infrastructure, that kind of thing. This energy asset is one that has been very volatile over the years. That is one thing he wants to get out of the company, sort of this volatility and he wants to make it more predictable. A quite radical cut here. Anna we talked a lot about th a lot this morning about the conglomerate nature of these businesses and how they seem to have gone out of fashion. Joe kaiser came to avoid the problems keen to avoid some of the problems that have fallen on his rivals. The other big competitor is nkrupp. Crop thysse you look a bit further out, and markets like the u. S. , ge is the quintessential conglomerate. Very troubled company. They have had to engage in prior sales of assets. That is something that has haunted kaiser along. He has been at siemens for life and has always said he does not want siemens to suffer a similar fate. He wants to be in control of his own company. If that means radically slimming down the business, then so be it. This company 20 years ago was really in every industry from mobile phones to dishwashers to radios and tvs and highspeed trains. It is a much Smaller Company today. It is a company that sort of controls its own destiny. That to him is more important than the share size. Anna it does seem as if he might face some headwinds in trying to spin off a 75 of this oil and gas business. He will have to persuade the unions and others. There could be resistance to some of it. What is the vision for the future of siemens he is going to be selling them . The vision really is we want to be a company that engages in infrastructure, the digital factory, and that really has far more stable businesses. Siemens historically has always had some assets that do well and others that really misbehave. Managed to even things out. He says he wants to be a reliable partner for investors going forward. You raise a good point. Does this energy business, is it attractive to investors . It has 20 million in sales. It might rock into the dax index on this instantaneously. Longterm, is this a viable business . Siemens will probably keep that little steak to make sure the company is on decent footing. It will be interesting to see whether investors really buy into this business in the way that siemens would like them to. Anna thank you very much. Benedikt kammel, bloombergs Global Business Senior Editor with the latest on siemens. From beijing, a host of great interviews from the Bloomberg New Economy Forum. Tomorrow, we will be speaking to the Standard Chartered ceo, bill winters, and ubs group ceo sergio ermotti. We catch up with the Goldman Sachs chairman and ceo david solomon, former white house chief economic advisor, and the ab invev ceo. A great lineup coming to us from china. Up next, when will the u. S. Curve flattening hit a stop . We will put that to markets live team member richard jones. He will be joining us next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 54 minutes into a negative trading day. Relations between the u. S. And china have become strained after the Senate Unanimously passed a bill aimed at supporting hong kong protesters. Beijing has turned to retaliate if it becomes a law. Joining us now is richard jones. I guess we have gone from trade talk inertia to trade talk deterioration or at least the market expects things to deteriorate given linkage that seems to be out there between the hong kong violence and trade negotiations. Good morning. I think that we definitely have seen a situation where whats going on in hong kong and was happened in the u. S. Senate has sort of heightened tensions between the countries. The phase i trade agreement we have been talking about for almost a month has looked really difficult to get over the finish line. I dont think this latest development will make that any easier. Therefore, i think of the reaction we are seeing and markets, Equities Trading lower, haven yields trading lower, i think that is something we will have to get used to, unless we get the phase one deal signed. That is looking more difficult after this latest turn of events between china and the u. S. Anna getting a date for the signing would be Real Progress from here, wouldnt it . Let me ask you the markets live question of the day. We have seen amongst the increasing nervousness around risk assets, we have seen flattening of the u. S. Curve. When will u. S. Curve flattening hit stocks . Stocks taking quite he hit today. Richard if the curve continues to flatten, and you have to say there are some concerns that not only the Global Economic backdrop, but the domestic economic backdrop in the u. S. Looks like it might be softening. We get further curve flattening and i think we will get the fed change its messaging going from being on hold to ready to act ready to sustain the economic expansion. With a more dovish fed, the economic slowdown look slow things slow things down. Anna thank you very much, richard jones. You can join in the question of the day debate. Nearly all sectors in negative europe. Y here in stocks under pressure due to the trade narrative. This is bloomberg. De narrative. This is bloomberg